<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 1, 1995)
$500,000,000
ELI LILLY AND COMPANY
MEDIUM-TERM NOTES
------------------------
Due More Than Nine Months From Date of Issue
------------------------
Eli Lilly and Company (the 'Company') may offer from time to time its
Medium-Term Notes having an aggregate initial public offering price of up to
$500,000,000 or the equivalent thereof in other currencies, including composite
currencies such as the European Currency Unit (the 'Specified Currency'). See
'Important Currency Exchange Information.' The interest rate on each Note will
be either a fixed rate established by the Company at the date of issue of such
Note, which may be zero in the case of certain Original Issue Discount Notes, or
a floating rate as set forth therein and specified in the applicable Pricing
Supplement. A Fixed Rate Note may pay a level amount in respect of both interest
and principal amortized over the life of the Note (an 'Amortizing Note').
Interest on each Fixed Rate Note is payable each March 1 and September 1
and at maturity. Interest on each Floating Rate Note is payable on the dates set
forth herein and in the applicable Pricing Supplement. Amortizing Notes will pay
principal and interest semiannually each March 1 and September 1, or quarterly
each March 1, June 1, September 1 and December 1, and at maturity. Each Fixed
Rate Note will mature on any day after nine months from the date of issue, as
set forth in the applicable Pricing Supplement. Each Floating Rate Note will
mature on an Interest Payment Date after nine months from the date of issue, as
set forth in the applicable Pricing Supplement. See 'Description of Notes.' If
specified in the applicable Pricing Supplement, at the option of the Company,
the Stated Maturity (as defined hereunder) of the Notes may be extended for one
or more whole year periods up to but not beyond the Final Maturity Date (as
defined hereinafter) set forth in such Pricing Supplement. If specified in the
applicable Pricing Supplement, the Notes may be redeemed by the Company or the
holder prior to maturity. The Notes will be issued in fully registered form in
denominations of $1,000 (or, in the case of Notes not denominated in U.S.
dollars, the equivalent thereof in the Specified Currency, rounded down to the
nearest 1,000 units of the Specified Currency) or any amount in excess thereof
which is an integral multiple of $1,000 (or, in the case of Notes not
denominated in U.S. dollars, 1,000 units of the Specified Currency). Any terms
relating to Notes being denominated in foreign currencies or composite
currencies will be as set forth in the applicable Pricing Supplement. Each Note
will be represented either by a Global Note registered in the name of a nominee
of The Depository Trust Company (the 'Depositary'), as Depositary (a 'Book-Entry
Note'), or by a certificate issued in definitive form (a 'Certificated Note'),
as set forth in the applicable Pricing Supplement. Beneficial interests in
Global Notes representing Book-Entry Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary and
its participants. Book-Entry Notes will not be issuable as Certificated Notes
except under the circumstances described in the accompanying Prospectus.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
Price to Agents' Proceeds to
Public(1) Commissions(2) Company(2)(3)
------------- -------------------- ---------------------------
<S> <C> <C> <C>
Per Note...................................... 100.000% .125%-.750% 99.875%-99.250%
Total(4)...................................... $500,000,000 $625,000 - $3,750,000 $499,375,000 - $496,250,000
</TABLE>
- ------------
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amount. If the Company issues any
Notes at a discount from or at a premium over its principal amount, the
Price to Public of any Note issued at a discount or premium will be set
forth in the applicable Pricing Supplement.
(2) The commission payable to an Agent for each Note sold through such Agent
shall be computed based upon the Price to Public of such Note and shall
depend on such Note's maturity; provided, however, that commissions with
respect to Notes having a maturity of 30 years or greater will be
negotiated. The Company may also sell Notes to an Agent, as principal, at
negotiated discounts, for resale to investors or other purchasers. The
Company may also sell Notes directly or indirectly on its own behalf, or
through other Agents. If the Company grants any discount or pays any
commission, such discount or commission will be disclosed in the
applicable Pricing Supplement.
(3) Before deducting expenses payable by the Company estimated at $500,000.
(4) Or the equivalent thereof in other currencies, including composite
currencies.
------------------------
Offers to purchase the Notes are being solicited from time to time by
Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. (the 'Agents') on
behalf of the Company, each of which has agreed to use its reasonable best
efforts to solicit purchases of such Notes. The Company has agreed to indemnify
the Agents against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. The Company may also appoint additional
agents from time to time to solicit sales of the Notes; provided that any such
solicitation and sale of Notes shall be on the same terms and conditions as
Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. have agreed to. The
Company may also sell Notes to an Agent acting as principal for its own account
for resale to one or more investors or other purchasers at varying prices
related to prevailing market prices at the time of resale or otherwise, to be
determined by such Agent. The Company may also solicit offers to purchase and
sell Notes directly on its own behalf, through any subsidiary or through an
electronic auction system at any time, upon any terms and to any person. No
termination date for the offering of the Notes has been established. If the
Company grants any discount or pays any commission, such discount or commission
will be disclosed in the applicable Pricing Supplement. The Company or the
Agents may reject any order in whole or in part. The Notes may be listed on one
or more securities exchanges. There can be no assurance that the Notes offered
hereby will be sold or that there will be a secondary market for the Notes. See
'Plan of Distribution.'
------------------------
MORGAN STANLEY & CO. GOLDMAN, SACHS & CO.
INCORPORATED
November 9, 1995
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY AGENT. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING
PROSPECTUS. THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SECURITIES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
IMPORTANT CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for the Notes in the Specified Currency, and
payments of principal, premium, if any, and interest on, such Notes will be made
in the Specified Currency, unless otherwise provided in the applicable Pricing
Supplement. Currently, there are limited facilities in the United States for the
conversion of U.S. dollars into foreign currencies and vice versa. In addition,
most banks do not currently offer non-U.S. dollar denominated checking or
savings account facilities in the United States. Accordingly, unless otherwise
specified in a Pricing Supplement or unless alternative arrangements are made,
payment of principal, premium, if any, and interest on Notes in a Specified
Currency other than U.S. dollars will be made to an account at a bank outside
the United States. See 'Description of Notes' and 'Foreign Currency Risks.'
If the applicable Pricing Supplement provides for payments of principal of
and interest on a non-U.S. dollar denominated Note to be made in U.S. dollars,
the conversion of the Specified Currency into U.S. dollars will be handled by
Citibank, N.A., in its capacity as Exchange Rate Agent. The costs of such
conversion will be borne by the holder of a Note (the 'Holder') through
deductions from such payments.
References herein to 'U.S. dollars' or 'U.S. $' or '$' are to the currency
of the United States of America.
------------------------
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Securities set forth in
the Prospectus, to which reference is hereby made. The particular terms of the
Notes sold pursuant to any pricing supplement (a 'Pricing Supplement') will be
described therein. The terms and conditions set forth in 'Description of Notes'
will apply to each Note unless otherwise specified herein or in the applicable
Pricing Supplement and in such Note.
If any Note is not to be denominated in U.S. dollars, the applicable
Pricing Supplement will specify the currency or currencies, including composite
currencies such as the European Currency Unit ('ECU'), in which the principal,
premium, if any, and interest with respect to such Note are to be paid, along
with any other terms relating to the non-U.S. dollar denomination, including
exchange rates for the Specified Currency as against the U.S. dollar at selected
times during the last five years, and any exchange controls affecting such
Specified Currency. See 'Foreign Currency Risks.'
GENERAL
The Notes issued under the Indenture referred to in the accompanying
Prospectus may be issued from time to time, in an aggregate principal amount of
up to $500,000,000 or the equivalent thereof in one or more foreign or composite
currencies. The aggregate principal amount may be increased from
S-2
<PAGE>
time to time as authorized by, or pursuant to authority delegated by, the Board
of Directors of the Company. The Indenture does not limit the aggregate
principal amount of Notes which may be issued thereunder and does not limit the
amount of additional indebtedness the Company may incur. As of the date of this
Prospectus Supplement, $185,750,000 aggregate principal amount of Medium-Term
Notes are outstanding under the Indenture. For the purpose of this paragraph,
(i) the principal amount of any Original Issue Discount Note (as defined below)
means the Issue Price (as defined below) of such Note and (ii) the principal
amount of any Note issued in a foreign currency or composite currency means
the U.S. dollar equivalent on the Issue Date of the Issue Price of such Note.
The Notes will rank pari passu with all other unsecured and unsubordinated
indebtedness of the Company.
Fixed Rate Notes, Amortizing Notes and Original Issue Discount Notes will
mature on any day after nine months from the original date of issuance (the
'Issue Date'), as set forth in the applicable Pricing Supplement. Floating Rate
Notes will mature on an Interest Payment Date (as defined below) after nine
months from the Issue Date, as set forth in the applicable Pricing Supplement.
Except as may be specified for Notes denominated in foreign or composite
currencies or as otherwise provided in the Pricing Supplement, the Notes will be
issued only in fully registered form in denominations of U.S. $1,000 or any
amount in excess thereof which is an integral multiple of U.S. $1,000.
Notes denominated in a Specified Currency other than U.S. dollars will be
issued in denominations of the equivalent of U.S. $1,000 (rounded down to an
integral multiple of 1,000 units of such Specified Currency), or any amount in
excess thereof which is an integral multiple of 1,000 units of such Specified
Currency, as determined by reference to the noon dollar buying rate in New York
City for cable transfers of such Specified Currency published by the Federal
Reserve Bank of New York (the 'Market Exchange Rate') on the Business Day (as
defined below) immediately preceding the Issue Date; provided, however, in the
case of ECUs, the Market Exchange Rate shall be the rate of exchange determined
by the Commission of the European Communities (or any successor thereto) as
published in the Official Journal of the European Communities, or any successor
publication, on the Business Day immediately preceding the Issue Date.
The Notes will be offered on a continuous basis, and each Note will be
issued initially as either a Book-Entry Note or a Certificated Note. Only Notes
payable solely in U.S. dollars may be issued as Book-Entry Notes. Except as set
forth in the Prospectus under 'Description of Securities -- Global Securities,'
Book-Entry Notes will not be issuable as Certificated Notes. See 'Book-Entry
System' below.
The Notes may be presented for payment of principal and interest, transfer
of the Notes will be registrable and the Notes will be exchangeable at the
agency in the Borough of Manhattan, The City of New York, maintained by the
Company for such purpose; provided, that Book-Entry Notes will be exchangeable
only in the manner and to the extent set forth under 'Description of
Securities -- Global Securities' in the Prospectus. On the date hereof, the
agent for the payment, transfer and exchange of the Notes (the 'Paying Agent')
is Citibank, N.A., acting through its corporate trust office at 111 Wall Street,
New York, New York 10043.
The applicable Pricing Supplement will specify the price (the 'Issue
Price') of each Note to be sold pursuant thereto (unless such Note is to be sold
at 100% of its principal amount), the interest rate or interest rate formula,
maturity, currency, principal amount, redemption provisions, put provisions and
any other terms on which each such Note will be issued.
'Business Day' means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law or regulation to close in The City of New York and (i) with
respect to LIBOR Notes (as defined below), in the City of London, (ii) with
respect to Notes denominated in a Specified Currency other than U.S. dollars,
Australian dollars or ECUs, in the capital city of the country of the Specified
Currency, (iii) with respect to Notes denominated in Australian dollars, in both
Sydney and Melbourne and (iv) with respect to Notes denominated in ECUs, in
Luxembourg and that is not a non-ECU clearing day, as determined by the ECU
Banking Association in Paris.
An 'Interest Payment Date' with respect to any Note shall be a date on
which, under the terms of such Note, regularly scheduled interest shall be
payable.
S-3
<PAGE>
'London Banking Day' means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
'Original Issue Discount Note' means any Note that provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof pursuant to the Indenture.
The 'Record Date' with respect to any Interest Payment Date shall be the
date 15 calendar days prior to such Interest Payment Date, whether or not such
date shall be a Business Day.
PAYMENT CURRENCY
If the applicable Pricing Supplement provides for payments of interest,
premium, if any, and principal on non-U.S. dollar denominated Notes to be made,
at the option of the Holders, in U.S. dollars, conversion of the Specified
Currency into U.S. dollars will be based on the highest bid quotation in The
City of New York received by the exchange rate agent (the 'Exchange Rate Agent')
at approximately 11:00 A.M., New York City time, on the same Business Day
preceding the applicable payment date from three recognized foreign exchange
dealers (one of which may be the Exchange Rate Agent) for the purchase by the
quoting dealer of the Specified Currency for U.S. dollars for settlement on such
payment date in the aggregate amount of the Specified Currency payable to the
Holders and at which the applicable dealer commits to execute a contract. If
such bid quotations are not available, payments will be made in the Specified
Currency. All currency exchange costs will be borne by the Holders by deductions
from such payments.
