Document:

Exhibit 10.20

 

ELANCO ANIMAL HEALTH INCORPORATED

 

Form of 2018 CHANGE IN CONTROL SEVERANCE PAY PLAN

FOR SELECT EMPLOYEES

 

Effective              , 2018

 

1.                                      PURPOSE

 

This Elanco Animal Health Incorporated  2018 Change in Control Severance Pay Plan For Select Employees has been established by the Company to provide for the payment of severance pay and benefits to Eligible Employees whose employment with a Participating Employer terminates due to certain conditions created by a Change in Control of the Company.  The purpose of the Plan is to assure continuity in operations of the Company during a period of Change in Control by allowing employees to focus on their responsibilities to the Company knowing that they have certain financial security in the event of their termination of employment.  The accomplishment of this purpose is in the best interests of the Company and its shareholders.  The Plan is effective as of                , 2018.

 

2.                                      DEFINITIONS

 

The terms defined in this Section 2 shall have the meanings given below:

 

(a)                                 “Base Salary” means an Eligible Employee’s gross annualized rate of base salary at the time of any determination hereunder, before any deductions, exclusions or any deferrals or contributions under any Participating Employer plan or program, but excluding bonuses, incentive awards or compensation, employee benefits or any other non-salary form of compensation.

 

(b)                                 “Board” means the Board of Directors of the Company.

 

(c)                                  “Change in Control” has the meaning given in Section 3.

 

(d)                                 “Code” means the Internal Revenue Code of 1986, as amended.

 

(e)                                  “Committee” means the Compensation Committee of the Board, or such other committee appointed by the Board to perform the functions of the Committee under the Plan, provided that at all times the Committee shall be constituted solely of directors who are Continuing Directors (as defined in Section 3) to the extent any such directors remain on the Board and are willing to serve in such capacity.

 

(f)                                   “Company” means Elanco Animal Health Incorporated, an Indiana corporation.

 

(g)                                  “Continuing Director” has the meaning set forth in the 2018 Elanco Stock Plan, as amended from time to time (or any successor plan thereto).

 

 

(h)                                 “Covered Termination” has the meaning given in Section 6.

 

(i)                                     “Eligible Employee” has the meaning given in Section 5.

 

(j)                                    “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

(k)                                 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(l)                                     “Participating Employer” has the meaning given in Section 4.

 

(m)                             “Plan” means this Elanco Animal Health Incorporated 2018 Change in Control Severance Pay Plan for Select Employees.

 

(n)                                 “Retirement Age” means the date the Eligible Employee reaches age 65, unless the Company’s senior-most officer responsible for the Human Resources department has approved a later date as the Retirement Age for the Eligible Employee.

 

(o)                                 “Section 409A” shall mean Section 409A of the Code and the applicable rulings and regulations promulgated thereunder.

 

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

 

(q)                                 “Severance Period” means the two (2) year period immediately following a Covered Termination.

 

3.                                      CHANGE IN CONTROL

 

For purposes of the Plan, a “Change in Control” of the Company shall be deemed to have occurred upon:

 

(a)                                 the acquisition by any “person,” as that term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (i) the Company, (ii) any subsidiary of the Company, or (iii) 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) of “beneficial ownership,” as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of 20% 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 (or which would have such voting power but for the application of the Indiana Control Shares Statute) (“Voting Stock”); provided, however, that an acquisition of Voting Stock directly from the Company shall not constitute a Change in Control under this Section 3(a);

 

(b)                                 the first day on which less than one-half of the total membership of the Board shall be Continuing Directors;

 

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(c)                                  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 60% of the Voting Stock of the Company or such surviving entity immediately after such Transaction; or

 

(d)                                 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.

 

For purposes of this Section 3 only, the term “subsidiary” means a corporation or limited liability company of which the Company owns directly or indirectly fifty percent (50%) or more of the voting power.  For the avoidance of doubt, the completion of the transaction pursuant to which the Company ceases to be a subsidiary of Eli Lilly & Company is not a Change in Control for purposes of this Plan.

 

4.                                      PARTICIPATING EMPLOYERS

 

A.                                    Designation of Participating Employers.  The Company and each subsidiary corporation of which the Company owns directly or indirectly one-hundred percent (100%) of the voting power at the time of the Change in Control shall be Participating Employers under the Plan.  In addition, the Committee may designate other affiliates of the Company as Participating Employers under the Plan, from time to time and under such terms and conditions, as shall be specified by an action in writing by the Committee.  Such terms and conditions may impose limitations on the extent to which any such affiliate participates in the Plan (including but not limited to the duration of any such participation), but shall not provide rights or benefits to Eligible Employees that are broader than those set forth in the Plan.  Any entity that is a Participating Employer at the time of a Change in Control shall continue to be a Participating Employer following a Change in Control, and any person, firm or business that is a successor to the business or interests of a Participating Employer following a Change in Control shall be treated as a Participating Employer under the Plan.

