Eli Lilly 2007 Annual Report Download - page 122

PROXY STATEMENT
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Company. However, the Committee may provide for partial or complete exceptions to this requirement as it
deems equitable.
(b) Restrictions on Transfer. During the Restriction Period, a Grantee may not sell, assign, transfer, pledge,
or otherwise dispose of the shares of Lilly Stock except to a Successor Grantee under Section 13(a). Each
certifi cate for shares issued or transferred under a Restricted Stock Grant shall be held in escrow by the
Company until the expiration of the Restriction Period.
(c) Withholding Tax. Before delivering the certifi cate for shares of Lilly Stock to the Grantee, Lilly may require the
Grantee to pay to the Company any required withholding tax. 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 requirement by having the Company withhold shares of Lilly Stock from the Grant having a fair
market value equal to the amount of the withholding tax. In the event the Grantee fails to pay the withholding
tax within the time period specifi ed in the Grant, the Committee may take whatever action it deems appropriate,
including withholding or selling suffi cient shares from the Grant to pay the tax and assessing interest or late
fees to the Grantee.
(d) Lapse of Restrictions. All restrictions imposed under the Restricted Stock Grant shall lapse (i) upon the
expiration of the Restriction Period if all conditions stated in Sections 7(a), (b) and (c) have been met or (ii) as
provided under Section 12(a)(ii). The Grantee shall then be entitled to delivery of the certifi cate.
(e) Total Number of Shares Granted. Not more than 3,000,000 shares of Lilly Stock may be issued or transferred
under the 2002 Plan in the form of Restricted Stock Grants and Stock Unit Awards, considered together.
8. Stock Option Grants to Nonemployee Directors
The Board may grant Stock Options to Nonemployee Directors and may determine the terms and conditions ap-
plicable to such Stock Options consistent with the following provisions:
(a) Option Price. The Board shall determine the price or prices at which Lilly Stock may be purchased by the
Nonemployee Director 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 Board’s discretion, the Grant
Date of a Stock Option may be established as the date on which Board action approving the Stock Option is
taken or any later date specifi ed by the Board. Once established, the Option Price may not be reduced except in
the case of adjustments under Section 4(b).
(b) Option Exercise Period. The Board shall determine the option exercise period of each Stock Option. The period
shall not exceed ten years from the Grant Date. Unless the Board shall otherwise expressly provide in a Stock
Option agreement, in the event a Grantee’s service on the Board is terminated, any Stock Option held by such
Grantee shall remain exercisable for fi ve years after such termination (or until the end of the option exercise
period, if earlier). In the event a Nonemployee Director is removed from the Board for “cause” (as determined
in accordance with applicable state law and the Articles of Incorporation of Lilly), any Stock Option held by that
Nonemployee Director shall terminate immediately.
(c) Exercise of Option. A Stock Option will be deemed exercised by a Nonemployee Director upon delivery of (i) a
notice of exercise to Lilly or its representative as designated by the Board, 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 Board’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 Board 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. Lilly 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.
9. Stock Appreciation Rights to Eligible Employees.
The Committee may grant Stock Appreciation Rights to Eligible Employees. A Stock Appreciation Right is an award
in the form of a right to receive, upon exercise or settlement of the right but without other payment, an amount
based on appreciation in the fair market value of shares of Lilly Stock over a base price established for the Award.
Stock Appreciation Rights shall be settled or exercisable at such time or times and upon conditions as may be ap-
proved by the Committee, provided that the Committee may accelerate the settlement or exercisability of a Stock
Appreciation Right at any time. The following provisions are applicable to Stock Appreciation Rights:
(a) Freestanding Stock Appreciation Rights. A Stock Appreciation Right may be granted without any related Stock
Option, and in such case, will be settled or exercisable at such time or times as determined by the Committee,
but in no event after eleven years from the Grant Date. The Committee shall determine the base price of a Stock
Appreciation Right granted without any related Option, provided, however, that such base price per share shall
not be less than the fair market value of Lilly Stock on the Grant Date.
(b) Tandem Stock Appreciation Rights. A Stock Appreciation Right may be granted in connection with a Stock Option,
either at the time of grant or at any time thereafter during the term of the Stock Option. A Stock Appreciation
Right granted in connection with a Stock Option will entitle the holder, upon exercise, to surrender the Stock
Option or any portion thereof to the extent unexercised, with respect to the number of shares as to which such
Stock Appreciation Right is exercised, and to receive payment of an amount computed as described in Section