Document:

exv10w1

 

Exhibit
10.1

2002

LILLY STOCK PLAN

As amended through April 16, 2007

     The 2002 Lilly Stock Plan (“2002 Plan”) authorizes the Board of Directors of Eli Lilly and
Company (“Board”) and the Compensation Committee of the Board, as applicable, to provide officers
and other employees of Eli Lilly and Company and its subsidiaries and nonemployee directors of Eli
Lilly and Company (“Nonemployee Directors”) with certain rights to acquire shares of Eli Lilly and
Company common stock (“Lilly Stock”). The Company believes that this incentive program will
benefit the Company’s shareholders by allowing the Company to attract, motivate, and retain
employees and directors and by providing those employees and directors stock-based incentives to
strengthen the alignment of interests between those persons and the shareholders. For purposes of
the 2002 Plan, the term “Company” shall mean Eli Lilly and Company and its subsidiaries, unless the
context requires otherwise.

1. Administration.

     (a) Grants to Eligible Employees. With respect to Grants to Eligible Employees (as those terms
are defined in Sections 2 and 3(a), respectively), the 2002 Plan shall be administered and
interpreted by the Compensation Committee of the Board consisting of not less than two independent
directors appointed by the Board from among its members. A person may serve on the Compensation
Committee for purposes of administration and interpretation of the 2002 Plan only if he or she (i)
is a “Non-employee Director” for purposes of Rule 16b-3 under the Securities Exchange Act of 1934,
as amended (the “1934 Act”), and (ii) satisfies the requirements of an “outside director” for
purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The
Compensation Committee may, subject to the provisions of the 2002 Plan, from time to time establish
such rules and regulations and delegate such authority to administer the 2002 Plan as it deems
appropriate for the proper administration of the Plan, except that no such delegation shall be made
in the case of awards intended to be qualified under Rule 16b-3 of the 1934 Act or Section 162(m)
of the Code. The decisions of the Compensation Committee or its authorized designees (the
“Committee”) shall be made in its sole discretion and shall be final, conclusive, and binding with
respect to the interpretation and administration of the 2002 Plan and any Grant made under it.

     (b) Grants to Nonemployee Directors. With respect to Stock Option Grants made to Nonemployee
Directors pursuant to Section 8, the Board shall serve to administer and interpret the 2002 Plan
and any such Grants, and all duties, powers and authority given to the Committee in subsection (a)
above or elsewhere in the 2002 Plan in connection with Grants to Eligible Employees shall be deemed
to be given to the Board in its sole discretion in connection with Stock Option Grants to
Nonemployee Directors.

2. Grants.

     Incentives under the 2002 Plan shall consist of incentive stock options or other forms of
tax-qualified stock options under the Code, nonqualified stock options, performance awards, stock
appreciation rights, stock unit awards, and restricted stock grants (collectively, “Grants”).

 

 

The Committee shall approve the form and provisions of each Grant to Eligible Employees and
the Board shall approve the form and provisions of each Stock Option Grant to Nonemployee
Directors. All Grants shall be subject to the terms and conditions set out herein and to such
other terms and conditions consistent with the 2002 Plan as the Committee or Board, as applicable,
deems appropriate. Grants under a particular section of the 2002 Plan need not be uniform and
Grants under two or more sections may be combined in one instrument. The Committee shall determine
the fair market value of Lilly Stock for purposes of the 2002 Plan.

3. Eligibility for Grants.

     (a) Grants to Eligible Employees. Grants may be made to any employee of the Company,
including a person who is also a member of the Board of Directors (“Eligible Employee”). The
Committee shall select the persons to receive Grants (“Grantees”) from among the Eligible Employees
and determine the number of shares subject to any particular Grant.

     (b) Grants to Nonemployee Directors. Grants of Stock Options may be made to any member of the
Board who is not an employee of the Company (a “Nonemployee Director”). The Board shall select the
persons who will receive Stock Options (“Grantees”) from among the Nonemployee Directors and
determine the number of shares subject to any particular Stock Option.

4. Shares Available for Grant.

     (a) Shares Subject to Issuance or Transfer. Subject to adjustment as provided in Section
4(b), the aggregate number of shares of Lilly Stock that may be issued or transferred under the
2002 Plan shall be the sum of the following amounts:

	 	(i)	 	80,000,000 shares;
	 
	 	(ii)	 	Any shares of Lilly Stock subject to an award hereunder or under the
1989, 1994 or 1998 Lilly Stock Plans (the “Prior Shareholder-Approved Plans”)
which, after the effective date of the 2002 Plan, are not purchased or awarded
under a Stock Option or Performance Award due to termination, lapse, or
forfeiture, or which are forfeited under a Restricted Stock Grant;
	 
	 	(iii)	 	Upon the termination or expiration of the 1998 Lilly Stock Plan, any
shares of Lilly Stock that remained available for grant under that plan at the
time of termination or expiration; and
	 
	 	(iv)	 	The number of shares of Lilly Stock exchanged by a Grantee as full or
partial payment to the Company of the exercise price of a Stock Option that was
granted hereunder or under a Prior Shareholder-Approved Plan.

The shares may be authorized but unissued shares or treasury shares.

