10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM              TO             

COMMISSION FILE NUMBER: 1-1136

BRISTOL-MYERS SQUIBB COMPANY

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE	22-0790350
(State of Incorporation)	(I.R.S. Employer Identification No.)

345 Park Avenue, New York, N.Y. 10154

(Address of principal executive offices)(Zip Code)

(212) 546-4000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes  x    No  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d)of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

¨  Yes    ¨  No

APPLICABLE ONLY TO CORPORATE ISSUERS:

At September 30, 2005, there were 1,956,520,637 shares outstanding of the Registrant’s $.10 par value Common Stock.

BRISTOL-MYERS SQUIBB COMPANY

INDEX TO FORM 10-Q

SEPTEMBER 30, 2005

	Page
PART I—FINANCIAL INFORMATION
Item 1.
Financial Statements:
Consolidated Statement of Earnings	3
Consolidated Statement of Comprehensive Income and Retained Earnings	4
Consolidated Balance Sheet	5
Consolidated Statement of Cash Flows	6
Notes to Consolidated Financial Statements	7-32
Report of Independent Registered Public Accounting Firm	33
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations	34-66
Item 3.
Quantitative and Qualitative Disclosures About Market Risk	66
Item 4.
Controls and Procedures	66
PART II—OTHER INFORMATION
Item 1.
Legal Proceedings	67
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 6.
Exhibits	68
Signatures	69

2

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED STATEMENT OF EARNINGS

(UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
	(in millions, except per share data)
EARNINGS
Net Sales	$	4,767		$	4,778		$	14,188		$	14,223
Cost of products sold		1,483			1,467			4,333			4,324
Marketing, selling and administrative		1,286			1,199			3,737			3,626
Advertising and product promotion		349			325			1,032			987
Research and development		669			615			1,971			1,823
Acquired in-process research and development		—			1			—			63
Provision for restructuring, net		(5	)		57			—			75
Litigation (income)/charges, net		(26	)		25			72			404
Gain on sale of business		(569	)		(3	)		(569	)		(316	)
Equity in net income of affiliates		(84	)		(70	)		(240	)		(204	)
Other expense, net		38			16			168			62
Total expenses		3,141			3,632			10,504			10,844
Earnings from Continuing Operations Before Minority Interest and Income Taxes		1,626			1,146			3,684			3,379
Provision for income taxes		507			239			754			753
Minority interest, net of taxes		155			152			437			387
Earnings from Continuing Operations		964			755			2,493			2,239
Discontinued Operations
Net Earnings		—			3			(5	)		10
Net Gain on Disposal		—			—			13			—
		—			3			8			10
Net Earnings	$	964		$	758		$	2,501		$	2,249
Earnings per Common Share
Basic
Earnings from Continuing Operations	$	.49		$	.39		$	1.28		$	1.16
Discontinued Operations
Net Earnings		—			—			—			—
Net Gain on Disposal		—			—			—			—
Net Earnings per Common Share	$	.49		$	.39		$	1.28		$	1.16
Diluted
Earnings from Continuing Operations	$	.49		$	.38		$	1.27		$	1.14
Discontinued Operations
Net Earnings		—			—			—			—
Net Gain on Disposal		—			—			—			—
Net Earnings per Common Share	$	.49		$	.38		$	1.27		$	1.14
Average Common Shares Outstanding
Basic		1,953			1,942			1,951			1,941
Diluted		1,984			1,975			1,983			1,975
Dividends declared per common share	$	.28		$	.28		$	.84		$	.84

The accompanying notes are an integral part of these financial statements.

3

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED STATEMENT OF

COMPREHENSIVE INCOME AND RETAINED EARNINGS

(UNAUDITED)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2005		2004			2005			2004
	(dollars in millions)
COMPREHENSIVE INCOME
Net Earnings	$	964	$	758		$	2,501		$	2,249
Other Comprehensive Income/(Loss):
Foreign currency translation, net of tax benefit of zero and $8 for the three months ended September 30, 2005 and 2004, respectively; and net of tax liability of $4 and tax benefit of $28 for the nine months ended September 30, 2005 and 2004, respectively		25		22			(211	)		63
Deferred (losses)/gains on derivatives qualifying as hedges, net of tax liability of $3 and tax benefit of $5 for the three months ended September 30, 2005 and 2004, respectively; and net of tax liability of $103 and $55 for the nine months ended September 30, 2005 and 2004, respectively		12		(19	)		283			109
Available for sale securities, net of tax benefit of $11 and $4 for the nine months ended September 30, 2005 and 2004, respectively		—		—			(20	)		(7	)
Total Other Comprehensive Income		37		3			52			165
Comprehensive Income	$	1,001	$	761		$	2,553		$	2,414
RETAINED EARNINGS
Retained Earnings, January 1						$	19,651		$	19,439
Net Earnings							2,501			2,249
Cash dividends declared							(1,640	)		(1,632	)
Retained Earnings, September 30						$	20,512		$	20,056

The accompanying notes are an integral part of these financial statements.

4

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

	September 30, 2005			December 31, 2004
	(dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	2,129		$	3,680
Marketable securities		1,652			3,794
Receivables, net of allowances of $202 and $221		3,305			4,373
Inventories, including consignment inventory		2,053			1,830
Deferred income taxes, net of valuation allowances		703			805
Prepaid expenses		303			319
Total Current Assets		10,145			14,801
Property, plant and equipment, net		5,649			5,765
Goodwill		4,824			4,905
Other intangible assets, net		1,988			2,260
Deferred income taxes, net of valuation allowances		1,636			1,129
Prepaid pension		1,095			1,280
Other assets		272			295
Total Assets	$	25,609		$	30,435
LIABILITIES
Current Liabilities:
Short-term borrowings	$	277		$	1,883
Accounts payable		1,342			2,127
Accrued expenses		2,524			2,838
Accrued rebates and returns		1,036			1,209
U.S. and foreign income taxes payable		486			1,023
Dividends payable		547			545
Accrued litigation liabilities		410			186
Deferred revenue on consigned inventory		—			32
Total Current Liabilities		6,622			9,843
Other liabilities		1,824			1,927
Long-term debt		5,895			8,463
Total Liabilities		14,341			20,233
Commitments and contingencies (Note 17)
STOCKHOLDERS’ EQUITY
Preferred stock, $2 convertible series: Authorized 10 million shares; issued and outstanding 7,190 in 2005 and 7,476 in 2004, liquidation value of $50 per share		—			—
Common stock, par value of $.10 per share: Authorized 4.5 billion shares; 2,205 million issued in 2005 and 2,202 million issued in 2004		220			220
Capital in excess of par value of stock		2,527			2,491
Restricted stock		(70	)		(57	)
Accumulated other comprehensive loss		(740	)		(792	)
Retained earnings		20,512			19,651
		22,449			21,513
Less cost of treasury stock—248 million common shares in 2005 and 255 million in 2004		(11,181	)		(11,311	)
Total Stockholders’ Equity		11,268			10,202
Total Liabilities and Stockholders’ Equity	$	25,609		$	30,435

The accompanying notes are an integral part of these financial statements.

5

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
	2005			2004
	(dollars in millions)
Cash Flows From Operating Activities:
Net earnings	$	2,501		$	2,249
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		427			427
Amortization		263			227
Deferred income tax benefits		(561	)		(454	)
Litigation settlement expense, net of recoveries		72			404
Provision for restructuring		—			75
Gain on sale of businesses		(632	)		(316	)
Acquired in-process research and development		—			63
Impairment charges and asset write-offs		19			—
(Gain)/loss on disposal of property, plant and equipment and investment in other companies		(4	)		1
Undistributed losses of affiliates, net		61			29
Unfunded pension expense		178			97
Changes in operating assets and liabilities:
Receivables		649			(208	)
Inventories		(344	)		(166	)
Prepaid expenses		—			(27	)
Other assets		8			35
Deferred revenue on consigned inventory		(32	)		(38	)
Litigation settlement payments, net of insurance recoveries		115			(500	)
Accounts payable and accrued expenses		(511	)		100
Product liability		(42	)		63
U.S. and foreign income taxes payable		(568	)		358
Other liabilities		(88	)		74
Net Cash Provided by Operating Activities		1,511			2,493
Cash Flows From Investing Activities:
Purchases, net of sales and maturities, of marketable securities		2,140			(857	)
Additions to property, plant and equipment and capitalized software		(537	)		(477	)
Proceeds from disposal of property, plant and equipment and investment in other companies		96			18
Proceeds from sale of businesses		843			365
Purchase of Acordis Speciality Fibres		—			(250	)
ImClone milestone payment		—			(150	)
Purchases of trademarks, patents, licenses and other businesses		—			(129	)
Divestiture and acquisition costs		—			(29	)
Investments in other companies		(28	)		—
Net Cash Provided by (Used in) Investing Activities		2,514			(1,509	)
Cash Flows From Financing Activities:
Short-term (repayments)/borrowings		(1,583	)		1,429
Long-term debt borrowings		8			11
Long-term debt repayments		(2,502	)		(2	)
Issuances of common stock under stock plans		154			95
Dividends paid		(1,639	)		(1,630	)
Net Cash Used in Financing Activities		(5,562	)		(97	)
Effect of Exchange Rates on Cash and Cash Equivalents		(14	)		10
(Decrease) Increase in Cash and Cash Equivalents		(1,551	)		897
Cash and Cash Equivalents at Beginning of Period		3,680			2,549
Cash and Cash Equivalents at End of Period	$	2,129		$	3,446

The accompanying notes are an integral part of these financial statements.

6

Note 1. Basis of Presentation and New Accounting Standards

Bristol-Myers Squibb Company (the Company) prepared these unaudited consolidated financial statements following the requirements of the Securities and Exchange Commission (SEC) and U.S. generally accepted accounting principles (GAAP) for interim reporting. Under those rules, certain footnotes and other financial information that are normally required by GAAP for annual financial statements can be condensed or omitted. The Company is responsible for the consolidated financial statements included in this Form 10-Q. These consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position at September 30, 2005 and December 31, 2004, the results of its operations for the three and nine months ended September 30, 2005 and 2004 and cash flows for the nine months ended September 30, 2005 and 2004. These consolidated financial statements and the related notes should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (2004 Form 10-K). PricewaterhouseCoopers LLP (PwC), an independent registered public accounting firm, has performed a review of the unaudited consolidated financial statements included in this Form 10-Q, and their review report thereon accompanies this Form 10-Q.

Revenues, expenses, assets and liabilities can vary during each quarter of the year. Accordingly, the results and trends in these unaudited consolidated financial statements may not be the same as those for the full year.

The Company recognizes revenue when substantially all the risks and rewards of ownership have transferred to the customer, primarily at the time of shipment of products. In the case of certain sales made by the Nutritionals and Related Healthcare segments and certain non-U.S. businesses within the Pharmaceuticals segment, revenue is recognized on the date of receipt by the purchaser. Revenues are reduced at the time of sale to reflect expected returns that are estimated based on historical experience. Additionally, provisions are made at the time of sale for all discounts, rebates and estimated sales allowances based on historical experience updated for changes in facts and circumstances, as appropriate. Such provisions are recorded as a reduction of revenue.

In addition, the Company includes alliance revenue in net sales. The Company has agreements to promote pharmaceuticals discovered by other companies. Alliance revenue is based upon a percentage of the Company’s copromotion partners’ net sales and is earned when the copromotion partners ship the related product and title passes to their customer.

The Company accounts for certain costs to obtain internal use software for significant systems projects in accordance with Statement of Position (SOP) 98-1. These costs, including external direct costs, interest costs and internal payroll and related costs for employees who are directly associated with such projects are capitalized and amortized over the estimated useful life of the software, which ranges from three to ten years. Costs to obtain software for projects that are not significant are expensed as incurred.

The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions are employed in estimates used in determining values of intangible assets, restructuring charges and accruals, sales rebate and return accruals, legal contingencies and tax assets and liabilities, as well as in estimates used in applying the revenue recognition policy and accounting for retirement and postretirement benefits (including the actuarial assumptions). Actual results could differ from the estimated results.

Certain prior period amounts have been reclassified to conform to the current year presentation.

In May 2005, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 154, Accounting Changes and Error Corrections, which replaces Accounting Principles Board (APB) Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. This pronouncement applies to all voluntary changes in accounting principle, and revises the requirements for accounting for and reporting a change in accounting principle. SFAS No. 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle, unless it is impracticable to do so. This pronouncement also requires that a change in the method of depreciation, amortization, or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate that is effected by a change in accounting principle. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Statement does not change the transition provisions of any existing accounting pronouncements, including those that are in a transition phase as of the effective date of SFAS No. 154. The Company is evaluating the impact this statement will have on its financial position and results of operations.

In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (FIN 47). FIN 47 clarifies that an entity must record a liability for a conditional asset retirement obligation if the fair value of the obligation can be reasonably estimated. Asset retirement obligations covered by FIN 47 are those for which an entity has a legal obligation to perform an asset retirement activity, even if the timing and method of settling the obligation are conditional on a future event that may or may not be within the control of the entity. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The Company is evaluating the impact this statement will have on its financial position and result of operations.

7

Note 1. Basis of Presentation and New Accounting Standards (Continued)

In December 2004, the FASB issued FASB Staff Position (FSP) No. 109-1— Application of SFAS No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004 (FSP No. 109-1). The FSP provides that the Deduction on Qualified Production Activities will be treated as a “special deduction” as described in SFAS No. 109, Accounting for Income Taxes. Accordingly, the tax effect of this deduction will be reported as a component of the Company’s tax provision and will not have an effect on deferred tax assets and liabilities. The Department of the Treasury recently issued Proposed Tax Regulations with respect to the Deduction on Qualified Production Activities. The Company is evaluating the impact of the Proposed Tax Regulations and the FSP on its income tax provision and results of operations.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets. The provisions of this Statement are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The provisions of this Statement should be applied prospectively, and eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and replaces it with an exception for exchanges that do not have commercial substance. The adoption of this accounting pronouncement is not expected to have a material effect on the Company’s financial position and results of operations.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs – an Amendment of ARB No. 43, Chapter 4. The standard requires abnormal amounts of idle facility and related expenses to be recognized as current period charges and also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is evaluating the impact this statement will have on its financial position and results of operations.

In December 2004, the FASB issued revised SFAS No. 123R (SFAS No. 123R), Share-Based Payment. This standard eliminates the ability to account for share-based compensation transactions using the intrinsic value-based method under APB Opinion No. 25, Accounting for Stock Issued to Employees, and requires instead that such transactions be accounted for using a fair-value-based method. In April 2005, the SEC delayed the effective date of SFAS No. 123R to financial statements issued for the first annual period beginning after June 15, 2005. The Company plans to adopt and comply with the requirements of SFAS No. 123R when it becomes effective January 1, 2006, and is evaluating the potential impact of this statement, which could have a material impact on the Company’s results of operations. Currently, the Company discloses the pro forma net income and related pro forma income per share information in accordance with SFAS No. 123, Accounting for Stock-Based Compensation, and SFAS No. 148, Accounting for Stock-Based Compensation Costs—Transition and Disclosure. The following table summarizes the Company’s results on a pro forma basis as if it had recorded compensation expense based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under SFAS No. 123, Accounting for Stock-Based Compensation, for the three and nine months ended September 30, 2005 and 2004:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
	(dollars in millions, except per share data)
Net Earnings:
As reported	$	964		$	758		$	2,501		$	2,249
Total stock-based employee compensation expense, included in reported net earnings, net of related tax effects		6			5			19			15
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(26	)		(34	)		(88	)		(104	)
Pro forma	$	944		$	729		$	2,432		$	2,160
Basic earnings per share:
As reported	$	.49		$	.39		$	1.28		$	1.16
Pro forma		.48			.38			1.25			1.11
Diluted earnings per share:
As reported	$	.49		$	.38		$	1.27		$	1.14
Pro forma		.48			.37			1.23			1.10

With respect to the accounting treatment of retirement eligibility provisions of employee stock-based compensation awards, the Company has historically followed the nominal vesting period approach. Upon the adoption of SFAS No. 123R, the Company will follow the non-substantive vesting period approach and recognize compensation cost immediately for awards granted to retirement eligible employees, or over the period from the grant date to the date retirement eligibility is achieved. The impact of applying the non-substantive vesting period approach will not be material.

8

Note 2. Alliances and Investments

Sanofi-Aventis

The Company has agreements with Sanofi-Aventis (Sanofi) for the codevelopment and cocommercialization of AVAPRO*AVALIDE * (irbesartan), an angiotensin II receptor antagonist indicated for the treatment of hypertension, and PLAVIX* (clopidogrel), a platelet aggregation inhibitor. The worldwide alliance operates under the framework of two geographic territories; one in the Americas (principally the United States, Canada, Puerto Rico and Latin American countries) and Australia and the other in Europe and Asia. Accordingly, two territory partnerships were formed to manage central expenses, such as marketing, research and development and royalties, and to supply finished product to the individual countries. In general, at the country level, agreements either to copromote (whereby a partnership was formed between the parties to sell each brand) or to comarket (whereby the parties operate and sell their brands independently of each other) are in place. The agreements expire on the later of (i) with respect to PLAVIX*, 2013 and, with respect to AVAPRO*/AVALIDE*, 2012 in the Americas and Australia and 2013 in Europe and Asia and (ii) the expiration of all patents and other exclusivity rights in the applicable territory.

The Company acts as the operating partner for the territory covering the Americas and Australia and owns a 50.1% majority controlling interest in the partnership within this territory. Sanofi’s ownership interest in the partnership within this territory is 49.9%. As such, the Company consolidates all country partnership results for this territory and records Sanofi’s share of the results as a minority interest, net of taxes, which was $152 million and $149 million for the three months ended September 30, 2005 and 2004, respectively, and $425 million and $371 million for the nine months ended September 30, 2005 and 2004, respectively. The Company recorded sales in this territory and in comarketing countries outside this territory (Germany, Italy, Spain and Greece) of $1,231 million and $1,143 million for the three months ended September 30, 2005 and 2004, respectively, and $3,467 million and $3,039 million for the nine months ended September 30, 2005 and 2004, respectively.

Sanofi acts as the operating partner of the territory covering Europe and Asia and owns a 50.1% majority financial controlling interest in the partnerships within this territory. The Company’s ownership interest in the partnerships within this territory is 49.9%. The Company accounts for the investment in partnership entities in this territory under the equity method and records its share of the results in equity in net income of affiliates in the consolidated statement of earnings. The Company’s share of net income from these partnership entities before taxes was $85 million and $67 million for the three months ended September 30, 2005 and 2004, respectively, and was $251 million and $201 million for the nine months ended September 30, 2005 and 2004, respectively.

In 2001, the Company and Sanofi formed an alliance for the copromotion of irbesartan, as part of which the Company contributed the irbesartan distribution rights in the United States and Sanofi paid the Company a total of $350 million in the two years ended December 31, 2002. The Company accounted for this transaction as a sale of an interest in a license and deferred and amortized the $350 million to other income over the expected useful life of the license, which is approximately eleven years. The Company recognized other income of $8 million in each of the three month periods ended September 30, 2005 and 2004 and $24 million in each of the nine month periods ended September 30, 2005 and 2004. The unamortized portion of the deferred income is recorded in the liabilities section of the consolidated balance sheet and was $224 million as of September 30, 2005 and $248 million as of December 31, 2004.

Otsuka

The Company has a worldwide commercialization agreement with Otsuka Pharmaceutical Co., Ltd. (Otsuka), to codevelop and copromote ABILIFY* (aripiprazole) for the treatment of schizophrenia and related psychiatric disorders, except in Japan, China, Taiwan, North Korea, South Korea, the Philippines, Thailand, Indonesia, Pakistan, and Egypt. The Company began copromoting the product with Otsuka in the U.S. and Puerto Rico in November 2002. In June 2004, the Company received marketing approval from the European Commission. The product is currently copromoted with Otsuka in the United Kingdom, Germany and Spain, and will also be copromoted in France. ABILIFY* is currently distributed exclusively by the Company in France on a temporary basis until copromotion with Otsuka commences. The Company records alliance revenue for its 65% contractual share of Otsuka’s net sales in these copromotion countries, excluding the United Kingdom, and records all expenses related to the product. The Company recognizes this alliance revenue when ABILIFY* is shipped and all risks and rewards of ownership have transferred to Otsuka’s customers. In the UK, and in France until copromotion with Otsuka commences, the Company records 100% of the net sales and related cost of products sold.

The Company also has an exclusive right to sell ABILIFY* in a number of other countries in Europe, the Americas and Asia. In these countries the Company records 100% of the net sales and related cost of products sold. Under the terms of the agreement, the Company purchases the product from Otsuka and performs finish manufacturing for sale by the Company to its customers. The agreement expires in November 2012 in the U.S. and Puerto Rico. For the countries in the European Union where the Company has an exclusive right to sell ABILIFY*, the agreement expires in June 2014. In each other country where the Company has the exclusive right to sell ABILIFY*, the agreement expires on the later of the tenth anniversary of the first commercial sale in such country or expiration of the applicable patent in such country.

9

Note 2. Alliances and Investments (Continued)

The Company recorded revenue for ABILIFY* of $260 million and $165 million for the three months ended September 30, 2005 and 2004, respectively, and $688 million and $402 million for the nine months ended September 30, 2005 and 2004, respectively. Total milestone payments made to Otsuka under the agreement through September 2005 were $217 million, of which $157 million was expensed as acquired in-process research and development. The remaining $60 million was capitalized in other intangible assets and is amortized in cost of products sold over the remaining life of the agreement in the U.S., ranging from eight to eleven years. The Company amortized in cost of products sold $2 million and $1 million in the three months ended September 30, 2005 and 2004, respectively, and $5 million and $3 million in the nine months ended September 30, 2005 and 2004, respectively. The unamortized capitalized payment balance was $42 million as of September 30, 2005 and $47 million as of December 31, 2004.

ImClone

The Company has a commercialization agreement expiring in September 2018 with ImClone Systems, Inc (ImClone), a biopharmaceutical company focused on developing targeted cancer treatments, for the codevelopment and copromotion of ERBITUX* in the United States. In February 2004, the U.S. Food and Drug Administration (FDA) approved the Biologics License Application (BLA) for ERBITUX* for use in combination with irinotecan in the treatment of patients with Epidermal Growth Factor Receptor (EGFR)-expressing, metastatic colorectal cancer who are refractory to irinotecan-based chemotherapy and for use as a single agent in the treatment of patients with EGFR-expressing, metastatic colorectal cancer who are intolerant to irinotecan-based chemotherapy. The Company paid ImClone $250 million in March 2004 as a milestone payment for the initial approval of ERBITUX*. An additional $250 million is payable upon FDA approval for use in treating an additional tumor type. In June 2004, the FDA approved ImClone’s Chemistry, Manufacturing and Controls supplemental BLA for licensure of its BB36 manufacturing facility. In August 2005, ImClone submitted a supplemental Biologics License Application (sBLA) to the FDA for approval of ERBITUX* in treatment of Squamous Cell Carcinoma of the Head and Neck (SCCHN). The FDA decision is expected by February 2006, and if approved, the Company will pay ImClone the additional $250 million. Under the agreement, ImClone receives a distribution fee based on a flat rate of 39% of product revenues in North America. The Company also has codevelopment and copromotion rights with ImClone in Canada. In September 2005, Health Canada’s Biologics and Genetic Therapies Directorate approved ERBITUX* as a treatment for metastatic colorectal cancer. In addition, the Company has a 50% share of the codevelopment and copromotion rights ImClone has with Merck KGaA in Japan to the extent the product is commercialized in that country.

The Company accounts for the $250 million approval milestone paid in March 2004 as a license acquisition and amortizes the payment into cost of products sold over the expected useful life of the license, which is approximately fourteen years. The Company amortized into cost of products sold $4 million for each of the three months ended September 30, 2005 and 2004, and $13 million and $10 million for the nine months ended September 30, 2005 and 2004, respectively. The unamortized portion of the approval payment is recorded in other intangibles, net and was $223 million as of September 30, 2005 and $236 million as of December 31, 2004.

The Company accounts for its investment in ImClone under the equity method and records its share of the results in equity in net income of affiliates in the consolidated statement of earnings. The Company’s recorded investment in ImClone common stock as of September 30, 2005 and December 31, 2004 was $66 million and $72 million, respectively, representing approximately 17% of the ImClone shares outstanding, respectively. On a per share basis, the carrying value of the ImClone investment and the closing market price of the ImClone shares as of September 30, 2005 were $4.56 and $31.45, respectively, compared to $5.03 and $46.08, respectively, as of December 31, 2004.

The Company determines its share in ImClone’s net income or loss by eliminating from ImClone’s results the milestone revenue ImClone recognizes for the pre-approval milestone payments that were recorded by the Company as additional equity investment. For its share of ImClone’s results of operations, the Company recorded net income of zero and $4 million for the three months ended September 30, 2005 and 2004, respectively, and a net loss of $6 million and net income of $1 million for the nine months ended September 30, 2005 and 2004, respectively. The Company recorded net sales for ERBITUX* of $107 million and $84 million for the three months ended September 30, 2005 and 2004, respectively and $292 million and $173 million for the nine months ended September 30, 2005 and 2004, respectively.