 

B.                                    Limitations in Foreign Jurisdictions.  Notwithstanding the foregoing or anything elsewhere in the Plan to the contrary, the Committee shall have the discretionary authority, as specified below, to exclude from participation or limit the participation of any Participating Employer with respect to individuals employed outside of the United States. The Committee shall exercise this authority only by an action in writing taken prior to a Change in Control on the basis of a good faith determination that, as a result of the specific effect of applicable local law or practice with respect to the Plan or severance benefits generally, it would be in the best interests of the Company to so exclude or limit such participation.  In addition, unless otherwise specified by the Committee, the severance payments and benefits under the Plan shall offset or be offset by the benefits otherwise payable to any such Eligible Employee under severance arrangements that exist by reason of applicable local law, practice or policy, in accordance with applicable law.

 

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5.                                      ELIGIBLE EMPLOYEES

 

All employees of the Participating Employers, including executive officers (as defined in Rule 3b-7 under the Exchange Act), who are classified by the Company as R8 or M5-M8 global job level or other groups or individuals as designated by the Committee (or any successor classifications) immediately prior to the Change in Control shall be eligible to participate in the Plan and shall be considered an Eligible Employee for all purposes hereunder.  Any person who is an Eligible Employee in accordance with the foregoing shall continue to be an Eligible Employee notwithstanding any change in his or her position or classification following a Change in Control, subject to Section 6 hereof relating to certain terminations of employment that are not treated as a Covered Termination.  The Committee shall notify each Eligible Employee of his or her participation in the Plan prior to the Change in Control; provided that any failure to so notify shall not affect the Eligible Employee’s participation in the Plan.

 

6.                                      COVERED TERMINATIONS

 

A.                                    General.  An Eligible Employee shall be treated as having incurred a “Covered Termination” hereunder if he or she incurs a Separation from Service within a period of two (2) years immediately following the date of a Change in Control, (i) by a Participating Employer other than for “Cause”, or (ii) by the Eligible Employee for “Good Reason”.  For purposes of the foregoing, the two (2) year period specified above within which a Separation from Service may be treated as a Covered Termination shall commence on the date the Change in Control becomes effective.  For purposes of the Plan, a Separation from Service shall be effective as of the last date of the Eligible Employee’s employment with the Participating Employer.

 

An Eligible Employee shall not be treated as having incurred a Covered Termination in the event of (1) death, (2) total disability (within the meaning of the Company’s Extended Disability Plan), (3) transfer of employment among Participating Employers (unless such transfer results in a Separation from Service for “Good Reason”), (4) involuntary termination by the Participating Employer for “Cause”, (5) voluntary termination by the Eligible Employee other than for Good Reason, (6) a termination of employment for any reason by either the Participating Employer or the Eligible Employee that does not occur during the two (2) year period specified above or (7) a termination of employment for any reason by either the Participating Employer or the Eligible Employee after the Eligible Employee reaches Retirement Age.

 

B.                                    Termination For Cause.  For purposes hereof, an Eligible Employee’s Separation from Service by the Participating Employer shall be deemed to be for “Cause” if as a result of:

 

(i)                                     the willful refusal of the Eligible Employee to perform, without legal cause, his or her material duties to the Participating Employer, resulting in demonstrable economic harm to any Participating Employer, which the Eligible Employee has failed to cure after thirty (30) calendar days’ advance written notice from the Company;

 

(ii)                                  any act of fraud, dishonesty or gross misconduct of the Eligible Employee resulting in demonstrable economic harm to any Participating Employer or other demonstrable harm to the business reputation of any Participating Employer; or

 

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(iii)                               the conviction of the Eligible Employee by a court of competent jurisdiction of any crime (or the entering of a plea of guilty or nolo contendere to a charge of any crime) constituting a felony.

 

A termination for Cause shall be communicated to the Eligible Employee in writing by the Participating Employer and shall specify the provisions of the Plan and factual matters relied upon in making the Cause determination.

 

C.                                    Termination for Good Reason.  For purposes hereof, an Eligible Employee’s Separation from Service by the Eligible Employee shall be deemed to be for “Good Reason” if as a result of:

 

(i)                                     a material diminution in the nature or status of the Eligible Employee’s position, title, reporting relationship, duties, responsibilities or authority, or the assignment to him or her of additional responsibilities that materially increase his or her workload;

 

(ii)                                  any reduction in the Eligible Employee’s then-current Base Salary;

 

(iii)                               a material reduction in the Eligible Employee’s opportunities to earn incentive bonuses below those in effect for the year most recently completed before the date of the Change in Control, taking into account all material bonus factors such as targeted bonus amounts and corporate performance measures;

 

(iv)                              a material reduction in the Eligible Employee’s employee benefits and coverages (including, without limitation, pension, profit sharing and all welfare, and fringe benefits) that are provided to the Eligible Employee from the benefit levels in effect immediately prior to the Change in Control;

 

(v)                                 the failure to grant to the Eligible Employee stock options, stock units, performance shares or similar incentive rights during each twelve (12) month period following the Change in Control on the basis of a number of shares or units and all other material terms (including vesting requirements) at least as favorable to the Eligible Employee as those rights granted to him or her on an annualized average basis for the three (3) year period immediately prior to the Change in Control;

 

(vi)                              relocation of the Eligible Employee by more than fifty (50) miles from his or her regularly assigned workplace existing immediately prior to the date of the Change in Control; or

 

(vii)                           any failure by a successor entity to the Company (including any entity that succeeds to the business or assets of the Company) in connection with a Change in Control to assume by operation of law or otherwise the obligations of the Company under the Plan, or any attempted amendment, termination or repudiation of the Plan by such successor entity, other than pursuant to the provisions of Section 15.

