EXHIBIT 10.
1994
LILLY STOCK PLAN,
as amended through
October 21, 1996
The 1994 Lilly Stock Plan ("1994 Plan") authorizes the
Compensation and Management Development Committee
("Committee") to provide officers and other key
executive, management, professional, and administrative
employees of Eli Lilly and Company and its subsidiaries
with certain rights to acquire shares of Eli Lilly and
Company common stock ("Lilly Stock"). The Company
believes that this incentive program will benefit the
Company's shareholders by allowing the Company to
attract, motivate, and retain key employees and by
causing those employees, through stock-based incentives,
to contribute materially to the growth and success of the
Company. For purposes of the 1994 Plan, the term
"Company" shall mean Eli Lilly and Company and its
subsidiaries, unless the context requires otherwise.
1. Administration.
The 1994 Plan shall be administered and interpreted by
the Committee consisting of not less than three persons
appointed by the Board of Directors of the Company from
among its members. A person may serve on the Committee
only if he or she (i) is a "Non-employee Director" for
purposes of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and (ii) satisfies
the requirements of an "outside director" for purposes
of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). The Committee shall determine
the fair market value of Lilly Stock for purposes of the
1994 Plan. The Committee may, subject to the provisions
of the 1994 Plan, from time to time establish such rules
and regulations and delegate such authority to administer
the 1994 Plan as it deems appropriate for the proper
administration of the Plan. The decisions of the
Committee or its authorized delegatees shall be final,
conclusive, and binding with respect to the
interpretation and administration of the 1994 Plan and
any Grant made under it.
2. Grants.
Incentives under the 1994 Plan shall consist of incentive
stock options, nonqualified stock options, performance
awards, and restricted stock grants (collectively,
"Grants"). All Grants shall be subject to the terms and
conditions consistent with the 1994 Plan as the Committee
deems appropriate. The Committee shall approve the form
and provisions of each Grant. Grants under a particular
section of the 1994 Plan need not be uniform and Grants
under two or more sections may be combined in one
instrument.
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3. Eligibility for Grants.
Grants may be made to any employee of the Company who is
an officer or other key executive, managerial,
professional, or administrative employee, including a
person who is also a member of the Board of Directors
("Eligible Employee"). The Committee shall select the
persons to receive Grants ("Grantees") from among the
Eligible Employees and determine the number of shares
subject to any particular Grant.
4. Shares Available for Grant.
(a) Shares Subject to Issuance or Transfer. Subject
to adjustment as provided in Section 4(b), the aggregate
number of shares of Lilly Stock that may be issued or
transferred under the 1994 Plan is 25,000,000. The
shares may be authorized but unissued shares or treasury
shares. The number of shares available for Grants at any
given time shall be 25,000,000, reduced by the aggregate
of all shares previously issued or transferred and of
shares which may become subject to issuance or transfer
under then-outstanding Grants. Payment in cash in lieu
of shares shall be deemed to be an issuance of the shares
for purposes of determining the number of shares
available for Grants under the 1994 Plan as a whole or to
any individual Grantee.
(b) Adjustment Provisions. If any subdivision or
combination of shares of Lilly Stock or any stock
dividend, reorganization, recapitalization, or
consolidation or merger with Eli Lilly and Company as the
surviving corporation occurs, or if additional shares or
new or different shares or other securities of the
Company or any other issuer are distributed with respect
to the shares of Lilly Stock through a spin-off or other
extraordinary distribution, the Committee shall make such
adjustments as it determines appropriate in the number of
shares of Lilly Stock that may be issued or transferred
in the future under Sections 4(a), 5(f), and 6(f). The
Committee shall also adjust as it determines appropriate
the number of shares and Option Price in outstanding
Grants made before the event.
5. Stock Options.
The Committee may grant options qualifying as incentive
stock options under the Code ("Incentive Stock Options"),
and nonqualified stock options (collectively, "Stock
Options"). The following provisions are applicable to
Stock Options:
(a) Option Price. The Committee shall determine the
price at which Lilly Stock may be purchased by the
Grantee under a Stock Option ("Option Price") which shall
be not less than the fair market value of Lilly Stock on
the date the Stock Option is granted (the "Grant Date").
