Eli Lilly 2003 Annual Report Download - page 64

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PROXY STATEMENT
62
DIRECTORS’ COMPENSATION
Directors who are employees receive no additional compensation for serving on the board or its committees.
We provide the following annual compensation to directors who are not employees:
Cash compensation
• retainer of $3,750 per month
• $1,600 for each board meeting attended
• $1,600 for each committee or other meeting attended if not held on the same day as a board meeting
• $2,000 to the committee chairpersons for each committee meeting attended as compensation for the chairper-
son’s preparation time
• reimbursement for customary and usual travel expenses
Stock Compensation
• 700 shares of Lilly stock in a deferred stock account in the Lilly Directors’ Deferral Plan (as described below),
payable after service on the board has ended.
• Stock options under the 2002 Lilly Stock Plan for 2,800 shares of Lilly stock. The option price is the fair market
value at the time of grant. The options are exercisable after 3 years and expire after 10 years.
Lilly Directors’ Deferral Plan
This plan allows directors to defer receipt of all or part of their retainer and meeting fees until after their service
on the board has ended. Each director can choose to invest the funds in either of two accounts:
• Deferred Compensation Account. Funds in this account earn interest each year at an annual rate of 120 percent
of the applicable federal long-term rate as established for the preceding December by the U.S. Treasury De-
partment under Section 1274(d) of the Internal Revenue Code. The rate for 2004 is 6.16 percent. The aggregate
amount of interest that accrued in 2003 for the participating directors was $201,055.76.
• Deferred Stock Account. This account allows the director, in effect, to invest his or her deferred cash compen-
sation in Lilly stock. In addition, the annual award of 700 shares to each director noted above is credited to this
account. Funds in this account are credited as hypothetical shares of Lilly stock based on the market price of the
stock at the time the compensation would otherwise have been earned. Hypothetical dividends are “reinvested”
in additional shares based on the market price of the stock on the date dividends are paid. All shares in the de-
ferred stock accounts are hypothetical and are not issued or transferred until the director ends his or her service
on the board or dies.
Both accounts may be paid in a lump sum or in annual installments for up to 10 years. The deferred compensation
account may also be paid in monthly installments for up to 10 years. Amounts in the deferred stock account are
paid in the form of shares of Lilly stock.