Eli Lilly 2007 Annual Report Download - page 121

PROXY STATEMENT
119119
360,000,000 shares of Lilly Stock may be issued or transferred under the 2002 Plan in the form of Incentive
Stock Options.
6. Performance Awards to Eligible Employees.
The Committee may grant to Eligible Employees Performance Awards, which shall be denominated at the time
of grant either in shares of Lilly Stock (“Stock Performance Awards”) or in dollar amounts (“Dollar Performance
Awards”). Payment under a Stock Performance Award or a Dollar Performance Award shall be made, at the dis-
cretion of the Committee, in shares of Lilly Stock (“Performance Shares”), or in cash or in any combination thereof,
if the fi nancial or market performance of the Company or any subsidiary, division, or other unit of the Company
(“Business Unit”) selected by the Committee meets certain fi nancial goals established by the Committee for the
Award Period. The following provisions are applicable to Performance Awards:
(a) Award Period. The Committee shall determine and include in the Grant the period of time (which shall be four
or more consecutive fi scal quarters) for which a Performance Award is made (“Award Period”). Grants of
Performance Awards need not be uniform with respect to the length of the Award Period. Award Periods for
different Grants may overlap. A Performance Award may not be granted for a given Award Period after one
half (1/2) or more of such period has elapsed, or in the case of an Award intended to be qualifi ed under Section
162(m) of the Code, after 90 days or more of such period has elapsed.
(b) Performance Goals and Payment. Before a Grant is made, the Committee shall establish objectives
(“Performance Goals”) that must be met by the Business Unit during the Award Period as a condition to
payment being made under the Performance Award. The Performance Goals, which must be set out in the
Grant, are limited to earnings per share; divisional income; net income; return on equity; sales; divisional sales;
economic value added (EVA); market value added (MVA); any of the foregoing before the effect of acquisitions,
divestitures, accounting changes, and restructuring and special charges, and other unusual gains or losses
(determined according to criteria established by the Committee at or within 90 days after the time of grant);
total shareholder return; or stock price goals. The Committee shall also set forth in the Grant the number of
Performance Shares or the amount of payment to be made under a Performance Award if the Performance
Goals are met or exceeded, including the fi xing of a maximum payment (subject to Section 6(f)).
(c) Computation of Payment. After an Award Period, the fi nancial performance of the Business Unit during the
period shall be measured against the Performance Goals. If the minimum Performance Goals are not met, no
payment shall be made under a Performance Award. If the minimum Performance Goals are met or exceeded,
p Prior to payment the Committee shall certify that fact in writing as to the performance achieved against
the Performance Goals and certify the number of Performance Shares, if any, or the amount of payment, if
any, to be made under a Performance Award in accordance with the grant for each Grantee. The Committee,
in its sole discretion, may elect to pay part or all of the Performance Award in cash in lieu of issuing or
transferring Performance Shares. The cash payment shall be based on the fair market value of Lilly Stock on
the date of payment (subject to Section 6(f)). The Company shall promptly notify each Grantee of the number of
Performance Shares and the amount of cash, if any, he or she is to receive.
(d) Revisions for Signifi cant Events. At any time before payment is made, the Committee may revise the Performance
Goals and the computation of payment if unusual events occur during an Award Period which have a substantial
effect on the Performance Goals and which in the judgment of the Committee make the application of
the Performance Goals unfair unless a revision is made; provided, however, that no such revision shall be
permissible with respect to a Performance Award intended to qualify for exemption under Section 162(m) of the
Code, except that the Committee (i) may provide in the terms of any such Performance Award that revisions to
the Performance Goals shall be made on a non-discretionary basis upon the occurrence of one or more specifi c
objective events, the occurrence of which are substantially uncertain at the time of grant, and (ii) may in its
discretion make a revision with respect to such Performance Award that results in a lesser payment than would
have occurred without the revision or in no payment at all.
(e) Requirement of Employment. To be entitled to receive payment under a Performance Award, a Grantee must
remain in the employment of the Company to the end of the Award Period, except that the Committee may
provide for partial or complete exceptions to this requirement as it deems equitable in its sole discretion,
consistent with maintaining the exemption under Section 162(m) of the Code. The Committee may impose
additional conditions on the Grantee’s entitlement to receive payment under a Performance Award.
(f) Maximum Payments. (i) No individual may receive Performance Award payments in respect of Stock Performance
Awards in excess of 100600,000 shares of Lilly Stock in any calendar year or payments in respect of Dollar
Performance Awards in excess of $8,000,000 in any calendar year. For purposes of determining the maximum
payment under this subsection, payment in cash of all or part of a Stock Performance Award will be deemed an
issuance of the number of shares with respect to which such cash payment is made. No individual may receive
both a Stock Performance Award and a Dollar Performance Award for the same Award Period.
(ii) Not more than 18,000,000 shares of Lilly Stock may be issued or transferred under the 2002 Plan in the
form of Performance Awards.
7. Restricted Stock Grants to Eligible Employees.
The Committee may issue or transfer shares of Lilly Stock to an Eligible Employee under a Restricted Stock Grant.
Upon the issuance or transfer, the Grantee shall be entitled to vote the shares and to receive any dividends paid.
The following provisions are applicable to Restricted Stock Grants:
(a) Requirement of Employment. If the Grantee’s employment terminates during the period designated in the Grant
as the “Restriction Period,” the Restricted Stock Grant terminates and the shares immediately revert to the