2006 Bonus Plan

EXHIBIT 10.1 The Eli Lilly and Company Bonus Plan (as amended October 16, 2006) TABLE OF CONTENTS Section 1 Purpose 2 Section 2 Definitions 2 Section 3 Administration 8 Section 4 Participation in the Plan 9 Section 5 Definition and Computation of Company Bonus 9 Section 6 Time of Payment 13 Section 7 Administrative Guidelines 14 Section 8 Miscellaneous 15 Section 9 Amendment, Suspension, or Termination 17


- 2 - The Eli Lilly and Company Bonus Plan
(as amended October 16, 2006) SECTION 1. PURPOSE The purpose of The Eli Lilly and Company Bonus Plan is to encourage and promote eligible employees to create and deliver innovative pharmaceutical-based health care solutions that enable people to live longer, healthier and more active lives, to outgrow our competitors through a constant stream of pharmaceutical innovation, and to materially increase shareholder value. The Plan is designed to accomplish the following key objectives: a. motivate superior employee performance through the implementation of a performance-based bonus system for all eligible management employees, United States employees (including those in Puerto Rico) and other employees as may be designated from time to time; b. encourage eligible employees to take greater ownership of the company and provide " Answers that Matter" daily by creating a direct relationship between key company measurements and individual bonus payouts; and c. enable the Company to attract and retain employees that will be instrumental in driving sustained growth and performance of Eli Lilly and Company by providing a competitive bonus program that rewards outstanding performance consistent with the Company' s mission, values and increased shareholder value.The Plan is intended to satisfy the requirements for providing " performance-based" compensation under Section 162(m) of the Internal Revenue Code. SECTION 2. DEFINITIONS The following words and phrases as used in this Plan will have the following meanings unless a different meaning is clearly required by the context. Masculine pronouns will refer both to males and to females: 2.1 Applicable Year means the calendar year immediately preceding the year in which payment of the Company Bonus is payable pursuant to Section 6. For example, the Applicable Year for 2005 payout is January 1, 2004 through December 31, 2004. 2.2 Bonus Target means the percentage of Participant Earnings for each Participant as described in Section 5.6(a) below. 2.3 Committee means (i) with respect to the Executive Officers of Lilly, the Compensation Committee, the members of which will be selected by the Board of Directors of Lilly,


- 3 - from among its members; and (ii) with respect to all other Eligible Employees, the Compensation Committee of the Board of Directors or its designee. Each member of the Compensation Committee will, to the extent deemed necessary or appropriate by the Board of Directors, satisfy the requirements of an " outside director" within the meaning of Section 162(m) of the Internal Revenue Code. 2.4 Company means Eli Lilly and Company and its subsidiaries. 2.5 Company Bonus means the amount of bonus compensation payable to a Participant as described in Section 5 below. Notwithstanding the foregoing, however, the Committee may determine, in its sole discretion, to reduce the amount of a Participant' s Company Bonus if such Participant becomes eligible to participate in such other bonus program of the Company as may be specifically designated by the Committee. Such reduction may be by a stated percentage up to and including 100% of the Company Bonus. 2.6 Company Performance Bonus Multiple means the amount as calculated in Sections 5.3 and 5.4 below. 2.7 Disabled means a Participant who (i) has become eligible for a payment under The Lilly Extended Disability Plan, assuming eligibility to participate in that plan, or (ii) for those employees ineligible to participate in The Lilly Extended Disability Plan, has become otherwise " disabled" under the applicable disability benefit plan or program for the Participant, or, in the event that there is no such disability benefit plan or program, has become disabled under applicable local law. 2.8 Earnings Per Share (EPS) means the diluted earnings per share of the Company as reported in the Company' s " Consolidated Statements of Income" in accordance with generally accepted accounting principles and Section 3.4 below. 2.9 Earnings Per Share Growth (EPS Growth) means the percentage increase in EPS in the Applicable Year compared to the prior year. 2.10 Effective Date means January 1, 2004, as amended from time to time. 2.11 Eligible Employee means: a. with respect to employees of Lilly or its Puerto Rican subsidiaries, a person (1) who is employed as an employee by the Company on a scheduled basis of twenty (20) or more hours per week and is scheduled to work at least five (5) months per year; and (2) who is receiving compensation, including temporary illness pay under Lilly' s Illness Pay Program or similar short-term disability program, from the Company for services rendered as an employee. Notwithstanding anything herein to the contrary, the term " Eligible Employee" will not include: (1) a person who has reached Retirement with the Company;


