Document:

exv10w2

Exhibit 10.2

ELI LILLY AND COMPANY

THE LILLY DIRECTORS’ DEFERRAL PLAN

(as Amended and Restated Effective 1/1/2009)

Preamble

          The Lilly Directors’ Deferral Plan has been established by the Company for the purpose of
providing an opportunity for Directors of the Company who are not salaried employees of the Company
to voluntarily defer receipt of some or all of their meeting fees and retainer and to share in the
long-term growth of the Company by acquiring, on a deferred basis, an ownership interest in the
Company. Subject to adjustment as provided in Section 5(f), the aggregate number of shares of Eli
Lilly and Company common stock that may be issued or transferred under this Plan after April 28,
2003, is 750,000. The shares may be authorized and unissued shares or treasury shares.

          The Plan constitutes a plan of unfunded deferred compensation and is intended to comply with
the requirements of Section 409A. Notwithstanding any other provision of this Plan, this Plan
shall be interpreted, operated and administered in a manner consistent with these intentions.

          For the rules that apply to the distribution of amounts that were earned and vested (within
the meaning of Section 409A) under the Plan prior to 2005 (and earnings thereon) and are exempt
from the requirements of Section 409A, see Appendix A.

Section 1. Definition of Terms

          The following terms used in the Plan shall have the meanings set forth below:

          (a) “Account” means one or more deferred compensation accounts maintained for each
Participant under the Plan. A Participant’s Account shall consist of a Deferred Compensation
Account and the Deferred Stock Account as described in Section 5 hereof.

          (b) “Annual Allocation Date” means the last Business Day in November of each calendar
year, or such other annual date, not earlier than the third Monday in February, established by the
Plan Administrator as the date as of which Shares are allocated to each Deferred Stock Account in
accordance with Section 5.

          (c) “Beneficiary” means the person or persons who are designated by the Participant or
are otherwise entitled to receive benefits under the Plan in the event of the Participant’s death,
as provided in Section 6(d) hereof.

 

 

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

          (e) “Business Day” means a day on which the Company’s corporate headquarters are open
for regular business.

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

          (g) “Company” means Eli Lilly and Company, an Indiana corporation.

          (h) “Deferral Amount” means the amount of a Participant’s Monthly Compensation that is
elected by a Participant for deferral under the Plan.

          (i) “Deferred Stock Participant” means a Director who is not, and for the preceding 12
months has not been, a salaried employee of the Company.

          (j) “Director” means a member of the Board of Directors of the Company.

          (k) “Dividend Payment Date” means the date as of which the Company pays a cash
dividend on Shares.

          (l) “Dividend Record Date” means the date established by the Board of Directors as the
record date for determining shareholders entitled to the dividend with respect to any Dividend
Payment Date.

          (m) “Election Form” means the written or electronic form or forms approved by the Plan
Administrator and completed by the Participant specifying the Participant’s election to defer
Monthly Compensation pursuant to Section 4 and setting forth the Participant’s Beneficiary
designation and the terms of distribution of the Participant’s Deferred Compensation Account and/or
Deferred Stock Account pursuant to Section 6.

          (n) “Monthly Compensation” means the monthly retainer and the aggregate of all meeting
fees, committee fees and committee chairperson fees to which a Director is entitled for services
rendered to the Company as a Director during the month, as established from time to time by
resolution of the Board of Directors. For avoidance of doubt, Monthly Compensation does not
include stock options granted to Directors or the Shares allocated pursuant to Section 5 of this
Plan.

          (o) “Monthly Deferral Participant” means a Director who is not, and for the preceding
12 months has not been, a salaried employee of the Company and who elects to defer all or part of
his or her Monthly Compensation pursuant to the Plan in accordance with Section 4 hereof.

          (p) “Participant” means any current or former Director with an outstanding Account
balance the Plan.

          (q) “Plan” means The Lilly Directors’ Deferral Plan, as amended and restated herein.

 

 

          (r) “Plan Administrator” means the Directors and Corporate Governance Committee of the
Board of Directors, or any successor committee of the Board of Directors that is charged with
matters relating to the compensation of non-employee directors. Except with respect to Section 5(f)
of this Plan, the Plan Administrator may at its discretion delegate any of its responsibilities to
one or more individuals provided that such delegation is in accordance with applicable laws.

          (s) “Plan Year” means the calendar year from January 1 through December 31 with
respect to which compensation eligible for deferral under the Plan is earned.

          (t) “Section 409A” means section 409A of the Code and the Treasury regulations and
other official guidance promulgated thereunder.

          (u) “Separation from Service” means a “separation from service” within the meaning of
Section 409A.

          (v) “Share” means a share of common stock of the Company.

          (w) “Unforeseeable Emergency” means a severe financial hardship of a Participant
resulting from an illness or accident of such Participant or Beneficiary, such Participant’s spouse
or a dependent (as defined in section 152(a) of the Code) of such Participant, loss of such
Participant’s property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of such Participant, each as
determined in the manner consistent with Section 409A, and any other event or circumstance within
the meaning of the term “unforeseeable emergency” under Section 409A.

          (x) “Valuation Date” means for any month, the third Monday of the month, or if Shares
are not traded on the New York Stock Exchange on such third Monday, the next day on which Shares
are traded on the New York Stock Exchange.

Section 2. Plan Administrator

          (a) Authority. The Plan Administrator shall have full authority to administer the
Plan in accordance with its terms and to exercise all responsibilities and authorities as provided
herein, including the discretionary authorities to determine the terms and conditions of deferrals
of compensation under the Plan, to determine the terms and conditions of crediting to and
distributing from Accounts under the terms of the Plan, and to adopt such rules and regulations for
administering the Plan as it may deem necessary or appropriate. The Plan Administrator has the
discretionary authority to interpret and construe all provisions of the Plan, to remedy possible
ambiguities, inconsistencies, or omissions under the Plan, and to resolve all questions of fact
arising under the Plan. The decisions of the Plan Administrator shall be final, binding and
conclusive on all parties. No member of the Board, the Plan Administrator nor any officers of the
Company shall have any liability for any action or determination taken under the Plan.

          (b) Delegation; Expenses. The appropriate officer(s) of the Company as designated by
the Plan Administrator are authorized to act on behalf of the Plan Administrator

 

 

for the day-to-day administration of the Plan, subject to the authority of the Plan
Administrator. Expenses of the administration of the Plan may be borne by the Company or may be
deducted from Participants’ Accounts at the sole discretion of the Plan Administrator.

Section 3. Participation

The Plan Administrator may require a Participant to comply with such terms and conditions as the
Plan Administrator may specify in order for the Participant to participate in the Plan.

Section 4. Elections to Participate

          (a) Deferral Elections. A Monthly Deferral Participant in the Plan may file an
Election Form with the Plan Administrator on or before the date specified in accordance with
Section 4(c) hereof. The Election Form shall permit the Monthly Deferral Participant to specify
the Deferral Amount subject to a minimum Deferral Amount of five thousand dollars ($5,000) for the
deferral of Monthly Compensation, or such amounts as may be specified by the Plan Administrator in
its sole discretion, and whether such Deferral Amount shall be credited in cash to his or her
Deferred Compensation Account or in Shares to his or her Deferred Stock Account, pursuant to
Section 5(a) hereof. The Election Form shall also set forth the terms of distribution of the
Participant’s Account in accordance with Section 6 hereof and the Participant’s Beneficiary
designation. All elections to defer compensation under the Plan are irrevocable, and no changes to
any Election Form delivered to the Plan Administrator shall be permitted, except as specifically
provided under the terms of the Plan.

          (b) Maximum Deferrals. A Monthly Deferral Participant may elect a Deferral Amount of
up to 100% of the Participant’s Monthly Compensation for a Plan Year. One hundred percent (100%)
of any annual allocation of Shares earned pursuant to Section 5(c) will be automatically credited
to a Deferred Stock Participant’s Deferred Stock Account.

          (c) Timing and Effect of Elections. Unless otherwise specified by the Plan
Administrator in accordance with the requirements of Section 409A, deferral elections on an
Election Form shall be made:

     (i) In the case of Monthly Compensation or an annual Share allocation not
qualifying as “performance-based compensation” within the meaning of Section 409A,
prior to the beginning of the Plan Year with respect to which the compensation is
earned; and

     (ii) In the case of Monthly Compensation or an annual Share allocation which
the Plan Administrator has determined qualifies as “performance-based compensation”
within the meaning of Section 409A, no later than June 30th of the applicable Plan
Year with respect to which the compensation is earned.

Deferral elections shall apply to Monthly Compensation and annual Share allocations with respect to
the Plan Year for which the elections are made. Participants will be required to make deferral
elections for future Plan Years at such times to be specified by the Plan Administrator in
accordance with the foregoing. If a Participant does not file an Election Form with the Plan

 

 

Administrator on or before the deadline established by the Plan Administrator for deferral
elections for a Plan Year, a Participant will be deemed not to have elected to defer Monthly
Compensation for such Plan Year, as applicable. Notwithstanding the foregoing, in the first year
in which an individual who is newly elected or appointed to serve as a Director becomes eligible to
participate in the Plan, such individual may, not later than thirty (30) days after the date he or
she becomes eligible to participate in the Plan, elect in accordance with the preceding provisions
of this Section 4, to defer the receipt of Monthly Compensation and set forth the terms of
distribution of the individual’s Account with respect to services to be performed after the filing
of the election with the Company.

Section 5. Accounts and Interest Credits

          (a) Participant Accounts. Accounts shall be maintained for each Participant under the
Plan:

     (i) Deferred Compensation Account — The Company shall maintain a
Deferred Compensation Account in the name of each Monthly Deferral Participant who
elects to have a Deferral Amount credited in cash pursuant to Section 4 hereof for a
given Plan Year. The Deferred Compensation Account shall be denominated in U.S.
dollars, rounded to the nearest whole cent. For each month, Deferral Amounts
allocated to a Deferred Compensation Account shall be credited to the Deferred
Compensation Account as of the last Business Day of the month.