Merck

In April 2004, the Company entered into a collaboration agreement with Merck & Co., Inc. (Merck) for worldwide codevelopment and copromotion for PARGLUVA™ (muraglitazar), the Company’s dual PPAR (peroxisome proliferator activated receptor) agonist, currently in Phase III clinical development for use in treating type 2 diabetes. Under the terms of the agreement, the Company received a $100 million upfront payment in May 2004 and a $55 million milestone payment in January 2005 for submission of the

10

Note 2. Alliances and Investments (Continued)

New Drug Application (NDA) and is entitled to receive $220 million in additional payments upon achievement of certain regulatory milestones, including $100 million for FDA approval of muraglitazar. Under the terms of agreement, the Company and Merck agreed to jointly develop the clinical and marketing strategy for muraglitazar, share equally in future development and commercialization costs and copromote the product to physicians on a global basis, with Merck to receive payments based on net sales levels.

In December 2004 the Company submitted an NDA to the FDA for regulatory approval of muraglitazar. In September 2005, the Company and Merck announced the FDA’s Endocrinologic and Metabolic Drugs Advisory Committee voted to recommend approval of muraglitazar for the treatment of type 2 diabetes, for use as a monotherapy and in combination with metformin. On October 18, 2005, the FDA issued an approvable letter for muraglitazar requesting additional information from ongoing clinical trials to more fully address the cardiovascular safety profile of muraglitazar. The Company determined that to receive regulatory approval and to achieve commercial success, additional studies may be required because ongoing muraglitazar trials are not designed to answer the questions raised by the FDA. The additional studies may take approximately five years to complete. The Company will continue discussions with the FDA. Merck advised the Company of their intent to terminate the agreement and the Company has agreed to begin discussions to terminate the agreement. The Company is in the process of evaluating a range of options including conducting additional studies or terminating further development of muraglitazar.

The upfront and milestone payments of $155 million, which are non-refundable, were deferred and are being amortized to other income over the expected remaining useful life of the agreement which is approximately sixteen years. The Company recognized $2 million of these payments in other income for each of the three month periods ended September 30, 2005 and September 30, 2004, respectively, and $7 million and $3 million for the nine months ended September 30, 2005 and 2004, respectively. The unamortized portion of the milestone payment is recorded in other liabilities and was $144 million as of September 30, 2005 and $151 million as of December 31, 2004.

Note 3. Restructuring

In the third quarter of 2005, the Company recorded pre-tax charges of $2 million related to employee termination benefits for approximately 13 selling and administrative personnel and asset impairment charges, which were offset by a $7 million adjustment reflecting a change in estimate for restructuring actions taken in prior periods.

The following table presents a detail of the charges by segment and type for the three months ended September 30, 2005. The Company expects to substantially complete these activities by late 2005.

	Employees	Termination Benefits			Asset Write-Downs		Total
	(dollars in millions)
Pharmaceuticals	—	$	—		$	1	$	1
Nutritionals	13		1			—		1
Changes in estimates	—		(7	)		—		(7	)
Restructuring as reflected in the statement of earnings	13	$	(6	)	$	1	$	(5	)

In the nine months ended September 30, 2005, the Company recorded pre-tax charges of $8 million related to the termination benefits and other related costs for workforce reductions and downsizing and streamlining of worldwide operations primarily in Latin America, Europe, Africa and Asia. Of these charges, $6 million related to employee termination benefits and related expenses for approximately 122 selling and administrative personnel, $1 million related to retention bonuses and $1 million related to asset impairments. These charges were offset by an $8 million adjustment reflecting changes in estimates for restructuring actions taken in prior periods.

The following table presents a detail of the charges by segment and type for the nine months ended September 30, 2005. The Company expects to substantially complete these activities by late 2005.

	Employees	Termination Benefits			Other Exit Costs			Relocation and Retention		Asset Write-Downs		Total
	(dollars in millions)
Pharmaceuticals	102	$	3		$	1		$	1	$	1	$	6
Nutritionals	13		1			—			—		—		1
Related Healthcare	7		1			—			—		—		1
Changes in estimates	—		(7	)		(1	)		—		—		(8	)
Restructuring as reflected in the statement of earnings	122	$	(2	)	$	—		$	1	$	1	$	—

11

Note 3. Restructuring (Continued)

In the third quarter of 2004, the Company recorded pre-tax charges of $59 million related to the termination benefits and other related costs for workforce reductions and downsizing and streamlining of worldwide operations primarily in the United States, Canada, Europe and Puerto Rico. Of these charges, $58 million related to employee termination benefits and related expenses for approximately 1,060 selling, administrative and manufacturing personnel, and $1 million related to the consolidation of certain research facilities. These charges were partially offset by a $2 million adjustment reflecting changes in estimates for restructuring actions taken in prior periods.

The following table presents a detail of the charges by segment and type for the three months ended September 30, 2004. The Company has substantially completed these restructuring activities.

	Employees	Termination Benefits		Other Exit Costs			Relocation and Retention		Total
	(dollars in millions)
Pharmaceuticals	1,060	$	58	$	—		$	1	$	59
Changes in estimates	—		—		(2	)		—		(2	)
Restructuring as reflected in the statement of earnings	1,060	$	58	$	(2	)	$	1	$	57

In the nine months ended September 30, 2004, the Company recorded pre-tax charges of $82 million related to the termination benefits and other related costs for workforce reductions and downsizing and streamlining of worldwide operations primarily in Israel, the United States, Canada, Europe and Puerto Rico. Of these charges, $75 million related to employee termination benefits and related expenses for approximately 1,270 selling, administrative and manufacturing personnel, $1 million related to asset impairments, $5 million of expense related to the consolidation of certain research facilities and $1 million of retention bonuses. These charges were partially offset by a $7 million adjustment reflecting changes in estimates for restructuring actions taken in prior periods.

The following table presents a detail of the charges by segment and type for the nine months ended September 30, 2004. The Company has substantially completed these restructuring activities.

	Employees	Termination Benefits			Other Exit Costs			Asset Write-Downs			Relocation and Retention		Total
	(dollars in millions)
Pharmaceuticals	1,212	$	67		$	3		$	1		$	6	$	77
Related Healthcare	15		2			—			—			—		2
Corporate/Other	43		3			—			—			—		3
Changes in estimates	—		(3	)		(3	)		(1	)		—		(7	)
Restructuring as reflected in the statement of earnings	1,270	$	69		$	—		$	—		$	6	$	75

Restructuring charges and spending against accrued liabilities associated with prior and current actions are as follows:

	Employee Termination Liability			Other Exit Costs Liability			Total
	(dollars in millions)
Balance at December 31, 2003	$	51		$	7		$	58
Charges		102			5			107
Spending		(68	)		(9	)		(77	)
Changes in estimates		(8	)		—			(8	)
Balance at December 31, 2004		77			3			80
Charges		5			1			6
Spending		(38	)		(3	)		(41	)
Changes in estimates		(7	)		(1	)		(8	)
Balance at September 30, 2005	$	37		$	—		$	37

12

Note 4. Acquisitions and Divestitures

In September 2005, the Company entered into a definitive agreement to sell its inventory, trademark, patent and intellectual property rights related to DOVONEX in the United States to Warner Chilcott Company, Inc. for $200 million in cash. In addition, the Company will receive a royalty based on 5% of net sales of DOVONEX through the end of 2007. The transaction is expected to close in early 2006, subject to customary regulatory approvals.

In the third quarter of 2005, the Company completed the sale of its U.S. and Canadian Consumer Medicines business and related assets (Consumer Medicines) to Novartis AG (Novartis). Under the terms of the agreement, Novartis acquired the trademarks, patents and intellectual property rights of Consumer Medicines for $661 million in cash, including the impact of a working capital adjustment, of which $15 million is attributable to a post-closing supply arrangement between the Company and Novartis. The related assets include the rights to the U.S. Consumer Medicines brands in Latin America, Europe, the Middle East and Africa. The transaction was accounted for in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The results of operations of Consumer Medicines are included in the Company’s consolidated statement of earnings up to the date of disposal. As a result of this transaction, the Company recorded a pre-tax gain of $569 million ($370 million net of tax) in the third quarter of 2005.

In April 2004, the Company completed the acquisition of Acordis Speciality Fibres (Acordis). The Company purchased all the stock of Acordis for $150 million and incurred $8 million of acquisition costs in connection with the transaction. An additional $10 million payment is contingent on the achievement of future production volumes. The purchase price for the acquisition was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. Of the $158 million, $63 million was allocated to in-process research and development, which was immediately expensed, and $22 million was assigned to identifiable intangible assets, predominantly patents. The excess of the purchase price over the estimated fair values of net assets acquired was recorded as goodwill. This acquisition was accounted for by the purchase method, and, accordingly, results of operations have been included in the accompanying consolidated financial statements from the date of acquisition.

In February 2004, the Company completed the divestiture of its Adult Nutritional business to Novartis for $386 million, including $20 million contingent on the achievement of contractual requirements, which were satisfied, and a $22 million upfront payment for a supply agreement. The Company recorded a total pre-tax gain of $320 million ($198 million net of tax), which included the $20 million contingent payment and a $5 million reduction in Company goodwill associated with the Mead Johnson product lines.

Note 5. Discontinued Operations

In May 2005, the Company completed the sale of Oncology Therapeutics Network (OTN) to One Equity Partners LLC for cash proceeds of $197 million, including the impact of a working capital adjustment. The Company recorded a pre-tax gain of $63 million ($13 million net of tax), presented as a gain on sale of discontinued operations in the consolidated statement of earnings.

The following amounts related to the OTN business have been segregated from continuing operations and reported as discontinued operations through the date of disposition, and do not reflect costs of certain services provided to OTN by the Company. Such costs, which were not allocated by the Company to OTN, were for services which included legal counsel, insurance, external audit fees, payroll processing, and certain human resource services and information technology systems support.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005			2004
	(dollars in millions)
Net sales	$	—	$	649	$	1,015		$	1,815
Earnings/(loss) before income taxes		—		5		(8	)		16
Net earnings/(loss) from discontinued operations		—		3		(5	)		10

The consolidated statement of cash flows includes the OTN business through the date of disposition. The Company uses a centralized approach to the cash management and financing of its operations and accordingly, debt was not allocated to this business. Cash flows from operating and investing activities of discontinued operations consist of outflows of $265 million and inflows of $90 million for the nine months ended September 30, 2005 and 2004, respectively.

13

Note 6. Earnings Per Share

The numerator for basic earnings per share is net earnings available to common stockholders. The numerator for diluted earnings per share is net earnings available to common stockholders with interest expense added back for the assumed conversion of the convertible debt into common stock. The denominator for basic earnings per share is the weighted average number of common stock outstanding during the period. The denominator for diluted earnings per share is weighted average shares outstanding adjusted for the effect of dilutive stock options and assumed conversion of the convertible debt into common stock. The computations for basic and diluted earnings per common share are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005			2004
	(dollars in millions, except per share amounts)
Basic:
Earnings from Continuing Operations	$	964	$	755	$	2,493		$	2,239
Discontinued Operations
Net Earnings		—		3		(5	)		10
Net Gain on Disposal		—		—		13			—
Net Earnings	$	964	$	758	$	2,501		$	2,249
Basic Earnings Per Share:
Average Common Shares Outstanding		1,953		1,942		1,951			1,941
Earnings from Continuing Operations	$	.49	$	.39	$	1.28		$	1.16
Discontinued Operations
Net Earnings		—		—		—			—
Net Gain on Disposal		—		—		—			—
Net Earnings per Common Share	$	.49	$	.39	$	1.28		$	1.16
Diluted:
Earnings from Continuing Operations	$	964	$	755	$	2,493		$	2,239
Interest expense on conversion of convertible debt bonds, net of tax		6		1		15			4
Discontinued Operations
Net Earnings		—		3		(5	)		10
Net Gain on Disposal		—		—		13			—
Net Earnings	$	970	$	759	$	2,516		$	2,253
Diluted Earnings Per Share:
Average Common Shares Outstanding		1,953		1,942		1,951			1,941
Conversion of convertible debt bonds		29		29		29			29
Incremental shares outstanding assuming the exercise of dilutive stock options		2		4		3			5
		1,984		1,975		1,983			1,975
Earnings from Continuing Operations	$	.49	$	.38	$	1.27		$	1.14
Discontinued Operations
Net Earnings		—		—		—			—
Net Gain on Disposal		—		—		—			—
Net Earnings per Common Share	$	.49	$	.38	$	1.27		$	1.14

Weighted-average shares issuable upon the exercise of stock options, which were not included in the diluted earnings per share calculation because they were not dilutive, were 139 million for the three and nine month periods ended September 30, 2005 and 129 million for the three and nine month periods ended September 30, 2004.

14

Note 7. Other (Income)/Expense, Net

The components of other (income)/expense, net are:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
	(dollars in millions)
Interest expense	$	79		$	80		$	249		$	219
Interest income		(28	)		(29	)		(96	)		(67	)
Foreign exchange transaction (gains)/losses		—			(20	)		47			35
Other, net		(13	)		(15	)		(32	)		(125	)
Other expense, net	$	38		$	16		$	168		$	62

Interest expense was reduced by net interest swap gains of $7 million and $39 million for the three months ended September 30, 2005 and 2004, respectively, and $50 million and $120 million for the nine months ended September 30, 2005 and 2004, respectively. Interest income relates primarily to cash, cash equivalents and investments in marketable securities. Other income includes income from third-party contract manufacturing, royalty income, gains and losses on disposal of investments and property, plant and equipment and debt retirement costs.

Note 8. Income Taxes

The effective income tax rate on earnings from continuing operations before minority interest and income taxes was 31.2% and 20.5% for the three and nine months ended September 30, 2005, respectively, compared with 20.9% and 22.3% for the three and nine months ended September 30, 2004, respectively. The higher effective tax rate for the three months ended September 30, 2005 was due primarily to a higher concentration of pre-tax earnings in the U.S. and Canada attributable to the sale of Consumer Medicines and lower foreign tax credits. The lower effective tax rate for the nine months ended September 30, 2005 was due primarily to a tax benefit associated with the release of contingency reserves resulting from the settlement of examinations by the Internal Revenue Service for the years 1998 through 2001, a change in estimate related to the reduction of a deferred tax provision established in the fourth quarter of 2004 for special dividends under the American Jobs Creation Act of 2004 (AJCA), partially offset by higher taxes on the sale of Consumer Medicines, lower foreign tax credits, and the unfavorable treatment of certain litigation reserves.

In the fourth quarter of 2004, the Company disclosed that it anticipated repatriating approximately $9 billion in special dividends in 2005 and recorded a $575 million provision for deferred taxes pursuant to the AJCA as enacted and other pending matters. In the first quarter of 2005, the Company repatriated approximately $6.2 billion in special dividends from foreign subsidiaries and anticipates repatriating the remainder of the $9 billion in the fourth quarter of 2005. The Company expects that it will use the special dividends in accordance with requirements established by the AJCA and the U.S. Treasury Department. During the second quarter of 2005, the U.S. Treasury Department issued AJCA related guidance clarifying that the “gross-up” for foreign taxes associated with the special dividends also qualifies for the 5.25% tax rate established by the AJCA. As a result of this guidance, the Company reduced the $575 million provision by recording a benefit of approximately $135 million in its tax provision for the second quarter of 2005. Except for earnings associated with the special dividends discussed above, U.S. income taxes have not been provided on the balance of unremitted earnings of non-U.S. subsidiaries, since the Company has invested or expects to invest such earnings permanently offshore.

Note 9. Inventories

The major categories of inventories follow:

	September 30, 2005		December 31, 2004
	(dollars in millions)
Finished goods	$	916	$	1,097
Work in process		789		458
Raw and packaging materials		348		275
	$	2,053	$	1,830

The Company has acquired raw and bulk materials in preparation for the manufacturing of potential products in anticipation of their commercialization. If regulatory approval is not granted or delayed, the value of inventory could be impaired. As of September 30, 2005, the carrying value of these inventories were $125 million and no allowance has been provided. Of the total carrying value of inventories that could be impaired, ORENCIA^®, a biologic compound proposed for the treatment of rheumatoid arthritis which the Company has filed a BLA with the FDA and is awaiting FDA’s actions, represents a significant portion of the total.

15

Note 10. Property, Plant and Equipment

The major categories of property, plant and equipment follow:

	September 30, 2005		December 31, 2004
	(dollars in millions)
Land	$	282	$	290
Buildings		4,533		4,497
Machinery, equipment and fixtures		4,519		4,686
Construction in progress		578		536
		9,912		10,009
Less accumulated depreciation		4,263		4,244
Property, plant and equipment, net	$	5,649	$	5,765

Note 11. Goodwill

The changes in the carrying amount of goodwill for the year ended December 31, 2004 and the nine months ended September 30, 2005 were as follows:

	Pharmaceuticals Segment		Nutritionals Segment			Related Healthcare Segment			Discontinued Operations			Total
	(dollars in millions)
Balance as of December 31, 2003	$	4,448	$	118		$	190		$	80		$	4,836
Purchase accounting adjustments:
Reduction due to sale of Adult Nutritional Business		—		(5	)		—			—			(5	)
Purchase price and allocation adjustments		—		—			74			—			74
Balance as of December 31, 2004		4,448		113			264			80			4,905
Purchase accounting adjustments:
Reduction due to sale of OTN		—		—			—			(80	)		(80	)
Reduction due to sale of Consumer Medicines		—		—			(1	)		—			(1	)
Balance as of September 30, 2005	$	4,448	$	113		$	263		$	—		$	4,824

Note 12. Other Intangible Assets

As of September 30, 2005 and December 31, 2004, other intangible assets consisted of the following:

	September 30, 2005		December 31, 2004
	(dollars in millions)
Patents / Trademarks	$	270	$	278
Less accumulated amortization		106		90
Patents / Trademarks, net		164		188
Licenses		459		523
Less accumulated amortization		106		116
Licenses, net		353		407
Technology		1,787		1,787
Less accumulated amortization		636		516
Technology, net		1,151		1,271
Capitalized Software		714		710
Less accumulated amortization		394		316
Capitalized Software, net		320		394
Total other intangible assets, net	$	1,988	$	2,260

16

Note 12. Other Intangible Assets (Continued)

Amortization expense for other intangible assets for the three months ended September 30, 2005 and 2004 was $84 million and $83 million, respectively, and for the nine months ended September 30, 2005 and 2004 was $263 million and $227 million, respectively.

Expected amortization expense related to the carrying amount of other intangible assets is as follows:

	(dollars in millions)
For the year ended December 31:
2005	352
2006	347
2007	321
2008	267
2009	235
Later Years	738

Note 13. Short-term Borrowings and Long-term Debt

Short-term borrowings were $277 million at September 30, 2005, compared with $1,883 million at December 31, 2004, primarily as result of the retirement of U.S. commercial paper. The balance of commercial paper outstanding at December 31, 2004 was $1,665 million, with an average interest rate of 2.3% per annum.

Long-term debt was $5,895 million at September 30, 2005 compared to $8,463 million at December 31, 2004. During the second quarter of 2005, the Company repurchased all of its outstanding $2.5 billion aggregate principal amount 4.75% Notes due 2006, and incurred an aggregate pre-tax loss of approximately $69 million in connection with the early redemption of the Notes and termination of related interest rate swaps.

In August 2005 a wholly-owned subsidiary of the Company entered into a new $2.5 billion term loan facility with a syndicate of lenders. Borrowings under this facility will be guaranteed by the Company, the subsidiaries of the borrower and by certain European subsidiaries of the Company. This facility contains a five-year tranche of up to $2.0 billion and a two-year tranche of up to $500 million. The Company is subject to substantially the same covenants as those included in its December 2004 Revolving Credit facility. The Company is also subject to further restrictions, including certain financial covenants. Prior to borrowing any proceeds against the facility, the Company obtained a waiver from the lenders for a covenant default under this facility due to a one-time intercompany distribution.

Note 14. Accumulated Other Comprehensive Income (Loss)

The accumulated balances related to each component of other comprehensive income (loss) are as follows:

	Foreign Currency Translation			Deferred Loss on Effective Hedges			Available for Sale Securities			Minimum Pension Liability Adjustment			Total Accumulated Other Comprehensive Loss
	(dollars in millions)
Balance at December 31, 2003	$	(491	)	$	(258	)	$	24		$	(130	)	$	(855	)
Other comprehensive income (loss)		63			109			(7	)		—			165
Balance at September 30, 2004	$	(428	)	$	(149	)	$	17		$	(130	)	$	(690	)
Balance at December 31, 2004	$	(283	)	$	(309	)	$	23		$	(223	)	$	(792	)
Other comprehensive income (loss)		(211	)		283			(20	)		—			52
Balance at September 30, 2005	$	(494	)	$	(26	)	$	3		$	(223	)	$	(740	)

17

Note 15. Business Segments

The Company has three reportable segments—Pharmaceuticals, Nutritionals and Related Healthcare. The Pharmaceuticals segment is comprised of the global pharmaceutical and international consumer medicines businesses. The Nutritionals segment consists of Mead Johnson, primarily an infant formula business. The Related Healthcare segment consists of the ConvaTec, Medical Imaging and Consumer Medicines (United States and Canada) businesses. Corporate/Other consists principally of interest income, interest expense, certain administrative expenses and allocations to the business segments for certain programs. In the third quarter of 2005, the Company completed the sale of its Consumer Medicines business of which the gain was recorded in Corporate/Other. For additional information on the sale of Consumer Medicines, see “—Note 4. Acquisitions and Divestitures.”

	Three Months Ended September 30,									Nine Months Ended September 30,
	Net Sales				Earnings Before Minority Interest and Income Taxes					Net Sales				Earnings Before Minority Interest and Income Taxes
	(dollars in millions)									(dollars in millions)
	2005		2004		2005		2004			2005		2004		2005			2004
Pharmaceuticals	$	3,778	$	3,848	$	915	$	1,127		$	11,242	$	11,414	$	2,884		$	3,309
Nutritionals		547		484		150		126			1,621		1,496		494			466
Related Healthcare		442		446		125		131			1,325		1,313		365			396
Total Segments		4,767		4,778		1,190		1,384			14,188		14,223		3,743			4,171
Corporate/Other		—		—		436		(238	)		—		—		(59	)		(792	)
Total	$	4,767	$	4,778	$	1,626	$	1,146		$	14,188	$	14,223	$	3,684		$	3,379

Note 16. Pension and Other Postretirement Benefit Plans

The Company and certain of its subsidiaries have defined benefit pension plans and defined contribution plans for regular full-time employees. The principal pension plan is the Bristol-Myers Squibb Retirement Income Plan. The funding policy is to contribute amounts to provide for current service and to fund past service liability. Plan benefits are based primarily on the participant’s years of credited service and compensation. Plan assets consist principally of equity and fixed-income securities.

The Company also provides comprehensive medical and group life benefits for substantially all U.S. retirees who elect to participate in its comprehensive medical and group life plans. The medical plan is contributory. Contributions are adjusted periodically and vary by date of retirement and the original retiring Company. The life insurance plan is noncontributory. Plan assets consist principally of equity and fixed-income securities. Similar plans exist for employees in certain countries outside of the United States.

Cost of the Company’s deferred benefits and postretirement benefit plans included the following components for the three and nine months ended September 30, 2005 and 2004:

	Three Months Ended September 30,												Nine Months Ended September 30,
	Pension Benefits						Other Benefits						Pension Benefits						Other Benefits
	2005			2004			2005			2004			2005			2004			2005			2004
	(dollars in millions)												(dollars in millions)
Service cost — benefits earned during the period	$	63		$	45		$	3		$	1		$	166		$	130		$	8		$	6
Interest cost on projected benefit obligation		97			76			10			4			259			226			31			30
Expected return on plan assets		(118	)		(95	)		(6	)		(2	)		(314	)		(280	)		(18	)		(11	)
Net amortization and deferral		62			40			—			1			166			119			—			11
Total net periodic benefit cost	$	104		$	66		$	7		$	4		$	277		$	195		$	21		$	36

Contributions

For the three and nine months ended September 30, 2005, there were no cash contributions to the U.S. pension plans, and $49 million and $87 million, respectively, were contributed to the international pension plans. The Company expects contributions to the international pension plans for the year ended December 31, 2005 will be in the range of $90 million to $110 million. There was no cash funding for other benefits.

Those cash benefit payments from the Company, which are classified as contributions in the SFAS No. 132 disclosure, for the three and nine months ended September 30, 2005, totaled $3 million and $12 million, respectively, for pension benefits, and $16 million and $49 million, respectively, for other benefits.

18

Note 17. Legal Proceedings and Contingencies

Various lawsuits, claims, proceedings and investigations are pending against the Company and certain of its subsidiaries. In accordance with SFAS No. 5, Accounting for Contingencies, the Company records accruals for such contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. These matters involve antitrust, securities, patent infringement, the Employee Retirement Income Security Act of 1974, as amended (ERISA), pricing, sales and marketing practices, environmental, health and safety matters, product liability and insurance coverage. The most significant of these matters are described below. There can be no assurance that there will not be an increase in the scope of these matters or that any future lawsuits, claims, proceedings or investigations will not be material. Management continues to believe, as previously disclosed, that during the next few years, the aggregate impact, beyond current reserves, of these and other legal matters affecting the Company is reasonably likely to be material to the Company’s results of operations and cash flows, and may be material to its financial condition and liquidity.