 

For purposes of the foregoing, but without limitation of the Eligible Employee’s right to otherwise terminate employment for Good Reason, if the Eligible Employee is in charge of a principal business unit, division or function of the Company immediately prior to a Change in Control, Good

 

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Reason shall not be deemed to exist based solely on the fact that the Eligible Employee is not in charge of such principal business unit, division or function of the combined entity following the Change in Control, unless as a result thereof, the Eligible Employee suffers a material diminution in the nature or status of the Eligible Employee’s position, title, reporting relationship, duties, responsibilities or authority or suffers some other Good Reason event.

 

A termination for Good Reason shall be communicated to the Participating Employer in writing by the Eligible Employee within thirty (30) days following his or her knowledge of the circumstances constituting Good Reason, and shall specify the provisions of the Plan and the factual matters relied upon in making the Good Reason determination.  The Participating Employer shall have the opportunity to cure the circumstances constituting Good Reason within 30 days following receipt of such written notice from the Eligible Employee, and if such circumstances are fully cured, such circumstances shall cease to constitute the basis for a Good Reason termination hereunder. If such circumstances are not fully cured, the Eligible Employee’s termination will become effective immediately following the expiration of the cure period.

 

7.                                      SEVERANCE PAYMENT

 

A.                                    Amount of Severance Payment.  The amount of the severance payment to be paid by the Company to an Eligible Employee who is treated as having incurred a Covered Termination hereunder shall equal two (2) times the sum of:

 

(i)                                     the Eligible Employee’s Base Salary at the time of Covered Termination (calculated without regard to any reduction in Base Salary that results in a Good Reason termination) or, if greater, at the time of the Change in Control, plus

 

(ii)                                  the Eligible Employee’s target annual cash incentive bonus for the year of Covered Termination or if there is no target-based annual cash incentive bonus, then the annual cash bonus paid or payable for the most recently completed calendar year prior to the Change in Control.

 

B.                                    Payment of Severance.  Subject to Section 18, the severance payment to be made hereunder shall be paid to the Eligible Employee in a single lump-sum cash payment, less any required tax withholding, on the date that is sixty (60) calendar days following the date of the Eligible Employee’s Covered Termination, conditioned upon the Eligible Employee having complied, prior to that date with the requirements of Section 10 hereof regarding a release of claims.

 

8.                                      OTHER SEVERANCE BENEFITS

 

In addition to the severance payment provided under Section 7, an Eligible Employee shall be entitled to the following benefits and other rights in the event of his or her Covered Termination:

 

A.                                    Welfare Benefits.  The Eligible Employee shall continue to participate, on the same basis as active employees of the Participating Employer, for eighteen (18) months immediately following a Covered Termination (“Continuation Period”) in the Participating Employer’s medical and dental plans (but not to include flexible spending plans), group life insurance plans, company-provided death benefit, supplemental life insurance and long-term disability plans for which he or she was eligible

 

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at the time of Covered Termination (or, if it would provide benefits or other terms more favorable to the Eligible Employee, at the time of the Change in Control), as though his or her Separation from Service had not occurred (the “Welfare Continuation Coverages”). All Welfare Continuation Coverages shall apply to the Eligible Employee and any of his or her dependents who would have been eligible for coverage if the Eligible Employee remained employed for the Continuation Period.  The Company may provide the Eligible Employee with the Welfare Continuation Coverages under arrangements other than its generally applicable welfare benefit plans, provided that the benefit coverages so provided are at least as favorable to the Eligible Employee as coverage under the otherwise applicable Welfare Continuation Coverages, on a coverage by coverage basis, and taking into account all tax consequences to the Eligible Employee.  At the expiration of the Continuation Period, the Eligible Employee shall be treated as a then terminating employee with respect to the right to elect continued medical and dental coverages in accordance with Section 4980B of the Code (or any successor provision thereto). Notwithstanding the foregoing, if the Eligible Employee becomes eligible to participate in welfare benefit coverages from a subsequent employer of the same type as provided under one or more of the Welfare Continuation Coverages, then the applicable Welfare Continuation Coverages provided by this Section 8.A, on a coverage by coverage basis, shall be terminated.  If and to the extent that any benefit under this Section 8.A or under Section 8.B. is not eligible for exemption from Section 409A pursuant to Treasury Regulation § 1.409A-1(b)(9)(v) (or any successor regulation) or otherwise, the Company shall, pursuant to Section 18 hereof, take such actions as it deems necessary to comply with the requirements of Treasury Regulation § 1.409A-3(i)(1)(iv) (or any successor regulation), including, without limitation, by providing that (i) the amount of the benefit under this Section 8.A or under Section 8.B. in any calendar year shall not affect the amount of the benefit thereunder for any other calendar year, (ii) any reimbursement of expenses under this Section 8.A or under Section 8.B. be made not later than the last day of the calendar year following the year in which the Eligible Employee incurred such expenses, and (iii) in no event shall any right to reimbursement or receipt of in-kind benefits under this Section 8.A. or under Section 8.B. be subject to liquidation or exchange for another benefit.

