Document:

exv10w5

Exhibit 10.5

Eli Lilly and Company

Shareholder Value Award

This Shareholder Value Award has been granted for the period of January 1, 2010 through
December 31, 2012 by Eli Lilly and Company, an Indiana corporation with its principal offices in
Indianapolis, Indiana (“Lilly” or the “Company”), to Grantee.

Performance Levels

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	No Payout	 	Level 1	 	Level 2	 	Level 3	 	Level 4	 	Level 5	 	Level 6
	 
	 	 	 	 	 	$	30.05	 	 	$	34.28	 	 	$	38.50	 	 	$	41.00	 	 	$	43.50	 	 	 	 	 
	Stock Price
	 	 	£ $30.04	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	3 $46.00	 
	 
	 	 	 	 	 	$	34.27	 	 	$	38.49	 	 	$	40.99	 	 	$	43.49	 	 	$	45.99	 	 	 	 	 
	% of Target
	 	 	0	%	 	 	40	%	 	 	60	%	 	 	80	%	 	 	100	%	 	 	120	%	 	 	140	%

 

 

Eli Lilly
and Company Shareholder Value Award 

Table of Contents

	 	 	 	 	 
	A. Recitals
	 	 	3	 
	B. Shareholder Value Award
	 	 	3	 
	Section 1. Statement of Award Period
	 	 	3	 
	Section 2. Number of Shares
	 	 	3	 
	Section 3. Computation of Final Stock Price
	 	 	3	 
	Section 4. Determination and Announcement of Award
	 	 	4	 
	Section 5. Committee Election to Pay Cash
	 	 	4	 
	Section 6. Issuance or Transfer of Performance Shares and Payment of Cash Award
	 	 	4	 
	Section 7. Consideration for Continued Employment Requirement
	 	 	4	 
	Section 8. Adjustments for Certain Employment Status Changes
	 	 	4	 
	Section 9. Notices, Payments, and Electronic Delivery and Participation
	 	 	5	 
	Section 10. Waiver
	 	 	6	 
	Section 11. Revocation or Modification
	 	 	6	 
	Section 12. Withholding Tax
	 	 	6	 
	Section 13. Section 409A Compliance
	 	 	7	 
	Section 14. Non-Transfer of Shareholder Value Award
	 	 	7	 
	Section 15. Severability and Section Headings
	 	 	7	 
	Section 16. Determinations by Committee
	 	 	7	 
	Section 17. Change in Control
	 	 	7	 
	Section 18. Nature of 2002 Plan & Shareholder Value Award
	 	 	9	 
	Section 19. Data Privacy Notice and Consent
	 	 	10	 
	Section 20. Effective Date
	 	 	11	 
	Section 21. Governing Law
	 	 	11	 
	Section 22. Language
	 	 	11	 
	Section 23. Appendix
	 	 	12	 

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Eli Lilly
and Company Shareholder Value Award 

	A.	 	Recitals
	 
	 	 	Under the 2002 LILLY STOCK PLAN (“2002 Plan”), the Compensation Committee (“Committee”)
has determined the form of this Shareholder Value Award and selected the Grantee, an Eligible
Employee of the Company, to receive a Shareholder Value Award for the Award Period January 1,
2010 through December 31, 2012. The applicable terms of the 2002 Plan are incorporated in this
Shareholder Value Award by reference, including the definitions of terms contained in the 2002
Plan. This award is granted under Section 6 of the 2002 Plan, “Performance Awards to Eligible
Employees,” and shall be considered a form of Performance Award for purposes of interpretation
and administration of the award under the 2002 Plan.
	 
	B.	 	Shareholder Value Award
	 
	 	 	Lilly grants to the Grantee the right to acquire Lilly Stock by issuance or transfer to
the Grantee of the Performance Shares to which he or she is entitled under this Shareholder
Value Award upon the following terms and conditions, including any special terms and conditions
set forth in the appendix for the Grantee’s country of residence, if any, as provided in
Section 23:
	 
	 	 	Section 1. Statement of Award Period
	 
	 	 	The Award Period shall begin January 1, 2010 and end December 31, 2012.
	 
