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EXHIBIT 10.
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THE
LILLY DIRECTOR’S DEFERRAL PLAN AS AMENDED THROUGH OCTOBER 19,
2009
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THE LILLY
DIRECTORS’ DEFERRAL PLAN
(as Amended and Restated on October 19,
2009)
The
Lilly Directors’ Deferral Plan has been established by the
Company for the purpose of providing an opportunity for Directors
of the Company who are not salaried employees of the Company to
voluntarily defer receipt of some or all of their meeting fees and
retainer and to share in the long-term growth of the Company by
acquiring, on a deferred basis, an ownership interest in the
Company. Subject to adjustment as provided in Section 5(f),
the aggregate number of shares of Eli Lilly and Company common
stock that may be issued or transferred under this Plan after
April 28, 2003, is 750,000. The shares may be authorized and
unissued shares or treasury shares.
The
Plan constitutes a plan of unfunded deferred compensation and is
intended to comply with the requirements of Section 409A.
Notwithstanding any other provision of this Plan, this Plan shall
be interpreted, operated and administered in a manner consistent
with these intentions.
For
the rules that apply to the distribution of amounts that were
earned and vested (within the meaning of Section 409A) under
the Plan prior to 2005 (and earnings thereon) and are exempt from
the requirements of Section 409A, see
Appendix A.
Section 1.
Definition of Terms
The
following terms used in the Plan shall have the meanings set forth
below:
(a)
“ Account ” means one or more deferred
compensation accounts maintained for each Participant under the
Plan. A Participant’s Account shall consist of a Deferred
Compensation Account and the Deferred Stock Account as described in
Section 5 hereof.
(b)
“ Annual Allocation Date ” means the last
Business Day in November of each calendar year, or such other
annual date, not earlier than the third Monday in February,
established by the Plan Administrator as the date as of which
Shares are allocated to each Deferred Stock Account in accordance
with Section 5.
(c)
“ Beneficiary ” means the person or persons who
are designated by the Participant or are otherwise entitled to
receive benefits under the Plan in the event of the
Participant’s death, as provided in Section 6(d)
hereof.
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(d)
“ Board ” means the Board of Directors of the
Company.
(e)
“ Business Day ” means a day on which the
Company’s corporate headquarters are open for regular
business.
(f)
“ Code ” means the Internal Revenue Code of
1986, as amended.
(g)
“ Company ” means Eli Lilly and Company, an
Indiana corporation.
(h)
“ Deferral Amount ” means the amount of a
Participant’s Monthly Compensation that is elected by a
Participant for deferral under the Plan.
(i)
“ Deferred Stock Participant ” means a Director
who is not, and for the preceding 12 months has not been, a
salaried employee of the Company.
(j)
“ Director ” means a member of the Board of
Directors of the Company.
(k)
“ Dividend Payment Date ” means the date as of
which the Company pays a cash dividend on Shares.
(l)
“ Dividend Record Date ” means the date
established by the Board of Directors as the record date for
determining shareholders entitled to the dividend with respect to
any Dividend Payment Date.
(m)
“ Election Form ” means the written or
electronic form or forms approved by the Plan Administrator and
completed by the Participant specifying the Participant’s
election to defer Monthly Compensation pursuant to Section 4
and setting forth the Participant’s Beneficiary designation
and the terms of distribution of the Participant’s Deferred
Compensation Account and/or Deferred Stock Account pursuant to
Section 6.
(n)
“ Monthly Compensation ” means the monthly
retainer and the aggregate of all meeting fees, committee fees and
committee chairperson fees to which a Director is entitled for
services rendered to the Company as a Director during the month, as
established from time to time by resolution of the Board of
Directors. For avoidance of doubt, Monthly Compensation does not
include stock options granted to Directors or the Shares allocated
pursuant to Section 5 of this Plan.
(o)
“ Monthly Deferral Participant ” means a
Director who is not, and for the preceding 12 months has not
been, a salaried employee of the Company and who elects to defer
all or part of his or her Monthly Compensation pursuant to the Plan
in accordance with Section 4 hereof.
(p)
“ Participant ” means any current or former
Director with an outstanding Account balance the Plan.
(q)
“ Plan ” means The Lilly Directors’
Deferral Plan, as amended and restated herein.
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(r)
“ Plan Administrator ” means the Directors and
Corporate Governance Committee of the Board of Directors, or any
successor committee of the Board of Directors that is charged with
matters relating to the compensation of non-employee directors.
Except with respect to Section 5(f) of this Plan, the Plan
Administrator may at its discretion delegate any of its
responsibilities to one or more individuals provided that such
delegation is in accordance with applicable laws.
