{"id":38785,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/directors-deferral-plan-eli-lilly-and-co.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"directors-deferral-plan-eli-lilly-and-co","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/compensation\/directors-deferral-plan-eli-lilly-and-co.html","title":{"rendered":"Directors’ Deferral Plan – Eli Lilly and Co."},"content":{"rendered":"\n\n\n
\n<\/td>\n\n<\/td>\n\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

ELI LILLY AND COMPANY<\/strong><\/p>\n

THE LILLY DIRECTORS153 DEFERRAL PLAN<\/u><\/strong>
\n
\n(as Amended and Restated on October 19, 2009)<\/u><\/strong><\/p>\n

Preamble<\/u><\/strong><\/p>\n

The Lilly Directors153 Deferral Plan has been established by the Company for
\nthe purpose of providing an opportunity for Directors of the Company who are not
\nsalaried employees of the Company to voluntarily defer receipt of some or all of
\ntheir meeting fees and retainer and to share in the long-term growth of the
\nCompany by acquiring, on a deferred basis, an ownership interest in the Company.
\nSubject to adjustment as provided in Section 5(f), the aggregate number of
\nshares of Eli Lilly and Company common stock that may be issued or transferred
\nunder this Plan after April 28, 2003, is 750,000. The shares may be authorized
\nand unissued shares or treasury shares.<\/p>\n

The Plan constitutes a plan of unfunded deferred compensation and is intended
\nto comply with the requirements of Section 409A. Notwithstanding any other
\nprovision of this Plan, this Plan shall be interpreted, operated and
\nadministered in a manner consistent with these intentions.<\/p>\n

For the rules that apply to the distribution of amounts that were earned and
\nvested (within the meaning of Section 409A) under the Plan prior to 2005 (and
\nearnings thereon) and are exempt from the requirements of Section 409A, see
\nAppendix A.<\/p>\n

Section 1. Definition of Terms<\/u><\/strong><\/p>\n

The following terms used in the Plan shall have the meanings set forth below:\n<\/p>\n

(a) “Account<\/u>” means one or more deferred compensation accounts
\nmaintained for each Participant under the Plan. A Participant153s Account shall
\nconsist of a Deferred Compensation Account and the Deferred Stock Account as
\ndescribed in Section 5 hereof.<\/p>\n

(b) “Annual Allocation Date<\/u>” means the last Business Day in November
\nof each calendar year, or such other annual date, not earlier than the third
\nMonday in February, established by the Plan Administrator as the date as of
\nwhich Shares are allocated to each Deferred Stock Account in accordance with
\nSection 5.<\/p>\n

(c) “Beneficiary<\/u>” means the person or persons who are designated by
\nthe Participant or are otherwise entitled to receive benefits under the Plan in
\nthe event of the Participant153s death, as provided in Section 6(d) hereof.<\/p>\n

1<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

(d) “Board<\/u>” means the Board of Directors of the Company.<\/p>\n

(e) “Business Day<\/u>” means a day on which the Company153s corporate
\nheadquarters are open for regular business.<\/p>\n

(f) “Code<\/u>” means the Internal Revenue Code of 1986, as amended.<\/p>\n

(g) “Company<\/u>” means Eli Lilly and Company, an Indiana corporation.\n<\/p>\n

(h) “Deferral Amount<\/u>” means the amount of a Participant153s Monthly
\nCompensation that is elected by a Participant for deferral under the Plan.<\/p>\n

(i) “Deferred Stock Participant<\/u>” means a Director who is not, and for
\nthe preceding 12 months has not been, a salaried employee of the Company.<\/p>\n

(j) “Director<\/u>” means a member of the Board of Directors of the
\nCompany.<\/p>\n

(k) “Dividend Payment Date<\/u>” means the date as of which the Company
\npays a cash dividend on Shares.<\/p>\n

(l) “Dividend Record Date<\/u>” means the date established by the Board of
\nDirectors as the record date for determining shareholders entitled to the
\ndividend with respect to any Dividend Payment Date.<\/p>\n

(m) “Election Form<\/u>” means the written or electronic form or forms
\napproved by the Plan Administrator and completed by the Participant specifying
\nthe Participant153s election to defer Monthly Compensation pursuant to Section 4
\nand setting forth the Participant153s Beneficiary designation and the terms of
\ndistribution of the Participant153s Deferred Compensation Account and\/or Deferred
\nStock Account pursuant to Section 6.<\/p>\n

(n) “Monthly Compensation<\/u>” means the monthly retainer and the
\naggregate of all meeting fees, committee fees and committee chairperson fees to
\nwhich a Director is entitled for services rendered to the Company as a Director
\nduring the month, as established from time to time by resolution of the Board of
\nDirectors. For avoidance of doubt, Monthly Compensation does not include stock
\noptions granted to Directors or the Shares allocated pursuant to Section 5 of
\nthis Plan.<\/p>\n

(o) “Monthly Deferral Participant<\/u>” means a Director who is not, and
\nfor the preceding 12 months has not been, a salaried employee of the Company and
\nwho elects to defer all or part of his or her Monthly Compensation pursuant to
\nthe Plan in accordance with Section 4 hereof.<\/p>\n

(p) “Participant<\/u>” means any current or former Director with an
\noutstanding Account balance the Plan.<\/p>\n

(q) “Plan<\/u>” means The Lilly Directors153 Deferral Plan, as amended and
\nrestated herein.<\/p>\n

2<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

(r) “Plan Administrator<\/u>” means the Directors and Corporate Governance
\nCommittee of the Board of Directors, or any successor committee of the Board of
\nDirectors that is charged with matters relating to the compensation of
\nnon-employee directors. Except with respect to Section 5(f) of this Plan, the
\nPlan Administrator may at its discretion delegate any of its responsibilities to
\none or more individuals provided that such delegation is in accordance with
\napplicable laws.<\/p>\n

(s) “Plan Year<\/u>” means the calendar year from January 1 through
\nDecember 31 with respect to which compensation eligible for deferral under the
\nPlan is earned.<\/p>\n

(t) “Section 409A<\/u>” means section 409A of the Code and the Treasury
\nregulations and other official guidance promulgated thereunder.<\/p>\n

(u) “Separation from Service<\/u>” means a “separation from service” within
\nthe meaning of Section 409A.<\/p>\n

(v) “Share<\/u>” means a share of common stock of the Company.<\/p>\n

(w) “Unforeseeable Emergency<\/u>” means a severe financial hardship of a
\nParticipant resulting from an illness or accident of such Participant or
\nBeneficiary, such Participant153s spouse or a dependent (as defined in section
\n152(a) of the Code) of such Participant, loss of such Participant153s property due
\nto casualty, or other similar extraordinary and unforeseeable circumstances
\narising as a result of events beyond the control of such Participant, each as
\ndetermined in the manner consistent with Section 409A, and any other event or
\ncircumstance within the meaning of the term “unforeseeable emergency” under
\nSection 409A.<\/p>\n