	 	 	Section 2. Number of Shares
	 
	 	 	The number of Performance Shares for the Award Period shall be determined by the
Performance Share value as approved by the Grantee’s supervisor and a FAS123(R) accepted
financial model. Target shares are set at Level 4. The remaining columns of the table on the
first page of this Shareholder Value Award are multiples of the target shares as set forth in
the % of Target row and correspond to the applicable stock price, subject to adjustment as
provided below in this Section or in Section 8. Grantees may view their Shareholder Value
Award by logging on to the Merrill Lynch website at
http://benefits.ml.com after March 31 of
each grant year.
	 
	 	 	The number of Performance Shares for the Award Period and the final stock price as defined
below in Section 3 will be adjusted by the Committee under Section 4(b) of the 2002 Plan upon
the occurrence, prior to the effective date of the issuance or transfer of shares for payment,
of any subdivision or combination of shares of Lilly Stock, or a stock dividend, capital
reorganization, recapitalization, or consolidation or merger with Lilly as the surviving
corporation, or if additional shares or new or different shares or other securities of Lilly or
any other issuer are distributed with respect to the shares of Lilly Stock through a spin-off,
exchange offer, or other extraordinary distribution occurring prior to the effective date of
the issuance or transfer of shares for payment. A fractional share resulting from such adjustment shall in the discretion of the Committee either
be paid in cash or rounded.
	 
	 	 	Section 3. Computation of Final Stock Price
	 
	 	 	The Final Stock Price shall be computed in accordance with Section 16 and using the
following procedures:

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Eli Lilly
and Company Shareholder Value Award 

	 	a.	 	The closing price for Lilly Stock on the New York Stock Exchange for each
trading day during the last two calendar months of the Award Period will be
collected and recorded.
	 
	 	b.	 	The stock price used to determine the payout level will be the average of
the closing stock prices collected in subsection (a) above rounded to the nearest
cent.

	 	 	Section 4. Determination and Announcement of Award
	 
	 	 	After the Final Stock Price for the Award Period is announced, the Final Stock Price and
the resulting number of Performance Shares for Grantee (determined in accordance with Sections
2 and 8), together with the Committee’s election between cash and shares of Lilly Stock under
Section 5, shall be communicated to Grantee.
	 
	 	 	Section 5. Committee Election to Pay Cash
	 
	 	 	At any time prior to award payout, the Committee may, if it so elects, determine to pay
part or all of any Shareholder Value Award in cash in lieu of issuing or transferring
Performance Shares. The
amount of cash shall be based upon the fair market value of Lilly Stock on a valuation date to
be determined by the Committee.
	 
	 	 	Section 6. Issuance or Transfer of Performance Shares and Payment of Cash Award
	 
	 	 	Subject to the condition relating to withholding tax stated in Section 12, Lilly shall
issue or transfer to the Grantee any Performance Shares to be issued or transferred under
Section 4 and pay to the Grantee any cash determined to be payable under that section within a
sixty day period starting the day after the Award Period expiration and ending on the sixtieth
day after the Award Period expiration as stated in Section 1. Grantee shall have no rights as
a shareholder of Lilly with respect to the shares of Lilly Stock until the shares are issued or
transferred on the books of Lilly.
	 
	 	 	Section 7. Consideration for Continued Employment Requirement
	 
	 	 	This Shareholder Value Award is made in consideration of services rendered by the
Grantee to the Company during the entire Award Period. If the status of the Grantee as an
Eligible Employee, as defined in the 2002 Plan, terminates before the end of the Award Period
except as outlined in Section 8 (c), then all rights of the Grantee under this Shareholder
Value Award shall terminate with respect to the Award Period. The Company shall incur no
liability to Grantee under this Shareholder Value Award by terminating Grantee’s status as an
Eligible Employee whether by action with respect to Grantee individually, either with or
without cause, or by dissolution or liquidation of Lilly or merger or consolidation of Lilly
with a corporation in which Lilly is not the surviving corporation, or otherwise.
	 