Except as set forth below, if the principal of, premium, if any, or
interest on, any Note is payable in a Specified Currency other than U.S. dollars
and such Specified Currency is not available to the Company for making payments
thereof due to the imposition of exchange controls or other circumstances beyond
the control of the Company or is no longer used by the government of the country
issuing such currency or for the settlement of transactions by public
institutions within the international banking community, then the Company will
be entitled to satisfy its obligations to Holders by making such payments in
U.S. dollars on the basis of the Market Exchange Rate on the date of such
payment or, if the Market Exchange Rate is not available on such date, as of the
most recent available date. Any payment made under such circumstances in U.S.
dollars where the required payment is in a Specified Currency other than U.S.
dollars will not constitute an Event of Default.
If payment in respect of a Note is required to be made in ECUs and ECUs are
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control or are no longer used in the European Monetary
System, then all payments in respect of such Note shall be made in U.S. dollars
until ECUs are again available or so used. The amount of each payment in U.S.
dollars shall be computed on the basis of the equivalent of the ECU in U.S.
dollars, determined as described below, as of the second Business Day prior to
the date on which such payment is due.
The equivalent of the ECU in U.S. dollars as of any date shall be
determined by the Company or its agent on the following basis. The component
currencies of the ECU for this purpose (the 'Components') shall be the currency
amounts that were components of the ECU as of the last date on which the ECU was
used in the European Monetary System. The equivalent of the ECU in U.S. dollars
shall be calculated by aggregating the U.S. dollar equivalents of the
Components. The U.S. dollar equivalent of each of the Components shall be
determined by the Company or such agent on the basis of the most recently
available Market Exchange Rates for such Components.
If the official unit of any Component is altered by way of combination or
subdivision, the number of units of that currency as a Component shall be
divided or multiplied in the same proportion. If two or more Components are
consolidated into a single currency, the amounts of those currencies as
Components shall be replaced by an amount in such single currency equal to the
sum of the amounts of the consolidated component currencies expressed in such
single currency. If any Component is divided into two or more currencies, the
amount of the original component currency shall be replaced by the amounts of
such two or more currencies, the sum of which shall be equal to the amount of
the original component currency.
S-4
<PAGE>
All determinations referred to above made by the Company or an agent of the
Company shall be at the sole discretion of the Company or such agent and shall,
in the absence of manifest error, be conclusive for all purposes and binding on
Holders.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; provided that the
interest payable upon maturity, redemption or repayment (whether or not the date
of maturity, redemption or repayment is an Interest Payment Date) will be
payable to the person to whom principal is payable. The initial interest payment
on a Note will be made on the first Interest Payment Date falling after the date
the Note is issued; provided, however, that payments of interest (or, in the
case of an Amortizing Note, principal and interest) on a Note issued less than
15 calendar days before an Interest Payment Date will be paid on the next
succeeding Interest Payment Date to the Holder of record on the Record Date with
respect to such succeeding Interest Payment Date.
U.S. dollar payments of interest, other than interest payable at maturity
(or on the date of redemption or repayment, if a Note is redeemed or repaid by
the Company prior to maturity), will be made by check mailed to the address of
the person entitled thereto as shown on the Note register. U.S. dollar payments
of principal, premium, if any, and interest upon maturity, redemption or
repayment will be made in immediately available funds against presentation and
surrender of the Note. Notwithstanding the foregoing, (a) the Depositary, as
Holder of Book-Entry Notes, shall be entitled to receive payments of interest by
wire transfer of immediately available funds and (b) a Holder of $10,000,000 or
more in aggregate principal amount of Certificated Notes having the same
Interest Payment Date shall be entitled to receive payments of interest by wire
transfer of immediately available funds upon written request to the Paying Agent
not later than 15 calendar days prior to the applicable Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement, payments
of principal, premium, if any, and interest on Notes in a Specified Currency
other than U.S. dollars will be made by wire transfer of immediately available
funds to an account maintained by the Holder with a bank located outside the
United States and the Holder of such Notes shall provide the Paying Agent with
the appropriate wire transfer instructions not later than 15 calendar days prior
to the applicable payment date. If such wire transfer instructions are not so
provided, payments of interest on such Notes will be made by check payable in
such Specified Currency mailed to the address of the person entitled thereto as
such address shall appear in the Note register.
Certain Notes, including Original Issue Discount Notes, may be considered
to be issued with original issue discount, which beneficial owners of such Notes
must include in income for United States federal income tax purposes at a
constant rate. See 'Certain Federal Tax Consequences -- Notes with Original
Issue Discount' below. Unless otherwise specified in the applicable Pricing
Supplement, if the principal of any Original Issue Discount Note is declared to
be due and payable immediately as described under 'Description of
Securities -- Default and Certain Rights on Default' in the Prospectus, the
amount of principal due and payable with respect to such Note shall be limited
to the aggregate principal amount of such Note multiplied by the sum of its
Issue Price (expressed as a percentage of aggregate principal amount) plus the
original issue discount amortized from the Issue Date to the date of declaration
(also expressed as a percentage of the aggregate principal amount), which
amortization shall be calculated using the 'interest method' (computed in
accordance with generally accepted accounting principles in effect on the date
of declaration). Special considerations applicable to any such Notes will be set
forth in the applicable Pricing Supplement.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the Issue Date at the annual
rate stated on the face thereof until the principal thereof is paid or made
available for payment. Such interest will be computed on the basis of a 360-day
year of twelve 30-day months. Payments of interest on Fixed Rate Notes other
than Amortizing Notes will be made semiannually on each March 1 and September 1
and at maturity or
S-5
<PAGE>
upon any earlier redemption or repayment. Payments of principal and interest on
Amortizing Notes, which are securities for which payments of principal and
interest are made in equal installments over the life of the security, will be
made either quarterly on each March 1, June 1, September 1 and December 1 or
semiannually on each March 1 and September 1, as set forth in the applicable
Pricing Supplement, and at maturity or upon any earlier redemption or repayment.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. A table setting forth repayment information in respect of each
Amortizing Note will be provided to the original purchaser and will be
available, upon request, to subsequent Holders.
If any Interest Payment Date for any Fixed Rate Note would fall on a day
that is not a Business Day, the interest payment shall be postponed to the next
day that is a Business Day, and no interest on such payment shall accrue for the
period from and after the Interest Payment Date. If the maturity date (or date
of redemption or repayment) of any Fixed Rate Note would fall on a day that is
not a Business Day, the payment of interest and principal (and premium, if any)
may be made on the next succeeding Business Day, and no interest on such payment
shall accrue for the period from and after the maturity date (or date of
redemption or repayment).
Interest payments for Fixed Rate Notes will include accrued interest from
the Issue Date or from the last date in respect of which interest has been paid,
as the case may be, to, but excluding, the Interest Payment Date or the date of
maturity or earlier redemption or repayment, as the case may be. The interest
rates the Company will agree to pay on newly-issued Fixed Rate Notes are subject
to change without notice by the Company from time to time, but no such change
will affect any Fixed Rate Notes theretofore issued or that the Company has
agreed to issue.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the Issue Date until the
principal thereof is paid or made available for payment at a rate determined by
reference to an interest rate basis (the 'Base Rate'), which may be adjusted by
a Spread or Spread Multiplier (each as defined below). The applicable Pricing
Supplement will designate one of the following Base Rates as applicable to each
Floating Rate Note: (a) the CD Rate (a 'CD Rate Note'), (b) the Commercial Paper
Rate (a 'Commercial Paper Rate Note'), (c) the CMT Rate (a 'CMT Rate Note'), (d)
the Federal Funds Rate (a 'Federal Funds Rate Note'), (e) LIBOR (a 'LIBOR
Note'), (f) the Prime Rate (a 'Prime Rate Note'), (g) the Treasury Rate (a
'Treasury Rate Note') or (h) such other Base Rate as is set forth in such
Pricing Supplement and in such Floating Rate Note. The 'Index Maturity' for any
Floating Rate Note is the period of maturity of the instrument or obligation
from which the Base Rate is calculated and will be specified in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, or (ii) multiplied by
the Spread Multiplier, if any. The 'Spread' is the number of basis points (one
one-hundredth of a percentage point) specified in the applicable Pricing
Supplement to be added to or subtracted from the Base Rate for such Floating
Rate Note, and the 'Spread Multiplier' is the percentage specified in the
applicable Pricing Supplement to be applied to the Base Rate for such Floating
Rate Note.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or ceiling,
on the rate of interest which may accrue during any interest period ('Maximum
Interest Rate'); and (ii) a minimum limitation, or floor, on the rate of
interest which may accrue during any interest period ('Minimum Interest Rate').
In addition to any Maximum Interest Rate which may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on a Floating Rate
Note will in no event be higher than the maximum rate permitted by New York law,
as the same may be modified by the United States law of general application.
Under current New York law, the maximum rate of interest, subject to certain
exceptions, for any loan in an amount less than $250,000 is 16% and for any loan
in the amount of $250,000 or more but less than $2,500,000 is 25% per annum on a
simple interest basis. These limits do not apply to loans of $2,500,000 or more.
S-6
<PAGE>
The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually or annually (such period being the
'Interest Reset Period' for such Note, and the first day of each Interest Reset
Period being an 'Interest Reset Date'), as specified in the applicable Pricing
Supplement. Unless otherwise specified in the Pricing Supplement, the Interest
Reset Date will be, in the case of Floating Rate Notes (other than Treasury Rate
Notes) which reset daily, each Business Day, in the case of Floating Rate Notes
(other than Treasury Rate Notes) which reset weekly, the Wednesday of each week,
in the case of Treasury Rate Notes which reset weekly, the Tuesday of each week,
in the case of Floating Rate Notes which reset monthly, the third Wednesday of
each month, in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December, in the case of Floating Rate
Notes which reset semiannually, the third Wednesday of two months of each year,
as specified in the applicable Pricing Supplement, and in the case of Floating
Rate Notes which reset annually, the third Wednesday of one month of each year,
as specified in the applicable Pricing Supplement; provided, however, that (a)
the interest rate in effect from the Issue Date to the first Interest Reset Date
with respect to a Floating Rate Note will be the initial interest rate set forth
in the applicable Pricing Supplement (the 'Initial Interest Rate') and (b) the
interest rate in effect for the fifteen days immediately prior to maturity,
redemption or payment will be that in effect on the fifteenth day preceding such
maturity, redemption or repayment date. If any Interest Reset Date for any
Floating Rate Note would otherwise be a day that is not a Business Day, such
Interest Reset Date shall be postponed to the next succeeding Business Day,
except that in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Reset Date shall be the next preceding
Business Day.
Except as provided below, unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in the
case of Notes with a daily, weekly or monthly Interest Reset Date, on the third
Wednesday of each month or on the third Wednesday of March, June, September and
December, as specified in the applicable Pricing Supplement; (ii) in the case of
Notes with a quarterly Interest Reset Date, on the third Wednesday of March,
June, September and December; (iii) in the case of Notes with a semiannual
Interest Reset Date, on the third Wednesday of the two months specified in the
applicable Pricing Supplement; and (iv) in the case of Notes with an annual
Interest Reset Date, on the third Wednesday of the month specified in the
applicable Pricing Supplement. If any Interest Payment Date (including the
maturity date or any earlier redemption or repayment date) for any Floating Rate
Note would fall on a day that is not a Business Day with respect to such Note,
such Interest Payment Date will be the following day that is a Business Day with
respect to such Note, except that, in the case of a LIBOR Note, if such Business
Day is in the next succeeding calendar month, such Interest Payment Date shall
be the immediately preceding day that is a Business Day with respect to such
LIBOR Note.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes (except Floating Rate Notes on which interest
is reset daily or weekly) shall be the amount of interest accrued from and
including the Issue Date or from and including the last date in respect of which
interest has been paid, as the case may be, to, but excluding, the Interest
Payment Date. In the case of a Floating Rate Note on which interest is reset
daily or weekly, interest payments shall be the amount of interest accrued from
and including the Issue Date or from but excluding the last date in respect of
which interest has been paid, as the case may be, to and including the Record
Date immediately preceding such Interest Payment Date, except that at maturity
or earlier redemption or repayment, the interest payable will include interest
accrued to, but excluding, the maturity, redemption or repayment date, as the
case may be.