(s)
“ Plan Year ” means the calendar year from
January 1 through December 31 with respect to which
compensation eligible for deferral under the Plan is
earned.
(t)
“ Section 409A ” means section 409A of the
Code and the Treasury regulations and other official guidance
promulgated thereunder.
(u)
“ Separation from Service ” means a
“separation from service” within the meaning of
Section 409A.
(v)
“ Share ” means a share of common stock of the
Company.
(w)
“ Unforeseeable Emergency ” means a severe
financial hardship of a Participant resulting from an illness or
accident of such Participant or Beneficiary, such
Participant’s spouse or a dependent (as defined in section
152(a) of the Code) of such Participant, loss of such
Participant’s property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result
of events beyond the control of such Participant, each as
determined in the manner consistent with Section 409A, and any
other event or circumstance within the meaning of the term
“unforeseeable emergency” under
Section 409A.
(x)
“ Valuation Date ” means for any month, the
third Monday of the month, or if Shares are not traded on the New
York Stock Exchange on such third Monday, the next day on which
Shares are traded on the New York Stock Exchange.
Section 2.
Plan Administrator
(a)
Authority . The Plan Administrator shall have full authority
to administer the Plan in accordance with its terms and to exercise
all responsibilities and authorities as provided herein, including
the discretionary authorities to determine the terms and conditions
of deferrals of compensation under the Plan, to determine the terms
and conditions of crediting to and distributing from Accounts under
the terms of the Plan, and to adopt such rules and regulations for
administering the Plan as it may deem necessary or appropriate. The
Plan Administrator has the discretionary authority to interpret and
construe all provisions of the Plan, to remedy possible
ambiguities, inconsistencies, or omissions under the Plan, and to
resolve all questions of fact arising under the Plan. The decisions
of the Plan Administrator shall be final, binding and conclusive on
all parties. No member of the Board, the Plan Administrator nor any
officers of the Company shall have any liability for any action or
determination taken under the Plan.
(b)
Delegation; Expenses . The appropriate officer(s) of the
Company as designated by the Plan Administrator are authorized to
act on behalf of the Plan Administrator
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for the
day-to-day administration of the Plan, subject to the authority of
the Plan Administrator. Expenses of the administration of the Plan
may be borne by the Company or may be deducted from
Participants’ Accounts at the sole discretion of the Plan
Administrator.
The Plan
Administrator may require a Participant to comply with such terms
and conditions as the Plan Administrator may specify in order for
the Participant to participate in the Plan.
Section 4.
Elections to Participate
(a)
Deferral Elections . A Monthly Deferral Participant in the
Plan may file an Election Form with the Plan Administrator on or
before the date specified in accordance with Section 4(c) hereof.
The Election Form shall permit the Monthly Deferral Participant to
specify the Deferral Amount subject to a minimum Deferral Amount of
five thousand dollars ($5,000) for the deferral of Monthly
Compensation, or such amounts as may be specified by the Plan
Administrator in its sole discretion, and whether such Deferral
Amount shall be credited in cash to his or her Deferred
Compensation Account or in Shares to his or her Deferred Stock
Account, pursuant to Section 5(a) hereof. The Election Form shall
also set forth the terms of distribution of the Participant’s
Account in accordance with Section 6 hereof and the
Participant’s Beneficiary designation. All elections to defer
compensation under the Plan are irrevocable, and no changes to any
Election Form delivered to the Plan Administrator shall be
permitted, except as specifically provided under the terms of the
Plan.
(b)
Maximum Deferrals . A Monthly Deferral Participant may elect
a Deferral Amount of up to 100% of the Participant’s Monthly
Compensation for a Plan Year. One hundred percent (100%) of any
annual allocation of Shares earned pursuant to Section 5(c) will be
automatically credited to a Deferred Stock Participant’s
Deferred Stock Account.
(c)
Timing and Effect of Elections . Unless otherwise specified
by the Plan Administrator in accordance with the requirements of
Section 409A, deferral elections on an Election Form shall be
made:
(i)
In the case of Monthly Compensation or an annual Share allocation
not qualifying as “performance-based compensation”
within the meaning of Section 409A, prior to the beginning of
the Plan Year with respect to which the compensation is earned;
and
(ii)
In the case of Monthly Compensation or an annual Share allocation
which the Plan Administrator has determined qualifies as
“performance-based compensation” within the meaning of
Section 409A, no later than June 30th of the applicable
Plan Year with respect to which the compensation is
earned.