	 	 	Section 8. Adjustments for Certain Employment Status Changes
	 
	 	 	The number of Performance Shares described in Section 2 is based on the assumption that
the Grantee is an employee in good standing throughout the entire Award Period. Unless
otherwise required by law, the number of Performance Shares shall be adjusted for changes in
employment status during the Award Period as follows:

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Eli Lilly
and Company Shareholder Value Award 

	 	a.	 	Leaves of Absence. The number of Performance Shares shall be
reduced proportionally for any portion of the total days in the Award Period
during which the Grantee is on an approved unpaid leave of absence longer than
ninety (90) days.
	 
	 	b.	 	Demotions and Disciplinary Actions. The Committee may, at its
discretion, reduce the number of Performance Shares, prorated according to time,
for any portion of the Award Period during which the Grantee has been (i) demoted
to a job classification below those considered by the Committee to be eligible for
Shareholder Value Awards, or (ii) subject to disciplinary action by the Company.
In the case of disciplinary action during the Award Period, the Committee may, at
its discretion, withhold payment of this Shareholder Value Award entirely.
	 
	 	c.	 	Retirement, death, disability or termination due to a plant closing or
reduction in workforce. In the event the Grantee’s employment is terminated
due to retirement as a retiree, death, disability, plant closing or reduction in
workforce (as defined below), the number of Performance Shares shall be reduced
proportionally for the portion of the total days during the Award Period in which
the Grantee was not an active employee. Any payment of Performance Shares that
have been reduced by operation of this Section 8.c. shall be paid following the
Award Period expiration as described in Section 6. A retiree is a person who is
(i) a retired employee under the Lilly Retirement Plan; (ii) a retired employee
under the retirement plan or program of a Lilly subsidiary; or (iii) a retired
employee under a retirement program specifically approved by the Committee. Plant
closing means the closing of a plant site or other corporate location that directly
results in termination of employment. 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. The Committee will
be responsible for approving, in its discretion, what is classified as disability, a
plant closing, or a reduction in workforce.

	 	 	Section 9. Notices, Payments, and Electronic Delivery and Participation
	 
	 	 	Any notice to be given by the Grantee or Successor Grantee shall be in writing, and any
notice or payment shall be deemed to have been given or made only upon receipt thereof by the
Treasurer of
Lilly at Lilly Corporate Center, Indianapolis, Indiana 46285, U.S.A. Any notice or
communication by Lilly in writing shall be deemed to have been given in the case of the Grantee
if mailed or delivered to the Grantee at any address specified in writing to Lilly by the
Grantee and, in the case of any Successor Grantee, at the address specified in writing to Lilly
by the Successor Grantee. In addition, Lilly may, in its sole discretion, decide to deliver
any documents related to the Shareholder Value Award grant or future awards under the 2002 Plan
by electronic means or request the Grantee’s consent to participate in the 2002 Plan by
electronic means. By accepting this Shareholder Value Award, the Grantee hereby consents to
receive such documents by electronic delivery and agrees to
participate in the 2002 Plan through an on-line or electronic system established and maintained
by Lilly or another third party designated by Lilly.

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	 	 	Section 10. Waiver
	 
	 	 	The waiver by Lilly of any provision of this instrument at any time or for any purpose
shall not operate as or be construed to be a waiver of that provision or any other provision of
this instrument at any subsequent time or for any other purpose.
	 
	 	 	Section 11. Revocation or Modification
	 
	 	 	This Shareholder Value Award shall be irrevocable except that Lilly shall have the right
to revoke or modify this Shareholder Value Award under Section 13(e) of the 2002 Plan.
	 
