Eli Lilly 2006 Annual Report Download - page 95

PROXY STATEMENT
9393
Accrued Pay and Regular Retirement Benefi ts. The amounts shown in the table above do not include payments
and benefi ts to the extent they are provided on a non-discriminatory basis to salaried employees generally upon
termination of employment. These include:
• Accrued salary and vacation pay
•
Regular pension benefi ts under the Lilly Retirement Plan and the non-qualifi ed retirement plan. See “Retirement
Benefi ts” on page 89. The amounts shown in the table above as Incremental Pension Benefi ts are explained below.
• Welfare benefi ts provided to all U.S. retirees, including retiree medical and dental insurance. The amounts
shown in the table above as Continuation of Medical / Welfare Benefi ts are explained below.
• Distributions of plan balances under the Lilly 401(k) plan and the non-qualifi ed savings plan. See the narrative
following the Nonqualifi ed Deferred Compensation in 2006 Table for information about the 401(k) plan and “Non-
qualifi ed Deferred Compensation” on pages 91–92 for information about the non-qualifi ed 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
performance awards (which are paid on a reduced basis for time worked during the award period), and restricted
stock awarded in payment of previous performance awards.
•
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 fi ve 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
Lilly deferred compensation plan. Those amounts are shown in the Non-qualifi ed Deferred Compensation in 2006
Table on page 91.
Death and Disability. A termination of employment due to death or disability does not entitle the named executive
offi cers to any payments or benefi ts that are not available to salaried employees generally.
Change-in-Control Severance Pay Program. As described in the Compensation Discussion and Analysis under
“Severance Pay” on pages 83–84, the company maintains a change-in-control severance pay program for nearly
all employees, including the named executive offi cers (the “CIC Program”). The amounts shown in the table for
“involuntary or good reason termination” following a 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, benefi ts, age, and service credit at
December 31, 2006. Eligible terminations include an involuntary termination for reasons other than cause, or a
voluntary termination by the executive for good reason, within two years following the change in control.
—A termination of an executive offi cer 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/her material duties,
resulting in demonstrable economic harm to the company; (ii) any act of fraud, dishonesty or gross
misconduct resulting in signifi cant economic harm or other signifi cant 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 offi cer 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/her of additional responsibilities that materially increase his/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 benefi ts from the benefi t 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 twelve (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/her on an annualized average basis for the three (3) year period immediately prior to
the change in control; or (vi) relocation of the executive by more than fi fty (50) miles.
• Cash severance payment. Represents the CIC Program benefi t of two times the 2006 annual base salary plus two
times cash bonus for 2006 under the Eli Lilly and Company Bonus Plan.
• Incremental pension benefi t. Represents the present value of an incremental non-qualifi ed pension benefi t of
two years of age credit and two years of service credit that is provided under the CIC Program. The following