exv10w1



 








Exhibit 10.1




The Eli Lilly and Company Bonus Plan



(as amended and restated January 1, 2005)




SECTION 1. PURPOSE



The purpose of The Eli Lilly and Company Bonus Plan is to encourage and promote eligible employees
to create and deliver innovative pharmaceutical-based health care solutions that enable people to
live longer, healthier and more active lives, to outgrow our competitors through a constant stream
of pharmaceutical innovation, and to materially increase shareholder value. The Plan is designed
to accomplish the following key objectives:





	 	a.	 	motivate superior employee performance through the implementation of a
performance-based bonus system for all eligible management employees, United States
employees (including those in Puerto Rico) and other employees as may be designated
from time to time;
	 
	 	b.	 	encourage eligible employees to take greater ownership of the company and
provide “Answers that Matter” daily by creating a direct relationship between key
company measurements and individual bonus payouts; and
	 
	 	c.	 	enable the Company to attract and retain employees that will be instrumental in
driving sustained growth and performance of Eli Lilly and Company by providing a
competitive bonus program that rewards outstanding performance consistent with the
Company’s mission, values and increased shareholder value.




The Plan is intended to satisfy the requirements for providing “performance-based” compensation
under Section 162(m) of the Internal Revenue Code.




SECTION 2. DEFINITIONS



The following words and phrases as used in this Plan will have the following meanings unless a
different meaning is clearly required by the context. Masculine pronouns will refer both to males
and to females:





	2.1	 	Applicable Year means the calendar year immediately preceding the year in which
payment of the Company Bonus is payable pursuant to Section 6. For example, the Applicable
Year for 2005 payout is January 1, 2004 through December 31, 2004.
	 
	2.2	 	Bonus Target means the percentage of Participant Earnings for each Participant as
described in Section 5.6(a) below.
	 
	2.3	 	Committee means (i) with respect to the Executive Officers of Lilly, the Compensation
Committee, the members of which will be selected by the Board of Directors of Lilly, from
among its members; and (ii) with respect to all other Eligible Employees, the










 



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	 	 	Compensation Committee of the Board of Directors or its designee. Each member of the
Compensation Committee will, to the extent deemed necessary or appropriate by the Board of
Directors, satisfy the requirements of an “outside director” within the meaning of Section
162(m) of the Internal Revenue Code.






	2.4	 	Company means Eli Lilly and Company and its subsidiaries.
	 
	2.5	 	Company Bonus means the amount of bonus compensation payable to a Participant as
described in Section 5 below. Notwithstanding the foregoing, however, the Committee may
determine, in its sole discretion, to reduce the amount of a Participant’s Company Bonus if
such Participant becomes eligible to participate in such other bonus program of the Company as
may be specifically designated by the Committee. Such reduction may be by a stated percentage
up to and including 100% of the Company Bonus.
	 
	2.6	 	Company Performance Bonus Multiple means the amount as calculated in Sections 5.3 and
5.4 below.
	 
	2.7	 	Disabled means a Participant who (i) has become eligible for a payment under The
Lilly Extended Disability Plan, assuming eligibility to participate in that plan, or (ii) for
those employees ineligible to participate in The Lilly Extended Disability Plan, has become
otherwise “disabled” under the applicable disability benefit plan or program for the
Participant, or, in the event that there is no such disability benefit plan or program, has
become disabled under applicable local law.
	 
	2.8	 	Earnings Per Share (EPS) means the diluted earnings per share of the Company as
reported in the Company’s “Consolidated Statements of Income” in accordance with generally
accepted accounting principles and Section 3.4 below.
	 
	2.9	 	Earnings Per Share Growth (EPS Growth) means the percentage increase in EPS in the
Applicable Year compared to the prior year.
	 