The Company’s decision to obtain insurance coverage is dependent on market conditions, including cost and availability, existing at the time such decisions are made. As a result of external factors, the availability of insurance has become more restrictive while the cost has increased significantly. The Company has evaluated its risks and has determined that the cost of obtaining insurance outweighs the benefits of coverage protection against losses and as such, became self-insured for product liabilities effective July 1, 2004. The Company will continue to evaluate these risks and benefits to determine its insurance needs in the future.

PLAVIX* Litigation

PLAVIX* is currently the Company’s largest product ranked by net sales. Net sales of PLAVIX* were approximately $3.3 billion for the year ended December 31, 2004. The PLAVIX* patents are subject to a number of challenges in the United States and Canada as described below.

Currently, the Company expects PLAVIX* to have market exclusivity in the United States until 2011. If the composition of matter patent for PLAVIX* is found not infringed, invalid and/or unenforceable at the U.S. District Court level, the FDA could then approve the defendants’ ANDAs to sell generic clopidogrel, and generic competition for PLAVIX* could begin before the Company has exhausted its appeals. Such generic competition would likely result in substantial decreases in the sales of PLAVIX* in the United States. The statutory stay imposed on the approval of the first-filed ANDA by the filing of the lawsuit on the ‘265 patent under the Hatch-Waxman Act expired May 17, 2005. Accordingly, the company that filed the first ANDA could obtain final approval at any time and decide to launch a generic product at risk assuming the ANDA application meets the regulatory requirements for approval. Thus there is no legal impediment to final approval of an ANDA and a corresponding generic launch at any time assuming the ANDA application meets the regulatory requirements for approval.

United States

The Company’s U.S. territory partnership under its alliance with Sanofi is a plaintiff in four pending patent infringement lawsuits instituted in the U.S. District Court for the Southern District of New York entitled Sanofi-Synthelabo, Sanofi-Synthelabo Inc., and Bristol-Myers Squibb Sanofi Pharmaceuticals Holding Partnership v. Apotex Inc. and Apotex Corp. (Apotex), 02-CV-2255 (SHS); Sanofi-Synthelabo, Sanofi-Synthelabo Inc. and Bristol-Myers Squibb Sanofi Pharmaceuticals Holding Partnership v. Dr. Reddy’s Laboratories, LTD, and Dr. Reddy’s Laboratories, Inc., 02-CV-3672 (SHS); Sanofi-Synthelabo, Sanofi-Synthelabo Inc., and Bristol-Myers Squibb Sanofi Pharmaceuticals Holding Partnership vs. Teva Pharmaceuticals USA, Inc. and Teva Pharmaceuticals Industries, Ltd., 04-CV-7458 and Sanofi-Aventis, Sanofi-Synthelabo Inc., and Bristol-Myers Squibb Sanofi Pharmaceuticals Holding Partnership v. Cobalt Pharmaceuticals Inc., 05-CV-8055 (SHS). Teva Pharmaceuticals Industries, Ltd. has since been dismissed from the case. Proceedings involving PLAVIX* also have been instituted outside the United States.

The U.S. suits were filed on March 21, 2002, May 14, 2002, September 23, 2004 and September 16, 2005 respectively, and were based on U.S. Patent No. 4,847,265, a composition of matter patent, which discloses and claims, among other things, the hydrogen sulfate salt of clopidogrel, which is marketed as PLAVIX*. The first two suits were also based on U.S. Patent No. 5,576,328, which discloses and claims, among other things, the use of clopidogrel to prevent a secondary ischemic event. The plaintiffs later withdrew Patent No. 5,576,328 from the two lawsuits. Plaintiffs’ infringement position is based on defendants’ filing of their Abbreviated New Drug Applications (ANDA) with the FDA, seeking approval to sell generic clopidogrel bisulfate prior to the expiration of the composition of matter patent in 2011. The defendants responded by alleging that the patent is invalid and/or unenforceable. Apotex has added antitrust counterclaims. The first two cases were consolidated for discovery. Fact discovery closed on October 15, 2003 and expert discovery was completed in November 2004. The joint pretrial order was submitted May 27, 2005, and the court approved it. The court has scheduled trial in the Apotex matter to begin on April 3, 2006. The Apotex case will be tried without a jury. Plaintiffs filed a motion to consolidate the Dr. Reddy’s case with the Apotex case for trial. That motion is pending before the court. In a stipulation approved by the U.S. District Court for the Southern District of New York on April 15, 2005, all parties to the patent infringement litigation against Teva have agreed that the Teva litigation will be stayed, pending resolution of the Apotex and Dr. Reddy’s litigation, and that the parties to the Teva litigation will be bound by the outcome of the litigation in the District Court against Apotex or Dr. Reddy. On April 18, 2005, the Court denied as moot the pending motion to consolidate the Teva litigation with the litigation against Apotex and Dr. Reddy’s, as a result of the Court’s approval of the stipulation. A similar stipulation was submitted to the court for approval in the Cobalt case on October 12, 2005.

On April 20, 2005, Apotex filed a complaint for declaratory judgment against Sanofi-Aventis, Sanofi-Aventis, Inc., and Bristol-Myers Squibb Sanofi Pharmaceuticals Holding Partnership. The complaint seeks a declaratory judgment that the ‘265 patent is unenforceable due to alleged inequitable conduct committed during the prosecution of the patent. The defendants responded by submitting a motion to dismiss, which the court granted on September 12, 2005. Apotex has filed an appeal to the United States Court of Appeals for the Federal Circuit.

The Company’s U.S. territory partnership under its alliance with Sanofi is a plaintiff in another pending patent infringement lawsuit instituted in the U.S. District Court for the District of New Jersey entitled Sanofi-Synthelabo, Sanofi-Synthelabo Inc. and Bristol-Myers Squibb Sanofi Pharmaceuticals Holding Partnership v. Watson Pharmaceuticals, Inc. and Watson Laboratories, Inc. 2:04-CV-4926. The suit was filed October 7, 2004 and was based on U.S. patent 6,429,210, which discloses and claims a particular crystalline or polymorph form of the hydrogen sulfate salt of clopidogrel, which is marketed as PLAVIX*. The case is in the discovery phase. Fact discovery is scheduled to close on January 16, 2006.

19

Note 17. Legal Proceedings and Contingencies (Continued)

Canada

Sanofi-Synthelabo and Sanofi-Synthelabo Canada Inc. instituted a prohibition action in the Federal Court of Canada against Apotex Inc. (Apotex) and the Minister of Health in response to a Notice of Allegation from Apotex directed against Canadian Patent 1,336,777 covering clopidogrel bisulfate. Apotex’s Notice of Allegation (NOA) indicated that it had filed an Abbreviated New Drug Submission (ANDS) for clopidogrel bisulfate tablets and that it sought approval (a Notice of Compliance) of that ANDS before the expiration of Canadian Patent 1,336,777, which expires August 12, 2012. Apotex’s NOA further alleged that the ‘777 patent was invalid or not infringed. A hearing was held from February 21 to February 25, 2005. On March 21, 2005, the Canadian Federal Court of Ottawa rejected Apotex’s challenge to the Canadian PLAVIX* patent and held that the asserted claims are novel, not obvious and infringed and granted Sanofi’s application for an order of prohibition against the Minister of Health and Apotex Inc. That order of prohibition will preclude approval of Apotex’s ANDS until the patent expires in 2012, unless the Federal Court’s decision is reversed on appeal. Apotex has filed an appeal.

Sanofi-Synthelabo and Sanofi-Synthelabo Canada Inc. also instituted a prohibition action in the Federal Court of Canada against Apotex and the Minister of Health in response to a NOA directed against Canadian Patent 2,334,870 covering the form 2 polymorph of clopidogrel bisulfate. Apotex seeks approval of its ANDS before expiration of the ‘870 patent in 2019. Apotex alleges in its NOA that it does not infringe the ‘870 patent and that it is invalid. That action was discontinued.

Sanofi-Aventis and Sanofi-Synthelabo Canada Inc. instituted a prohibition action in the Federal Court of Canada against Novopharm Limited (Novopharm) and the Minister of Health in response to a Notice of Allegation from Novopharm directed against Canadian Patent 1,336,777 covering clopidogrel bisulfate. Novopharm’s NOA indicated that it had filed an ANDS for clopidogrel bisulfate tablets and that it sought approval (a Notice of Compliance) of that ANDS before the expiration of Canadian Patent 1,336,777, which expires August 12, 2012. Novopharm’s NOA further alleged that the ‘777 patent was invalid. Novopharm has since withdrawn its NOA and agreed to be bound by the result in the Apotex proceeding. The prohibition action has therefore been discontinued.

Sanofi-Aventis and Sanofi-Synthelabo Canada instituted a prohibition action in the Federal Court of Canada against Cobalt Pharmaceuticals Inc. and the Minister of Health in response to a Notice of Allegation from Cobalt directed against Canadian patents 1,336,777 and 2,334,870. Cobalt’s NOA indicated that it has filed an ANDS for clopidogrel bisulfate tablets and that it sought a Notice of Compliance for that ANDS before the expiration of the ‘777 and ‘870 patents. Cobalt alleged that the ‘777 patent was invalid and that the ‘870 patent was invalid and not infringed. The proceeding is in its early stages.

United Kingdom

In December 2004, Aircoat Limited (Aircoat) filed a nullity petition in the Court of Session in Glasgow, Scotland. By its nullity petition, Aircoat seeks revocation of European Patent 0 281 459, which has been registered in the United Kingdom. European Patent 0 281 459 covers, inter alia, clopidogrel bisulfate, the active ingredient in PLAVIX*. Aircoat specifically alleges that the claims of European Patent 0 281 459 are invalid and the UK patent should be revoked on the grounds of lack of novelty and/or lack of inventive step. Aircoat withdrew its nullity petition and the court dismissed the action on August 4, 2005. Aircoat has no right to appeal the dismissal of the action.

Although the plaintiffs intend to vigorously pursue enforcement of their patent rights in PLAVIX*, it is not possible at this time reasonably to assess the outcome of these lawsuits, or, if the Company were not to prevail in these lawsuits, the timing of potential generic competition for PLAVIX*. It also is not possible reasonably to estimate the impact of these lawsuits on the Company.

However, loss of market exclusivity of PLAVIX* and the subsequent development of generic competition would be material to the Company’s sales of PLAVIX* and results of operations and cash flows, and could be material to its financial condition and liquidity.

20

Note 17. Legal Proceedings and Contingencies (Continued)

OTHER PATENT LITIGATION

TEQUIN. The Company and Kyorin Pharmaceuticals Co., Ltd. (Kyorin) commenced a patent infringement action on March 23, 2004, against Teva USA and Teva Industries in the United States District Court for the Southern District of New York, relating to the antibiotic gatifloxacin, for which Kyorin holds the composition of matter patent and which the Company sells as TEQUIN. Teva Industries has since been dismissed from the case. This action relates to Teva’s filing of an ANDA for a generic version of gatifloxacin tablets with a certification that the composition of matter patent, which expires in December 2007 but which has been granted a patent term extension until December 2009, is invalid or not infringed. The filing of the suit places a stay on the approval of Teva’s generic product until June 2007, unless there is a court decision adverse to the Company and Kyorin before that date. Trial in this matter has been scheduled to begin on May 1, 2006.

TEQUIN (injectable form). The Company and Kyorin commenced patent infringement actions on March 8, 2005, against Apotex Inc. and Apotex Corp., and against Sicor Pharmaceuticals, Inc., Sicor Inc., Sicor Pharmaceuticals Sales Inc., Teva Pharmaceuticals USA, Inc., and Teva Pharmaceutical Industries Ltd. in the United States District Court for the Southern District of New York, relating to injectable forms of the antibiotic gatifloxacin, for which Kyorin holds the composition of matter patent and which the Company sells as TEQUIN. The action related to Apotex’s and Sicor’s filing of ANDAs for generic versions of injectable gatifloxacin with p(IV) certifications that the composition of the matter patent, which expires December 2007 but which was granted a patent term extension until December 2009, is invalid. The filing of the lawsuits places stays on the approvals of both Apotex’s and Sicor’s generic products until July/August 2007, unless there is a court decision adverse to the Company and Kyorin before that date. The Sicor case was consolidated with the above proceeding. In a stipulation approved by the U.S. District Court for the Southern District of New York on August 22, 2005, the parties agreed that the Apotex case will be stayed pending resolution of the Teva and Sicor cases, and that the parties will be bound by the outcome of the above litigation.

ERBITUX*. On October 28, 2003, a complaint was filed by Yeda Research and Development Company Ltd. (Yeda) against ImClone and Aventis Pharmaceuticals, Inc. in the U.S. District Court for the Southern District of New York. This action alleges and seeks that three individuals associated with Yeda should also be named as co-inventors on U.S. Patent No. 6,217,866, which covers the therapeutic combination of any EGFR-specific monoclonal antibody and anti-neoplastic agents, such as chemotherapeutic agents, for use in the treatment of cancer. If Yeda’s action were successful, Yeda could be in a position to practice, or to license others to practice, the invention. This could result in product competition for ERBITUX* that might not otherwise occur. The Company, which is not a party to this action, is unable to predict the outcome at this stage in the proceedings.

On May 5, 2004, RepliGen Corporation (Repligen) and Massachusetts Institute of Technology (MIT) filed a lawsuit in the United States District Court for the District of Massachusetts against ImClone claiming that ImClone’s manufacture and sale of ERBITUX* infringes a patent which generally covers a process for protein production in mammalian cells. Repligen and MIT seek damages based on sales of ERBITUX* which commenced in February 2004. The patent expired on May 5, 2004, although Repligen and MIT are seeking extension of the patent. The Company, which is not a party to this action, is unable to predict the outcome at this stage in the proceedings.

ABILIFY*. On August 11, 2004, Otsuka filed with the United States Patent and Trademark Office (USPTO) a Request for Reexamination of U.S. composition of matter patent covering ABILIFY*, an antipsychotic agent used for the treatment of schizophrenia and related psychiatric disorders (U.S. Patent Number No. 5,006,528, the “528 Patent”) that expires in 2009, and may be extended until 2014 if pending supplemental protection extensions are granted. Otsuka has determined that the original ‘528 Patent application contained an error in that the description of a prior art reference was identified by the wrong patent number. In addition, Otsuka has taken the opportunity to bring other information to the attention of the USPTO. The USPTO has granted the Request for Reexamination and the reexamination proceeding is ongoing. The reexamination proceeding will allow the USPTO to consider the patentability of the patent claims in light of the corrected patent number and newly cited information. The USPTO is expected to make a final decision on the reexamination before the end of 2006.

The Company and Otsuka believe that the invention claimed in the ‘528 Patent is patentable over the prior art and expect that the USPTO will reconfirm that in the reexamination. However, there can be no guarantee as to the outcome. If the patentability of the ‘528 Patent were not reconfirmed following a reexamination, there may be sooner than expected loss of market exclusivity of ABILIFY* and the subsequent development of generic competition which would be material to the Company.

21

Note 17. Legal Proceedings and Contingencies (Continued)

SECURITIES LITIGATION

VANLEV Litigation

In April, May and June 2000, the Company, its former chairman of the board and chief executive officer, Charles A. Heimbold, Jr., and its former chief scientific officer, Peter S. Ringrose, Ph.D., were named as defendants in a number of class action lawsuits alleging violations of federal securities laws and regulations. These actions have been consolidated into one action in the U.S. District Court for the District of New Jersey. The plaintiff claims that the defendants disseminated materially false and misleading statements and/or failed to disclose material information concerning the safety, efficacy and commercial viability of, VANLEV, a drug in development, during the period November 8, 1999 through April 19, 2000.

In May 2002, the plaintiff submitted an amended complaint adding allegations that the Company, its former chairman of the board and current chief executive officer, Peter R. Dolan, its former chairman of the board and chief executive officer, Charles A. Heimbold, Jr., and its former chief scientific officer, Peter S. Ringrose, Ph.D., disseminated materially false and misleading statements and/or failed to disclose material information concerning the safety, efficacy, and commercial viability of VANLEV during the period April 19, 2000 through March 20, 2002. A number of related class actions, making essentially the same allegations, were also filed in the U.S. District Court for the Southern District of New York. These actions have been transferred to the U.S. District Court for the District of New Jersey.

The Company filed a motion for partial judgment in its favor based upon the pleadings. The plaintiff opposed the motion, in part by seeking again to amend its complaint. The court granted in part and denied in part the Company’s motion and ruled that the plaintiff may amend its complaint to challenge certain alleged misstatements.

The court certified two separate classes: a class relating to the period from November 8, 1999 to April 19, 2000 (the “First Class Period”) and a class relating to the period from March 22, 2001 to March 20, 2002 (the “Second Class Period”). The First Class Period involves claims related to VANLEV’s efficacy, safety and/or potential to be a blockbuster drug. The Second Class Period involves claims related to VANLEV’s potential to be a blockbuster drug. The class certifications are without prejudice to defendants’ rights to fully contest the merits of plaintiff’s claims. The plaintiff seeks compensatory damages, costs and expenses on behalf of shareholders with respect to the two class periods.

On December 17, 2004, the Company and the other defendants made a motion for summary judgment as to all of plaintiff’s claims. In January 2005, the plaintiff moved for leave to file a third amended complaint, seeking to combine the two class periods into one expanded class period from October 19, 1999 through March 19, 2002 and to add further allegations that the Company, Peter R. Dolan, Charles A. Heimbold, Jr., and Peter S. Ringrose, Ph.D. disseminated materially false and misleading statements and or failed to disclose material information concerning the safety, efficacy and commercial viability of VANLEV. The Magistrate Judge denied the plaintiff’s motion. Plaintiff appealed to the District Court.

On August 17, 2005, the Court granted in part and denied in part the summary judgment motion and also affirmed the Magistrate Judge’s denial of plaintiff’s motion for leave to amend their complaint. The Court also dismissed two of the three individual defendants, Peter R. Dolan and Peter S. Ringrose, from the case.

On October 18, 2005 the parties participated in a court-ordered mediation of the litigation. The parties are required to respond to the mediator’s proposed number to settle the litigation on November 15, 2005. A settlement of the matter could be material to results of operations.

It is not possible at this time reasonably to assess the final outcome of this litigation or reasonably to estimate the possible loss or range of loss with respect to this litigation. If the Company were not to prevail in final, non-appealable determinations of this litigation, the impact could be material to results of operations.

Other Securities Matters

In 2002, the Company and certain of its current and former officers were named as defendants in a number of securities class actions, which were consolidated in the United States District Court for the Southern District of New York. In 2003, the plaintiffs filed a consolidated amended class action complaint alleging violations of federal securities laws and regulations in connection with sales incentives and wholesaler inventory levels and ImClone, and ImClone’s product, ERBITUX*. In 2004, the Court certified the action as a class action, approved a settlement of the action, and dismissed the case with prejudice.

22

Note 17. Legal Proceedings and Contingencies (Continued)

Approximately 58 million shares were excluded from this class action settlement pursuant to requests for exclusion. Of those, plaintiffs purporting to hold approximately 44.5 million shares brought four suits in New York State Supreme Court. Those four actions have been settled and dismissed with prejudice.

Also in 2002 and 2003, certain of the Company’s current and former officers and directors were named as defendants in a number of derivative suits, which were consolidated in the United States District Court for the Southern District of New York. Plaintiffs filed a consolidated, amended, derivative complaint against certain members of the board of directors, current and former officers, PwC and the Company. That complaint alleged, among other things, violations of federal securities laws and breaches of fiduciary duty by certain individual defendants in connection with the Company’s conduct concerning, among other things: safety, efficacy and commercial viability of VANLEV (as discussed above); the Company’s sales incentives to certain wholesalers and the inventory levels of those wholesalers; the Company’s investment in and relations with ImClone and ImClone’s product ERBITUX*; and alleged anticompetitive behavior in connection with BUSPAR and TAXOL^®. The lawsuit also alleged malpractice (negligent misrepresentation and negligence) by PwC. The parties reached a settlement of the action, under which the Company agreed to adopt certain corporate governance enhancements and not to oppose plaintiffs’ attorneys’ request for up to $4.75 million in fees. On May 13, 2005, the District Court approved the settlement and dismissed the action with prejudice. In July 2005, the Court awarded plaintiffs $3.5 million in attorneys fees, which were paid from directors’ and officers’ liability insurance proceeds. On June 8, 2005, a shareholder filed a notice of appeal with the Second Circuit. On August 17, 2005, that appeal was dismissed. Two similar actions which were pending in New York State court have been dismissed with respect to the Company and its current and former officers and directors.

On August 4, 2004, the Company entered into a final settlement with the SEC, concluding an investigation concerning certain wholesaler inventory and accounting matters. The Company agreed, without admitting or denying any liability, not to violate certain provisions of the securities laws. The Company also agreed to establish a $150 million fund, which will be distributed to certain Company shareholders under a plan of distribution established by the SEC.

The settlement does not resolve the ongoing investigation by the SEC of the activities of certain current and former members of the Company’s management in connection with the wholesaler inventory issues and other accounting matters. The Company is continuing to cooperate with this investigation.

On June 15, 2005, the United States Attorney’s Office for the District of New Jersey (the Office) filed a criminal complaint charging the Company with conspiracy to commit securities fraud in connection with a previously disclosed investigation by that Office, concerning the inventory and various accounting matters covered by the Company’s settlement with the SEC. In connection with the filing of that complaint, the Company and the Office entered into a Deferred Prosecution Agreement. Pursuant to that Agreement, the Company agreed to maintain and continue to implement remedial measures pursuant to the settlement with the SEC, take certain additional remedial actions and continue to cooperate with the U.S. Attorney’s Office, including with respect to the ongoing investigation regarding individual current and former employees of the Company, as well as to make an additional payment of $300 million into the fund for shareholders established pursuant to the Company’s settlement with the SEC. If the Company fulfills its obligations under the Deferred Prosecution Agreement, the Office will dismiss the criminal complaint two years from the date of its filing.

The Company and a number of the Company’s current and former officers were named as defendants in a purported class action filed in 2004 in the Circuit Court of Cook County, Illinois. The complaint made factual allegations similar to those made in the settled federal class action in the Southern District of New York and asserted common law fraud and breach of fiduciary duty claims on behalf of stockholders who purchased the Company’s stock before October 19, 1999 and held their stock through March 10, 2003. The Company removed the action to the United States District Court for the Northern District of Illinois and on July 1, 2005, the District Court dismissed the case with prejudice. On September 21, 2005, a similar case was filed in New York State Supreme Court. On October 7, 2005, the Company removed that case to the United States District Court for the Southern District of New York.

On November 18, 2004, a class action complaint was filed in the United States District Court for the Eastern District of Missouri against the Company, D&K Healthcare Resources, Inc. (D&K) and several current and former D&K directors and officers on behalf of purchasers of D&K stock between August 10, 2000 and September 16, 2002. The complaint alleges that the Company participated in fraudulently inflating the value of D&K stock by allegedly engaging in improper “channel-stuffing” agreements with D&K. BMS filed a motion to dismiss this case on January 28, 2005. That motion is under consideration by the court. Under the Private Securities Litigation Reform Act, discovery is automatically stayed pending the outcome of the motion to dismiss. The plaintiff has moved to partially lift the automatic stay. The court is considering that motion.

23

Note 17. Legal Proceedings and Contingencies (Continued)

ERISA Litigation

In December 2002 and the first quarter of 2003, the Company and others were named as defendants in five class actions brought under the Employee Retirement Income Security Act (ERISA) in the U.S. District Courts for the Southern District of New York and the District of New Jersey. These actions have been consolidated in the Southern District of New York under the caption In re Bristol-Myers Squibb Co. ERISA Litigation, 02 CV 10129 (LAP). An Amended Consolidated Complaint was served on August 18, 2003. A Second Amended Consolidated Complaint was filed on May 27, 2005 on behalf of four named plaintiffs and a putative class consisting of all participants in, or beneficiaries of, the Bristol-Myers Squibb Company Savings and Investment Program (Savings Plan) at any time between January 1, 1999 and March 10, 2003 whose accounts included investment in Company stock. The named defendants are the Company, the Bristol-Myers Squibb Company Savings Plan Committee (Committee), thirteen individuals who presently serve on the Committee or who served on the Committee in the recent past, Charles A. Heimbold, Jr. and Peter R. Dolan (the past and present Chief Executive Officers, respectively, and the Company). The Second Amended Consolidated Complaint generally alleges that the defendants breached their fiduciary duties under ERISA during the class period by, among other things, imprudently investing assets of the Savings Plan in Company stock; misrepresenting and failing to disclose truthful and adequate information about Company stock as a Savings Plan investment; and operating under conflicts of interest. In addition, all defendants except Heimbold and Dolan were alleged to have failed to monitor the other Savings Plan fiduciaries. These ERISA claims are predicated upon factual allegations similar to those raised in “Other Securities Matters” above, concerning, among other things: the safety, efficacy and commercial viability of VANLEV; the Company’s sales incentives to certain wholesalers and the inventory levels of those wholesalers; and alleged anticompetitive behavior in connection with BUSPAR and TAXOL^®.