Deferral
elections shall apply to Monthly Compensation and annual Share
allocations with respect to the Plan Year for which the elections
are made. Participants will be required to make deferral elections
for future Plan Years at such times to be specified by the Plan
Administrator in accordance with the foregoing. If a Participant
does not file an Election Form with the Plan
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Administrator
on or before the deadline established by the Plan Administrator for
deferral elections for a Plan Year, a Participant will be deemed
not to have elected to defer Monthly Compensation for such Plan
Year, as applicable. Notwithstanding the foregoing, in the first
year in which an individual who is newly elected or appointed to
serve as a Director becomes eligible to participate in the Plan,
such individual may, not later than thirty (30) days after the
date he or she becomes eligible to participate in the Plan, elect
in accordance with the preceding provisions of this Section 4,
to defer the receipt of Monthly Compensation and set forth the
terms of distribution of the individual’s Account with
respect to services to be performed after the filing of the
election with the Company.
Section 5.
Accounts and Interest Credits
(a)
Participant Accounts . Accounts shall be maintained for each
Participant under the Plan:
(i)
Deferred Compensation Account — The Company shall
maintain a Deferred Compensation Account in the name of each
Monthly Deferral Participant who elects to have a Deferral Amount
credited in cash pursuant to Section 4 hereof for a given Plan
Year. The Deferred Compensation Account shall be denominated in
U.S. dollars, rounded to the nearest whole cent. For each month,
Deferral Amounts allocated to a Deferred Compensation Account shall
be credited to the Deferred Compensation Account as of the last
Business Day of the month.
(ii)
Deferred Stock Account — The Company shall maintain a
Deferred Stock Account for each Deferred Stock Participant and for
each Monthly Deferral Participant who elects to have a Deferral
Amount credited in Shares. The Deferred Stock Account shall be
denominated in Shares and maintained in fractions rounded to three
(3) decimal places. Deferral Amounts allocated to a Deferred
Stock Account shall be credited to the Deferred Stock Account as of
the last Business Day of the month. Shares and, if necessary,
fractional Shares, shall be credited based upon the closing price
of Shares on the New York Stock Exchange on the Valuation Date for
that month. Shares allocated to each Share Account shall be
hypothetical and not issued or transferred by the Company until
payment is made pursuant to Section 6 hereof.
A
Participant’s Account shall consist of book entries only and
shall not constitute a separate cash or Share fund or other asset
held in trust or as security for the Company’s obligation to
pay the amount of the Account to the Participant. The balance of a
Participant’s Account shall be adjusted pursuant to this
Section 5 and reduced by the amount of applicable tax
withholding, distributions and expenses. A Participant’s
Account may include sub-accounts as the Company considers necessary
or advisable for purposes of maintaining a proper accounting of
amounts credited or debited for a Participant under the Plan. A
Participant shall receive or have on-line access to a statement of
such Participant’s Account no less frequently than once a
year following the end of each Plan Year.
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(b)
Crediting of Deferral Amount . A Participant who has filed
an Election Form with the Plan Administrator for the deferral of
Monthly Compensation with respect to a Plan Year shall have the
Deferral Amount deducted from the applicable compensation and
credited to the Participant’s appropriate Account under the
Plan. The Deferral Amount so credited shall be reduced by
applicable tax withholding, distributions and expenses.
(c)
Annual Share Allocation . As of the Annual Allocation Date
of each Plan Year, there shall be allocated to the Deferred Stock
Account of each person who (i) is a Deferred Stock Participant
on that date or (ii) was a Deferred Stock Participant at any
time subsequent to the last Annual Allocation Date, as part of his
or her compensation for service on the Board of Directors, up to
7,500 Shares, as may be specified from time to time by resolution
of the Board of Directors.
(d)
Interest Credits . The Deferred Compensation Accounts of
Participants shall be credited with interest computed each Plan
Year or portion thereof at a rate equal to 120% of the long-term
applicable federal rate, with monthly compounding (as prescribed
under section 1274(d) of the Code), as in effect for the month of
December for the immediately preceding Plan Year. Such interest
shall accrue on all Deferral Amounts and prior earnings thereon of
Deferred Compensation Accounts and be credited daily to such
accounts.
(e)
Cash Dividends . Cash dividends paid on Shares shall be
deemed to have been paid on the Shares allocated to each
Participant’s Deferred Stock Account as if the allocated
Shares were actual Shares issued and outstanding on the Dividend
Record Date. An amount equal to the amount of such dividends shall
be credited in Shares to each Deferred Stock Account as of the last
Business Day of each month in which a Dividend Payment Date occurs,
based upon the closing price for Shares on the New York Stock
Exchange on the Valuation Date for that month.
