Document:

Exhibit 10.22

 

 

Elanco Animal Health Incorporated

Nonqualified Stock Option Award Agreement

 

This Nonqualified Stock Option has been granted on [INSERT DATE] (“Grant Date”) by Elanco Animal Health Incorporated, an Indiana corporation, (“Elanco” or the “Company”), to the Eligible Individual who has received this Nonqualified Stock Option Award Agreement (the “Grantee”).

 

	
 
    	
Number of Shares:
    	
Log into UBS account at
    
	
 
    	
 
    	
http://myequity.elanco.com
    
	
 
    	
 
    	
 
    
	
 
    	
Grantee:
    	
INSERT GRANTEE NAME
    
	
 
    	
 
    	
 
    
	
 
    	
Option Price:
    	
INSERT OPTION PRICE
    
	
 
    	
 
    	
 
    
	
 
    	
Vesting Date(s):
    	
INSERT VESTING DATE(S)
    
	
 
    	
 
    	
(except as otherwise provided in this Nonqualified Stock Option   Award Agreement)
    
	
 
    	
 
    	
 
    
	
 
    	
Termination Date:
    	
INSERT TERMINATION DATE
    
	
 
    	
 
    	
(or earlier in certain circumstances)
    

 

 

Elanco Nonqualified Stock Option Award Agreement

 

Table of Contents

 

	
Section 1.
    	
Grant of Nonqualified Stock   Option
    	
3
    
	
Section 2.
    	
Vesting
    	
3
    
	
Section 3.
    	
Option Exercise Period
    	
4
    
	
Section 4.
    	
Change in Control
    	
4
    
	
Section 5.
    	
Exercise of Option
    	
5
    
	
Section 6.
    	
Rights of the Grantee
    	
6
    
	
Section 7.
    	
Prohibition Against Transfer
    	
6
    
	
Section 8.
    	
Responsibility for Taxes
    	
6
    
	
Section 9.
    	
Nature of Grant
    	
7
    
	
Section 10.
    	
Data Privacy
    	
9
    
	
Section 11.
    	
Additional Terms and Conditions
    	
11
    
	
Section 12.
    	
Governing Law and Choice of Venue
    	
11
    
	
Section 13.
    	
Miscellaneous Provisions
    	
12
    
	
Section 14.
    	
Option Subject to Acknowledgement   of Acceptance
    	
13
    
	
Appendix
    	
 
    	
14
    

 

2

 

Section 1.        Grant of Nonqualified Stock Option

 

Elanco, an Indiana corporation (“Elanco” or the “Company”), has granted to the Eligible Individual who has received this Nonqualified Stock Option Award Agreement (the “Grantee”) an award of stock options (the “Option” or the “Award”) with respect to the number of shares of Elanco Common Stock (the “Shares”) and the option price per Share (the “Option Price”) set forth on page 1 of this document pursuant to and subject to the terms and conditions set forth in the 2018 Elanco Stock Plan (the “Plan”) and to the terms and conditions set forth in this Nonqualified Stock Option Award Agreement, including all appendices, exhibits and addenda hereto (the “Award Agreement”). In the event of any conflict between the terms of the Plan and this Award Agreement, the terms of the Plan shall govern.

 

Any capitalized terms used but not defined in this Award Agreement shall have the meanings set forth in the Plan.

 

Section 2.        Vesting

 

a.              The Award shall vest at the close of business in Greenfield, Indiana, U.S.A. on the earliest of the following dates (each, a “Vesting Date”):

 

(i)                  the 3rd anniversary of the Grant Date, with respect to 100% of the Award, subject to any alternative date(s) set forth in the Appendix, or

 

(ii)               the date the Grantee is subject to a Qualifying Termination, which means any one of the following:

 

A.            the date the Grantee’s Service is terminated due to the Grantee’s death;

 

B.            the date the Grantee’s Service is terminated by reason of Disability;

 

C.            the date the Grantee’s Service is terminated due to a plant closing or reduction in workforce (as defined below);

 

D.            the date the Grantee’s Service is terminated as a result of the Grantee’s failure to locate a position within the Company or an Affiliate following the placement of the Grantee on reallocation or medical reassignment in the United States.

 

“Plant closing” means the closing of a plant site or other corporate location that directly results in termination of the Grantee’s Service.

 

“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 the Grantee’s Service.

 

The Committee’s determination as to whether (1) the Grantee’s Service has been terminated by reason of Disability, (2) the Grantee’s Service has been terminated as a direct result of either a plant closing or a reduction in workforce, (3) the Grantee’s Service has been terminated as a result of the failure to locate a

 

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position within the Company or an Affiliate following reallocation or medical reassignment, and (4) a leave of absence or a transfer of employment between the Company and an Affiliate or between Affiliates constitutes a termination of Service shall be final and binding on the Grantee.

 

b.              In the event the Grantee’s Service with the Company or an Affiliate is terminated prior to a Vesting Date for any reason or in any circumstance other than those specified in Section 2(a)(ii), any unvested portion of the Award shall be forfeited.

 

Section 3.        Option Exercise Period

 

This Option may be exercised from the Vesting Date to and including through the earliest of the following dates (the “Option Exercise Period”):

 

a.              the Termination Date set forth on the first page of this Award Agreement;

 

b.              the 90th day following the date that the Grantee is subject to a Qualifying Termination.

 

c.               the 30th day following the date that the Grantee’s Service is terminated for any reason other than as set forth in section 3(b).

 

Section 4.        Change in Control

 

The provisions of Section 13.2 of the Plan apply to this Award with the following modifications:

 

a.              The only Change in Control event that shall result in a benefit under this Section 4 shall be the consummation of a merger, share exchange, or consolidation of the Company, as defined in Section 2.6(c) of the Plan (a “Transaction”).

 

b.              In the event that the Award is not converted, assumed, substituted, continued or replaced by a successor or surviving corporation, or a parent or subsidiary thereof, in connection with a Transaction, then immediately prior to the Transaction, the Award shall vest automatically in full.

 

c.               In the event that the Award is converted, assumed, substituted, continued or replaced by a successor or surviving corporation, or a parent or subsidiary thereof, in connection with a Transaction and the Grantee is subject to a Covered Termination (as defined below) prior to any applicable Vesting Date, the Award shall vest automatically in full.

 

For purposes of this provision, “Covered Termination” shall mean a Qualifying Termination, Grantee’s termination without Cause or the Grantee’s resignation for Good Reason. “Cause” and “Good Reason” shall have the meanings ascribed to them in the Elanco Animal Health Incorporated 2018 Change in Control Severance Pay Plan for Employees or the Elanco Animal Health Incorporated 2018 Change in Control Severance Pay Plan for Select Employees (both as amended from time to time) or any successor plan or arrangement thereto, as applicable.

 

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d.              If the Grantee is entitled to receive stock of the acquiring entity or successor to the Company as a result of the application of this Section 4, then references to Shares in this Award Agreement shall be read to mean stock of the successor or surviving corporation, or a parent or subsidiary thereof, as and when applicable.