	 	 	Section 12. Withholding Tax
	 
	 	 	Regardless of any action Lilly and/or the Grantee’s employer (the “Employer”) takes with
respect to any or all income tax (including federal, state, local and non-U.S. tax), social
insurance, payroll tax, payment on account or other tax-related withholding (“Tax Related
Items”), the Grantee acknowledges that the ultimate liability for all Tax Related Items legally
due by the Grantee is and remains the Grantee’s responsibility and that Lilly and the Employer
(a) make no representations or undertakings regarding the treatment of any Tax Related Items in
connection with any aspect of the Shareholder Value Award, including the grant of the
Shareholder Value Award, the transfer and issuance of any Performance Shares or the receipt of
any cash payment pursuant to this Shareholder
Value Award, the receipt of any dividends and the sale of any Performance Shares acquired
pursuant to this Shareholder Value Award; and (b) do not commit to structure the terms of the
grant or any aspect of the Shareholder Value Award to reduce or eliminate the Grantee’s
liability for Tax Related Items.
	 
	 	 	Prior to the applicable tax event, the Grantee shall pay, or make adequate arrangements
satisfactory to Lilly and/or the Employer to satisfy all Tax Related Items. In this regard,
the Grantee authorizes Lilly and/or the Employer to withhold all applicable Tax Related Items
legally payable by the Grantee from the Grantee’s wages or other cash compensation payable to
the Grantee by Lilly and/or the
Employer or from any cash payment received upon expiration of the Award Period in accordance
with Section 6. Alternatively, or in addition, if permissible under local law, the Grantee
authorizes Lilly and/or the Employer, at their discretion, to (i) withhold from the proceeds of
the sale of Performance Shares acquired pursuant to this Shareholder Value Award, (ii) arrange
for the sale of Performance Shares to be issued upon the expiration of the Award Period (at the
Grantee’s behalf and at the Grantee’s direction pursuant to this authorization), and/or (iii)
withhold in Performance Shares otherwise issuable to the Grantee pursuant to this Shareholder
Value Award, provided that Lilly and/or the Employer shall withhold only the number of
Performance Shares necessary to satisfy the minimum withholding amount (or such other amount
that, as determined by Lilly, will not
trigger unfavorable accounting). If the obligation for Tax Related Items is satisfied by
withholding Performance Shares as described in (iii) herein, the Grantee will be deemed to have
been issued the full number of Performance Shares to which he or she is entitled pursuant to
this Shareholder Value Award, notwithstanding that a number of Performance Shares are withheld
to satisfy the obligation for Tax Related Items. The Grantee shall pay to Lilly and/or the
Employer any amount of Tax Related Items that Lilly and/or the Employer may be required to
withhold as a result of any aspect of this Shareholder Value Award that cannot be satisfied by
the means previously described. Lilly may 

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and Company Shareholder Value Award 

	 	 	refuse to deliver Performance Shares or any cash
payment to the Grantee if the Grantee fails to comply with the Grantee’s obligation in
connection with the Tax Related Items as described herein.

	 	 	Section 13. Section 409A Compliance
	 
	 	 	To the extent applicable, it is intended that this Shareholder Value Award comply with the
requirements of Section 409A of the U.S. Internal Revenue Code of 1986, as amended and the
Treasury Regulations and other guidance issued thereunder (“Section 409A”), and this
Shareholder Value Award 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. This Shareholder Value Award is subject to Section 13(k) of the 2002 Plan
concerning Section 409A.
	 
	 	 	Section 14. Non-Transfer of Shareholder Value Award
	 
	 	 	No right in or under this Shareholder Value Award is transferable except by operation of
law to a duly appointed guardian of the estate of Grantee or upon the death of the Grantee by
will or the applicable laws of descent and distribution and then only subject to the provisions
of Sections 7 and 8.
	 