     (ii) Deferred Stock Account — The Company shall maintain a
Deferred Stock Account for each Deferred Stock Participant and for each Monthly
Deferral Participant who elects to have a Deferral Amount credited in Shares. The
Deferred Stock Account shall be denominated in Shares and maintained in fractions
rounded to three (3) decimal places. Deferral Amounts allocated to a Deferred Stock
Account shall be credited to the Deferred Stock Account as of the last Business Day
of the month. Shares and, if necessary, fractional Shares, shall be credited based
upon the closing price of Shares on the New York Stock Exchange on the Valuation
Date for that month. Shares allocated to each Share Account shall be hypothetical
and not issued or transferred by the Company until payment is made pursuant to
Section 6 hereof.

A Participant’s Account shall consist of book entries only and shall not constitute a separate cash
or Share fund or other asset held in trust or as security for the Company’s obligation to pay the
amount of the Account to the Participant. The balance of a Participant’s Account shall be adjusted
pursuant to this Section 5 and reduced by the amount of
applicable tax withholding, distributions and expenses. A Participant’s Account may include sub-accounts as the Company
considers necessary or advisable for purposes of maintaining a proper accounting of amounts
credited or debited for a Participant under the Plan. A Participant shall receive or have on-line
access to a statement of such Participant’s Account no less frequently than once a year following
the end of each Plan Year.

 

 

          (b) Crediting of Deferral Amount. A Participant who has filed an Election Form with
the Plan Administrator for the deferral of Monthly Compensation with respect to a Plan Year shall
have the Deferral Amount deducted from the applicable compensation and credited to the
Participant’s appropriate Account under the Plan. The Deferral Amount so credited shall be reduced
by applicable tax withholding, distributions and expenses.

          (c) Annual Share Allocation. As of the Annual Allocation Date of each Plan Year,
there shall be allocated to the Deferred Stock Account of each Deferred Stock Participant who is a
Deferred Stock Participant on that date, as part of his or her compensation for service on the
Board of Directors, up to 7,500 Shares, as may be specified from time to time by resolution of the
Board of Directors.

          (d) Interest Credits. The Deferred Compensation Accounts of Participants shall be
credited with interest computed each Plan Year or portion thereof at a rate equal to 120% of the
long-term applicable federal rate, with monthly compounding (as prescribed under section 1274(d) of
the Code), as in effect for the month of December for the immediately preceding Plan Year. Such
interest shall accrue on all Deferral Amounts and prior earnings thereon of Deferred Compensation
Accounts and be credited daily to such accounts.

          (e) Cash Dividends. Cash dividends paid on Shares shall be deemed to have been paid
on the Shares allocated to each Participant’s Deferred Stock Account as if the allocated Shares
were actual Shares issued and outstanding on the Dividend Record Date. An amount equal to the
amount of such dividends shall be credited in Shares to each Deferred Stock Account as of the last
Business Day of each month in which a Dividend Payment Date occurs, based upon the closing price
for Shares on the New York Stock Exchange on the Valuation Date for that month.

          (f) Capital Adjustments. The number of Shares referred to in the Preamble and Section
5 hereof and the number of Shares allocated to each Deferred Stock Account shall be adjusted by the
Plan Administrator, in the event of any subdivision or combination of Shares or any stock dividend,
stock split, reorganization, recapitalization, or consolidation or merger with the Company as the
surviving corporation, or if additional shares or new or different shares or other securities of
the Company or any other issuer are distributed with respect to Shares through a spin-off or other
extraordinary distribution.

          (g) Vesting of Accounts. A Participant is fully vested in his or her entire Account
balance.

Section 6. Distribution of Accounts

          (a) Distribution upon Separation from Service. A Participant shall specify on an
Election Form the manner in which the amounts deferred in the Deferred Compensation Account and the
Deferred Stock Account, as applicable, for a Plan Year (and earnings thereon) shall be distributed
from the Participant’s Account upon the Participant’s Separation from Service. All elections are
irrevocable, and no changes shall be permitted to any Election Form delivered to the Plan
Administrator, except as specifically provided under the terms of the Plan. A Participant may
elect, to the extent permitted by the Plan Administrator and set forth on the

 

 

Election Form, that such portion of the Account be distributed upon a Participant’s Separation
from Service either in:

     (i) Lump Sum payment in January of the second Plan Year following the
Plan Year in which the Participant’s Separation from Service occurs; or

     (ii) Annual Installment payments over a period of two (2) to ten (10)
years commencing in January of the second Plan Year following the Plan Year in which
the Participant’s Separation from Service occurs, with subsequent installment
payments to be made in each January within the applicable period. 

If a Participant fails to make a timely payment election on the Election Form for a Plan Year, the
amounts deferred in the Deferred Compensation Account and the Deferred Stock Account, as
applicable, for such Plan Year (and earnings thereon) shall be distributed in a lump sum in
accordance with Section 6(a)(i) hereof.

          (b) Form of Distributions. All distributions of a Participant’s Deferred Compensation
Account under the Plan shall be made in cash. Except as provided in Section 6(f), all
distributions of a Participant’s Deferred Stock Account shall be paid in Shares, at which time the
Shares shall be issued or transferred from the books of the Company to the Participant. All Shares
to be issued or transferred hereunder may be newly issued or treasury shares. Fractional Shares
shall not be issued or transferred to a Participant, provided that in the case of a final payment
under the Plan with respect to a Participant, any fraction remaining in the Participant’s Deferred
Stock Account shall be rounded up to the next whole Share and that number of whole Shares shall be
issued or transferred. The value of the Deferred Stock Account is calculated with reference to the
closing price of Shares on the last trading day of the prior Plan Year.

          (c) Distribution of Account. The Company shall distribute amounts from the
Participant’s Deferred Compensation Account and the Deferred Stock Account in the manner and on the
date(s) applicable under this Section 6. If the payment option described in Section 6(a)(i) hereof
is applicable, the amount of the lump sum shall be calculated using the valuation of the applicable
portion of the Participant’s Account as of the December 31 preceding the date of the payment. If
the payment option described in Section 6(a)(ii) hereof is applicable, the amount of each
installment shall be calculated using the valuation of the applicable portion of the Participant’s
Account as of the December 31 preceding the date of the installment payment divided by the number
of installment payments that have not yet been made.

          (d) Distribution upon Death. Notwithstanding any election made by a Participant or
any other provision of this Section 6 to the contrary, if a Participant dies before full
distribution of his or her Account balance, any remaining balance shall be distributed to the
Participant’s Beneficiary in a lump sum within 90 days following the date of the Participant’s
death. The amount of such lump sum distribution shall be calculated using the valuation of the
Participant’s Account as of the date preceding the date of distribution. Any payment required to
be made to a Participant under the Plan that cannot be made due to the Participant’s death shall be
made to the Participant’s Beneficiary, subject to applicable law. Each Participant shall have the
right to designate one or more Beneficiaries, and to change a Beneficiary designation, from time to
time by filing a written notice with the Plan Administrator. In the event that a

 

 

Beneficiary does not survive the Participant and no successor Beneficiary is selected, or in
the event no valid Beneficiary designation has been made, the Participant’s Beneficiary shall be
the Participant’s estate.

          (e) Unforeseeable Emergency. Upon the written request of a Participant, the Plan
Administrator may permit the Participant to withdraw some or all of the Participant’s Account for
the purpose of enabling the Participant to meet the immediate needs created by an Unforeseeable
Emergency. The circumstances that will constitute an Unforeseeable Emergency will depend upon the
facts of each case, but in any case, the amounts distributed with respect to an Unforeseeable
Emergency shall not exceed the amounts necessary to satisfy such Unforeseeable Emergency plus
amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking
into account the extent to which such hardship is or may be relieved through reimbursement or
compensation by insurance or otherwise, by liquidation of the Participant’s assets, to the extent
that the liquidation of such assets would not itself cause severe financial hardship, or by
cessation of deferrals under the Plan.

          (f) Payment of Cash in Lieu of Shares. If at any time the Plan Administrator
determines that payment of Shares to a Participant (or a Participant’s Beneficiary) or the
ownership or subsequent disposition of such Shares by such Participant or Beneficiary may violate
or conflict with any applicable law or regulation, the Plan Administrator shall pay all or a
portion of the Participant’s Deferred Stock Account in cash.

          (g) Withholding Taxes. All distributions of a Participant’s Account under the Plan
shall be subject to income tax and other withholdings that the Plan Administrator deems necessary
or appropriate, and the Plan Administrator may reduce the amount credited to any Participant’s
Account to the extent it deems necessary to satisfy tax withholding requirements. Participants or
Beneficiaries receiving distributions under the Plan shall bear all taxes on amounts paid under the
Plan to the extent that taxes are not withheld thereon, irrespective of whether withholding is
required.

Section 7. Administrative Matters 

          (a) Claims Procedure. Any person making a claim for benefits hereunder shall submit
the claim in writing to the Plan Administrator. If the Plan Administrator denies the claim in
whole or in part, it shall issue to the claimant a written notice explaining the reason for the
denial and identifying any additional information or documentation that might enable the claimant
to perfect the claim. The claimant may, within sixty (60) days of receiving a written notice of
denial, submit a written request for reconsideration to the Plan Administrator, together with a
written explanation of the basis of the request. The Plan Administrator shall consider any such
request and shall provide the claimant with a written decision together with a written explanation
thereof. No legal action may be commenced or maintained against the Plan more than one year after
the Plan Administrator wholly or partially denies, or is deemed to have wholly or patially denied,
a claim for Plan benefits. All interpretations, determinations, and decisions of the Plan
Administrator in respect of any claim shall be final, binding and conclusive.

          (b) Incapacity. If the Plan Administrator determines that any person entitled to
benefits under the Plan is unable to care for his or her affairs because of illness, accident or

 

 

other physical and mental incapacity, any payment due (unless a duly qualified guardian or
other legal representative has been appointed) may be paid consistent with the terms described
herein for the benefit of such person to such person’s spouse, parent, brother, sister, adult child
or other party deemed by the Plan Administrator in its sole discretion to ensure proper care for
such person.