(x) “Valuation Date<\/u>” means for any month, the third Monday of the
\nmonth, or if Shares are not traded on the New York Stock Exchange on such third
\nMonday, the next day on which Shares are traded on the New York Stock Exchange.\n<\/p>\n

Section 2. Plan Administrator<\/u><\/strong><\/p>\n

(a) Authority<\/u>. The Plan Administrator shall have full authority to
\nadminister the Plan in accordance with its terms and to exercise all
\nresponsibilities and authorities as provided herein, including the discretionary
\nauthorities to determine the terms and conditions of deferrals of compensation
\nunder the Plan, to determine the terms and conditions of crediting to and
\ndistributing from Accounts under the terms of the Plan, and to adopt such rules
\nand regulations for administering the Plan as it may deem necessary or
\nappropriate. The Plan Administrator has the discretionary authority to interpret
\nand construe all provisions of the Plan, to remedy possible ambiguities,
\ninconsistencies, or omissions under the Plan, and to resolve all questions of
\nfact arising under the Plan. The decisions of the Plan Administrator shall be
\nfinal, binding and conclusive on all parties. No member of the Board, the Plan
\nAdministrator nor any officers of the Company shall have any liability for any
\naction or determination taken under the Plan.<\/p>\n

(b) Delegation; Expenses<\/u>. The appropriate officer(s) of the Company as
\ndesignated by the Plan Administrator are authorized to act on behalf of the Plan
\nAdministrator<\/p>\n

3<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

for the day-to-day administration of the Plan, subject to the authority of
\nthe Plan Administrator. Expenses of the administration of the Plan may be borne
\nby the Company or may be deducted from Participants153 Accounts at the sole
\ndiscretion of the Plan Administrator.<\/p>\n

Section 3. Participation<\/u><\/strong><\/p>\n

The Plan Administrator may require a Participant to comply with such terms
\nand conditions as the Plan Administrator may specify in order for the
\nParticipant to participate in the Plan.<\/p>\n

Section 4. Elections to Participate<\/u><\/strong><\/p>\n

(a) Deferral Elections<\/u>. A Monthly Deferral Participant in the Plan may
\nfile an Election Form with the Plan Administrator on or before the date
\nspecified in accordance with Section 4(c) hereof. The Election Form shall permit
\nthe Monthly Deferral Participant to specify the Deferral Amount subject to a
\nminimum Deferral Amount of five thousand dollars ($5,000) for the deferral of
\nMonthly Compensation, or such amounts as may be specified by the Plan
\nAdministrator in its sole discretion, and whether such Deferral Amount shall be
\ncredited in cash to his or her Deferred Compensation Account or in Shares to his
\nor her Deferred Stock Account, pursuant to Section 5(a) hereof. The Election
\nForm shall also set forth the terms of distribution of the Participant153s Account
\nin accordance with Section 6 hereof and the Participant153s Beneficiary
\ndesignation. All elections to defer compensation under the Plan are irrevocable,
\nand no changes to any Election Form delivered to the Plan Administrator shall be
\npermitted, except as specifically provided under the terms of the Plan.<\/p>\n

(b) Maximum Deferrals<\/u>. A Monthly Deferral Participant may elect a
\nDeferral Amount of up to 100% of the Participant153s Monthly Compensation for a
\nPlan Year. One hundred percent (100%) of any annual allocation of Shares earned
\npursuant to Section 5(c) will be automatically credited to a Deferred Stock
\nParticipant153s Deferred Stock Account.<\/p>\n

(c) Timing and Effect of Elections<\/u>. Unless otherwise specified by the
\nPlan Administrator in accordance with the requirements of Section 409A, deferral
\nelections on an Election Form shall be made:<\/p>\n

(i) In the case of Monthly Compensation or an annual Share allocation not
\nqualifying as “performance-based compensation” within the meaning of Section
\n409A, prior to the beginning of the Plan Year with respect to which the
\ncompensation is earned; and<\/p>\n

(ii) In the case of Monthly Compensation or an annual Share allocation which
\nthe Plan Administrator has determined qualifies as “performance-based
\ncompensation” within the meaning of Section 409A, no later than June 30th of the
\napplicable Plan Year with respect to which the compensation is earned.<\/p>\n

Deferral elections shall apply to Monthly Compensation and annual Share
\nallocations with respect to the Plan Year for which the elections are made.
\nParticipants will be required to make deferral elections for future Plan Years
\nat such times to be specified by the Plan Administrator in accordance with the
\nforegoing. If a Participant does not file an Election Form with the Plan<\/p>\n

4<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

Administrator on or before the deadline established by the Plan Administrator
\nfor deferral elections for a Plan Year, a Participant will be deemed not to have
\nelected to defer Monthly Compensation for such Plan Year, as applicable.
\nNotwithstanding the foregoing, in the first year in which an individual who is
\nnewly elected or appointed to serve as a Director becomes eligible to
\nparticipate in the Plan, such individual may, not later than thirty (30) days
\nafter the date he or she becomes eligible to participate in the Plan, elect in
\naccordance with the preceding provisions of this Section 4, to defer the receipt
\nof Monthly Compensation and set forth the terms of distribution of the
\nindividual153s Account with respect to services to be performed after the filing
\nof the election with the Company.<\/p>\n

Section 5. Accounts and Interest Credits<\/u><\/strong><\/p>\n

(a) Participant Accounts<\/u>. Accounts shall be maintained for each
\nParticipant under the Plan:<\/p>\n

(i) Deferred Compensation Account<\/u> : The Company shall maintain a
\nDeferred Compensation Account in the name of each Monthly Deferral Participant
\nwho elects to have a Deferral Amount credited in cash pursuant to Section 4
\nhereof for a given Plan Year. The Deferred Compensation Account shall be
\ndenominated in U.S. dollars, rounded to the nearest whole cent. For each month,
\nDeferral Amounts allocated to a Deferred Compensation Account shall be credited
\nto the Deferred Compensation Account as of the last Business Day of the month.\n<\/p>\n

(ii) Deferred Stock Account<\/u> : The Company shall maintain a Deferred
\nStock Account for each Deferred Stock Participant and for each Monthly Deferral
\nParticipant who elects to have a Deferral Amount credited in Shares. The
\nDeferred Stock Account shall be denominated in Shares and maintained in
\nfractions rounded to three (3) decimal places. Deferral Amounts allocated to a
\nDeferred Stock Account shall be credited to the Deferred Stock Account as of the
\nlast Business Day of the month. Shares and, if necessary, fractional Shares,
\nshall be credited based upon the closing price of Shares on the New York Stock
\nExchange on the Valuation Date for that month. Shares allocated to each Share
\nAccount shall be hypothetical and not issued or transferred by the Company until
\npayment is made pursuant to Section 6 hereof.<\/p>\n