	 	 	Section 15. Severability and Section Headings
	 
	 	 	If one or more of the provisions of this instrument shall be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby and the invalid, illegal or
unenforceable provisions shall be deemed null and void; however, to the extent permissible by
law, any provisions which could be deemed null
and void shall first be construed, interpreted or revised retroactively to permit this
instrument to be construed so as to foster the intent of this Shareholder Value Award and the
2002 Plan.
	 
	 	 	The section headings in this instrument are for convenience of reference only and shall not be
deemed a part of, or germane to, the interpretation or construction of this instrument.
	 
	 	 	Section 16. Determinations by Committee
	 
	 	 	Determinations by the Committee pursuant to any provision of the 2002 Plan, pursuant to
rules, regulations and procedures adopted by the Committee or pursuant to this instrument,
including without limitation the determination of the amount and method of computation of the
Stock Price,
whether to make an exception to the rule of Section 7, or adjustments under Section 2 or
Section 3, shall be final and binding on the Grantee and any Successor Grantee.
	 
	 	 	Section 17. Change in Control
	 
	 	 	The provisions of Section 12(a)(iii) of the 2002 Plan apply to this Shareholder Value
Award with the following modifications:

	 	a.	 	The only Change in Control event that shall result in a payment under
Section 12(a)(iii) of the 2002 Plan shall be consummation of a change in ownership
of the Company as defined in Section 12(b)(i) of the 2002 Plan (a “Transaction”).

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and Company Shareholder Value Award 

	 	b.	 	On the date of the consummation of such Transaction, the Grantee will be
paid an amount equal to the product of (a) the Grantee’s award opportunity for the
Shareholder Value Award based on the value of Lilly Stock established for the
consideration to be paid to holders of Lilly Stock in the Transaction, and (b) a
fraction, the numerator of which is the number of days that have elapsed since the
beginning of the Award Period to the date of the consummation of the Transaction
and the denominator of which is the total number of days in the Award Period. The
payment will be deemed to have been made immediately prior to the consummation of
the Transaction in order to allow the Performance Shares
paid to be deemed outstanding and eligible to receive the consideration being paid to
Lilly shareholders in the Transaction.

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Eli Lilly
and Company Shareholder Value Award 

	 	 	Section 18. Nature of 2002 Plan & Shareholder Value Award
	 
	 	 	In accepting this Shareholder Value Award, the Grantee acknowledges that:

	 	a.	 	the 2002 Plan is established voluntarily by Lilly, it is discretionary in
nature and may be modified, amended, suspended or terminated by Lilly at any time,
as provided in the 2002 Plan;
	 
	 	b.	 	the Shareholder Value Award is voluntary and occasional and does not create
any contractual or other right to receive future Shareholder Value Awards, or
benefits in lieu
of Shareholder Value Awards even if Shareholder Value Awards have been granted
repeatedly in the past;
	 
	 	c.	 	all decisions with respect to future grants of Shareholder Value Awards, if
any, will be at the sole discretion of Lilly;
	 
	 	d.	 	the Grantee’s participation in the 2002 Plan is voluntary;
	 
	 	e.	 	the Shareholder Value Award is an extraordinary item that does not
constitute compensation of any kind for services of any kind rendered to Lilly or
the Employer and which is outside the scope of the Grantee’s employment contract,
if any;
	 
	 	f.	 	the Shareholder Value Award is not part of normal or expected compensation
or salary for any purposes, including, but not limited to, calculation of any
severance, resignation, termination, redundancy, end of service payments, bonuses,
long-service awards, pension or welfare or retirement benefits or similar payments
and in no event should be
considered as compensation for, or relating in any way to, past services for Lilly or
the Employer;
	 
	 	g.	 	neither the Shareholder Value Award nor any provision of this instrument,
the 2002 Plan or the policies adopted pursuant to the 2002 Plan confer upon the
Grantee any right with respect to employment or continuation of current
employment, and in the event that the Grantee is not an employee of Lilly or any
subsidiary of Lilly, the Shareholder Value Award shall not be interpreted to form
an employment contract or relationship with Lilly or any subsidiary of Lilly;
	 