On June 6, 2005, counsel for plaintiffs and the Company entered into a Stipulation and Agreement of Settlement (Settlement). The Settlement provides, among other things, that the Company pay to the BMS Savings Plan Master Trust approximately $41 million less plaintiffs’ attorneys’ fees, costs and certain expenses (including notice costs). Additionally, the Company agreed to certain structural changes relating to plan administration and participant education. The Settlement provides for certification, for Settlement purposes only, of a class consisting of all persons who were participants in, or beneficiaries of, (i) the Bristol-Myers Squibb Company Savings and Investment Program; (ii) the Bristol-Myers Squibb Puerto Rico, Inc. Savings and Investment Program; and (iii) the Bristol-Myers Squibb Company Employee Incentive Thrift Plan, at any time between January 1, 1999 and March 10, 2003 and whose accounts in such plans included investments in the Bristol-Myers Squibb Company Stock Fund (excluding the individual defendants). The U.S. District Court for the Southern District of New York preliminarily approved the Settlement on June 22, 2005. Notice of the Settlement was completed by August 22, 2005. On October 12, 2005, the Court conducted a fairness hearing, issued final approval of the Settlement and awarded attorneys’ fees.

Pricing, Sales and Promotional Practices Litigation and Investigations

The Company, together with a number of other pharmaceutical manufacturers, is a defendant in several private class actions and in actions brought by the Nevada, Montana, Pennsylvania, Wisconsin, Kentucky, Illinois, Alabama and California Attorneys General, the City of New York and several New York counties that are pending in federal and state courts relating to the pricing of certain Company products. The federal cases, and some related state court cases that were removed to federal courts, have been consolidated for pre-trial purposes under the caption In re Pharmaceutical Industry Average Wholesale Price Litigation, MDL No. 1456, Civ. Action No. 01-CV-12257-PBS, before United States District Court Judge Patti B. Saris in the United States District Court for the District of Massachusetts (AWP Multidistrict Litigation). The Amended Master Complaint contains two sets of allegations against the Company. First, it alleges that the Company’s and many other pharmaceutical manufacturers’ reporting of prices for certain drug products (20 listed drugs in the Company’s case) had the effect of falsely overstating the Average Wholesale Price (AWP) published in industry compendia, which in turn improperly inflated the reimbursement paid to medical providers, pharmacists, and others who prescribed, administered or sold those products to consumers. Second, it alleges that the Company and certain other defendant pharmaceutical manufacturers conspired with one another in a program called the “Together Rx Card Program” to fix AWPs for certain drugs made available to consumers through the Program. The Amended Master Complaint asserts claims under the federal RICO and antitrust statutes and state consumer protection and fair trade statutes.

The Amended Master Complaint is brought on behalf of two main proposed classes, whose definitions have been subject to further amendment as the case has progressed. As of December 17, 2004, those proposed classes may be summarized as: (1) all persons or entities who, from 1991 forward, paid or reimbursed all or part of a listed drug under Medicare Part B or under a private contract that expressly used AWP as a pricing standard and (2) all persons or entities who, from 2002 forward, paid or reimbursed any portion of the purchase price of a drug covered by the Together Rx Card Program based in whole or in part on AWP. The first class is further divided into several proposed subclasses depending on whether the listed drug in question is physician-administered, self-administered, sold through a pharmacy benefits manager or specialty pharmacy, or is a brand-name or generic drug. On September 3, 2004, plaintiffs in the AWP Multidistrict Litigation moved for certification of a proposed plaintiff class. The parties briefed that motion, as it related to the amended proposed definition of the first main class and sub-classes discussed above, and motion was heard by the Court on February 10, 2005.

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Note 17. Legal Proceedings and Contingencies (Continued)

In a Memorandum and Order dated August 16, 2005, the Court declined to certify any proposed classes as to pharmacy-dispensed drugs. It did, however, certify a class under the Massachusetts consumer fraud statute for persons and entities that paid for certain physician-administered drugs based on AWPs. The Court indicated that it would also certify a nationwide class of individual Medicare Part B beneficiaries who made an AWP-based co-payment for physician-administered drugs if plaintiffs were able to find suitable class representatives. Defendants have petitioned the United States Court of Appeals for the First Circuit for permission to appeal the certification of the Massachusetts-based classes. That petition is pending.

Discovery in the AWP Multidistrict Litigation closed as to the Company and four other defendant manufacturers on August 31, 2005. The current schedule calls for identification of proposed class representatives for the Medicare Part B class, challenges to those proposed representatives, expert reports, expert depositions and summary judgment briefing on liability issues during the second half of 2005 into early 2006.

The cases commenced by the Nevada, Montana, Pennsylvania, Wisconsin, Kentucky, Illinois, Alabama, and California Attorneys General (the Attorneys General AWP Cases) and the cases commenced by New York City and several New York counties (the New York City & County AWP Cases) include fraud and consumer protection claims, or in the case of California, state False Claims Act claims, similar to those in the Amended Master Complaint. Certain of the states, city and counties also have made additional allegations that defendants, including the Company, have violated state Medicaid statutes by, among other things, failing to provide the states with adequate rebates required under federal law.

In a series of decisions in June, September, and October 2004, affecting the Montana Attorney General’s case and the New York City & County AWP Cases which are proceeding in the AWP Multidistrict Litigation in coordination with the private class actions, the Court declined to find that the Medicaid rebate claims were preempted by federal law, but nevertheless dismissed many of the claims relating to “rebate” payments made by several drug manufacturers, including those claims relating to the Company as insufficiently pled. The Court allowed to proceed the state law claims that allege that the Company misreported AWPs. The Company has filed its answer to the claims remaining in the Montana Attorney General’s complaint. On June 15, 2005, New York City and all of the Counties that have sued thus far (except Suffolk, Nassau and Erie Counties, which continue to proceed separately) served the Company and other manufacturers with a Consolidated Complaint. The Consolidated Complaint contains claims similar to those in the prior, individual complaints of the City and Counties. Defendants anticipate moving to dismiss the Consolidated Complaint.

The Company also joined with other defendants in a motion to dismiss the Pennsylvania Attorney General’s action. In a decision filed February 1, 2005, the Pennsylvania Commonwealth Court granted the motion to dismiss on the ground that the plaintiff had failed to plead the complaint with the requisite particularity. The Attorney General has since served an Amended Complaint to which defendants have objected. Defendants’ objections to the Pennsylvania Complaint have been fully briefed and were heard by the Commonwealth Court on June 8, 2005. On July 16, 2004, the Nevada court denied the Company’s and other defendants’ motions to dismiss the complaint except as to the state RICO claim and granted the Attorney General leave to replead, in an opinion that was based on the prior rulings of the AWP Multidistrict Litigation Court. The Nevada court subsequently entered an order coordinating all discovery in that case with that in the AWP Multidistrict Litigation. The Company and other defendants also have made motions to dismiss in the other Attorneys General AWP Cases, with the exception of the California case which was not unsealed as to the Company until August 2005. Those motions to dismiss are currently pending.

The Company is also one of a number of defendants in a private class action making AWP based claims in Arizona state court and New Jersey state court. The Arizona case is currently stayed. The New Jersey case has been removed to the AWP Multidistrict Litigation Court where a motion is pending that will determine whether the case remains for pre-trial purposes in that Court or is remanded to New Jersey state court.

On or about October 8, 2004, the Company was added as a defendant in a putative class action previously commenced against other drug manufacturers in federal court in Alabama. The case was brought by two health care providers that are allegedly entitled under a federal statute, Section 340B of the Public Health Service Act, to discounted prices on prescription drugs dispensed to the poor in the

providers’ local areas. The plaintiff health care providers contend that they and an alleged class of other providers authorized to obtain discounted prices under the statute may in fact not have received the level of discounts to which they are entitled. The Amended Complaint against the Company and the other manufacturers asserts claims directly under the federal statute, as well as under state law for unjust enrichment and for an accounting. The Company joined in a motion to dismiss the Complaint that was filed by the original manufacturer defendants and that, with the court’s approval, was made applicable to the Amended Complaint. By order dated September 30, 2005, the Alabama federal court denied the motion to dismiss. Accordingly, the Company anticipates filing an answer to the Amended Complaint in the Alabama Section 340B case. In August 2005, the Company was among several drug manufacturers named as a defendant in a similar case involving Section 340B of the Public Health Service Act filed in California state court by the County of Santa Clara. The defendants have removed that case to federal court in California.

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Note 17. Legal Proceedings and Contingencies (Continued)

These cases are at a very preliminary stage, and the Company is unable to assess the outcome and any possible effects on its business and profitability, or reasonably estimate possible loss or range of loss with respect to these cases. If the Company were not to prevail in final, non-appealable determinations of these litigations and investigations, the impact could be material.

The Company, together with a number of other pharmaceutical manufacturers, also has received subpoenas and other document requests from various government agencies seeking records relating to its pricing, sales and marketing practices, and “Best Price” reporting for drugs covered by Medicare and/or Medicaid. The requests for records have come from the U.S. Attorneys’ Offices for the District of Massachusetts, the Eastern District of Pennsylvania, and the Northern District of Texas, the Civil Division of the Department of Justice, the Offices of the Inspector General of the Department of Health and Human Services and the Office of Personnel Management (each in conjunction with the Civil Division of the Department of Justice), and several states. In addition, requests for information have come from the House Committee on Energy & Commerce and the Senate Finance Committee in connection with investigations that the committees are currently conducting into Medicaid Best Price issues and the use of educational grants by pharmaceutical companies.

As previously disclosed, in mid-2003, the Company initiated an internal review of certain of its sales and marketing practices, focusing on whether these practices comply with applicable anti-kickback laws and analyzing these practices with respect to compliance with (1) Best Price reporting and rebate requirements under the Medicaid program and certain other U.S. governmental programs, which reference the Medicaid rebate program and (2) applicable FDA requirements. The Company has met with representatives of the U.S. Attorney’s Office for the District of Massachusetts to discuss the review and has received related subpoenas from that U.S. Attorney’s Office, including a subpoena received on May 5, 2005 for documents relating to possible off label promotion of ABILIFY*. The Company’s internal review is expected to continue until resolution of pending governmental investigations of related matters.

The Company is producing documents and actively cooperating in the investigations, which could result in the assertion of civil and/or criminal claims. The Company has reserves for liabilities in relation to pharmaceutical pricing and sales and marketing practices of $134 million. It is not possible at this time to reasonably assess the final outcome of these matters. In accordance with GAAP, the Company has determined that the above amount represents minimum expected probable losses with respect to these matters, which losses could include the imposition of fines, penalties, administrative remedies and/or liability for additional rebate amounts. Eventual losses related to these matters may exceed these reserves, and the further impact could be material. The Company does not believe that the top–end of the range for these losses can be estimated. If the Company were not to prevail in final, non–appealable determinations of these litigations and investigations, the impact could be material.

As previously disclosed, in 2004 the Company undertook an analysis of its methods and processes for calculating prices for reporting under governmental rebate and pricing programs related to its U.S. Pharmaceuticals business. The analysis was completed in early 2005. Based on the analysis, the Company identified the need for revisions to the methodology and processes used for calculating reported pricing and related rebate amounts and implemented these revised methodologies and processes beginning with its reporting to the Federal government agency with primary responsibility for these rebate and price reporting obligations, the Centers for Medicare and Medicaid Services (CMS) in the first quarter of 2005. In addition, using the revised methodologies and processes, the Company also has recalculated the “Best Price and “Average Manufacturer’s Price” required to be reported under the Company’s federal Medicaid rebate agreement and certain state agreements, and the corresponding revised rebate liability amounts under those programs for the three-year period 2002 to 2004. Upon completion of the analysis in early 2005, the Company determined that the estimated rebate liability for those programs for the three-year period 2002 to 2004 was actually less than the rebates that had been paid by the Company for such period. Accordingly, in the fourth quarter of 2004, the Company recorded a reduction to the rebate liability in the amount of the estimated overpayment. The Company’s proposed revisions and an updated estimate have been submitted for review to CMS. The Department of Justice (DOJ) has informed the Company that it also is reviewing the submission in conjunction with the previously disclosed subpoena received by the Company from the DOJ relating to, among other things, “Best Price” reporting for drugs covered by Medicaid as discussed in more detail above, and has requested the Company to provide additional information regarding the proposed revisions and estimate. These agencies may take the position that further revisions to the Company’s methodologies and calculations are required. Upon completion of governmental review, the Company will determine whether any further recalculation of the liability from the Company under the identified programs for any period or under any other similar programs is necessary or appropriate. The Company believes, based on current information, that any such recalculation is not likely to result in material rebate liability. However, due to the uncertainty surrounding the recoverability of the Company’s estimated overpayment arising from the review process described above, the Company recorded a reserve in an amount equal to the estimated overpayment.

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Note 17. Legal Proceedings and Contingencies (Continued)

General Commercial Litigation

The Company, together with a number of other pharmaceutical manufacturers, has been named as a defendant in an action filed in California State Superior Court in Oakland, James Clayworth et al. v. Bristol-Myers Squibb Company, et al., alleging that the defendants have conspired to fix the prices of pharmaceuticals by agreeing to charge more for their drugs in the United States than they charge outside the United States, particularly Canada, and asserting claims under California’s Cartwright Act and unfair competition law. The plaintiffs seek treble damages for any damages they have sustained; restitution of any profit obtained by defendants through charging artificially higher prices to plaintiffs; an injunction barring the defendants from charging the plaintiffs higher prices offered to other customers; an award of reasonable attorneys’ fees and costs; and any other relief the Court deems proper.

This case is at a preliminary stage, and the Company is unable to assess the outcome and any possible effect on its business and profitability, or reasonably estimate possible loss or range of loss with respect to this case. If the Company were not to prevail in a final, non-appealable determination of this litigation, the impact could be material.

The Company also has been named as a defendant, along with many other pharmaceutical companies, in an action brought by the Utility Consumers Action Network, a consumer advocacy organization which focuses on privacy issues. The lawsuit, filed in California State Superior Court, San Diego County, and entitled Utility Consumers Action Network on behalf of the Privacy Rights Clearinghouse, et al. v. Bristol-Myers Squibb Co., et al, was originally directed only at retail drug stores but was amended in July, 2004 to add the Company and the other pharmaceutical companies as defendants. Another lawsuit, Rowan Klein, a Representative Action on Behalf of Similarly Situated Persons and the Consuming Public, v. Walgreen’s, et al., was filed in February 2005, also in California State Superior Court, San Diego County, against retail pharmacies, the Company and other pharmaceutical companies, and is substantially the same as the Utility Consumers Action Network lawsuit (jointly referred to as “the Complaints”). The Complaints seek equitable relief, monetary damages and attorneys’ fees based upon allegedly unfair business practices and untrue and misleading advertising under various California statutes, including the California Confidentiality of Medical Information Act. Specifically, the Complaints allege that through the “Drug Marketing Program”, retail stores are selling consumers’ confidential medical information to companies. The Complaints further allege that the companies are using consumers’ medical information for direct marketing that increase the sale of targeted drugs.

Both cases are at a very preliminary stage, and the Company is unable to assess the outcome and any possible effect on its business and profitability, or reasonably estimate possible loss or range of loss with respect to this case. If the Company were not to prevail in a final, non-appealable determination of these two lawsuits, the impact could be material.

Product Liability Litigation

The Company is a party to product liability lawsuits involving allegations of injury caused by the Company’s pharmaceutical and over-the-counter medications. These lawsuits involve certain over-the-counter medications containing phenylpropanolamine (PPA), while others involve hormone replacement therapy (HRT) products, and the Company’s SERZONE and STADOL NS prescription drugs. In addition to lawsuits, the Company also faces unfiled claims involving the same products.

PPA. The Company remains a defendant in 14 lawsuits filed on behalf of 14 plaintiffs alleging damages for personal injuries resulting from the ingestion of PPA-containing products. The Company has established reserves with respect to the PPA product liability litigation. The Company believes that the remaining matters will be resolved within the amounts reserved.

SERZONE. SERZONE (nefazodone hydrochloride) is an antidepressant that was launched by the Company in May 1994 in Canada and in March 1995 in the United States. In December 2001, the Company added a black box warning to its SERZONE label warning of the potential risk of severe hepatic events including possible liver failure and the need for transplantation and risk of death. Within several months of the black box warning being added to the package insert for SERZONE, a number of lawsuits, including several class actions, were filed against the Company. Plaintiffs allege that the Company knew or should have known about the hepatic risks posed by SERZONE and failed to adequately warn physicians and users of the risks. They seek compensatory and punitive damages, medical monitoring, and refunds for the costs of purchasing SERZONE. In May 2004, the Company announced that, following an evaluation of the commercial potential of the product after generic entry into the marketplace and rapidly declining brand sales, it had decided to discontinue the manufacture and sale of the product in the U.S. effective June 14, 2004.

At present, the Company has approximately 217 lawsuits, on behalf of approximately 2,631 plaintiffs, pending against it in federal and state courts throughout the United States. Twenty-seven of these cases are pending in New York State Court and have been consolidated for pretrial discovery. In addition, there are approximately 654 alleged, but unfiled, claims of injury associated with SERZONE. In August 2002, the federal cases were transferred to the U.S. District Court for the Southern District of West Virginia, In

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Note 17. Legal Proceedings and Contingencies (Continued)

re Serzone Products Liability Litigation, MDL 1477. In June 2003, the District Court dismissed the class claims in all but two of the class action complaints. A purported class action has also been filed in Illinois. In addition to the cases filed in the United States, there are four national class actions filed in Canada.

Without admitting any wrongdoing or liability, on or around October 15, 2004, the Company entered into a settlement agreement with respect to all claims in the United States and its territories regarding SERZONE. The settlement agreement embodies a schedule of payments dependent upon whether the class member has developed a qualifying medical condition, whether he or she can demonstrate that they purchased or took SERZONE, and whether certain other criteria apply. Pursuant to the settlement agreement, plaintiffs’ class counsel filed a class action complaint seeking relief for the settlement class. Pursuant to the terms of the proposed settlement, all claims will be dismissed, the litigation will be terminated, the defendants will receive releases, and the Company commits to paying at least $70 million to funds for class members. Class Counsel has petitioned the court for an award of reasonable attorneys’ fees and expenses; the fees will be paid by the Company and will not reduce the amount of money paid to class members as part of the settlement. The Company may terminate the settlement based upon the number of claims submitted or the number of purported class members who opt not to participate in the settlement and instead pursue individual claims. On November 18, 2004, the District Court conditionally certified the temporary settlement class and preliminarily approved the settlement. The opt-out period ended on April 8, 2005. Potential class members could have entered the settlement up to and including May 13, 2005. The fairness hearing occurred on June 29, 2005. On September 2, 2005, the Court issued an opinion granting final approval of the settlement; the order approving the settlement was entered on September 9, 2005.

In the second quarter of 2004, the Company established reserves for liabilities for these lawsuits of $75 million, including reasonable attorney’s fees and expenses. It is not possible at this time to reasonably assess the final outcome of these lawsuits due to a number of contingencies that could affect the settlement. In accordance with GAAP, the Company has determined that the above amounts represent minimum expected probable losses with respect to these lawsuits. Eventual losses related to these lawsuits may exceed these reserves, and the further impact could be material. The Company does not believe that the top-end of the range for these losses can be estimated.

STADOL NS. The Company remains a defendant in 8 lawsuits filed on behalf of 27 plaintiffs alleging damages for personal injuries resulting from the use of STADOL NS; the Company is finalizing the settlement of 7 of those lawsuits involving 26 plaintiffs. The Company has established reserves with respect to the STADOL NS product liability litigation. The Company believes that the remaining matters will be resolved within the amounts reserved.

The Company entered into agreements in 2004 and 2005, totaling $113 million, to settle coverage disputes with its various insurers with respect to the STADOL NS and SERZONE cases as discussed above.

BREAST IMPLANT LITIGATION. The Company, together with its subsidiary Medical Engineering Corporation (MEC) and certain other companies, remains a defendant in a few lawsuits alleging damages for personal injuries of various types resulting from polyurethane-covered breast implants and smooth-walled breast implants formerly manufactured by MEC or a related company. The vast majority of similar lawsuits were resolved through settlements or trial.

The Company remains subject to the terms of a nationwide class action settlement approved by the Federal District Court in Birmingham, Alabama (Revised Settlement) that will run through 2010. The Company has established reserves in respect of breast implant product liability litigation. The Company believes that any possible loss in addition to the amounts reserved will not be material.

HORMONE REPLACEMENT THERAPY (HRT) LITIGATION. In 1991, The National Institute of Health (NIH) launched the Women’s Health Initiative (WHI) clinical trials involving Prempro (estrogen and progestin) and Premarin (estrogen), both of which are manufactured by Wyeth. A July 2002, article in the Journal of the American Medical Association reported that among the Prempro subjects, there were increased risks of breast cancer, heart attacks, blood clots and strokes, and decreased risks of hip fractures and colorectal cancer. The Prempro phase of the study was stopped on July 9, 2002. The Premarin phase continued, only to be stopped on March 1, 2004 when the NIH informed study participants that they should stop study medications in the trial of conjugated equine estrogens (Premarin, Estrogen-alone) versus placebo. Women will continue to be followed for several more years, including ascertainment of outcomes and mammogram reports. The first legal complaints were filed against Wyeth shortly after WHI was halted in July 2002. In July 2003, the Company was served with its first HRT lawsuit. The Company products involved in this litigation are:

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Note 17. Legal Proceedings and Contingencies (Continued)

ESTRACE^® (an estrogen-only tablet); ESTRADIOL (generic estrogen-only tablet); DELESTROGEN^® (an injectable estrogen); and OVCON^® (an oral contraceptive containing both estrogen and progestin). All of these products were sold to other companies between January 2000 and August 2001, but the Company maintains the ESTRACE^® ANDA, and continues to manufacture some of the products under a supply agreement.

The Company currently is a defendant in approximately 640 lawsuits involving the above-mentioned products, filed on behalf of approximately 1,242 plaintiffs, in federal and state courts throughout the United States. All of these lawsuits involve multiple defendants. The Company expects to be dismissed from many cases in which its products were never used. Plaintiffs allege, among other things, that these products cause breast cancer, stroke, blood clots, cardiac and other injuries in women, that the defendants were aware of these risks and failed to warn consumers. The federal cases are being transferred to the U.S. District Court for the Eastern District of Arkansas, In re Prempro (Wyeth) Products Liability Litigation, MDL No., 1507.

Environmental Proceedings

The following discussion describes (1) environmental proceedings with a governmental authority which may involve potential monetary sanctions of $100,000 or more (the threshold prescribed by specific SEC rule), (2) a civil action or an environmental claim that could result in significant liabilities, (3) updates of ongoing matters, or the resolution of other matters, disclosed in recent public filings and (4) a summary of environmental remediation costs.

The U.S. Environmental Protection Agency (EPA) is investigating industrial and commercial facilities throughout the U.S. that use refrigeration equipment containing ozone-depleting substances (ODS) and enforcing compliance with regulations governing the prevention, service and repair of leaks (ODS requirements). In 2004, the Company performed a voluntary corporate-wide audit at its facilities in the U.S. and Puerto Rico that use ODS-containing refrigeration equipment. The Company submitted an audit report to the EPA in November 2004, identifying potential violations of the ODS requirements at several of its facilities. In addition to the matters covered in the Company’s audit report letter to the EPA, the EPA previously sent the Company’s wholly owned subsidiary, Mead Johnson, a request for information regarding compliance with ODS requirements at its facility in Evansville, Indiana. The Company responded to the request in June 2004, and, as a result, identified potential violations at the Evansville facility. The company currently is in discussions with EPA to resolve both the potential violations discovered during the audit and those identified as a result of the EPA request for information to the Evansville facility. If the EPA determines that the Evansville facility, or any other facilities, was, or is, in violation of applicable ODS requirements, the Company could be subject to penalties and/or be required to convert or replace refrigeration equipment to use non-ODS approved substitutes.

In March 2005, the Company commenced a voluntary environmental audit of the Barceloneta and Humacao facilities to determine their compliance with EPA’s regulations regarding the maximum achievable control technology requirements for emissions of hazardous air pollutants from pharmaceuticals production (Pharmaceutical MACT). In May 2005, the Company disclosed potential violations of the Pharmaceutical MACT requirements at both facilities and is currently in the process of analyzing the potential violations to provide more details to EPA. To date, the Company has not been contacted by EPA with respect to these potential violations; however, if EPA determines that the Barceloneta and Humacao facilities violated the Pharmaceutical MACT requirements, the Company could be subject to civil penalties and/or be required to make investments in the facilities to ensure their compliance with the Pharmaceutical MACT.