          (c) Inability to Locate. If the Plan Administrator is unable to locate a person to
whom a payment is due under the Plan for a period of twelve (12) months, commencing with the first
day of the month as of which the payment becomes payable, the total amount payable to such person
shall be forfeited.

          (d) Liability. Any decision made or action taken by the Board of Directors, the Plan
Administrator, or any employee of the Company or any of its subsidiaries, arising out of or in
connection with the construction, administration, interpretation, or effect of the Plan, shall be
absolutely discretionary, and shall be conclusive and binding on all parties. Neither the Plan
Administrator nor a member of the Board of Directors and no employee of the Company or any of its
subsidiaries shall be liable for any act or action hereunder, whether of omission or commission, by
any other member or employee or by any agent to whom duties in connection with the administration
of the Plan have been delegated or, except in circumstances involving bad faith, for anything done
or omitted to be done.

Section 8. Unfunded Status

          All Accounts and all rights of Participants to benefits under the Plan are unfunded
obligations of the Company. Plan benefits shall be paid from the general assets of the Company,
and Participants shall have the status of an unsecured general creditor of the Company with respect
to all interests under the Plan. The Plan is a plan of unfunded deferred compensation.
Notwithstanding the foregoing, the Company may, but shall not be required to, establish a trust or
other funding vehicle under the Plan that does not affect the Plan’s status as a Plan of unfunded
deferred compensation.

Section 9. Nontransferability; Successors

          No interest of any person in, or right to receive a distribution under, the Plan shall be
subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other
alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be
taken, either voluntarily or involuntarily for the satisfaction of the debts of, or other
obligations or claims against, such person.

          The obligations of the Company under the Plan will be binding upon the Company’s successors,
transferees and assigns.

Section 10. Limitation of Rights

          Nothing in the Plan shall confer upon any Participant the right to continue to serve as a
Director of the Company or to serve in the capacity in which the Participant is employed by the
Company. Nothing in the Plan shall be interpreted as creating a right of a Participant to

 

 

receive any compensation or benefit from the Company. A Participant shall have no rights as a
shareholder of the Company with respect to any Shares until the Shares are issued or transferred to
the Participant on the books of the Company.

Section 11. Enforceability

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

Section 12. Effective Date; Amendment and Termination

          The Plan, as amended and restated, shall become effective for the 2009 Plan Year and for
future Plan Years until terminated by the Board. The Board may amend or terminate the Plan at any
time and in any manner; provided that no amendment or termination shall reduce the amount credited
to a Participant’s Account at the time of any such amendment or termination, and no amendment shall
be effective that shall cause the Plan to fail to meet the requirements of Section 409A. Upon
termination of the Plan in accordance with the requirements of Section 409A, (i) all future
deferrals of compensation will cease, (ii) all Plan Accounts will continue to receive interest
credits (or be invested) as permitted under the Plan, and (iii) all Plan Accounts will be
distributed in accordance with the Participant’s elections under the provisions of the Plan, unless
the Company determines in its sole discretion that all such amounts shall be distributed upon
termination in accordance with the requirements of Section 409A. 

ELI LILLY AND COMPANY

 

 

APPENDIX A

GRANDFATHERED AMOUNTS

     Distribution of amounts that were earned and vested (within the meaning of Section 409A) under
the Plan prior to 2005 (and earnings thereon) and are exempt from the requirements of Section 409A
shall be made in accordance with the Plan terms as in effect on January 1, 2004, as attached below.

THE LILLY DIRECTORS’ DEFERRAL PLAN

(As amended and restated through January 1, 2004)

Section 1. Establishment of the Plan and Shares Available.

     1.1. Establishment of Plan. This Plan was established effective January 1, 1996, to
permit Directors of the Company who are not salaried employees of the Company to voluntarily defer
receipt of some or all of their meeting fees and retainer and to share in the long-term growth of
the Company by acquiring, on a deferred basis, an ownership interest in the Company. This amended
and restated Plan is effective January 1, 2004.

     1.2. Shares Available. Subject to adjustment as provided in Section 7.5, the
aggregate number of shares of Eli Lilly and Company common stock that may be issued or transferred
under this Plan after April 28, 2003, is 750,000. The shares may be authorized and unissued shares
or treasury shares.

Section 2. Definitions.

The following terms shall have the definitions set forth in this Section 2:

     2.1. Annual Allocation Date. The last Business Day in November of each calendar
year, or such other annual date, not earlier than the third Monday in February, established by the
Committee as the date as of which Shares are allocated to each Share Account in accordance with
Section 6.

     2.2. Beneficiary. The beneficiary or beneficiaries (including any contingent
beneficiary or beneficiaries) designated pursuant to subsection 8.3 hereof.

     2.3 Business Day. A day on which the Company’s corporate headquarters are open for
regular business.

     2.4. Board of Directors. The Board of Directors of the Company.

     2.5. Committee. The Directors and Corporate Governance Committee of the Board of
Directors, or any successor committee of the Board of Directors that is charged with matters
relating to the compensation of non-employee directors.

 

 

     2.6. Company. Eli Lilly and Company.

     2.7. Company Credit. For any calendar year or part thereof, an amount computed, and
credited annually to a Participant’s Deferred Compensation Account at an annual rate that is equal
to one hundred twenty percent (120%) of the applicable federal long-term rate, with compounding (as
prescribed under Section 1274(d) of the Internal Revenue Code) that was in effect for the month of
December immediately preceding the calendar year.

     2.8. Deferred Amount. The amount of a Monthly Deferral Participant’s Monthly
Compensation that the Participant elects to defer in accordance with Section 4 hereof.

     2.9. Deferred Stock Participant. A Director who is not, and for the preceding 12
months has not been, a salaried employee of the Company and who becomes a Participant in the Plan
in accordance with Section 3 hereof.

     2.10. Director. A member of the Board of Directors.

     2.11. Dividend Payment Date. The date as of which the Company pays a cash dividend
on Shares.

     2.12. Dividend Record Date. With respect to any Dividend Payment Date, the date
established by the Board of Directors as the record date for determining shareholders entitled to
the dividend.

     2.13. Individual Accounts or Accounts. The separate accounts (the Deferred
Compensation Account and the Share Account) described in Section 7 hereof. When used in the
singular, the term shall refer to one of these two accounts, as the context requires.

     2.14. Monthly Compensation. For any month, the monthly retainer and the aggregate of
all meeting fees, committee fees and committee chairperson fees to which a Director is entitled for
services rendered to the Company as a Director during the month, as established from time to time
by resolution of the Board of Directors. For avoidance of doubt, Monthly Compensation does not
include stock options granted to Directors or the Shares allocated pursuant to Section 6 of this
Plan.

     2.15. Monthly Deferral Participant. A Director who is not a salaried employee of the
Company and who has elected to defer all or part of his or her Compensation pursuant to the Plan in
accordance with Section 4 hereof.

     2.16. Participant. A Director who is a Deferred Stock Participant, a Monthly
Deferral Participant, or both.

     2.17. Plan. The Lilly Directors’ Deferral Plan, as set forth herein and as it may be
amended from time to time.

 

 

     2.18. Share. A share of common stock of the Company.

     2.19. Valuation Date. For any month, the third Monday of the month, or if Shares are
not traded on the New York Stock Exchange on such third Monday, the next day on which Shares are
traded on the New York Stock Exchange.

Section 3. Deferred Stock Participants.

Each Director who participated in The Lilly Non-Employee Directors’ Deferred Stock Plan immediately
before the effective date of this Plan shall continue as a Deferred Stock Participant on such
effective date, and all elections in effect under The Lilly Non-Employee Directors’ Deferred Stock
Plan shall remain in effect under this Plan, unless and until amended in accordance with this Plan.
Thereafter, each person who becomes a Director, and who is not, and for the preceding 12 months
has not been, a salaried employee of the Company, shall become a Deferred Stock Participant.

Section 4. Monthly Deferral Participants.

Each Director who participated in The Lilly Directors’ Deferred Compensation Plan immediately
before the effective date of the Plan shall continue as a Monthly Deferral Participant on such
effective date, and all elections in effect under The Lilly Directors’ Deferred Compensation Plan
shall remain in effect under this Plan, unless and until amended in accordance with this Plan.
Prior to the beginning of each calendar year, any Director who is not a salaried employee of the
Company may defer the receipt of Monthly Compensation to be earned by the Director during such year
by filing with the Company a written election that:

          (i) defers payment of a designated amount (of one Thousand Dollars ($1,000) or more) or
percentage of his or her Monthly Compensation for services attributable to the following calendar
year or portion thereof (the “Deferred Amount”);

          (ii) specifies the payment option selected by the Participant pursuant to subsection 8.2
hereof for such Deferred Amount; and

          (iii) specifies the option selected by the Participant pursuant to Section 5 hereof for such
Deferred Amount.

The amount deferred may not exceed the Director’s aggregate Monthly Compensation for the calendar
year. Notwithstanding the foregoing, any individual who is newly elected or appointed to serve as
a Director may, not later than thirty (30) days after his election or appointment becomes
effective, elect in accordance with the preceding provisions of this Section 4, to defer the
receipt of Monthly Compensation earned during the portion of the current calendar year that follows
the filing of the election with the Company. Except as provided in subsections 8.2 and 8.4 hereof,
any elections made pursuant to this Section 4 with respect to a calendar year shall be irrevocable
when made. If a Participant fails to make an election under section 5 with respect to his or her
Deferred Amount for a future calendar year, the Participant’s previous election shall

 

 

remain in effect, provided that the Participant may amend his or her election with regard to a
future calendar year at any time.

Section 5. Form of Deferred Compensation Credits.

     5.1. Deferred Compensation Account. Except with respect to Deferred Amounts which a
Monthly Deferral Participant elects to have credited in Shares in accordance with subsection 5.2
hereof, the Deferred Amount shall be denominated in U.S. dollars and credited to the Participant’s
Deferred Compensation Account pursuant to subsection 7.1 hereof.