 

B.                                    Accrued Rights.  The Eligible Employee shall be entitled to the following payments and benefits in respect of accrued compensation rights at the time of a Covered Termination, in addition to all other rights provided under the Plan: (i) payment of any accrued but unpaid Base Salary through the date of Covered Termination; (ii) payment of any accrued but unpaid annual cash bonus for the most recently completed calendar year prior to the Covered Termination; (iii) payment of the accrued annual cash bonus for the year in effect on the date of the Covered Termination, determined on the basis of the bonus earned under terms of the applicable bonus plan through the date of termination or, if greater, the pro-rata amount of the target annual cash bonus for the period of such year through the date of termination; and (iv) all benefits and rights accrued under the employee benefit plans, fringe benefit programs and payroll practices of a Participating Employer in accordance with their terms (including, without limitation, employee pension, employee welfare, incentive bonus and stock incentive plans). Payment of the amounts described in clauses (i) through (iii) shall be made to the Eligible Employee within thirty (30) calendar days after the Eligible Employee’s Covered Termination.

 

C.                                    Outplacement; Relocation.  The Eligible Employee shall be provided, at the Company’s sole expense, with professional outplacement services selected by the Eligible Employee consistent with his or her duties or profession and of a type and level customary for persons in his or her position;

 

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provided, however, that the Company shall not be required to pay fees in connection with the foregoing in an amount greater than fifteen (15) percent of the Eligible Employee’s Base Salary as determined under clause (i) of Section 7.A.  The Company shall honor any prior agreement or understanding with an Eligible Employee who has incurred a Covered Termination to reimburse his or her relocation expenses to the Indianapolis, Indiana metropolitan area or, if it does not result in a greater cost to the Company, to such other location selected by the Eligible Employee. Payment for any such outplacement services or relocation expense shall be made on the business day that is six (6) months following the date of the Covered Termination.

 

D.                                    Indemnification.  With respect to any Eligible Employee who is, immediately prior to a Change in Control or a Covered Termination, indemnified by the Company for his or her service as a director, officer or employee of a Participating Employer, the Company shall indemnify such Eligible Employee to the fullest extent permitted by applicable law, and the Company shall maintain in full force and effect, for the duration of all applicable statute of limitation periods, insurance policies at least as favorable to the Eligible Employee as those maintained by the Company for the benefit of its directors and officers at the time of Change in Control, provided that such insurance policies are commercially available from carriers of recognized standing, with respect to all costs, charges and expenses whatsoever (including payment of expenses in advance of final disposition of a proceeding) incurred or sustained by the Eligible Employee in connection with any action, suit or proceeding to which he or she may be made a party by reason of being or having been a director, officer or employee of a Participating Employer or serving or having served any other enterprise as a director, officer or employee at the request of a Participating Employer.

 

9.                                      REDUCTION OF TOTAL PAYMENTS

 

(a)                                 In the event it shall be determined that any payment, right or distribution by the Company or any other person or entity to or for the benefit of an Eligible Employee pursuant to the terms of the Plan or otherwise, in connection with, or arising out of, his or her employment with a Participating Employer or a change in ownership or effective control of the Company or a substantial portion of its assets (a “Payment”) would be a “parachute payment” within the meaning of Section 280G of the Code on account of the aggregate value of the Payments due to the Eligible Employee being equal to or greater than three times the “base amount,” as defined in Section 280G(b)(3) of the Code, (the “Parachute Threshold”) so that the Eligible Employee would be subject to the excise tax imposed by Section 4999 of the Code, and reducing the aggregate value of the Payments would result in an increase in the aggregate Payments to be received by the Eligible Employee (after taking into account the excise tax imposed pursuant to Section 4999 of the Code, any tax imposed by any comparable provision of state law, and any applicable federal, state, and local income and employment taxes), the Company shall reduce the total Payments by the amount necessary to maximize the aggregate value of Payments to such Eligible Employee determined on an after-tax basis, reducing first any taxable Payments, and thereafter any other non-taxable Payments.  For purposes of determining the amount of an Eligible Employee’s aggregate value of Payments on an after-tax basis, the Eligible Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Payments are to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of such Eligible Employee’s residence on the effective date of the Covered Termination, net of the

 

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maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.

 

(b)                                 In the event the Internal Revenue Service adjusts any item included in the Company’s computations under subsection 9(a) above so that such Eligible Employee did not receive the full net benefit intended under the provisions of this Section 9, the Company shall reimburse such Eligible Employee, by the end of the calendar year following the year of such adjustment, for all or a portion of the taxes imposed pursuant to such adjustment to the extent necessary to make such Eligible Employee whole.