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In the Committee's discretion, the Grant Date of a Stock
Option may be established as the date on which Committee
action approving the Stock Option is taken or any later
date specified by the Committee.
(b) Option Exercise Period. The Committee shall
determine the option exercise period of each Stock
Option. The period shall not exceed ten years from the
Grant Date.
(c) Exercise of Option. A Stock Option will be
deemed exercised by a Grantee upon delivery of (i) a
notice of exercise to the Company or its representative
as designated by the Committee, and (ii) accompanying
payment of the Option Price if the Stock Option requires
such payment at the time of exercise. The notice of
exercise, once delivered, shall be irrevocable.
(d) Satisfaction of Option Price. A Stock Option
may require payment of the Option Price upon exercise or
may specify a period not to exceed 30 days following
exercise within which payment must be made ("Payment
Period"). The Grantee shall pay or cause to be paid the
Option Price in cash, or with the Committee's permission,
by delivering (or providing adequate evidence of
ownership of) shares of Lilly Stock already owned by the
Grantee and having a fair market value on the date of
exercise equal to the Option Price, or a combination of
cash and such shares. If the Grantee fails to pay the
Option Price within the Payment Period, the Committee
shall have the right to take whatever action it deems
appropriate, including voiding the option exercise or
voiding that part of the Stock Option for which payment
was not timely received. The Company shall not deliver
shares of Lilly Stock upon exercise of a Stock Option
until the Option Price and any required withholding tax
are fully paid.
(e) Share Withholding. With respect to any
nonqualified option, the Committee may, in its discretion
and subject to such rules as the Committee may adopt,
permit or require the Grantee to satisfy, in whole or in
part, any withholding tax obligation which may arise in
connection with the exercise of the nonqualified option
by having the Company withhold shares of Lilly Stock
having a fair market value equal to the amount of the
withholding tax.
(f) Limits on Individual Grants. No individual
Grantee may be granted Stock Options under the 1994 Plan
for more than 1,500,000 shares of Lilly Stock in any
three consecutive calendar years.
(g) Limits on Incentive Stock Options. The
aggregate fair market value of the stock covered by
Incentive Stock Options granted under the 1994 Plan or
any other stock option plan of the Company or any
subsidiary or parent of the Company that become
exercisable for the first time by any employee in any
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calendar year shall not exceed $100,000. The aggregate
fair market value will be determined at the Grant Date.
An Incentive Stock Option shall not be granted to any
Eligible Employee who, on the Grant Date, owns stock
possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any
subsidiary or parent of the Company.
6. Performance Awards.
The Committee may grant Performance Awards which shall be
denominated at the time of grant either in shares of
Lilly Stock ("Stock Performance Awards") or in dollar
amounts ("Dollar Performance Awards"). Payment under a
Stock Performance Award or a Dollar Performance Award
shall be made, at the discretion of the Committee, in
shares of Lilly Stock ("Performance Shares"), or in cash
or in any combination thereof, if the financial
performance of the Company or any subsidiary, division,
or other unit of the Company ("Business Unit") selected
by the Committee meets certain financial goals
established by the Committee for the Award Period. The
following provisions are applicable to Performance
Awards:
(a) Award Period. The Committee shall determine and
include in the Grant the period of time (which shall be
four or more consecutive fiscal quarters) for which a
Performance Award is made ("Award Period"). Grants of
Performance Awards need not be uniform with respect to
the length of the Award Period. Award Periods for
different Grants may overlap. A Performance Award may
not be granted for a given Award Period after one half
(1/2) or more of such period has elapsed.
(b) Performance Goals and Payment. Before a Grant
is made, the Committee shall establish objectives
("Performance Goals") that must be met by the Business
Unit during the Award Period as a condition to payment
being made under the Performance Award. The Performance
Goals, which must be set out in the Grant, are limited to
earnings per share, divisional income, net income, or any
of the foregoing before the effect of acquisitions,
divestitures, accounting changes, and restructuring and
special charges (determined according to criteria
established by the Committee). The Committee shall also
set forth in the Grant the number of Performance Shares
or the amount of payment to be made under a Performance
Award if the Performance Goals are met or exceeded,
including the fixing of a maximum payment (subject to
Section 6(f)).