 

Section 5.        Exercise of Option

 

The Grantee may exercise this Option with respect to not less than one hundred (100) whole Shares, unless the exercise covers the entire balance of the Shares subject to purchase, by delivering to the Company or the exercise agent, as applicable, in accordance with Section 13(a) a notice of exercise in the form of a notice to be approved by the Company and made available to the Grantee. The following additional provisions apply, as applicable, depending on the mode of payment selected by the Grantee:

 

a.              Cash Exercise. The Grantee may choose to pay for the Option Price by delivering funds directly. In that event, the notice of exercise must be accompanied by cash, a personal check, or a cashier’s check in U.S. dollars in the amount of the Option Price and any required withholding for Tax-Related Items (as defined in Section 8 below). The notice of exercise must specify the number of Shares covered by the exercise. Once delivered, the notice of exercise shall be irrevocable. Upon receipt of the notice of exercise and payment of the Option Price, the Company shall deliver to the Grantee a statement of the fair market value of Shares on the exercise date and the amount of withholding for Tax-Related Items due, if any.

 

b.              Exercise using shares (stock swap). To the extent permitted by the Committee, the Grantee may exchange Shares owned by the Grantee for at least 6 months whose current value covers the Option Price. The notice of exercise must state the number of Shares being exchanged as well as the number of Shares covered by the exercise. Any required withholding for Tax-Related Items must be paid by cash, a personal check, or a cashier’s check in U.S. dollars. Once delivered, the notice of exercise shall be irrevocable. Upon receipt of the notice of exercise, the Company shall deliver to the Grantee a statement of the fair market value of Shares on the exercise date and the amount of withholding for Tax-Related Items due, if any.

 

c.               Cashless Exercise. The Grantee may choose to pay for the Option Price through a sale of Shares received upon exercise of this Option. The exercise agent, a financial or brokerage institution approved by the Company, shall execute such a sale. The exercise agent shall agree to pay on behalf of the Grantee the Option Price and any withholding for Tax-Related Items. At the election of the Grantee, the exercise agent shall either:

 

(i)             Sell, and retain the proceeds of, a sufficient number of Shares from the exercise to pay the Option Price, any withholding for Tax-Related Items, and transaction costs, with the remaining Shares and any cash balance to be delivered to the Grantee; or

 

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(ii)          Sell all the Shares exercised and deliver to the Grantee the cash balance remaining after deduction of the Option Price, any withholding for Tax-Related Items, and transaction costs.

 

The notice of exercise shall be delivered in accordance with procedures to be established by the Company and communicated to the Grantee. Once delivered, the notice shall be irrevocable except that an attempted exercise may be deemed null and void by the Company or the exercise agent in its discretion if it determines that the anticipated proceeds from the sale of the Shares subject to the Option could be insufficient to cover the Option Price, withholding for Tax-Related Items, and transaction costs.

 

Section 6.        Rights of the Grantee

 

The Company will not issue or transfer Shares upon exercise of this Option until the Option Price and any withholding for Tax-Related Items have been fully paid or the exercise agent has certified that it will make such payments in accordance with procedures satisfactory to the Company. The Grantee shall have no rights as a shareholder as to Shares covered by an exercise until the Shares are issued or transferred on the Company’s books. At the time the Grantee becomes the owner of the Shares covered by the exercise, he or she shall cease to be the owner of any Shares exchanged in payment of the Option Price.

 

Section 7.        Prohibition Against Transfer

 

The right of a Grantee to receive payments of Shares under this Award may not be transferred except to a duly appointed guardian of the estate of the Grantee or to a successor of the Grantee by will or the applicable laws of descent and distribution and then only subject to the provisions of this Award Agreement. A Grantee may not assign, sell, pledge, or otherwise transfer Shares or cash to which he or she may be entitled hereunder prior to transfer or payment thereof to the Grantee, and any such attempted assignment, sale, pledge or transfer shall be void.

 

Section 8.        Responsibility for Taxes

 

a.              Regardless of any action the Company 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, fringe benefits tax, payment on account or other tax related items related to the Grantee’s participation in the Plan and legally applicable to the Grantee (“Tax Related Items”), the Grantee acknowledges that the ultimate liability for all Tax Related Items is and remains the Grantee’s responsibility and may exceed the amount actually withheld by the Company or the Employer. The Grantee further acknowledges that the Company and the Employer (i) make no representations or undertakings regarding the treatment of any Tax Related Items in connection with any aspect of the Award, including the grant of the Option, the vesting of the Option, the exercise of the Option, the transfer and issuance of any Shares, the receipt of any dividends and the sale of any Shares acquired pursuant to this Award; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Grantee’s liability for Tax Related Items or 

 

6

 

achieve any particular tax result. Furthermore, if the Grantee becomes subject to Tax Related Items in more than one jurisdiction, the Grantee acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax Related Items in more than one jurisdiction.

 

b.              Prior to the applicable taxable or tax withholding event, as applicable, the Grantee shall pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax Related Items. In this regard, the Grantee authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any obligations with regard to all Tax-Related Items by arranging for the sale of Shares to be issued upon exercise of the Award (on the Grantee’s behalf and at the Grantee’s direction pursuant to this authorization or such other authorization as the Grantee may be required to provide to the Company or its designated broker in order for such sale to be effectuated) and withhold from the proceeds of such sale or by one or a combination of the following methods: (i) withholding from the Grantee’s wages or other cash compensation paid to the Grantee by the Company and/or the Employer and/or (ii) any other arrangement approved by the Company and permissible under Applicable laws.

 

c.               Depending on the withholding method, the Company and/or the Employer may withhold or account for Tax Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case the Grantee may receive a refund of any over-withheld amount in cash as soon as practicable and without interest and will not be entitled to the equivalent amount in Shares. If the obligation for Tax Related Items is satisfied by withholding Shares, for tax purposes, the Grantee will be deemed to have been issued the full number of Shares to which he or she is entitled pursuant to this Award, notwithstanding that a number of Shares are withheld to satisfy the obligation for Tax Related Items.

 

d.              The Company may require the Grantee to pay the Company and/or the Employer any amount of Tax Related Items that the Company and/or the Employer may be required to withhold or account for as a result of any aspect of this Award that cannot be satisfied by the means previously described. The Company may refuse to deliver Shares to the Grantee if the Grantee fails to comply with the Grantee’s obligation in connection with the Tax Related Items as described in this Section 8.