 

(c)                                  All determinations required to be made under this Section 9, including whether any Payment is a “parachute payment” and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized accounting firm designated by the Company which is not the auditor of the Company or another party involved in the Change in Control (the “Accounting Firm”) and shall be based upon “substantial authority” (within the meaning of Section 6662 of the Code).  All fees and expenses of the Accounting Firm shall be borne by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Eligible Employee.

 

10.                               RELEASE OF CLAIMS

 

All payments and benefits that may be made to an Eligible Employee upon a Covered Termination under the Plan shall be contingent upon the Eligible Employee entering into and not revoking a separation agreement, which shall contain a general release of claims against the Company and the Participating Employer, in substantially the form attached hereto as Exhibit A, subject to such modifications as may be determined by the Committee in good faith to take into account changes in laws or differences in laws in other jurisdictions.  The Company will provide the separation agreement to the Eligible Employee within five (5) business days of the Covered Termination.

 

11.                               NO MITIGATION OR OFFSET

 

The Eligible Employee shall be under no obligation to minimize or mitigate damages by seeking other employment, and the obtaining of any such other employment shall in no event effect any reduction of the Company’s obligation to make the payments and provide the benefits required under the Plan.  Except as provided in Section 10, the Company’s obligation to make the payments and provide the benefits required under the Plan shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other rights which a Participating Employer may have against the Eligible Employee.

 

12.                               UNFUNDED STATUS

 

The Plan is intended to constitute an employee pension benefit plan under ERISA which is unfunded and is maintained primarily for the purpose of providing deferred compensation for a select group of

 

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management or highly compensated employees, and shall be interpreted and administered accordingly.  The payments and benefits provided hereunder shall be paid from the general assets of the Company.  Nothing herein shall be construed to require the Company 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 Company from which the payment pursuant to the Plan may be made.  Consistent with the foregoing, the Company may, in its sole discretion, deposit funds in a grantor trust or otherwise establish arrangements to pay amounts that become due under the Plan, and, notwithstanding anything elsewhere in the Plan to the contrary, the payments and benefits due under the Plan shall be reduced to reflect the amount of any payment made in respect of any Eligible Employee from a grantor trust or other arrangement established for this purpose.

 

13.                               ADMINISTRATION

 

The Committee shall be the named fiduciary of the Plan and the plan administrator for purposes of ERISA.  The Committee shall be responsible for the overall operation of the Plan and shall have the fiduciary responsibility for the general operation of the Plan.  The Committee may allocate to any one or more of the Company’s employees any responsibility the Committee may have under the Plan and may designate any other person or persons to carry out any of the Committee’s responsibilities under the Plan.  As plan administrator, the Committee shall maintain records pursuant to the Plan’s provisions and shall be responsible for the handling, processing and payment of any claims for benefits under the Plan.

 

14.                               CLAIMS AND DISPUTES

 

A.                                    Filing a Claim. Within thirty (30) calendar days following a Covered Termination, the Company shall notify each Eligible Employee whom the Company determines is entitled to payments and benefits under the Plan of his or her entitlement to such payments and benefits.  An Eligible Employee who is not so notified may submit a claim for payments and benefits under the Plan in writing to the Company within ninety (90) calendar days after becoming entitled to such benefits as described in Section 6. Claims filed after such ninety (90) calendar day period will be denied.

 

All claims must be in writing and contain the following information:

 

·                  The name of the Eligible Employee filing the claim;

·                  The name of the Plan; and

·                  A statement that the Eligible Employee is making a claim under the Plan and the basis for such claim.

 

All claims must be timely delivered to the Company at the address below:

 

Elanco Animal Health Incorporated

Attention: Corporate Secretary

2500 Innovation Way

Greenfield, IN 46140

 

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B.                                    Process for Determining Claims. The Company will notify each claimant of its decision to approve or deny the claimant’s claim within a reasonable period of time, but not later than ninety (90) days after the date the claim was received by the Company. In special circumstances, the Company may have up to an additional ninety (90) days to provide the claimant with such written notice, provided that the Company must notify the claimant prior to the expiration of the initial ninety (90) day period, state the reason(s) for such extension and state the date by which the Company expects to make its determination.

 

C.                                    Content of Initial Determination. If the claimant’s claim is denied in whole or in part, the Company will provide written or electronic notice of its adverse benefit determination that includes the following information:

 

·                  The specific reason(s) for the adverse benefit determination;

·                  Reference to the specific provision(s) of the Plan on which the determination is based;

·                  A description of any additional material or information necessary for the claimant to perfect his or her claim and an explanation of why such material or information is necessary;

·                  A description of the Plan’s appeals procedures and the time limits applicable to such procedures; and

·                  A statement of the claimant’s rights to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on appeal.

 

D.                                    Filing an Appeal. A claimant may appeal a denied claim within sixty (60) days following receipt of written notice of the adverse benefit determination. Appeals may include any written comments, documents, records, or other information relating to the claim, and must include the following information:

 

·                  The name of the Eligible Employee filing the appeal;

·                  The name of the Plan;

·                  Information identifying the initial adverse benefit determination; and

·                  The basis for appeal of the initial adverse benefit determination.

