Exhibit 10.1
1994
LILLY STOCK PLAN,
as amended through
October 15, 2001
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 set out herein and to such other 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.
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"). 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
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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
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.
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(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 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.
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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.
(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
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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.
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 15% or more of the shares of the Company's capital stock the holders of which
have general voting power under ordinary circumstances to elect at least a
majority of the Board of Directors of the Company (or which would have such
voting power but for the application of the Indiana Control Share Statute)
("Voting Stock"); provided, however, that an acquisition of Voting Stock
directly from the Company shall not constitute a Change in Control;
(ii) the first day on which less than two-thirds of the total membership of the
Board of Directors of the Company shall be Continuing Directors (as that term is
defined in Article 13(f) of the Company's Articles of Incorporation);
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(iii) consummation of a merger, share exchange, or consolidation of the Company
(a "Transaction"), other than a Transaction which would result in the Voting
Stock of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the Voting Stock of the
Company or such surviving entity immediately after such Transaction; or
(iv) a complete liquidation of the Company or a sale or disposition of all or
substantially all the assets of the Company, other than a sale or disposition of
assets to any subsidiary of the Company.
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.
(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.
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(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.
(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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