     (b) Adjustment Provisions. If any subdivision or combination of shares of Lilly Stock or any
stock dividend, reorganization, recapitalization, or consolidation or merger with Eli Lilly

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and
Company as the surviving corporation occurs, or if additional shares or new or different
shares or other securities of the Company or any other issuer are distributed with respect to the
shares of Lilly Stock through a spin-off or other extraordinary distribution, the Committee shall
make such adjustments as it determines appropriate in the number of shares of Lilly Stock that may
be issued or transferred in the future under Sections 4(a), 5(f) and (g), 6(f), 7(e), 9(d), and
10(c). The Committee shall also adjust equitably outstanding Grants made before the event with
respect to the number of shares subject to the Grant, the Option Price of Stock Options, the base
price of Stock Appreciation Rights, and stock-related performance goals under Performance Awards or
Stock Unit Awards (such as earnings per share or stock price related goals).

5. Stock Option Grants to Eligible Employees.

     The Committee may grant to Eligible Employees options qualifying as incentive stock options
under the Code (“Incentive Stock Options”), other forms of tax-favored stock options under the
Code, and nonqualified stock options (collectively, “Stock Options”). The Committee shall
determine the terms and conditions applicable to Stock Options granted to Eligible Employees
consistent with the following:

     (a) Option Price. The Committee shall determine the price or prices at which Lilly Stock may
be purchased by the Grantee under a Stock Option (“Option Price”) which shall be not less than the
fair market value of Lilly Stock on the date the Stock Option is granted (the “Grant Date”). In
the Committee’s discretion, the Grant Date of a Stock Option may be established as the date on
which Committee action approving the Stock Option is taken or any later date specified by the
Committee. Once established, the Option Price may not be reduced except in the case of adjustments
under Section 4(b).

     (b) Option Exercise Period. The Committee shall determine the option exercise period of each
Stock Option. The period shall not exceed ten years from the Grant Date in the case of an
Incentive Stock Option, and eleven years in the case of any other Stock Option.

     (c) Exercise of Option. A Stock Option will be deemed exercised by a Grantee upon delivery
of (i) a notice of exercise to the Company or its representative as designated by the Committee,
and (ii) accompanying payment of the Option Price if the Stock Option requires such payment at the
time of exercise. The notice of exercise, once delivered, shall be irrevocable.

     (d) Satisfaction of Option Price. A Stock Option may require payment of the Option Price
upon exercise or may specify a period not to exceed 30 days following exercise within which payment
must be made (“Payment Period”). The Grantee shall pay or cause to be paid the Option Price in
cash, or with the Committee’s permission, by delivering (or providing adequate evidence of
ownership of) shares of Lilly Stock already owned by the Grantee and having a fair market value on
the date of exercise equal to the Option Price, or a combination of cash and such shares. If the
Grantee fails to pay the Option Price within the Payment Period, the Committee shall have the right
to take whatever action it deems appropriate, including voiding the option exercise or voiding that
part of the Stock Option for which payment was not timely received. The Company shall not deliver
shares of Lilly Stock upon exercise of a Stock Option until the Option Price and any required
withholding tax are fully paid.

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     (e) Share Withholding. With respect to any Stock Option, the Committee may, in its
discretion and subject to such rules as the Committee may adopt, permit or require the Grantee to
satisfy, in whole or in part, any withholding tax obligation which may arise in connection with the
exercise of the nonqualified option by having the Company withhold shares of Lilly Stock having a
fair market value equal to the amount of the withholding tax.

     (f) Limits on Individual Grants. No individual Grantee may be granted Stock Options or Stock
Appreciation Rights, considered together, under the 2002 Plan for more than 2,500,000 shares of
Lilly Stock in any period of three consecutive calendar years.

     (g) Limits on Incentive Stock Options. The aggregate fair market value of the stock covered
by Incentive Stock Options granted under the 2002 Plan or any other stock option plan of the
Company or any subsidiary or parent of the Company that become exercisable for the first time by
any employee in any calendar year shall not exceed $100,000 (or such other limit as may be
established by the Code). The aggregate fair market value for this purpose will be determined at
the Grant Date. An Incentive Stock Option shall not be granted to any Eligible Employee who, on
the Grant Date, owns stock possessing more than 10 percent of the total combined voting power of
all classes of stock of the Company or any subsidiary or parent of the Company. Not more than
60,000,000 shares of Lilly Stock may be issued or transferred under the 2002 Plan in the form of
Incentive Stock Options.

6. Performance Awards to Eligible Employees.

     The Committee may grant to Eligible Employees Performance Awards, which shall be denominated
at the time of grant either in shares of Lilly Stock (“Stock Performance Awards”) or in dollar
amounts (“Dollar Performance Awards”). Payment under a Stock Performance Award or a Dollar
Performance Award shall be made, at the discretion of the Committee, in shares of Lilly Stock
(“Performance Shares”), or in cash or in any combination thereof, if the financial performance of
the Company or any subsidiary, division, or other unit of the Company (“Business Unit”) selected by
the Committee meets certain financial goals established by the Committee for the Award Period. The
following provisions are applicable to Performance Awards:

     (a) Award Period. The Committee shall determine and include in the Grant the period of time
(which shall be four or more consecutive fiscal quarters) for which a Performance Award is made
(“Award Period”). Grants of Performance Awards need not be uniform with respect to the length of
the Award Period. Award Periods for different Grants may overlap. A Performance Award may not be
granted for a given Award Period after one half (1/2) or more of such period has elapsed, or in the
case of an Award intended to be qualified under Section 162(m) of the Code, after 90 days or more
of such period has elapsed.