 

Section 9.        Nature of Grant

 

In accepting the grant, Grantee acknowledges, understands and agrees that:

 

a.              the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, as provided in the Plan;

 

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b.              the Award is voluntary and occasional and does not create any contractual or other right to receive future awards of Options, or benefits in lieu thereof, even if Options have been granted in the past;

 

c.               all decisions with respect to future awards of Options or other awards, if any, will be at the sole discretion of the Committee;

 

d.              the Grantee’s participation in the Plan is voluntary;

 

e.               the Award and any Shares subject to the Award are not intended to replace any pension rights or compensation;

 

f.                the Award and any Shares subject to the Award, and the income and value of same, are not part of normal or expected compensation for any purpose, including but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, holiday pay, leave pay, pension or welfare or retirement benefits or similar mandatory payments;

 

g.               unless otherwise agreed with the Company, the Award and any Shares subject to the Award, and the income and value of same, are not granted as consideration for, or in connection with, the service the Grantee may provide as a director of an Affiliate;

 

h.              neither the Award nor any provision of this Award Agreement, the Plan or the policies adopted pursuant to the 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 the Company, any Affiliate of the Company, the Award shall not be interpreted to form an employment contract or relationship with the Company or any Affiliate;

 

i.                  the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;

 

j.                 if the underlying Shares do not increase in value, the Option will have no value;

 

k.              if the Grantee exercises the Option and acquires Shares, the value of such Shares may increase or decrease in value, even below the Option Price;

 

i.                  no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from the Grantee ceasing to provide employment or other services to the Company or the Employer (for any reason whatsoever, whether or not later found to be invalid or in breach of local labor laws in the jurisdiction where the Grantee is employed or the terms of Grantee’s employment agreement, if any);

 

m.          for purposes of the Award, the Grantee’s employment will be considered terminated as of the date he or she is no longer actively providing Services and the Grantee’s right, if any, to earn and exercise any portion of the Award after such termination of employment or Services (regardless of the reason for such termination and whether or not such termination is later found to be invalid or in breach of employment laws in the jurisdiction where the Grantee is employed or the terms of the Grantee’s employment agreement, if any) will be measured by the date the Grantee ceases to actively provide Services and

 

8

 

will not be extended by any notice period (e.g., active service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where the Grantee is employed or the terms of the Grantee’s employment agreement, if any); the Committee shall have the exclusive discretion to determine when the Grantee is no longer actively providing Services for purposes of the Award (including whether the Grantee may still be considered to be actively providing services while on a leave of absence);

 

n.              unless otherwise provided in the Plan or by the Committee in its discretion, the Award and the benefits evidenced by this Award Agreement do not create any entitlement to have the Award or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and

 

o.              neither the Company, the Employer nor any Affiliate shall be liable for any foreign exchange rate fluctuation between the Grantee’s local currency and the United States Dollar that may affect the value of the Option or any amounts due to the Grantee pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise.

 

Section 10.     Data Privacy

 

a.              Data Collection and Usage. The Company and the Employer may collect, process and use certain personal information about the Grantee, and persons closely associated with the Grantee, including, but not limited to, the Grantee’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number (e.g., resident registration number), salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Grantee’s favor (“Data”), for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the Grantee’s consent. Where required under Applicable Law, Data may also be disclosed to certain securities or other regulatory authorities where the Company’s securities are listed or traded or regulatory filings are made and the legal basis, where required, for such disclosure are the Applicable Laws.

 

b.              Stock Plan Administration Service Providers. The Company transfers Data to UBS Financial Services Inc. and/or its affiliated companies (“UBS”), an independent service provider, which is assisting the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different service provider and share Data with such other provider serving in a similar manner. The Grantee may be asked to agree on separate terms and data processing practices with the service provider, with such agreement being a condition to the ability to participate in the Plan.

 

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c.               International Data Transfers. The Company and its service providers are based in the United States. The Grantee’s country or jurisdiction may have different data privacy laws and protections than the United States. For example, the European Commission has issued a limited adequacy finding with respect to the United States that applies only to the extent companies register for the EU-U.S. Privacy Shield program, which is open to companies subject to Federal Trade Commission jurisdiction and in which the Company participates with respect to employee data. The Company’s legal basis, where required, for the transfer of Data is Grantee’s consent

 

d.              Data Retention. The Company will hold and use the Data only as long as is necessary to implement, administer and manage the Grantee’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws.

 

e.               Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Grantee is providing the consents herein on a purely voluntary basis. If the Grantee does not consent, or if the Grantee later seeks to revoke the Grantee’s consent, the Grantee’s salary from or employment and career with the Employer will not be affected; the only consequence of refusing or withdrawing the Grantee’s consent is that the Company would not be able to grant this Award or other awards to the Grantee or administer or maintain such awards.

 

f.                 Declaration of Consent. By accepting the Award and indicating consent via the Company’s online acceptance procedure, the Grantee is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data by the Company and the transfer of Data to the recipients mentioned above, including recipients located in countries which do not adduce an adequate level of protection from a European (or other non-U.S.) data protection law perspective, for the purposes described above.

 

The Grantee understands that the Company may rely on a different legal basis for the processing or transfer of Data in the future and/or request that the Grantee provide another data privacy consent form. If applicable and upon request of the Company, the Grantee agrees to provide an executed acknowledgement or data privacy consent form to the Employer or the Company (or any other acknowledgements, agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in the Grantee’s country, either now or in the future. The Grantee understands that he or she will not be able to participate in the Plan if he or she fails to execute any such acknowledgement, agreement or consent requested by the Company and/or the Employer.

 

10

 

Section 11.     Additional Terms and Conditions

 

a.              Country-Specific Conditions. The Award shall be subject to any special terms and conditions set forth in any Appendix to this Award Agreement for the Grantee’s country. Moreover, if the Grantee relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to the Grantee, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Award Agreement.

 

b.              Insider Trading / Market Abuse Laws. The Grantee may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including but not limited to the United States and the Grantee’s country of residence, which may affect the Grantee’s ability to directly or indirectly, for the Grantee or for a third party, acquire or sell, or attempt to sell, or otherwise dispose of Shares or rights to acquire Shares (e.g., Options) under the Plan during such times as the Grantee is considered to have “inside information” regarding the Company (as determined under the laws or regulations in the applicable jurisdictions). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. The Grantee acknowledges that it is his or her responsibility to comply with any applicable restrictions, and the Grantee should consult with his or her personal legal advisor on this matter.

 

c.               Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Award and any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Grantee to execute any additional agreements or undertakings that may be necessary to accomplish the foregoing. Without limitation to the foregoing, the Grantee agrees that the Option and any benefits or proceeds the Grantee may receive hereunder shall be subject to forfeiture and/or repayment to the Company to the extent required to comply with any requirements imposed under Applicable Laws or any compensation recovery policy of the Company that reflects the provisions of Applicable Laws.

 

Section 12.     Governing Law and Choice of Venue

 

The validity and construction of this Award Agreement 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 Award Agreement, 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 Award is granted and/or to be performed.