(c) Computation of Payment. After an Award Period,
the financial performance of the Business Unit during the
period shall be measured against the Performance Goals.
If the Performance Goals are not met, no payment shall be
made under a Performance Award. If the Performance Goals
are met or exceeded, the Committee shall certify that
fact in writing and certify the number of Performance
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Shares or the amount of payment to be made under a
Performance Award in accordance with the grant for each
Grantee. The Committee, in its sole discretion, may
elect to pay part or all of the Performance Award in cash
in lieu of issuing or transferring Performance Shares.
The cash payment shall be based on the fair market value
of Lilly Stock on the date of payment (subject to Section
6(f)). The Company shall promptly notify each Grantee of
the number of Performance Shares and the amount of cash,
if any, he or she is to receive.
(d) Revisions for Significant Events. At any time
before payment is made, the Committee may revise the
Performance Goals and the computation of payment if
unforeseen events occur during an Award Period which have
a substantial effect on the Performance Goals and which
in the judgment of the Committee make the application of
the Performance Goals unfair unless a revision is made;
provided, however, that no such revision shall be made
with respect to a Performance Award to the extent that
the Committee determines the revision would cause payment
under the Award to fail to be fully deductible by the
Company under Section 162 (m) of the Code.
(e) Requirement of Employment. To be entitled to
receive payment under a Performance Award, a Grantee must
remain in the employment of the Company to the end of the
Award Period, except that the Committee may provide for
partial or complete exceptions to this requirement as it
deems equitable in its sole discretion.
(f) Maximum Payment. No individual may receive
Performance Award payments in respect of Stock
Performance Awards in excess of 60,000 shares of Lilly
Stock in any calendar year or payments in respect of
Dollar Performance Awards in excess of $2,000,000 in any
calendar year. No individual may receive both a Stock
Performance Award and a Dollar Performance Award for the
same Award Period.
7. Restricted Stock Grants.
The Committee may issue or transfer shares of Lilly Stock
to a Grantee under a Restricted Stock Grant. Upon the
issuance or transfer, the Grantee shall be entitled to
vote the shares and to receive any dividends paid. The
following provisions are applicable to Restricted Stock
Grants:
(a) Requirement of Employment. If the Grantee's
employment terminates during the period designated in the
Grant as the "Restriction Period," the Restricted Stock
Grant terminates. However, the Committee may provide for
partial or complete exceptions to this requirement as it
deems equitable.
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(b) Restrictions on Transfer. During the
Restriction Period, a Grantee may not sell, assign,
transfer, pledge, or otherwise dispose of the shares of
Lilly Stock except to a Successor Grantee under Section
10(a). Each certificate for shares issued or transferred
under a Restricted Stock Grant shall be held in escrow by
the Company until the expiration of the Restriction
Period.
(c) Withholding Tax. Before delivering the
certificate for shares of Lilly Stock to the Grantee,
Lilly may require the Grantee to pay to the Company any
required withholding tax. The Committee may, in its
discretion and subject to such rules as the Committee may
adopt, permit or require the Grantee to satisfy, in whole
or in part, any withholding tax requirement by having the
Company withhold shares of Lilly Stock from the Grant
having a fair market value equal to the amount of the
withholding tax. In the event the Grantee fails to pay
the withholding tax within the time period specified in
the Grant, the Committee may take whatever action it
deems appropriate, including withholding or selling
sufficient shares from the Grant to pay the tax and
assessing interest or late fees to the Grantee.
(d) Lapse of Restrictions. All restrictions imposed
under the Restricted Stock Grant shall lapse (i) upon the
expiration of the Restriction Period if all conditions
stated in Sections 7(a), (b) and (c) have been met or
(ii) as provided under Section 9(a)(ii). The Grantee
shall then be entitled to delivery of the certificate.
8. Amendment and Termination of the 1994 Plan.
(a) Amendment. The Company's Board of Directors may
amend or terminate the 1994 Plan, but no amendment shall
withdraw from the Committee the right to select Grantees
under Section 3.