With respect to a Floating Rate Note, accrued interest shall be calculated
by multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. The interest factor for each such day is computed by dividing the
interest rate applicable to such day by 360, in the case of CD Rate Notes,
Commercial Paper Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime
Rate Notes or by the actual number of days in the year, in the case of Treasury
Rate Notes and CMT Rate Notes. All percentages used in or resulting from any
calculation of the rate of interest on a Floating Rate Note will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point
(.0000001), with five one-millionths of a percentage point rounded
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upward, and all dollar amounts used in or resulting from such calculation on
Floating Rate Notes will be rounded to the nearest cent, with one-half cent
rounded upward. The interest rate in effect on any Interest Reset Date will be
the applicable rate as reset on such date. The interest rate applicable to any
other day is the interest rate from the immediately preceding Interest Reset
Date (or, if none, the Initial Interest Rate).
The applicable Pricing Supplement shall specify a calculation agent (the
'Calculation Agent') with respect to any issue of Floating Rate Notes. Upon the
request of the Holder of any Floating Rate Note, the Calculation Agent will
provide the interest rate then in effect and, if determined, the interest rate
which will become effective on the next Interest Reset Date with respect to such
Floating Rate Note.
The 'Interest Determination Date' pertaining to an Interest Reset Date for
CD Rate Notes, Commercial Paper Rate Notes, CMT Rate Notes, Federal Funds Rate
Notes and Prime Rate Notes will be the second Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a LIBOR Note will be the second London Banking Day preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a Treasury Rate Note will be the day of the week in which such
Interest Reset Date falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless that
day is a legal holiday, in which case the auction is normally held on the
following Tuesday, but such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Interest Determination Date pertaining to the Interest
Reset Date occurring in the next succeeding week. If an auction falls on a day
that is an Interest Reset Date, such Interest Reset Date will be the next
following Business Day.
The 'Calculation Date,' where applicable, pertaining to an Interest
Determination Date will be the earlier of the tenth calendar day after such
Interest Determination Date or the next succeeding Record Date after such
Interest Determination Date or, if either such day is not a Business Day, the
next such Business Day.
Interest rates will be determined by the Calculation Agent as follows:
CD RATE NOTES
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any) specified
in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, 'CD Rate'
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in 'Statistical Release H.15(519), Selected Interest
Rates,' or any successor publication of the Board of Governors of the Federal
Reserve System ('H.15(519)') under the heading 'CDs (Secondary Market),' or, if
not so published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate on
such Interest Determination Date for negotiable certificates of deposit having
the Index Maturity designated in the applicable Pricing Supplement as published
by the Federal Reserve Bank of New York in its daily statistical release
'Composite 3:30 P.M. Quotations for U.S. Government Securities' (the 'Composite
Quotations') under the heading 'Certificates of Deposit.' If such rate is not
yet published in either H.15(519) or the Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such
Interest Determination Date, for negotiable certificates of deposit with a
remaining maturity closest to the Index Maturity designated in the Pricing
Supplement in an amount that is representative for a single transaction in that
market at that time of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for negotiable certificates of deposit of major United States money center
banks of the highest credit standing in the market for negotiable certificates
of deposit; provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not
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quoting as set forth above, the rate of interest in effect for the applicable
period will be the same as the CD Rate for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the rate of
interest payable on the CD Rate Notes for which such CD Rate is being determined
shall be the Initial Interest Rate).
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any) specified in the Commercial Paper Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
'Commercial Paper Rate' means, with respect to any Interest Determination Date,
the Money Market Yield (as defined below) of the rate on such date for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement, as such rate shall be published in H.15(519), under the heading
'Commercial Paper.' In the event that such rate is not published prior to 9:00
A.M., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate shall be the Money Market
Yield of the rate on such Interest Determination Date for commercial paper
having the specified Index Maturity as published in Composite Quotations under
the heading 'Commercial Paper.' If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not yet available in either H.15(519) or Composite
Quotations, then the Commercial Paper Rate shall be the Money Market Yield of
the arithmetic mean of the offered rates as of 11:00 A.M., New York City time,
on such Interest Determination Date of three leading dealers of commercial paper
in The City of New York selected by the Calculation Agent for commercial paper
of the specified Index Maturity, placed for an industrial issuer whose bond
rating is 'AA,' or the equivalent, from a nationally recognized rating agency;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting offered rates as mentioned in this sentence, the rate of
interest in effect for the applicable period will be the same as the Commercial
Paper Rate for the immediately preceding Interest Reset Period (or, if there was
no such Interest Reset Period, the rate of interest payable on the Commercial
Paper Rate Notes for which such Commercial Paper Rate is being determined shall
be the Initial Interest Rate).
'Money Market Yield' shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D x 360 x 100
-------------
360 - (D x M)
where 'D' refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and 'M' refers to the actual
number of days in the interest period for which interest is being calculated.
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread or Spread Multiplier, if any) specified
in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, 'CMT Rate'
means, with respect to any Interest Determination Date, the rate displayed on
the Designated CMT Telerate Page under the caption '. . . Treasury Constant
Maturities. . .Federal Reserve Board Release H.15. . .Mondays Approximately 3:45
P.M.,' under the column for Index Maturity specified in the applicable Pricing
Supplement for (i) if the Designated CMT Telerate Page is 7055, the rate on such
Interest Determination Date and (ii) if the Designated CMT Telerate Page is
7052, the week, or the month, as applicable, ended immediately preceding the
week in which the related Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page or is not displayed by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate for such Interest
Determination Date will be such treasury constant maturity rate for the
specified Index Maturity as published in the relevant H.15(519). If such rate is
no longer published or is not published by 3:00 P.M., New York City time, on the
related Calculation Date, then the CMT Rate on such Interest Determination Date
will be such treasury
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constant maturity rate for the specified Index Maturity (or other United States
Treasury rate for the specified Index Maturity) for the Interest Determination
Date with respect to such Interest Reset Date as may then be published by either
the Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in the relevant H.15(519). If such information is not provided by
3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate on such Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity, based on the arithmetic mean of the
secondary market closing offer side prices as of approximately 3:30 P.M., New
York City time, on such Interest Determination Date reported, according to their
written records, by three leading primary United States government securities
dealers (each, a 'Reference Dealer') in The City of New York (which may include
the Agent or its affiliates) selected by the Calculation Agent (from five such
Reference Dealers selected by the Calculation Agent and eliminating the highest
quotation (or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), for the most
recently issued direct noncallable fixed rate obligations of the United States
('Treasury Notes') with an original maturity of approximately the specified
Index Maturity and a remaining term to maturity of not less than such Designated
CMT Maturity Index minus one year. If the Calculation Agent is unable to obtain
three such Treasury Note quotations, the CMT Rate on such Interest Determination
Date will be calculated by the Calculation Agent and will be a yield to maturity
based on the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 P.M., New York City time, on such Interest Determination Date
of three Reference Dealers in The City of New York (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest quotation (or,
in the event of equality, one of the lowest)), for Treasury Notes with an
original maturity of the number of years that is the next highest to the
specified Index Maturity and a remaining term to maturity closest to the
specified Index Maturity and in an amount of at least $100 million. If three or
four (and not five) of such Reference Dealers are quoting as described above,
then the CMT Rate will be based on the arithmetic mean of the offer prices
obtained and neither the highest nor the lowest of such quotes will be
eliminated; provided, however, that if fewer than three Reference Dealers so
selected by the Calculation Agent are quoting as mentioned herein, the CMT Rate
determined as of such Interest Determination Date will be the CMT Rate in effect
on such Interest Determination Date. If two Treasury Notes with an original
maturity as described in the second preceding sentence have remaining terms to
maturity equally close to the specified Index Maturity, the quotes for the
Treasury Note with the shorter remaining term to maturity will be used.
'Designated CMT Telerate Page' means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement (or any other
page as may replace such page on that service for the purpose of displaying
Treasury Constant Maturities as reported in H.15(519)) for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052, for the most recent week.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
'Federal Funds Rate' means, with respect to any Interest Determination Date, the
rate on such date for Federal funds as published in H.15(519) under the heading
'Federal Funds (Effective),' or, if not so published by 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
the Federal Funds Rate will be the rate on such Interest Determination Date as
published in the Composite Quotations under the heading 'Federal Funds/Effective
Rate.' If such rate is not yet published in either H.15(519) or the Composite
Quotations by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the Federal Funds Rate for such Interest
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Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the rates for the last transaction in overnight Federal
funds, as of 11:00 A.M., New York City time, on such Interest Determination
Date, arranged by three leading brokers of Federal funds transactions in The
City of New York selected by the Calculation Agent; provided, however, that if
the brokers selected as aforesaid by the Calculation Agent are not quoting as
set forth above, the rate of interest in effect for the applicable period will
be the same as the Federal Funds Rate for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the rate of
interest payable on the Federal Funds Rate Notes for which such Federal Funds
Rate is being determined shall be the Initial Interest Rate).
LIBOR NOTES
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any) specified in
the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, 'LIBOR'
for each Interest Reset Date will be determined by the Calculation Agent as
follows:
(i) As of the Interest Determination Date, the Calculation Agent will
determine (a) if 'LIBOR Reuters' is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page (as defined below) by its terms provides only for a
single rate, in which case such single rate shall be used) for deposits in
the London interbank market in the Index Currency for the period of the
Index Maturity, commencing on the second London Business Day immediately
following such Interest Determination Date, which appear on the Designated
LIBOR Page at approximately 11:00 A.M., London time, on such Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page,
or (b) if 'LIBOR Telerate' is specified in the applicable Pricing
Supplement, the rate for deposits in the Index Currency for the period of
the Index Maturity, commencing on such Interest Determination Date, that
appears on the Designated LIBOR Page at approximately 11:00 A.M., London
time, on such Interest Determination Date. If fewer than two offered rates
appear (if 'LIBOR Reuters' is specified in the applicable Pricing
Supplement and calculation of LIBOR is based on the arithmetic mean of the
offered rates), or if no rate appears (if the applicable Pricing Supplement
specifies either (x) 'LIBOR Reuters' and the Designated LIBOR Page by its
terms provides only for a single rate or (y) 'LIBOR Telerate'), LIBOR in
respect of that Interest Determination Date will be determined as described
in (ii) below.
(ii) With respect to an Interest Determination Date on which fewer
than two offered rates appear (if 'LIBOR Reuters' is specified in the
applicable Pricing Supplement and calculation of LIBOR is based on the
arithmetic mean of the offered rates) or no rate appears (if the applicable
Pricing Supplement specifies either (x) 'LIBOR Reuters' and the Designated
LIBOR Page by its terms provides only for a single rate or (y) 'LIBOR
Telerate'), the Calculation Agent will request the principal London offices
of each of four major reference banks in the London interbank market, as
selected by the Calculation Agent (after consultation with the Company), to
provide the Calculation Agent with its offered quotations for deposits in
the Index Currency for the period of the specified Index Maturity,
commencing on the second London Banking Day immediately following such
Interest Determination Date, to prime banks in the London interbank market
at approximately 11:00 A.M., London time, on such Interest Determination
Date and in a principal amount equal to an amount of not less than U.S. $1
million (or the equivalent in the Index Currency) that is representative of
a single transaction in such Index Currency in such market at such time. If
at least two such quotations are provided, LIBOR will be the arithmetic
mean of such quotations. If fewer than two quotations are provided, LIBOR
in respect of that Interest Determination Date will be the arithmetic mean
of rates quoted at approximately 11:00 A.M. (or such other time specified
in the applicable Pricing Supplement), in the applicable principal
financial center for the country of the Index Currency on such Interest
Determination Date, by three major banks in such principal financial center
selected by the Calculation Agent (after consultation with
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the Company) on such Interest Determination Date for loans in the Index
Currency to leading European banks, for the period of the specified Index
Maturity commencing on the second London Banking Day immediately following
such Interest Determination Date and in a principal amount of not less than
$1 million (or the equivalent in the Index Currency) that is representative
of a single transaction in such Index Currency in such market at such time;
provided, however, that if the banks selected as aforesaid by the
Calculation Agent are not quoting rates as mentioned in this sentence,
'LIBOR' for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the LIBOR Notes for
which LIBOR is being determined shall be the Initial Interest Rate).