In October 2003, the Company was contacted by counsel representing the North Brunswick, NJ Board of Education regarding a site where waste materials from E.R. Squibb and Sons, a wholly owned subsidiary of the Company, may have been disposed from the 1940’s through the 1960’s. Fill material containing industrial waste and heavy metals in excess of residential standards was discovered in Fall 2003 during an expansion project at the North Brunswick Township High School, as well as at a number of neighboring residential properties and adjacent public park areas. In January 2004, the New Jersey Department of Environmental Protection (NJDEP) sent the Company and approximately five other companies an information request letter about possible waste disposal at the site, to which the Company responded in March 2004. The school board and the Township, who are the current owners of school property and the park, are conducting and jointly financing soil remediation work under a work plan approved by the NJDEP, and are evaluating the need to conduct response actions to remediate or contain potentially impacted ground water. In addition, the school board reportedly is facing unexpected project cost increases due to contractor claims that discovery of the waste material has delayed and complicated performance of site work. The site owner entities have asked the Company to contribute to the cost of remediation, and to contribute funds on an interim basis to assure uninterrupted performance of necessary site work in the face of unbudgeted cost increases. The Company is actively monitoring the clean-up project, including its costs, and has offered to negotiate with the school board and Township on the terms of a cooperative funding agreement and allocation process. Municipal records indicate the Township operated a municipal landfill at the site in the 1940’s through the 1960’s, and the Company is actively investigating the historic use of the site, including the Company’s possible connection. To date, no claims have been asserted against the Company.

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Note 17. Legal Proceedings and Contingencies (Continued)

In September 2003, the NJDEP issued an administrative enforcement Directive and Notice under the New Jersey Spill Compensation and Control Act requiring the Company and approximately 65 other companies to perform an assessment of natural resource damages and to implement unspecified interim remedial measures to restore conditions in the Lower Passaic River. The Directive alleges that the Company is liable because it historically sent bulk waste to the former Inland Chemical Company facility in Newark, N.J. (now owned by McKesson Corp.) for reprocessing, and that releases of hazardous substances from this facility have migrated into Newark Bay and continue to have an adverse impact on the Lower Passaic River watershed. Subsequently, the EPA also issued a notice letter under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to numerous parties—but not including the Company—seeking their cooperation in a study of conditions in substantially the same stretch of the Passaic River that is the subject of the NJDEP’s Directive. A group of these other parties entered into a consent agreement with EPA in 2004 to finance a portion of that study. The EPA estimates this study will cost $20 million, of which roughly half will be financed by this private party group. This study may also lead to clean-up actions, directed by the EPA and the Army Corps of Engineers. The Company is working cooperatively with a group of the parties that received the NJDEP Directive and/or the EPA notice to explore potential resolutions of the Directive and to address the risk of collateral claims. Although the Company does not believe it has caused or contributed to any contamination in the Lower Passaic River watershed, the Company has informed the NJDEP that it is willing to discuss NJDEP’s allegations against the Company. In the Directive and in more recent communications to the cooperating group, NJDEP has stated that if the responsible parties do not cooperate, the NJDEP may perform the damage assessment and restoration and take civil action to recover its remedial costs, and treble damages for administrative costs and penalties. Also, in late 2004, a group of federal agencies designated as trustees of natural resources affected by contamination in the Passaic River watershed approached the cooperating group about funding a cooperative study of possible natural resources damages (NRD) in the area. This study presumably would dovetail with the ongoing EPA study, and ideally would be joined by the NJDEP, to coordinate actions NJDEP may seek under the Directive. Discussions with the federal trustees are ongoing. In early 2005, McKesson asserted that the Company is obligated to reimburse a fixed percentage of costs that McKesson ultimately may face in this matter by operation of a 1993 cost-sharing agreement governing performance of an on-site remedy at the former Inland facility. The Company has denied the obligation but has proposed to enter an agreement to toll the running of any limitations bars on any claims McKesson may have to allow consideration of such claims in the larger context of facts and claims that may develop with respect to the NJDEP Directive and/or the EPA remedial process. The extent of any liability the Company may face, under either the Directive, the EPA’s notice letter, or with respect to future NRD actions or claims by the federal trustees, or in contribution to McKesson or other responsible parties, cannot yet be determined.

On October 16, 2003, the Michigan Department of Environmental Quality (MDEQ) sent the Company a Letter of Violation (LOV) alleging that, over an unspecified period of time, emissions from certain digestion tanks at Mead Johnson’s Zeeland, Michigan facility exceeded an applicable limit in the facility’s renewable operating air permit. The LOV requires the Company to take corrective action and to submit a compliance program report. The MDEQ has not demanded fines or penalties, and has not taken further enforcement action. The Company and the MDEQ completed revisions to the Company’s air use permit which appear to have resolved the matter.

On December 1, 2003, the Company and the NJDEP entered an Administrative Consent Order (ACO) concerning alleged violations of the New Jersey Air Pollution Control Act and its implementing regulations at the Company’s New Brunswick facility. Pursuant to the ACO, the Company agreed to submit a permit application creating a facility-wide emissions cap and to pay an administrative fine of approximately $28,000. Both of these obligations were satisfied in early 2004. Subsequently, on February 15, 2005, the ACO was amended to provide that the Company would install a new cogeneration turbine at its New Brunswick facility by December 31, 2006, and would obtain air permits, including those required for the cogeneration turbine, by December 31, 2005. The estimated cost of the new cogeneration turbine is approximately $5 million.

The Company is one of several defendants, including most of the major U.S. pharmaceutical companies, in a purported class action suit filed in superior court in Puerto Rico in February 2000 by residents of three wards from the Municipality of Barceloneta, alleging that air emissions from a government owned and operated wastewater treatment facility in the Municipality have caused respiratory and other ailments, violated local air rules and adversely impacted property values. The Company believes its wastewater discharges to the treatment facility are in material compliance with the terms of the Company’s permit. Discovery in the case is ongoing, and the plaintiffs’ motion to certify the class is pending at this time. In September 2005 the parties stipulated to the dismissal (with prejudice) of all claims for property damage and personal injury, leaving only claims related to nuisance remaining in the case. The court had scheduled a hearing on the class certification motion for September 30, 2005, but that hearing was adjourned on account of ongoing settlement discussions and problems with the plaintiffs’ expert report, which was rejected by the court. The Company believes that this litigation will be resolved for an immaterial amount, which may bring the matter to resolution. However, in the event of an adverse judgment, the Company’s ultimate financial liability could be greater than anticipated.

In August 2005, the Company received a notice letter from the U.S. Department of Justice (DOJ), on behalf of the U.S. Environmental Protection Agency (EPA) alleging that waste materials from the Company’s Calgon Vestal Laboratories (CVL) facility were among those found at the Sauget Area Two Superfund Site in suburban St. Louis, Illinois. EPA reportedly has incurred over $3 million in initial site response actions, and currently is conducting a comprehensive site characterization study designed to

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Note 17. Legal Proceedings and Contingencies (Continued)

allow EPA to develop and select a final site remedy. As a result, remaining site costs cannot be estimated at this time. Inquiries are underway within the cooperating potentially responsible parties (PRP) group and with EPA to learn more about the nature and extent of CVL’s possible transactional connection to this site. However, initial research indicates this type of liability is among those retained by the Company’s predecessor (Merck), from whom the Company acquired CVL pursuant to a 1994 sales agreement. Merck has been put on notice of this claim, and discussions are underway to determine if Merck should assume responsibility for this claim.

In September 2005, the Company received a notice letter from a PRP Group cooperating in the clean-up of the former Philip Services Corp. incinerator and disposal site in South Carolina, alleging a nexus from the former E.R. Squibb facility in Kenly, North Carolina. The Group is performing site investigation work under a consent agreement with the South Carolina Department of Health and Environmental Control; as a result, no information is available on potential site costs. The Group has invited the Company to join the group in lieu of litigation; that offer currently is being evaluated, which, among other things, would allow the Company access to the Group’s compilation of site records documenting the transactional connection of the Company and others. Internal investigation also is underway, including whether other Company facilities may have used the site. At this time, no estimate can be made of the Company’s potential liability at the site.

The Company is also responsible under various state, federal and foreign laws, including CERCLA, for certain costs of investigating and/or remediating contamination resulting from past industrial activity at the Company’s current or former sites or at waste disposal or reprocessing facilities operated by third parties. The Company typically estimates these costs based on information obtained from the EPA, or counterpart state agency, and/or studies prepared by independent consultants, including the total estimated costs for the site and the expected cost-sharing, if any, with other PRP. The Company accrues liabilities when they are probable and reasonably estimable. As of September 30, 2005, the Company estimated its share of the total future costs for these sites to be approximately $58 million, recorded as other liabilities, which represents the sum of best estimates or, where no simple estimate can reasonably be made, estimates of the minimal probable amount among a range of such costs (without taking into account any potential recoveries from other parties, which are not currently expected). The Company has paid less than $4 million (excluding legal fees) in each of the last five years for investigation and remediation of such matters, including liabilities under CERCLA and for other on-site remedial obligations. Although it is not possible to predict with certainty the outcome of these environmental proceedings or the ultimate costs of remediation, the Company does not believe that any reasonably possible expenditures that the Company may incur in excess of existing reserves will have a material adverse effect on its business, financial position, or results of operations.

Other Matters

On October 25, 2004, the SEC notified the Company that it is conducting an informal inquiry into the activities of certain of the Company’s German pharmaceutical subsidiaries and its employees and/or agents. The Company believes the SEC’s informal inquiry may encompass matters currently under investigation by the Staatsanwaltin prosecutor in Munich, Germany. Although, uncertain at this time, the Company believes the inquiry and investigation may concern potential violations of the Foreign Corrupt Practices Act and/or German law. The Company is cooperating with both the SEC and the German authorities. The Company has established an accrual which represents minimum expected probable losses with respect to the investigation by the Staatsanwaltin prosecutor.

Indemnification of Officers and Directors

The Company’s corporate by-laws require that, to the extent permitted by law, the Company shall indemnify its officers and directors against judgments, fines, penalties and amounts paid in settlement, including legal fees and all appeals, incurred in connection with civil or criminal actions or proceedings, as it relates to their services to the Company and its subsidiaries. The by-laws provide no limit on the amount of indemnification. Indemnification is not permitted in the case of willful misconduct, knowing violation of criminal law, or improper personal benefit. As permitted under the laws of the state of Delaware, the Company has for many years purchased directors and officers insurance coverage to cover claims made against the directors and officers. The amounts and types of coverage have varied from period to period as dictated by market conditions.

The litigation matters and regulatory actions described above involve certain of the Company’s current and former directors and officers, all of whom are covered by the aforementioned indemnity and if applicable, certain prior period insurance policies. However, certain indemnification payments may not be covered under the Company’s directors and officers’ insurance coverage. The Company cannot predict with certainty the extent to which the Company will recover from its insurers the indemnification payments made in connection with the litigation matters and regulatory actions described above.

On July 31, 2003, one of the Company’s insurers, Federal Insurance Company (Federal), filed a lawsuit in the New York Supreme Court against the Company and several current and former officers and members of the board of directors, seeking rescission, or in the alternative, declarations allowing Federal to avoid payment under certain Directors and Officers insurance policies and certain

31

Note 17. Legal Proceedings and Contingencies (Continued)

Fiduciary Liability insurance policies with respect to potential liability arising in connection with the matters described under the “—VANLEV Litigation,” “—Other Securities Matters” and “—ERISA Litigation” sections above. The parties negotiated a settlement of these disputes. Pursuant to the settlement, the Company received substantially all of the $203 million in insurance proceeds which were reflected in its financial statements.

Note 18. Subsequent Events

In October 2005, the Company borrowed, through its subsidiary, $2.0 billion against its existing $2.5 billion term loan facility. For additional information, see “—Note 13. Short-term Borrowings and Long-term Debt.”

The Company previously disclosed that it anticipated to repatriate approximately $9.0 billion in special dividends in 2005 pursuant to the AJCA, of which approximately $6.2 billion was repatriated in the first quarter of 2005. In November 2005, the Company will repatriate a substantial portion of the remaining special dividends, and anticipates completing the repatriation of special dividends in the fourth quarter of 2005. For additional information on the AJCA, see “—Note 8. Income Taxes.”

On October 18, 2005, the FDA issued an approvable letter for muraglitazar requesting additional information from ongoing clinical trials to more fully address the cardiovascular safety profile of muraglitazar. On October 27, 2005, Merck advised the Company of their intent to terminate the collaborative agreement and the Company has agreed to begin discussions to terminate the agreement. For additional information related to the approvable letter, see “—Note 2. Alliances and Investments.”

32

Report of Independent Registered Public Accounting Firm

To the Board of Directors

and Stockholders of

Bristol-Myers Squibb Company:

We have reviewed the accompanying consolidated balance sheet of Bristol-Myers Squibb Company and its subsidiaries as of September 30, 2005, and the related consolidated statements of earnings and comprehensive income for each of the three-month and nine-month periods ended September 30, 2005 and 2004 and the consolidated statements of retained earnings and cash flows for the nine-month periods ended September 30, 2005 and 2004. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2004, and the related consolidated statements of earnings, comprehensive income and retained earnings and of cash flows for the year then ended, management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004 and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004; and in our report dated March 3, 2005, we expressed unqualified opinions thereon. The consolidated financial statements and management’s assessment of the effectiveness of internal control over financial reporting referred to above are not presented herein. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2004, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

November 2, 2005

33

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Summary

Bristol-Myers Squibb Company (BMS, the Company or Bristol-Myers Squibb) is a worldwide pharmaceutical and related healthcare products company whose mission is to extend and enhance human life. The Company is engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of pharmaceuticals and other healthcare related products.

The Company continues to execute its strategy of serving specialists and high-value primary care physicians by transitioning its product portfolio to focus on disease areas of significant unmet need, where innovative medicines can help patients with serious illnesses.

During the third quarter of 2005, among the Company’s full-development programs, ORENCIA^®, a potential therapy for rheumatoid arthritis was recommended for approval by the U.S. Food and Drug Administration (FDA) Arthritis Advisory Committee and saxagliptin, the Company’s DPP4 inhibitor for the potential treatment of diabetes transitioned to Phase III.

On October 18, 2005, as previously disclosed, the FDA issued an approvable letter for PARGLUVA™ (muraglitazar), the Company’s investigational oral medicine for the treatment of type 2 diabetes. The FDA has requested additional information from ongoing clinical trials to more fully address the cardiovascular safety profile of muraglitazar. The Company determined that to receive regulatory approval and to achieve commercial success, additional studies may be required because ongoing muraglitazar trials are not designed to answer the questions raised by the FDA. The additional studies may take approximately five years to complete. The Company will continue discussions with the FDA. Merck advised the Company of their intent to terminate the collaborative agreement and the Company has agreed to begin discussions to terminate the agreement. The Company is in the process of evaluating a range of options including conducting additional studies or terminating further development of muraglitazar.

The Company invested $669 million in research and development in the third quarter of 2005, a 9% increase over 2004. For the quarter, research and development dedicated to pharmaceutical products, was $616 million and as a percentage of Pharmaceutical sales was 16.3% compared to $566 million and 14.7% in 2004.

For the third quarter of 2005, the Company reported global sales from continuing operations of $4.8 billion. Sales remained constant from the prior year level due to the favorable impact from foreign exchange rate fluctuations, an increase in average selling prices, which were offset by a decrease in volume. U.S. sales remained constant at $2.7 billion in both 2005 and 2004, while international sales decreased 1% to $2.1 billion, including a 2% favorable foreign exchange impact.

The Company and its subsidiaries are the subject of a number of significant pending lawsuits, claims, proceedings and investigations. It is not possible at this time reasonably to assess the final outcome of these investigations or litigations. Management continues to believe, as previously disclosed, that during the next few years, the aggregate impact, beyond current reserves, of these and other legal matters affecting the Company is reasonably likely to be material to the Company’s results of operations and cash flows, and may be material to its financial condition and liquidity. For additional discussion of this matter, see “Item 1. Financial Statements—Note 17. Legal Proceedings and Contingencies.”

The following discussion of the Company’s three and nine-month results of continuing operations excludes the results related to the Oncology Therapeutics Network (OTN) business, which were previously presented as a separate segment, and has been segregated from continuing operations and reflected as discontinued operations for all periods presented. See “—Discontinued Operations” below.

Three Months Results of Operations

	Three Months Ended September 30,						% Change
	2005			2004
	(dollars in millions)
Net Sales	$	4,767		$	4,778		—
Earnings from continuing operations before minority interest and income tax	$	1,626		$	1,146		42	%
% of net sales		34.1	%		24.0	%
Provision on income taxes	$	507		$	239		112	%
Effective tax rate		31.2	%		20.9	%
Earnings from continuing operations	$	964		$	755		28	%
% of net sales		20.2	%		15.8	%

34

Net sales from continuing operations for the third quarter of 2005 remained constant at $4,767 in 2005 and $4,778 million in 2004. U.S. sales remained constant at $2,638 million in 2005 and $2,633 million in 2004, while international sales decreased 1%, including a 2% favorable foreign exchange impact, to $2,129 million in 2005 from $2,145 million in 2004.

The composition of the net increase/(decrease) in sales is as follows:

Three Months Ended September 30,		Analysis of % Change
	Total Change	Volume	Price	Foreign Exchange
2005 vs. 2004	—	(2)%	1%	1%

In general, the Company’s business is not seasonal. For information on U.S. pharmaceuticals prescriber demand, reference is made to the table within Business Segments under the Pharmaceuticals section below, which sets forth a comparison of changes in net sales to the estimated total prescription growth (for both retail and mail order customers) for certain of the Company’s pharmaceutical products.

The Company operates in three reportable segments—Pharmaceuticals, Nutritionals and Related Healthcare. In May 2005, the Company completed the sale of OTN, which was previously presented as a separate segment. As such, the results of operations for OTN are presented as part of the Company’s results from discontinued operations in accordance with Statement of Financial Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Accordingly, OTN results of operations in prior periods have been reclassified to discontinued operations to conform with current year presentations. The percent of the Company’s net sales by segment were as follows:

	Net Sales
	Three Months Ended September 30,						% Change
	2005			2004
	(dollars in millions)
Pharmaceuticals	$	3,778		$	3,848		(2	)%
% of net sales		79.3	%		80.6	%
Nutritionals	$	547		$	484		13	%
% of net sales		11.5	%		10.1	%
Related Healthcare	$	442		$	446		(1	)%
% of net sales		9.2	%		9.3	%
Total	$	4,767		$	4,778		—

The Company recognizes revenue net of various sales adjustments to arrive at net sales as reported on the Consolidated Statement of Earnings. These adjustments are referred to as gross-to-net sales adjustments. The following table sets forth the reconciliation of the Company’s gross sales to net sales by each significant category of gross-to-net sales adjustments:

	Three Months Ended September 30,
	2005			2004
	(dollars in millions)
Gross Sales	$	5,674		$	5,925
Gross-to-Net Sales Adjustments
Prime Vendor Charge-Backs		(241	)		(314	)
Women, Infants and Children (WIC) Rebates		(212	)		(227	)
Managed Healthcare Rebates and Other Contract Discounts		(129	)		(194	)
Medicaid Rebates		(143	)		(149	)
Cash Discounts		(67	)		(80	)
Sales Returns		(46	)		(61	)
Other Adjustments		(69	)		(122	)
Total Gross-to-Net Sales Adjustments		(907	)		(1,147	)
Net Sales	$	4,767		$	4,778

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The decrease in prime vendor charge-backs in 2005 was primarily due to lower relative sales volume in this segment due to product mix. The decrease in managed healthcare rebates was primarily attributable to lower sales volume through managed healthcare companies. The decrease in other adjustments was due to lower sales discounts in the international businesses.

Pharmaceuticals

The composition of the net decrease in pharmaceutical sales is as follows:

Three Months Ended September 30,		Analysis of % Change
	Total Change	Volume	Price	Foreign Exchange
2005 vs. 2004	(2)%	(5)%	2%	1%

For the three months ended September 30, 2005, worldwide Pharmaceuticals sales decreased 2% to $3,778 million. Domestic pharmaceutical sales decreased 3% to $2,082 million from $2,154 million in 2004, primarily due to the continued impact of exclusivity losses for PARAPLATIN and VIDEX EC, increased competition for PRAVACHOL, partially offset by the continued growth of PLAVIX*, ABILIFY*, REYATAZ and ERBITUX*. In aggregate, estimated wholesaler inventory levels of the Company’s key pharmaceutical products sold by the U.S. Pharmaceutical business at the end of the third quarter were down from the end of the second quarter of 2005, by approximately one-tenth of a month to two-and-a-half weeks. Individually, estimated wholesaler inventory levels of major brands such as PLAVIX*, PRAVACHOL and AVAPRO*/AVALIDE* decreased to approximately two weeks.

International pharmaceutical sales remained unchanged, including a 2% favorable foreign exchange impact, at $1,696 million in the third quarter of 2005 compared to 2004. The sales decrease excluding the favorable impact of foreign exchange was primarily due to a decline in TAXOL^® and PRAVACHOL sales resulting from increased generic competition, partially offset by increased sales of newer products including REYATAZ and ABILIFY*, as well as growth of PLAVIX*.

Key pharmaceutical products and their sales, representing 81% of total pharmaceutical sales in the third quarter of both 2005 and 2004, are as follows:

	Three Months Ended September 30,
	2005		2004		% Change
	(dollars in millions)
Cardiovascular
PLAVIX*	$	980	$	902	9	%
PRAVACHOL		527		598	(12	)%
AVAPRO*/AVALIDE*		251		241	4	%
MONOPRIL		49		69	(29	)%
COUMADIN		57		65	(12	)%
Virology
SUSTIVA		170		157	8	%
REYATAZ		176		106	66	%
ZERIT		51		69	(26	)%
VIDEX/VIDEX EC		41		67	(39	)%
Infectious Diseases
CEFZIL		48		54	(11	)%
BARACLUDE™		2		—	—
Oncology
TAXOL®		175		243	(28	)%
ERBITUX*		107		84	27	%
PARAPLATIN		42		177	(76	)%
Affective (Psychiatric) Disorders
ABILIFY* (total revenue)		260		165	58	%
Metabolics
GLUCOPHAGE* Franchise		43		43	—
Other Pharmaceuticals
EFFERALGAN		66		61	8	%

36

• Sales of PLAVIX*, a platelet aggregation inhibitor, increased 9%, including a 1% favorable foreign exchange impact, to $980 million from $902 million in 2004. Domestic sales increased 7% to $833 million from $781 million in 2004, primarily due to increased demand, partially offset by a reduction in U.S. wholesaler inventory levels in 2005. Estimated U.S. prescription demand grew approximately 12% compared to 2004. PLAVIX* is a cardiovascular product that was launched from the alliance between the Company and Sanofi-Aventis (Sanofi). Market exclusivity for PLAVIX* is expected to expire in 2011 in the U.S. and 2013 in the European Union (EU). Statements on exclusivity are subject to any adverse determination that may occur with respect to the PLAVIX* patent litigation. For additional information on the PLAVIX* patent litigation, see “Item 1. Financial Statements—Note 17. Legal Proceedings and Contingencies.”

• Sales of PRAVACHOL, an HMG Co-A reductase inhibitor, decreased 12% to $527 million from $598 million in 2004. Domestic sales decreased 7% to $297 million in 2005, primarily due to lower demand resulting from increased competition and the related reduction in wholesaler inventory levels, partially offset by lower managed healthcare rebate costs in 2005. Estimated U.S. prescriptions declined by 18% compared to 2004. International sales decreased 18%, including a 1% favorable foreign exchange impact, to $230 million, reflecting generic competition in key European markets. Market exclusivity protection for PRAVACHOL is expected to expire in April 2006 in the U.S. Market exclusivity in the EU expired in 2004, with the exception of France and Sweden, for which expiration will occur in August and March 2006, respectively, and in Italy, for which expiration will occur in January 2008.

• Sales of AVAPRO*/AVALIDE*, an angiotensin II receptor blocker for the treatment of hypertension, also part of the Sanofi alliance, increased 4%, including a 2% favorable foreign exchange impact, to $251 million from $241 million in 2004. Domestic sales decreased 1% to $147 million from $148 million in 2004, primarily due to a reduction in wholesaler inventory levels in 2005, partially offset by increased demand. Estimated U.S. prescription growth increased approximately 11% compared to 2004. International sales increased 12%, including a 4% favorable foreign exchange impact, to $104 million from $93 million in 2004, primarily due to increased sales in Canada and Australia. Market exclusivity for AVAPRO*/AVALIDE* (known in the EU as APROVEL*/KARVEA*) is expected to expire in 2011 in the U.S. and 2012 in countries in the EU; AVAPRO*/AVALIDE* is not currently marketed in Japan.

• Sales of MONOPRIL, a second generation angiotesin converting enzyme (ACE) inhibitor for the treatment of hypertension, decreased 29%, including a 2% favorable foreign exchange impact, to $49 million due to increased generic competition in key European markets. Market exclusivity protection for MONOPRIL expired in 2003 in the U.S. and has expired or is expected to expire between 2001 and 2008 in countries in the EU. MONOPRIL is not currently marketed in Japan.

• Sales of COUMADIN, an oral anti-coagulant used predominately in patients with atrial fibrillation or deep venous thrombosis/pulmonary embolism, decreased 12%, including a 1% favorable foreign exchange impact, to $57 million in 2005 compared to $65 million in 2004 due to continued competition. Estimated U.S. prescriptions declined by approximately 22% compared to 2004. Market exclusivity for COUMADIN expired in the U.S. in 1997.