     5.2. Shares. Prior to the beginning of each calendar year, a Monthly Deferral
Participant may elect to have all or a percentage of the Deferred Amount for the following calendar
year credited in Shares and allocated to the Participant’s Share Account pursuant to subsection 7.2
hereof.

Section 6. Annual Allocations to Share Accounts.

     6.1. Annual Allocation of Shares. As of the Annual Allocation Date of each calendar
year, there shall be allocated to the Share Account (as described in Section 7.2 below) of each
Deferred Stock Participant who is a Director on that date, as part of his or her compensation for
service on the Board of Directors, seven hundred (700) Shares or such other number of Shares, not
to exceed 3,000 shares, as may be specified from time to time by resolution of the Board of
Directors.

Section 7. Individual Accounts.

The Company shall maintain Individual Accounts for Participants as follows:

     7.1. Deferred Compensation Account. The Company shall maintain a Deferred
Compensation Account in the name of each Monthly Deferral Participant who elects to defer the
receipt of Monthly Compensation pursuant to Section 4 hereof for a calendar year and does not elect
to have the Deferred Amount for such calendar year credited in Shares pursuant to subsection 5.2
hereof. The Deferred Compensation Account shall be denominated in U.S. dollars, rounded to the
nearest whole cent. For each month, Deferred Amounts allocated to a Deferred Compensation Account
pursuant to subsection 5.1 hereof shall be credited to the Deferred Compensation Account as of the
last Business Day of the month.

     7.2. Share Account. The Company shall maintain a Share Account for each Deferred
Stock Participant and for each Monthly Deferral Participant who elects to have a Deferred Amount
credited in Shares pursuant to subsection 5.2 hereof. The Share Account shall be denominated in
Shares and maintained in fractions rounded to three (3) decimal places. Shares allocated to each
Share Account shall be hypothetical and not issued or transferred by the Company until payment is
made pursuant to Section 8 hereof.

     For each month, Deferred Amounts allocated to a Share Account pursuant to subsection 5.2
hereof shall be credited to the Share Account as of the last Business Day of the month.

 

 

Shares and, if necessary, fractional Shares, shall be credited based upon the average of the
high and low price of Shares on the New York Stock Exchange on the Valuation Date for that month.

     7.3. Accrual of Company Credit. The Treasurer of the Company shall determine the
annual rate of Company Credit on or before December 31 of each calendar year. This rate shall be
effective for the following calendar year. The Company Credit shall accrue monthly, at one-twelfth
of the applicable annual rate, on all amounts credited to a Participant’s Deferred Compensation
Account, including the Company Credits for prior years. The Company Credit shall not accrue on any
amount distributed to a Participant (or to the Participant’s Beneficiary) during the month for
which the accrual is determined, except where an amount is distributed to a Beneficiary in the
month of the Participant’s death. The Company Credit for each year shall be credited to each
Deferred Compensation Account as of December 31 of that year and shall be compounded monthly.

     7.4. Cash Dividends. Cash dividends paid on Shares shall be deemed to have been paid
on the Shares allocated to each Participant’s Share Account as if the allocated Shares were actual
Shares issued and outstanding on the Dividend Record Date. An amount equal to the amount of such
dividends shall be credited in Shares to each Share Account as of the last Business Day of each
month in which a Dividend Payment Date occurs, based upon the average of the high and low prices
for Shares on the New York Stock Exchange on the Valuation Date for that month.

     7.5. Capital Adjustments. The number of Shares referred to in Sections 1.2 and 6
hereof and the number of Shares allocated to each Share Account shall be adjusted by the Committee,
as it deems appropriate in its discretion, in the event of any subdivision or combination of Shares
or any stock dividend, stock split, reorganization, recapitalization, or consolidation or merger
with Eli Lilly and Company as the surviving corporation, or if additional shares or new or
different shares or other securities of the Company or any other issuer are distributed with
respect to Shares through a spin-off or other extraordinary distribution.

     7.6. Account Statements. Within a reasonable time following the end of each calendar
year, the Company shall render an annual statement to each Participant. The annual statement shall
report the number of Shares credited to the Participant’s Share Account as of December 31 of that
year and the dollar amount, if any, credited to the Participant’s Deferred Compensation Account as
of December 31 of that year.

Section 8. Payment Provisions.

     8.l. Method of Payment. All payments to a Participant (or to a Participant’s
Beneficiary) with respect to the Participant’s Deferred Compensation Account shall be paid in cash.
Except as provided in Section 8.5, all payments to a Participant (or to a Participant’s
Beneficiary) with respect to the Participant’s Share Account shall be paid in Shares, at which time
the Shares shall be issued or transferred on the books of the Company. All Shares to be issued or
transferred hereunder may be newly issued or treasury shares. Fractional Shares shall not be
issued or transferred to a Participant, provided that in the case of a final payment under the Plan
with respect to a Participant, any fraction remaining in the Participant’s Share Account shall be
rounded up to the next whole Share and that number of whole Shares shall be issued or

 

 

transferred. If Shares are not traded on the New York Stock Exchange on any day on which a
payment of Shares is to be made under the Plan, then that payment shall be made on the next day on
which Shares are traded on the New York Stock Exchange.

     8.2. Payment Options. Prior to each calendar year, or within 30 days after becoming
a Participant, the Participant shall select a payment election with respect to the payment of one
or both of the Participant’s Individual Accounts from the following payment elections:

          (i) a lump sum in January of the calendar year immediately following the calendar year in
which the Participant ceases to be a Director;

          (ii) a lump sum in January of the second calendar year following the calendar year in which
the Participant ceases to be a Director;

          (iii) annual (or, in the case of the Deferred Compensation Account only, monthly)
installments over a period of two to ten years commencing in January of the calendar year following
the calendar year during which the Participant ceases to be a Director; or

          (iv) annual (or in the case of the Deferred Compensation Account only, monthly) installments
over a period of two to ten years commencing in January of the second calendar year following the
calendar year in which the Participant ceases to be a director.

If a payment option described in paragraphs (i) or (ii), above, has been elected, the amount of the
lump sum with respect to the Participant’s Deferred Compensation Account shall be equal to the
amount credited to the Participant’s Deferred Compensation Account as of the December 31
immediately preceding the date of the payment, and the amount of the lump sum with respect to the
Participant’s Share Account shall be equal to the number of Shares credited to the Share Account as
of the December 31 immediately preceding the date of payment. If a payment option described in
paragraphs (iii) or (iv), above, has been elected, the amount of each installment with respect to
the Participant’s Deferred Compensation Account shall be equal to the amount credited to the
Participant’s Deferred Compensation Account as of the last day of the month immediately preceding
the date of a monthly installment payment, or the December 31 immediately preceding the date of an
annual installment payment, divided by the number of installment payments that have not yet been
made. The amount of each installment with respect to the Participant’s Share Account shall be
equal to the number of Shares credited to the Participant’s Share Account as of the December 31
immediately preceding the date of an annual installment payment, divided by the number of
installment payments that have not yet been made.

     A Participant may elect that his or her final payment election may control over all prior
payment elections. If the Participant fails to elect a payment option, the amount credited to the
Participant’s Individual Account shall be distributed in a lump sum in accordance with the payment
option described in paragraph (i) above. At the time of any scheduled payment, if the amount
credited to a Participant’s Deferred Compensation Account or the value of Shares credited to a
Participant’s Share Account is less than $25,000, the Committee, in its sole discretion, may pay
out the Account in a lump sum.

 

 

     8.3. Payment Upon Death. Within a reasonable period of time following the death of a
Participant, the amount credited to the Participant’s Deferred Compensation Account and the Shares
credited to the Participant’s Share Account shall be paid by the Company in a lump sum to the
Participant’s Beneficiary. For purposes of this subsection 8.3, the amount credited to the
Participant’s Deferred Compensation Account and the number of Shares credited to the Participant’s
Share Account shall be determined as of the later of the date of death or the last Business Day of
the month prior to the month in which the payment occurs.

     A Participant may designate the Beneficiary, in writing, in a form acceptable to the Committee
before the Participant’s death. A Participant may revoke a prior designation of Beneficiary and
may also designate a new Beneficiary without the consent of the previously designated Beneficiary,
provided that such revocation and new designation (if any) are in writing, in a form acceptable to
the Committee, and filed with the Committee before the Participant’s death. If the Participant
does not designate a Beneficiary, or if no designated Beneficiary survives the Participant, any
amount not distributed to the Participant during the Participant’s life shall be paid to the
Participant’s estate in a lump sum in accordance with this subsection 8.3.

     8.4. Payment on Unforeseeable Emergency. The Committee may, in its sole discretion,
direct payment to a Participant of all or of any portion of the Participant’s Individual Account
balance, notwithstanding an election under subsection 8.2 above, at any time that it determines
that such Participant has an unforeseeable emergency, and then only to the extent reasonably
necessary to meet the emergency. For purposes of this section, “unforeseeable emergency” means
severe financial hardship to the Participant resulting from a sudden and unexpected illness or
accident of the Participant or of a dependent of the Participant, loss of the Participant’s
property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as
a result of events beyond the control of the Participant. The circumstances that will constitute
an unforeseeable emergency will depend upon the facts of each case, but, in any case, payment may
not be made to the extent that such hardship is, or may be, relieved —

          (i) through reimbursement or compensation by insurance or otherwise;

          (ii) by liquidation of the Participant’s assets, to the extent the liquidation of such assets
would not itself cause severe financial hardship; or

          (iii) by cessation of deferrals under the Plan.

     Examples of what are not considered to be unforeseeable emergencies include the need to send a
Participant’s child to college or the desire to purchase a home.

     8.5. Payment of Cash in Lieu of Shares. If at any time the Committee shall determine
that payment of Shares to a Participant (or a Participant’s Beneficiary) or the ownership or
subsequent disposition of such Shares by such Participant or Beneficiary may violate or conflict
with any applicable law or regulation, the Committee may, in its discretion, pay all or a portion
of the Participant’s Share Account in cash. In this case, the amount of cash shall be determined
with reference to the average of the high and low trading price for Shares on the December 31

 

 

next preceding the date of payment, or if Shares are not traded on that day, the next
preceding trading day.