	 	h.	 	the future value of the underlying Performance Shares is unknown and cannot
be predicted with certainty;
	 
	 	i.	 	the value of any Performance Shares acquired upon expiration of the Award
Period may increase or decrease in value, even below the tax valuation price;
	 
	 	j.	 	no claim or entitlement to compensation or damages shall arise from
termination of the Shareholder Value Award or from any diminution in value of the
Shareholder Value Award
or Performance Shares acquired upon expiration of the Award Period resulting from
termination of the Grantee’s employment by Lilly or the Employer (for any reason

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Eli Lilly
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	 	 	 	whatsoever and whether or not in breach of local labor laws) and the Grantee
irrevocably releases Lilly and the Employer from any such claim that may arise; if,
notwithstanding the foregoing, any such claim is found by a court of competent
jurisdiction to have arisen, then, by accepting this Shareholder Value Award, the
Grantee shall be deemed irrevocably to have waived his or her entitlement to pursue
such claim;
	 
	 	k.	 	in the event of termination of the Grantee’s employment (whether or not in
breach of local labor laws), the Grantee’s right to receive Performance Shares
upon expiration of the Award Period will terminate effective as of the date the
Grantee is no longer actively employed (unless one of the adjustments in Section 8
applies) and will not be extended by any notice period mandated under local law
(e.g., active employment would not include a period of “garden leave” or similar
period pursuant to local law); the Committee shall have the exclusive discretion
to determine when the Grantee is no longer actively employed for purposes of the
Shareholder Value Award;
	 
	 	l.	 	Lilly is not providing any tax, legal or financial advice, nor is Lilly
making any recommendations regarding the Grantee’s participation in the 2002 Plan,
or the Grantee’s acquisition or sale of the underlying Performance Shares; and
	 
	 	m.	 	the Grantee is hereby advised to consult with his or her own personal tax,
legal and financial advisors regarding the Grantee’s participation in the 2002
Plan before taking any action related to the 2002 Plan.

	 	 	Section 19. Data Privacy Notice and Consent
	 
	 	 	The Grantee hereby explicitly and unambiguously consents to the collection, use and
transfer, in electronic or other form, of the Grantee’s personal data as described in this
Shareholder Value Award
by and among, as applicable, the Employer, Lilly, its subsidiaries and its affiliates for the
exclusive purpose of implementing, administering and managing the Grantee’s participation in
the 2002 Plan.
	 
	 	 	The Grantee understands that Lilly may hold certain personal information about the Grantee,
including, but not limited to, the Grantee’s name, home address and telephone number, date of
birth, social insurance number or other identification number, salary, nationality, job title,
any shares of stock or directorships held in Lilly, details of all Shareholder Value Awards or
any other entitlement to shares awarded, canceled, vested, unvested or outstanding in the
Grantee’s favor, for the purpose of implementing, administering and managing the 2002 Plan
(“Data”). The Grantee understands that
Data may be transferred to any third parties assisting in the implementation, administration
and management of the 2002 Plan, that these recipients may be located in the Grantee’s country,
or elsewhere, and that the recipient’s country may have different data privacy laws and
protections than the Grantee’s country. The Grantee authorizes the recipients to receive,
possess, use, retain and transfer the Data, in electronic or other form, for the purposes of
implementing, administering and managing the Grantee’s participation in the 2002 Plan,
including any requisite transfer of such Data as may be required to a broker, escrow agent or
other third party with whom any shares received upon expiration of the Award Period may be
deposited. The Grantee understands that Data will be held only as long as is necessary to
implement, administer and manage the Grantee’s participation in

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	 	 	the 2002 Plan. The Grantee understands that the Grantee may, at any time, request an equity
award transaction statement, request any necessary amendments to Data or refuse or withdraw the
consents herein, in any case without cost, by contacting in writing the Grantee’s local human
resources representative. The Grantee understands that refusal or withdrawal of consent may
affect the Grantee’s ability to participate in the 2002 Plan. For more information on the
consequences of the Grantee’s refusal to consent or withdrawal of consent, the Grantee
understands that the Grantee may contact the Grantee’s local human resources representative.

