Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
On February 9, 2021, Eli Lilly and Company (the "Company" or "Lilly") announced
that the Board of Directors of the Company elected Anat Ashkenazi, age 48, as
senior vice president and chief financial officer of the Company. Since joining
Lilly in 2001, Ms. Ashkenazi has held a range of roles across strategy and
finance. Most recently, she served as senior vice president, controller and
chief financial officer of Lilly Research Laboratories. In this role, she
oversaw the chief financial officers of the Company's commercial business areas
(BioMedicine, Diabetes, Oncology, and International), as well as those for
research and development, manufacturing and quality, G&A, and accounting and
financial reporting functions. She also led the corporate strategic planning
team and business transformation office. She previously served as vice
president, finance and chief financial officer, Lilly Diabetes and Lilly Global
Manufacturing and Quality, and chief financial officer, Lilly Oncology.
In connection with her election as senior vice president and chief financial
officer, effective February 9, 2021, Ms. Ashkenazi will receive an annualized
base salary of $900,000 and will be eligible for an annualized target bonus of
$900,000. In addition, Ms. Ashkenazi received equity awards with an aggregate
target grant date value (calculated based on the most recent closing price of
the Company's common stock) of $2,200,000 in the form of (i) a shareholder value
award with a target value of $770,000 for the 2021-2023 performance period,
(ii) a relative value award with a target value of $770,000 for the 2021-2023
performance period, and (iii) a performance award with a target value of
$660,000 for the 2021-2022 performance period.
There are no arrangements or understandings between Ms. Ashkenazi and any person
pursuant to which Ms. Ashkenazi was selected as an officer. There is no family
relationship between Ms. Ashkenazi and any director or executive officer of the
Company, and Ms. Ashkenazi is not a party to any transaction subject to
Section 404(a) of Regulation S-K involving the Company or any of its
subsidiaries.
On February 9, 2021, the Company also announced that Joshua L. Smiley, senior
vice president and chief financial officer of the Company, informed the Company
of his resignation from the Company. The Company was recently made aware of
allegations of an inappropriate personal relationship between Mr. Smiley and a
Lilly employee. Lilly immediately engaged external counsel to conduct a
thorough, independent investigation. That investigation revealed consensual
though inappropriate personal communications between Mr. Smiley and certain
Lilly employees and behavior that Lilly leadership concluded exhibited poor
judgment by Mr. Smiley. Lilly holds all employees accountable to its core values
and strongly believes its executive officers carry an even higher burden in
ensuring those values are upheld. Mr. Smiley did not meet that standard.
Mr. Smiley's conduct in question was not related to financial controls,
financial statements or any other business matters or judgments.
In connection with Mr. Smiley's resignation, he and the Company entered into a
Separation Agreement (the "Separation Agreement"), which provides that
Mr. Smiley immediately resign from his position as senior vice president and
chief financial officer of the Company, as well as forego all of his $1 million
2020 cash bonus, approximately $3 million of his 2018-2020 shareholder value
award, and all other current and future equity incentive awards, totaling over
$20 million at target value (calculated based on the most recent closing price
of the Company's common stock). Mr. Smiley will be available to the Company's
chief executive officer Dave Ricks and Ms. Ashkenazi through July 2021 to
facilitate the transition of his responsibilities, at reduced cash compensation
of $9,000 every two weeks. The Separation Agreement includes customary
provisions regarding confidentiality and a release of claims against the
Company, as well as a 24-month non-solicitation agreement and an 18-month
non-competition agreement.
The foregoing is a summary description of certain terms of the Separation
Agreement and, by its nature, is incomplete. It is qualified in its entirety by
the full text of the Separation Agreement, a copy of which will be filed with
the Company's Quarterly Report on Form 10-Q for the quarter ending March 31,
2021.
A copy of the press release announcing Ms. Ashkenazi's election and Mr. Smiley's
resignation is attached as Exhibit 99.1 to this Current Report on Form 8-K.
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Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
On February 4, 2021, the Board of Directors of the Company approved an amendment
to the Company's bylaws (the "Bylaws"), effective February 9, 2021, to remove a
provision providing the temporary authority to assume the duties and exercise
the powers of the chief executive officer to specified officers in the event of
the sudden death or incapacity of the incumbent. Going forward, the Company's
Board of Directors will exercise its discretion to determine an appropriate
course of action should such a circumstance arise.
The amendment is set forth below. Deletions are indicated by strikeouts. A
marked version of the Bylaws is attached as Exhibit 3.2 to this Current Report
on Form 8-K and the foregoing description is qualified by reference to the full
text of the Bylaws.
SECTION 3.7. Chief Executive Officer. The Chief Executive Officer shall, subject
to the control of the Board of Directors, have general supervision over the
management and direction of the business of the Corporation. He or she shall see
that all orders and resolutions of the Board of Directors are carried into
effect. The Chief Executive Officer shall have such other powers and perform
such other duties as are assigned to him or her by the Bylaws or the Board of
Directors. At any time in which the Chief Executive Officer is unable to
discharge the powers and duties of the office, then until such time as the Board
shall appoint a new Chief Executive Officer or determines that the Chief
Executive Officer is able to resume office, temporary authority to perform such
duties and exercise such powers shall be granted in the following manner:
(a) First, to the President; or if he or she is unable to discharge such
powers and duties,
(b) To the Chief Financial Officer; or if he or she is unable to discharge
such powers and duties,
(c) To the executive officer serving as chief scientific officer; or if he or
she is unable to discharge such powers and duties,
(d) To the executive officer in charge of the Corporation's largest business
unit, measured by total revenue on a consolidated basis for the most
recently completed fiscal year.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit
No. Description
3.1 Eli Lilly and Company Bylaws, as amended effective February 9, 2021.
3.2 Eli Lilly and Company Bylaws, marked to show amendments effective
February 9, 2021.
99.1 Press Release of Eli Lilly and Company, dated February 9, 2021.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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