Section 9. Ownership of Shares.

A Participant shall have no rights as a shareholder of the Company with respect to any Shares until
the Shares are issued or transferred to the Participant on the books of the Company.

Section 10. Prohibition Against Transfer.

The right of a Participant to receive payments of Shares and cash under the Plan may not be
transferred except by will or applicable laws of descent and distribution. A Participant may not
assign, sell, pledge, or otherwise transfer Shares or cash to which he is entitled hereunder prior
to transfer or payment thereof to the Participant, and any such attempted assignment, sale, pledge
or transfer shall be void.

Section 11. General Provisions.

     11.1. Director’s Rights Unsecured. The Plan is unfunded. The right of any
Participant to receive payments of cash or Shares under the provisions of the Plan shall be an
unsecured claim against the general assets of the Company.

     11.2. Administration. Except as otherwise provided in the Plan, the Plan shall be
administered by the Committee, which shall have the final authority to adopt rules and regulations
for carrying out the Plan, and to interpret, construe, and implement the provisions of the Plan.

     11.3. Legal Opinions. The Committee may consult with legal counsel, who may be
counsel for the Company or other counsel, with respect to its obligations and duties under the
Plan, or with respect to any action, proceeding, or any questions of law, and shall not be liable
with respect to any action taken, or omitted, by it in good faith pursuant to the advice of such
counsel.

     11.4. Liability. Any decision made or action taken by the Board of Directors, the
Committee, or any employee of the Company or any of its subsidiaries, arising out of or in
connection with the construction, administration, interpretation, or effect of the Plan, shall be
absolutely discretionary, and shall be conclusive and binding on all parties. Neither the
Committee nor a member of the Board of Directors and no employee of the Company or any of its
subsidiaries shall be liable for any act or action hereunder, whether of omission or commission, by
any other member or employee or by any agent to whom duties in connection with the administration
of the Plan have been delegated or, except in circumstances involving bad faith, for anything done
or omitted to be done.

     11.5. Withholding. The Company shall have the right to deduct from all payments
hereunder any taxes required by law to be withheld from such payments. The recipients of such

 

 

payments shall bear all taxes on amounts paid under the Plan to the extent that no taxes are
withheld thereon, irrespective of whether withholding is required.

     11.6. Legal Holidays. If any day on which action under the Plan must be taken falls
on a Saturday, Sunday, or legal holiday, such action may be taken on the next succeeding day that
is not a Saturday, Sunday, or legal holiday; provided, that this subsection 11.8 shall not permit
any action that must be taken in one calendar year to be taken in any subsequent calendar year.

     11.7. Participant Who Becomes Employee. If a Participant becomes an employee of the
Company but remains a Director, he or she will no longer be entitled to new deferrals under the
Plan as a Deferred Stock Participant or Monthly Deferral Participant. However, the individual’s
Account balances will continue to be administered under the Plan (including eligibility for the
Company Credit and Cash Dividends under Sections 7.3 and 7.4) until they are paid out in accordance
with Section 8.

Section 12. Term, Amendment, Suspension, and Termination.

The Plan shall remain in effect until terminated by the Board of Directors. The Board of Directors
shall have the right at any time, and from time to time, to amend, suspend, or terminate the Plan,
subject to the following:

          (i) no amendment or termination shall reduce the number of Shares or the cash balance in an
Individual Account;

          (ii) the number of Shares allocated annually pursuant to Section 6 hereof may not be changed
more frequently than every calendar year; and

          (iii) to the extent required by New York Stock Exchange listing rules or applicable law,
material amendments shall be submitted to the Company’s shareholders for approval.

Section 13. Applicable Law.

The Plan shall be governed by, and construed in accordance with, the laws of the State of Indiana,
except to the extent that such laws are preempted by Federal law.

Section 14. Effective Date.

The effective date of this Plan is January 1, 1996. Nothing herein shall invalidate or adversely
affect any previous election, designation, deferral, or accrual in accordance with the terms of The
Lilly Directors’ Deferred Compensation Plan or The Lilly Non-Employee Directors’ Deferred Stock
Plan that were in effect prior to the effective date of this Plan.exv10w3

Exhibit 10.3

ELI LILLY AND COMPANY

THE LILLY DEFERRED COMPENSATION PLAN

(as Amended and Restated Effective 1/1/2009) 

Preamble

     The Lilly Deferred Compensation Plan has been established by the Company for the purpose of
providing an opportunity for selected employees to defer receipt of all or part of their Base
Salary and/or Annual Bonus compensation and earn tax-deferred investment returns thereon. The Plan
constitutes a plan of unfunded deferred compensation maintained for a select group of management or
highly compensated employees for purposes of ERISA, and is intended to comply with the requirements
of Section 409A. Notwithstanding any other provision of this Plan, this Plan shall be interpreted,
operated and administered in a manner consistent with these intentions.

     For the rules that apply to the distribution of amounts that were earned and vested (within
the meaning of Section 409A) under the Plan prior to 2005 (and earnings thereon) and are exempt
from the requirements of Section 409A, see Appendix A.

Section 1. Definition of Terms

          The following terms used in the Plan shall have the meanings set forth below:

          (a) “Account” means the deferred compensation account maintained for each Participant
under the Plan.

          (b) “Annual Bonus” means the pre-tax amount of a Participant’s annual bonus for a Plan
Year, disregarding any deferrals, offsets or withholdings from such annual bonus, that is earned
under the Eli Lilly and Company Bonus Plan, or any successor or similar annual bonus plan or
arrangement of the Company in effect.

          (c) “Base Salary” means the pre-tax amount of a Participant’s base salary from the
Company or a Subsidiary as in effect from time to time during a Plan Year, disregarding any
deferrals, offsets or withholdings from such base salary.

          (d) “Beneficiary” means the person or persons who are designated by the Participant or
are otherwise entitled to receive benefits under the Plan in the event of the Participant’s death,
as provided in Section 6(c) hereof.

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

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

1

 

          (g) “Company” means Eli Lilly and Company, an Indiana corporation.

          (h) “Deferral Amount” means the amount of a Participant’s Base Salary and/or Annual
Bonus that is elected by a Participant for deferral under the Plan.

          (i) “Election Form” means the written or electronic form or forms approved by the Plan
Administrator and completed by the Participant specifying the terms and conditions of an election
to defer Base Salary and/or Annual Bonus compensation under the Plan and setting forth the
Participant’s Beneficiary designation and the terms of distribution of the Participant’s Account
pursuant to Section 6.

          (j) “Eligible Employee” means (i) any SEC Executive Officer of the Company, and (ii)
any other employee of the Company or any Subsidiary who is among a “select group of management or
highly compensated employees” for purposes of ERISA as may be selected by the Plan Administrator
(or its designee) on an annual basis for participation in the Plan.

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

          (l) “Participant” means an Eligible Employee who has been designated by the Plan
Administrator to participate in the Plan and who elects to defer all or a portion of the employee’s
Base Salary and/or Annual Bonus compensation under Section 4 hereof.

          (m) “Plan” means The Lilly Deferred Compensation Plan, as amended and restated herein.

          (n) “Plan Administrator” means the Compensation Committee of the Board or such other
committee designated by the Board consisting of at least two (2) members of the Board who are not
employees of the Company or any Subsidiary. The Compensation Committee may at its discretion
delegate any of its responsibilities to one or more individuals provided that such delegation is in
accordance with applicable laws and provided further that the Compensation Committee may not
delegate authority to make individual determinations under the Plan as to SEC Executive Officers of
the Company.

          (o) “Plan Year” means the calendar year from January 1 through December 31 with
respect to which Base Salary and Annual Bonus compensation eligible for deferral under the Plan is
earned.

          (p) “SEC Executive Officer” means an officer or employee of the Company from time to
time designated as an executive officer for purposes of the Company’s annual securities filings
pursuant to the Securities Exchange Act of 1934, as amended.

          (q) “Section 409A” means section 409A of the Code and the Treasury regulations and
other official guidance promulgated thereunder.

2

 

          (r) “Separation from Service” means a “separation from service” within the meaning of
Section 409A.

          (s) “Subsidiary” means any corporation in which the Company has control, directly or
indirectly, of more than fifty percent (50%) of the aggregate voting securities of the corporation.

          (t) “Unforeseeable Emergency” means a severe financial hardship of a Participant
resulting from an illness or accident of such Participant or Beneficiary, such Participant’s spouse
or a dependent (as defined in section 152(a) of the Code) of such Participant, loss of such
Participant’s property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of such Participant, each as
determined in the manner consistent with Section 409A, and any other event or circumstance within
the meaning of the term “unforeseeable emergency” under Section 409A.

Section 2. Plan Administrator

          (a) Authority. The Plan Administrator shall have full authority to administer the
Plan in accordance with its terms and to exercise all responsibilities and authorities as provided
herein, including the discretionary authorities to designate the Eligible Employees who may
participate in the Plan, to determine the terms and conditions of deferrals of Base Salary and
Annual Bonus compensation under the Plan, to determine the terms and conditions of crediting to and
distributing from Accounts under the terms of the Plan, and to adopt such rules and regulations for
administering the Plan as it may deem necessary or appropriate. The Plan Administrator has the
discretionary authority to interpret and construe all provisions of the Plan, to remedy possible
ambiguities, inconsistencies, or omissions under the Plan, and to resolve all questions of fact
arising under the Plan. The decisions of the Plan Administrator shall be final, binding and
conclusive on all parties. No member of the Board, the Plan Administrator nor any officers of the
Company shall have any liability for any action or determination taken under the Plan.

          (b) Delegation; Expenses. The appropriate officer(s) of the Company as designated by
the Plan Administrator are authorized to act on behalf of the Plan Administrator for the day-to-day
administration of the Plan, subject to the authority of the Plan Administrator. The Plan
Administrator may also specifically delegate to the appropriate officer(s) the authority to
designate the Eligible Employees (other than SEC Executive Officers) who may participate in the
Plan. Expenses of the administration of the Plan may be borne by the Company or may be deducted
from Participants’ Accounts at the sole discretion of the Plan Administrator.