 

The claimant will be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim, as determined by the Company under applicable federal regulations.

 

All appeals must be timely delivered to the Company at the address below:

 

Elanco Animal Health Incorporated

Attention: Corporate Secretary

2500 Innovation Way

Greenfield, IN 46140

 

E.                                    Process for Determining Appeals. The Company’s review on appeal will take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit

 

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determination. The Company will notify each claimant of its decision on appeal within a reasonable period of time, but not later than sixty (60) days after the date the request for appeal was received by the Company. In special circumstances, the Company may have up to an additional sixty (60) days to provide the claimant with such written notice, provided that the Company must notify the claimant prior to the expiration of the initial sixty (60) day period, state the reason for such extension and state the date by which the Company expects to make its determination on appeal.

 

F.                                     Content of Appeal Determination.  If the claimant’s appeal is denied in whole or in part, the Company will provide written or electronic notice of its adverse benefit determination that includes the following information:

 

·                  The specific reason(s) for the adverse benefit determination;

·                  Reference to the specific provision(s) of the Plan on which the determination is based;

·                  A statement of the claimant’s right to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim, as determined by the Company under applicable federal regulations; and

·                  A statement of the claimant’s rights to bring a civil action under Section 502(a) of ERISA.

 

G.                                   Authorized Representative. Eligible Employees may authorize a representative to pursue any claim or appeal on their behalf.  The Company will recognize a person as an Eligible Employee’s authorized representative if such person submits a writing that has been signed by such Eligible Employee and notarized stating that the authorized representative is authorized to act on your behalf.  A court order stating that a person is authorized to submit claims on behalf of an Eligible Employee will also be recognized.

 

H.                                   Tolling. If an extension of time is required, either during the initial review or on appeal,  due to the claimant’s failure to submit additional information requested by the Company, the period for making the benefit determination may, in the sole discretion of the Company, be tolled from the date on which the notification of extension is sent to the claimant until the date on which the claimant responds to the request for additional information.  If the claimant does not respond in a timely fashion, as determined by the Company in its sole discretion, the Company will decide the appeal without such additional information.

 

I.                                        Exhaustion Requirement. No action at law or at equity to recover payments or benefits under the Plan may be brought by an Eligible Employee (or an authorized representative thereof) until such Eligible Employee or authorized representative has exhausted the claims and appeals procedures described in this Section 14.

 

15.                               TERM AND AMENDMENT

 

The Plan became effective as of           , 2018. The Plan shall continue to be effective until terminated in accordance with this Section 15. The Board shall have the right, by resolution or other written action, to terminate or amend the Plan; provided, however, that the Plan may only be terminated or amended prior to a Change in Control, and then only (i) with respect to an amendment or termination that becomes effective upon the first (1st) anniversary of the date of Board approval thereof, or (ii) to the extent any such amendment is of a technical or clarifying nature, or increases the rights or benefits

 

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of all affected Eligible Employees, and does not materially adversely affect in any manner the rights or benefits of any Eligible Employee, unless the Company has obtained the express written consent, in return for good and valuable consideration, of all affected Eligible Employees in respect of any such amendment.  Notwithstanding the foregoing, the Plan may be amended at any time if such change is required to comply with a change in applicable law.  In addition, any amendment, modification, or termination of the Plan that is adopted or which becomes effective before the completion of the transaction pursuant to which the Company ceases to be a subsidiary of Eli Lilly & Company shall become effective only if such amendment, modification, or termination is approved in writing by the Compensation Committee of the Board of Directors of Eli Lilly & Company.  Notwithstanding the foregoing, in the event of a Change in Control, the Plan shall continue in effect, and no termination or amendment of the Plan shall occur (other than any required amendment in connection with a change in applicable law), until the satisfaction of all severance payments and benefits to which Eligible Employees are or may become entitled to under the Plan.  Upon the occurrence of a Change in Control during the term of the Plan, the Plan shall not be operative with respect to any subsequent Change in Control.

 

16.                               SUCCESSORS AND ASSIGNS

 

The Plan shall be binding upon any person, firm or business that is a successor to the business or interests of the Company, whether as a result of a Change in Control of the Company or otherwise.  Any successor to the Company shall be required to assume the Plan in writing and honor the obligations of the Company and the Participating Employers hereunder.  All payments and benefits that become due to an Eligible Employee under the Plan shall inure to the benefit of his or her heirs, assigns, designees or legal representatives.

 

17.                               ENFORCEABILITY

 

The Company intends the Plan to constitute a legally enforceable obligation between it and each Eligible Employee, and that the Plan confer vested rights on each Eligible Employee in accordance with the terms of the Plan, with each Eligible Employee being a third-party beneficiary thereof.  Nothing in the Plan, however, shall be construed to confer on any Eligible Employee any right to continue in the employ of a Participating Employer or affect the right of a Participating Employer to terminate the employment or change the terms and conditions of employment of an Eligible Employee, with or without notice or cause, prior to a Change in Control, or to take any such action following a Change in Control, subject to the consequences specified by the Plan.