     (b) Performance Goals and Payment. Before a Grant is made, the Committee shall establish
objectives (“Performance Goals”) that must be met by the Business Unit during the Award Period as a
condition to payment being made under the Performance Award. The Performance Goals, which must be
set out in the Grant, are limited to earnings per share;

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divisional income; net income; return on
equity; sales; divisional sales; economic value added
(EVA); market value added (MVA); any of the foregoing before the effect of acquisitions,
divestitures, accounting changes, and restructuring and special charges (determined according to
criteria established by the Committee at or within 90 days after the time of grant); total
shareholder return; or stock price goals. The Committee shall also set forth in the Grant the
number of Performance Shares or the amount of payment to be made under a Performance Award if the
Performance Goals are met or exceeded, including the fixing of a maximum payment (subject to
Section 6(f)).

     (c) Computation of Payment. After an Award Period, the financial performance of the Business
Unit during the period shall be measured against the Performance Goals. If the minimum Performance
Goals are not met, no payment shall be made under a Performance Award. If the minimum Performance
Goals are met or exceeded, prior to payment the Committee shall certify that fact in writing and
certify the number of Performance Shares or the amount of payment to be made under a Performance
Award in accordance with the grant for each Grantee. The Committee, in its sole discretion, may
elect to pay part or all of the Performance Award in cash in lieu of issuing or transferring
Performance Shares. The cash payment shall be based on the fair market value of Lilly Stock on the
date of payment (subject to Section 6(f)). The Company shall promptly notify each Grantee of the
number of Performance Shares and the amount of cash, if any, he or she is to receive.

     (d) Revisions for Significant Events. At any time before payment is made, the Committee may
revise the Performance Goals and the computation of payment if unusual events occur during an Award
Period which have a substantial effect on the Performance Goals and which in the judgment of the
Committee make the application of the Performance Goals unfair unless a revision is made; provided,
however, that no such revision shall be permissible with respect to a Performance Award intended to
qualify for exemption under Section 162(m) of the Code, except that the Committee (i) may provide
in the terms of any such Performance Award that revisions to the Performance Goals shall be made on
a non-discretionary basis upon the occurrence of one or more specific objective events, the
occurrence of which are substantially uncertain at the time of grant, and (ii) may in its
discretion make a revision with respect to such Performance Award that results in a lesser payment
than would have occurred without the revision or in no payment at all.

     (e) Requirement of Employment. To be entitled to receive payment under a Performance Award,
a Grantee must remain in the employment of the Company to the end of the Award Period, except that
the Committee may provide for partial or complete exceptions to this requirement as it deems
equitable in its sole discretion, consistent with maintaining the exemption under Section 162(m) of
the Code. The Committee may impose additional conditions on the Grantee’s entitlement to receive
payment under a Performance Award.

     (f) Maximum Payments. (i) No individual may receive Performance Award payments in respect of
Stock Performance Awards in excess of 100,000 shares of Lilly Stock in any calendar year or
payments in respect of Dollar Performance Awards in excess of $8,000,000 in any calendar year. For
purposes of determining the maximum payment under this subsection, payment in cash of all or part
of a Stock Performance Award will be deemed an issuance of the number of shares with respect to
which such cash payment is made. No individual may receive both a Stock Performance Award and a
Dollar Performance Award for the same Award Period.

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     (ii) Not more than 18,000,000 shares of Lilly Stock may be issued or transferred under the
2002 Plan in the form of Performance Awards.

7. Restricted Stock Grants to Eligible Employees.

     The Committee may issue or transfer shares of Lilly Stock to an Eligible Employee under a
Restricted Stock Grant. Upon the issuance or transfer, the Grantee shall be entitled to vote the
shares and to receive any dividends paid. The following provisions are applicable to Restricted
Stock Grants:

     (a) Requirement of Employment. If the Grantee’s employment terminates during the period
designated in the Grant as the “Restriction Period,” the Restricted Stock Grant terminates and the
shares immediately revert to the Company. However, the Committee may provide for partial or
complete exceptions to this requirement as it deems equitable.

     (b) Restrictions on Transfer. During the Restriction Period, a Grantee may not sell, assign,
transfer, pledge, or otherwise dispose of the shares of Lilly Stock except to a Successor Grantee
under Section 13(a). Each certificate for shares issued or transferred under a Restricted Stock
Grant shall be held in escrow by the Company until the expiration of the Restriction Period.

     (c) Withholding Tax. Before delivering the certificate for shares of Lilly Stock to the
Grantee, Lilly may require the Grantee to pay to the Company any required withholding tax. The
Committee may, in its discretion and subject to such rules as the Committee may adopt, permit or
require the Grantee to satisfy, in whole or in part, any withholding tax requirement by having the
Company withhold shares of Lilly Stock from the Grant having a fair market value equal to the
amount of the withholding tax. In the event the Grantee fails to pay the withholding tax within
the time period specified in the Grant, the Committee may take whatever action it deems
appropriate, including withholding or selling sufficient shares from the Grant to pay the tax and
assessing interest or late fees to the Grantee.