A Participant153s Account shall consist of book entries only and shall not
\nconstitute a separate cash or Share fund or other asset held in trust or as
\nsecurity for the Company153s obligation to pay the amount of the Account to the
\nParticipant. The balance of a Participant153s Account shall be adjusted pursuant
\nto this Section 5 and reduced by the amount of applicable tax withholding,
\n<\/u>distributions and expenses. A Participant153s Account may include sub-accounts
\nas the Company considers necessary or advisable for purposes of maintaining a
\nproper accounting of amounts credited or debited for a Participant under the
\nPlan. A Participant shall receive or have on-line access to a statement of such
\nParticipant153s Account no less frequently than once a year following the end of
\neach Plan Year.<\/p>\n

5<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

(b) Crediting of Deferral Amount<\/u>. A Participant who has filed an
\nElection Form with the Plan Administrator for the deferral of Monthly
\nCompensation with respect to a Plan Year shall have the Deferral Amount deducted
\nfrom the applicable compensation and credited to the Participant153s appropriate
\nAccount under the Plan. The Deferral Amount so credited shall be reduced by
\napplicable tax withholding, distributions and expenses.<\/p>\n

(c) Annual Share Allocation<\/u>. As of the Annual Allocation Date of each
\nPlan Year, there shall be allocated to the Deferred Stock Account of each person
\nwho (i) is a Deferred Stock Participant on that date or (ii) was a Deferred
\nStock Participant at any time subsequent to the last Annual Allocation Date, as
\npart of his or her compensation for service on the Board of Directors, up to
\n7,500 Shares, as may be specified from time to time by resolution of the Board
\nof Directors.<\/p>\n

(d) Interest Credits<\/u>. The Deferred Compensation Accounts of
\nParticipants shall be credited with interest computed each Plan Year or portion
\nthereof at a rate equal to 120% of the long-term applicable federal rate, with
\nmonthly compounding (as prescribed under section 1274(d) of the Code), as in
\neffect for the month of December for the immediately preceding Plan Year. Such
\ninterest shall accrue on all Deferral Amounts and prior earnings thereon of
\nDeferred Compensation Accounts and be credited daily to such accounts.<\/p>\n

(e) Cash Dividends<\/u>. Cash dividends paid on Shares shall be deemed to
\nhave been paid on the Shares allocated to each Participant153s Deferred Stock
\nAccount as if the allocated Shares were actual Shares issued and outstanding on
\nthe Dividend Record Date. An amount equal to the amount of such dividends shall
\nbe credited in Shares to each Deferred Stock Account as of the last Business Day
\nof each month in which a Dividend Payment Date occurs, based upon the closing
\nprice for Shares on the New York Stock Exchange on the Valuation Date for that
\nmonth.<\/p>\n

(f) Capital Adjustments<\/u>. The number of Shares referred to in the
\nPreamble and Section 5 hereof and the number of Shares allocated to each
\nDeferred Stock Account shall be adjusted by the Plan Administrator, in the event
\nof any subdivision or combination of Shares or any stock dividend, stock split,
\nreorganization, recapitalization, or consolidation or merger with the Company as
\nthe surviving corporation, or if additional shares or new or different shares or
\nother securities of the Company or any other issuer are distributed with respect
\nto Shares through a spin-off or other extraordinary distribution.<\/p>\n

(g) Vesting of Accounts<\/u>. A Participant is fully vested in his or her
\nentire Account balance.<\/p>\n

Section 6. Distribution of Accounts<\/u><\/strong><\/p>\n

(a) Distribution upon Separation from Service<\/u>. A Participant shall
\nspecify on an Election Form the manner in which the amounts deferred in the
\nDeferred Compensation Account and the Deferred Stock Account, as applicable, for
\na Plan Year (and earnings thereon) shall be distributed from the Participant153s
\nAccount upon the Participant153s Separation from Service. All elections are
\nirrevocable, and no changes shall be permitted to any Election Form delivered to
\nthe Plan Administrator, except as specifically provided under the terms of the
\nPlan.<\/p>\n

6<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

A Participant may elect, to the extent permitted by the Plan Administrator
\nand set forth on the Election Form, that such portion of the Account be
\ndistributed upon a Participant153s Separation from Service either in:<\/p>\n

(i) Lump Sum<\/u> payment in January of the second Plan Year following the
\nPlan Year in which the Participant153s Separation from Service occurs; or<\/p>\n

(ii) Annual Installment<\/u> payments over a period of two (2) to ten (10)
\nyears commencing in January of the second Plan Year following the Plan Year in
\nwhich the Participant153s Separation from Service occurs, with subsequent
\ninstallment payments to be made in each January within the applicable
\nperiod. <\/u><\/p>\n

If a Participant fails to make a timely payment election on the Election Form
\nfor a Plan Year, the amounts deferred in the Deferred Compensation Account and
\nthe Deferred Stock Account, as applicable, for such Plan Year (and earnings
\nthereon) shall be distributed in a lump sum in accordance with Section 6(a)(i)
\nhereof.<\/p>\n

(b) Form of Distributions<\/u>. All distributions of a Participant153s
\nDeferred Compensation Account under the Plan shall be made in cash. Except as
\nprovided in Section 6(f), all distributions of a Participant153s Deferred Stock
\nAccount shall be paid in Shares, at which time the Shares shall be issued or
\ntransferred from the books of the Company to the Participant. All Shares to be
\nissued or transferred hereunder may be newly issued or treasury shares.
\nFractional Shares shall not be issued or transferred to a Participant, provided
\nthat in the case of a final payment under the Plan with respect to a
\nParticipant, any fraction remaining in the Participant153s Deferred Stock Account
\nshall be rounded up to the next whole Share and that number of whole Shares
\nshall be issued or transferred. The value of the Deferred Stock Account is
\ncalculated with reference to the closing price of Shares on the last trading day
\nof the prior Plan Year.<\/p>\n

(c) Distribution of Account<\/u>. The Company shall distribute amounts from
\nthe Participant153s Deferred Compensation Account and the Deferred Stock Account
\nin the manner and on the date(s) applicable under this Section 6. If the payment
\noption described in Section 6(a)(i) hereof is applicable, the amount of the lump
\nsum shall be calculated using the valuation of the applicable portion of the
\nParticipant153s Account as of the December 31 preceding the date of the payment.
\nIf the payment option described in Section 6(a)(ii) hereof is applicable, the
\namount of each installment shall be calculated using the valuation of the
\napplicable portion of the Participant153s Account as of the December 31 preceding
\nthe date of the installment payment divided by the number of installment
\npayments that have not yet been made.<\/p>\n