	2.10	 	Effective Date means January 1, 2004, as amended from time to time.
	 
	2.11	 	Eligible Employee means:






	 	a.	 	with respect to employees of Lilly or its Puerto Rican subsidiaries, a person
(1) who is employed as an employee by the Company on a scheduled basis of twenty (20)
or more hours per week and is scheduled to work at least five (5) months per year; and
(2) who is receiving compensation, including temporary illness pay under Lilly’s
Illness Pay Program or similar short-term disability program, from the Company for
services rendered as an employee. Notwithstanding anything herein to the contrary, the
term “Eligible Employee” will not include:






	 	(1)	 	a person who has reached Retirement with the Company;










 



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	 	(2)	 	a person who is Disabled;
	 
	 	(3)	 	a person who is a “leased employee” within the meaning of
Section 414(n) of the Internal Revenue Code of 1986, as amended, or whose basic
compensation for services on behalf of the Company is not paid directly by the
Company;
	 
	 	(4)	 	a person who is classified as a “Fixed Duration Employee”, as
that term is used by Lilly;
	 
	 	(5)	 	a person who is classified as a special status employee because
his employment status is temporary, seasonal, or otherwise inconsistent with
regular employment status;
	 
	 	(6)	 	a person who is eligible to participate in the Eli Lilly and
Company Prem1er Rewards Plan or such other Company bonus or incentive program
as may be specifically designated by the Committee or its designee; or
	 
	 	(7)	 	a person who submits to the Committee in writing a request that
he not be considered eligible for participation in the Plan or is a member of
the Board of Directors of Lilly unless he or she is also an Eligible Employee.
	 
	 	(8)	 	any other category of employees designated by the Committee in
its discretion with respect to any Applicable Year.






	 	b.	 	with respect to those employees who are employed by the Company, but not by
Lilly or a Puerto Rican subsidiary, an employee of the Company designated by the
Committee as a Participant in the Plan with respect to any Applicable Year. In its
discretion, the Committee may designate Participants either on an individual basis or
by determining that all employees in specified job categories, classifications, levels,
subsidiaries or other appropriate classification will be Participants.
	 
	 	c.	 	Notwithstanding anything herein to the contrary, the term Eligible Employee
will not include any person who is not so recorded on the payroll records of the
Company, including any such person who is subsequently reclassified by a court of law
or regulatory body as a common law employee of the Company. Consistent with the
foregoing, and for purposes of clarification only, the term employee or Eligible
Employee does not include any individual who performs services for the Company as an
independent contractor or under any other non-employee classification.






	2.12	 	Lilly means Eli Lilly and Company.










 



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	2.13	 	Lilly Executive Officer or Section 162(m) Participant means a Participant who
has been designated by the Board of Directors of Lilly as an executive officer pursuant to
Rule 3b-7 under the Securities Exchange Act of 1934, as amended. For purposes of this Plan, a
Lilly Executive Officer will be considered a Section 162(m) Participant whether or not he is a
“covered employee” under Section 162(m).
	 
	2.14	 	Participant means an Eligible Employee who is participating in the Plan.
	 
	2.15	 	Participant Earnings means (A) those amounts described below that are earned during
the portion of the Applicable Year during which the employee is a Participant in the Plan:






	 	(i)	 	regular compensation (including applicable
deferred compensation amounts), overtime, shift premiums and other
forms of additional compensation determined by and paid currently
pursuant to an established formula or procedure;
	 
	 	(ii)	 	salary reduction contributions to The Lilly
Employee Savings Plan or elective contributions under any similar
tax-qualified plan that is intended to meet the requirements of
Section 401(k) of the Internal Revenue Code or similar Company
savings program;
	 
	 	(iii)	 	elective contributions to any cafeteria
plan that is intended to meet the requirements of Section 125 of the
Internal Revenue Code or other pre-tax contributions to a similar
Company benefit plan;
	 
	 	(iv)	 	payments made under the terms of Lilly’s
Illness Pay Program or other similar Company or government-required
leave program during an Applicable Year to a Participant who is on
approved leave of absence and is receiving one hundred percent (100%)
of his base pay; and
	 
	 	(v)	 	other legally-mandated or otherwise
required pre-tax deductions from a Participant’s base salary.






	 	(B)	 	The term “Participant Earnings” does not include:






	 	(i)	 	compensation paid in lieu of earned
vacation;
	 
	 	(ii)	 	amounts contributed to the Retirement Plan
or any other qualified plan, except as provided in clause (A)(ii),
above;
	 
	 	(iii)	 	payments made under the terms of Lilly’s
Illness Pay Program or other similar Company or government-required
leave program during an Applicable Year to a Participant who is on
approved leave of absence and is receiving less than the full amount
of his base pay;
	 
	 	(iv)	 	amounts paid under this Plan or other bonus
or incentive program of the Company;










 



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	 	(v)	 	payments made under The Lilly Severance Pay
Plan or any other severance-type benefit (whether company-sponsored
or mandated by law) arising out of or relating to a Participant’s
termination of employment;
	 
	 	(vi)	 	payments based upon the discretion of the
Company;
	 
	 	(vii)	 	in the case of a person employed by a
Lilly subsidiary, foreign service, cost of living, or other
allowances that would not be paid were the person employed by Lilly;
	 
	 	(viii)	 	amounts paid as commissions, sales bonuses, or Market Premiums (as
defined under the Retirement Plan); or
	 
	 	(ix)	 	earnings with respect to the exercise of
stock options or vesting of restricted stock.