• Sales of SUSTIVA, a non-nucleoside reverse transcriptase inhibitor for the treatment of HIV, increased 8% to $170 million in 2005 from $157 million in 2004, primarily due to an estimated U.S. prescription growth of approximately 6% for the third quarter of 2005. Market exclusivity protection for SUSTIVA is expected to expire in 2013 in the U.S. and in countries in the EU; the Company does not, but others do, market SUSTIVA in Japan.

• Sales of REYATAZ, a protease inhibitor for the treatment of HIV, increased 66%, including a 1% favorable foreign exchange impact, to $176 million in 2005 compared to $106 million in 2004 primarily due to increased demand. REYATAZ has achieved an estimated monthly new prescription share of the U.S. protease inhibitors market of approximately 31%. European sales increased 152% to $53 million in the third quarter of 2005 from $21 million in 2004. Market exclusivity for REYATAZ is expected to expire in 2017 in the U.S., in countries in the EU and Japan.

• Sales of ZERIT, an antiretroviral agent used in the treatment of HIV, decreased 26% to $51 million in 2005 from $69 million in 2004, primarily resulting from a decrease in estimated U.S. prescriptions of approximately 31% compared to 2004. Market exclusivity protection for ZERIT is expected to expire in 2008 in the U.S., between 2007 and 2011 in countries in the EU and 2008 in Japan.

• Sales of VIDEX/VIDEX EC, an antiretroviral agent used in the treatment of HIV, decreased 39% to $41 million in 2005 from $67 million in 2004, primarily as a result of generic competition in the U.S. which began in the fourth quarter of 2004. The Company has a licensing agreement with the U.S. Government for VIDEX/VIDEX EC, which by its terms became non-exclusive in 2001. The U.S. Government’s method of use patent expires in 2007 in the U.S. (which includes an earned pediatric extension) and in Japan, and between 2006 and 2009 in countries in the EU. The license to the Company is non-exclusive, which has allowed another company to obtain a license from the U.S. Government and receive approval for marketing. With respect to VIDEX/VIDEX EC, the Company has patents covering the reduced mass formulation of VIDEX/VIDEX EC that expire in 2012 in the U.S., the EU and Japan. However, these patents apply only to the type of reduced mass formulation specified in the patent. Other reduced mass formulations may exist. There is currently no issued patent covering the VIDEX EC formulation.

37

• Sales of CEFZIL, an antibiotic for the treatment of mild to moderately severe bacterial infections, decreased 11%, including a 1% favorable foreign exchange impact, to $48 million in 2005 from $54 million in 2004 due to lower demand. Market exclusivity is expected to expire in December 2005 in the U.S. and between 2007 and 2009 in the EU.

• BARACLUDE™, the Company’s internally developed oral antiviral agent for the treatment of chronic hepatitis B, was approved by the FDA in March 2005, and generated domestic sales of $7 million since its U.S. launch in April 2005. BARACLUDE™ received approvals from international authorities in Brazil, Indonesia and Argentina during the third quarter of 2005. The Company has a composition of matter patent that expires in the U.S. in 2010.

• Sales of TAXOL^®, an anti-cancer agent sold almost exclusively in the non-U.S. markets, were $175 million in 2005 compared to $243 million in 2004. Sales of TAXOL^® decreased 28%, including a 1% favorable foreign exchange impact, primarily as a result of increased generic competition in Europe. Market exclusivity protection for TAXOL^® expired in 2002 in the U.S., in 2003 in the EU and is expected to expire between 2005 and 2013 in Japan.

• Sales of ERBITUX*, used to treat refractory metastatic colorectal cancer, which is sold almost exclusively in the U.S., increased 27% to $107 million in 2005 compared to $84 million in 2004. ERBITUX* is marketed by the Company under a distribution and copromotion agreement with ImClone Systems Incorporated (ImClone). A patent relating to combination therapy with ERBITUX* expires in 2017. The Company’s right to market ERBITUX* in North America and Japan expires in September 2018. The Company does not, but others do, market ERBITUX* in countries in the EU.

• Sales of PARAPLATIN, an anticancer agent, decreased 76% to $42 million in 2005 from $177 million in 2004 due to increased generic competition. Domestic sales decreased 94% to $9 million in 2005 from $145 million in 2004. Market exclusivity protection for PARAPLATIN expired in October 2004 in the U.S., in 2000 in the EU and in 1998 in Japan.

• Total revenue for ABILIFY* increased 58% to $260 million in 2005 from $165 million in 2004, primarily due to strong growth in domestic demand and the continued growth in Europe, which achieved sales of $40 million in the third quarter of 2005. Estimated U.S. wholesale inventory levels at the end of the third quarter increased to nine-tenths of a month. Estimated U.S. prescription demand grew approximately 38% compared to 2004. ABILIFY* is an antipsychotic agent for the treatment of schizophrenia, acute bipolar mania and Bipolar I Disorder. Total revenue for ABILIFY* primarily consists of alliance revenue for the Company’s 65% share of net sales in copromotion countries with Otsuka Pharmaceutical Co., Ltd. (Otsuka). Market exclusivity protection for ABILIFY* is expected to expire in 2009 in the U.S. (and may be extended until 2014 if a pending patent term extension is granted). The Company also has the right to copromote ABILIFY* in several European countries (the United Kingdom, France, Germany and Spain) and to act as exclusive distributor for the product in the rest of the EU. Market exclusivity protection for ABILIFY* is expected to expire in 2009 for the EU (and may be extended until 2014 if pending supplemental protection certificates are granted). The Company’s right to market ABILIFY* expires in November 2012 in the U.S. and Puerto Rico and, for the countries in the EU where the Company has the exclusive right to market ABILIFY* until June 2014. Statements on exclusivity are subject to any adverse determination that may occur with respect to the ABILIFY* patent reexamination. For additional information on this matter, see “Item 1. Financial Statements – Note 17. Legal Proceedings and Contingencies.” For additional information on revenue recognition of ABILIFY*, see “Item 1. Financial Statements— Note 2. Alliances and Investments.”

• GLUCOPHAGE* franchise sales remained constant at $43 million in 2005 compared to 2004. Market exclusivity protection expired in March 2000 for GLUCOPHAGE* IR, in October 2003 for GLUCOPHAGE* XR (Extended Release), and in January 2004 for GLUCOVANCE*. The Company does not, but others do, market these products in the EU and Japan.

• Sales of EFFERALGAN, a pain relief acetaminophen, increased 8% to $66 million in 2005 from $61 million in 2004 due to product back-orders in the second quarter of 2005 which were resolved in the third quarter.

The estimated prescription and prescription growth data provided above includes information only from the retail and mail order channels and do not reflect information from other channels, such as hospitals, institutions and long-term care, among others. The estimated prescription and prescription growth data are based on National Prescription Audit (NPA) data provided by IMS Health (IMS) as described below.

In most instances, the basic exclusivity loss date indicated above is the expiration date of the patent that claims the active ingredient of the drug or the method of using the drug for the approved indication. In some instances, the basic exclusivity loss date indicated is the expiration date of the data exclusivity period. In situations where there is only data exclusivity without patent protection, a competitor could seek regulatory approval by submitting its own clinical trial data to obtain marketing approval. The Company assesses the market exclusivity period for each of its products on a case-by-case basis. The length of market exclusivity for any of the Company’s products is difficult to predict with certainty because of the complex interaction between patent and regulatory forms of exclusivity and other factors. There can be no assurance that a particular product will enjoy market exclusivity for the full period of time that the Company currently anticipates. The estimates of market exclusivities reported above are for business planning purposes only and are not intended to reflect the Company’s legal opinion regarding the strength or weakness of any particular patent or other legal position.

38

The following table sets forth for each of the Company’s top 15 pharmaceutical products sold by the U.S. Pharmaceuticals business (based on 2004 annual net sales), for the three months ended September 30, 2005 and 2004 compared to the same periods in the prior year: (a) changes in reported U.S. net sales for the period; (b) estimated total U.S. prescription growth for the retail and mail order channels and the estimated U.S. therapeutic category share of the applicable product, calculated by the Company based on NPA data provided by IMS, a supplier of market research for the pharmaceutical industry; and (c) estimated total U.S. prescription growth for the retail and mail order channels and the estimated U.S. therapeutic category share of the applicable product, calculated by the Company based on Next-Generation Prescription Services (NGPS) data provided by IMS.

	Three Months Ended September 30, 2005						Month Ended September 30, 2005
	% Change in U.S. Net Sales(a)		% Change in U.S. Total Prescriptions				Estimated TRx Therapeutic Category Share % (e)
			NPA Data (b)		NGPS Data (c)		NPA Data (b)	NGPS Data (c)
ABILIFY* (total revenue)	41		38		36		11	11
AVAPRO*/AVALIDE*	(1	)	11		11		15	15
CEFZIL	(10	)	(15	)	(17	)	2	2
COUMADIN	(16	)	(22	)	(25	)	21	20
DOVONEX	(9	)	(7	)	(8	)	2	3
ERBITUX* (d)	28		N/A		N/A		N/A	N/A
GLUCOPHAGE* Franchise	(3	)	(46	)	(45	)	2	2
PARAPLATIN (d)	(94	)	N/A		N/A		N/A	N/A
PLAVIX*	7		12		11		86	86
PRAVACHOL	(7	)	(18	)	(17	)	7	7
REYATAZ	40		35		30		13	13
SUSTIVA	6		6		7		23	23
TEQUIN	(32	)	(36	)	(35	)	1	1
VIDEX/VIDEX EC	(74	)	(72	)	(72	)	3	3
ZERIT	(29	)	(31	)	(31	)	7	7

	Three Months Ended September 30, 2004						Month Ended September 30, 2004
	% Change in U.S. Net Sales(a)		% Change in U.S. Total Prescriptions				Estimated TRx Therapeutic Category Share % (e)
			NPA Data (b)		NGPS Data (c)		NPA Data (b)	NGPS Data (c)
ABILIFY* (total revenue)	52		85		85		8	8
AVAPRO*/AVALIDE*	36		15		17		15	15
CEFZIL	58		(26	)	(24	)	2	2
COUMADIN	(5	)	(18	)	(23	)	28	28
DOVONEX	—		(9	)	(7	)	3	3
ERBITUX* (d)	—		N/A		N/A		N/A	N/A
GLUCOPHAGE* Franchise	(83	)	(74	)	(75	)	4	4
PARAPLATIN (d)	(31	)	N/A		N/A		N/A	N/A
PLAVIX*	32		23		26		84	84
PRAVACHOL	(31	)	(13	)	(12	)	10	10
REYATAZ	103		*	*	*	*	11	11
SUSTIVA	121		4		10		23	23
TEQUIN	(9	)	(21	)	(19	)	2	2
VIDEX/VIDEX EC	59		(3	)	3		9	9
ZERIT	48		(29	)	(26	)	9	9

(a) Reflects percentage change in net sales in dollar terms, including change in average selling prices and wholesaler buying patterns.

(b) Based on a simple average of the estimated number of prescriptions in the retail and mail order channels as provided by IMS.

(c) Based on a weighted average of the estimated number of prescription units (pills) in each of the retail and mail order channels based on data provided by IMS.

(d) ERBITUX* and PARAPLATIN specifically, and oncology products in general, do not have prescription-level data because physicians do not write prescriptions for these products. The Company believes therapeutic category share information provided by third parties for these products may not be reliable and accordingly, none is presented here.

(e) The therapeutic categories are determined by the Company as those products considered to be in direct competition with the Company’s own products. The products listed above compete in the following therapeutic categories: ABILIFY* (antipsychotics), AVAPRO*/AVALIDE* (angiotensin receptor blockers), CEFZIL (branded oral solid and liquid antibiotics), COUMADIN (warfarin), DOVONEX (anti-inflamatory-antipsoriasis), GLUCOPHAGE* Franchise (oral antidiabetics), PLAVIX* (antiplatelets), PRAVACHOL (HMG CoA reductase inhibitors), REYATAZ (antiretrovirals—third agents), SUSTIVA (antiretrovirals—third agents), TEQUIN (branded oral solid antibiotics), VIDEX/VIDEX EC (nucleoside reverse transcriptase inhibitors) and ZERIT (nucleoside reverse transcriptase inhibitors).

** In excess of 200%.

The Company has historically reported estimated total U.S. prescription growth and estimated therapeutic category share based on NPA data, which IMS makes available to the public on a subscription basis, and a simple average of the estimated number of prescriptions in the retail and mail order channels. For the third quarter, the Company is disclosing estimated total U.S. prescription growth and estimated therapeutic category share based on both NPA and NGPS data. NGPS

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data is collected by IMS under a new, revised methodology and has been released by IMS on a limited basis through a pilot program. IMS has publicly announced it expects to make NGPS data available to the public on a subscription basis in 2007. The Company believes that the NGPS data provided by IMS provides a superior estimate of prescription data for the Company’s products in the retail and mail order channels. The Company has calculated the estimated total U.S. prescription growth and the estimated therapeutic category share based on NGPS data on a weighted average basis to reflect the fact that mail order prescriptions include a greater volume of product supplied compared with retail prescriptions. The Company believes that calculation of the estimated total U.S. prescription growth and the estimated therapeutic category share based on the NGPS data and the weighted average approach with respect to the retail and mail order channels provides a superior estimate of total prescription demand. The Company now uses this methodology for its internal demand forecasts.

The estimated prescription growth data and estimated therapeutic category share provided above only include information from the retail and mail order channels and do not reflect information from other channels, such as hospitals, institutions and long-term care, among others. The data provided by IMS is a product of IMS’s own record-keeping processes and is itself an estimate based on sampling procedures, subject to the inherent limitations of estimates based on sampling. In addition, the NGPS data is part of a pilot program which is still being refined by IMS.

The Company continuously seeks to improve the quality of its estimates of prescription growth amounts and the estimated therapeutic category share percentages through review of its methodologies and processes for calculation of these estimates and review and analysis of its own and third parties’ data used in such calculations. The Company expects that it will continue to review and refine its methodologies and processes for calculation of these estimates and will continue to review and analyze its own and third parties’ data used in such calculations.

The following table sets forth for each of the Company’s top 15 pharmaceutical products sold by the Company’s U.S. Pharmaceuticals business (based on 2004 annual net sales), the U.S. Pharmaceuticals net sales of the applicable product for each of the five quarters ended September 30, 2004 through September 30, 2005, and the estimated number of months on hand of the applicable product in the U.S. wholesaler distribution channel as of the end of each of the five quarters.

	September 30, 2005			June 30, 2005				March 31, 2005
	Net Sales (dollar in millions)		Months on Hand	Net Sales (dollar in millions)			Months on Hand	Net Sales (dollar in millions)		Months on Hand
ABILIFY* (total revenue)	$	214	0.9	$	200		0.7	$	161	0.7
AVAPRO*/AVALIDE*		147	0.5		157		0.6		102	0.8
CEFZIL		27	0.7		30		0.8		50	0.7
COUMADIN		49	0.6		42		0.7		42	1.0
DOVONEX		31	0.6		36		0.7		30	0.6
ERBITUX*		106	—		97		—		87	*	*
GLUCOPHAGE* Franchise		38	0.7		44		0.8		39	1.0
PARAPLATIN		9	1.1		(1	)	0.8		15	0.9
PLAVIX*		833	0.4		823		0.6		673	0.8
PRAVACHOL		297	0.5		353		0.7		258	0.8
REYATAZ		105	0.6		98		0.8		92	0.8
SUSTIVA		101	0.6		97		0.8		103	0.8
TEQUIN		21	0.9		22		0.8		38	0.7
VIDEX/VIDEX EC		7	1.1		5		1.0		10	1.2
ZERIT		24	0.8		26		0.8		26	0.8

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	December 31, 2004				September 30, 2004
	Net Sales (dollar in millions)			Months on Hand	Net Sales (dollar in millions)		Months on Hand
ABILIFY* (total revenue)	$	170		0.9	$	152	0.6
AVAPRO*/AVALIDE*		154		0.9		148	0.6
CEFZIL		60		1.1		30	0.6
COUMADIN		69		1.0		58	0.9
DOVONEX		40		0.9		34	0.7
ERBITUX*		88		0.2		83	0.2
GLUCOPHAGE* Franchise		48		1.1		39	1.0
PARAPLATIN		(12	)	1.2		145	1.2
PLAVIX*		816		0.9		781	0.6
PRAVACHOL		433		1.0		318	0.6
REYATAZ		99		0.9		75	0.6
SUSTIVA		103		0.8		95	0.7
TEQUIN		39		0.9		31	0.7
VIDEX/VIDEX EC		25		0.9		27	0.6
ZERIT		31		0.9		34	0.7

** Less than 0.1 months on hand.

For all products other than ERBITUX*, the Company determines the above months on hand estimates by dividing the estimated amount of the product in the U.S. wholesaler distribution channel by the estimated amount of out-movement of the product from the U.S. wholesaler distribution channel over a period of thirty-one days, all calculated as described below. Factors that may influence the Company’s estimates include generic competition, seasonality of products, wholesaler purchases in light of increases in wholesaler list prices, new product launches, new warehouse openings by wholesalers and new customer stockings by wholesalers. In addition, such estimates are calculated using data from third parties which data are a product of the third parties’ own record-keeping processes and such third-party data also may reflect estimates.

At December 31, 2004, the estimated value of CEFZIL inventory in the U.S. wholesaler distribution channel exceeded one month on hand by approximately $1.6 million. Prescriptions for CEFZIL, an antibiotic product, are typically higher in the winter months in the U.S. As a result, the Company’s U.S. wholesalers build higher inventories of the product in the fourth quarter to meet that expected higher demand. At March 31, 2005, the Company had worked down U.S. wholesaler inventory levels of CEFZIL to less than one month on hand, and remained at less than one month on hand in subsequent quarters.

At December 31, 2004, the estimated value of GLUCOPHAGE* Franchise products inventory (GLUCOPHAGE* XR, GLUCOPHAGE* IR, GLUCOVANCE* and METAGLIP*) in the U.S. wholesaler distribution channel exceeded one month on hand by approximately $1.6 million. As with all products, the months on hand estimate for the GLUCOPHAGE* Franchise products is an average of months on hand for all stock-keeping units (SKUs) of the product group. The increase in months on hand of the GLUCOPHAGE* Franchise products at the end of the fourth quarter to above one month on hand resulted primarily from the purchase by wholesalers of certain SKUs. After giving effect to these purchases, the increased months on hand for these SKUs were less than one month on hand. However, when the increased months on hand for these SKUs were averaged with all SKUs for the GLUCOPHAGE* Franchise products, the aggregate estimated months on hand exceeded one month. At March 31, 2005, the estimated value of GLUCOPHAGE* Franchise products inventory in the U.S. wholesaler distribution channel had been worked down to approximately one month on hand, and has been worked down to less than one month on hand at June 30 and September 30, 2005.

In October 2004, the U.S. patent for PARAPLATIN (carboplatin) expired, and the product lost exclusivity. The resulting generic competition for PARAPLATIN led to a significant decrease in demand for PARAPLATIN, which in turn led to the months on hand of the product in the U.S. wholesaler distribution channel exceeding one month at September 30, 2004, December 31, 2004 and September 30, 2005. The estimated value of PARAPLATIN inventory in the U.S. wholesaler distribution channel over one month on hand was approximately $6.6 million at September 30, 2004, $6.0 million at December 31, 2004 and $0.7 million at September 30, 2005. The Company plans to continue to monitor PARAPLATIN sales with the intention of working down wholesaler inventory levels to less than one month on hand.

At March 31 and September 30, 2005, the estimated value of VIDEX/VIDEX EC inventory in the U.S. wholesaler distribution channel exceeded one month on hand by approximately $1.1 million and $0.2 million, respectively. As a result of generic competition in the U.S. commencing in the fourth quarter of 2004, demand for VIDEX EC decreased significantly. The Company plans to continue to monitor VIDEX/VIDEX EC sales with the intention of working down wholesaler inventory levels to less than one month on hand.

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The Company maintains inventory management agreements (IMAs) with most of its U.S. pharmaceutical wholesalers which account for nearly 100% of total gross sales of U.S. pharmaceutical products. Under the current terms of the IMAs, the Company’s three largest wholesaler customers provide the Company with weekly information with respect to inventory levels of product on hand and the amount of out-movement of products. These three wholesalers currently account for over 90% of total gross sales of U.S. pharmaceutical products. The inventory information received from these wholesalers excludes inventory held by intermediaries to whom they sell, such as retailers and hospitals, and excludes goods in transit to such wholesalers. The Company uses the information provided by these three wholesalers as of the Friday closest to quarter end to calculate the amount of inventory on hand for these wholesalers at the applicable quarter end. This amount is then increased by the Company’s estimate of goods in transit to these wholesalers as of the applicable Friday which have not been reflected in the weekly data provided by the wholesalers. Under the Company’s revenue recognition policy, sales are recorded when substantially all the risks and rewards of ownership are transferred, which in the U.S. Pharmaceutical business is generally when product is shipped. In such cases, goods in transit to a wholesaler are owned by the applicable wholesaler and, accordingly, are reflected in the calculation of inventories in the wholesaler distribution channel. The Company estimates the amount of goods in transit by using information provided by these wholesalers with respect to their open orders as of the applicable Friday and the Company’s records of sales to these wholesalers with respect to such open orders. The Company determines the out-movement of a product from these wholesalers over a period of thirty-one days by using the most recent four weeks of out-movement of a product as provided by these wholesalers and extrapolating such amount to a thirty-one day basis. The Company estimates inventory levels on hand and out-movements for its U.S. Pharmaceutical business’s wholesaler customers other than the three largest wholesalers for each product based on the assumption that such amounts bear the same relationship to the three largest wholesalers’ inventory levels and out-movements for such product as the percentage of aggregate sales for all products to these other wholesalers in the applicable quarter bears to aggregate sales for all products to the Company’s three largest wholesalers in such quarter. Finally, the Company considers whether any adjustments are necessary to these extrapolated amounts based on such factors as historical sales of individual products made to such other wholesalers and third-party market research data related to prescription trends and patient demand. In addition, the Company receives inventory information from these other wholesalers on a selective basis for certain key products.

The Company’s U.S. pharmaceuticals business, through the IMAs discussed above, has arrangements with substantially all of its direct wholesaler customers that allow the Company to monitor U.S. wholesaler inventory levels and require those wholesalers to maintain inventory levels at approximately one month or less of their demand. In the third quarter of 2005, the Company negotiated amendments to its IMAs with its three largest wholesalers. The amendments extended the original agreements through December 31, 2005 and established lower limits than the original agreements for inventory levels of Company pharmaceutical products held by the wholesalers. The Company is in discussions to extend the agreements for periods beyond 2005.

To help maintain the product quality of the Company’s biologic oncology product, ERBITUX*, the product is shipped only to end-users and not to other intermediaries (such as wholesalers) to hold for later sales. During 2004 and through May 2005, one of the Company’s wholesalers provided warehousing, packing and shipping services for ERBITUX*. Such wholesaler held ERBITUX* inventory on consignment and, under the Company’s revenue recognition policy, the Company recognized revenue when such inventory was shipped by the wholesaler to the end-user. The above estimates of months on hand for the three months ended March 31, 2005, were calculated by dividing the inventories of ERBITUX* held by the wholesaler for its own account as reported by the wholesaler as of the end of the quarter by the Company’s net sales for the last calendar month of the quarter. The inventory levels reported by the wholesaler are a product of the wholesaler’s own record-keeping process. Upon the divestiture of OTN in May 2005, the Company discontinued the consignment arrangement with the wholesaler and thereafter did not have ERBITUX* consignment inventory. Following the divestiture, the Company sells ERBITUX* to intermediaries (such as specialty oncology distributors) and ships ERBITUX* directly to the end users of the product who are the customers of those intermediaries. The Company recognizes revenue upon such shipment consistent with its revenue recognition policy. Accordingly, subsequent to June 30, 2005, there was no ERBITUX* inventory held by wholesalers.

As previously disclosed, for the Company’s pharmaceuticals business outside of the United States, nutritionals and related healthcare business units around the world, the Company has significantly more direct customers, limited information on direct customer product level inventory and corresponding out movement information and the reliability of third party demand information, where available, varies widely. Accordingly, the Company relies on a variety of methods to estimate direct customer product level inventory and to calculate months on hand for these business units. As such, the information required to estimate months on hand in the direct customer distribution channel for non-U.S. Pharmaceuticals business for the quarter ended September 30, 2005 is not available prior to the filing of this quarterly report on Form 10-Q. The Company will disclose this information on its website approximately 60 days after the end of the quarter and in the Company’s Form 10-K for the period ending December 31, 2005.

The following table, which was posted on the Company’s website and furnished on Form 8-K, sets forth for each of the Company’s key products sold by the reporting segments listed below, the net sales of the applicable product for the three months ended June 30, 2005 and March 31, 2005 and the estimated number of months on hand of the applicable product in the direct customer distribution channel for the reporting segment as of June 30, 2005 and March 31, 2005. The estimates of months on hand for key products described below

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for the International Pharmaceuticals reporting segment are based on data collected for all of the Company’s significant business units outside of the United States. Also described further below is information on non-key product(s) where the amount of inventory on hand at direct customers is more than approximately one month and the impact is not de minimis. For the other reporting segments, estimates are based on data collected for the United States and all significant business units outside of the United States.

