Eli Lilly 2006 Annual Report Download - page 101

PROXY STATEMENT
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At any time prior to payment, the committee can adjust awards for the effect of unforeseen events that have
a substantial effect on the performance goals and would otherwise make application of the performance goals
unfair. However, the committee may not increase the amount that would otherwise be payable to individuals who
are subject to Section 162(m) of the Code.
Restricted Stock Grants or Stock Units. The committee may also issue or transfer shares under a restricted
stock grant. The grant will set forth a restriction period during which the shares may not be transferred. If the
grantee’s employment terminates during the restriction period, the grant terminates and the shares are returned
to the company. However, the committee can provide complete or partial exceptions to that requirement as it
deems equitable. If the grantee remains employed beyond the end of the restriction period, the restrictions lapse
and the shares become freely transferable.
The committee may grant stock unit awards subject to vesting and transfer restrictions and conditions of payment
determined by the committee. The value of each stock unit equals the fair market value of Lilly stock and may include
the right to receive the equivalent of dividends on the shares granted. Payment is made in the form of Lilly stock.
A maximum of 3,000,000 shares of Lilly stock may be issued or transferred under the 2002 Plan in the form of
restricted stock grants or stock unit awards, considered together.
Authority of Committee
The 2002 Plan is administered and interpreted by the committee, each member of which must be a “nonemployee”
director within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 and an “outside director” within
the meaning of section 162(m) of the Code. As to grants to employees, the committee selects persons to receive grants
from among the eligible employees, determines the type of grants and number of shares to be awarded, and sets the
terms and conditions of the grants. The committee may establish rules for administration of the 2002 Plan and may
delegate authority to others for plan administration, subject to limitations imposed by SEC and IRS rules and state law.
Other Information
The 2002 Plan remains effective until April 14, 2012, unless earlier terminated by the board. The board may amend the
2002 Plan as it deems advisable, except that shareholder approval is required for any amendment that would (i) allow the
repricing of stock options below the original option price, (ii) allow the grant of stock options at an option price below fair
market value of Lilly stock on the date of grant, (iii) increase the number of shares authorized for issuance or transfer, or
(iv) increase any of the various maximum limits established for stock options, performance awards, and restricted stock.
The Committee may provide in the grant agreement, or by subsequent action, that the following shall occur in
the event of a change in control (as defi ned in Article 12 of the 2002 Plan), in order to preserve all of the grantee’s
rights: (i) any outstanding stock option not already vested shall become immediately exercisable; (ii) any restriction
periods on restricted stock grants shall immediately lapse; and (iii) outstanding performance awards will be vested
and paid out on a prorated basis, based on the maximum award opportunity and the number of months elapsed
compared to the total number of months in the award period.
The future amounts that will be received by grantees under the 2002 Plan are not determinable. In 2006, the
named executive offi cers received stock option grants as set forth on page 87 in the Grants of Plan-Based Awards
During 2006 Table, and in connection with the 2006 award year received performance awards as detailed on page
87 in the narrative following the Grants of Plan-Based Awards During 2006 Table. Also in 2006, the executive
offi cers as a group (10 offi cers) received stock option grants for 755,302 shares and all other employees (3,854 em-
ployees) received options grants for 4,804,932 shares. With respect to the 2006 award year, the executive offi cers
as a group received payouts for performance awards totaling 321,468 shares and all other employees received
performance awards, restricted stock grants, and restricted stock units totaling 2,357,195 shares.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table presents information as of December 31, 2006, regarding our compensation plans under which
shares of Lilly common stock have been authorized for issuance.
Plan category
(a) Number of securities to be issued
upon exercise of outstanding options,
warrants, and rights
(b) Weighted-average exercise
price of outstanding options,
warrants, and rights
(c) Number of securities remaining
available for future issuance under
equity compensation plans (exclud-
ing securities refl ected in column (a))
Equity compensation plans approved by security
holders 79,012,219 $68.59 45,157,699
Equity compensation plan not approved by security
holders 1 9,797,960 $75.74 320,555
Total 88,810,179 $69.38 45,478,254