	 	 	Section 20. Effective Date
	 
	 	 	The effective date of this instrument shall be the date of grant.
	 
	 	 	Section 21. Governing Law
	 
	 	 	The validity and construction of this Shareholder Value Award shall be governed by the
laws of the State of Indiana, U.S.A. without regard to laws that might cause other law to
govern under applicable principles of conflict of laws. For purposes of litigating any dispute
that arises under this Shareholder Value Award, the parties hereby submit to and consent to the
jurisdiction of the State of Indiana, and agree that such litigation shall be conducted in the
courts of Marion County, Indiana, or the federal courts for the United States for the Southern
District of Indiana, and no other courts, where this Shareholder Value Award is granted and/or
to be performed.
	 
	 	 	Section 22. Language
	 
	 	 	If the Grantee has received this instrument or any other document related to the 2002 Plan
translated into a language other than English and if the translated version is different than
the English version, the English version will control.

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and Company Shareholder Value Award 

	 	 	Section 23. Appendix
	 
	 	 	If the Grantee is a non-U.S. resident, his or her participation in the 2002 Plan and this
Shareholder Value Award will be subject to the special terms and conditions set forth in the
appendix for the Grantee’s country of residence, if any (“Appendix”). The Appendix constitutes
part of this instrument.

IN WITNESS WHEREOF, Lilly has caused this Shareholder Value Award to be executed and granted in
Indianapolis, Indiana, by its proper officer.

	 	 	 	 	 
	 	ELI LILLY AND COMPANY

 	 
	 	By:  	
 	 
	 	 	John Lechleiter 	 
	 	 	Chairman of the Board and

Chief Executive Officer 	 
	 

Page 12exv10w8

Exhibit 10.8

The Eli Lilly and Company Bonus Plan

(as amended January 1, 2010)

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	SECTION 1. PURPOSE
	 	 	1	 
	 
	 	 	 	 
	SECTION 2. DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	SECTION 3. ADMINISTRATION
	 	 	6	 
	 
	 	 	 	 
	SECTION 4. PARTICIPATION IN THE PLAN
	 	 	7	 
	 
	 	 	 	 
	SECTION 5. DEFINITION AND COMPUTATION OF COMPANY BONUS
	 	 	7	 
	 
	 	 	 	 
	SECTION 6. TIME OF PAYMENT
	 	 	11	 
	 
	 	 	 	 
	SECTION 7. ADMINISTRATIVE GUIDELINES
	 	 	11	 
	 
	 	 	 	 
	SECTION 8. MISCELLANEOUS
	 	 	11	 
	 
	 	 	 	 
	SECTION 9. AMENDMENT, SUSPENSION, OR TERMINATION
	 	 	13	 

- i -

 

The Eli Lilly and Company Bonus Plan

(as amended January 1, 2010)

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 2010 payout is January 1, 2009 through December 31, 2009.

	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 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

- 1 -

 

	 	 	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, Lilly USA, LLC. or Lilly’s 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;
	 
	 	(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

- 2 -

 

	 	 	 	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 Premler Rewards Plan, a bonus or incentive plan for eligible employees
of Elanco Animal Health 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, Lilly USA, LLC., 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.

	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.

- 3 -

 

	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 401(k) 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;
	 
	 	(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.

- 4 -

 

	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), age sixty-five with five years of service (65 and 5) 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	 	Revenue means, for any Applicable Year, the consolidated net revenue of the Company
as set forth in the “Statements of Operations” as reported by the Company in accordance with
generally accepted accounting principles and Section 3.4 below.

	2.23	 	Revenue Growth means the percentage increase in Revenue in the Applicable Year
compared to the prior year.

	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.