 

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Section 13.     Miscellaneous Provisions

 

a.              Notices (and Payments) and Electronic Delivery and Participation. Any notice to be given by the Grantee or successor Grantee shall be in writing, and any notice and payment shall be deemed to have been given or made only upon receipt thereof by the Corporate Secretary of the Company at the Elanco Animal Health Global Headquarters, Greenfield, Indiana 46140, U.S.A. Any notice or communication by the Company 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 the Company by the Grantee and, in the case of any successor Grantee, at the address specified in writing to the Company by the successor Grantee. In addition, the Company may, in its sole discretion, decide to deliver any documents related to the Award and participation in the Plan by electronic means or request the Grantee’s consent to participate in the Plan by electronic means. By accepting this Award, the Grantee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

 

b.              Language. If the Grantee has received this Award Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

 

c.               Waiver. The waiver by the Company of any provision of this Award Agreement at any time or for any purpose shall not operate as or be construed to be a waiver of the same or any other provision of this Award Agreement at any subsequent time or for any other purpose.

 

d.              Severability and Section Headings. If one or more of the provisions of this Award Agreement 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 Award Agreement to be construed so as to foster the intent of this Award Agreement and the Plan.

 

The section headings in this Award Agreement are for convenience of reference only and shall not be deemed a part of, or germane to, the interpretation or construction of this instrument.

 

e.               No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Grantee’s participation in the Plan or the Grantee’s acquisition or sale of the underlying Shares. The Grantee should consult with his or her own personal tax,

 

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legal and financial advisors regarding the Grantee’s participation in the Plan before taking any action related to the Plan.

 

Section 14.     Option Subject to Acknowledgement of Acceptance

 

Notwithstanding any provisions of this Award Agreement, the Option is subject to acknowledgement of acceptance by the Grantee prior to 4:00 PM (EDT) [INSERT DATE], through the website of UBS, the Company’s stock plan administrator. If the Grantee does not acknowledge acceptance of the Option prior to 4:00 PM (EDT) [INSERT DATE], the Option will be cancelled, subject to the Committee’s discretion for unforeseen circumstances.

 

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed in Indianapolis, Indiana, by its proper officer.

 

 

	
 
    	
ELANCO ANIMAL HEALTH INCORPORATED
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Jeffrey N. Simmons
    
	
 
    	
 
    	
President, Chief Executive   Officer and Director
    

 

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Appendix

 

Elanco Animal Health Incorporated 
 2018 Elanco Stock Plan 
 Nonqualified Stock Option Award

 

This Appendix includes special terms and conditions applicable to the Grantee’s country. These terms and conditions supplement or replace (as indicated) the terms and conditions set forth in the Award Agreement to which it is attached. If the Grantee is a citizen or resident of a country other than the one in which the Grantee is currently working and/or residing (or is considered as such for local law purposes), or if the Grantee transfers employment or residency to a different country after the Award is granted, Elanco will, in its discretion, determine the extent to which the terms and conditions herein will apply. This Appendix also includes other information relevant to the Award.

 

Unless otherwise defined herein, the terms defined in the Plan or the Award Agreement, as applicable, shall have the same meanings in this Appendix.

 

The Grantee should also be aware that he or she may be required to take certain steps to comply with Applicable Laws in the Grantee’s country in connection with the Award. For example, exchange control, foreign asset and/or account and/or other tax reporting obligations may apply to the Grantee upon receipt of the Award or the Shares subject to the Award or upon the sale of Shares. For more information regarding such obligations, the Grantee should refer to the Employee Information Supplement for the Grantee’s country, if any. The Grantee should also consult with his or her own personal tax and legal advisors to determine what, if any, obligations exist with respect to the Award and/or the acquisition or sale of Shares. Neither the Company nor the Employer is responsible for any failure on the part of the Grantee to be aware of or comply with Applicable Laws.

 

14

 

Appendix for Switzerland

 

Elanco Animal Health Incorporated 
 2018 Elanco Stock Plan 
 Nonqualified Stock Option Award

 

Securities Law Information.

 

The grant of the Award and the issuance of Shares is not intended to be publicly offered in or from Switzerland. Because this is a private offering in Switzerland, the Award is not subject to registration in Switzerland. Neither this Award Agreement nor any other materials relating to the Award (i) constitute a prospectus as such term is understood pursuant to article 652a of the Swiss Code of Obligations, (ii) may be publicly distributed nor otherwise made publicly available in Switzerland, or (iii) have been or will be filed with, approved or supervised by any Swiss regulatory authority, including the Swiss Financial Market Supervisory Authority (“FINMA”).

 

15Exhibit 10.23

 

THE LILLY SEVERANCE PAY PLAN

 

As Amended Effective January 3, 2017

 

 

TABLE OF CONTENTS

 

	
SECTION 1.   ESTABLISHMENT
    	
1
    
	
 
    	
 
    
	
1.01
    	
 
    	
The Establishment of   the Plan
    	
1
    
	
1.02
    	
 
    	
The Lilly Employee   Welfare Plan
    	
1
    
	
1.03
    	
 
    	
Applicability of Plan
    	
1
    
	
 
    	
 
    	
 
    
	
SECTION 2.   DEFINITIONS
    	
2
    
	
 
    	
 
    
	
2.01
    	
 
    	
Definitions
    	
2
    
	
 
    	
 
    	
 
    
	
SECTION 3.   SEVERANCE BENEFITS
    	
5
    
	
 
    	
 
    
	
3.01
    	
 
    	
Eligibility
    	
5
    
	
3.02
    	
 
    	
Amount of Benefit
    	
5
    
	
3.03
    	
 
    	
Payment
    	
8
    
	
3.04
    	
 
    	
Death
    	
8
    
	
3.05
    	
 
    	
Section 409A
    	
8
    
	
 
    	
 
    	
 
    
	
SECTION 4.   LIMITATIONS ON SEVERANCE BENEFITS
    	
10
    
	
 
    	
 
    
	
4.01
    	
 
    	
Transfer
    	
10
    
	
4.02
    	
 
    	
Merger or Sale
    	
10
    
	
4.03
    	
 
    	
Disciplinary   Terminations
    	
10
    
	
4.04
    	
 
    	
Certain Other   Terminations
    	
11
    
	
4.05
    	
 
    	
Timing of Termination
    	
11
    
	
4.06
    	
 
    	
Death
    	
11
    
	
4.07
    	
 
    	
Set-Off
    	
11
    
	
 
    	
 
    	
 
    
	
SECTION 5.   MISCELLANEOUS
    	
12
    
	
 
    	
 
    
	
5.01
    	
 
    	
Filing of Claims
    	
12
    
	
5.02
    	
 
    	
Discontinuation of   Participation by Employer; Amendment of Separate Schedule of Severance   Benefits
    	
12
    
	
5.03
    	
 
    	
Benefits Solely from   General Assets
    	
12
    
	
5.04
    	
 
    	
Plan Expenses
    	
12
    
	
5.05
    	
 
    	
Information to be   Furnished
    	
12
    

 

 

SECTION 1.  ESTABLISHMENT

 

1.01                        The Establishment of the Plan

 

Effective January 1, 1990, Eli Lilly and Company (the “Company”) established an unfunded employee welfare benefit plan entitled The Lilly Severance Pay Plan, which was amended and restated, effective April 1, 1996, in the form of The Lilly Severance Pay Plan (the “Prior Plan”).  The Lilly Severance Pay Plan (the “Plan”) is hereby amended and restated effective January 1, 2001 (the “Effective Date”).  The purpose of the Plan is to provide severance benefits to certain employees of the Company and certain of its subsidiaries and affiliates in the event that their employment is terminated under the circumstances specified herein.  An individual shall not be entitled to severance benefits under the Plan by reason of any termination of employment that occurred before the Plan’s original effective date of January 1, 1990.