- 4 - (2) a person who is Disabled; (3) a person who is a " leased employee" within the meaning of Section 414(n) of the Internal Revenue Code of 1986, as amended, or whose basic compensation for services on behalf of the Company is not paid directly by the Company; (4) a person who is classified as a " Fixed Duration Employee" , as that term is used by Lilly; (5) a person who is classified as a special status employee because his employment status is temporary, seasonal, or otherwise inconsistent with regular employment status; (6) a person who is eligible to participate in the Eli Lilly and Company Prem1er Rewards Plan or such other Company bonus or incentive program as may be specifically designated by the Committee or its designee; or (7) a person who submits to the Committee in writing a request that he not be considered eligible for participation in the Plan or is a member of the Board of Directors of Lilly unless he or she is also an Eligible Employee. (8) any other category of employees designated by the Committee in its discretion with respect to any Applicable Year. b. with respect to those employees who are employed by the Company, but not by Lilly or a Puerto Rican subsidiary, an employee of the Company designated by the Committee as a Participant in the Plan with respect to any Applicable Year. In its discretion, the Committee may designate Participants either on an individual basis or by determining that all employees in specified job categories, classifications, levels, subsidiaries or other appropriate classification will be Participants. c. Notwithstanding anything herein to the contrary, the term Eligible Employee will not include any person who is not so recorded on the payroll records of the Company, including any such person who is subsequently reclassified by a court of law or regulatory body as a common law employee of the Company. Consistent with the foregoing, and for purposes of clarification only, the term employee or Eligible Employee does not include any individual who performs services for the Company as an independent contractor or under any other non-employee classification. 2.12 Lilly means Eli Lilly and Company.


- 5 - 2.13 Lilly Executive Officer or Section 162(m) Participant means a Participant who has been designated by the Board of Directors of Lilly as an executive officer pursuant to Rule 3b-7 under the Securities Exchange Act of 1934, as amended. For purposes of this Plan, a Lilly Executive Officer will be considered a Section 162(m) Participant whether or not he is a " covered employee" under Section 162(m). 2.14 Participant means an Eligible Employee who is participating in the Plan. 2.15 Participant Earnings means (A) those amounts described below that are earned during the portion of the Applicable Year during which the employee is a Participant in the Plan: (i) regular compensation (including applicable deferred compensation amounts), overtime, shift premiums and other forms of additional compensation determined by and paid currently pursuant to an established formula or procedure; (ii) salary reduction contributions to The Lilly Employee Savings Plan or elective contributions under any similar tax-qualified plan that is intended to meet the requirements of Section 401(k) of the Internal Revenue Code or similar Company savings program; (iii) elective contributions to any cafeteria plan that is intended to meet the requirements of Section 125 of the Internal Revenue Code or other pre-tax contributions to a similar Company benefit plan; (iv) payments made under the terms of Lilly' s Illness Pay Program or other similar Company or government-required leave program during an Applicable Year to a Participant who is on approved leave of absence and is receiving one hundred percent (100%) of his base pay; and (v) other legally-mandated or otherwise required pre-tax deductions from a Participant' s base salary. (B) The term " Participant Earnings" does not include: (i) compensation paid in lieu of earned vacation; (ii) amounts contributed to the Retirement Plan or any other qualified plan, except as provided in clause (A)(ii), above; (iii) payments made under the terms of Lilly' s Illness Pay Program or other similar Company or government-required leave program during an Applicable Year to a Participant who is on approved leave of absence and is receiving less than the full amount of his base pay; (iv) amounts paid under this Plan or other bonus or incentive program of the Company; (v) payments made under The Lilly Severance Pay Plan or any other


- 6 - severance-type benefit (whether company-sponsored or mandated by law) arising out of or relating to a Participant' s termination of employment; (vi) payments based upon the discretion of the Company; (vii) in the case of a person employed by a Lilly subsidiary, foreign service, cost of living, or other allowances that would not be paid were the person employed by Lilly; (viii) amounts paid as commissions, sales bonuses, or Market Premiums (as defined under the Retirement Plan); or (ix) earnings with respect to the exercise of stock options or vesting of restricted stock. 2.16 Performance Benchmarks mean the amounts as calculated in Section 5.3 below. The Performance Benchmarks will be established after considering expected pharmaceutical peer group performance and based on performance measures as described in Section 5.2. 2.17 Plan means The Eli Lilly and Company Bonus Plan as set forth herein and as hereafter modified or amended from time to time. The Plan is an incentive compensation program and is not subject to the Employee Retirement Income Security Act of 1974, as amended (" ERISA" ), pursuant to Department of Labor Regulation Section 2510.3. 2.18 Plant Closing means the closing of a plant site or other Company location that directly results in termination of employment. 2.19 Reduction in Workforce means the elimination of a work group, functional or business unit or other broadly applicable reduction in job positions that directly results in termination of employment. 2.20 Retirement means the cessation of employment upon the attainment of age fifty-five with ten years of service (55 and 10) or at least eighty (80) points, as determined by the provisions of the Retirement Plan as amended from time to time, assuming eligibility to participate in that plan. For persons who are not participants in the Retirement Plan, Retirement means the cessation of employment as a retired employee under the applicable retirement benefit plan or program as provided by the Company or applicable law. 2.21 Retirement Plan means The Lilly Retirement Plan. 2.22 Sales means, ...