	Three Months Ended June 30, 2005			Three Months Ended March 31, 2005
	Net Sales (dollars in millions)		Months on Hand	Net Sales (dollars in millions)		Months on Hand
International Pharmaceuticals
ABILIFY* (total revenue)	$	40	0.6	$	27	0.6
AVAPRO*/AVALIDE*		101	0.4		94	0.4
BUFFERIN		32	1.0		26	0.5
CAPOTEN		42	0.8		42	0.8
DAFALGAN		33	0.8		40	1.3
EFFERALGAN		55	0.5		88	0.9
MAXIPIME		52	0.8		46	0.7
MONOPRIL		52	0.7		56	0.6
PARAPLATIN		34	0.6		29	0.6
PERFALGAN		42	0.6		42	0.5
PLAVIX*		145	0.5		141	0.7
PRAVACHOL		272	0.7		262	0.7
REYATAZ		85	0.8		57	0.6
SUSTIVA		70	0.6		70	0.5
TAXOL®		182	0.5		201	0.5
VIDEX/VIDEX EC		38	0.9		39	0.8
ZERIT		33	0.6		33	0.6
Nutritionals
ENFAMIL		250	0.9		235	0.9
NUTRAMIGEN		47	1.0		44	1.0
Related Healthcare
ConvaTec
Ostomy		139	0.9		127	0.9
Wound Therapeutics		103	0.8		97	0.8
Medical Imaging
CARDIOLITE		108	0.7		102	0.7
Consumer Medicines
EXCEDRIN		39	1.5		38	1.6

The above months on hand information represents the Company’s estimates of aggregate product level inventory on hand at direct customers as of June 30, 2005 and March 31, 2005 divided by the expected demand for the applicable product. Expected demand is the estimated ultimate patient/consumer demand calculated based on estimated end-user consumption or direct customer outmovement data over the most recent thirty-one day period or other reasonable period. Factors that may affect the Company’s estimates include generic competition, seasonality of products, direct customer purchases in light of price increases, new product launches, new warehouse openings by direct customers, new customer stockings by direct customers and expected direct customer purchases for governmental bidding situations.

The Company relies on a variety of methods to calculate months on hand for these reporting segments. Where available, the Company relies on information provided by third parties to determine estimates of aggregate product level inventory on hand at direct customers and expected demand. For the reporting segments listed above, however, the Company has limited information on direct customer product level inventory, end-user consumption and direct customer outmovement data. Further, the quality of third party information, where available, varies widely. In some circumstances, such as the case with new products or seasonal products, such historical end-user consumption or outmovement information may not be available or applicable. In such cases, the Company uses estimated prospective demand. In cases where direct customer product level inventory, ultimate patient/consumer demand or outmovement data do not exist or are otherwise not available, the Company has developed a variety of other methodologies to calculate estimates of such data, including using such factors as historical sales made to direct customers and third party market research data related to prescription trends and end-user demand.

As of March 31, 2005, DAFALGAN, a non-key analgesic product sold principally in Europe, had net sales of $40 million and approximately 1.3 months, or $16 million, of inventory on hand at direct customers. The level of inventory on hand is due primarily to private pharmacists purchasing DAFALGAN approximately once every eight weeks, which has been worked down to less than one month on hand at June 30, 2005.

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As of June 30, 2005 and March 31, 2005, Excedrin, an analgesic product sold principally in the U.S., had approximately 1.5 months and 1.6 months, respectively, of inventory on hand at direct customers. The level of inventory on hand is due to the customary practice of direct customers holding within their warehouses and stores one and one-half to two months of product on hand. EXCEDRIN was included in the third quarter 2005 sale of the Company’s Consumer Medicines business.

The Company continuously seeks to improve the quality of its estimates of months on hand of inventories held by its direct customers including thorough review of its methodologies and processes for calculation of these estimates and review and analysis of its own and third parties’ data used in such calculations. The Company expects that it will continue to review and refine its methodologies and processes for calculation of these estimates and will continue to review and analyze its own and third parties’ data in such calculations. The Company also has and will continue to take steps to expedite the receipt and processing of data for the non-U.S. Pharmaceuticals business.

Nutritionals

The composition of the net increase in nutritional sales is as follows:

Three Months Ended September 30,		Analysis of % Change
	Total Change	Volume	Price	Foreign Exchange
2005 vs. 2004	13%	10%	1%	2%

Key Nutritional product lines and their sales, representing 94% of total Nutritional sales in the third quarter of both 2005 and 2004, are as follows:

	Three Months Ended September 30,
	2005		2004		% Change
	(dollars in millions)
Infant Formulas	$	373	$	339	10	%
ENFAMIL		230		203	13	%
Toddler/Children’s Nutritionals		140		116	21	%

Worldwide Nutritional sales increased 13%, including a 2% favorable foreign exchange impact, to $547 million in 2005 from $484 million in 2004.

International Nutritional sales increased 11%, including a 4% favorable foreign exchange impact, to $281 million from $254 million in 2004, primarily due to increased sales in Toddler/Children’s Nutritional products.

Domestic Nutritional sales increased 16% to $266 million in 2005 from $230 million in 2004, primarily due to increased sales in ENFAMIL.

Sales of ENFAMIL, the Company’s best-selling infant formula, increased 13%, including a 1% favorable foreign exchange impact, to $230 million in 2005 from $203 million in 2004, primarily due to strong sales growth in the U.S. and the launch of ENFAMIL GENTLEASE LIPIL infant formula in August 2005.

Related Healthcare

The Related Healthcare segment includes ConvaTec, the Medical Imaging business and Consumer Medicines in the United States and Canada. The composition of the net decrease in Related Healthcare segment sales is as follows:

Three Months Ended September 30,		Analysis of % Change
	Total Change	Volume	Price	Foreign Exchange
2005 vs. 2004	(1)%	1%	(2)%	—

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Related Healthcare sales by business and their key products for the three months ended September 30 were as follows:

	Three Months Ended September 30,
	2005		2004		% Change
	(dollars in millions)
ConvaTec	$	250	$	237	5	%
Ostomy		139		135	3	%
Wound Therapeutics		104		99	5	%
Medical Imaging		150		145	3	%
CARDIOLITE		106		101	5	%
Consumer Medicines		42		64	(34	)%

• ConvaTec sales increased 5%, including a 1% favorable foreign exchange impact to $250 million in 2005 compared to $237 million in 2004, primarily due to the increase in worldwide sales of wound therapeutic and ostomy products. Sales of wound therapeutic products increased 5%, including a 1% favorable foreign exchange impact, to $104 million in 2005 from $99 million in 2004, primarily due to increased sales of AQUACEL^®. Ostomy sales increased 3%, including a 1% favorable foreign exchange impact, to $139 million in 2005 from $135 million in 2004, primarily due to the introduction of new products.

• Medical Imaging sales increased 3% to $150 million in 2005 compared to $145 million in 2004. Sales of CARDIOLITE increased 5% to $106 million in 2005 from $101 million in 2004, primarily due to increased demand.

• Consumer Medicines sales decreased 34% to $42 million in 2005 from $64 million in 2004. During the third quarter of 2005, the Company completed the sale of the U.S. and Canadian Consumer Medicines business and related assets. For additional information, see “Item 1. Financial Statements — Note 4. Acquisitions and Divestitures.”

Geographic Areas

In general, the Company’s products are available in most countries in the world. The largest markets are in the United States, France, Japan, Spain, Italy, Germany, Canada, and the UK. The Company’s sales by geographic areas were as follows:

	Three Months Ended September 30,
	2005			2004			% Change
	(dollars in millions)
United States	$	2,638		$	2,633		—
% of Total		55	%		55	%
Europe, Middle East and Africa		1,222			1,346		(9	)%
% of Total		26	%		28	%
Other Western Hemisphere		392			342		15	%
% of Total		8	%		7	%
Pacific		515			457		13	%
% of Total		11	%		10	%
Total	$	4,767		$	4,778		—

Sales in the United States remained constant in 2005, with decreased sales in PARAPLATIN due to generic competition that began at the end of 2004, being offset by increased sales of growth drivers including PLAVIX*, ABILIFY*, REYATAZ and ERBITUX*.

Sales in Europe, Middle East and Africa decreased 9% as a result of sales decline of TAXOL^® and PRAVACHOL from exclusivity losses. This decrease in sales was partially offset by increased sales in major European markets of ABILIFY* and REYATAZ, which were both launched in Europe in the second quarter of 2004.

Sales in the Other Western Hemisphere countries increased 15%, including a 11% favorable foreign exchange impact, primarily due to increased sales of PLAVIX* across all markets, and REYATAZ in Brazil and Canada.

Sales in the Pacific region increased 13%, including a 2% favorable foreign exchange impact, as a result of increased sales of TAXOL^® in Japan, and ENFAGROW in China, Malaysia and Vietnam.

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Expenses

	Three Months Ended September 30,
	2005			2004			% Change
	(dollars in millions)
Cost of products sold	$	1,483		$	1,467		1	%
% of net sales		31.1	%		30.7	%
Marketing, selling and administrative	$	1,286		$	1,199		7	%
% of net sales		27.0	%		25.1	%
Advertising and product promotion	$	349		$	325		7	%
% of net sales		7.3	%		6.8	%
Research and development	$	669		$	615		9	%
% of net sales		14.0	%		12.9	%
Acquired in-process and development	$	—		$	1		(100	)%
% of net sales		—			—
Provision for restructuring, net	$	(5	)	$	57		(109	)%
% of net sales		(0.1	)%		1.2	%
Litigation (income)/charges, net	$	(26	)	$	25		*	*
% of net sales		(0.5	)%		0.5	%
Gain on sale of business	$	(569	)	$	(3	)	*	*
% of net sales		(11.9	)%		(0.1	)%
Equity in net income of affiliates	$	(84	)	$	(70	)	(20	)%
% of net sales		(1.8	)%		(1.5	)%
Other expense, net	$	38		$	16		138	%
% of net sales		0.8	%		0.4	%
Total Expenses, net	$	3,141		$	3,632		(14	)%
% of net sales		65.9	%		76.0	%

** In excess of 200%.

• Cost of products sold, as a percentage of sales, increased to 31.1% in the third quarter of 2005 compared with 30.7% in the third quarter of 2004, primarily due to the unfavorable impact of pharmaceutical sales mix, partially offset by sales growth of ABILIFY*, REYATAZ and PLAVIX*.

• Marketing, selling and administrative expenses, as a percentage of sales, were 27.0% in the third quarter of 2005 and 25.1% in the third quarter of 2004. In 2005, marketing, selling and administrative expenses increased 7% to $1,286 million from 2004, primarily due to higher legal costs, higher pension expenses reflecting increased amortization of unrecognized net losses as well as changes in actuarial assumptions, and increased expenditures on late-stage compounds.

• Advertising and product promotion expenditures increased 7% to $349 million in 2005 from 2004, primarily for increased investments behind PLAVIX* and the launch of BARACLUDE™, in addition to increased costs associated with pre-launch activities.

• The Company’s investment in research and development totaled $669 million in the third quarter of 2005, an increase of 9% over 2004, and as a percentage of sales were 14.0% in the third quarter of 2005 compared with 12.9% in the third quarter of 2004. The increase in research and development expenses reflects continued investments in late-stage compounds. In 2005, investment in pharmaceutical research and development equaled 16.3% of Pharmaceuticals sales compared to 14.7% in 2004.

• Acquired in-process research and development of $1 million in 2004 is related to the acquisition of Acordis. For additional information on the acquisition, see “Item 1. Financial Statements—Note 4. Acquisitions and Divestitures.”

• Restructuring programs have been implemented to downsize, realign and streamline operations in order to increase productivity, reduce operating expenses and to rationalize the Company’s manufacturing network, research facilities, and the sales and marketing organizations. Actions under the third quarter 2005 restructuring program are expected to be complete by late 2005, while actions under the third quarter 2004 restructuring program are substantially completed. As a result of these actions, the Company expects the future annual benefit to earnings from continuing operations before minority interest and income taxes to be approximately $1 million and $125 million for the third quarter 2005 and 2004 programs, respectively. For additional information on restructuring, see “Item 1. Financial Statements—Note 3. Restructuring.”

46

• In the third quarter of 2005, the Company recorded litigation insurance recovery of $26 million in aggregate as a result of agreements to settle coverage disputes primarily related to product liability with its various insurers. In the third quarter of 2004, the Company recorded litigation charges of $25 million, related to anti-trust litigation regarding PLATINOL. For additional information on litigation charges, see “Item 1. Financial Statements — Note 17. Legal Proceedings and Contingencies — Other Securities Matters.”

• The gain on sale of business of $569 million ($370 million net of tax) in the third quarter of 2005 is related to sale of the U.S. and Canadian Consumer Medicines business and related assets. The gain on sale of business of $3 million in 2004 is related to the sale of the Mead Johnson Adult Nutritional business. For additional information on these sales, see “Item 1. Financial Statements — Note 4. Acquisitions and Divestitures.”

• Equity in net income of affiliates for the third quarter of 2005 was $84 million, compared with $70 million in the third quarter of 2004. Equity in net income of affiliates is principally related to the Company’s joint venture with Sanofi and investment in ImClone. The $14 million increase in equity in net income of affiliates primarily reflects the increase in net income in the Sanofi joint venture. For additional information on equity in net income of affiliates, see “Item 1. Financial Statements — Note 2. Alliances and Investments.”

• Other expenses, net of income, were $38 million and $16 million in the third quarters of 2005 and 2004, respectively. Other expenses include net interest expense, foreign exchange gains and losses, income from third-party contract manufacturing and royalty income and litigation matters. The $22 million increase in other expenses in 2005 was primarily due to net foreign exchange gains recognized in 2004. For additional information, see “Item 1. Financial Statements — Note 7. Other (Income) / Expense, Net.”

During the quarters ended September 30, 2005 and 2004, the Company recorded several (income)/expense items that affected the comparability of results of the periods presented herein, which are set forth in the following table.

Three Months Ended September 30, 2005

	Cost of products sold		Gain on sale of business			Provision for restructuring and other items, net			Litigation settlement income			Other expense, net		Total
	(dollars in millions)
Litigation Matters:
Insurance recoveries	$	—	$	—		$	—		$	(26	)	$	—	$	(26	)
Other:
Gain on sale of Consumer Medicines business		—		(569	)		—			—			—		(569	)
Loss on sale of fixed assets		—		—			—			—			1		1
Accelerated depreciation and asset impairment		35		—			—			—			—		35
Downsizing and streamlining of worldwide operations		—		—			(5	)		—			—		(5	)
	$	35	$	(569	)	$	(5	)	$	(26	)	$	1		(564	)
Income taxes on items above															202
Increase to Net Earnings from Continuing Operations														$	(362	)

47

Three Months Ended September 30, 2004

	Cost of products sold		Research and development		Acquired in-process research and development		Gain on sale of business			Provision for restructuring and other items, net		Litigation settlement expense		Other expense, net		Total
	(dollars in millions)
Litigation Matters:
Product liability	$	—	$	—	$	—	$	—		$	—	$	—	$	11	$	11
Anti-trust litigation		—		—		—		—			—		25		—		25
		—		—		—		—			—		25		11		36
Other:
Gain on sale of Adult Nutritional business		—		—		—		(3	)		—		—		—		(3	)
Accelerated depreciation		47		1		—		—			—		—		—		48
Downsizing and streamlining of worldwide operations		—		—		—		—			57		—		—		57
Milestone payment		—		10		—		—			—		—		—		10
Acordis IPR&D write-off		—		—		1		—			—		—		—		1
	$	47	$	11	$	1	$	(3	)	$	57	$	25	$	11		149
Income taxes on items above																	(39	)
Reduction to Net Earnings from Continuing Operations																$	110

Earnings Before Minority Interest and Income Taxes

	Earnings From Continuing Operations Before Minority Interest and Income Taxes
	Three Months Ended September 30,
	2005		2004			% Change
	(dollars in millions)
Pharmaceuticals	$	915	$	1,127		(19	)%
Nutritionals		150		126		19	%
Related Healthcare		125		131		(5	)%
Total segments		1,190		1,384		(14	)%
Corporate/Other		436		(238	)	*	*
Total	$	1,626	$	1,146		42	%

** in excess of 200%.

In the third quarter of 2005, earnings from continuing operations before minority interest and income taxes increased 42% to $1,626 million from $1,146 million in the third quarter of 2004. The $480 million increase was primarily driven by the gain on sale of the U.S. and Canadian Consumer Medicines business and related assets.

Pharmaceutical

Earnings before minority interest and income taxes decreased to $915 million in the third quarter of 2005 from $1,127 million in the third quarter of 2004 primarily due to lower sales and gross margin erosion as a result of an unfavorable shift in the sales mix, investments in research and development, legal costs and marketing expenditures on late-stage compounds.

Nutritional

Earnings before minority interest and income taxes increased to $150 million in the third quarter of 2005 from $126 million in the third quarter of 2004, primarily from sales growth of both infant and children’s nutritional products.

Related Healthcare

Earnings before minority interest and income taxes in the Related Healthcare segment decreased to $125 million in the third quarter of 2005 from $131 million in the third quarter of 2004, primarily due to the sale of the U.S. and Canadian Consumer Medicines business and related assets.

48

Income Taxes

The effective income tax rate on earnings from continuing operations before minority interest and income taxes was 31.2% in the third quarter of 2005 compared with 20.9% in the third quarter of 2004. The higher effective tax rate for the three months ended September 30, 2005 was due primarily to a higher concentration of pre-tax earnings in the U.S. and Canada attributable to the sale of the Consumer Medicines business and related assets, and lower foreign tax credits. In the third quarter of 2005, as a result of the sale of the Consumer Medicines business and other changes in assumptions regarding future taxable profits, the Company recorded a net benefit of approximately $3 million in its tax provision associated with the reduction of its valuation allowance on certain deferred tax assets.

Net Earnings

Net earnings from continuing operations increased 28% in the third quarter of 2005 to $964 million from $755 million in the third quarter of 2004. In the third quarter of 2005, basic earnings per share from continuing operations increased 26% to $0.49 from $0.39 in the third quarter of 2004, while diluted earnings per share from continuing operations increased 29% to $0.49 from $0.38 in 2004.

Nine Months Results of Operations

	Nine Months Ended September 30,
	2005			2004			% Change
	(dollars in millions)
Net Sales	$	14,188		$	14,223		—
Earnings from continuing operations before minority interest and income tax		3,684			3,379		9	%
% of net sales		26.0	%		23.8	%
Provision on income taxes		754			753		—
Effective tax rate		20.5	%		22.3	%
Earnings from continuing operations		2,493			2,239		11	%
% of net sales		17.6	%		15.7	%

Except as noted below, the factors affecting the third quarter comparisons all affected the nine month comparisons.

Net sales from continuing operations for the first nine months of 2005 remained constant at $14,188 million from $14,223 million in 2004. U.S. sales decreased 2% to $7,616 million in 2005 from $7,803 million in 2004, while international sales increased 2%, including a 3% favorable foreign exchange impact, to $6,572 million in 2005 from $6,420 million in 2004.

The composition of the net (decrease)/increase in sales is as follows:

Nine Months Ended September 30,		Analysis of % Change
	Total Change	Volume	Price	Foreign Exchange
2005 vs. 2004	—	(2)%	—	2%

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The percent of the Company’s net sales by segment were as follows:

	Net Sales
	Nine Months Ended September 30,
	2005			2004			% Change
	(dollars in millions)
Pharmaceuticals	$	11,242		$	11,414		(2	)%
% of net sales		79.2	%		80.3	%
Nutritionals		1,621			1,496		8	%
% of net sales		11.4	%		10.5	%
Related Healthcare		1,325			1,313		1	%
% of net sales		9.4	%		9.2	%
Total	$	14,188		$	14,223		—

The following table sets forth the reconciliation of the Company’s gross sales to net sales by each significant category of gross-to-net sales adjustments:

	Nine Months Ended September 30,
	2005			2004
	(dollars in millions)
Gross Sales	$	17,103		$	17,561
Gross-to-Net Sales Adjustments
Prime Vendor Charge-Backs		(863	)		(958	)
Women, Infants and Children (WIC) Rebates		(630	)		(634	)
Managed Healthcare Rebates and Other Contract Discounts		(409	)		(524	)
Medicaid Rebates		(464	)		(469	)
Cash Discounts		(202	)		(233	)
Sales Returns		(130	)		(220	)
Other Adjustments		(217	)		(300	)
Total Gross-to-Net Sales Adjustments		(2,915	)		(3,338	)
Net Sales	$	14,188		$	14,223

The decrease in prime vendor charge-backs in 2005 was primarily due to lower relative sales volume in this segment due to product mix. The decrease in managed healthcare rebates was primarily attributable to lower sales volume through managed healthcare companies. The decrease in sales returns was primarily due to lower returns for certain products including TEQUIN, PRAVACHOL and SUSTIVA. The decrease in other adjustments was due to lower sales discounts in the international businesses and lower rebates to foreign governments.

50

The following table sets forth the activities and ending balances of each significant category of gross-to-net sales adjustments:

	Prime Vendor Charge- Backs			Women, Infants and Children (WIC) Rebates			Managed Healthcare Rebates and Other Contract Discounts			Medicaid Rebates			Cash Discounts			Sales Returns			Other Adjustments			Total
	(dollars in millions)
Balance at December 31, 2003	$	101		$	208		$	249		$	233		$	30		$	268		$	124		$	1,213
Provision related to sales made in current period		1,314			843			646			618			311			270			463			4,465
Provision related to sales made in prior periods		5			3			14			55			—			6			(32	)		51
Returns and payments		(1,314	)		(820	)		(711	)		(534	)		(308	)		(316	)		(385	)		(4,388	)
Impact of foreign currency translation		—			—			—			—			—			1			6			7
Balance at December 31, 2004		106			234			198			372			33			229			176			1,348
Provision related to sales made in current period		868			630			403			428			202			149			248			2,928
Provision related to sales made in prior periods		(5	)		—			6			36			—			(19	)		(31	)		(13	)
Returns and payments		(871	)		(638	)		(425	)		(505	)		(209	)		(159	)		(290	)		(3,097	)
Impact of foreign currency translation		—			—			(3	)		—			—			(2	)		—			(5	)
Balance at September 30, 2005	$	98		$	226		$	179		$	331		$	26		$	198		$	103		$	1,161

In the first nine months of 2005, the Company recorded gross-to-net sales adjusting charges and credits related to sales made in prior periods. The significant items included charges of $36 million for Medicaid rebates primarily as a result of higher than expected Medicaid utilization of various products; charges of $6 million for managed care rebates due to changes in estimates of managed care claims; credits of $5 million for prime vendor charge-backs primarily resulting from a resolution of intermediary pricing discrepancies impacting the Company’s oncology business, partially offset by charges for other adjustments; credits of $19 million for sales returns resulting from lower returns for certain products; and credits of $31 million for other adjustments primarily as a result of lower than expected rebates to foreign governments. No other significant revisions were made to the estimates for gross-to-net sales adjustments in 2005.

Pharmaceuticals

The composition of the net decrease in pharmaceutical sales is as follows:

Nine Months Ended September 30,	Total Change	Analysis of % Change
		Volume	Price	Foreign Exchange
2005 vs. 2004	(2)%	(3)%	(1)%	2%

For the nine months ended September 30, 2005, worldwide Pharmaceuticals sales decreased 2% to $11,242 million. Domestic pharmaceutical sales decreased 4% to $5,956 million from $6,191 million in 2004, while international pharmaceutical sales increased 1%, including a 3% favorable foreign exchange impact to $5,286 million in the first nine months of 2005 from $5,223 million in 2004.

51

Key pharmaceutical products and their sales, representing 80% of total pharmaceutical sales in the first nine months of both 2005 and 2004, respectively, are as follows:

	Nine Months Ended September 30,
	2005		2004		% Change
	(dollars in millions)
Cardiovascular
PLAVIX*	$	2,762	$	2,368	17	%
PRAVACHOL		1,672		1,925	(13	)%
AVAPRO*/AVALIDE*		705		671	5	%
MONOPRIL		162		206	(21	)%
COUMADIN		156		179	(13	)%
Virology
SUSTIVA		510		449	14	%
REYATAZ		508		266	91	%
ZERIT		169		205	(18	)%
VIDEX/VIDEX EC		133		207	(36	)%
Infectious Diseases
CEFZIL		184		181	2	%
BARACLUDE™		7		—	—
Oncology
TAXOL®		566		735	(23	)%
ERBITUX*		292		173	69	%
PARAPLATIN		119		646	(82	)%
Affective (Psychiatric) Disorders
ABILIFY* (total revenue)		688		402	71	%
Metabolics
GLUCOPHAGE Franchise		137		283	(52	)%
Other Pharmaceuticals
EFFERALGAN		209		198	6	%

• Sales of PLAVIX* increased 17%, including a 1% favorable foreign exchange impact, to $2,762 million from $2,368 million in 2004. Domestic sales increased 15% to $2,329 million from $2,017 million in 2004, primarily due to continued estimated prescription growth of approximately 14% in the U.S. market.