 

1.02                        The Lilly Employee Welfare Plan

 

The Plan shall be part of, and shall constitute a “Component Plan” under, The Lilly Employee Welfare Plan, a program established to provide medical, dental, extended disability, life insurance, holiday, vacation, and other benefits to eligible employees (including the beneficiaries of such employees) of the Company and its participating subsidiary and affiliated companies.  The provisions of The Lilly Employee Welfare Plan are, to the extent applicable, incorporated herein by reference.

 

1.03                        Applicability of Plan

 

The provisions of the Plan shall apply only to persons in the employ of the Company or certain of its subsidiaries and affiliates on or after the Effective Date.  The rights and benefits, if any, of persons who were employed by the Company or certain of its subsidiaries and affiliates prior to the Effective Date, but who are not in the employ on or after the Effective Date, shall be determined in accordance with the provisions of the Prior Plan in effect on the date their employment terminated.

 

1

 

SECTION 2.  DEFINITIONS

 

2.01                        Definitions

 

(a)                                 The following words and phrases as used in the Plan shall have the following meanings unless a different meaning is required by the context:

 

(1)                                         Additional Severance Payment.  The term “Additional Severance Payment” means the additional severance pay benefit described in the provision entitled “Additional Severance Payment” in paragraph 3.02(a).

 

(2)                                         Annual Compensation.  The term “Annual Compensation” means the amount of an Employee’s Weekly Compensation multiplied by fifty-two (52).

 

(3)                                         Company.  The term “Company” means Eli Lilly and Company, a corporation organized under the laws of the State of Indiana, or any corporation that succeeds to the ownership of all or substantially all of the assets of Eli Lilly and Company.

 

(4)                                         Controlled Group.  The term “Controlled Group” means a group of entities that would be aggregated under Section 414(b) or (c) of the Internal Revenue Code, provided that such group includes the Company at the time of reference.

 

(5)                                         Employee.  The term “Employee” means any regular employee of an Employer who is neither temporary nor a special status employee and who works 20 or more hours per week, but does not include any executive officer of the Company (within the meaning of Rule 3b-7 of the Securities Exchange Act of 1934).  For purposes of this Plan, the term “special status employee” includes an employee designated as a fixed duration employee, as determined by the Employer.  Notwithstanding anything herein to the contrary, the term Employee shall not include any person who is a member of a collective bargaining agreement or 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 does not include any individual who performs services for the Company as an independent contractor or under any other non-employee classification.

 

(6)                                 Employee Benefits Committee.  The term “Employee Benefits Committee” means the committee by that name appointed by the Board of Directors or any other committee appointed by the Board of Directors to administer the Plan.

 

2

 

(7)                                 Employer.  The term “Employer” means the Company, and any subsidiary or affiliated company (i) that has been specifically designated by the Company or the Employee Benefits Committee as an Employer for the purposes of the Welfare Plan and the Plan, (ii) that has heretofore adopted or hereafter adopts the Welfare Plan and the Plan, and (iii) that has not elected to terminate or withdraw from its participation in the Welfare Plan or the Plan.

 

(8)                                 Plan.  The term “Plan” means the Lilly Severance Pay Plan, as herein set forth and as amended from time to time.

 

(9)                                 Revocation Period.  The term “Revocation Period” has the meaning described in paragraph 3.02(c).

 

(10)                          Section 409A.  “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended, and the applicable rulings and regulations promulgated thereunder.

 

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

 

(12)                          Service.  The term “Service” means the period of an Employee’s continuous employment with the Controlled Group, measured from the date on which the Employee is first employed by any member of the Controlled Group to the date on which the Employee’s employment with the Controlled Group terminates.  If an Employee who is employed by one member of the Controlled Group is transferred to another member of the Controlled Group without an interruption in service, “Service” shall include the Employee’s period of continuous employment with both members of the Controlled Group.

 

If an Employee terminates employment with a member of the Controlled Group and is subsequently re-employed by the same or another member of the Controlled Group following an interruption in service, “Service” shall include only the Employee’s period of continuous employment after the date on which the Employee was re-employed by a member of the Controlled Group.  “Service” for such an Employee shall not include the Employee’s period of continuous employment with the Controlled Group prior to the date on which the Employee was re-employed by a member of the Controlled Group.  Notwithstanding the foregoing, for any Employee who was employed by a member of the Controlled Group prior to February 2001, was employed by Enron Building Services, Inc. or its successor during 2001 and was subsequently re-employed by the same or another member of the Controlled Group, “Service” shall include both the

 

3

 

Employee’s period of continuous employment with the Controlled Group prior to and after the interruption in service.

 

“Service” shall include periods of approved leaves of absence.

 

The Employer may make adjustments in “Service” as defined in this paragraph, provided that it does so on a uniform and nondiscriminatory basis and notifies the Employee Benefits Committee of any such adjustments.

 

(13)                          Severance Agreement and Release.  The term “Severance Agreement and Release” means the severance agreement and release described in paragraph 3.02(c).

 

(14)                          Severance Benefit.  The term “Severance Benefit” means the severance pay benefit described in paragraph 3.02(a) or 3.02(b), whichever is applicable.

 

(15)                          Transition Assistance.  A onetime payment equal to five thousand dollars ($5,000), less applicable taxes, provided to an Eligible Employee for any purpose, whether for payment of medical premiums, job placement services or miscellaneous expenses or other purpose.

 

(16)                          Triggering Event.  The term “Triggering Event” shall have the meaning defined in paragraph 4.02(a) hereof.

 

(17)                          Weekly Compensation.  The term “Weekly Compensation” means the basic weekly salary or wages paid by an Employer for an Employee’s performance of services, excluding overtime, bonuses, and any other forms of extra earnings, but including elective contributions under any plan that is intended to meet the requires of Section 125 or Section 401(k) of the Code.

 

(18)                          Welfare Plan.  The term “Welfare Plan” means The Lilly Employee Welfare Plan, as amended from time to time.

 

(19)                          Year.  The term “Year” when used with reference to “Service” means any period of 365 (or, in a leap year, 366) calendar days.

 

(b)  Gender.  Masculine pronouns shall refer both to males and to females.

