Eli Lilly 2009 Annual Report Download - page 149

• welfare benefits provided to all U.S. retirees, including retiree medical and dental insurance. The amounts
shown in the table above as “Continuation of Medical / Welfare Benefits” are explained below.
• distributions of plan balances under the 401(k) plan and the nonqualified savings plan. See the narrative
following the Nonqualified Deferred Compensation in 2009 table for information about the 401(k) plan, the
deferred compensation plan, and the nonqualified savings plan.
• the value of accelerated vesting of certain unvested equity grants upon retirement. Under the company’s
stock plans, employees who terminate employment while retirement-eligible receive accelerated vesting of
unvested stock options (except for options granted in the 12 months before retirement, which are forfeited),
outstanding PAs and SVAs (which are paid on a reduced basis for time worked during the performance
period), and restricted stock awarded in payment of previous PAs.
• the value of option continuation upon retirement. When an employee terminates prior to retirement, his or
her stock options are terminated 30 days thereafter. However, when a retirement-eligible employee
terminates, his or her options remain in force until the earlier of five years after retirement or the option’s
normal expiration date.
Deferred Compensation. The amounts shown in the table do not include distributions of plan balances under the
deferred compensation plan. Those amounts are shown in the Nonqualified Deferred Compensation in 2009
table.
Death and Disability. A termination of employment due to death or disability does not entitle the named executive
officers to any payments or benefits that are not available to salaried employees generally.
Termination for Cause. Executives receive no severance or enhanced pension or medical benefits and forfeit any
unvested equity grants.
Change-in-Control Severance Pay Plan. As described in the “Compensation Discussion and Analysis” under
“Severance Benefits,” the company maintains a change-in-control severance pay plan (CIC plan) for nearly all
employees, including the named executive officers. The CIC plan defines a change in control very specifically, but
generally the terms include the occurrence of, or entry into, an agreement to do one of the following:
(i) acquisition of 15 percent (20 percent beginning October 20, 2010) or more of the company’s stock;
(ii) replacement by the shareholders of one third (one half beginning October 20, 2010) or more of the board of
directors; (iii) consummation of a merger, share exchange, or consolidation of the company; or (iv) liquidation of
the company or sale or disposition of all or substantially all of its assets. The amounts shown in the table for
“involuntary or good reason termination after change in control” are based on the following assumptions and
plan provisions:
•Covered terminations. The table assumes a termination of employment that is eligible for severance under
the terms of the current plan, based on the named executive’s compensation, benefits, age, and service
credit at December 31, 2009. Eligible terminations include an involuntary termination for reasons other than
for cause, or a voluntary termination by the executive for good reason, within two years following the change
in control.
—A termination of an executive officer by the company is for cause if it is for any of the following reasons:
(i) the employee’s willful and continued refusal to perform, without legal cause, his or her material duties,
resulting in demonstrable economic harm to the company; (ii) any act of fraud, dishonesty, or gross
misconduct resulting in significant economic harm or other significant harm to the business reputation of
the company; or (iii) conviction of or the entering of a plea of guilty or nolo contendere to a felony.
—A termination by the executive officer is for good reason if it results from: (i) a material diminution in the
nature or status of the executive’s position, title, reporting relationship, duties, responsibilities, or
authority, or the assignment to him or her of additional responsibilities that materially increase his or her
workload; (ii) any reduction in the executive’s then-current base salary; (iii) a material reduction in the
executive’s opportunities to earn incentive bonuses below those in effect for the year prior to the change
in control; (iv) a material reduction in the executive’s employee benefits from the benefit levels in effect
immediately prior to the change in control; (v) the failure to grant to the executive stock options, stock
units, performance shares, or similar incentive rights during each 12-month period following the change in
control on the basis of a number of shares or units and all other material terms at least as favorable to
the executive as those rights granted to him or her on an annualized average basis for the three-year
period immediately prior to the change in control; or (vi) relocation of the executive by more than 50 miles.
•Cash severance payment. Represents the CIC plan benefit of two times the employee’s 2009 annual base
salary plus two times the employee’s cash bonus for 2009 under the bonus plan.
•Incremental pension benefit. Represents the present value of an incremental nonqualified pension benefit
of two years of age credit and two years of service credit that is provided under the CIC plan. The
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