	2.16	 	Performance Benchmarks mean the amounts as calculated in Section 5.3 below. The
Performance Benchmarks will be established after considering expected pharmaceutical peer
group performance and based on performance measures as described in Section 5.2.
	 
	2.17	 	Plan means The Eli Lilly and Company Bonus Plan as set forth herein and as hereafter
modified or amended from time to time. The Plan is an incentive compensation program and is
not subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
pursuant to Department of Labor Regulation Section 2510.3.
	 
	2.18	 	Plant Closing means the closing of a plant site or other Company location that
directly results in termination of employment.
	 
	2.19	 	Reduction in Workforce means the elimination of a work group, functional or business
unit or other broadly applicable reduction in job positions that directly results in
termination of employment.
	 
	2.20	 	Retirement means the cessation of employment upon the attainment of age fifty-five
with ten years of service (55 and 10) or at least eighty (80) points, as determined by the
provisions of the Retirement Plan as amended from time to time, assuming eligibility to
participate in that plan. For persons who are not participants in the Retirement Plan,
Retirement means the cessation of employment as a retired employee under the applicable
retirement benefit plan or program as provided by the Company or applicable law.
	 
	2.21	 	Retirement Plan means The Lilly Retirement Plan.
	 
	2.22	 	Sales means, for any Applicable Year, the consolidated net sales of the Company as
set forth in the “Consolidated Statements of Income” as reported by the Company in accordance
with generally accepted accounting principles and Section 3.4 below.
	 
	2.23	 	Sales Growth means the percentage increase in Sales in the Applicable Year compared
to the prior year.










 



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	2.24	 	Section 162(m) means Section 162(m) of the Internal Revenue Code of 1986, as amended.
	 
	2.25	 	Service means the aggregate time of employment of an Eligible Employee by the
Company.





SECTION 3. ADMINISTRATION





	3.1	 	Committee. The Plan will be administered by the Compensation Committee of the Board
of Directors of Eli Lilly and Company or, if the name of the Compensation Committee is
changed, the Plan will be administered by such successor committee. For all Eligible
Employees other than Lilly Executive Officers, the Compensation Committee may delegate all or
a portion of its responsibilities within its sole discretion by resolution. Any reference in
this Plan to the Committee or its authority will be deemed to include such designees (other
than with respect to Lilly Executive Officers or a member of the Board of Directors or for
purposes of Section 9).
	 
	3.2	 	Powers of the Committee. The Committee will have the right to interpret the terms
and provisions of the Plan and to determine any and all questions arising under the Plan,
including, without limitation, the right to remedy possible ambiguities, inconsistencies, or
omissions by a general rule or particular decision. The Committee will have authority to
adopt, amend and rescind rules consistent with the Plan, to make exceptions in particular
cases to the rules of eligibility for participation in the Plan (except with respect to Lilly
Executive Officers), and to delegate authority for approval of participation of any Eligible
Employee except for Lilly Executive Officers or a member of the Board of Directors. The
Committee will take all necessary action to establish annual Performance Benchmarks and
approve the timing of payments, as necessary.
	 
	3.3	 	Certification of Results. Before any amount is paid under the Plan, the Committee
will certify in writing the calculation of EPS, EPS Growth, Sales and Sales Growth (or other
applicable performance measures) for the Applicable Year and the satisfaction of all other
material terms of the calculation of the Company Performance Bonus Multiple and Company Bonus.
	 
	3.4	 	Adjustments for Significant Events. Not later than 90 days after the beginning of an
Applicable Year, the Committee may specify with respect to Company Bonuses for the Applicable
Year that the performance measures described in Section 5.2 will be determined before the
effects of acquisitions, divestitures, restructurings or special charges or gains, changes in
corporate capitalization, accounting changes, and/or events that are treated as extraordinary
items for accounting purposes; provided that such adjustments shall be made only to the extent
permitted by Section 162(m) in the case of Lilly Executive Officers.