(d) Distribution upon Death<\/u>. Notwithstanding any election made by a
\nParticipant or any other provision of this Section 6 to the contrary, if a
\nParticipant dies before full distribution of his or her Account balance, any
\nremaining balance shall be distributed to the Participant153s Beneficiary in a
\nlump sum within 90 days following the date of the Participant153s death. The
\namount of such lump sum distribution shall be calculated using the valuation of
\nthe Participant153s Account as of the date preceding the date of distribution. Any
\npayment required to be made to a Participant under the Plan that cannot be made
\ndue to the Participant153s death shall be made to the Participant153s Beneficiary,
\nsubject to applicable law. Each Participant shall have the right to designate
\none or more Beneficiaries, and to change a Beneficiary designation, from<\/p>\n

7<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

time to time by filing a written notice with the Plan Administrator. In the
\nevent that a Beneficiary does not survive the Participant and no successor
\nBeneficiary is selected, or in the event no valid Beneficiary designation has
\nbeen made, the Participant153s Beneficiary shall be the Participant153s estate.<\/p>\n

(e) Unforeseeable Emergency<\/u>. Upon the written request of a
\nParticipant, the Plan Administrator may permit the Participant to withdraw some
\nor all of the Participant153s Account for the purpose of enabling the Participant
\nto meet the immediate needs created by an Unforeseeable Emergency. The
\ncircumstances that will constitute an Unforeseeable Emergency will depend upon
\nthe facts of each case, but in any case, the amounts distributed with respect to
\nan Unforeseeable Emergency shall not exceed the amounts necessary to satisfy
\nsuch Unforeseeable Emergency plus amounts necessary to pay taxes reasonably
\nanticipated as a result of the distribution, after taking into account the
\nextent to which such hardship is or may be relieved through reimbursement or
\ncompensation by insurance or otherwise, by liquidation of the Participant153s
\nassets, to the extent that the liquidation of such assets would not itself cause
\nsevere financial hardship, or by cessation of deferrals under the Plan.<\/p>\n

(f) Payment of Cash in Lieu of Shares<\/u>. If at any time the Plan
\nAdministrator determines that payment of Shares to a Participant (or a
\nParticipant153s Beneficiary) or the ownership or subsequent disposition of such
\nShares by such Participant or Beneficiary may violate or conflict with any
\napplicable law or regulation, the Plan Administrator shall pay all or a portion
\nof the Participant153s Deferred Stock Account in cash.<\/p>\n

(g) Withholding Taxes<\/u>. All distributions of a Participant153s Account
\nunder the Plan shall be subject to income tax and other withholdings that the
\nPlan Administrator deems necessary or appropriate, and the Plan Administrator
\nmay reduce the amount credited to any Participant153s Account to the extent it
\ndeems necessary to satisfy tax withholding requirements. Participants or
\nBeneficiaries receiving distributions under the Plan shall bear all taxes on
\namounts paid under the Plan to the extent that taxes are not withheld thereon,
\nirrespective of whether withholding is required.<\/p>\n

Section 7. Administrative Matters <\/u><\/strong><\/p>\n

(a) Claims Procedure<\/u>. Any person making a claim for benefits hereunder
\nshall submit the claim in writing to the Plan Administrator. If the Plan
\nAdministrator denies the claim in whole or in part, it shall issue to the
\nclaimant a written notice explaining the reason for the denial and identifying
\nany additional information or documentation that might enable the claimant to
\nperfect the claim. The claimant may, within sixty (60) days of receiving a
\nwritten notice of denial, submit a written request for reconsideration to the
\nPlan Administrator, together with a written explanation of the basis of the
\nrequest. The Plan Administrator shall consider any such request and shall
\nprovide the claimant with a written decision together with a written explanation
\nthereof. No legal action may be commenced or maintained against the Plan more
\nthan one year after the Plan Administrator wholly or partially denies, or is
\ndeemed to have wholly or patially denied, a claim for Plan benefits. All
\ninterpretations, determinations, and decisions of the Plan Administrator in
\nrespect of any claim shall be final, binding and conclusive.<\/p>\n

8<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

(b) Incapacity<\/u>. If the Plan Administrator determines that any person
\nentitled to benefits under the Plan is unable to care for his or her affairs
\nbecause of illness, accident or other physical and mental incapacity, any
\npayment due (unless a duly qualified guardian or other legal representative has
\nbeen appointed) may be paid consistent with the terms described herein for the
\nbenefit of such person to such person153s spouse, parent, brother, sister, adult
\nchild or other party deemed by the Plan Administrator in its sole discretion to
\nensure proper care for such person.<\/p>\n

(c) Inability to Locate<\/u>. If the Plan Administrator is unable to locate
\na person to whom a payment is due under the Plan for a period of twelve (12)
\nmonths, commencing with the first day of the month as of which the payment
\nbecomes payable, the total amount payable to such person shall be forfeited.\n<\/p>\n

(d) Liability<\/u>. Any decision made or action taken by the Board of
\nDirectors, the Plan Administrator, or any employee of the Company or any of its
\nsubsidiaries, arising out of or in connection with the construction,
\nadministration, interpretation, or effect of the Plan, shall be absolutely
\ndiscretionary, and shall be conclusive and binding on all parties. Neither the
\nPlan Administrator nor a member of the Board of Directors and no employee of the
\nCompany or any of its subsidiaries shall be liable for any act or action
\nhereunder, whether of omission or commission, by any other member or employee or
\nby any agent to whom duties in connection with the administration of the Plan
\nhave been delegated or, except in circumstances involving bad faith, for
\nanything done or omitted to be done.<\/p>\n

Section 8. Unfunded Status<\/u><\/strong><\/p>\n

All Accounts and all rights of Participants to benefits under the Plan are
\nunfunded obligations of the Company. Plan benefits shall be paid from the
\ngeneral assets of the Company, and Participants shall have the status of an
\nunsecured general creditor of the Company with respect to all interests under
\nthe Plan. The Plan is a plan of unfunded deferred compensation. Notwithstanding
\nthe foregoing, the Company may, but shall not be required to, establish a trust
\nor other funding vehicle under the Plan that does not affect the Plan153s status
\nas a Plan of unfunded deferred compensation.<\/p>\n

Section 9. Nontransferability; Successors<\/u><\/strong><\/p>\n

No interest of any person in, or right to receive a distribution under, the
\nPlan shall be subject in any manner to sale, transfer, assignment, pledge,
\nattachment, garnishment, or other alienation or encumbrance of any kind; nor may
\nsuch interest or right to receive a distribution be taken, either voluntarily or
\ninvoluntarily for the satisfaction of the debts of, or other obligations or
\nclaims against, such person.<\/p>\n

The obligations of the Company under the Plan will be binding upon the
\nCompany153s successors, transferees and assigns.<\/p>\n

Section 10. Limitation of Rights<\/u><\/strong><\/p>\n

9<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

Nothing in the Plan shall confer upon any Participant the right to continue
\nto serve as a Director of the Company or to serve in the capacity in which the
\nParticipant is employed by the Company. Nothing in the Plan shall be interpreted
\nas creating a right of a Participant to receive any compensation or benefit from
\nthe Company. A Participant shall have no rights as a shareholder of the Company
\nwith respect to any Shares until the Shares are issued or transferred to the
\nParticipant on the books of the Company.<\/p>\n