'Index Currency' means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
'Designated LIBOR Page' means either (a) if 'LIBOR Reuters' is designated
in the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if 'LIBOR Telerate' is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate (and, if the
U.S. dollar is the Index Currency, Page 3750) had been specified.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, 'Prime
Rate' means, with respect to any Interest Determination Date, the rate set forth
in H.15(519) for such date opposite the caption 'Bank Prime Loan.' If such rate
is not yet published by 9:00 A.M., New York City time, on the Calculation Date,
the Prime Rate for such Interest Determination Date will be the arithmetic mean
of the rates of interest publicly announced by each bank named on the Reuters
Screen NYMF Page as such Bank's prime rate or base lending rate as in effect for
such Interest Determination Date as quoted on the Reuters Screen NYMF Page on
such Interest Determination Date, or, if fewer than four such rates appear on
the Reuters Screen NYMF Page for such Interest Determination Date, the rate
shall be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close of business on
such Interest Determination Date by at least two of the three major money center
banks in The City of New York selected by the Calculation Agent from which
quotations are requested. If fewer than two quotations are provided, the Prime
Rate shall be calculated by the Calculation Agent and shall be determined as the
arithmetic mean on the basis of the prime rates in The City of New York by the
appropriate number of substitute banks or trust companies organized and doing
business under the laws of the United States, or any State thereof, in each case
having total equity capital of at least U.S. $500 million and being subject to
supervision or examination by federal or state authority, selected by the
Calculation Agent to quote such rate or rates.
If in any month or two consecutive months the Prime Rate is not published
in H.15(519) and the banks or trust companies selected as aforesaid are not
quoting as mentioned in the preceding paragraph, the 'Prime Rate' for such
Interest Reset Period will be the same as the Prime Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the rate of interest payable on the Prime Rate Notes for which the Prime Rate is
being determined shall be the Initial Interest Rate). If this failure continues
over three or more consecutive months, the Prime Rate for each succeeding
Interest Determination Date until the maturity or redemption of such Prime Rate
Notes or, if earlier, until this failure ceases, shall be LIBOR determined as if
such Prime Rate Notes were LIBOR Notes, and the Spread, if any, shall be the
number of basis points specified in the applicable Pricing Supplement as the
'Alternate Rate Event Spread.'
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TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if any)
specified in the Treasury Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
'Treasury Rate' means, with respect to any Interest Determination Date, the rate
for the auction held on such date of direct obligations of the United States
('Treasury Bills') having the Index Maturity designated in the applicable
Pricing Supplement, as published in H.15(519) under the heading 'Treasury
Bills -- auction average (investment)' or, if not so published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate on such Interest Determination Date
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the auction
of Treasury Bills having the Index Maturity designated in the applicable Pricing
Supplement are not published or reported as provided above by 3:00 P.M., New
York City time, on such Calculation Date or if no such auction is held on such
Interest Determination Date, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 P.M., New York City time, on such Interest
Determination Date, of three leading primary United States government securities
dealers selected by the Calculation Agent for the issue of Treasury Bills with a
remaining maturity closest to the Index Maturity designated in the applicable
Pricing Supplement; provided, however, that if the dealers selected as aforesaid
by the Calculation Agent are not quoting bid rates as mentioned in this
sentence, the Treasury Rate for such Interest Reset Date will be the same as the
Treasury Rate for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the rate of interest payable on the Treasury
Rate Notes for which the Treasury Rate is being determined shall be the Initial
Interest Rate).
INDEXED NOTES
The Notes may be issued, from time to time, as Notes of which the principal
amount payable on a date after 9 months from the Issue Date (the 'Stated
Maturity') and/or on which the amount of interest payable on an Interest Payment
Date will be determined by reference to currencies, currency units, commodity
prices, financial or non-financial indices or other factors (the 'Indexed
Notes'), as indicated in the applicable Pricing Supplement. Holders of Indexed
Notes may receive a principal amount at maturity that is greater than or less
than the face amount of such Notes depending upon the fluctuation of the
relative value, rate or price of the specified index. Specific information
pertaining to the method for determining the principal amount payable at
maturity, a historical comparison of the relative value, rate or price of the
specified index and the face amount of the Indexed Note and certain additional
United States federal tax considerations will be described in the applicable
Pricing Supplement.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note will indicate whether the
Company has the option to extend the Stated Maturity of such Note for one or
more whole year periods (each an 'Extension Period') up to but not beyond the
date (the 'Final Maturity Date') set forth in such Pricing Supplement and the
basis or formula, if any, for setting the interest rate or the Spread or Spread
Multiplier, as the case may be, applicable to any such Extension Period.
The Company may exercise such option with respect to a Note by notifying
the Trustee of such exercise at least 45 but not more than 60 days prior to the
Stated Maturity of such Note in effect prior to the exercise of such option (the
'Original Stated Maturity Date'). No later than 30 days prior to the Original
Stated Maturity Date, the Trustee will mail to the Holder of such Note a notice
(the 'Extension Notice') relating to such Extension Period, in the manner
provided for in the Indenture, setting forth (i) the election of the Company to
extend the Stated Maturity of such Note, (ii) the new Stated Maturity, (iii) in
the case of a Fixed Rate Note, the interest rate applicable to the Extension
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Period or, in the case of a Floating Rate Note, the Spread or Spread Multiplier
applicable to the Extension Period, and (iv) the provisions, if any, for
redemption during the Extension Period, including the date or dates on which or
the period or periods during which and the price or prices at which such
redemption may occur during the Extension Period. Upon the mailing by the
Trustee of an Extension Notice to the Holder of a Note, the Stated Maturity of
such Note shall be extended automatically as set forth in the Extension Notice,
and, except as modified by the Extension Notice and as described in the next
paragraph, such Note will have the same term as prior to the mailing of such
Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to the Original
Stated Maturity Date for a Note, the Company may, at its option, revoke the
interest rate, in the case of a Fixed Rate Note, or the Spread or Spread
Multiplier, in the case of a Floating Rate Note, provided for in the Extension
Notice and establish a higher interest rate, in the case of a Fixed Rate Note,
or a higher Spread or Spread Multiplier, if any, in the case of a Floating Rate
Note, for the Extension Period by mailing or causing the Trustee to mail notice
of such higher interest rate or higher Spread or Spread Multiplier, if any, as
the case may be, first class, postage prepaid, to the Holder of such Note. Such
notice shall be irrevocable. All Notes with respect to which the Stated Maturity
is extended will bear such higher interest rate, in the case of a Fixed Rate
Note, or higher Spread or Spread Multiplier, if any, in the case of a Floating
Rate Note, for the Extension Period.
If the Company elects to extend the Stated Maturity of a Note, the Holder
of such Note may, if provided for in the applicable Pricing Supplement, have the
option to elect repayment of such Note by the Company on the Original Stated
Maturity Date at a price equal to the principal amount thereof plus any accrued
interest to such date. In order for a Note to be so repaid on the Original
Stated Maturity Date, the Holder thereof must follow the procedures set forth
below under 'Repayment at the Holders' Option; Repurchase' for optional
repayment, except that the period for delivery of such Note or notification to
the Trustee shall be at least 25 but not more than 35 days prior to the Original
Stated Maturity Date and except that a Holder who has tendered a Note for
repayment pursuant to an Extension Notice may, by written notice to the Trustee,
revoke any such tender for repayment until the close of business on the tenth
day prior to the Original Stated Maturity Date.
OPTIONAL REDEMPTION
The Pricing Supplement will indicate either that the Notes cannot be
redeemed prior to maturity or will indicate the terms on which the Notes will be
redeemed at the option of the Company. Notice of redemption will be provided in
the manner set forth in the Indenture. The Notes, except for Amortizing Notes,
will not be subject to any sinking fund, unless otherwise indicated in the
Pricing Supplement.
REPAYMENT AT THE HOLDERS' OPTION; REPURCHASE
If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be repayable at the option of the Holder on a date or dates
specified prior to its maturity date at a price equal to 100% of the principal
amount thereof, together with accrued interest to the date of repayment, unless
such Note was issued with original issue discount, in which case the Pricing
Supplement will specify the amount payable upon such repayment.
In order for such a Note to be repaid, the Paying Agent must receive, at
least 15 days but not more than 30 days prior to the repayment date, (i) the
Note with the form entitled 'Option to Elect Repayment' on the reverse of the
Note duly completed or (ii) a telegram, telex, facsimile transmission or a
letter from a member of a national securities exchange, or the National
Association of Securities Dealers, Inc. ('NASD') or a commercial bank or trust
company in the United States setting forth the name of the holder of the Note,
the principal amount of the Note, the principal amount of the Note to be repaid,
the certificate number or a description of the tenor and terms of the Note, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid, together with the duly completed form
entitled 'Option to Elect Repayment' on the reverse of the Note, will be
received by the Paying Agent not later than the fifth Business Day after the
date of such telegram, telex, facsimile transmission or letter; provided,
however, that such telegram, telex, facsimile transmission or letter shall only
be effective if such Note and form duly completed are received by the
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Paying Agent by such fifth Business Day. Exercise of the repayment option by the
Holder will be irrevocable. The repayment option may be exercised by the Holder
for less than the entire principal amount of the Note but, in that event, the
principal amount of the Note remaining outstanding after repayment must be an
authorized denomination.
The Company may purchase Notes at any price in the open market or
otherwise. Notes so purchased by the Company may, at the discretion of the
Company, be held or resold or surrendered to the Trustee for cancellation.
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Book-Entry Notes up to $200,000,000 principal
amount having the same Issue Date, interest rate, if any, amortization schedule,
if any, maturity date and other terms, if any, will be represented by a single
Global Note, and all Floating Rate Book-Entry Notes having the same Issue Date,
Initial Interest Rate, Base Rate, Interest Period, Interest Payment Dates, Index
Maturity, Reset Date, Reset Period, Spread or Spread Multiplier, if any, Minimum
Interest Rate, if any, Maximum Interest Rate, if any, maturity date and other
terms, if any, will be represented by a single Global Note. Each Global Note
representing Book-Entry Notes will be deposited with, or on behalf of, the
Depositary, and registered in the name of a nominee of the Depositary.
Certificated Notes will not be exchangeable for Book-Entry Notes and, except
under the circumstances described in the Prospectus under 'Description of
Securities -- Global Securities,' Book-Entry Notes will not be exchangeable for
Certificated Notes and will not otherwise be issuable as Certificated Notes.
The Depositary has advised the Company and the Agents as follows: the
Depositary is a limited-purpose trust company organized under the Banking Law of
the State of New York, a member of the Federal Reserve System, a 'clearing
corporation' within the meaning of the New York Uniform Commercial Code, and a
'clearing agency' registered pursuant to the provisions of section 17A of the
Securities Exchange Act of 1934, as amended. The Depositary was created to hold
securities of its participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (including the
Agents), banks, trust companies, clearing corporations, and certain other
organizations, some of whom (and/or their representatives) own the Depositary.
Access to the Depositary's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly. The
Depositary currently accepts only Notes denominated and payable in U.S. dollars.
A further description of the Depositary's procedures with respect to Global
Notes representing Book-Entry Notes is set forth in the Prospectus under
'Description of Securities -- Global Securities.' The Depositary has confirmed
to the Company, each Agent and the Trustee that it intends to follow such
procedures.
FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes that are denominated in, or the payment of which is
related to the value of, a Specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies (or composite currencies) and the
possibility of the imposition or modification of exchange controls. In recent
years, rates of exchange between U.S. dollars and certain foreign currencies
have been highly volatile and such volatility may be expected to continue in the
future. Fluctuations in any particular exchange rate that have occurred in the
past are not necessarily indicative, however, of fluctuations in such rate that
may occur during the term of any Note. Depreciation against the U.S. dollar of
the currency in which a Note is payable would result in a decrease in the
effective yield of such Note below its coupon rate and, in certain
circumstances, could result in a loss to the investor on a U.S.
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dollar basis. In addition, depending on the specific terms of a currency linked
Note, changes in exchange rates relating to any of the currencies involved may
result in a decrease in its effective yield, and in certain circumstances, could
result in a loss of all or a substantial portion of the principal of a Note to
the investor.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN FINANCIAL AND LEGAL
ADVISORS AS TO ANY SPECIFIC RISKS ENTAILED BY AN INVESTMENT BY SUCH INVESTOR IN
NOTES DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF,
FOREIGN CURRENCY. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO
ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, premium, if
any, and interest on the Notes. Such persons should consult their own counsel
with regard to such matters.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at the time of payment of principal of, premium,
if any, or interest on a Note. Even if there are no actual exchange controls, it
is possible that the Specified Currency for any particular Note not denominated
in U.S. dollars would not be available when payments on such Note are due. In
that event, the Company would make required payments in U.S. dollars on the
basis of the Market Exchange Rate on the date of such payment, or if such rate
of exchange is not then available, on the basis of the Market Exchange Rate as
of the most recent available date. See 'Description of Notes -- Payment
Currency.'