 



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	3.5	 	Finality of Committee Determinations. Any determination by the Committee of Sales,
Sales Growth, EPS, EPS Growth, any other performance measure, Performance Benchmarks and the
level and entitlement to Company Bonus, and any interpretation, rule, or decision adopted by
the Committee under the Plan or in carrying out or administering the Plan, will be final and
binding for all purposes and upon all interested persons, their heirs, and personal
representatives. The Committee may rely conclusively on determinations made by Lilly and its
auditors to determine Sales, Sales Growth, EPS, EPS Growth and related information for
administration of the Plan, whether such information is determined by the Company, auditors or
a third-party vendor engaged specifically to provide such information to the Company. This
subsection is not intended to limit the Committee’s power, to the extent it deems proper in
its discretion, to take any action permitted under the Plan.





SECTION 4. PARTICIPATION IN THE PLAN





	4.1	 	General Rule. Only Eligible Employees may participate in and receive payments under
the Plan.
	 
	4.2	 	Commencement of Participation. An Eligible Employee will become a Participant in the
Plan as follows: (i) in the case of Eligible Employees under Section 2.11(a), on the date on
which the individual completes at least one hour of employment as an Eligible Employee within
the United States or Puerto Rico, and (ii) in the case of Eligible Employees under Section
2.11(b), on the date as of which the Committee has designated the individual to become a
Participant in the Plan.
	 
	4.3	 	Termination of Participation. An Eligible Employee will cease to be a Participant
upon termination of employment with the Company for any reason, or at the time he otherwise
ceases to be an Eligible Employee under the Plan.





SECTION 5. DEFINITION AND COMPUTATION OF COMPANY BONUS





	5.1	 	Computation for Eligible Employees. Company Bonus amounts will depend significantly
on Company performance as well as Participants’ individual performance for certain Eligible
Employees. As more specifically described below, a Participant’s Company Bonus is calculated
by multiplying the Participant’s Bonus Target by his Participant Earnings and the Company
Performance Bonus Multiple. For eligible management and Lilly employees and those
Participants designated by the Committee, individual performance will also impact the Company
Bonus calculation, as described in Section 5.6(c) below. Company Bonuses are paid out to
eligible Participants in the manner provided below.










 



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	5.2	 	Establishment of Performance Measures. Not later than 90 days after the beginning of
each Applicable Year, the Committee will, in its sole discretion, determine appropriate
performance measures for use in calculating Company Bonus amounts. These performance measures
may include Sales Growth, EPS Growth, growth in net income, return on assets, return on
equity, total shareholder return, EVA, MVA or any of the foregoing before the effect of
acquisitions, divestitures, accounting changes, restructurings and special charges or gains
(determined according to objective criteria established by the Committee not later than ninety
(90) days after the beginning of the Applicable Year). Unless otherwise specified in a
written resolution adopted by the Committee for the Applicable Year, the Committee will use
EPS Growth and Sales Growth, in each case before the effect of acquisitions, divestitures,
accounting changes, restructurings and special charges or gains (determined as described
above) as performance measures.
	 
	5.3	 	Establishment of Performance Benchmarks. Not later than 90 days after the beginning
of each Applicable Year, the Committee will establish Performance Benchmarks for the Company
based on the performance measures described in Section 5.2 above. Unless otherwise specified
in a written resolution adopted by the Committee for the Applicable Year, the Performance
Benchmarks will correspond with EPS Growth and Sales Growth amounts for the Applicable Year,
established after considering expected pharmaceutical peer group performance. The Performance
Benchmarks will correspond to EPS Growth and Sales Growth multiples equal to 1.0. The
Committee will also adopt a formula that will determine the extent to which the performance
measure multiples will vary as the Company’s actual results vary from the Performance
Benchmarks.
	 
	5.4	 	Company Performance Bonus Multiple. Unless otherwise specified in a written
resolution adopted by the Committee not later than 90 days after the beginning of the
Applicable Year, the Company Performance Bonus Multiple is equal to the product of the EPS
Growth multiple and 0.75 plus the product of the Sales Growth multiple and 0.25 (i.e., Company
Performance Bonus Multiple = (EPS Growth multiple * 0.75) + (Sales Growth multiple * 0.25)).
	 