 

4

 

SECTION 3.  SEVERANCE BENEFITS

 

3.01                        Eligibility

 

Subject to the discretion of the Employer, and subject to the provisions of subsection 3.02 and (except as provided in paragraph (d), below) Section 4 hereof, an Employee shall be eligible to receive from his Employer a severance benefit in the amount calculated in accordance with subsection 3.02 hereof upon the Employee’s Separation from Service with the Employer for the following reasons:

 

(a)                                 Discharge, or resignation in lieu of discharge, for reasons other than those specified in subsection 4.03 hereof;

 

(b)                                 Resignation because of disability, as defined in the Employer’s extended disability plan, if such disability constitutes a prior condition under such extended disability plan;

 

(c)                                  The closing of the office or facility in which the Employee is employed; or

 

(d)                                 Any other reason determined by the Employer to warrant the payment of a severance benefit pursuant to the Plan, including any such reason that otherwise would fail to warrant the payment of a severance benefit because of the limitations in Section 4 hereof.

 

3.02                        Amount of Benefit

 

(a)                                 An Employee who satisfies the eligibility requirements in subsection 3.01 will be entitled to a Severance Benefit as described in this subsection 3.02.  Subject to the provisions of paragraphs 3.02(b) and 3.02(d), the Severance Benefit (which will include, if applicable, the Additional Severance Payment described below), shall be equal to the following:  the greater of (i) twelve times an Employee’s Weekly Compensation; or (ii) eight times an Employee’s Weekly Compensation plus an additional two times an Employee’s Weekly Compensation for each Year of Service completed by the Employee, but not to exceed seventy-eight times an Employee’s Weekly Compensation.

 

By way of illustration only, an Eligible Employee with ten years of Service would receive eight times an Employee’s Weekly Compensation plus an additional twenty times an Employee’s Weekly Compensation (8 + (2*10)) times Weekly Compensation or twenty-eight times his Weekly Compensation.  Similarly, an Eligible Employee with thirty-seven years of Service would be eligible to receive (8 + (2*37)) times the Employee’s Weekly Compensation equal to eighty-two times an Employee’s Weekly Compensation, reduced to the maximum severance amount equal to seventy-eight (78) times an Employee’s Weekly Compensation.

 

5

 

In addition, and subject to the provisions of paragraphs 3.02(b) and 3.02(d), each Eligible Employee also will be entitled to Transition Assistance.

 

Additional Severance Payment.  If an Employee is entitled to the Severance Benefit described above (by satisfying the eligibility requirements described in subsections 3.01 and 3.02 above), the Employee may also be eligible under certain circumstances for an Additional Severance Payment.  The Employee is eligible for an Additional Severance Payment if the Employee is provided a specified period of time (i.e., the “reallocation period”) in which to look for another job with the Employer as a result of, or in conjunction with, a plant closing, reduction in force, or other reallocation, as determined by the Employer.  If the Employee chooses voluntarily to leave such employment prior to the end of the applicable reallocation period, the Employee will be eligible for an Additional Severance Payment that is equal to the additional base pay the Employee would have received if the Employee had remained employed through the end of the reallocation period designated by the Employer.  In circumstances in which this Additional Severance Payment is applicable, an Employee who is eligible for an Additional Severance Payment and is otherwise entitled to Severance Benefits under this paragraph 3.02(a) will not be rendered ineligible for Severance Benefits due solely to the voluntary nature of the Employee’s termination during the reallocation period.  For an example of how the Additional Severance Payment is determined, if an Employee’s position is eliminated due to a reduction in force and the Employee is given a 12-week reallocation period (during which the Employee remains employed by the Company and looks for another position within the Company), and if the Employee chooses voluntarily to leave employment with the Company after three weeks of that realloation period, the Employee’s Additional Severance Payment would be equal to nine weeks of base pay.

 

Eligible Employees of Novartis Animal Health US, Inc. (or its Corporate Successor):  Notwithstanding the foregoing, an Employee who was employed by Novartis Animal Health US, Inc. on December 31, 2014, became an Employee under the Plan as of March 1, 2015 and satisfies the eligibility requirements for a severance benefit under subsection 3.01 of the Plan during the period from January 1, 2015 through December 31, 2016, will be eligible for a cash severance payment equal to the greater of (i) the severance amount that would have been provided under the terms of the “Severance Pay Plan for Employees of Novartis Group Companies in the United States” dated March 1, 2012 (“Novartis Plan”); and (ii) the Severance Benefit described in subsection 3.02(a) above, except that such Employees who were notified that their roles would end on March 10, 2015 and otherwise qualify for a cash severance benefit on March 10, 2015 will not be eligible for an “Additional Severance Payment” and will be required to remain employed through March 10, 2015.  In addition, such Employees also will be eligible to elect an extension of medical and dental benefits pursuant to the Consolidated Omnibus Budget Reconciliation Act (COBRA) for the Employee and/or the Employee’s covered dependents at rates applicable to active employees under The Eli Lilly and Company

 

6

 

Health Plan for the number of weeks’ severance calculated under the Novartis Plan, as determined by the Company (and thereafter at full COBRA rates).

 

Former Eligible Employees of Boehringer Ingelheim Vetmedica, Inc.:  Notwithstanding the foregoing, an Employee who was employed by Boehringer Ingelheim Vetmedica, Inc. (“BIVI Employee”) on January 2, 2017, became an Employee under the Plan as of January 3, 2017, and satisfies the eligibility requirements for a severance benefit under subsection 3.01 of the Plan during the period from January 3, 2017 through January 2, 2019, will be eligible for severance benefits as described on Attachment A (“Severance Guidelines”).  In no event will a BIVI Employee be eligible for an “Additional Severance Payment” under the terms of the Plan during the period from January 3, 2017 through January 2, 2019.

 

(b)                                 An Employer, acting through its Board of Directors and/or most senior vice president with responsibility for human resources, may adopt for any designated group of Employees a schedule of Severance Benefits different from that set forth in paragraph 3.02(a) hereof.  In such an event, the Employer shall inform the Employee Benefits Committee, which shall attach such schedule for the Severance Benefits as part of Attachment A to the Plan.  Any schedule of Severance Benefits that is made a part of the Plan by inclusion in Attachment A (i) may be amended or modified at any time in accordance with subsection 5.02 hereof and (ii) shall comply with the limitations placed on welfare benefit plans providing severance benefits as provided in Section 2510.3-2(b) of the regulations promulgated by the U.S. Department of Labor, or like successor regulation, except as determined by the most senior vice president with responsibility for human resources.

 

(c)                                  Receipt of any Severance Benefit and/or Additional Severance Payment described above is conditioned on the prior execution of (and failure timely to revoke) a Severance Agreement and Release.  The Severance Agreement and Release shall be a written document, in a form determined by the Company, intended to create a binding agreement by the Employee to release any claims that the Employee may have against the Company, and certain related entities or individuals, that arise on or before the date on which the Employee signs the Severance Agreement and Release, including, without limitation, any claims under the federal Age Discrimination in Employment Act, as amended (“ADEA”).  The Severance Agreement and Release may also require the Employee, after termination of employment, to cooperate with the Company in connection with any lawsuits or disputes with respect to which the Employee has information or may be a witness.  The Employee will be given a specified period of time to consider the Severance Agreement and Release before signing it, will be advised to consult an attorney before signing the Severance Agreement and Release and may have the right to revoke the Severance

 

7

 

Agreement and Release, as specified in the Severance Agreement and Release, within a period (the “Revocation Period”) specified in such agreement.