     (d) Lapse of Restrictions. All restrictions imposed under the Restricted Stock Grant shall
lapse (i) upon the expiration of the Restriction Period if all conditions stated in Sections 7(a),
(b) and (c) have been met or (ii) as provided under Section 12(a)(ii). The Grantee shall then be
entitled to delivery of the certificate.

     (e) Total Number of Shares Granted. Not more than 3,000,000 shares of Lilly Stock may be
issued or transferred under the 2002 Plan in the form of Restricted Stock Grants and Stock Unit
Awards, considered together.

8. Stock Option Grants to Nonemployee Directors

     The Board may grant Stock Options to Nonemployee Directors and may determine the terms and
conditions applicable to such Stock Options consistent with the following provisions:

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     (a) Option Price. The Board shall determine the price or prices at which Lilly Stock may be
purchased by the Nonemployee Director under a Stock Option (“Option Price”) which shall be not less
than the fair market value of Lilly Stock on the date the Stock Option is granted (the
“Grant Date”). In the Board’s discretion, the Grant Date of a Stock Option may be established
as the date on which Board action approving the Stock Option is taken or any later date specified
by the Board. Once established, the Option Price may not be reduced except in the case of
adjustments under Section 4(b).

     (b) Option Exercise Period. The Board shall determine the option exercise period of each
Stock Option. The period shall not exceed ten years from the Grant Date. Unless the Board shall
otherwise expressly provide in a Stock Option agreement, in the event a Grantee’s service on the
Board is terminated, any Stock Option held by such Grantee shall remain exercisable for five years
after such termination (or until the end of the option exercise period, if earlier). In the event
a Nonemployee Director is removed from the Board for “cause” (as determined in accordance with
applicable state law and the Articles of Incorporation of Lilly), any Stock Option held by that
Nonemployee Director shall terminate immediately.

     (c) Exercise of Option. A Stock Option will be deemed exercised by a Nonemployee Director
upon delivery of (i) a notice of exercise to Lilly or its representative as designated by the
Board, and (ii) accompanying payment of the Option Price if the Stock Option requires such payment
at the time of exercise. The notice of exercise, once delivered, shall be irrevocable.

     (d) Satisfaction of Option Price. A Stock Option may require payment of the Option Price
upon exercise or may specify a period not to exceed 30 days following exercise within which payment
must be made (“Payment Period”). The Grantee shall pay or cause to be paid the Option Price in
cash, or with the Board’s permission, by delivering (or providing adequate evidence of ownership
of) shares of Lilly Stock already owned by the Grantee and having a fair market value on the date
of exercise equal to the Option Price, or a combination of cash and such shares. If the Grantee
fails to pay the Option Price within the Payment Period, the Board shall have the right to take
whatever action it deems appropriate, including voiding the option exercise or voiding that part of
the Stock Option for which payment was not timely received. Lilly shall not deliver shares of
Lilly Stock upon exercise of a Stock Option until the Option Price and any required withholding tax
are fully paid.

9. Stock Appreciation Rights to Eligible Employees.

     The Committee may grant Stock Appreciation Rights to Eligible Employees. A Stock Appreciation
Right is an award in the form of a right to receive, upon exercise or settlement of the right but
without other payment, an amount based on appreciation in the fair market value of shares of Lilly
Stock over a base price established for the Award. Stock Appreciation Rights shall be settled or
exercisable at such time or times and upon conditions as may be approved by the Committee, provided
that the Committee may accelerate the settlement or exercisability of a Stock Appreciation Right at
any time. The following provisions are applicable to Stock Appreciation Rights:

     (a) Freestanding Stock Appreciation Rights. A Stock Appreciation Right may be granted without
any related Stock Option, and in such case, will be settled or exercisable at such time or times as
determined by the Committee, but in no event after eleven years from the Grant Date.

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The Committee
shall determine the base price of a Stock Appreciation Right granted without any
related Option, provided, however, that such base price per share shall not be less than the
fair market value of Lilly Stock on the Grant Date.

     (b) Tandem Stock Appreciation Rights. A Stock Appreciation Right may be granted in connection
with a Stock Option, either at the time of grant or at any time thereafter during the term of the
Stock Option. A Stock Appreciation Right granted in connection with a Stock Option will entitle
the holder, upon exercise, to surrender the Stock Option or any portion thereof to the extent
unexercised, with respect to the number of shares as to which such Stock Appreciation Right is
exercised, and to receive payment of an amount computed as described in Section 9(c). The Stock
Option will, to the extent and when surrendered, cease to be exercisable. A Stock Appreciation
Right granted in connection with a Stock Option hereunder will have a base price per share equal to
the per share exercise price of the Stock Option, will be exercisable at such time or times, and
only to the extent, that the related Stock Option is exercisable, and will expire no later than the
related Stock Option expires. If a related Stock Option is exercised in whole or in part, then the
SAR related to the shares purchased terminates as of the date of such exercise.