Section 11. Enforceability<\/u><\/strong><\/p>\n

To the extent not preempted by federal law, the Plan shall be construed,
\nadministered and enforced in accordance with the laws of the State of Indiana,
\nregardless of the law that might otherwise govern under applicable principles or
\nprovisions of choice or conflict of law doctrines. To the extent that any
\nprovision of the Plan or portion thereof shall be invalid or unenforceable, it
\nshall be considered deleted herefrom and the remainder of such provision and the
\nPlan shall be unaffected and shall continue in full force and effect.<\/p>\n

Section 12. Effective Date; Amendment and Termination<\/u><\/strong>\n<\/p>\n

The Plan, as amended and restated, shall become effective for the 2009 Plan
\nYear (except as to the share limit specified in Section 5(c), which shall become
\neffective October 20, 2008) and for future Plan Years until terminated by the
\nBoard. The Board may amend or terminate the Plan at any time and in any manner;
\nprovided that no amendment or termination shall reduce the amount credited to a
\nParticipant153s Account at the time of any such amendment or termination, and no
\namendment shall be effective that shall cause the Plan to fail to meet the
\nrequirements of Section 409A. Upon termination of the Plan in accordance with
\nthe requirements of Section 409A, (i) all future deferrals of compensation will
\ncease, (ii) all Plan Accounts will continue to receive interest credits (or be
\ninvested) as permitted under the Plan, and (iii) all Plan Accounts will be
\ndistributed in accordance with the Participant153s elections under the provisions
\nof the Plan, unless the Company determines in its sole discretion that all such
\namounts shall be distributed upon termination in accordance with the
\nrequirements of Section 409A. <\/u><\/p>\n

10<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

APPENDIX A<\/strong><\/p>\n

GRANDFATHERED AMOUNTS<\/strong><\/p>\n

Distribution of amounts that were earned and vested (within the meaning of
\nSection 409A) under the Plan prior to 2005 (and earnings thereon) and are exempt
\nfrom the requirements of Section 409A shall be made in accordance with the Plan
\nterms as in effect on January 1, 2004, as attached below.<\/p>\n

THE LILLY DIRECTORS153 DEFERRAL PLAN<\/strong>
\n(As amended and restated through January 1, 2004)<\/p>\n

Section 1. Establishment of the Plan and Shares
\nAvailable.<\/u><\/strong><\/p>\n

1.1. Establishment of Plan.<\/u> This Plan was established effective
\nJanuary 1, 1996, to permit Directors of the Company who are not salaried
\nemployees of the Company to voluntarily defer receipt of some or all of their
\nmeeting fees and retainer and to share in the long-term growth of the Company by
\nacquiring, on a deferred basis, an ownership interest in the Company. This
\namended and restated Plan is effective January 1, 2004.<\/p>\n

1.2. Shares Available.<\/u> Subject to adjustment as provided in Section
\n7.5, the aggregate number of shares of Eli Lilly and Company common stock that
\nmay be issued or transferred under this Plan after April 28, 2003, is 750,000.
\nThe shares may be authorized and unissued shares or treasury shares.<\/p>\n

Section 2. Definitions.<\/u><\/strong><\/p>\n

The following terms shall have the definitions set forth in this Section 2:\n<\/p>\n

2.1. Annual Allocation Date<\/u>. The last Business Day in November of each
\ncalendar year, or such other annual date, not earlier than the third Monday in
\nFebruary, established by the Committee as the date as of which Shares are
\nallocated to each Share Account in accordance with Section 6.<\/p>\n

2.2. Beneficiary<\/u>. The beneficiary or beneficiaries (including any
\ncontingent beneficiary or beneficiaries) designated pursuant to subsection 8.3
\nhereof.<\/p>\n

2.3 Business Day.<\/u> A day on which the Company153s corporate headquarters
\nare open for regular business.<\/p>\n

2.4. Board of Directors<\/u>. The Board of Directors of the Company.<\/p>\n

2.5. Committee<\/u>. The Directors and Corporate Governance Committee of
\nthe Board of Directors, or any successor committee of the Board of Directors
\nthat is charged with matters relating to the compensation of non-employee
\ndirectors.<\/p>\n

11<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

2.6. Company<\/u>. Eli Lilly and Company.<\/p>\n

2.7. Company Credit<\/u>. For any calendar year or part thereof, an amount
\ncomputed, and credited annually to a Participant153s Deferred Compensation Account
\nat an annual rate that is equal to one hundred twenty percent (120%) of the
\napplicable federal long-term rate, with compounding (as prescribed under Section
\n1274(d) of the Internal Revenue Code) that was in effect for the month of
\nDecember immediately preceding the calendar year.<\/p>\n

2.8. Deferred Amount<\/u>. The amount of a Monthly Deferral Participant153s
\nMonthly Compensation that the Participant elects to defer in accordance with
\nSection 4 hereof.<\/p>\n

2.9. Deferred Stock Participant<\/u>. A Director who is not, and for the
\npreceding 12 months has not been, a salaried employee of the Company and who
\nbecomes a Participant in the Plan in accordance with Section 3 hereof.<\/p>\n

2.10. Director<\/u>. A member of the Board of Directors.<\/p>\n

2.11. Dividend Payment Date<\/u>. The date as of which the Company pays a
\ncash dividend on Shares.<\/p>\n

2.12. Dividend Record Date<\/u>. With respect to any Dividend Payment Date,
\nthe date established by the Board of Directors as the record date for
\ndetermining shareholders entitled to the dividend.<\/p>\n

2.13. Individual Accounts or Accounts<\/u>. The separate accounts (the
\nDeferred Compensation Account and the Share Account) described in Section 7
\nhereof. When used in the singular, the term shall refer to one of these two
\naccounts, as the context requires.<\/p>\n

2.14. Monthly Compensation<\/u>. For any month, the monthly retainer and
\nthe aggregate of all meeting fees, committee fees and committee chairperson fees
\nto which a Director is entitled for services rendered to the Company as a
\nDirector during the month, as established from time to time by resolution of the
\nBoard of Directors. For avoidance of doubt, Monthly Compensation does not
\ninclude stock options granted to Directors or the Shares allocated pursuant to
\nSection 6 of this Plan.<\/p>\n

2.15. Monthly Deferral Participant<\/u>. A Director who is not a salaried
\nemployee of the Company and who has elected to defer all or part of his or her
\nCompensation pursuant to the Plan in accordance with Section 4 hereof.<\/p>\n

2.16. Participant<\/u>. A Director who is a Deferred Stock Participant, a
\nMonthly Deferral Participant, or both.<\/p>\n

2.17. Plan<\/u>. The Lilly Directors153 Deferral Plan, as set forth herein
\nand as it may be amended from time to time.<\/p>\n