 

(d)                                 The severance benefit determined under paragraph 3.02(a) or paragraph 3.02(b) hereof shall be reduced, to the extent permitted by law, by the value of any retiree health benefits received by an individual who is eligible for an immediate pension.  If the individual receives immediate pension benefits that are actuarially reduced, the amount of the deduction for retiree health benefits shall be reduced by the same percentage.

 

3.03                        Payment

 

The Employer shall pay a Severance Benefit due to an eligible Employee in a single lump-sum payment, less any required tax withholdings on the date that is forty-five days (45) calendar days following the date of the Eligible Employee’s Separation from Service, conditioned upon the eligible Employee having complied, prior to that date, with the requirements of Section 3.02 regarding a release of claims.

 

3.04                        Death

 

If the Employee Benefits Committee determines that any Employee entitled to benefits under the Plan died after becoming eligible for such benefits but before such benefits have been paid, any payment otherwise due to the Employee shall be paid to the Employee’s surviving spouse, if any, and if none, to the Employee’s estate.

 

3.05                        Section 409A

 

The parties intend that all benefits and payments to be made to a Participant hereunder will be provided or paid to such Participant in compliance with all applicable provisions of Section 409A and the regulations issued thereunder, and the rulings, notices, and other guidance issued by the Internal Revenue Services interpreting the same, and this Plan shall be construed and administered in accordance with such intent.  This Plan may be modified to the extent necessary to comply with all applicable requirements of, and to avoid the imposition of any additional tax, interest and penalties under, Section 409A in connection with, the benefits and payments to be provided or paid to an eligible Employee hereunder.  Any such modification shall maintain the original intent and benefit to the Employer and the eligible Employee of the applicable provision of this Plan, to the maximum extent possible without violating Section 409A.

 

All payments to be made upon a termination of employment under this Agreement may only be made upon a “Separation from Service” under Section 409A.  Severance Benefits under the Plan are intended to be exempt from Section 409A under the “separation pay exception,” to the maximum extent applicable.  Any payments that qualify for the “short-term deferral” exception

 

8

 

or another exception under Section 409A shall be paid under the applicable exception as described herein.  Further, for purposes of the limitations on nonqualified deferred compensation under Section 409A, each payment of compensation under the Plan shall be treated as a separate payment.  Notwithstanding the foregoing or anything elsewhere in the Plan to the contrary, if an eligible Employee is treated as a “specified employee” as of the date of any payment under this  Plan, then, to the extent required, the commencement of any payment under this Plan shall be delayed until the date that is six (6) months following the date of the eligible Employee’s Separation from Service.  In no event may an eligible Employee, directly or indirectly, designate the calendar year of a payment.

 

9

 

SECTION 4.  LIMITATIONS ON SEVERANCE BENEFITS

 

4.01                        Transfer

 

An Employee shall not be eligible to receive a severance benefit pursuant to the Plan if the Employee has been offered a position with a member of the Controlled Group (or a joint venture including a member of the Controlled Group), that is within fifty (50) or fewer miles of the Employee’s current workplace, regardless of whether the Employee accepts the position.

 

4.02                        Merger or Sale

 

(a)                                 Subject to the provisions of paragraphs 4.02(b) and (c) hereof, an Employee shall not be eligible to receive a severance benefit pursuant to the Plan if (i) his employment with the Employer is terminated as a result of a sale of assets, merger, liquidation, business reorganization, or disposition, and (ii) the Employee is employed by a successor employer as of the first business day following the closing of such sale, merger, liquidation, business reorganization, or disposition.  If an event described in clause (i) (a “Triggering Event”) occurs, an individual described in clause (ii) shall be ineligible to receive a severance benefit under the Plan not only when the Triggering Event occurs, but also when the individual subsequently terminates his employment with the successor employer.  This paragraph (a) shall apply regardless of whether the successor employer has agreed to provide severance benefits comparable to those provided under the Plan.

 

(b)                                 If a Triggering Event (as defined in paragraph 4.02(a)) occurs, the successor employer of an individual described in clause (ii) of paragraph 4.02(a) shall not be required to pay any severance benefit with respect to Service that such individual completed before the Triggering Event unless the successor employer has agreed in writing to provide a severance benefit with respect to such Service.

 

(c)                                  The provisions of this paragraph 4.02 shall not apply to benefits payable under The Eli Lilly and Company Change in Control Severance Pay Plan For Employees.

 

4.03                        Disciplinary Terminations

 

An Employee shall not be eligible to receive a severance benefit pursuant to the Plan if his employment with the Employer is terminated for any of the following disciplinary reasons:

 

(a)                                 misconduct, including, but not limited to, dishonesty, falsification of reports or the unauthorized removal of Company property, such as finished stock, supplies, or raw materials, or, depending on the seriousness of the offense, abusive or sexually harassing conduct toward another; or

 

10

 

(b)                                 possession of firearms or violation of the Employer’s drug or gambling policies; or

 

(c)                                  insubordination, including, but not limited to, willful negligence, or refusal to carry out instructions; or

 

(d)                                 absence of three days without notice.

 

4.04                        Certain Other Terminations

 

(a)                                 An Employee shall not be eligible to receive a severance benefit pursuant to the Plan if the Employee initiates the termination of his employment with the Employer, except for resignations in lieu of discharge referred to in paragraph 3.01(a) hereof or as described in Schedule A attached hereto.

 

(b)                                 An Employee shall not be eligible to receive a severance benefit pursuant to the Plan if the Employee is eligible to receive any income-replacement benefit provided at the Employer’s expense, including any long-term disability benefit or worker’s compensation benefit, but excluding any eligibility for, or payment of, an old-age benefit under the Social Security system or a benefit under a defined benefit or defined contribution plan sponsored by the Employer.

 

4.05                        Timing of Termination

 

An Employee shall not be eligible to receive a severance benefit pursuant to the Plan if the Employee’s employment is terminated during or immediately following an unpaid leave of absence that is scheduled to last or has lasted in excess of twelve (12) months.

 

4.06                        Death

 

No benefits shall be paid pursuant to the Plan on behalf of an Employee who dies while employed by an Employer.

 

4.07                        Set-Off

 

To the extent permitted by law, the Employer may direct that debts owed to an Employer by the Employee be set off against severance benefits.  The Employee shall receive from the Employer appropriate notification that such set-off has been made and such debt satisfied.

 

11

 

SECTION 5.  MISCELLANEOUS

 

5.01                        Filing of Claims

 

Claims for benefits payable pursuant to the Plan shall be filed with the Employer on forms supplied by the Employer.