 

The Plan shall be construed and enforced in accordance with ERISA and the laws of the State of Indiana to the extent not preempted by ERISA, regardless of the law that might otherwise govern under applicable principles or provisions of choice or conflict of law doctrines.  To the extent any provision of the Plan shall be invalid or unenforceable under any applicable law, it shall be considered deleted herefrom and all other provisions of the Plan shall be unaffected and shall continue in full force and effect.

 

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18.                               SECTION 409A COMPLIANCE

 

To the extent applicable, it is intended that the Plan and all payments hereunder be exempt from or comply with the requirements of Section 409A, and the Plan shall be interpreted and applied by the Committee in a manner consistent with this intent in order to avoid the imposition of any additional tax under Section 409A.  In the event that any provision of the Plan is determined by the Committee to not comply with the applicable requirements of Section 409A, the Committee shall have the authority to take such actions and to make such changes to the Plan as the Committee deems necessary to comply with such requirements.  In no event whatsoever shall the Company be liable for any tax, interest or penalties that may be imposed on the Eligible Employee by or any damages for failing to comply with Section 409A. 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 the Plan, then, to the extent required, the commencement of any payment under the Plan shall be delayed until the date that is six (6) months following the date of the Eligible Employee’s Separation from Service.

 

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EXHIBIT A

 

SEVERANCE AGREEMENT AND RELEASE OF CLAIMS

 

15Exhibit 10.21

 

 

Elanco Animal Health Incorporated

Restricted Stock Unit Award Agreement

 

This Restricted Stock Unit Award 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 Restricted Stock Unit Award Agreement (the “Grantee”).

 

	
 
    	
Number of Shares:
    	
Log into UBS account at
    
	
 
    	
 
    	
http://myequity.elanco.com
    
	
 
    	
 
    	
 
    
	
 
    	
Grantee:
    	
INSERT GRANTEE NAME
    
	
 
    	
 
    	
 
    
	
 
    	
Vesting Date(s):
    	
l00% on 3rd anniversary of Grant Date
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(except as otherwise provided in this Restricted Stock Unit   Award Agreement)
    

 

 

Elanco Restricted Stock Unit Award Agreement

 

Table of Contents

 

	
Section 1.
    	
Grant of Restricted Stock Units
    	
3
    
	
Section 2.
    	
Vesting
    	
3
    
	
Section 3.
    	
Change in Control
    	
4
    
	
Section 4.
    	
Settlement
    	
4
    
	
Section 5.
    	
Rights of the Grantee
    	
5
    
	
Section 6.
    	
Prohibition Against Transfer
    	
5
    
	
Section 7.
    	
Responsibility for Taxes
    	
6
    
	
Section 8. 
    	
Section 409A Compliance
    	
7
    
	
Section 9.
    	
Nature of Grant
    	
7
    
	
Section 10. 
    	
Data Privacy
    	
9
    
	
Section 11. 
    	
Additional Terms and Conditions
    	
10
    
	
Section 12. 
    	
Governing Law and Choice of Venue
    	
11
    
	
Section 13. 
    	
Miscellaneous Provisions
    	
11
    
	
Section 14. 
    	
Award Subject to Acknowledgement   of Acceptance
    	
12
    
	
Appendix
    	
 
    	
14
    

 

2

 

Section 1.        Grant of Restricted Stock Units

 

Elanco, an Indiana corporation (“Elanco” or the “Company”), has granted to the Eligible Individual who has received this Restricted Stock Unit Award Agreement (the “Grantee”) an award of stock restricted stock units (the “Restricted Stock Units” or the “Award”) with respect to the number of shares of Elanco Common Stock (the “Shares”) 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 Restricted Stock Unit 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 position within the Company or an Affiliate following reallocation or medical

 

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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.        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 3 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.

 

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 3, 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 4.        Settlement

 

a.              Except as provided below, the Award shall be paid to the Grantee as soon as practicable and generally within sixty days following the applicable Vesting Date, or, if earlier, a vesting event contemplated under the Section 3 above, but in no event shall the Award be paid later than December 31 of the year in which the Vesting Date or vesting event occurs.

 

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b.              If the Award is considered an item of non-qualified deferred compensation subject to Section 409A of the Code (“NQ Deferred Compensation”) and the Vesting Date is a termination of the Grantee’s Service, (i) the Award shall not be paid unless and until the Grantee experiences a “separation from service” within the meaning of Section 409A of the Code (a “Section 409A Separation”) and (ii) if the Grantee is a “specified employee” within the meaning of Section 409A of the Code as of the Vesting Date, the vested portion of the Award shall instead be paid on the earliest of (1) the Vesting Dates set forth in Section 2(a)(i), (2) the first day following the six (6) month anniversary of the Grantee’s Section 409A Separation, (3) the date of a Section 409A CIC, and (4) the date of the Grantee’s death. If the Award is considered NQ Deferred Compensation and the Vesting Date is a Transaction that does not constitute a “change in control event” within the meaning of Section 409A of the Code (a “Section 409A CIC”), the Award shall instead be settled on the earliest of (A) the Vesting Dates set forth in Section 2(a)(i) with respect to the portion of the Award that was scheduled to vest on such Vesting Dates, (B) the date of a Section 409A CIC, and (C) the date of the Grantee’s death.