With respect to any Note denominated in, or the payment of which is related
to the value of, a foreign currency or currency unit, the applicable Pricing
Supplement shall include information with respect to applicable current exchange
controls, if any, and historic exchange rate information on such currency or
currency unit. The information contained therein shall constitute a part of this
Prospectus Supplement and is furnished as a matter of information only and
should not be regarded as indicative of the range of or trends in fluctuations
in currency exchange rates that may occur in the future.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. In the event an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a court in the
United States (other than a New York court), it is likely that such court would
grant judgment relating to the Notes only in U.S. dollars. If an action based on
Notes denominated in a Specified Currency other than U.S. dollars were commenced
in a New York court, however, such court would render or enter a judgment or
decree in the Specified Currency. Such judgment would then be converted into
U.S. dollars at the rate of exchange prevailing on the date of entry of the
judgment or decree.
CERTAIN FEDERAL TAX CONSEQUENCES
The following discussion describes the principal United States federal tax
treatment of United States persons who are beneficial owners of Notes
('Owners'). This summary is based on the Internal Revenue Code of 1986, as
amended (the 'Code'), revenue rulings, judicial decisions and existing and
proposed Treasury Regulations, changes to any of which subsequent to the date of
this Prospectus Supplement may affect the tax consequences described herein.
This summary discusses only Notes held as capital assets within the meaning of
the Code. It does not discuss all of the tax consequences that may be important
to Owners in light of their particular circumstances or to Owners subject to
special rules, such as foreign persons, certain financial institutions,
insurance companies, dealers in securities or foreign currencies, persons
holding Notes as part of a hedge or straddle transaction, or Owners whose
functional currency is not the U.S. dollar. When the Company offers any foreign
or composite currency denominated notes, foreign currency linked Notes, Notes
intended to be marketed to foreign persons,
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or Indexed Notes, a Pricing Supplement to this Prospectus Supplement will set
forth information concerning certain additional United States federal income tax
consequences applicable to Owners. Prospective investors are urged to consult
their own tax advisors regarding the federal tax consequences to them of holding
and disposing of Notes, including the advisability of making any of the
elections described below, as well as any tax consequences arising under the
laws of any state or other taxing jurisdiction.
PAYMENTS OF INTEREST
Interest paid on a Note will generally be taxable to an Owner as ordinary
interest income at the time it accrues or is received in accordance with the
Owner's method of accounting for federal income tax purposes. Special rules
governing the treatment of interest paid with respect to Notes having original
issue discount are described below.
ORIGINAL ISSUE DISCOUNT
In the case of Original Issue Discount Notes and certain other Notes sold
at a discount from their principal amount, the excess of the 'stated redemption
price at maturity' (as defined below) of each such Note over its 'issue price'
(defined as the initial offering price to the public, excluding bond houses and
brokers, at which a substantial amount of such Notes have been sold) will be
original issue discount for tax purposes if such excess equals or exceeds
one-quarter of one percent of the stated redemption price at maturity multiplied
by the number of complete years to maturity. A Note having such original issue
discount will be referred to herein as an 'OID Note.' The stated redemption
price at maturity of a Note includes all payments on the Note other than
interest based on a fixed rate (or a variable rate, unless the applicable
Pricing Supplement hereto otherwise states) and payable unconditionally at least
annually. Special rules may apply to Floating Rate Notes, Notes with a right to
an optional redemption or extension of maturity, and certain other situations.
Unless otherwise described in the applicable Pricing Supplement for an issue of
Notes having one or more of these features, these special rules will not apply
to the Notes.
Subject to certain special rules discussed below for Notes having a
maturity of one year or less, Owners will include original issue discount in
income as it accrues and before the receipt of cash attributable to such income,
based on a compounding of the yield to maturity of the Note. Under these rules,
Owners will generally include in income increasingly greater amounts of original
issue discount in successive accrual periods, unless payments that are part of
the stated redemption price at maturity of a Note are made before its final
maturity.
ACQUISITION PREMIUM AND MARKET DISCOUNT
In the event that an Owner purchases an OID Note at an acquisition premium
(i.e., at a price in excess of its 'adjusted issue price' but less than its
stated redemption price at maturity), the amount includable in income in each
taxable year as original issue discount is reduced by that portion of the excess
properly allocable to such year. The adjusted issue price is defined as the sum
of the issue price of the Note and the aggregate amount of previously accrued
original issue discount, less any prior payment of amounts included in its
stated redemption price at maturity. Unless an Owner makes the accrual method
election described below, acquisition premium is allocated on a pro rata basis
and thus reduces each accrual of original issue discount by a constant fraction.
An Owner that purchases a Note at a price that is less than its stated
redemption price at maturity, or in the case of an OID Note its adjusted issue
price, by an amount that is not less than one-quarter of one percent of the
stated redemption price at maturity multiplied by the number of complete years
to maturity, will treat any principal payments on, or any gain realized upon the
disposition or retirement of such Note as interest income to the extent of the
market discount that accrued while such Owner held the Note, unless an election
is made to include such market discount in income on a current basis. An Owner
of a Note that acquired it at a market discount and does not elect to include
market discount in income on a current basis may also be required to defer the
deduction for a portion of the interest
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expense on any indebtedness incurred or continued to purchase or carry the Note
until the deferred income is realized.
NOTES PURCHASED AT A PREMIUM
Except as noted below, an Owner that purchases a Note for an amount in
excess of its principal amount, or in the case of an OID Note its stated
redemption price at maturity, will be treated as having premium with respect to
such Note in the amount of such excess. An Owner that purchases an OID Note at a
premium is not required to include in income any original issue discount with
respect to such Note. If an Owner makes an election under section 171(c)(2) of
the Code to treat premium as 'amortizable bond premium,' the amount of interest
included in such Owner's income for each accrual period will be reduced by the
portion of the premium allocable to such period based on the Note's yield to
maturity. If an Owner makes the election under section 171(c)(2), the election
will also apply to all bonds the interest on which is not excludable from gross
income held by the Owner at the beginning of the first taxable year to which the
election applies and to all such fully taxable bonds thereafter acquired by it.
If such an election is not made, such an Owner must include the full amount of
each interest payment in income in accordance with its regular method of
accounting and will receive a tax benefit from the premium only in computing its
gain or loss upon the sale or other disposition or payment of the principal
amount at maturity of the Note.
ACCRUAL METHOD ELECTION
An Owner may elect to include in gross income its entire return on a Note
(i.e., the excess of all remaining payments to be received on the Note over the
amount paid for the Note by such Owner) based on the compounding of interest at
a constant rate. Such an election for a Note with amortizable bond premium or
market discount will result in a deemed election for all of the Owner's debt
instruments with amortizable bond premium or market discount.
NOTES WITH A TERM OF ONE YEAR OR LESS
Except as noted below, a cash method Owner of an OID Note that matures one
year or less from the date of its issuance (a 'Short-Term Note') is not required
to include interest or original issue discount in income as it accrues. Accrual
basis Owners, banks, regulated investment companies and certain other Owners
described in section 1281(b) of the Code are required to include original issue
discount and stated interest in income as it accrues, regardless of their method
of accounting, on a straight-line basis unless the Owner makes an irrevocable
election to accrue such original issue discount on the basis of its yield to
maturity and daily compounding.
A cash method Owner of a Short-Term Note that is not otherwise required to
account for interest or original issue discount on such Short-Term Note as it
accrues may nevertheless elect to include in income interest and original issue
discount as they accrue under the rules described above on all obligations
having a maturity of one year or less held by the Owner in the taxable year of
the election and in all subsequent years. The election described in this
paragraph is independent of the election described in the preceding paragraph
and is irrevocable without the consent of the Internal Revenue Service (the
'IRS'). In the case of an Owner who is not required or who does not elect to
include original issue discount in income currently, (i) any gain realized on
the sale, exchange or retirement of a Short-Term Note will be ordinary income to
the extent of accrued original issue discount, and (ii) an Owner of such a
Short-Term Note will be required to defer deductions for interest expense on any
indebtedness incurred or continued to purchase or carry the Short-Term Note, in
an amount not exceeding the deferred interest income, until the deferred
interest income is recognized.
DISPOSITION OF NOTES
Upon the sale, redemption or retirement of a Note, an Owner will recognize
gain or loss equal to the difference between the amount realized (excluding any
amount attributable to accrued interest) and the Owner's tax basis in the Note.
An Owner's tax basis for determining gain or loss will be the cost of such Note
to such Owner, increased by the amount of any original issue discount and market
discount
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includible in such Owner's gross income with respect to such Note, and decreased
by the amount of any payments under the Note that are part of its stated
redemption price at maturity and by the portion of any premium applied to reduce
interest payments as described above under the heading 'Notes Purchased at a
Premium.' Such gain or loss will be capital gain or loss except to the extent
the gain represents accrued original issue discount, or market discount on the
Note not previously included in gross income, to which extent such gain would be
treated as ordinary income. Any amount received for a Note disposed of between
interest payment dates which is attributable to accrued interest will also be
treated as ordinary income. Any capital gain or loss will be long-term capital
gain or loss if at the time of sale, exchange or retirement the Note has been
held for more than one year.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company is generally required to report to the IRS payments of interest
and accruals of original issue discount on Notes. The amount of original issue
discount required to be reported by the Company may not be equal to the amount
required to be reported as taxable income by an Owner of an OID Note acquired
subsequent to its original issuance.
Backup withholding of federal income tax at a rate of 31 percent may apply
to payments made in respect of the Notes, as well as payments of proceeds from
the sale of Notes, to registered Holders or Owners that are not 'exempt
recipients' and that fail to provide certain identifying information to the
Company or its agent in the manner required. Individuals generally are not
exempt recipients, while corporations and certain other entities generally are
exempt recipients. Amounts withheld under the backup withholding rules would be
allowed as a refund or a credit against the recipient's United States federal
income tax, provided that the required information is furnished to the IRS.
THE FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON AN OWNER'S PARTICULAR
SITUATION. OWNERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING
THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THEIR
POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by the Company through
the Agents, who have agreed to use reasonable best efforts to solicit such
offers. The Company may appoint additional agents to solicit sales of the Notes;
provided that any such solicitation and sale of Notes shall be on the same terms
and conditions as the Agents have agreed to. If the Company grants any discount
or pays any commission, such discount or commission will be disclosed in the
applicable Pricing Supplement.
The Company may also solicit offers to purchase and sell Notes directly on
its own behalf, through any subsidiary or through an electronic auction system
at any time, upon any terms and to any person. The Company will have the sole
right to accept offers to purchase Notes and may reject any offer to purchase
Notes in whole or in part. The Agent will have the right to reject any offer to
purchase Notes solicited by it in whole or in part. Payment of the purchase
price of the Notes will be required to be made in immediately available funds.
The Company will pay the relevant Agent, in connection with sales of Notes
resulting from a solicitation made or an offer to purchase received by such
Agent, a commission ranging from .125% to .750% of the principal amount of Notes
to be sold, depending upon the maturity of the Notes.
The Company may also sell Notes to the Agent as principal for its own
account at discounts to be agreed upon at the time of sale. Such Notes may be
resold to investors and other purchasers at a fixed offering price or at
prevailing market prices, or prices related thereto at the time of such resale
or otherwise, as determined by the Agent and specified in the applicable Pricing
Supplement. The Agent may offer the Notes it has purchased as principal to other
dealers. The Agent may sell the Notes to any dealer at a discount and, unless
otherwise specified in the applicable Pricing Supplement, such discount allowed
to any dealer will not be in excess of 66 2/3% of the discount to be received by
the Agent from
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the Company. After the initial public offering of Notes that are to be resold by
the Agent to investors and other purchasers on a fixed public offering price
basis, the public offering price, concession and discount may be changed.
The Agents may be deemed to be 'underwriters' within the meaning of the
Securities Act of 1933, as amended (the 'Securities Act'). The Company and the
Agents have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
made in respect thereof. The Company has also agreed to reimburse the Agents for
certain expenses.
Concurrently with the offerings of the Notes through the Agents described
herein, the Company may issue other debt securities pursuant to the Indenture
referred to herein. Any securities so issued and sold will reduce
correspondingly the aggregate amount of Notes that may be offered by this
Prospectus Supplement and the Prospectus.