12<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

2.18. Share<\/u>. A share of common stock of the Company.<\/p>\n

2.19. Valuation Date<\/u>. For any month, the third Monday of the month, or
\nif Shares are not traded on the New York Stock Exchange on such third Monday,
\nthe next day on which Shares are traded on the New York Stock Exchange.<\/p>\n

Section 3. Deferred Stock Participants.<\/u><\/strong><\/p>\n

Each Director who participated in The Lilly Non-Employee Directors153 Deferred
\nStock Plan immediately before the effective date of this Plan shall continue as
\na Deferred Stock Participant on such effective date, and all elections in effect
\nunder The Lilly Non-Employee Directors153 Deferred Stock Plan shall remain in
\neffect under this Plan, unless and until amended in accordance with this Plan.
\nThereafter, each person who becomes a Director, and who is not, and for the
\npreceding 12 months has not been, a salaried employee of the Company, shall
\nbecome a Deferred Stock Participant.<\/p>\n

Section 4. Monthly Deferral Participants.<\/u><\/strong><\/p>\n

Each Director who participated in The Lilly Directors153 Deferred Compensation
\nPlan immediately before the effective date of the Plan shall continue as a
\nMonthly Deferral Participant on such effective date, and all elections in effect
\nunder The Lilly Directors153 Deferred Compensation Plan shall remain in effect
\nunder this Plan, unless and until amended in accordance with this Plan. Prior to
\nthe beginning of each calendar year, any Director who is not a salaried employee
\nof the Company may defer the receipt of Monthly Compensation to be earned by the
\nDirector during such year by filing with the Company a written election that:\n<\/p>\n

(i) defers payment of a designated amount (of one Thousand Dollars ($1,000)
\nor more) or percentage of his or her Monthly Compensation for services
\nattributable to the following calendar year or portion thereof (the “Deferred
\nAmount”);<\/p>\n

(ii) specifies the payment option selected by the Participant pursuant to
\nsubsection 8.2 hereof for such Deferred Amount; and<\/p>\n

(iii) specifies the option selected by the Participant pursuant to Section 5
\nhereof for such Deferred Amount.<\/p>\n

The amount deferred may not exceed the Director153s aggregate Monthly
\nCompensation for the calendar year. Notwithstanding the foregoing, any
\nindividual who is newly elected or appointed to serve as a Director may, not
\nlater than thirty (30) days after his election or appointment becomes effective,
\nelect in accordance with the preceding provisions of this Section 4, to defer
\nthe receipt of Monthly Compensation earned during the portion of the current
\ncalendar year that follows the filing of the election with the Company. Except
\nas provided in subsections 8.2 and 8.4 hereof, any elections made pursuant to
\nthis Section 4 with respect to a calendar year shall be irrevocable when made.
\nIf a Participant fails to make an election under section 5 with respect to his
\nor her Deferred Amount for a future calendar year, the Participant153s previous
\nelection shall<\/p>\n

13<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

remain in effect, provided that the Participant may amend his or her election
\nwith regard to a future calendar year at any time.<\/p>\n

Section 5. Form of Deferred Compensation Credits.<\/u><\/strong>\n<\/p>\n

5.1. Deferred Compensation Account<\/u>. Except with respect to Deferred
\nAmounts which a Monthly Deferral Participant elects to have credited in Shares
\nin accordance with subsection 5.2 hereof, the Deferred Amount shall be
\ndenominated in U.S. dollars and credited to the Participant153s Deferred
\nCompensation Account pursuant to subsection 7.1 hereof.<\/p>\n

5.2. Shares<\/u>. Prior to the beginning of each calendar year, a Monthly
\nDeferral Participant may elect to have all or a percentage of the Deferred
\nAmount for the following calendar year credited in Shares and allocated to the
\nParticipant153s Share Account pursuant to subsection 7.2 hereof.<\/p>\n

Section 6. Annual Allocations to Share Accounts.<\/u><\/strong><\/p>\n

6.1. Annual Allocation of Shares<\/u>. As of the Annual Allocation Date of
\neach calendar year, there shall be allocated to the Share Account (as described
\nin Section 7.2 below) of each Deferred Stock Participant who is a Director on
\nthat date, as part of his or her compensation for service on the Board of
\nDirectors, seven hundred (700) Shares or such other number of Shares, not to
\nexceed 3,000 shares, as may be specified from time to time by resolution of the
\nBoard of Directors.<\/p>\n

Section 7. Individual Accounts.<\/u><\/strong><\/p>\n

The Company shall maintain Individual Accounts for Participants as follows:\n<\/p>\n

7.1. Deferred Compensation Account<\/u>. The Company shall maintain a
\nDeferred Compensation Account in the name of each Monthly Deferral Participant
\nwho elects to defer the receipt of Monthly Compensation pursuant to Section 4
\nhereof for a calendar year and does not elect to have the Deferred Amount for
\nsuch calendar year credited in Shares pursuant to subsection 5.2 hereof. The
\nDeferred Compensation Account shall be denominated in U.S. dollars, rounded to
\nthe nearest whole cent. For each month, Deferred Amounts allocated to a Deferred
\nCompensation Account pursuant to subsection 5.1 hereof shall be credited to the
\nDeferred Compensation Account as of the last Business Day of the month.<\/p>\n

7.2. Share Account<\/u>. The Company shall maintain a Share Account for
\neach Deferred Stock Participant and for each Monthly Deferral Participant who
\nelects to have a Deferred Amount credited in Shares pursuant to subsection 5.2
\nhereof. The Share Account shall be denominated in Shares and maintained in
\nfractions rounded to three (3) decimal places. Shares allocated to each Share
\nAccount shall be hypothetical and not issued or transferred by the Company until
\npayment is made pursuant to Section 8 hereof.<\/p>\n

For each month, Deferred Amounts allocated to a Share Account pursuant to
\nsubsection 5.2 hereof shall be credited to the Share Account as of the last
\nBusiness Day of the month.<\/p>\n

14<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

Shares and, if necessary, fractional Shares, shall be credited based upon the
\naverage of the high and low price of Shares on the New York Stock Exchange on
\nthe Valuation Date for that month.<\/p>\n

7.3. Accrual of Company Credit<\/u>. The Treasurer of the Company shall
\ndetermine the annual rate of Company Credit on or before December 31 of each
\ncalendar year. This rate shall be effective for the following calendar year. The
\nCompany Credit shall accrue monthly, at one-twelfth of the applicable annual
\nrate, on all amounts credited to a Participant153s Deferred Compensation Account,
\nincluding the Company Credits for prior years. The Company Credit shall not
\naccrue on any amount distributed to a Participant (or to the Participant153s
\nBeneficiary) during the month for which the accrual is determined, except where
\nan amount is distributed to a Beneficiary in the month of the Participant153s
\ndeath. The Company Credit for each year shall be credited to each Deferred
\nCompensation Account as of December 31 of that year and shall be compounded
\nmonthly.<\/p>\n

