Document:

exv10w12

 

Exhibit 10.12

2005 BASE SALARIES

On January 25, 2005, the Compensation Committee authorized the following increases to the base
salaries of the Company’s executive officers, effective January 1, 2005:

	 	 	 	 	 
	Name	 	2005 Base Salary	 
	Michael McNeil
	 	$	300,000	 
	Jon J. Eberle
	 	$	105,000	 
	Dwain C. Jorgensen
	 	$	102,740	 
	Susan K. Kolling
	 	$	107,110	 
	Bradley C. Krehbiel
	 	$	135,200exv10w11

 

Exhibit 10.11 Summary of 2005 Compensation for Non-employee Directors

For 2005, the board of directors has approved the following annual compensation to directors
who are not employees:

Cash compensation

	 	•  	Retainer of $3,750 per month
	 
	 	•  	$1,600 for each board meeting attended (or $1,600 per day for multi-day meetings)
	 
	 	•  	$1,600 for each committee or other meeting attended if not held on the same day as a
board meeting
	 
	 	•  	$2,000 to the committee chairpersons for each committee meeting attended as
compensation for the chairperson’s preparation time
	 
	 	•  	Reimbursement for customary and usual travel expenses

Stock compensation

	 	•  	1,500 shares of Lilly stock in a deferred stock account in the Lilly Directors’
Deferral Plan, payable after service on the board has ended.

Lilly Directors’ Deferral Plan

This plan allows directors to defer receipt of all or part of their retainer and meeting fees until
after their service on the board has ended. Each director can choose to invest the funds in either
of two accounts:

	 	•  	Deferred Compensation Account. Funds in this account earn interest each year at
an annual rate of 120 percent of the applicable federal long-term rate as established for
the preceding December by the U.S. Treasury Department under Section 1274(d) of the
Internal Revenue Code with monthly compounding.
	 
	 	•  	Deferred Share Account. This account allows the director, in effect, to invest
his or her deferred cash compensation in Lilly stock. In addition, the annual award of shares to each director noted above is credited to this account. Funds in this account
are credited as hypothetical shares of Lilly stock based on the market price of the stock
at the time the compensation would otherwise have been earned. Hypothetical dividends are
“reinvested” in additional shares based on the market price of the stock on the date
dividends are paid. All shares in the deferred share accounts are hypothetical and are
not issued or transferred until the director ends his or her service on the board or dies.

Both accounts may be paid in a lump sum or in annual installments for up to 10 years. The deferred
compensation account may also be paid in monthly installments for up to 10 years. Amounts in the
deferred share account are paid in the form of shares of Lilly stock.

Insurance

The company provides $250,000 of accidental death and dismemberment insurance to each non-employee
director.exv10w12

 

Exhibit 10.12 Summary of 2005 Compensation for Named Executive Officers

At its meeting on December 20, 2004, the Compensation Committee of the Board of Directors of
Eli Lilly and Company approved the 2005 compensation of the company’s named executive officers (as
defined in Regulation S-K Item 402(a)(3)) as described below:

																	
	Executive Officer	 	 	Salary (1)	 	 	Bonus (2)	 	 	Option Grant	 	(3)	 	 	Performance	 	Award (4)
	 	 	 	 	 	 	 	 	 	No. of shares	 	Present	 	 	No. of shares	 	Present
	 	 	 	 	 	 	 	 	 	 	 	value	 	 	 	 	value
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Sidney Taurel

Chairman, President, and

Chief Executive Officer
	 	$	1,580,000	 	$	1,726,800	 	 	255,621	$	4,320,000	 	 	51,752	$	2,880,000
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	John C. Lechleiter, Ph.D.

Executive Vice President,

Pharmaceutical
Operations
	 	$	929,800	 	$	692,875	 	 	127,811	$	2,160,000	 	 	25,876	$	1,440,000
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Charles E. Golden

Executive Vice President

and Chief Financial

Officer
	 	$	845,700	 	$	631,200	 	 	78,107	$	1,320,000	 	 	15,813	$	880,000
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Steven M. Paul, M.D.

Executive Vice President,

Science and Technology
	 	$	831,060	 	$	617,415	 	 	85,207	$	1,440,000	 	 	17,251	$	960,000
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Robert A. Armitage

Senior Vice President and

General Counsel
	 	$	637,940	 	$	411,370	 	 	53,254	$	900,000	 	 	10,782	$	600,000

	(1)  	Annualized base salaries effective as of March 1, 2005, the merit increase date for U.S.
employees.
	 
	(2)  	Target bonus under the Eli Lilly and Company Bonus Plan. Actual bonuses earned for 2005 may
vary from zero to 200 percent of the target amount, depending on the company’s 2005 results
relative to predetermined corporate performance measures that are based 25 percent on sales
growth and 75 percent on earnings-per-share growth (adjusted for unusual items in accordance
with predetermined criteria).
	 