(f)
Capital Adjustments . The number of Shares referred to in
the Preamble and Section 5 hereof and the number of Shares
allocated to each Deferred Stock Account shall be adjusted by the
Plan Administrator, in the event of any subdivision or combination
of Shares or any stock dividend, stock split, reorganization,
recapitalization, or consolidation or merger with the Company as
the surviving corporation, or if additional shares or new or
different shares or other securities of the Company or any other
issuer are distributed with respect to Shares through a spin-off or
other extraordinary distribution.
(g)
Vesting of Accounts . A Participant is fully vested in his
or her entire Account balance.
Section 6.
Distribution of Accounts
(a)
Distribution upon Separation from Service . A Participant
shall specify on an Election Form the manner in which the amounts
deferred in the Deferred Compensation Account and the Deferred
Stock Account, as applicable, for a Plan Year (and earnings
thereon) shall be distributed from the Participant’s Account
upon the Participant’s Separation from Service. All elections
are irrevocable, and no changes shall be permitted to any Election
Form delivered to the Plan Administrator, except as specifically
provided under the terms of the Plan.
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A
Participant may elect, to the extent permitted by the Plan
Administrator and set forth on the Election Form, that such portion
of the Account be distributed upon a Participant’s Separation
from Service either in:
(i)
Lump Sum payment in January of the second Plan Year
following the Plan Year in which the Participant’s Separation
from Service occurs; or
(ii)
Annual Installment payments over a period of two (2) to
ten (10) years commencing in January of the second Plan Year
following the Plan Year in which the Participant’s Separation
from Service occurs, with subsequent installment payments to be
made in each January within the applicable period.
If a
Participant fails to make a timely payment election on the Election
Form for a Plan Year, the amounts deferred in the Deferred
Compensation Account and the Deferred Stock Account, as applicable,
for such Plan Year (and earnings thereon) shall be distributed in a
lump sum in accordance with Section 6(a)(i) hereof.
(b)
Form of Distributions . All distributions of a
Participant’s Deferred Compensation Account under the Plan
shall be made in cash. Except as provided in Section 6(f), all
distributions of a Participant’s Deferred Stock Account shall
be paid in Shares, at which time the Shares shall be issued or
transferred from the books of the Company to the Participant. All
Shares to be issued or transferred hereunder may be newly issued or
treasury shares. Fractional Shares shall not be issued or
transferred to a Participant, provided that in the case of a final
payment under the Plan with respect to a Participant, any fraction
remaining in the Participant’s Deferred Stock Account shall
be rounded up to the next whole Share and that number of whole
Shares shall be issued or transferred. The value of the Deferred
Stock Account is calculated with reference to the closing price of
Shares on the last trading day of the prior Plan Year.
(c)
Distribution of Account . The Company shall distribute
amounts from the Participant’s Deferred Compensation Account
and the Deferred Stock Account in the manner and on the date(s)
applicable under this Section 6. If the payment option
described in Section 6(a)(i) hereof is applicable, the amount
of the lump sum shall be calculated using the valuation of the
applicable portion of the Participant’s Account as of the
December 31 preceding the date of the payment. If the payment
option described in Section 6(a)(ii) hereof is applicable, the
amount of each installment shall be calculated using the valuation
of the applicable portion of the Participant’s Account as of
the December 31 preceding the date of the installment payment
divided by the number of installment payments that have not yet
been made.
(d)
Distribution upon Death . Notwithstanding any election made
by a Participant or any other provision of this Section 6 to
the contrary, if a Participant dies before full distribution of his
or her Account balance, any remaining balance shall be distributed
to the Participant’s Beneficiary in a lump sum within
90 days following the date of the Participant’s death.
The amount of such lump sum distribution shall be calculated using
the valuation of the Participant’s Account as of the date
preceding the date of distribution. Any payment required to be made
to a Participant under the Plan that cannot be made due to the
Participant’s death shall be made to the Participant’s
Beneficiary, subject to applicable law. Each Participant shall have
the right to designate one or more Beneficiaries, and to change a
Beneficiary designation, from
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time to
time by filing a written notice with the Plan Administrator. In the
event that a Beneficiary does not survive the Participant and no
successor Beneficiary is selected, or in the event no valid
Beneficiary designation has been made, the Participant’s
Beneficiary shall be the Participant’s estate.
(e)
Unforeseeable Emergency . Upon the written request of a
Participant, the Plan Administrator may permit the Participant to
withdraw some or all of the Participant’s Account for the
purpose of enabling the Participant to meet the immediate needs
created by an Unforeseeable Emergency. The circumstances that will
constitute an Unforeseeable Emergency will depend upon the facts of
each case, but in any case, the amounts distributed with respect to
an Unforeseeable Emergency shall not exceed the amounts necessary
to satisfy such Unforeseeable Emergency plus amounts necessary to
pay taxes reasonably anticipated as a result of the distribution,
after taking into a
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