The Company may apply for the listing of the Notes on one or more national
securities exchanges. The Company has been advised by the Agents that the Agents
intend to make a market in the Notes, as permitted by applicable laws and
regulations. The Agents are not obligated to do so, however, and the Agents may
discontinue making a market at any time without notice. No assurance can be
given as to the liquidity of any trading market for the Notes.
The Agents each engage in transactions with and perform services for the
Company in the ordinary course of business.
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PROSPECTUS
$1,000,000,000
ELI LILLY AND COMPANY
DEBT SECURITIES
------------------------
Eli Lilly and Company (the 'Company' or 'Lilly') may offer from time to
time its debt securities (the 'Securities') having an aggregate initial offering
price of up to $1,000,000,000 (or the equivalent in foreign currency or currency
units) on terms to be determined at the time of sale. The Securities may be sold
for U.S. dollars, foreign currencies or currency units, and the principal of,
premium, if any, and interest, if any, on the Securities may be payable in U.S.
dollars, foreign currencies or currency units. The Securities may be issued in
one or more series with the same or various maturities at or above par or with
an original issue discount. The Securities may be issued in registered form
('Registered Securities'), in bearer form, with or without coupons ('Bearer
Securities'), or in the form of one or more global securities (each a 'Global
Security'). Bearer Securities will be offered only outside the United States and
its possessions to Non-United States persons or to offices located outside the
United States and its possessions of certain United States financial
institutions or to other qualifying persons in accordance with United States
Treasury Regulations Section 1.163-5(c)(2)(i)(D). The specific designation,
aggregate principal amount, currency or currency unit in which the principal,
premium, if any, or interest, if any, is payable, authorized denominations,
purchase price, maturity, rate or rates (which may be fixed or variable) and
time of payment of any interest, redemption or repurchase terms, any listing on
a securities exchange and any other specific terms of the Securities in respect
of which this Prospectus is being delivered (the 'Offered Securities') are set
forth in the accompanying supplement to this Prospectus (the 'Prospectus
Supplement'), together with the terms of offering of the Offered Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
The Securities may be offered through underwriters, agents or dealers, or
directly to purchasers by the Company or subsidiaries of the Company. If an
underwriter, agent or dealer is involved in the offering of any Offered
Securities, the underwriter's discount, agent's commission or dealer's purchase
price will be set forth in, or may be calculated from, the Prospectus
Supplement, and the net proceeds to the Company from such offering will be the
public offering price of the Offered Securities less such discount in the case
of an underwriter, the purchase price of the Offered Securities less such
commission in the case of an agent or the purchase price of the Offered
Securities in the case of a dealer, and less, in each case, the other expenses
of the Company associated with the issuance and distribution of the Offered
Securities. Any such underwriter (or any representative thereof), dealer or
agent may include Morgan Stanley & Co. Incorporated. See 'Plan of Distribution'
for possible indemnification arrangements for dealers, underwriters and agents.
------------------------
June 1, 1995
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER, DEALER OR AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SECURITIES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the 'Commission'). The reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's Regional Offices at 7 World Trade Center, 13th Floor,
New York, New York 10048 and the Citicorp Center, 500 West Madison Street, Room
1400, Chicago, Illinois 60661. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington
D.C. 20549 at prescribed rates. Such reports, proxy statements and other
information concerning the Company also can be inspected at the office of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, at the
American Stock Exchange, 86 Trinity Place, New York, New York 10006 and at the
Pacific Stock Exchange Incorporated, 301 Pine Street, San Francisco, California
94101.
------------------------
INFORMATION INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994 and the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1995, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are incorporated herein by reference.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering
of the Securities, shall be deemed to be incorporated in this Prospectus by
reference and to be a part hereof from the respective date of filing of each
such document. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement herein or in any
other subsequently filed document which also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents incorporated by reference herein, other than exhibits to such
documents. Requests should be directed to Eli Lilly and Company, Shareholder
Services Department, Lilly Corporate Center, Indianapolis, Indiana 46285,
telephone number (317) 276-2000.
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<PAGE>
THE COMPANY
Eli Lilly and Company was incorporated in 1901 under the laws of Indiana to
succeed to the drug manufacturing business founded in Indianapolis, Indiana, in
1876 by Colonel Eli Lilly. The Company, including its subsidiaries, is engaged
in the discovery, development, manufacture and sale of products and the
provision of services in one industry segment -- Life Sciences. Products are
manufactured or distributed through owned or leased facilities in the United
States, Puerto Rico and 26 other countries, in 19 of which the Company owns or
has an interest in manufacturing facilities. Its products are sold in
approximately 117 countries. Through its PCS Health Systems subsidiary, the
Company provides pharmacy benefit management services in the United States.
Most of the Company's products were discovered or developed through the
Company's research and development activities, and the success of the Company's
business depends to a great extent on the introduction of new products resulting
from these research and development activities. Research efforts are primarily
directed toward the discovery of products to diagnose and treat diseases in
human beings and animals and to increase the efficiency of animal food
production. The principal executive offices of the Company are located at Lilly
Corporate Center, Indianapolis, Indiana 46285, telephone number (317) 276-2000.
USE OF PROCEEDS
Unless otherwise indicated in the Prospectus Supplement, the net proceeds
to be received by the Company from sales of the Securities will be used for
general corporate purposes, which may include reducing short-term indebtedness
in the form of commercial paper used to finance the acquisition of the pharmacy
benefits management business of McKesson Corporation, a Delaware corporation,
working capital, capital expenditures, stock repurchases, repayment and
refinancing of other indebtedness and acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- ----------------------------------------------------
PRO
FORMA
1994(1) 1994 1993 1992 1991 1990
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
5.1 14.0 7.6 11.7 19.1 15.7
</TABLE>
- ------------
(1) The pro forma ratio of earnings to fixed charges gives full-year effect to
the acquisition of PCS Health Systems, Inc. from McKesson Corporation as
discussed in 'Recent Developments' in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, as incorporated herein by
reference. This acquisition was financed with approximately $4 billion of
short-term indebtedness in the form of commercial paper of which
$800,000,000 was refinanced with long-term indebtedness.
The ratio of earnings to fixed charges represents the historical ratio of
the Company and is calculated on a total worldwide basis. The ratio is computed
by dividing the sum of earnings from continuing operations before taxes and
fixed charges excluding capitalized interest by fixed charges. Fixed charges
represent interest expense (including capitalized interest).
DESCRIPTION OF SECURITIES
The Securities are to be issued under an Indenture (the 'Indenture'),
between the Company and Citibank, N.A., as Trustee (the 'Trustee'). The form of
the Indenture, dated as of February 1, 1991, is an exhibit to the Registration
Statement of which this Prospectus is a part. The Indenture incorporates the
Company's Standard Multiple-Series Indenture provisions, a copy of which is an
exhibit to the Registration Statement. The Indenture does not limit the
aggregate principal amount of Securities which may be issued thereunder. The
Company may issue Securities under the Indenture as the
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Company shall see fit. The Company may enter into one or more additional
indentures providing for the issuance of Securities with one or more banking
institutions organized under the laws of the United States of America, any state
thereof or such foreign jurisdictions as may be permitted under the Trust
Indenture Act of 1939, as amended, serving as trustee. Reference is made to the
Prospectus Supplement for information regarding the Indenture or any additional
indenture under which the Offered Securities will be issued.
The statements under this heading are subject to the detailed provisions of
the Indenture. Whenever particular provisions of the Indenture or terms defined
therein are referred to, such provisions or definitions are incorporated by
reference herein as a part of the statements made and the statements are
qualified in their entirety by such reference.
General: The Securities will be unsecured general obligations of the
Company and will rank on a parity with the other unsecured and unsubordinated
indebtedness for borrowed money of the Company. The Indenture provides that the
Offered Securities and other unsecured debt securities of the Company, without
limitation as to aggregate principal amount (collectively, the 'Indenture
Securities'), may be issued in one or more series, and a single series may be
issued at various times, with different maturity dates and different interest
rates, in each case as authorized from time to time by the Company.
One or more series of the Indenture Securities may be issued with the same
or various maturities at par or at a discount. Offered Securities bearing no
interest or interest at a rate which at the time of issuance is below the market
rate ('Original Issue Discount Securities') will be sold at a discount (which
may be substantial) below their stated principal amount. Federal income tax
consequences and other special considerations applicable to any such Original
Issue Discount Securities will be described in the Prospectus Supplement
relating thereto.
If any of the Offered Securities are sold for any foreign currency or
currency unit or if the principal of, premium, if any, or interest, if any, on
any of the Offered Securities is payable in any foreign currency or currency
unit, the restrictions, elections, tax consequences, specific terms and other
information with respect to such issue of Offered Securities and such foreign
currency or currency unit will be set forth in the Prospectus Supplement
relating thereto.
The Prospectus Supplement will state the price or prices (which may be
expressed as a percentage of the aggregate principal amount thereof) at which
the Offered Securities will be sold.
Reference is made to the Prospectus Supplement relating to the Offered
Securities for the following terms thereof:
(1) the specific designation of the Offered Securities;
(2) the aggregate principal amount of the Offered Securities;
(3) the date or dates on which the principal of and premium, if any,
on the Offered Securities shall be payable or the method of determination
thereof;
(4) the rate or rates (which may be fixed or variable) at which the
Offered Securities shall bear interest, if any, or the method by which such
rate or rates shall be determined, the date or dates from which such
interest shall accrue, or the method by which such date or dates shall be
determined, the date or dates on which such interest shall be payable and
the record dates therefor;
(5) if other than in U.S. dollars, the currency or currency unit in
which payment of the principal of, premium, if any, and interest, if any,
on the Offered Securities shall be payable and the Dollar Determination
Agent (as defined in the Indenture), if any;
(6) if the amount of payments of the principal of, premium, if any, or
interest, if any, on the Offered Securities may be determined with
reference to an index, formula or other method based on a currency or
currency unit, or other commodity as permitted, other than that in which
the Offered Securities are stated to be payable, the manner in which such
amounts shall be determined;
(7) if the principal of, premium, if any, or interest, if any, on the
Offered Securities are to be payable at the election of the Company or a
holder thereof in a currency or currency unit other than that in which the
Offered Securities are stated to be payable, the period or periods within
which and the terms and conditions upon which such election may be made;
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(8) the place or places where the principal of, premium, if any, and
interest, if any, on the Offered Securities shall be payable;
(9) the period or periods within which, the price or prices at which
and the terms and conditions upon which the Offered Securities may be
redeemed, in whole or in part, at the option of the Company;
(10) the obligation, if any, of the Company to redeem, purchase or
repay the Offered Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which the Offered Securities shall be redeemed, purchased or repaid,
in whole or in part, pursuant to such obligation;
(11) whether the Offered Securities are to be issued as Bearer
Securities and, if so, (i) whether the Offered Securities are also to be
issued as Registered Securities and (ii) the manner in which such Bearer
Securities are to be dated;
(12) whether the Offered Securities are to be issued in whole or in
part in the form of one or more Global Securities and, if so, the identity
of the Depositary (as defined in the Indenture) for such Global Security or
Securities;
(13) if a temporary Global Security is to be issued with respect to
the Offered Securities, whether any interest thereon payable on an interest
payment date prior to the issuance of a permanent Global Security or
definitive Bearer Securities will be paid to the Depositary for such
temporary Global Security and, in such event, the terms and conditions upon
which such interest payments received by such Depositary will be credited
to the account of the persons entitled thereto on such interest payment
date;
(14) if a temporary Global Security is to be issued with respect to
the Offered Securities, the terms upon which interests in such temporary
Global Security may be exchanged for interests in a permanent Global
Security or for definitive Securities of the series and the terms upon
which interests in a permanent Global Security, if any, may be exchanged
for definitive Securities of the series;
(15) if any of the Offered Securities are to be issued in registered
form, the denominations, if other than denominations of $1,000 and any
integral multiple thereof, in which such Registered Securities are to be
issued and, if any of the Offered Securities are to be issued in bearer
form, the denominations, if other than the denomination of $5,000, in which
such Bearer Securities are to be issued;
(16) if other than the principal amount thereof, the portion of the
principal amount of the Offered Securities payable upon declaration of
acceleration of the maturity of the Offered Securities;
(17) the provisions, if any, relating to the cancellation and
satisfaction of the Indenture or certain covenants contained in the
Indenture with respect to the Offered Securities prior to the maturity
thereof pursuant to Section 12.02 thereof (see 'Defeasance of the Indenture
and the Indenture Securities');
(18) any deletions from or modifications of or additions to the Events
of Default set forth in Section 6.01 or covenants contained in Article 5 of
the Indenture pertaining to the Offered Securities;
(19) whether and under what circumstances and with what procedures and
documentation the Company will pay additional amounts on any of the Offered
Securities to any holder who is not a United States Person (including a
definition of such term), in respect of any tax, assessment or governmental
charge withheld or deducted and, if so, whether the Company will have the
option to redeem such Securities rather than pay additional amounts (and
the terms of any such option);
(20) the Person to whom any interest on any Registered Security shall
be payable, if other than the Person in whose name that Security (or a
Predecessor Security) is registered at the close of business on the record
date therefor, the manner in which, or the Person to whom any interest on
any Bearer Security shall be payable, if otherwise than upon presentation
and surrender of the
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<PAGE>
coupons appertaining thereto as they severally mature and the extent to
which, or the manner in which, any interest payable on a temporary Global
Security will be paid; and
(21) any other terms of the Offered Securities not inconsistent with
the provisions of the applicable Indenture and not adversely affecting the
rights of the holders of any other series of Indenture Securities then
outstanding. (Section 3.01)
The Company may authorize the issuance and provide for the terms of a
series of Indenture Securities pursuant to a resolution of its Board of
Directors or any duly authorized committee thereof or pursuant to a supplemental
indenture. The provisions of the Indenture described above provide the Company
with the ability, in addition to the ability to issue Indenture Securities with
terms different from those of Indenture Securities previously issued, to
'reopen' a previous issue of a series of Indenture Securities and to issue
additional Indenture Securities of such series.
