Eli Lilly 2007 Annual Report Download - page 120

PROXY STATEMENT
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(ii) Any shares of Lilly Stock subject to an award hereunder or under the 1989, 1994 or 1998 Lilly Stock
Plans (the “Prior Shareholder-Approved Plans”) which, after the effective date of the 2002 Plan,:
a. are not purchased or awarded under a Stock Option or Performance Award due to termination,
lapse, or forfeiture, or which are forfeited under a Restricted Stock Grant; are not issued or
transferred in connection with a Stock Option, Stock Appreciation Right or Stock Unit Award due to
termination, lapse, surrender or forfeiture;
b. are not issued or transferred in connection with the payment of a Performance Award due to ter-
mination, lapse, surrender, forfeiture, failure to achieve Performance Goals, or payment in cash in
lieu of shares pursuant to Section 6(c); or
c. are forfeited under a Restricted Stock Grant.
(iii) Upon the termination or expiration of the 1998 Lilly Stock Plan, any shares of Lilly Stock that remained
available for grant under that plan at the time of termination or expiration; and
(iv) The number of shares of Lilly Stock exchanged by a Grantee as full or partial payment to the Company
of the exercise price of a Stock Option that was granted hereunder or under a Prior Shareholder-Ap-
proved Plan or withheld for taxes under Sections 5(e), 7(c), 9(e) or 10(c).
The shares may be authorized but unissued shares or treasury shares.
(b) Adjustment Provisions. If any subdivision or combination of shares of Lilly Stock or any stock dividend,
reorganization, recapitalization, or consolidation or merger with Eli Lilly and Company as the surviving
corporation occurs, or if additional shares or new or different shares or other securities of the Company or any
other issuer are distributed with respect to the shares of Lilly Stock through a spin-off or other extraordinary
distribution, the Committee shall make such adjustments as it determines appropriate in the number of shares
of Lilly Stock that may be issued or transferred in the future under Sections 4(a), 5(f) and (g), 6(f), 7(e), and 9(d),
and 10(c). The Committee shall also adjust as it determines appropriate the number of shares and Option Price
or base price as applicable in outstanding Grants made before the event.
5. Stock Option Grants to Eligible Employees.
The Committee may grant to Eligible Employees options qualifying as incentive stock options under the Code (“In-
centive Stock Options”), other forms of tax-favored stock options under the Code, and nonqualifi ed stock options
(collectively, “Stock Options”). The Committee shall determine the terms and conditions applicable to Stock Options
granted to Eligible Employees consistent with the following:
(a) Option Price. The Committee shall determine the price or prices at which Lilly Stock may be purchased by the
Grantee under a Stock Option (“Option Price”) which shall be not less than the fair market value of Lilly Stock
on the date the Stock Option is granted (the “Grant Date”). In the Committee’s discretion, the Grant Date of a
Stock Option may be established as the date on which Committee action approving the Stock Option is taken or
any later date specifi ed by the Committee. Once established, the Option Price may not be reduced except in the
case of adjustments under Section 4(b).
(b) Option Exercise Period. The Committee shall determine the option exercise period of each Stock Option. The
period shall not exceed ten years from the Grant Date in the case of an Incentive Stock Option, and eleven years
in the case of any other Stock Option.
(c) Exercise of Option. A Stock Option will be deemed exercised by a Grantee upon delivery of (i) a notice of exercise
to the Company or its representative as designated by the Committee, and (ii) accompanying payment of the
Option Price if the Stock Option requires such payment at the time of exercise. The notice of exercise, once
delivered, shall be irrevocable.
(d) Satisfaction of Option Price. A Stock Option may require payment of the Option Price upon exercise or may specify
a period not to exceed 30 days following exercise within which payment must be made (“Payment Period”).
The Grantee shall pay or cause to be paid the Option Price in cash, or with the Committee’s permission, by
delivering (or providing adequate evidence of ownership of) shares of Lilly Stock already owned by the Grantee
and having a fair market value on the date of exercise equal to the Option Price, or a combination of cash and
such shares. If the Grantee fails to pay the Option Price within the Payment Period, the Committee shall have
the right to take whatever action it deems appropriate, including voiding the option exercise or voiding that part
of the Stock Option for which payment was not timely received. The Company shall not deliver shares of Lilly
Stock upon exercise of a Stock Option until the Option Price and any required withholding tax are fully paid.
(e) Share Withholding. With respect to any Stock Option, the Committee may, in its discretion and subject to such
rules as the Committee may adopt, permit or require the Grantee to satisfy, in whole or in part, any withholding
tax obligation which may arise in connection with the exercise of the nonqualifi ed option by having the Company
withhold shares of Lilly Stock having a fair market value equal to the amount of the withholding tax.
(f) Limits on Individual Grants. No individual Grantee may be granted Stock Options or Stock Appreciation Rights,
considered together, under the 2002 Plan for more than 2,500,000 3,500,000 shares of Lilly Stock in any period
of three consecutive calendar years.
(g) Limits on Incentive Stock Options. The aggregate fair market value of the stock covered by Incentive Stock
Options granted under the 2002 Plan or any other stock option plan of the Company or any subsidiary or
parent of the Company that become exercisable for the fi rst time by any employee in any calendar year shall
not exceed $100,000 (or such other limit as may be established by the Code). The aggregate fair market value
for this purpose will be determined at the Grant Date. An Incentive Stock Option shall not be granted to any
Eligible Employee who, on the Grant Date, owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company or any subsidiary or parent of the Company. Not more than