Section 3. Eligibility and Participation

          (a) Eligible Employees. Each Eligible Employee may become a Participant in the Plan
with respect to Base Salary and/or Annual Bonus compensation earned during a Plan Year, subject to
and in accordance with the terms and limitations of the Plan. Selection for participation by the
Plan Administrator with respect to compensation earned for a Plan Year does not confer upon the
Eligible Employee the right to participate in the Plan with respect to compensation earned during a
future Plan Year. The Plan Administrator may require an Eligible

3

 

Employee to comply with such terms and conditions as the Plan Administrator may specify in
order for the Eligible Employee to participate in the Plan.

          (b) Participants. Subject to Section 3(a) above, each Eligible Employee who makes an
election to defer compensation under Section 4 hereof shall become a Participant in the Plan, and
shall remain a Participant until receiving the distribution of the Participant’s entire Account
balance in accordance with Section 6 hereof. All Eligible Employees shall be eligible to defer
their Annual Bonus under the Plan. Only SEC Executive Officers for the applicable plan year shall
be eligible to defer their Base Salary under the Plan.

Section 4. Elections to Participate

          (a) Deferral Elections. An Eligible Employee designated by the Plan Administrator to
be a Participant in the Plan may file an Election Form with the Plan Administrator on or before the
date specified in accordance with Section 4(c) hereof. The Election Form shall permit the
Participant to specify the Deferral Amount subject to a minimum Deferral Amount of five thousand
dollars ($5,000) for the deferral of each of Base Salary and Annual Bonus, as applicable, or such
amounts as may be specified by the Plan Administrator in its sole discretion. The Election Form
shall also set forth the terms of distribution of the Participant’s Account in accordance with
Section 6 hereof and the Participant’s Beneficiary designation. All elections to defer
compensation under the Plan are irrevocable, and no changes to any Election Form delivered to the
Plan Administrator shall be permitted, except as specifically provided under the terms of the Plan.

          (b) Maximum Deferrals. An Eligible Employee may elect a Deferral Amount of up to 100%
of the Eligible Employee’s Annual Bonus for a Plan Year. An SEC Executive Officer shall also be
permitted to elect a Deferral Amount of up to 100% of the SEC Executive Officer’s Base Salary for a
Plan Year; provided that the Plan Administrator shall have the right to limit the Deferral Amount
with respect to the Participant’s Annual Bonus or Base Salary, if applicable, of an SEC Executive
Officer to ensure that the Company has sufficient funds to cover all applicable taxes and other
necessary and appropriate deductions.

          (c) Timing and Effect of Elections. Unless otherwise specified by the Plan
Administrator in accordance with the requirements of Section 409A, deferral elections on an
Election Form shall be made:

     (i) In the case of Base Salary and any Annual Bonus not qualifying as
“performance-based compensation” within the meaning of Section 409A, prior to the
beginning of the Plan Year with respect to which the Base Salary and/or Annual Bonus
is earned; and

     (ii) In the case of Annual Bonus that the Plan Administrator determines is
“performance-based compensation” within the meaning of Section 409A, no later than
June 30th of the applicable Plan Year with respect to which the Annual Bonus is
earned.

4

 

Deferral elections shall apply to Base Salary and Annual Bonus compensation for the Plan Year for
which they are made. Participants will be required to make deferral elections for future Plan
Years at such times to be specified by the Plan Administrator in accordance with the foregoing. If
a Participant does not file an Election Form with the Plan Administrator on or before the deadline
established by the Plan Administrator for deferral elections for a Plan Year, a Participant will be
deemed not to have elected to defer Base Salary or Annual Bonus compensation for such Plan Year, as
applicable. A Participant’s election to defer Base Salary or Annual Bonus compensation with
respect to a Plan Year shall not be affected by the Participant ceasing to be treated as an SEC
Executive Officer or Eligible Employee following the time that such election is made.

Section 5. Accounts and Interest Credits

          (a) Participant Accounts. An Account shall be maintained for each Participant under
the Plan. A Participant’s Account shall consist of book entries only and shall not constitute a
separate cash fund or other asset held in trust or as security for the Company’s obligation to pay
the amount of the Account to the Participant. The balance of a Participant’s Account shall be the
sum of Deferral Amounts credited to the Participant’s Account, adjusted for interest credits and
reduced by the amount of applicable tax withholding, distributions and expenses. A Participant’s
Account may include sub-accounts as the Company considers necessary or advisable for purposes of
maintaining a proper accounting of amounts credited or debited for a Participant under the Plan. A
Participant shall receive or have on-line access to a statement of such Participant’s Account no
less frequently than once a year following the end of each Plan Year.

          (b) Crediting of Deferral Amount. A Participant who has filed an Election Form with
the Plan Administrator for the deferral of Base Salary and/or Annual Bonus compensation with
respect to a Plan Year shall have the Deferral Amount deducted from the applicable compensation and
credited to the Participant’s Account under the Plan at the same time as the compensation would
otherwise be paid to the Participant. The Deferral Amount so credited shall be reduced by
applicable withholding, distributions and expenses.

          (c) Interest Credits. The Accounts of Participants shall be credited with interest
computed each Plan Year or portion thereof at a rate equal to 120% of the long-term applicable
federal rate, with monthly compounding (as prescribed under section 1274(d) of the Code), as in
effect for the month of December for the immediately preceding Plan Year. Such interest shall
accrue on all Deferral Amounts and prior earnings thereon and be credited daily to a Participant’s
Account.

          (d) Vesting of Accounts. All Deferral Amounts and interest credits thereon under a
Participant’s Account shall be fully vested at all times.

Section 6. Distribution of Accounts

          (a) Distribution upon Separation from Service. A Participant shall specify on an
Election Form the manner in which the Participant’s deferred Base Salary and Annual Bonus
compensation as applicable for a Plan Year (and earnings thereon) shall be distributed from the

5

 

Participant’s Account under the Plan upon the Participant’s Separation from Service. Any
election by the Participant as to the distribution of such portion of the Account shall be
irrevocable. A Participant may elect, to the extent permitted by the Plan Administrator and set
forth on the Election Form, that such portion of the Account be distributed upon a Participant’s
Separation from Service either in:

     (i) Lump Sum payment in January of the second Plan Year following the
Plan Year in which the Participant’s Separation from Service occurs; or

     (ii) Annual Installment payments over a period of two (2) to ten (10)
years commencing in January of the second Plan Year following the Plan Year in which
the Participant’s Separation from Service occurs, with subsequent installment
payments to be made in each January within the applicable period.

If a Participant fails to make a timely payment election on the Election Form for a Plan Year, the
Participant’s Deferral Amount for such Plan Year (and earnings thereon) shall be distributed in a
lump sum in accordance with Section 6(a)(i) hereof.

          (b) Distribution of Account. The Company shall distribute amounts from the
Participant’s Account in the manner specified in this Section 6. If the payment option described
in Section 6(a)(i) hereof is applicable, the amount of the lump sum shall be calculated using the
valuation of the applicable portion of the Participant’s Account as of the December 31 preceding
the date of the payment. If the payment option described in Section 6(a)(ii) hereof is applicable,
the amount of each installment shall be calculated using the valuation of the applicable portion of
the Participant’s Account as of the December 31 preceding the date of the installment payment
divided by the number of installment payments that have not yet been made. 

          (c) Distribution upon Death. Notwithstanding any election made by a Participant or
any other provision of this Section 6 to the contrary, if a Participant dies before full
distribution of his Account balance, any remaining balance shall be distributed to the
Participant’s Beneficiary in a lump sum within 90 days following the date of the Participant’s
death. The amount of such lump sum distribution shall be calculated using the valuation of the
Participant’s Account as of the date preceding the date of distribution. Any payment required to
be made to a Participant under the Plan that cannot be made due to the Participant’s death shall be
made to the Participant’s Beneficiary, subject to applicable law. Each Participant shall have the
right to designate one or more Beneficiaries, and to change a Beneficiary designation, from time to
time by filing a written notice with the Plan Administrator. In the event that a Beneficiary does
not survive the Participant and no successor Beneficiary is selected, or in the event no valid
Beneficiary designation has been made, the Participant’s Beneficiary shall be the Participant’s
estate.

          (d) Unforeseeable Emergency. Upon the written request of a Participant, the Plan
Administrator may permit the Participant to withdraw some or all of the Participant’s Account for
the purpose of enabling the Participant to meet the immediate needs created by an Unforeseeable
Emergency. The circumstances that will constitute an Unforeseeable Emergency will depend upon the
facts of each case, but in any case, the amounts distributed with respect to an Unforeseeable
Emergency shall not exceed the amounts necessary to satisfy such

6

 

Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as a result
of the distribution, after taking into account the extent to which such hardship is or may be
relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the
Participant’s assets, to the extent that the liquidation of such assets would not itself cause
severe financial hardship, or by cessation of deferrals under the Plan.

          (e) Withholding Taxes. All distributions of a Participant’s Account under the Plan
shall be subject to income tax and other withholdings that the Plan Administrator deems necessary
or appropriate, and the Plan Administrator may reduce the amount credited to any Participant’s
Account to the extent it deems necessary to satisfy tax withholding requirements. Participants or
Beneficiaries receiving distributions under the Plan shall bear all taxes on amounts paid under the
Plan to the extent that taxes are not withheld thereon, irrespective of whether withholding is
required.

Section 7. Administrative Matters 

          (a) Claims Process. 

               (i) To be effective under this procedure, a claim for benefits by a Participant or Beneficiary
must be made to the Plan Administrator or its designee in writing, unless the Plan Administrator or
its designee waives such writing requirement.

               (ii) If a claim is wholly or partially denied, the Plan Administrator or its designee shall
furnish such claimant with written notice of the denial within 90 days after the original claim was
filed, unless special circumstances require a longer period (not exceeding an additional 90 days)
for adjudication and the claimant is notified in writing of such extension prior to the expiration
of the initial 90-day period. A notice of denial shall set forth in a manner calculated to be
understood by the claimant (1) the reasons for denial, (2) specific reference to pertinent Plan
provisions on which the denial is based, (3) a description of any additional information needed to
perfect the claim and an explanation of why such information is necessary, and (4) an explanation
of the Plan’s claims procedure.