(b) Termination of 1994 Plan. The 1994 Plan shall
terminate on the fifth anniversary of its effective date
unless terminated earlier by the Board or unless extended
by the Board.
(c) Termination and Amendment of Outstanding Grants.
A termination or amendment of the 1994 Plan that occurs
after a Grant is made shall not result in the termination
or amendment of the Grant unless the Grantee consents or
unless the Committee acts under Section 10(e). The
termination of the 1994 Plan shall not impair the power
and authority of the Committee with respect to
outstanding Grants. Whether or not the 1994 Plan has
terminated, an outstanding Grant may be terminated or
amended under Section 10(e) or may be amended (i) by
agreement of the Company and the Grantee consistent with
the 1994 Plan or (ii) by action of the Committee provided
that the amendment is consistent with the 1994 Plan and
is found by the Committee not to impair the rights of the
Grantee under the Grant.
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9. Change in Control.
(a) Effect on Grants. Unless the Committee shall
otherwise expressly provide in the agreement relating to
a Grant, upon the occurrence of a Change in Control (as
defined below):
(i) In the case of Stock Options, (y) each
outstanding Stock Option that is not then fully
exercisable shall automatically become fully exercisable
until the termination of the option exercise period of
the Stock Option (as modified by subsection (i)(z) that
follows), and (z) in the event the Grantee's employment
is terminated within two years after a Change in Control,
his or her outstanding Stock Options at that date of
termination shall be immediately exercisable for a period
of three months following such termination, provided,
however, that, to the extent the Stock Option by its
terms otherwise permits a longer option exercise period
after such termination, such longer period shall govern,
and provided further that in no event shall a Stock
Option be exercisable more than 10 years after the Grant
Date;
(ii) The Restriction Period on all outstanding
Restricted Stock Grants shall automatically expire and
all restrictions imposed under such Restricted Stock
Grants shall immediately lapse; and
(iii) Each Grantee of a Performance Award for an
Award Period that has not been completed at the time of
the Change in Control shall be deemed to have earned a
minimum Performance Award equal to the product of (y)
such Grantee's maximum award opportunity for such
Performance Award, and (z) a fraction, the numerator of
which is the number of full and partial months that have
elapsed since the beginning of such Award Period to the
date on which the Change in Control occurs, and the
denominator of which is the total number of months in
such Award Period.
(b) Change in Control. For purposes of the 1994
Plan, a Change in Control shall mean the happening of any
of the following events:
(i) The acquisition by any "person," as that term
is used in Sections 13(d) and 14(d) of the 1934 Act
(other than (w) the Company, (x) any subsidiary of the
Company, (y) any employee benefit plan or employee stock
plan of the Company or a subsidiary of the Company or any
trustee or fiduciary with respect to any such plan when
acting in that capacity, or (z) Lilly Endowment, Inc.,)
of "beneficial ownership," as defined in Rule 13d-3
under the 1934 Act, directly or indirectly, of 20% or
more of the shares of the Company's capital stock the
holders of which have general voting power under ordinary
circumstances to elect at least a majority of the Board
of Directors of the Company (or which would have such
voting power but for the application of the Indiana
Control Share Statute) ("Voting Stock");
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(ii) the first day on which less than two-thirds of
the total membership of the Board of Directors of the
Company shall be Continuing Directors (as that term is
defined in Article 13(f) of the Company's Articles of
Incorporation);
(iii) approval by the shareholders of the Company of
a merger, share exchange, or consolidation of the Company
(a "Transaction"), other than a Transaction which would
result in the Voting Stock of the Company outstanding
immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50%
of the Voting Stock of the Company or such surviving
entity immediately after such Transaction; or
(iv) approval by the shareholders of the Company of
a complete liquidation of the Company or a sale or
disposition of all or substantially all the assets of the
Company.