     (c) Payment of Stock Appreciation Rights. A Stock Appreciation Right will entitle the holder,
upon settlement or exercise, as applicable, to receive payment of an amount determined by
multiplying: (i) the excess of the fair market value of a share of Lilly Stock on the date of
settlement or exercise of the Stock Appreciation Right over the base price of the Stock
Appreciation Right, by (ii) the number of shares as to which the Stock Appreciation Right is
settled or exercised. Payment of the amount determined under the foregoing will be made in shares
of Lilly Stock valued at their fair market value on the date of settlement or exercise, as
applicable, subject to applicable tax withholding requirements.

     (d) Limits on Individual Grants. No individual Grantee may be granted Stock Options or Stock
Appreciation Rights, considered together, under the 2002 Plan for more than 2,500,000 shares of
Lilly Stock in any period of three consecutive calendar years.

     (e) Share Withholding. With respect to any Stock Appreciation Right, the Committee may, in
its discretion and subject to such rules as the Committee may adopt, permit or require the Grantee
to satisfy, in whole or in part, any withholding tax obligation which may arise in connection with
the exercise or settlement of the right by having the Company withhold shares of Lilly Stock having
a fair market value equal to the amount of the withholding tax.

10. Stock Unit Awards to Eligible Employees.

     The Committee may grant Stock Unit Awards to Eligible Employees. A Stock Unit Award is an
award of a number of hypothetical share units with respect to shares of Lilly Stock that are
granted subject to such vesting and transfer restrictions and conditions of payment as the
Committee shall determine and set forth in an award agreement. The value of each unit under a
Stock Unit Award is equal to the fair market value of the Lilly Stock on any applicable date of
determination. A Stock Unit Award shall be subject to such restrictions and conditions as the
Committee shall determine. A Stock Unit Award may be granted, at the discretion of the Committee,
together with a dividend equivalent right with respect to the same number of shares of Lilly Stock.
The following provisions are applicable to Stock Unit Awards:

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     (a) Vesting of Stock Unit Awards. On the Grant Date, the Committee shall determine any
vesting requirements with respect to a Stock Unit Award, which shall be set forth in the award
agreement, provided that the Committee may accelerate the vesting of a Stock Unit Award at any
time. Vesting requirements may be based on the continued employment of the Grantee with the
Company for a specified time period or periods. Vesting requirements may also be based on the
attainment of specified performance goals or measures established by the Committee. A Stock Unit
Award may also be granted on a fully vested basis, with a deferred payment date.

     (b) Payment of Stock Unit Awards. A Stock Unit Award shall become payable to a Grantee at the
time or times determined by the Committee and set forth in the award agreement, which may be upon
or following the vesting of the award. The payment with respect to each share unit under a Stock
Unit Award shall be determined by reference to the fair market value of Lilly Stock on each
applicable payment date. Payment will be made in shares of Lilly Stock, subject to applicable tax
withholding requirements.

     (c) Total Number of Shares Granted. Not more than 3,000,000 shares of Lilly Stock may be
issued or transferred under the 2002 Plan in the form of Restricted Stock Grants and Stock Unit
Awards, considered together.

     (d) Share Withholding. With respect to any Stock Unit Award, the Committee may, in its
discretion and subject to such rules as the Committee may adopt, permit or require the Grantee to
satisfy, in whole or in part, any withholding tax obligation which may arise in connection with the
payment of the award by having the Company withhold shares of Lilly Stock having a fair market
value equal to the amount of the withholding tax.

11. Amendment and Termination of the 2002 Plan.

     (a) Amendment. The Board may amend or terminate the 2002 Plan, but no amendment shall (i)
allow the repricing of Stock Options or Stock Appreciation Rights at a price below the original
Option Price or base price as applicable; (ii) allow the grant of Stock Options or Stock
Appreciation Rights at an Option Price (or base price as applicable) below the fair market value of
Lilly Stock on the Grant Date; (iii) increase the number of shares authorized for issuance or
transfer pursuant to Sections 4(a), 6(f)(ii), 7(e), or 10(c); or (iv) increase the maximum
limitations on the number of shares subject to Grants imposed under Sections 5(f), 5(g), 6(f)(i),
or 9(d), unless in any case such amendment receives approval of the shareholders of the Company.

     (b) Termination of 2002 Plan; Resubmission to Shareholders. The 2002 Plan shall remain in
effect until April 14, 2012 or until earlier terminated the Board. To the extent required under
Section 162(m) of the Code, the material terms of the 2002 Plan will be submitted to the
shareholders of the Company for reapproval not later than the annual meeting of shareholders that
occurs in 2007 if the Plan has not been terminated at that time.

     (c) Termination and Amendment of Outstanding Grants. A termination or amendment of the 2002
Plan that occurs after a Grant is made shall not result in the termination or amendment of the
Grant unless the Grantee consents or unless the Committee acts under Section 13(e). The
termination of the 2002 Plan shall not impair the power and authority of the Committee with respect
to outstanding Grants. Whether or not the 2002 Plan has terminated, an outstanding

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Grant may be terminated or amended under Section 13(e) or may be amended (i) by agreement of
the Company and the Grantee consistent with the 2002 Plan or (ii) by action of the Committee
provided that the amendment is consistent with the 2002 Plan and is found by the Committee not to
impair the rights of the Grantee under the Grant.