- 5 -

 

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, Revenue and Revenue 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.

	3.5	 	Finality of Committee Determinations. Any determination by the Committee of Revenue,
Revenue 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 Revenue, Revenue 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

- 6 -

 

	 	 	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.

	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 Revenue 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 Revenue 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 

- 7 -

 

	 	 	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 Revenue Growth amounts for the Applicable Year,
established after considering expected pharmaceutical peer group performance. The Performance
Benchmarks will correspond to EPS Growth and Revenue 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. Notwithstanding the foregoing, each performance measure multiple established
above will be no less than 0.0 or greater than 2.0 in any Applicable Year, regardless of the
Company’s actual results.

	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 Revenue Growth multiple and 0.25 (i.e.,
Company Performance Bonus Multiple = (EPS Growth multiple * 0.75) + (Revenue 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. 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.

	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, whether such Participant is
designated on an individual basis or by specified job categories, classifications,
levels, subsidiaries or other appropriate classification, 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. No later than early in the Applicable Year, each Participant will
receive information regarding the Participant’s Bonus Target. In the event that a
Participant’s pay grade level changes during the Applicable Year (e.g., because of
promotion, demotion or otherwise), the Participant’s Bonus Target will be prorated
based on the Bonus Target applicable to each pay grade level (with related job
responsibilities) and the percentage of time that the Participant is employed at each
pay grade level during the Applicable Year.
	 
	 	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.

- 8 -

 

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 5.6(b) above will be adjusted based on the
Participant’s performance rating at the end of the Applicable Year. Not later than 90
days after the beginning of the Applicable Year, the Committee will determine applicable
performance multipliers or performance ranges for the applicable performance rating
system in effect for the Participant. For each such Participant, the performance rating
will be determined by the Participant’s supervision.

In the event that a Participant does not receive a year-end performance rating, but is otherwise
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. Except as described below, 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. Notwithstanding the foregoing, an Eligible Employee in the United
States who has not received a year-end performance rating and (1) is on employment
probation (or its equivalent outside the United States) for

- 9 -

 

	 	 	 	unsatisfactory
performance and takes Retirement in lieu of a termination of employment; or (2)
takes Retirement in lieu of termination of employment because of an immediately
terminable offense (e.g. absence of three days without notice, insubordination,
violation of substance abuse policy, possession of firearms, misconduct) will not be
considered to satisfy the last day of Applicable Year requirement.

	 	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 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, Revenue, Revenue 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.

- 10 -

 

SECTION 6. TIME OF PAYMENT

	6.1	 	General Rule. Payment under the Plan will be made in the year following the
Applicable Year on or prior to March 15 of such 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. Any such
payment would be paid consistent with the timing requirements described in subsection 6.1
above.

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,
Revenue, Revenue Growth and any other material terms of the calculation of the Company
Performance Bonus Multiple and Company Bonus for the Applicable Year as described 

- 11 -

 

	 	 	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.
Notwithstanding the foregoing, the Company reserves the right to and, in appropriate cases,
will, seek restitution of any Company Bonus awarded to a Lilly Executive Officer if:

	 	a.	 	The amount of the Company Bonus was calculated based upon the
achievement of certain financial results that were subsequently the subject of
a restatement of all or a portion of the Company’s financial statements;
	 
	 	b.	 	The Lilly Executive Officer engaged in intentional misconduct
that caused or partially caused the need for such a restatement; and
	 
	 	c.	 	The amount of the Company Bonus that would have been awarded to
the Lilly Executive Officer had the financial results been properly reported
would have been lower than the amount actually awarded.

	 	 	This subsection is not intended to limit the Company’s power to take such action as it deems
necessary to remedy the misconduct, prevent its recurrence and, if appropriate, based on all
relevant facts and circumstances, punish the wrongdoer in a manner it deems appropriate.
	 
	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
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

- 12 -

 

	 	 	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), 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 2014 annual meeting.

- 13 -

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