10. General Provisions.
(a) Prohibitions Against Transfer. (i) Except as
provided in part (ii) of this subparagraph, only a
Grantee or his or her authorized legal representative may
exercise rights under a Grant. Such persons may not
transfer those rights. The rights under a Grant may not
be disposed of by transfer, alienation, pledge,
encumbrance, assignment, or any other means, whether
voluntary, involuntary, or by operation of law, and any
such attempted disposition shall be void; provided,
however, that when a Grantee dies, the personal
representative or other person entitled under a Grant
under the 1994 Plan to succeed to the rights of the
Grantee ("Successor Grantee") may exercise the rights. A
Successor Grantee must furnish proof satisfactory to the
Company of his or her right to receive the Grant under
the Grantee's will or under the applicable laws of
descent and distribution.
(ii) Notwithstanding the foregoing, the Committee
may, in its discretion and subject to such limitations
and conditions as the Committee deems appropriate, grant
non-qualified stock options on terms which permit the
Grantee to transfer all or part of the stock option, for
estate or tax planning purposes or for donative purposes,
and without consideration, to a member of the Grantee's
immediate family (as defined by the Committee), a trust
for the exclusive benefit of such immediate family
members, or a partnership, corporation or limited
liability company the equity interests of which are owned
exclusively by the Grantee and/or one or more members of
his or her immediate family. No such stock option or any
other Grant shall be transferable incident to divorce.
Subsequent transfers of a stock option transferred under
this part (ii) shall be prohibited except for transfers
to a Successor Grantee upon the death of the transferee.
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(b) Substitute Grants. The Committee may make a
Grant to an employee of another corporation who becomes
an Eligible Employee by reason of a corporate merger,
consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company in
substitution for a stock option, performance award, or
restricted stock grant granted by such other corporation
("Substituted Stock Incentive"). The terms and
conditions of the substitute Grant may vary from the
terms and conditions that would otherwise be required by
the 1994 Plan and from those of the Substituted Stock
Incentives. The Committee shall prescribe the exact
provisions of the substitute Grants, preserving where
possible the provisions of the Substituted Stock
Incentives. The Committee shall also determine the
number of shares of Lilly Stock to be taken into account
under Section 4.
(c) Subsidiaries. The term "subsidiary" means a
corporation of which Eli Lilly and Company owns directly
or indirectly 50% or more of the voting power.
(d) Fractional Shares. Fractional shares shall not
be issued or transferred under a Grant, but the Committee
may pay cash in lieu of a fraction or round the fraction.
(e) Compliance with Law. The 1994 Plan, the
exercise of Grants, and the obligations of the Company to
issue or transfer shares of Lilly Stock under Grants
shall be subject to all applicable laws and regulations
and to approvals by any governmental or regulatory agency
as may be required. The Committee may revoke any Grant
if it is contrary to law or modify a Grant to bring it
into compliance with any valid and mandatory law or
government regulation. The Committee may also adopt
rules regarding the withholding of taxes on payment to
Grantees.
(f) Ownership of Stock. A Grantee or Successor
Grantee shall have no rights as a shareholder of the
Company with respect to any shares of Lilly Stock covered
by a Grant until the shares are issued or transferred to
the Grantee or Successor Grantee on the Company's books.
(g) No Right to Employment. The 1994 Plan and the
Grants under it shall not confer upon any Grantee the
right to continue in the employment of the Company or
affect in any way the right of the Company to terminate
the employment of a Grantee at any time, with or without
notice or cause.
(h) Foreign Jurisdictions. The Committee may
adopt, amend, and terminate such arrangements and make
such Grants, not inconsistent with the intent of the 1994
Plan, as it may deem necessary or desirable to make
available tax or other benefits of the laws of foreign
jurisdictions to Grantees who are subject to such laws.
The terms and conditions of such foreign Grants may vary
from the terms and conditions that would otherwise be
required by the 1994 Plan.
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(i) Governing Law. The 1994 Plan and all Grants
made under it shall be governed by and interpreted in
accordance with the laws of the State of Indiana,
regardless of the laws that might otherwise govern under
applicable Indiana conflict-of-laws principles.
(j) Effective Date of the 1994 Plan. The 1994 Plan
shall become effective upon its approval by the Company's
shareholders at the annual meeting to be held on April
18, 1994, or any adjournment of the meeting.
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