               (iii) The claimant shall have 90 days from receipt of the denial notice in which to make
written application for review by the Plan Administrator or its designee. The claimant shall have
the right (1) to receive upon request and free of charge, reasonable access to, and copies of all
documents, records, and other information relevant to the claim for benefits, and (2) to submit
written comments, documents, records, and other information relating to the claim.

               (iv) The Plan Administrator or its designee shall issue a decision within 60 days after
receipt of an application for review, unless special circumstances require an extension. In no
event will the decision be delayed beyond 120 days after receipt of the application for review.

               (v) A claimant for benefits whose application for review is totally or partially denied may
make a final appeal to the Plan Administrator or designee within 90 days

7

 

from receipt of the second denial notice. The final request for review must be in writing.
The same rights detailed in (iii) above will apply for this appeal.

               (vi) The Plan Administrator shall issue a decision on the final appeal within 60 days after
the receipt of an final appeal, unless special circumstances require an extension. In no event
will the decision be delayed beyond 120 days after receipt of the final appeal.

The Plan Administrator may establish such additional rules and procedures for processing claims as
it deems advisable. All interpretations, determinations, and decisions of the Plan Administrator
or its designee under this claims procedure shall be final and conclusive.

          (b) Incapacity. If the Plan Administrator determines that any person entitled to
benefits under the Plan is unable to care for his or her affairs because of illness, accident or
other physical and mental incapacity, any payment due (unless a duly qualified guardian or other
legal representative has been appointed) may be paid consistent with the terms described herein for
the benefit of such person to such person’s spouse, parent, brother, sister, adult child or other
party deemed by the Plan Administrator in its sole discretion to ensure proper care for such
person.

          (c) Inability to Locate. If the Plan Administrator is unable to locate a person to
whom a payment is due under the Plan for a period of twelve (12) months, commencing with the first
day of the month as of which the payment becomes payable, the total amount payable to such person
shall be forfeited.

Section 8. Unfunded Status

          All Accounts and all rights of Participants to benefits under the Plan are unfunded
obligations of the Company. Plan benefits shall be paid from the general assets of the Company,
and Participants shall have the status of an unsecured general creditor of the Company with respect
to all interests under the Plan. The Plan is a plan of unfunded deferred compensation for purposes
of ERISA. Notwithstanding the foregoing, the Company may, but shall not be required to, establish
a trust or other funding vehicle under the Plan that does not affect the Plan’s status as a Plan of
unfunded deferred compensation under ERISA.

Section 9. Nontransferability; Successors

          No interest of any person in, or right to receive a distribution under, the Plan shall be
subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other
alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be
taken, either voluntarily or involuntarily for the satisfaction of the debts of, or other
obligations or claims against, such person.

          The obligations of the Company under the Plan will be binding upon the Company’s successors,
transferees and assigns.

Section 10. Limitation of Rights

8

 

          Nothing in the Plan shall confer upon any Participant the right to continue to be employed by
the Company or to serve in the capacity in which the Participant is employed by the Company.
Nothing in the Plan shall be interpreted as creating a right of a Participant to receive any
amount of Base Salary, Annual Bonus or other compensation or benefit from the Company.

Section 11. Enforceability

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

Section 12. Effective Date; Amendment and Termination

          The Plan, as amended and restated, shall become effective for the 2009 Plan Year and for
future Plan Years until terminated by the Board. The Board may amend or terminate the Plan at any
time and in any manner; provided that no amendment or termination shall reduce the amount credited
to a Participant’s Account at the time of any such amendment or termination, and no amendment shall
be effective that shall cause the Plan to fail to meet the requirements of Section 409A. Upon
termination of the Plan in accordance with the requirements of Section 409A, (i) all future
deferrals of compensation will cease, (ii) all Plan Accounts will continue to receive interest
credits (or be invested) as permitted under the Plan, and (iii) all Plan Accounts will be
distributed in accordance with the Participant’s elections under the provisions of the Plan, unless
the Company determines in its sole discretion that all such amounts shall be distributed upon
termination in accordance with the requirements of Section 409A.

ELI LILLY AND COMPANY

9

 

APPENDIX A

GRANDFATHERED AMOUNTS

     Distribution of amounts that were earned and vested (within the meaning of Section 409A) under
the Plan prior to 2005 (and earnings thereon) and are exempt from the requirements of Section 409A
shall be made in accordance with the Plan terms as in effect on April 19, 2004, as attached below.

The Lilly Deferred Compensation Plan

(As Amended and Restated as of April 19, 2004)

Section 1. Establishment of the Plan.

There is hereby established for the benefit of Participants an unfunded plan of voluntarily
deferred compensation known as “The Lilly Deferred Compensation Plan.”

Section 2. Definitions.

When used in the Plan, the following terms shall have the definitions set forth in this Section 2:

2.1. Base Salary. The term “Base Salary” means the base salary to which a
management employee is entitled for services rendered to the Company as a management employee.

2.2. Base Salary Year. The term “Base Salary Year” means each calendar year in
which Base Salary deferred under the Plan is earned by a Participant.

2.3. Beneficiary. The term “Beneficiary” means the beneficiary or beneficiaries
(including any contingent beneficiary or beneficiaries) designated pursuant to subsection 6.2
hereof.

10

 

2.4. Board of Directors. The term “Board of Directors” means the Board of
Directors of Eli Lilly and Company.

2.5. Bonus. The term “Bonus” means the payment to which an Eligible Employee is
entitled pursuant to the Contingent Compensation Plan,the Senior Executive Bonus Plan or the Lilly
Executive Bonus Plan (the EVA Bonus Plan) of the Company or any other similar compensation plan as
may from time to time be designated by the Committee.

2.6. Bonus Year. The term “Bonus Year” means each calendar year in which a Bonus
deferred under the Plan is earned by a Participant.

2.7. Committee. The term “Committee” means the committee designated in subsection
9.1 hereof to administer the Plan.

2.8. Company. The term “Company” means Eli Lilly and Company and its affiliates
and subsidiaries.

2.9. Company Credit. The term “Company Credit” means an amount computed and
credited each calendar year or part thereof to Participants’ accounts as described in Section 5 at
a rate that is equal to one hundred twenty percent (120%) of the applicable federal long-term rate,
with compounding (as prescribed under Section 1274(d) of the Internal Revenue Code) that was in
effect for the month of December immediately preceding the calendar year. 

2.10. Disability. The term “Disability” means a condition that the Committee
determines (i) is attributable to sickness, injury, or disease and (ii) renders a Participant
incapable of engaging in any activity for remuneration or profit commensurate with the
Participant’s education, experience, and training.

2.11. Eligible Employee. The term “Eligible Employee” means a management employee
of the Company who is designated by the Committee as eligible to defer a Bonus earned in the
following year.

11

 

2.12. Lilly. The term “Lilly” means Eli Lilly and Company.

2.13. Participant. The term “Participant” means an Eligible Employee who has
elected to defer all or part of a Bonus pursuant to the Plan in accordance with Section 3.1 hereof
or an SEC Executive Officer who has elected to defer all or part of Base Salary pursuant to the
Plan in accordance with Section 3.2 hereof.

2.14. Plan. The term “Plan” means “The Lilly Deferred Compensation Plan” as set
forth herein and as it may be amended from time to time.

2.15. Retirement. The term “Retirement” means the first day of the month next
following the Participant’s last day of work for the Company, but only if such first day of the
month occurs on or after the first to occur of (i) the day on which the Participant attains age 65
or (ii) the day on which the Participant is eligible to commence receiving a monthly retirement
benefit under a retirement plan or program maintained by the Company and covering the Participant.

2.16. SEC Executive Officers. The term “SEC Executive Officers” shall mean those
officers and employees from time to time designated as Executive Officers for purposes of the proxy
statement and Form 10-K.

Section 3. Participation.

3.1. Bonuses. Prior to the beginning of each Bonus Year, the Committee shall select
those Eligible Employees who may elect to defer Bonuses pursuant to the Plan. Upon selection by
the Committee and before the beginning of the applicable Bonus Year, an Eligible Employee may defer
the receipt of a Bonus pursuant to the Plan by filing a written election with the Committee, in a
form satisfactory to the Committee, that

	 	(i)	 	defers payment of a designated amount (of One Thousand Dollars ($1,000) or more) or
percentage of the Bonus, if any, to be earned in the Bonus Year, and

12

 

	 	(ii)	 	specifies the payment option selected by the Participant pursuant to subsection 6.1
hereof.

The amount deferred may not exceed the amount of the Bonus. Except as provided in subsections 6.1
and 6.3 hereof, any election made pursuant to this Section 3 (including any election made pursuant
to paragraphs (i) and (ii), above) with respect to a Bonus Year shall be irrevocable when made.

Selection of an Eligible Employee for deferral of a Bonus during one year does not confer upon the
Eligible Employee a right to defer Bonuses for subsequent years. The Eligible Employees who shall
be permitted to defer Bonuses pursuant to the Plan shall be selected annually by the Committee. If
an Eligible Employee is also an SEC Executive Officer as of the beginning of the Bonus Year, the
Eligible Employee may also defer the receipt of Base Salary as provided in Section 3.2.

3.2. Base Salary. Subject to the right of the Committee to limit deferrals
described below, prior to the beginning of each Compensation Year, an SEC Executive Officer may
defer the receipt of up to one hundred percent (100%) of Base Salary pursuant to the Plan by filing
a written election with the Committee, in a form satisfactory to the Committee, that

	 	(i)	 	defers payment of a designated amount of One Thousand Dollars ($1,000) or
more or a percentage of Base Salary, and
	 
	 	(ii)	 	specifies the payment option selected by the Participation pursuant to
subsection 6.1 hereof.