 

5.02                        Discontinuation of Participation by Employer; Amendment of Separate Schedule of Severance Benefits

 

Each Employer reserves the right to discontinue its participation in the Plan at any time or to amend its separate schedule of severance benefits, if any, attached hereto as part of Attachment A.

 

5.03                        Benefits Solely from General Assets

 

The benefits provided hereunder shall be paid solely from the general assets of the Employer.  Nothing herein shall be construed to require any Employer or the Employee Benefits Committee to maintain any fund or to segregate any amount for the benefit of any Employee, and no Employee or other person shall have any right against, right to, or security or other interest in any fund, account, or asset of the Employer from which the payment pursuant to the Plan may be made.

 

5.04                        Plan Expenses

 

All reasonable expenses of administering the Plan shall be paid by the Employer.

 

5.05                        Information to be Furnished

 

Each Employee shall furnish the Employee Benefits Committee with such information and evidence, or sign such documents, as may be reasonably required from time to time for the proper administration of the Plan.

 

12

 

Attachment A

 

Schedule 7.12
 Severance Guidelines

 

Additional Definitions

 

For purposes of this Schedule 7.12:

 

“Base Pay” shall mean the Transferred Employee’s current annual rate of pay as of the time of the Eligible Termination.  The term “base pay” excludes overtime, bonus, commissions, additional or incentive compensation, shift differential, or pay for hours worked in excess of the Transferred Employee’s regularly scheduled work hours.

 

“Bonus Policy” shall mean the policies and programs established pursuant to Section 7.02(a) of the Agreement.

 

“Cause” shall mean the occurrence of one or more of the following with respect to a Transferred Employee:

 

(i)                                     The Transferred Employee’s failure to perform his or her job responsibilities to the reasonable satisfaction of the Purchaser;

 

(ii)                                  The Transferred Employee’s engagement in willful misconduct or gross negligence;

 

(iii)                               The Transferred Employee’s willful failure or refusal to follow a lawful directive of the Purchaser;

 

(iv)                              The Transferred Employee’s material violation of the Purchaser’s policies and procedures;

 

(v)                                 The Transferred Employee’s conviction or plea of nolo contendere of any felony or of a misdemeanor involving fraud, dishonesty, moral turpitude, or violence or that otherwise renders the Transferred Employee unsuitable for continued employment in his or her position; or

 

(vi)                              Other just cause as determined by Purchaser in its sole discretion.

 

“Disability” shall mean an injury or sickness which prevents an Employee from performing the essential functions of any occupation for which he is or may reasonably become qualified based on his/her education, training or experience.

 

13

 

“Eligible Termination” shall mean the involuntary termination by the Purchaser of a Transferred Employee’s employment and actual loss of all employment with the Purchaser. A termination of employment for any of the following reasons shall not be considered to be an Eligible Termination:

 

(i)                                     Resignation or other voluntary termination of employment;

 

(ii)                                  Failure to return to work upon expiration of an authorized leave of absence;

 

(iii)                               Death or Disability; or

 

(iv)                              Termination for Cause.

 

“General Release Agreement” shall mean an agreement, in a form acceptable to Purchaser, in its sole discretion, between a Transferred Employee and Purchaser that provides for the payment of severance pay pursuant to this schedule in consideration of a general release and waiver of all claims against Purchaser and entities, individuals, fiduciaries and agents affiliated with Purchaser.  Employees who accept this payment of severance pay will, among other things, waive all seniority, and recall rights.

 

“Purchaser” shall mean Purchaser (as defined in the agreement) or any of its affiliates.

 

“Year(s) of Continuous Service” shall mean, as of an Eligible Employee’s Eligible Termination of Employment, the Eligible Employee’s years of employment using his or her adjusted employment date which includes credit for service with (1) Wyeth, or any of its affiliates, (2) Boehringer Ingelheim Vetmedica, Inc., or any of its affiliates, and (3) Purchaser.

 

1.                                      Severance Benefits

 

Subject to the other provisions of this Schedule, Purchaser shall pay each Transferred Employee who experiences an Eligible Termination a lump sum severance payment, in the dollar amount of the product of the following two factors: (1) the Benefit Factor (determined under the table in item 2 of this Schedule, below) and (2) the Transferred Employee’s weekly Base Pay (which is equal to Base Pay divided by 52), less applicable withholdings. In addition, and subject to the other provisions of this Schedule, Purchaser shall pay each Transferred Employee who experiences an Eligible Termination (i) a lump sum equal to a pro-rata portion of the Transferred Employee’s current year bonus calculated at 100%, as determined by the Bonus Policy, less applicable withholdings, and (ii) a lump sum equal to three times the monthly COBRA premium for coverage based on the group health coverage in effect for the Transferred Employee at the time of the Eligible Termination. This amount shall be paid within 30 (thirty) days after the Transferred Employee’s General Release Agreement becomes effective. In addition, Purchaser will provide outplacement services to the employee through the local Lee Hecht Harrison office in an amount not to exceed five thousand ($5000.00) in fees and services (provided such

 

14

 

outplacement services are provided for a limited period of time as determined under Treas. Reg.  § 1.409A-1 (b)(9)(v)). Purchaser will pay Lee Hecht Harrison directly for services billed. In no event shall severance pay exceed the lesser of (i) the equivalent of twice the Eligible Employee’s total annual compensation during the year immediately preceding the termination date (as determined under 29 C.F.R. § 2510.3-2(b)), or (ii) the limit imposed under Treas. Reg. § 1.409A-1 (b )(9)(iii)(A) (generally two times the Eligible Employee’s annual rate of pay, subject to certain limits).

 

2.                                      Benefit Factor

 

A Transferred Employee’s Benefit Factor shall be determined based on his or her Years of Continuous Service, as set forth in the following table.

 

	
Completed Years of Continuous Service
    	
 
    	
Benefit Factor (Equivalent # of Weeks of
   Base Pay)
    
	
0
    	
 
    	
9
    
	
1
    	
 
    	
9
    
	
2
    	
 
    	
9
    
	
3
    	
 
    	
9
    
	
4
    	
 
    	
12
    
	
5
    	
 
    	
15
    
	
6
    	
 
    	
18
    
	
7
    	
 
    	
21
    
	
8
    	
 
    	
24
    
	
9
    	
 
    	
27
    
	
10
    	
 
    	
30
    
	
11
    	
 
    	
33
    
	
12
    	
 
    	
36
    
	
13
    	
 
    	
39
    
	
14
    	
 
    	
42
    
	
15
    	
 
    	
45
    
	
16
    	
 
    	
48
    
	
17
    	
 
    	
51
    
	
18
    	
 
    	
54
    
	
19
    	
 
    	
57
    
	
20
    	
 
    	
60
    
	
21
    	
 
    	
63
    
	
22
    	
 
    	
66
    
	
23
    	
 
    	
69
    
	
24
    	
 
    	
72
    
	
25 and above
    	
 
    	
75
    

 

15

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