	(3)  	Granted February 11, 2005. The options vest February 11, 2008 and expire February 10, 2015.
The exercise price is $55.65, the market value of Lilly stock on the date of grant. Present
values are as of the grant date and are based on the company’s trinomial lattice valuation
method of 30.37 percent of the exercise price of $55.65.
	 
	(4)  	Target payout under the performance award program for 2005. Actual payouts earned for 2005
may vary from zero to 200 percent of the target amount, depending on the growth in the
company’s 2005 earnings per share (adjusted for unusual items in accordance with predetermined
criteria). Present values are as of February 11, 2005, and are based on 100 percent of the
market value of Lilly stock on that date ($55.65 per share).

The named executive officers will continue to participate in other employee benefits as described
in the company’s proxy statements, including a defined benefit retirement plan, a 401(k) plan, the
Lilly Deferred Compensation Plan, and the company’s change in control severance pay program.exv10w13

 

Exhibit 10.13

September 4, 2002

Charles E. Golden

Executive Vice President and
   Chief
Financial Officer

Eli Lilly and Company

Lilly Corporate Center

Indianapolis, IN 46285

Re: Offer Letter Clarification

Dear Charlie:

You have requested clarification regarding the terms of your original offer of employment with Eli
Lilly and Company, dated February 20, 1996, as clarified and supplemented by letters dated December
20, 1996 and November 30, 2000. Specifically, you have asked that Lilly clarify your eligibility
for retiree medical benefits. This letter will restate our understanding relating to your
eligibility for retirement benefits and confirm our understanding regarding related benefits.

As described in your Offer Letter, you will be entitled to a retirement benefit (provided through
The Lilly Retirement Plan and The Lilly Excess Benefit Plan [Retirement]) using 26 years 1 month of
service in addition to your actual service with Lilly. All of the provisions of the various
formulae provided under the Retirement Plan will apply. However, after determining the benefit in
this manner, the deferred vested retirement benefit you will be eligible to receive from General
Motors Corporation at the date of your retirement from Lilly will be subtracted from the Lilly
benefit calculation to provide the actual benefit. If your benefit under the General Motors plan
is not payable at the time of your retirement from the Company, the unreduced Lilly benefit will be
paid until such time as the General Motors benefit becomes payable. At that time, your Lilly
benefit will be reduced by the amount payable from General Motors.

To receive this retirement benefit, you will be required to work a minimum of 10 years from the
date of your initial employment with Lilly, or until March 1, 2006, except that the 10-year minimum
work requirement will be waived if any of the following circumstances occur prior to March 1, 2006:

	 	1.  	Lilly requests your retirement, or your employment is terminated, for any
reason other than Disciplinary Termination as defined in Section 4.03 of The Lilly
Severance Pay Plan;
	 
	 	2.  	You become disabled under the terms of The Eli Lilly and Company Extended
Disability Plan; or

 

 

Charles E. Golden

September 4, 2002

Page 2

	 	3.  	a Change in Control occurs and you suffer a Covered Termination, as both terms
are defined under the Eli Lilly and Company Change in Control Severance Pay Plan for
Select Employees (“CIC Plan”). It is understood that in the event of such Covered
Termination, you would receive, in addition to the benefit provided under the
Retirement Plan described above, the Pension Supplement as set forth in Section 8.C. of
the CIC Plan.

In addition, it is understood that if you satisfy the 10-year minimum work requirement or any
of the conditions described above occur for the waiver of that requirement, you would be
eligible for retiree medical coverage equivalent to the coverage provided to retirees under The
Eli Lilly and Company Health Plan. Such coverage would be provided for the duration of your
retirement unless you choose to work for another employer that offers health coverage. In that
event, you agree to select the other employer’s health coverage as primary (even if there is a
charge to do so) and Lilly agrees to provide secondary health coverage to you. Similarly,
Lilly will provide only secondary health coverage to you once you become eligible for Medicare.
As you may be aware, medical claims paid under the retiree medical coverage are considered
taxable income to you if you do not have actual eighty points (age plus actual service) under
The Lilly Retirement Plan at the time of your retirement. Accordingly, Lilly agrees to
gross-up any payment amounts at the end of each calendar year for applicable state and federal
taxes so that you do not recognize a tax impact on such health benefits.

If you are married at the time of your retirement (and have been married for at least one year)
your spouse will be eligible for medical coverage under the same retiree medical coverage you
have. If you are not married at the time of your retirement and subsequently marry, you may
add your spouse to your coverage for a qualifying change in status. Such coverage, however,
would terminate upon your death.

Finally, it is understood that if you satisfy the 10-year minimum work requirement or any of
the conditions described above occur for the waiver of that requirement, you would also be
considered a retiree for other benefit purposes, including the terms of any stock options or
equity programs in which you participate.

Charlie, please let me know if you have any questions.

	 	 	 	 	 
	 	 	ELI LILLY AND COMPANY

 	 
	 	By:  	          /s/ Cathleen A. Kennedy
 	 
	 	 	Cathleen A. Kennedy 	 
	 	 	Executive Director, Human Resources 	 
	 

cc:      Pedro P. Granadillo

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