The Indenture Securities may be issued as Registered Securities, Bearer
Securities or both. Indenture Securities of a series may be issued in whole or
in part in the form of one or more Global Securities, as described below under
'Global Securities.' One or more Global Securities will be issued in a
denomination or aggregate denominations equal to the aggregate principal amount
of outstanding Indenture Securities of the series to be represented by such
Global Security or Securities. The Prospectus Supplement relating to a series of
Indenture Securities denominated in a foreign currency or currency unit will
specify the denomination thereof. (Section 3.02)
Limitations on the issuance of Bearer Securities, as well as certain
Federal income tax consequences and other special considerations applicable to
any such Bearer Securities, will be described in the Prospectus Supplement
relating thereto.
Exchange, Registration and Transfer: At the option of a holder of the
Indenture Securities upon request confirmed in writing, and subject to the terms
of the applicable Indenture, Bearer Securities (with all unmatured coupons,
except as provided below) of any series may be exchanged for an equal aggregate
principal amount of Registered Securities (if the Indenture Securities of such
series are to be issued as Registered Securities) or Bearer Securities (if
Bearer Securities of such series are to be issued in more than one denomination)
of the same series (with the same interest rate and maturity date), but no
Bearer Security will be delivered in or to the United States, and Registered
Securities of any series (other than a Global Security, except as set forth
below) will be exchangeable into an equal aggregate principal amount of
Registered Securities of the same series (with the same interest rate and
maturity date) of different authorized denominations. If a holder surrenders
Bearer Securities in exchange for Registered Securities between a Regular Record
Date or, in certain circumstances, a Special Record Date (each as defined in the
Indenture), and the relevant interest payment date, such holder will not be
required to surrender the coupon relating to such interest payment date.
Registered Securities may not be exchanged for Bearer Securities. (Section 3.05)
Indenture Securities may be presented for exchange, and Registered
Securities (other than a Global Security) may be presented for transfer (with
the form of transfer endorsed thereon duly executed), at the office of any
transfer agent or at the office of the Security Registrar, without service
charge and upon payment of any taxes and other governmental charges as described
in the applicable Indenture. Such transfer or exchange will be effected upon the
transfer agent or the Security Registrar, as the case may be, being satisfied
with the documents of title and identity of the person making the request.
Bearer Securities, and the coupons if any appertaining thereto, will be
transferable by delivery. (Section 3.05)
Global Securities: The Indenture Securities of a series may be issued in
whole or in part in the form of one or more Global Securities that will be
deposited with, or on behalf of, the Depositary identified in the Prospectus
Supplement relating thereto. Global Securities may be issued in either
registered or bearer form and in either temporary or permanent form. Unless and
until it is exchanged in whole or in part for Indenture Securities in definitive
form, a Global Security may not be transferred except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. (Sections 3.03 and 3.05)
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<PAGE>
The specific terms of the depositary arrangement with respect to any
Indenture Securities of a series will be described in the Prospectus Supplement
relating thereto. The Company anticipates that the following provisions will
apply to all depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Indenture Securities represented by such
Global Security to the accounts of institutions that have accounts with such
Depositary ('participants'). The accounts to be credited shall be designated by
the underwriters or agents through which such Indenture Securities were sold or
by the Company, if such Indenture Securities are offered and sold directly by
the Company. Ownership of beneficial interests in a Global Security will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depositary for such Global Security or by participants or persons that
hold through participants. The laws of some states require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and such laws may impair the ability to transfer beneficial
interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
owner of such Global Security, such Depositary or such nominee, as the case may
be, will be considered the sole owner or holder of the Indenture Securities
represented by such Global Security for all purposes under the Indenture
governing such Indenture Securities. Except as set forth below, owners of
beneficial interests in a Global Security will not be entitled to have Indenture
Securities of the series represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of Indenture
Securities of such series in definitive form and will not be considered the
owners or holders thereof under the Indenture governing such Indenture
Securities.
Subject to certain limitations on the issuance of Bearer Securities which
will be described in the Prospectus Supplement relating thereto, payments of
principal of, premium, if any, and interest, if any, on Indenture Securities
registered in the name of or held by a Depositary or its nominee will be made to
the Depositary or its nominee, as the case may be, as the registered owner or
the holder of the Global Security representing such Indenture Securities. None
of the Company, the Trustee for such Indenture Securities, any paying agent or
the Security Registrar for such Indenture Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for such Indenture Securities or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Company expects that the Depositary for Indenture Securities of a
series, upon receipt of any payment of principal, premium, if any, or interest,
if any, in respect of a permanent Global Security, will credit immediately
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Security
as shown on the records of such Depositary. The Company also expects that
payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in 'street name,' and
will be the responsibility of such participants. Receipt by owners of beneficial
interests in a temporary Global Security of payments in respect of such
temporary Global Security may be subject to restrictions. Any such restrictions
will be described in the Prospectus Supplement relating thereto.
If a Depositary for Indenture Securities of a series is at any time
unwilling or unable to continue as Depositary and a successor depositary is not
appointed by the Company within ninety days, the Company will issue Indenture
Securities of such series in definitive form in exchange for the Global Security
or Securities representing the Indenture Securities of such series. In addition,
the Company may at any time and in its sole discretion determine not to have any
Indenture Securities of a series represented by one or more Global Securities
and, in such event, will issue Indenture Securities of such series in definitive
form in exchange for the Global Security or Securities representing such
Indenture Securities. Further, if the Company so specifies with respect to the
Indenture Securities of a series, each Person specified by the Depositary of the
Global Security representing Indenture Securities of such series may, on terms
acceptable to the Company and the Depositary for such Global Security, receive
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Indenture Securities of such series in definitive form. In any such instance,
each Person so specified by the Depositary of the Global Security will be
entitled to physical delivery in definitive form of Indenture Securities of the
series represented by such Global Security equal in principal amount to such
Person's beneficial interest in the Global Security. Indenture Securities of
such series so issued in definitive form will be issued (a) as Registered
Securities if the Indenture Securities of such series are to be issued as
Registered Securities, (b) as Bearer Securities if the Indenture Securities of
such series are to be issued as Bearer Securities or (c) as either Registered or
Bearer Securities, if the Indenture Securities of such series are to be issued
in either form. A description of certain restrictions on the issuance of a
Bearer Security in definitive form in exchange for an interest in a Global
Security will be contained in the Prospectus Supplement relating thereto.
(Section 3.05)
Payment and Paying Agents: Payment of principal of, premium, if any, and
interest, if any, on Bearer Securities will be made in the currency or currency
unit designated in the Prospectus Supplement, subject to any applicable laws and
regulations, at such paying agencies outside the United States as the Company
may appoint from time to time. Any such payment may be made, at the option of a
holder, by a check in the designated currency or currency unit or by transfer to
an account in the designated currency or currency unit maintained by the payee
with a bank located outside the United States. No payment with respect to any
Bearer Security will be made at the principal corporate trust office of the
Trustee or any other paying agency maintained by the Company in the United
States nor will any such payment be made by transfer to an account with a bank
located, or by check mailed to an address, in the United States. Notwithstanding
the foregoing, payments of principal of and premium, if any, and interest, if
any, on Bearer Securities may be made in U.S. dollars at the principal corporate
trust office of the Trustee in the Borough of Manhattan, The City of New York,
if payment of the full amount thereof at all paying agencies outside the United
States is illegal or effectively precluded by exchange controls or other similar
restrictions. (Sections 3.11 and 5.02)
Unless otherwise set forth in the applicable Prospectus Supplement, payment
of principal of and premium, if any, on Registered Securities will be made in
the designated currency or currency unit against surrender of such Registered
Securities at the principal corporate trust office of the Trustee in the Borough
of Manhattan, The City of New York. Unless otherwise indicated in the Prospectus
Supplement, payment of any installment of interest on Registered Securities will
be made to the person in whose same such Registered Security is registered at
the close of business on the regular record date for such interest. Unless
otherwise indicated in the Prospectus Supplement, payments of such interest will
be made at the principal corporate trust office of the Trustee in the Borough of
Manhattan, The City of New York, or by a check in the designated currency or
currency unit mailed to each holder of a Registered Security at such holder's
registered address. (Section 3.11)
The paying agents outside the United States initially appointed by the
Company for a series of Indenture Securities will be named in the Prospectus
Supplement. The Company may terminate the appointment of any of the paying
agents from time to time, except that the Company will maintain at least one
paying agent in the Borough of Manhattan, The City of New York, for payments
with respect to Registered Securities and at least one paying agent in a city in
Europe so long as any Bearer Securities are outstanding where Bearer Securities
may be presented for payment and may be surrendered for exchange, provided that
so long as any series of Indenture Securities is listed on The International
Stock Exchange of the United Kingdom and the Republic of Ireland or the
Luxembourg Stock Exchange or any other stock exchange located outside the United
States and such stock exchange shall so require, the Company will maintain a
paying agent in London or Luxembourg or any other required city located outside
the United States, as the case may be, for such series of Indenture Securities.
(Section 5.02)
All moneys paid by the Company to a paying agent for the payment of
principal of, premium, if any, or interest, if any, on any Indenture Security
that remains unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company and the
holder of such Indenture Security entitled to receive such payment will
thereafter look only to the Company for payment thereof. (Section 12.05)
Concerning the Trustee: The Trustee shall, prior to the occurrence of any
Event of Default (as defined in the Indenture) with respect to the Indenture
Securities of any series and after the curing or
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waiving of all Events of Default with respect to such series which have
occurred, perform only such duties as are specifically set forth in such
Indenture. During the existence of any Event of Default with respect to the
Indenture Securities of any series, the Trustee shall exercise such of the
rights and powers vested in it under the Indenture with respect to such series
and use the same degree of care and skill in their exercise as a prudent man
would exercise or use under the circumstances in the conduct of his own affairs.
The Trustee may acquire and hold Indenture Securities and, subject to
certain conditions, otherwise deal with the Company as if it were not Trustee
under the Indenture. (Section 7.03)
The Company has lines of credit from the Trustee.