7.4. Cash Dividends<\/u>. Cash dividends paid on Shares shall be deemed to
\nhave been paid on the Shares allocated to each Participant153s Share Account as if
\nthe allocated Shares were actual Shares issued and outstanding on the Dividend
\nRecord Date. An amount equal to the amount of such dividends shall be credited
\nin Shares to each Share Account as of the last Business Day of each month in
\nwhich a Dividend Payment Date occurs, based upon the average of the high and low
\nprices for Shares on the New York Stock Exchange on the Valuation Date for that
\nmonth.<\/p>\n

7.5. Capital Adjustments<\/u>. The number of Shares referred to in Sections
\n1.2 and 6 hereof and the number of Shares allocated to each Share Account shall
\nbe adjusted by the Committee, as it deems appropriate in its discretion, in the
\nevent of any subdivision or combination of Shares or any stock dividend, stock
\nsplit, reorganization, recapitalization, or consolidation or merger with Eli
\nLilly and Company as the surviving corporation, or if additional shares or new
\nor different shares or other securities of the Company or any other issuer are
\ndistributed with respect to Shares through a spin-off or other extraordinary
\ndistribution.<\/p>\n

7.6. Account Statements<\/u>. Within a reasonable time following the end of
\neach calendar year, the Company shall render an annual statement to each
\nParticipant. The annual statement shall report the number of Shares credited to
\nthe Participant153s Share Account as of December 31 of that year and the dollar
\namount, if any, credited to the Participant153s Deferred Compensation Account as
\nof December 31 of that year.<\/p>\n

Section 8. Payment Provisions<\/u>.<\/strong><\/p>\n

8.1. Method of Payment<\/u>. All payments to a Participant (or to a
\nParticipant153s Beneficiary) with respect to the Participant153s Deferred
\nCompensation Account shall be paid in cash. Except as provided in Section 8.5,
\nall payments to a Participant (or to a Participant153s Beneficiary) with respect
\nto the Participant153s Share Account shall be paid in Shares, at which time the
\nShares shall be issued or transferred on the books of the Company. All Shares to
\nbe issued or transferred hereunder may be newly issued or treasury shares.
\nFractional Shares shall not be issued or transferred to a Participant, provided
\nthat in the case of a final payment under the Plan with respect to a
\nParticipant, any fraction remaining in the Participant153s Share Account shall be
\nrounded up to the next whole Share and that number of whole Shares shall be
\nissued or<\/p>\n

15<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

transferred. If Shares are not traded on the New York Stock Exchange on any
\nday on which a payment of Shares is to be made under the Plan, then that payment
\nshall be made on the next day on which Shares are traded on the New York Stock
\nExchange.<\/p>\n

8.2. Payment Options<\/u>. Prior to each calendar year, or within 30 days
\nafter becoming a Participant, the Participant shall select a payment election
\nwith respect to the payment of one or both of the Participant153s Individual
\nAccounts from the following payment elections:<\/p>\n

(i) a lump sum in January of the calendar year immediately following the
\ncalendar year in which the Participant ceases to be a Director;<\/p>\n

(ii) a lump sum in January of the second calendar year following the calendar
\nyear in which the Participant ceases to be a Director;<\/p>\n

(iii) annual (or, in the case of the Deferred Compensation Account only,
\nmonthly) installments over a period of two to ten years commencing in January of
\nthe calendar year following the calendar year during which the Participant
\nceases to be a Director; or<\/p>\n

(iv) annual (or in the case of the Deferred Compensation Account only,
\nmonthly) installments over a period of two to ten years commencing in January of
\nthe second calendar year following the calendar year in which the Participant
\nceases to be a director.<\/p>\n

If a payment option described in paragraphs (i) or (ii), above, has been
\nelected, the amount of the lump sum with respect to the Participant153s Deferred
\nCompensation Account shall be equal to the amount credited to the Participant153s
\nDeferred Compensation Account as of the December 31 immediately preceding the
\ndate of the payment, and the amount of the lump sum with respect to the
\nParticipant153s Share Account shall be equal to the number of Shares credited to
\nthe Share Account as of the December 31 immediately preceding the date of
\npayment. If a payment option described in paragraphs (iii) or (iv), above, has
\nbeen elected, the amount of each installment with respect to the Participant153s
\nDeferred Compensation Account shall be equal to the amount credited to the
\nParticipant153s Deferred Compensation Account as of the last day of the month
\nimmediately preceding the date of a monthly installment payment, or the December
\n31 immediately preceding the date of an annual installment payment, divided by
\nthe number of installment payments that have not yet been made. The amount of
\neach installment with respect to the Participant153s Share Account shall be equal
\nto the number of Shares credited to the Participant153s Share Account as of the
\nDecember 31 immediately preceding the date of an annual installment payment,
\ndivided by the number of installment payments that have not yet been made.<\/p>\n

A Participant may elect that his or her final payment election may control
\nover all prior payment elections. If the Participant fails to elect a payment
\noption, the amount credited to the Participant153s Individual Account shall be
\ndistributed in a lump sum in accordance with the payment option described in
\nparagraph (i) above. At the time of any scheduled payment, if the amount
\ncredited to a Participant153s Deferred Compensation Account or the value of Shares
\ncredited to a Participant153s Share Account is less than $25,000, the Committee,
\nin its sole discretion, may pay out the Account in a lump sum.<\/p>\n

16<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

8.3. Payment Upon Death<\/u>. Within a reasonable period of time following
\nthe death of a Participant, the amount credited to the Participant153s Deferred
\nCompensation Account and the Shares credited to the Participant153s Share Account
\nshall be paid by the Company in a lump sum to the Participant153s Beneficiary. For
\npurposes of this subsection 8.3, the amount credited to the Participant153s
\nDeferred Compensation Account and the number of Shares credited to the
\nParticipant153s Share Account shall be determined as of the later of the date of
\ndeath or the last Business Day of the month prior to the month in which the
\npayment occurs.<\/p>\n

A Participant may designate the Beneficiary, in writing, in a form acceptable
\nto the Committee before the Participant153s death. A Participant may revoke a
\nprior designation of Beneficiary and may also designate a new Beneficiary
\nwithout the consent of the previously designated Beneficiary, provided that such
\nrevocation and new designation (if any) are in writing, in a form acceptable to
\nthe Committee, and filed with the Committee before the Participant153s death. If
\nthe Participant does not designate a Beneficiary, or if no designated
\nBeneficiary survives the Participant, any amount not distributed to the
\nParticipant during the Participant153s life shall be paid to the Participant153s
\nestate in a lump sum in accordance with this subsection 8.3.<\/p>\n