The amount deferred may not exceed the amount of Base Salary. Except as provided in subsections 6.1
and 6.3 hereof, any election made pursuant to this Section 3 (including any

13

 

election made pursuant to paragraphs (i) and (ii), above) with respect to a Bonus Year shall be
irrevocable when made and shall not be affected by the Participant’s ceasing to be an SEC Executive
Officer after the beginning of the Bonus Year.

The Committee reserves the right to limit the amount of Deferrals of Base Salary to assure that the
Company has sufficient funds to cover taxes, benefit payments, and other necessary and appropriate
deductions.

Section 4. Individual Account.

The Treasurer of Lilly shall maintain an account in the name of each Participant. In the year
following the Bonus Year or Base Salary Year, each Participant’s account shall be credited, as of
the first day of the month in which Bonuses or Base Salary are paid, with the amount that the
Participant has elected to defer hereunder. Each Participant shall be given an annual statement,
as of December 31 of each year, showing for each year (i) the amount of Bonuses or Base Salary
deferred and (ii) the amount of the Company Credit to the Participant’s account.

Section 5. Accrual of Company Credit.

The Treasurer of Lilly shall determine the applicable annual rate of Company Credit on or before
December 31 of each calendar year. This rate shall be effective for the following calendar year.
The Company Credit shall accrue monthly, at one-twelfth of the applicable annual rate, on all
amounts credited to the Participant’s account, including the Company Credits for prior years. The
Company Credit shall not accrue on any amount distributed to the Participant (or to the
Participant’s Beneficiary) during the month for which the accrual is determined, except where an
amount is distributed to a Beneficiary in the month of the Participant’s death. The Company Credit
for each year shall be credited to each Participant’s account as of December 31 of that year and
shall be compounded annually.

14

 

Section 6. Payment.

6.1. Payment Options. The Participant shall select a payment election from the
payment options described below. A Participant may elect that his final payment election control
over all prior payment elections. The payment option selected by a Participant shall provide for
payment to the Participant of the amount credited to the Participant’s
account in

	 	(i)	 	a lump sum in January of the second calendar year following the calendar year
in which the Participant’s employment terminates by reason of Retirement or Disability;
or

	 	(ii)	 	annual installments over a period of two to ten years commencing in January of
the second calendar year following the calendar year in which the Participant’s
employment terminates by reason of Retirement or Disability;

provided, that in no event shall a lump sum be paid or installment payments begin under any payment
option before the first January that begins after any Bonus that has been deferred under the
payment option has been determined. The Company shall pay the aggregate amounts deferred, together
with a proportionate part of the aggregate Company Credit accrued to the date (or dates) of
payment, in the manner and on the date(s) specified by the Participant. If a payment option
described in paragraph (i), above, has been elected, the amount of the lump sum shall be equal to
the amount credited to the Participant’s account as of the December 31 next preceding the date of
the payment. If the payment option described in paragraph (ii), above, has been elected, the
amount of each installment shall be equal to the amount credited to the Participant’s account as of
the December 31 next preceding the date of the installment payment divided by the number of
installment payments that have not yet been made. If the Participant fails to elect a payment
option, the amount credited to the Participant’s account shall be distributed in a lump sum in
accordance with the payment option described in paragraph (i), above. If the amount credited to
the Participant’s account is less than $25,000 at any time following the year in which

15

 

the Participant’s employment terminates by reason of Retirement of Disability, the Committee, in
its sole discretion, may pay out the amount credited to the Participant’s account in a lump sum.

6.2. Payment upon Death. Within a reasonable period of time following the death of
a Participant, the balance in the Participant’s account shall be paid in a lump sum to the
Participant’s Beneficiary. For purposes of this subsection 6.2, the balance in the Participant’s
account shall be determined as of the date of payment. A Participant may designate the
Beneficiary, in writing, in a form acceptable to the Committee, and filed with the Committee before
the Participant’s death. A Participant may, before the Participant’s death, revoke a prior
designation of Beneficiary and may also designate a new Beneficiary without the consent of the
previously designated Beneficiary, provided that such revocation and new designation (if any) are
in writing, in a form acceptable to the Committee, and filed with the Committee before the
Participant’s death. If the Participant does not designate a Beneficiary, or if no designated
Beneficiary survives the Participant, any amount not distributed to the Participant during the
Participant’s life shall be paid to the Participant’s estate in a lump sum in accordance with this
subsection 6.2.

6.3. Resignation or Dismissal. Within a reasonable time following termination of a
Participant’s employment by resignation or dismissal, the balance in the Participant’s account
shall be paid in a lump sum to the Participant. For purposes of this subsection 6.3, the balance
in the Participant’s account shall be determined as of a date determined by the Cormittee in its
sole discretion.

6.4. Payment on Unforeseeable Emergency. The Administrator may, in its sole
discretion, direct payment to a Participant of all or of any portion of the Participant’s Account
balance, notwithstanding an election under Section 6.1. above, at any time that it determines that
such Participant has an unforeseeable emergency and then only to the extent reasonably necessary to
meet the emergency. For purposes of this rule, “unforeseeable emergency” means severe financial
hardship to the Participant resulting from a sudden and unexpected illness or accident of the
Participant or of a dependent of the Participant, loss of the Participant’s property due to

16

 

casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. The circumstances that will constitute an
unforeseeable emergency will depend upon the facts of each case, but, in any case, payment may not
be made to the extent that such hardship is or may be relieved —

	 	(i)	 	Through reimbursement or compensation by insurance or otherwise,
	 
	 	(ii)	 	By liquidation of the Participant’s assets, to the extent the liquidation of
such assets would not itself cause severe financial hardship, or
	 
	 	(iii)	 	By cessation of deferrals under the Plan.

Examples of what are not considered to be unforeseeable emergencies include the need to send a
Participant’s child to college or the desire to purchase a home.

6.5. Cash Payments. All payments under the Plan shall be made in cash.

Section 7.
Prohibition Against Transfer.

The right of a Participant to receive payments under the Plan may not be transferred except by will
or applicable laws of descent and distribution. A Participant may not assign, sell, pledge, or
otherwise transfer any amount to which he is entitled hereunder prior to transfer or payment
thereof to the Participant.

Section 8. Participant’s Rights Unsecured.

The Plan is unfunded. The right of any Participant to receive payments under the Plan shall be an
unsecured claim against the general assets of the Company.

17

 

Section 9. Administration.

9.1. Committee. The Plan shall be administered by the Compensation and Management
Development Committee of the Board of Directors,the members of which shall be selected by the Board
of Directors from among its members. No member of the Committee may be a salaried employee of the
Company.

9.2. Powers of the Committee. The Committee’s powers shall include, but not be
limited to, the power

	 	(i)	 	to select Eligible Employees for participation in the Plan,
	 
	 	(ii)	 	to interpret the terms and provisions of the Plan and to determine any and all
questions arising under the Plan, including, without limitation, the right to remedy
possible ambiguities, inconsistencies, or omissions by a general rule or particular
decision,
	 
	 	(iii)	 	to adopt rules consistent with the Plan, and
	 
	 	(iv)	 	to limit the deferrals of SEC Executive Officers to assure that the Company
has sufficient funds to cover taxes, benefit payments, and other necessary or
appropriate deductions.

9.3. Finality of Committee Determinations. Determinations by the Committee and any
interpretation, rule, or decision adopted by the Committee under the Plan or in carrying out or
administering the Plan shall be final and binding for all purposes and upon all interested persons,
their heirs, and personal representatives.

9.4. Claims Procedures. Any person making a claim for benefits hereunder shall
submit the claim in writing to the Committee. If the Committee denies the claim in whole or in
part, it shall issue to the claimant a written notice explaining the reason for the denial and
identifying any

18

 

additional information or documentation that might enable the claimant to perfect the claim. The
claimant may, within 60 days of receiving a written notice of denial, submit a written request for
reconsideration to the Committee, together with a written explanation of the basis of the request.
The Committee shall consider any such request and shall provide the claimant with a written
decision together with a written explanation thereof. All interpretations, determinations, and
decisions of the committee in respect of any claim shall be final and conclusive.

9.5. Withholding. The Company shall have the right to deduct from all payments
hereunder any taxes required by law to be withheld from such payments. The recipients of such
payments shall bear all taxes on amounts paid under the Plan to the extent that no taxes are
withheld thereon, irrespective of whether withholding is required.

9.6. Incapacity. If the Committee determines that any person entitled to benefits
under the Plan is unable to care for his or her affairs because of illness or accident, any payment
due (unless a duly qualified guardian or other legal representative has been appointed) may be paid
for the benefit of such person to such person’s spouse, parent, brother, sister,or other party
deemed by the Committee to have incurred expenses for such person.

9.7. Inability to Locate. If the Committee is unable to locate a person to
whom a payment is due under the Plan for a period of twelve (12) months, commencing with the
first day of the month as of which the payment becomes payable, the total amount payable to
such person shall be forfeited.

9.8. Legal Holidays. If any day on (or on or before) which action under the Plan
must be taken falls on a Saturday, Sunday,or legal holiday, such action may be taken on (or on
or before) the next succeeding day that is not a Saturday, Sunday,or legal holiday; provided, that
this subsection 9.8 shall not permit any action that must be taken in one calendar year to be taken
in any subsequent calendar year.

19

 

Section 10. No Employment Rights.

No provision of the Plan or any action taken hereunder by the Company, the Board of Directors, or
the Committee shall give any person any right to be retained in the employ of the Company, and the
right and power of the Company to dismiss or discharge any Participant is specifically reserved.

Section 11. Amendment, Suspension, and Termination.

The Board of Directors shall have the right to amend, suspend, or terminate the Plan at any time.
The Committee shall also have the right to amend the Plan, except for subsection 9.1 hereof and
this Section 11.

Section 12. Applicable Law.

The Plan shall be governed by, and construed in accordance with, the laws of the State of Indiana,
except to the extent that such laws are preempted by Federal law.

Section 13. Effective Date.

This amendment and restatement of the Plan is effective as of January 1, 2004. Nothing herein
shall invalidate or adversely affect any previous election, designation, deferral, or accrual in
accordance with the terms of the Plan that were then in effect.

20

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