 

c.               At such time, the Company shall issue or transfer Shares or the cash equivalent, as contemplated under Section 4(d) below, to the Grantee. In the event the Grantee is entitled to a fractional Share, the fraction may be paid in cash or rounded, in the Committee’s discretion.

 

d.              At any time prior to the applicable Vesting Date or until the Award is paid in accordance with this Section 4, the Committee may, if it so elects, determine to pay part or all of the Award in cash in lieu of issuing or transferring Shares. The amount of cash shall be based on the Fair Market Value of the Shares on the applicable Vesting Date.

 

e.               In the event of the death of the Grantee, the payments described above shall be made to the successor of the Grantee.

 

Section 5.        Rights of the Grantee

 

a.              No Shareholder Rights. The Restricted Stock Units do not entitle the Grantee to any rights of a shareholder of the Company until such time as the Restricted Stock Units vest and Shares are issued or transferred to the Grantee.

 

b.              No Trust; Grantee’s Rights Unsecured. Neither this Award Agreement nor any action in accordance with this Award Agreement shall be construed to create a trust of any kind. The right of the Grantee to receive payments of cash or Shares pursuant to this Award Agreement shall be an unsecured claim against the general assets of the Company.

 

Section 6.        Prohibition Against Transfer

 

The right of a Grantee to receive payments of Shares and/or cash 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

 

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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 7.        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 Restricted Stock Units, the vesting of the Restricted Stock Units and the lapse of restrictions, the transfer and issuance of any Shares, the receipt of any cash payment pursuant to the Award, 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 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.

 

c.               If the Restricted Stock Units are paid to the Grantee in cash in lieu of Shares, the Grantee authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any obligation for Tax Related Items by withholding from the cash amount paid to the Grantee pursuant to the Award or from the Grantee’s wages or other cash compensation paid to the Grantee by the Company and/or the Employer.

 

d.              If the Restricted Stock Units are paid to the Grantee in Shares and the Grantee is not subject to the short-swing profit rules of Section 16(b) of the Exchange Act, the Grantee authorizes the Company and/or the Employer, or their respective agents, at their discretion, to (i) withhold from the Grantee’s wages or other cash compensation paid to the Grantee by the Company and/or the Employer, (ii) arrange for the sale of Shares to be issued upon settlement 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

 

6

 

for such sale to be effectuated) and withhold from the proceeds of such sale, and/or (iii) withhold in Shares otherwise issuable to the Grantee pursuant to this Award.

 

e.               If the Restricted Stock Units are paid to the Grantee in Shares and the Grantee is subject to the short-swing profit rules of Section 16(b) of the Exchange Act, the Company will withhold in Shares otherwise issuable to the Grantee pursuant to this Award, unless the use of such withholding method is prevented by applicable law or has materially adverse accounting or tax consequences, in which case the withholding obligation for Tax Related Items may be satisfied by one or a combination of the methods set forth in Section 7(d)(i) and (ii) above.

 

f.                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.

 

g.               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 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 in this Section 7.

 

Section 8. Section 409A Compliance

 

To the extent applicable, it is intended that this Award comply with the requirements of Section 409A of the U.S. Internal Revenue Code of 1986, as amended and the Treasury Regulations and other guidance issued thereunder (“Section 409A”) and this Award shall be interpreted and applied by the Committee in a manner consistent with this intent in order to avoid the imposition of any additional tax under Section 409A.

 

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 Restricted Stock Units, or benefits in lieu thereof, even if Restricted Stock Units have been granted in the past;

 

c.               all decisions with respect to future awards of Restricted Stock Units 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 or any subsidiary 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.                 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);

 

k.              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 to the Company or an Affiliate and the Grantee’s right, if any, to earn and be paid 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 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

 

8

 

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);

 

i.                  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

 

m.          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 Award or any amounts due to the Grantee pursuant to the settlement of the Award or the subsequent sale of any Shares acquired upon settlement..

 

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 Restricted Stock Units 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.

 

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

 

9

 

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.

 

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

 

10

 

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., Restricted Stock Units) 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 Restricted Stock Unit Award 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.

 

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 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

 

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

 

Section 14.     Award Subject to Acknowledgement of Acceptance

 

Notwithstanding any provisions of this Award Agreement, the Award 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 

 

12

 

acknowledge acceptance of the Option prior to 4:00 PM (EDT) INSERT DATE, the Award 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 
 Restricted Stock Unit

 

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.

 

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Appendix for Switzerland

 

Elanco Animal Health Incorporated 
 2018 Elanco Stock Plan 
 Restricted Stock Unit

 

Securities Law Information.

 

The grant of the Restricted Stock Units 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 Restricted Stock Units are 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”).

 

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