	5.5	 	Company Performance Bonus Multiple Threshold and Ceiling: Notwithstanding Sections
5.3 and 5.4, the Company Performance Bonus Multiple will not be less than 0.25 or greater than
2.0 in an Applicable Year. If the calculations described in Sections 5.3 and 5.4 above result
in a number that is less than 0.25, the Company Performance Bonus Multiple will equal 0.25 for
the Applicable Year. If the calculations described in Sections 5.3 and 5.4 above result in a
multiple greater than 2.0, the Company Performance Bonus Multiple will equal 2.0 for the
Applicable Year. Notwithstanding the foregoing, the Committee may reduce the Company
Performance Bonus Multiple (including but not limited to a reduction to below 0.25) for some
or all Eligible Employees, in its discretion.










 



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	5.6	 	Participant Company Bonus.






	 	a.	 	Bonus Target. Not later than 90 days after the beginning of the
Applicable Year, the Bonus Target for each Participant will be determined by the
Committee on a basis that takes into consideration a Participant’s pay grade level and
job responsibilities. The Bonus Target for each Participant for the Applicable Year
will be expressed as a percentage of Participant Earnings as of December 31 of the
Applicable Year. Early in the Applicable Year, each Participant will receive
information regarding the Participant’s Bonus Target.
	 
	 	b.	 	Company Bonus Calculation. Except as described in Section 5.6(c)
below, a Participant’s Company Bonus will equal the product of the Company Performance
Bonus Multiple and the Participant’s Bonus Target and the Participant’s Earnings.
	 
	 	c.	 	Adjustment for Performance Multiplier, if Applicable.
	 
	 	 	 	Notwithstanding anything herein to the contrary, all eligible management employees
(except Lilly Executive Officers), United States employees and other employees as may be
designated from time to time by the Committee are subject to individual performance
multipliers. For all such Participants subject to an individual performance multiplier,
the amount calculated in Section 5.5(b) above will be adjusted based on the
Participant’s performance rating at the end of the Applicable Year as described below.
For each such Participant, the performance rating will be determined by the
Participant’s supervision.






	 	1.	 	Exemplary Performance. If the
Participant receives an exemplary or equivalent performance rating
(using the applicable performance rating system then in effect for
the Participant), the amount calculated in Section 5.6(b) will be
multiplied by an amount determined by the Committee, not to exceed
1.5, to obtain the Participant’s actual Company Bonus.
	 
	 	2.	 	Satisfactory Performance. If the
Participant receives a satisfactory or equivalent performance rating
(using the applicable performance rating system then in effect for
the Participant), the amount calculated in Section 5.6(b) will be
multiplied by 1.0 so that the Participant’s actual Company Bonus will
equal the amount calculated in Section 5.6(b) above.
	 
	 	3.	 	Unsatisfactory Performance. If the
Participant receives a year-end unsatisfactory or equivalent
performance rating (using the applicable performance rating system
then in effect for the Participant), the amount calculated in Section
5.6(b) will be multiplied by 0.0 so that the Participant’s actual
Company Bonus will equal $0.00.










 



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In the event that a Participant does not receive a year-end performance rating, but is eligible for
a Company Bonus, the amount calculated in Section 5.6(b) will be multiplied by 1.0 so that the
Participant’s actual Company Bonus will be the amount calculated in Section 5.6(b) above.





	5.7	 	Conditions on Company Bonus. Payment of any Company Bonus is neither guaranteed nor
automatic. A Participant’s Company Bonus is not considered to be any form of compensation,
wages, or benefits, unless and until paid.
	 