12. Change in Control.

     (a) Effect on Grants. The Committee may provide in the agreement relating to a Grant or at
any later date, that upon the occurrence of a Change in Control (as defined below) the following
shall occur:

	 	(i)	 	In the case of Stock Options, each outstanding Stock Option that is not then fully
exercisable shall automatically become fully exercisable and shall remain so for the period
permitted in the agreement relating to the Grant;
	 
	 	(ii)	 	The Restriction Period on all outstanding Restricted Stock Grants shall automatically
expire and all restrictions imposed under such Restricted Stock Grants shall immediately lapse;
	 
	 	(iii)	 	Each Grantee of a Performance Award for an Award Period that has not been completed at
the time of the Change in Control shall be deemed to have earned a minimum Performance Award equal
to the product of (y) such Grantee’s maximum award opportunity for such Performance Award, and (z)
a fraction, the numerator of which is the number of full and partial months that have elapsed since
the beginning of such Award Period to the date on which the Change in Control occurs, and the
denominator of which is the total number of months in such Award Period; provided, however, that
nothing in this subsection shall prejudice the right of the Grantee to receive a larger payment
under such Performance Award pursuant to the terms of the Award or under any other plan of the
Company;
	 
	 	(iv)	 	Each outstanding Stock Appreciation Right that is not then fully exercisable shall
automatically become fully exercisable and shall remain so for the period permitted in the
agreement relating to the Grant; and
	 
	 	(v)	 	Each outstanding Stock Unit Award shall fully and immediately vest and become payable.

     (b) Change in Control. For purposes of the 2002 Plan, a Change in Control shall mean the
happening of any of the following events:

	 	(i)	 	The acquisition by any “person,” as that term is used in Sections 13(d) and 14(d) of the
1934 Act (other than (w) the Company, (x) any subsidiary of the Company, (y) any employee benefit
plan or employee stock plan of the Company or a subsidiary of the Company or any trustee or
fiduciary with respect to any such plan when acting in that capacity, or (z) Lilly Endowment,
Inc.,) of “beneficial ownership,” as defined in Rule 13d-3 under the 1934 Act, directly or
indirectly, of 15 percent or more of the shares of the Company’s capital stock the holders of which
have general voting power under ordinary circumstances to elect at least a majority of the Board of
Directors of the Company (or which would have such voting power but for the application of the
Indiana Control Share Statute) (“Voting Stock”); provided, however,

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	 	 	 	that an acquisition of Voting Stock directly from the Company shall not constitute a Change in
Control;
	 
	 	(ii)	 	The first day on which less than two-thirds of the total membership of the Board of
Directors of the Company shall be Continuing Directors (as that term is defined in Article 13(f) of
the Company’s Articles of Incorporation);
	 
	 	(iii)	 	Consummation of a merger, share exchange, or consolidation of the Company (a
“Transaction”), other than a Transaction which would result in the Voting Stock of the Company
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) more than 50 percent of the
Voting Stock of the Company or such surviving entity immediately after such Transaction; or
	 
	 	(iv)	 	A complete liquidation of the Company or a sale or disposition of all or substantially
all the assets of the Company, other than a sale or disposition of assets to any subsidiary of the
Company.

13. General Provisions.

     (a) Prohibitions Against Transfer. (i) Except as provided in part (ii) of this subparagraph,
during a Grantee’s lifetime, only the Grantee or his or her authorized legal representative may
exercise rights under a Grant. Such persons may not transfer those rights. The rights under a
Grant may not be disposed of by transfer, alienation, pledge, encumbrance, assignment, or any other
means, whether voluntary, involuntary, or by operation of law, and any such attempted disposition
shall be void; provided, however, that when a Grantee dies, the personal representative or other
person entitled under a Grant under the 2002 Plan to succeed to the rights of the Grantee
(“Successor Grantee”) may exercise the rights. A Successor Grantee must furnish proof satisfactory
to the Company of his or her right to receive the Grant under the Grantee’s will or under the
applicable laws of descent and distribution.

     (ii) Notwithstanding the foregoing, the Committee may, in its discretion and subject to such
limitations and conditions as the Committee deems appropriate, grant non-qualified stock options
(or amend previously-granted options) on terms which permit the Grantee to transfer all or part of
the stock option, for estate or tax planning purposes or for donative purposes, and without
consideration, to a member of the Grantee’s immediate family (as defined by the Committee), a trust
for the exclusive benefit of such immediate family members, or a partnership, corporation, limited
liability company or similar entity the equity interests of which are owned exclusively by the
Grantee and/or one or more members of his or her immediate family. No such stock option or any
other Grant shall be transferable incident to divorce. Subsequent transfers of a stock option
transferred under this part (ii) shall be prohibited except for transfers to a Successor Grantee
upon the death of the transferee.