8.4. Payment on Unforeseeable Emergency<\/u>. The Committee may, in its
\nsole discretion, direct payment to a Participant of all or of any portion of the
\nParticipant153s Individual Account balance, notwithstanding an election under
\nsubsection 8.2 above, at any time that it determines that such Participant has
\nan unforeseeable emergency, and then only to the extent reasonably necessary to
\nmeet the emergency. For purposes of this section, “unforeseeable emergency”
\nmeans severe financial hardship to the Participant resulting from a sudden and
\nunexpected illness or accident of the Participant or of a dependent of the
\nParticipant, loss of the Participant153s property due to casualty, or other
\nsimilar extraordinary and unforeseeable circumstances arising as a result of
\nevents beyond the control of the Participant. The circumstances that will
\nconstitute an unforeseeable emergency will depend upon the facts of each case,
\nbut, in any case, payment may not be made to the extent that such hardship is,
\nor may be, relieved :<\/p>\n

(i) through reimbursement or compensation by insurance or otherwise;<\/p>\n

(ii) by liquidation of the Participant153s assets, to the extent the
\nliquidation of such assets would not itself cause severe financial hardship; or\n<\/p>\n

(iii) by cessation of deferrals under the Plan.<\/p>\n

Examples of what are not considered to be unforeseeable emergencies include
\nthe need to send a Participant153s child to college or the desire to purchase a
\nhome.<\/p>\n

8.5. Payment of Cash in Lieu of Shares<\/u>. If at any time the Committee
\nshall determine that payment of Shares to a Participant (or a Participant153s
\nBeneficiary) or the ownership or subsequent disposition of such Shares by such
\nParticipant or Beneficiary may violate or conflict with any applicable law or
\nregulation, the Committee may, in its discretion, pay all or a portion of the
\nParticipant153s Share Account in cash. In this case, the amount of cash shall be
\ndetermined with reference to the average of the high and low trading price for
\nShares on the December 31<\/p>\n

17<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

next preceding the date of payment, or if Shares are not traded on that day,
\nthe next preceding trading day.<\/p>\n

Section 9. Ownership of Shares.<\/u><\/strong><\/p>\n

A Participant shall have no rights as a shareholder of the Company with
\nrespect to any Shares until the Shares are issued or transferred to the
\nParticipant on the books of the Company.<\/p>\n

Section 10. Prohibition Against Transfer.<\/u><\/strong><\/p>\n

The right of a Participant to receive payments of Shares and cash under the
\nPlan may not be transferred except by will or applicable laws of descent and
\ndistribution. A Participant may not assign, sell, pledge, or otherwise transfer
\nShares or cash to which he is entitled hereunder prior to transfer or payment
\nthereof to the Participant, and any such attempted assignment, sale, pledge or
\ntransfer shall be void.<\/p>\n

Section 11. General Provisions.<\/u><\/strong><\/p>\n

11.1. Director153s Rights Unsecured<\/u>. The Plan is unfunded. The right of
\nany Participant to receive payments of cash or Shares under the provisions of
\nthe Plan shall be an unsecured claim against the general assets of the Company.\n<\/p>\n

11.2. Administration<\/u>. Except as otherwise provided in the Plan, the
\nPlan shall be administered by the Committee, which shall have the final
\nauthority to adopt rules and regulations for carrying out the Plan, and to
\ninterpret, construe, and implement the provisions of the Plan.<\/p>\n

11.3. Legal Opinions<\/u>. The Committee may consult with legal counsel,
\nwho may be counsel for the Company or other counsel, with respect to its
\nobligations and duties under the Plan, or with respect to any action,
\nproceeding, or any questions of law, and shall not be liable with respect to any
\naction taken, or omitted, by it in good faith pursuant to the advice of such
\ncounsel.<\/p>\n

11.4. Liability<\/u>. Any decision made or action taken by the Board of
\nDirectors, the Committee, or any employee of the Company or any of its
\nsubsidiaries, arising out of or in connection with the construction,
\nadministration, interpretation, or effect of the Plan, shall be absolutely
\ndiscretionary, and shall be conclusive and binding on all parties. Neither the
\nCommittee nor a member of the Board of Directors and no employee of the Company
\nor any of its subsidiaries shall be liable for any act or action hereunder,
\nwhether of omission or commission, by any other member or employee or by any
\nagent to whom duties in connection with the administration of the Plan have been
\ndelegated or, except in circumstances involving bad faith, for anything done or
\nomitted to be done.<\/p>\n

11.5. Withholding<\/u>. The Company shall have the right to deduct from all
\npayments hereunder any taxes required by law to be withheld from such payments.
\nThe recipients of such<\/p>\n

18<\/p>\n<\/p>\n<\/p>\n

<\/p>\n

payments shall bear all taxes on amounts paid under the Plan to the extent
\nthat no taxes are withheld thereon, irrespective of whether withholding is
\nrequired.<\/p>\n

11.6. Legal Holidays<\/u>. If any day on which action under the Plan must
\nbe taken falls on a Saturday, Sunday, or legal holiday, such action may be taken
\non the next succeeding day that is not a Saturday, Sunday, or legal holiday;
\nprovided, that this subsection 11.8 shall not permit any action that must be
\ntaken in one calendar year to be taken in any subsequent calendar year.<\/p>\n

11.7. Participant Who Becomes Employee.<\/u> If a Participant becomes an
\nemployee of the Company but remains a Director, he or she will no longer be
\nentitled to new deferrals under the Plan as a Deferred Stock Participant or
\nMonthly Deferral Participant. However, the individual153s Account balances will
\ncontinue to be administered under the Plan (including eligibility for the
\nCompany Credit and Cash Dividends under Sections 7.3 and 7.4) until they are
\npaid out in accordance with Section 8.<\/p>\n

Section 12. Term, Amendment, Suspension, and
\nTermination.<\/u><\/strong><\/p>\n

The Plan shall remain in effect until terminated by the Board of Directors.
\nThe Board of Directors shall have the right at any time, and from time to time,
\nto amend, suspend, or terminate the Plan, subject to the following:<\/p>\n

(i) no amendment or termination shall reduce the number of Shares or the cash
\nbalance in an Individual Account;<\/p>\n

(ii) the number of Shares allocated annually pursuant to Section 6 hereof may
\nnot be changed more frequently than every calendar year; and<\/p>\n

(iii) to the extent required by New York Stock Exchange listing rules or
\napplicable law, material amendments shall be submitted to the Company153s
\nshareholders for approval.<\/p>\n

Section 13. Applicable Law.<\/u><\/strong><\/p>\n

The Plan shall be governed by, and construed in accordance with, the laws of
\nthe State of Indiana, except to the extent that such laws are preempted by
\nFederal law.<\/p>\n

Section 14. Effective Date.<\/u><\/strong><\/p>\n

The effective date of this Plan is January 1, 1996. Nothing herein shall
\ninvalidate or adversely affect any previous election, designation, deferral, or
\naccrual in accordance with the terms of The Lilly Directors153 Deferred
\nCompensation Plan or The Lilly Non-Employee Directors153 Deferred Stock Plan that
\nwere in effect prior to the effective date of this Plan.<\/p>\n

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