	5.8	 	Required Employment. Except as provided below in this Section 5.8 or as otherwise
designated by the Committee, if a Participant is not employed by the Company on the last day
of the Applicable Year, or is otherwise not an Eligible Employee on that date, the Participant
is not entitled to any Company Bonus payment under this Plan for that Applicable Year.






	 	a.	 	Leaves of Absence. A Participant who, on the last day
of the Applicable Year, is on approved leave of absence under the Family and
Medical Leave Act of 1993, military leave under the Uniformed Services
Employment and Reemployment Rights Act, or such other approved leave of absence
will be considered to be an Eligible Employee on that date for purposes of this
Plan.
	 
	 	b.	 	Transfer. An employee who is a Participant in this
Plan for a portion of the Applicable Year and then transfers to a position
within the Company in which he is ineligible to participate in this Plan, but
who remains employed by the Company on the last day of the Applicable Year,
will be treated as satisfying the last-day-of-Applicable Year requirement for
purposes of this Plan. In that event, his Company Bonus will be based on his
Participant Earnings for the portion of the Applicable Year in which the
employee was a Participant in the Plan.
	 
	 	c.	 	Retirement, Disability or Death. A Participant who was
an Eligible Employee for some portion of the Applicable Year and then takes
Retirement, becomes and remains Disabled through the end of the Applicable
Year, or dies during the Applicable Year will be considered to satisfy the
last-day-of-Applicable-Year requirement described in this Section 5.8 for
purposes of this Plan.
	 
	 	d.	 	Reallocation, Medical Reassignment, Plant Closing or
Reduction in Workforce. A Participant who was an Eligible Employee for
some portion of the Applicable Year and whose employment is terminated as a
result of his failure to locate a position following his reallocation or
medical reassignment in the United States, or a Plant Closing or Reduction in
Workforce will be considered to satisfy the last-day-of-Applicable Year
requirement described in this Section 5.8 for purposes of this Plan. The
Committee or its designee’s determination regarding whether a Participant’s
termination is a direct result










 



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	 	 	 	of either a Plant Closing or a Reduction in Workforce will be final and binding.






	 	e.	 	Notice of Resignation. In addition, a Participant who
submits a notice of resignation from employment with the Company prior to the
end of the Applicable Year and whose effective date of resignation is two (2)
weeks or less from the date of notice of resignation will be considered
employed by the Company for purposes of this Plan until the end of his
specified notice period.






	5.9	 	New Participants. If an Eligible Employee began participation in the Plan during an
Applicable Year and is eligible for a Company Bonus, his Company Bonus will be based on
Participant Earnings earned after the employee became a Participant. An Eligible Employee who
became assigned to a position eligible for a Company Bonus at any time other than the first of
the month will become a Participant the first of the following month.
	 
	5.10	 	Section 162(m) Requirements, Bonus Maximum. In the case of Lilly Executive Officers,
all determinations necessary for computing a Company Bonus for the Applicable Year, including
establishment of all components of EPS, EPS Growth, Sales, Sales Growth, Company Performance
Bonus Multiple and Bonus Target percentages, shall be made by the Committee not later than 90
days after the commencement of the Applicable Year. As and to the extent required by Section
162(m), the terms of a Company Bonus for a Lilly Executive Officer must state, in terms of an
objective formula or standard, the method of computing the amount of compensation payable to
the Lilly Executive Officer, and must preclude discretion to increase the amount of
compensation payable that would otherwise be due under the terms of the award.
Notwithstanding anything elsewhere in the Plan to the contrary, the maximum amount of the
Company Bonus that may be payable to a Lilly Executive Officer in respect of any Applicable
Year will be $7 million.





SECTION 6. TIME OF PAYMENT





	6.1	 	General Rule. Payment under the Plan will be made prior to April 1 of the year
following the Applicable Year.
	 
	6.2	 	Terminated Employee. Except as provided in Section 5.8 above, in the event an
Eligible Employee’s employment with the Company ends for any reason prior to the last day of
the Applicable Year, he will not receive any Company Bonus for the Applicable Year.
	 
	6.3	 	Deceased Eligible Employee. In the event an Eligible Employee dies before payment
under the Plan is made, the Committee may, in its sole discretion, authorize the Company to
pay to his personal representative or beneficiary an amount not to exceed the amount
established by the Committee to reflect the payment accrued at the date of death.










 



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SECTION 7. ADMINISTRATIVE GUIDELINES





	7.1	 	Establishment and Amendment by the Committee. The Committee may establish objective
and nondiscriminatory written guidelines for administering those provisions of the Plan that
expressly provide for the determination of eligibility, Company Bonus or benefits on the basis
of rules established by the Committee. The Committee may, from time to time, amend or
supplement the administrative guidelines established in accordance with this subsection 7.1.
The administrative guidelines established or amended in accordance with this subsection 7.1
will not be effective to the extent that they materially increase the Plan’s liability, or to
the extent that they are inconsistent with, or purport to amend, any provision of the Plan set
forth in a document other than such administrative guidelines.
	 