     (b) Substitute Grants. In the event of a business combination in which another corporation
is combined with the Company by reason of a corporate merger, consolidation, acquisition of stock
or property, reorganization or liquidation in which the Company is the surviving entity, the
Committee may make Grants to individuals who are or were employees,

-11-

 

directors, or consultants to such other corporation in substitution for stock options,
performance awards, restricted stock grant, stock appreciation rights, or stock unit awards granted
to such individuals by such other corporation that are outstanding at the time of the business
combination (“Substituted Stock Incentives”). The terms and conditions of the substitute Grants
may vary from the terms and conditions that would otherwise be required by the 2002 Plan and from
those of the Substituted Stock Incentives. The Committee shall prescribe the exact provisions of
the substitute Grants, preserving where practical the provisions of the Substituted Stock
Incentives. The Committee shall also determine the number of shares of Lilly Stock to be taken
into account under Section 4.

     (c) Subsidiaries. The term “subsidiary” means a corporation, limited liability company or
similar form of entity of which Eli Lilly and Company owns directly or indirectly 50 percent or
more of the voting power.

     (d) Fractional Shares. Fractional shares shall not be issued or transferred under a Grant,
but the Committee may pay cash in lieu of a fraction or round the fraction.

     (e) Compliance with Law. The 2002 Plan, the exercise of Grants, and the obligations of the
Company to issue or transfer shares of Lilly Stock under Grants shall be subject to all applicable
laws and regulations and to approvals by any governmental or regulatory agency as may be required.
The Committee may revoke any Grant if it is contrary to law or modify a Grant to bring it into
compliance with any valid and mandatory law or government regulation. The Committee may also adopt
rules regarding the withholding of taxes on payment to Grantees.

     (f) Ownership of Stock. A Grantee or Successor Grantee shall have no rights as a shareholder
of the Company with respect to any shares of Lilly Stock covered by a Grant until the shares are
issued or transferred to the Grantee or Successor Grantee on the Company’s books.

     (g) No Right to Employment or to Future Grants. The 2002 Plan and the Grants under it shall
not confer upon any Eligible Employee or Grantee the right to continue in the employment of the
Company or as a member of the Board or affect in any way (i) the right of the Company to terminate
the employment of an Eligible Employee or Grantee at any time, with or without notice or cause, or
(ii) any right of the Company or its shareholders to terminate the Grantee’s service on the Board.
Neither the status of an individual as an Eligible Employee nor the receipt of one or more Grants
by a Grantee shall confer upon the Eligible Employee or Grantee any rights to future Grants.

     (h) Foreign Jurisdictions. The Committee may adopt, amend, and terminate such arrangements
and make such Grants, not inconsistent with the intent of the 2002 Plan, as it may deem necessary
or desirable to make available tax or other benefits of the laws of foreign jurisdictions to
Grantees who are subject to such laws. The terms and conditions of such foreign Grants may vary
from the terms and conditions that would otherwise be required by the 2002 Plan.

     (i) Governing Law. The 2002 Plan and all Grants made under it shall be governed by and
interpreted in accordance with the laws of the State of Indiana, regardless of the laws that might
otherwise govern under applicable Indiana conflict-of-laws principles.

-12-

 

     (j) Effective Date of the 2002 Plan. The 2002 Plan is effective upon its approval by the
Company’s shareholders at the annual meeting to be held on April 15, 2002, or any adjournment of
the meeting.

* * *

-13-exv10w2

 

Exhibit 10.2

Eli Lilly and Company

Shareholder Value Award

This
Shareholder Award has been granted for the period of January 1,
200[  ] through December 31,
200[  ] by Eli Lilly and Company, an Indiana corporation with its principal offices in Indianapolis,
Indiana (Lilly), to [Grantee]

Performance Levels

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	No	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Payout	 	 	Level 1	 	 	Level 2	 	 	Level 3	 	 	Level 4	 	 	Level 5	 	 	Level 6	 
	Stock Price
	 	 	 	 	 	$	[       ]	 	 	$	[       ]	 	 	$	[       ]	 	 	$	[       ]	 	 	$	[       ]	 	 	 	 	 
	 
	 	 	<$[       ]	 	 	 	—	 	 	 	—	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	<$[       ]	 
	 
	 	 	 	 	 	$	[       ]	 	 	$	[       ]	 	 	$	[       ]	 	 	$	[       ]	 	 	$	[       ]	 	 	 	 	 
	% 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
	 	 	4	 
	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
	 	 	5	 
	Section 9. Notices, Payments and Electronic Delivery
	 	 	5	 
	Section 10. Waiver
	 	 	6	 
	Section 11. Revocation or Modification
	 	 	6	 
	Section 12. Withholding Tax
	 	 	6	 
	Section 13. No Compensation Deferrals
	 	 	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. Acknowledgement of Nature of 2002 Stock Plan & Shareholder Value Award
	 	 	8	 
	Section 19. Data Privacy Notice and Consent
	 	 	9	 
	Section 20. Effective Date
	 	 	10	 
	Section 21. Governing Law
	 	 	10	 
	Section 22. Language
	 	 	10	 

 

 

	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,
200[  ], through December 31, 200[  ]. 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”, 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 terms and conditions following:

  Section 1. Statement of Award Period

     The Award Period shall begin January 1, 200[  ] and end December 31, 200[  ].

  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 % 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.

Page 3

 

  Section 3. Computation of Final Stock Price

The Final Stock Price shall be computed in accordance with the following procedures:

	 	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 taxes stated in Section 12, Lilly shall
issue or transfer to the Grantee any Performance Shares to be issued or transferred under
Section 5 and pay to the Grantee any cash determined to be payable under that section not later
than the sixtieth day after the expiration of the Award Period 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.

