Eli Lilly 2007 Annual Report Download - page 109

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PROXY STATEMENT
107107
Proposed Amendments:
• Eliminate the 18,000,000-share limit. This limit was adopted at a time when performance awards created
a greater accounting expense to the company than stock options. With changes in accounting rules, the
expense of the different types of grants is comparable, and therefore the limit no longer serves its intended
purpose of minimizing the accounting cost of the Plan.
• Raise the individual limit from 100,000 to 600,000 shares annually. This change is also necessary to allow the
grant of both traditional performance awards and SVAs under the current program design.
• Eliminate Dollar Performance Awards. We have not granted Dollar Performance Awards for many years and
do not contemplate granting them in the future.
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 Plan in the form of re-
stricted stock grants or stock unit awards, considered together.
Proposed Amendments:
• Eliminate the 3,000,000-share maximum. This limit was adopted at a time when stock grants created a
greater accounting expense to the company than stock options. With changes in accounting rules, the
expense of the different kinds of grants is comparable, and therefore the limit no longer serves its intended
purpose of minimizing the accounting cost of the Plan.
• Allow stock grants to be paid in cash to facilitate making stock grants in certain foreign countries.
Authority of Committee
The Plan is administered and interpreted by the Committee, each member of which must be a “nonemployee direc-
tor” 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 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 Plan remains effective until April 14, 2012, unless earlier terminated by the board. The board may amend the
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 issu-
ance or transfer, or (iv) increase any of the various maximum limits established for stock options, performance
awards, and restricted stock.
Proposed Amendment: Extend termination date of the Plan to April 20, 2020.
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 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 pe-
riods 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 Plan are not determinable. For the 2007 award
year, no stock options were granted to employees or directors, and employees received the following performance
awards, shareholder value awards (which were granted under the Plan as a form of performance award), restrict-