	7.2.	 	Amendment by Board of Directors. Any administrative guidelines established by the
Committee pursuant to subsection 7.1 may be amended or revoked by the Board of Directors,
either prospectively or retroactively, in accordance with the general amendment procedures set
forth in section 9 below.





SECTION 8. MISCELLANEOUS





	8.1	 	No Vested Right. No employee, participant, beneficiary, or other individual will
have a vested right to a Company Bonus or any part thereof until payment is made to him under
Section 6.
	 
	8.2	 	No Employment Rights. No provision of the Plan or any action taken by the Company,
the Board of Directors of the Company, or the Committee will give any person any right to be
retained in the employ of the Company. The right and power of the Company to dismiss or
discharge any Participant for any reason or no reason, with or without notice, is specifically
reserved.
	 
	8.3	 	No Adjustments. After the certification of the calculation of EPS, EPS Growth,
Sales, Sales Growth and any other material terms of the calculation of the Company Performance
Bonus Multiple and Company Bonus for the Applicable Year as described in Section 3.3 above, no
adjustments will be made to reflect any subsequent change in accounting, the effect of
federal, state, or municipal taxes later assessed or determined, or otherwise.
	 
	8.4	 	Other Representations. Nothing contained in this Plan, and no action taken pursuant
to its provisions, will create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and any employee, participant, beneficiary, legal
representative, or any other person. Although Participants generally have no right to any
payment from this Plan, to the extent that any Participant acquires a right to receive










 



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	 	 	payments from the Company under the Plan, such right will be no greater than the right of an
unsecured general creditor of the Company. All payments to be made hereunder will be paid
from the general funds of the Company and no special or separate fund will be established,
and no segregation of assets will be made, to assure payment of such amount.






	8.5	 	Tax Withholding. The Company will make such provisions and take such steps as it may
deem necessary or appropriate for the withholding of all federal, state, local, and other
taxes required by law to be withheld with respect to Company Bonus payments under the Plan,
including, but not limited to, deducting the amount required to be withheld from the amount of
cash otherwise payable under the Plan, or from salary or any other amount then or thereafter
payable to an employee, Participant, beneficiary, or legal representative.
	 
	8.6	 	Currency. The Company Bonus will be based on the currency in which the highest
portion of base pay is regularly paid. The Committee will determine the appropriate foreign
exchange conversion methodology in its discretion.
	 
	8.7	 	Effect of Plan on other Company plans. Nothing contained in this Plan is intended to
amend, modify, terminate, or rescind other benefit or compensation plans established or
maintained by the Company. Whether and to what extent a Participant’s Company Bonus is taken
into account under any other plan will be determined solely in accordance with the terms of
such plan.
	 
	8.8	 	Construction. This Plan and all the rights thereunder will be governed by, and
construed in accordance with, the laws of the state of Indiana, without reference to the
principles of conflicts of law thereof.
	 
	8.9	 	Notice. Any notice to be given to the Company or Committee pursuant to the
provisions of the Plan will be in writing and directed to Secretary, Eli Lilly and Company,
Lilly Corporate Center, Indianapolis, IN 46285.





SECTION 9. AMENDMENT, SUSPENSION, OR TERMINATION



The Board of Directors of the Company will have the right to amend, modify, suspend, revoke, or
terminate the Plan, in whole or in part, at any time and without notice, by written resolution of
the Board of Directors. The Committee also will have the right to amend the Plan, except that the
Committee may not amend this Section 9. Solely to the extent deemed necessary or advisable by the
Board (or the Committee) for purposes of complying with Section 162(m), the Board (or the
Committee) may seek the approval by the Company’s stockholders of the Plan or any amendments to the
Plan or any aspect of the Plan or Plan amendments. Any such approval shall be obtained in a
separate vote of stockholders, with approval by a majority of the votes cast on the issue,
including abstentions to the extent abstentions are counted as voting under applicable state law
and the Articles of Incorporation and By-laws of the Company. To the extent deemed necessary or
advisable by the Board of Directors to comply with Section 162(m),








 



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the material terms of the performance measures used in calculating Company Bonus amounts will be
disclosed to and reapproved by the stockholders of the Company no later than the Company’s 2009
annual meeting.