Page 4

 

  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:

	 	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 senior most vice president
of Lilly responsible for human resources may, in his or her 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 senior most vice president
responsible for human resources may also, in his or her 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. 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 senior most vice president over human resources of Lilly will be
responsible for approving, in his or her discretion, what is classified as
disability, a plant closing, or a reduction in workforce.

  Section 9. Notices, Payments and Electronic Delivery

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 by the
Treasurer of Lilly at Lilly Corporate Center, Indianapolis, Indiana 46285. 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 Shareholder Value Awards
that may be awarded 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 grant of Shareholder Value Awards, the Grantee

Page 5

 

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.

  Section 10. Waiver

The waiver by Lilly of any provision of this instrument at any time or for any purpose
shall not operate as 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 and local taxes), 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 (i) make no
representations or undertakings regarding the treatment of any Tax Related Items in connection
with any aspect of the Shareholder Value Awards, including the grant of the Shareholder Value
Awards, the transfer and issuance of any Performance Shares or the receipt of any cash payment
and the subsequent sale of any Performance Shares acquired; and (ii) do not commit to structure
the terms of the grant or any aspect of the Shareholder Value Awards to reduce or eliminate the
Grantee’s liability for Tax Related Items.

Prior to the issuance of any Performance Shares or the receipt of a cash payment, the Grantee
shall pay, or make adequate arrangements satisfactory to Lilly and/or the Employer to satisfy
all withholding and payment on account obligations of Lilly and/or the Employer. 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) sell or arrange for the sale of Performance Shares to be issued upon the
expiration of the Award Period to satisfy the withholding or payment on account obligation (at
the Grantee’s behalf and at the Grantee’s direction pursuant to this authorization), and/or
(ii) withhold in Performance Shares, provided that Lilly and/or the Employer shall withhold
only the amount of Performance Shares necessary to satisfy the minimum withholding amount (or
such other amount that will not trigger unfavorable accounting). 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 the Grantee’s receipt of Shareholder Value Awards, the
issuance of Performance Shares upon the expiration of the Award Period or the receipt of a cash
payment that cannot be satisfied by the means previously described. Lilly may 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.

Page 6

 

  Section 13. No Compensation Deferrals

Neither the 2002 Plan nor this instrument is intended to provide for an elective deferral
of compensation that would be subject to Section 409A of the U.S. Internal Revenue Code of
1986, as amended (“Section 409A”). Lilly reserves the right, to the extent Lilly deems
necessary or advisable in its sole discretion, to unilaterally amend or modify the 2002 Plan
and/or this instrument to ensure that no awards (including without limitation, the Shareholder
Value Awards) become subject to the requirements of Section 409A, provided however that Lilly
makes no representation that the Shareholder Value Awards are not subject to Section 409A nor
makes any undertaking to preclude Section 409A from applying to the Shareholder Value Awards.

  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 (or in the case of Section 8, the senior most vice
president of Lilly responsible for human resources) 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 Transaction as defined in Section
12(b)(iii) of the 2002 Plan pursuant to which Lilly is not the surviving entity.

Page 7

 

	 	b.	 	Upon 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.

  Section 18. Acknowledgement of Nature of 2002 Stock 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 awarded
repeatedly in the past;
	 
	 	c.	 	all decisions with respect to future awards, if any, will be at the sole discretion
of Lilly;
	 
	 	d.	 	the Grantee’s participation in the 2002 Plan is voluntary;
	 
	 	e.	 	Shareholder Value Awards are extraordinary items that do not constitute
compensation of any kind for services of any kind rendered to Lilly and are outside the
scope of the Grantee’s employment contract, if any;
	 
	 	f.	 	Shareholder Value Awards are 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 retirement benefits or similar payments;
	 
	 	g.	 	neither the Shareholder Value Awards 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, Shareholder Value
Awards 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.	 	if the Grantee receives Performance Shares, the value of such Performance Shares
acquired upon expiration of the Award Period may increase or decrease in value;

Page 8

 

	 	j.	 	no claim or entitlement to compensation or damages arises from termination of
Shareholder Value Awards, and no claim or entitlement to compensation or damages shall
arise from any diminution in value of the Shareholder Value Awards or Performance Shares
received upon expiration of the Award Period resulting from termination of the Grantee’s
employment by Lilly or the Employer (for any reason 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 grant
of Shareholder Value Awards, 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 that 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); furthermore,
in the event of termination of employment (whether or not in breach of local labor laws),
the Grantee’s right to receive Performance Shares pursuant to the Shareholder Value
Awards after termination of employment, if any, will be measured by the date of
termination of the Grantee’s active employment and will not be extended by any notice
period mandated under 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 Awards;
	 
	 	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

Page 9

 

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 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 laws that might cause other law to govern
under applicable principles of conflicts of law. 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 grant is made
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.

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

	 	 	 
	 

	 	ELI LILLY AND COMPANY
	 
	 	 
	 

	 	By 
	 

	 	Sidney Taurel
	 

	 	Chairman of the Board and
	 

	 	Chief Executive Officer

Page 10

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