Modification of the Indenture: The Indenture contains provisions permitting
the Company and the Trustee, without the consent of the holders of the Indenture
Securities, to establish, among other things, the form and terms of any series
of Indenture Securities issuable thereunder by one or more supplemental
indentures, to add covenants and to provide for security for the Indenture
Securities, and, with the consent of the holders of not less than a majority of
the aggregate principal amount of the Indenture Securities of any series at the
time outstanding, evidenced as in the Indenture provided, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture with respect to Indenture Securities of such series or modifying in
any manner the rights of the holders of the Indenture Securities of such series;
provided, however, that no such supplemental indenture shall (i) extend the
fixed maturity, or the earlier optional date of maturity, if any, of any
Indenture Security of a particular series or reduce the principal amount thereof
or the premium thereon, if any, or reduce the rate or extend the time of payment
of interest, if any, thereon, or make the principal thereof or premium, if any,
or interest, if any, thereon payable in any currency or currency unit other than
as provided pursuant to the Indenture or in the Indenture Securities of such
series, without the consent of the holder of each Indenture Security so
affected, or (ii) reduce the aforesaid percentage of Indenture Securities of any
series, the holders of which are required to consent to any such supplemental
indenture, without the consent of the holders of all Indenture Securities of
such series outstanding thereunder. (Sections 10.01 and 10.02)
Certain Covenants: Unless otherwise provided in the Indenture Securities,
the Indenture contains a covenant by the Company not to create, assume or suffer
to exist any lien on any Restricted Property (described below) to secure any
debt of the Company, any subsidiary or any other person, or permit any
subsidiary to do so, without securing the Indenture Securities of any series
having the benefit of the covenant by such lien equally and ratably with such
debt for so long as such debt shall be so secured, subject to certain exceptions
specified in the Indenture. Exceptions include: (a) existing liens or liens on
facilities of corporations at the time they become subsidiaries; (b) liens
existing on facilities when acquired, or incurred to finance the purchase price,
construction or improvement thereof; (c) certain liens in favor of or required
by contracts with governmental entities; and (d) liens otherwise prohibited by
such covenant, securing indebtedness which, together with the aggregate amount
of outstanding indebtedness secured by liens otherwise prohibited by such
covenant and the value of certain sale and leaseback transactions, does not
exceed 15% of the Company's consolidated net tangible assets (defined in the
Indenture as total assets less current liabilities and intangible assets).
(Section 5.09)
Unless otherwise provided in the Indenture Securities, the Indenture also
contains a covenant by the Company not to, and not to permit any subsidiary to,
enter into any sale and leaseback transaction covering any Restricted Property
unless (a) the Company would be entitled under the provisions described above to
incur debt equal to the value of such sale and leaseback transaction, secured by
liens on the facilities to be leased, without equally and ratably securing the
Indenture Securities, or (b) the Company, during the six months following the
effective date of such sale and leaseback transaction, applies an amount equal
to the value of such sale and leaseback transaction to the voluntary retirement
of long-term indebtedness or to the acquisition of Restricted Property. (Section
5.10)
The Indenture defines Restricted Property as (a) any manufacturing facility
(or portion thereof) owned or leased by the Company or any subsidiary and
located within the continental United States which, in the opinion of the Board
of Directors, is of material importance to the business of the Company and its
subsidiaries taken as a whole, but no such manufacturing facility (or portion
thereof) shall be deemed of material importance if its gross book value (before
deducting accumulated
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depreciation) is less than 2% of the Company's consolidated net tangible assets,
or (b) any shares of capital stock or indebtedness of any subsidiary owning any
such manufacturing facility. (Section 5.09)
Because the covenants described above cover only manufacturing facilities
in the continental United States, the Company's manufacturing facilities in
Puerto Rico are excluded from the operation of the covenants.
There are no other restrictive covenants contained in the Indenture. The
Indenture does not contain any provision which will restrict the Company from
incurring, assuming or becoming liable with respect to any indebtedness or other
obligations, whether secured or unsecured, or from paying dividends or making
other distributions on its capital stock or purchasing or redeeming its capital
stock. The Indenture does not contain any financial ratios, or specified levels
of net worth or liquidity to which the Company must adhere. In addition, the
Indenture does not contain any provision which would require that the Company
repurchase or redeem or otherwise modify the terms of any of its Securities upon
a highly-leveraged transaction, reorganization, restructuring, merger or similar
transaction involving the Company which may adversely affect the
creditworthiness of the Securities.
Default and Certain Rights on Default: The Indenture provides that upon the
happening of any Event of Default with respect to any series of Indenture
Securities specified therein (unless it is inapplicable to such series of
Indenture Securities or it is specifically deleted in the supplemental indenture
or Board Resolution under which such series of Indenture Securities is issued or
has been modified in any such supplemental indenture), including (i) failure to
pay interest when due on the Indenture Securities of such series outstanding
thereunder, continued for 30 days; (ii) failure to pay principal or premium, if
any, when due (whether at maturity, declaration or otherwise) on the Indenture
Securities of such series outstanding thereunder; (iii) failure to observe or
perform any covenant of the Company in the Indenture or the Indenture Securities
of such series (other than a covenant included in the Indenture or the Indenture
Securities solely for the benefit of a series of Indenture Securities other than
such series), continued for 60 days after written notice from the Trustee or the
holders of 25% or more in aggregate principal amount of the Indenture Securities
of such series outstanding thereunder; (iv) certain events of bankruptcy,
insolvency or reorganization; and (v) any other Event of Default as may be
specified for such series, the Trustee or the holders of 25% or more in
aggregate principal amount of Indenture Securities of such series outstanding
thereunder may declare the principal amount of all Indenture Securities of such
series to be due and payable immediately, but if all defaults with respect to
Indenture Securities of such series (other than non-payment of accelerated
principal) are cured and there has been no sale of property under any judgment
or decree for the payment of moneys due which shall have been obtained or
entered, the holders of a majority in aggregate principal amount of the
Indenture Securities of such series outstanding thereunder may waive the default
and rescind the declaration and its consequences. (Section 6.01)
The Indenture provides that the holders of a majority in aggregate
principal amount of the Indenture Securities of any series outstanding
thereunder may, subject to certain exceptions, direct the time, method and place
of conducting any proceeding for any remedy available to, or exercising any
power or trust conferred upon, the Trustee with respect to Indenture Securities
of such series and may on behalf of all holders of Indenture Securities of such
series waive any past default and its consequences with respect to Indenture
Securities of such series, except a default in the payment of the principal of,
premium, if any, or interest, if any, on any of the Indenture Securities of such
series. (Section 6.06)
Holders of any Security of any series may not institute any proceeding to
enforce the Indenture unless the Trustee shall have refused or neglected to act
for 60 days after a request and offer of satisfactory indemnity by the holders
of 25% or more in aggregate principal amount of the Indenture Securities of such
series outstanding thereunder, but the right of any holder of any Security of
any series to enforce payment of the principal of, premium, if any, or interest,
if any, on his Indenture Securities when due shall not be impaired without the
consent of such holder. (Section 6.04)
The Trustee is required to give the holders of any Security of any series
notice of default with respect to such series (Events of Default summarized
above, exclusive of any grace period and irrespective of any requirement that
notice of default be given) known to it within 90 days after the happening
thereof, unless cured before the giving of such notice, but, except for defaults
in payments of
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the principal of, premium, if any, or interest, if any, on the Indenture
Securities of such series, the Trustee may withhold notice if and so long as it
determines in good faith that the withholding of such notice is in the interests
of the holders of the Securities of such series.
The Company is required to deliver to the Trustee each year an officers'
certificate stating whether such officers have obtained knowledge of any default
by the Company in the performance of certain covenants and, if so, specifying
such default and the nature thereof. (Section 5.06)
Consolidation, Merger and Sale of Assets: The Company, without the consent
of the Holders of any of the Outstanding Securities under the Indenture, may
consolidate or merge with or into, or transfer or lease substantially all of its
assets to, any Person that is a corporation organized and validly existing under
the laws of any domestic jurisdiction, or may permit any such Person to
consolidate with or merge into the Company or convey, transfer or lease
substantially all of its assets to the Company, provided (a) that any successor
Person assumes the Company's obligations on the Securities under the Indenture,
(b) that after giving effect to the transaction, no Event of Default, and no
event which, after notice or lapse of time, would become an Event of Default,
shall have occurred and be continuing, and (c) that certain other conditions are
met. (Section 11.02)
Defeasance of the Indenture and the Indenture Securities: If the Prospectus
Supplement relating to the Offered Securities so provides, the Company at its
option (a) will be Discharged (as such term is defined in the Indenture) from
any and all obligations in respect of the Offered Securities (except for certain
obligations to register the transfer and exchange of Securities, replace stolen,
lost or mutilated Securities and coupons, maintain paying agencies and hold
moneys for payment in trust) or (b) need not comply with certain restrictive
covenants of the Indenture, in each case after the Company deposits with the
Trustee thereunder, in trust, money, and, in the case of Securities and coupons
denominated in U.S. dollars, U.S. Government Obligations (as defined in the
Indenture) or, in the case of Securities and coupons denominated in a foreign
currency, Foreign Government Securities (as defined in the Indenture), which
through the payment of interest thereon and principal thereof in accordance with
their terms will provide money or a combination of money, and U.S. Government
Obligations or Foreign Government Securities, as the case may be, in an amount
sufficient to pay in the currency, currencies or currency unit or units in which
the Offered Securities are payable all the principal of, and interest on, the
Offered Securities on the date such payments are due in accordance with the
terms of the Offered Securities. Among the conditions to the Company's
exercising any such option, the Company is required to deliver to the Trustee an
opinion of independent counsel of recognized standing to the effect that the
deposit and related defeasance would not cause the Holders of the Offered
Securities to recognize income, gain or loss for United States Federal income
tax purposes and that the Holders will be subject to United States Federal
income tax in the same amounts, in the same manner and at the same time as would
have been the case if such deposit and related defeasance had not occurred.
(Sections 12.01 and 12.02)
PLAN OF DISTRIBUTION
The Company may offer the Securities (i) to or through one or more
underwriters, (ii) to or through dealers, (iii) through agents, or (iv) directly
or through its subsidiaries to purchasers. The Prospectus Supplement will
describe the method of distribution of the Offered Securities.
The distribution of Offered Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such market
prices or at negotiated prices.
If underwriters are used in the offering of Offered Securities, the names
of the managing underwriter or underwriters and any other underwriters, and the
terms of the transaction, including compensation of the underwriters and
dealers, if any, will be set forth in the Prospectus Supplement relating to such
offering. Only underwriters named in a Prospectus Supplement will be deemed to
be underwriters in connection with the Offered Securities described therein.
Firms not so named will have no direct or indirect participation in the
underwriting of such Offered Securities, although such a firm may participate in
the distribution of such Offered Securities under circumstances entitling it to
a dealer's commission. It is anticipated that any underwriting agreement
pertaining to any Offered
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Securities will (i) entitle the underwriters to indemnification by the Company
against certain civil liabilities, including liabilities under the Securities
Act of 1933, as amended (the 'Securities Act'), or to contribution for payments
which the underwriters may be required to make in respect thereof, (ii) provide
that the obligations of the underwriters will be subject to certain conditions
precedent, and (iii) provide that the underwriters generally will be obligated
to purchase all Offered Securities if any are purchased.
The Company also may sell Offered Securities to a dealer as principal. In
such event, the dealer may then resell such Offered Securities to the public at
varying prices to be determined by such dealer at the time of resale. The name
of the dealer and the terms of the transactions will be set forth in the
Prospectus Supplement relating thereto.
Offered Securities also may be offered through agents designated by the
Company from time to time. Any such agent will be named, and the terms of any
such agency will be set forth, in the Prospectus Supplement relating thereto.
Unless otherwise indicated in such Prospectus Supplement, any such agent will
act on a best efforts basis for the period of its appointment.
As one of the means of direct issuance of the Indenture Securities, the
Company may utilize the services of any available electronic auction system to
conduct an electronic 'dutch auction' of the Indenture Securities among
potential purchasers who are eligible to participate in the auction of such
Indenture Securities, if so described in the Prospectus Supplement.
Dealers and agents named in a Prospectus Supplement may be deemed to be
underwriters (within the meaning of the Securities Act) of the Offered
Securities described therein and, under agreements which may be entered into
with the Company, may be entitled to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act, or to
contribution for payments which they may be required to make in respect thereof.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, the Company in the ordinary course of business.
In connection with the original issuance of Offered Securities issued as
Bearer Securities, in order to meet the requirements set forth in U.S. Treasury
Regulation Section 1.163-5(c)(2)(i)(D), each underwriter, dealer and agent will
agree to certain restrictions in connection with the original issuance of such
Offered Securities. Such restrictions will be described in the Prospectus
Supplement relating thereto.
Offers to purchase Securities may be solicited directly by the Company or
through its subsidiaries and sales thereof may be made by the Company directly
to institutional investors or others. The terms of any such sales will be
described in the Prospectus Supplement relating thereto.
LEGAL MATTERS
The legality of the Securities offered hereby will be passed upon by Dewey
Ballantine, 1301 Avenue of the Americas, New York, New York, on behalf of the
Company, and Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York, on
behalf of the underwriters or agents, if any. Dewey Ballantine and Davis Polk &
Wardwell in rendering their opinions, will rely, as to matters governed by the
laws of the State of Indiana, upon the opinion of Daniel P. Carmichael,
Secretary and Deputy General Counsel for the Company.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in the Company's Annual Report (Form 10-K) for the year ended December
31, 1994, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
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