• Sales of PRAVACHOL decreased 13%, including a 1% favorable foreign exchange impact, to $1,672 million from $1,925 million in 2004. Domestic sales decreased 8% to $908 million in 2005. Estimated U.S. prescriptions decreased approximately 16%. International sales decreased 19%, including a 3% favorable foreign exchange impact, to $764 million.

• Sales of AVAPRO*/AVALIDE* increased 5%, including a 2% favorable foreign exchange impact, to $705 million from $671 million in 2004. Domestic sales were $406 million in 2005 compared with $408 million in 2004, while international sales increased 14%, including a 5% favorable foreign exchange impact, to $299 million from $263 million in 2004 primarily due to increased sales in Canada, Germany, Australia and France.

• Sales of MONOPRIL decreased 21%, including a 3% favorable foreign exchange impact, to $162 million.

• Sales of COUMADIN decreased 13%, including a 1% favorable foreign exchange impact, to $156 million in 2005 compared to $179 million in 2004.

• Sales of SUSTIVA increased 14%, including a 2% favorable foreign exchange impact, to $510 million in 2005 from $449 million in 2004, primarily due to estimated U.S. prescription growth of approximately 5%, higher average selling prices and lower sales returns.

• Sales of REYATAZ were $508 million in 2005 compared to $266 million in 2004. Sales in Europe continued to grow since its introduction in the second quarter of 2004, achieving sales of $148 million in the first nine months of 2005.

• Sales of ZERIT decreased 18%, including a 2% favorable foreign exchange impact, to $169 million in 2005 from $205 million in 2004, as a result of a decrease in estimated U.S. prescriptions of approximately 31% compared to 2004.

52

• Sales of VIDEX/VIDEX EC decreased 36%, including a 2% favorable foreign exchange impact, to $133 million in 2005 from $207 million in 2004.

• Sales of CEFZIL increased 2%, including a 2% favorable foreign exchange impact, to $184 million in 2005 from $181 million in 2004.

• BARACLUDE™ generated sales of $7 million since its launch in the U.S. in April 2005.

• Sales of TAXOL^® were $566 million in 2005, a decrease of 23% including a 2% favorable foreign exchange impact, compared to $735 million in 2004.

• Sales of ERBITUX* were $292 million in 2005 compared to $173 million in 2004 after its introduction in February 2004.

• Sales of PARAPLATIN decreased 82% to $119 million in 2005 from $646 million in 2004. Domestic sales decreased 96% to $23 million in 2005 from $549 million in 2004.

• Total revenue for ABILIFY* increased 71%, including a 1% favorable foreign exchange impact, to $688 million in 2005 from $402 million in 2004. Estimated U.S. prescription demand increased approximately 46% compared to 2004. Total revenue for ABILIFY* in Europe has continued to grow since its launch, to $98 million in the first nine months of 2005.

• GLUCOPHAGE* franchise sales decreased 52% to $137 million in 2005, compared to $283 million in 2004, primarily resulting from increased generic competition.

• Sales of EFFERALGAN increased 6%, including a 4% favorable foreign exchange impact, to $209 million in 2005 from $198 million in 2004.

The estimated prescription and prescription growth data provided above includes information only from the retail and mail order channels and do not reflect information from other channels, such as hospitals, institutions and long-term care, among others. The estimated prescription and prescription growth data are based on NPA data provided by IMS.

53

The following table sets forth for each of the Company’s top 15 pharmaceutical products sold by the U.S. Pharmaceuticals business (based on 2004 annual net sales), for the nine months ended September 30, 2005 and 2004 compared to the same periods in the prior year: (a) changes in reported U.S. net sales for the period; (b) estimated total U.S. prescription growth for the retail and mail order channels calculated by the Company based on NPA data provided by IMS, a supplier of market research for the pharmaceutical industry; and (c) estimated total U.S. prescription growth for the retail and mail order channels calculated by the Company based on NGPS provided by IMS.

	Nine Months Ended September 30,
	2005						2004
	% Change in U.S. Net Sales(a)		% Change in U.S. Total Prescriptions				% Change in U.S. Net Sales(a)		% Change in U.S. Total Prescriptions
			NPA Data (b)		NGPS Data (c)				NPA Data (b)		NGPS Data (c)
ABILIFY* (total revenue)	50		46		44		91		127		127
AVAPRO*/AVALIDE*	—		13		14		26		16		18
CEFZIL	6		(9	)	(9	)	(30	)	(28	)	(27	)
COUMADIN	(16	)	(18	)	(18	)	(31	)	(18	)	(23	)
DOVONEX	(3	)	(6	)	(7	)	14		(8	)	(7	)
ERBITUX* (d)	69		N/A		N/A		—		N/A		N/A
GLUCOPHAGE* Franchise	(55	)	(66	)	(65	)	(62	)	(55	)	(56	)
PARAPLATIN (d)	(96	)	N/A		N/A		(9	)	N/A		N/A
PLAVIX*	15		14		14		44		26		29
PRAVACHOL	(8	)	(16	)	(16	)	(18	)	(8	)	(8	)
REYATAZ	43		44		42		*	*	*	*	*	*
SUSTIVA	15		5		8		4		5		12
TEQUIN	(5	)	(30	)	(28	)	(26	)	(18	)	(17	)
VIDEX/VIDEX EC	(73	)	(62	)	(62	)	(1	)	(1	)	5
ZERIT	(14	)	(31	)	(29	)	(37	)	(29	)	(27	)

(a) Reflects percentage change in net sales in dollar terms, including change in average selling prices and wholesaler buying patterns.

(b) Based on a simple average of the estimated number of prescriptions in the retail and mail order channels as provided by IMS.

(c) Based on a weighted average of the estimated number of prescription units (pills) in each of the retail and mail order channels based on data provided by IMS.

(d) ERBITUX* and PARAPLATIN specifically, and oncology products in general, do not have prescription-level data because physicians do not write prescriptions for these products. The Company believes therapeutic category share information provided by third parties for these products may not be reliable and accordingly, none is presented here.

** In excess of 200%.

For an explanation of the data presented above and the calculation of such data. See “—Three Months Results of Operations”.

Nutritionals

The composition of the net increase in nutritional sales is as follows:

Nine Months Ended September 30,	Total Change	Analysis of % Change
		Volume	Price	Foreign Exchange
2005 vs. 2004	8%	5%	2%	1%

Key Nutritional product lines and their sales, representing 95% and 93% of total Nutritional sales in the first nine months of 2005 and 2004, respectively, are as follows:

	Nine Months Ended September 30,
	2005		2004		% Change
	(dollars in millions)
Infant Formulas	$	1,145	$	1,043	10	%
ENFAMIL		715		635	13	%
Toddler/Children’s Nutritionals		390		348	12	%

Worldwide Nutritional sales increased 8%, including a 1% favorable foreign exchange impact and a 2% unfavorable impact from the divestiture of the Adult Nutritional business in 2004, to $1,621 million in 2005 from 2004. International sales increased 10% to $833 million, including a 3% favorable foreign exchange impact and a 1% unfavorable impact from the divestiture of the Adult Nutritional business in 2004. Domestic sales increased 6% to $788 million, including a 4% unfavorable impact from the divestiture of the Adult Nutritional business in 2004.

Sales of ENFAMIL increased 13%, including a 1% favorable foreign exchange impact, to $715 million in 2005 from $635 million in 2004.

Related Healthcare

The composition of the net increase in Related Healthcare segment sales is as follows:

Nine Months Ended September 30,	Total Change	Analysis of % Change
		Volume	Price	Foreign Exchange
2005 vs. 2004	1%	—	(1)%	2%

Related Healthcare sales by business and their key products for the nine months ended September 30 were as follows:

	Nine Months Ended September 30,
	2005		2004		% Change
	(dollars in millions)
ConvaTec	$	725	$	688	5	%
Ostomy		405		399	2	%
Wound Therapeutics		304		280	9	%
Medical Imaging		446		435	3	%
CARDIOLITE		316		298	6	%
Consumer Medicines		154		190	(19	)%

• ConvaTec sales increased 5%, including a 3% favorable foreign exchange impact to $725 million in 2005 from $688 million in 2004. Sales of wound therapeutic products increased 9%, including a 2% favorable foreign exchange impact, to $304 million in 2005 from $280 million in 2004, while ostomy sales increased 2%, including a 3% favorable foreign exchange impact, to $405 million in 2005 from $399 million in 2004.

54

• Medical Imaging sales increased 3%, including a 1% favorable foreign exchange impact to $446 million in 2005 from $435 million in 2004. Sales of CARDIOLITE increased 6% to $316 million in 2005 from $298 million in 2004.

• Consumer Medicines sales decreased 19% to $154 million from $190 million in 2004.

Geographic Areas

The Company’s sales by geographic areas were as follows:

	Nine Months Ended September 30,
	2005			2004			% Change
	(dollars in millions)
United States	$	7,616		$	7,803		(2	)%
% of Total		54	%		55	%
Europe, Middle East and Africa		3,940			4,021		(2	)%
% of Total		28	%		28	%
Other Western Hemisphere		1,148			1,035		11	%
% of Total		8	%		7	%
Pacific		1,484			1,364		9	%
% of Total		10	%		10	%
Total	$	14,188		$	14,223		—

Sales in the United States decreased 2% in 2005, with lower sales of PARAPLATIN, the GLUCOPHAGE* franchise as a result of generic competition, PRAVACHOL due to increased competition, partially offset by increased sales of growth drivers.

Sales in Europe, Middle East and Africa decreased 2%, including a 3% favorable foreign exchange impact as a result of sales decline in France, Germany, the UK, Italy, partially offset by increased sales in Spain.

Sales in the Other Western Hemisphere countries increased 11%, including a 7% favorable foreign exchange impact, primarily due to increased sales in Latin American countries.

Sales in the Pacific region increased 9%, including a 2% favorable foreign exchange impact, as a result of increased sales in Japan, China and Australia.

55

Expenses

	Nine Months Ended September 30,
	2005			2004			% Change
	(dollars in millions)
Cost of products sold	$	4,333		$	4,324		—
% of net sales		30.5	%		30.4	%
Marketing, selling and administrative	$	3,737		$	3,626		3	%
% of net sales		26.3	%		25.5	%
Advertising and product promotion	$	1,032		$	987		5	%
% of net sales		7.3	%		6.9	%
Research and development	$	1,971		$	1,823		8	%
% of net sales		13.9	%		12.8	%
Acquired in-process research and development	$	—		$	63		(100	)%
% of net sales		—			0.5	%
Provision for restructuring, net	$	—		$	75		(100	)%
% of net sales		—			0.5	%
Litigation (income)/charges, net	$	72		$	404		(82	)%
% of net sales		0.5	%		2.8	%
Gain on sale of business	$	(569	)	$	(316	)	(80	)%
% of net sales		(4.0	)%		(2.2	)%
Equity in net income of affiliates	$	(240	)	$	(204	)	(18	)%
% of net sales		(1.7	)%		(1.4	)%
Other expense, net	$	168		$	62		171	%
% of net sales		1.2	%		0.4	%
Total expenses	$	10,504		$	10,844		(3	)%
% of net sales		74.0	%		76.2	%

• Cost of products sold, as a percentage of sales, increased to 30.5% in the first nine months of 2005 compared with 30.4% in the first nine months of 2004. The increase is primarily due to the unfavorable impact of U.S. Pharmaceutical sales mix in 2005, partially offset by $76 million of net litigation charges recorded 2004.

• Marketing, selling and administrative expenses, as a percentage of sales, were 26.3% in the first nine months of 2005 and 25.5% in the first nine months of 2004.

• Advertising and product promotion expenditures increased 5% to $1,032 million from 2004, primarily due to the launch of BARACLUDE™ and continued investments in growth drivers, partially offset by lower spending on mature products.

• The Company’s investment in research and development totaled $1,971 million in the first nine months of 2005, an increase of 8% over 2004. In 2005, research and development spending dedicated to pharmaceutical products increased to 16.0% of Pharmaceuticals sales compared with 14.7% in 2004.

• Acquired in-process research and development of $63 million in the first nine months of 2004 is related to the acquisition of Acordis. For additional information on the sale, see “Item 1. Financial Statements—Note 4. Acquisitions and Divestitures.”

• Actions under the restructuring program for the first nine months of 2005 are expected to be complete by late 2005, while actions under the restructuring program for the first nine months 2004 are substantially completed. As a result of these actions, the Company expects the future annual benefit to earnings from continuing operations before minority interest and income taxes to be approximately $7 million and $142 million for the two restructuring programs for the first nine months of 2005 and 2004, respectively. For additional information on restructuring, see “Item 1. Financial Statements—Note 3. Restructuring.”

• For the first nine months of 2005, the Company recorded net litigation charges of $72 million, reflecting an increase to the reserves for liabilities related to private litigations and governmental investigations of $373 million, ERISA litigation and

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other matters of $20 million, partially offset by insurance recoveries of $321 million. The $404 million litigation expense recorded in 2004 consisted of $320 million related to private litigation and governmental investigations related to wholesaler inventory issues and accounting matters, $50 million related to the PLATINOL litigation settlement and $34 million related to pharmaceutical pricing and sales and practices. For additional information on litigation charges, see “Item 1. Financial Statements — Note 17. Legal Proceedings and Contingencies.”

• In 2005 the Company recorded a gain of $569 million on the sale of the U.S. and Canadian Consumer Medicines business and related assets. The gain on sale of business of $316 million in 2004 related to the sale of the Mead Johnson Adult Nutritional business. For additional information on these sales, see “Item 1. Financial Statements—Note 4. Acquisitions and Divestitures.”

• Equity in net income of affiliates for the first nine months of 2005 was $240 million, compared with $204 million in the first nine months of 2004. Equity in net income of affiliates is principally related to the Company’s joint venture with Sanofi and investment in ImClone. The $36 million increase in equity in net income of affiliates primarily reflects an increase in net income in the Sanofi joint venture, partially offset by a net loss from the investment in ImClone. For additional information on equity in net income of affiliates, see “Item 1. Financial Statements—Note 2. Alliances and Investments.”

• Other expenses, net of income, were $168 million and $62 million in the first nine months of 2005 and 2004, respectively. Other expenses include net interest expense, foreign exchange gains and losses, income from third-party contract manufacturing, royalty income, gains and losses on disposal of property, plant and equipment, and debt retirement costs. The increase in other expenses in 2005 was primarily due to debt retirement costs in connection with the repurchase of the $2.5 billion Notes due 2006, partially offset by the gain on sale of an equity investment. For additional information on the repurchase of the $2.5 billion Notes, see “Item 1. Financial Statements—Note 13. Short-term Borrowings and Long-term Debt.”

During the nine months ended September 30, 2005 and 2004, the Company recorded several (income)/expense items that affected the comparability of results of the periods presented herein, which are set forth in the following table.

Nine Months Ended September 30, 2005

	Cost of products sold		Research and development		Gain on sale of business			Litigation settlement expense/(income)			Other (income) / expense, net			Total
	(dollars in millions)
Litigation Matters:
Private litigations and governmental investigations	$	—	$	—	$	—		$	373		$	—		$	373
ERISA liability and other matters		—		—		—			20			—			20
Insurance recoveries		—		—		—			(321	)		—			(321	)
		—		—		—			72			—			72
Other:
Gain on sale of equity investment		—		—		—			—			(27	)		(27	)
Loss on sale of fixed assets		—		—		—			—			18			18
Accelerated depreciation and asset impairment		69		2		—			—			—			71
Gain on sale of Consumer Medicines businesses		—		—		(569	)		—			—			(569	)
Upfront and milestone payments		—		35		—			—			—			35
Debt retirement costs		—		—		—			—			69			69
	$	69	$	37	$	(569	)	$	72		$	60			(331	)
Income taxes on items above															178
Adjustment to taxes on repatriation of foreign earnings															(135	)
Increase to Net Earnings from Continuing Operations														$	(288	)

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Nine Months Ended September 30, 2004

	Cost of products sold			Research and development		Acquired in- process research and development		Gain on sale of business			Provision for restructuring and other items, net		Litigation settlement expense		Other expense, net		Total
	(dollars in millions)
Litigation Matters:
Private litigation and governmental investigations	$	—		$	—	$	—	$	—		$	—	$	320	$	—	$	320
Product liability		75			—		—		—			—		—		11		86
Pharmaceutical pricing and sales litigation		—			—		—		—			—		34		—		34
Commercial litigation		26			—		—		—			—		—		—		26
Anti-trust litigation		—			—		—		—			—		50		—		50
Product liability insurance recovery		(25	)		—		—		—			—		—		—		(25	)
		76			—		—		—			—		404		11		491
Other:
Gain on sale of Adult Nutritional business		—			—		—		(316	)		—		—		—		(316	)
Accelerated depreciation		70			1		—		—			—		—		4		75
Downsizing and streamlining of worldwide operations		1			—		—		—			75		—		—		76
Milestone payments		—			40		—		—			—		—		—		40
Acordis IPR&D write-off		—			—		63		—			—		—		—		63
	$	147		$	41	$	63	$	(316	)	$	75	$	404	$	15		429
Income taxes on items above																		(94	)
Reduction to Net Earnings from Continuing Operations																	$	335

Earnings Before Minority Interest and Income Taxes

	Earnings From Continuing Operations Before Minority Interest and Income Taxes
	Nine Months ended September 30,
	2005			2004			% Change
	(dollars in millions)
Pharmaceuticals	$	2,884		$	3,309		(13	)%
Nutritionals		494			466		6	%
Related Healthcare		365			396		(8	)%
Total segments		3,743			4,171		(10	)%
Corporate/Other		(59	)		(792	)	93	%
Total	$	3,684		$	3,379		9	%

In the first nine months of 2005, earnings from continuing operations before minority interest and income taxes increased 9% to $3,684 million from $3,379 million in the first nine months of 2004. The $305 million increase included a $569 million gain on sale of the U.S. and Canadian Consumer Medicines business and related assets in the third quarter of 2005 and a $316 million gain in the first quarter of 2004 from the sale of the Adult Nutritional business. The increase was offset by higher spending on research and development and marketing, selling and administrative costs in 2005.

Pharmaceutical

Earnings before minority interest and income taxes decreased to $2,884 million in the first nine months of 2005 from $3,309 million in the first nine months of 2004.

Nutritional

Earnings before minority interest and income taxes increased to $494 million in the first nine months of 2005 from $466 million in the first nine months of 2004.

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Related Healthcare

Earnings before minority interest and income taxes in the Related Healthcare segment decreased to $365 million in the first nine months of 2005 from $396 million in the first nine months of 2004. The $31 million decrease was primarily due to lower earnings in the Consumer Medicines business.

Income Taxes

The effective income tax rate on earnings from continuing operations before minority interest and income taxes was 20.5% in the first nine months of 2005 compared with 22.3% in the first nine months of 2004. The lower effective tax rate for the nine months ended September 30, 2005 was due primarily to a tax benefit associated with the release of contingency reserves resulting from the settlement of examinations by the Internal Revenue Service for the years 1998 through 2001, a change in estimate related to the reduction of a deferred tax provision established in the fourth quarter of 2004 for special dividends under the American Jobs Creation Act of 2004 (AJCA), partially offset by higher taxes on the sale of the Consumer Medicines business, lower foreign tax credits, and the unfavorable treatment of certain litigation reserves. The Company has recorded valuation allowances for certain state net deferred tax assets, state net operating loss and tax credit carryforwards, foreign net operating loss and tax credit carryforwards, and charitable contribution carryforwards. The Company currently believes that the state net deferred tax assets, state net operating loss and tax credit carryforwards, foreign net operating loss and tax credit carryforwards, and charitable contribution carryforwards for which valuation allowances have been provided, more likely than not, will not be realized in the future. In the third quarter of 2005, as a result of the sale of the Consumer Medicines business and other changes in assumptions regarding future taxable profits, the Company recorded a net benefit of approximately $3 million in its tax provision associated with the reduction of its valuation allowance on certain deferred tax assets.

As a result of Temporary Regulations issued by the Internal Revenue Service, the Company is evaluating certain changes to its global legal entity structure and their effects on its projected effective tax rate for 2005 and beyond. Such changes are not expected to have a current cash income tax effect.

Net Earnings

Net earnings from continuing operations increased 11% in the first nine months of 2005 to $2,493 million from $2,239 million in the first nine months of 2004. In the first nine months of 2005, basic earnings per share from continuing operations increased 10% to $1.28 from $1.16 in the first nine months of 2004, while diluted earnings per share from continuing operations increased 11% to $1.27 from $1.14 in 2004.

Discontinued Operations

In May 2005, the Company completed the sale of OTN to One Equity Partners LLC for cash proceeds of $197 million. The Company recorded a pre-tax gain of $63 million ($13 million net of tax), presented as a gain on sale of discontinued operations in the consolidated statement of earnings.

The following amounts related to the OTN business have been segregated from continuing operations and are reflected as discontinued operations for all periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005			2004
	(dollars in millions)
Net sales	$	—	$	649	$	1,015		$	1,815
Earnings before income taxes		—		5		(8	)		16
Net (loss)/earnings from discontinued operations		—		3		(5	)		10

Developments

On October 18, 2005, the FDA issued an approvable letter for muraglitazar, an investigational oral medicine for the treatment of type 2 diabetes. The FDA has requested additional information from ongoing clinical trials to more fully address the cardiovascular safety profile of muraglitazar. For additional information related to the approvable letter, see “Item 1. Financial Statements—Note 2. Alliances and Investments.”

In September 2005, the FDA’s Arthritis Advisory Committee unanimously recommended approval of ORENCIA^® (abatacept), an investigational selective modulator of T-cell co-stimulation under development for the treatment of rheumatoid arthritis. The Company completed its submission of a Biologics License Application to the FDA for ORENCIA^® in March 2005, and the original FDA action date of October 1, 2005 has been postponed to December 31, 2005.

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In August 2005, the Company and ImClone announced that ImClone has submitted a supplemental Biologics License Application to the FDA for approval of ERBITUX*, an IgG1 monoclonal antibody in the treatment of Squamous Cell Carcinoma of the Head and Neck (SCCHN). The application seeks U.S. marketing approval for the use of ERBITUX* in combination with radiation for locally or regionally advanced SCCHN, and as monotherapy in patients with recurrent and/or metastatic SCCHN where prior platinum-based chemotherapy has failed or where platinum-based therapy would not be appropriate. ImClone has requested priority review of the application. ERBITUX* is currently indicated for the treatment of refractory metastatic colorectal cancer.

In the third quarter of 2005, the Company completed the sale of its U.S. and Canadian Consumer Medicines business and related assets (Consumer Medicines) to Novartis AG (Novartis). Under the terms of the agreement, Novartis acquired the trademarks, patents and intellectual property rights of Consumer Medicines for $661 million in cash, of which $15 million is attributable to a post-closing supply arrangement between the Company and Novartis. The related assets include the rights to the U.S. Consumer Medicines brands in Latin America, Europe, the Middle East and Africa. As a result of this transaction, the Company recorded a pre-tax gain of $569 million ($370 million net of tax) in the third quarter of 2005.

Financial Position, Liquidity and Capital Resources

Cash, cash equivalents and marketable debt securities totaled approximately $3.8 billion at September 30, 2005 compared to $7.5 billion at December 31, 2004. The Company continues to maintain a sufficient level of working capital, which was approximately $3.5 billion and $5.0 billion at September 30, 2005 and December 31, 2004, respectively. In 2005 and future periods, the Company expects cash generated by its U.S. operations, together with existing cash and borrowings from the capital markets, to sufficiently cover cash needs for working capital, capital expenditures, milestone payments and dividends paid in the United States. Cash and cash equivalents, marketable securities, the conversion of other working-capital items and borrowings are expected to fund near-term operations.

In the fourth quarter of 2004, the Company disclosed that it anticipated repatriating approximately $9 billion in special dividends in 2005 and recorded a $575 million provision for deferred taxes pursuant to the American Jobs Creation Act of 2004 (AJCA) as enacted and other pending matters. In the first quarter of 2005, the Company repatriated approximately $6.2 billion in special dividends from foreign subsidiaries and will repatriate the remainder of the $9 billion in the fourth quarter of 2005. The Company expects that it will use the special dividends in accordance with requirements established by the U.S. Treasury Department. During the second quarter of 2005, the U.S. Treasury Department issued AJCA related guidance clarifying that the “gross-up” for foreign taxes associated with the special dividends also qualifies for the 5.25% tax rate established by the AJCA. As a result of this guidance, the Company reduced the $575 million provision by recording a benefit of approximately $135 million in its tax provision for the second quarter of 2005. Except for earnings associated with the special dividends discussed above, U.S. income taxes have not been provided on the balance of unremitted earnings of non-U.S. subsidiaries, since the Company has invested or expects to invest such earnings permanently offshore.

Cash and cash equivalents at September 30, 2005 primarily consisted of U.S. dollar denominated bank deposits with an original maturity of three months or less. Marketable securities at September 30, 2005 primarily consisted of U.S. dollar denominated floating rate instruments with an ‘AAA/aaa’ credit rating. Due to the nature of these instruments, the Company considers it reasonable to expect that their fair market values will not be significantly impacted by a change in interest rates, and that they can be liquidated for cash at short notice.

Short-term borrowings were $277 million at September 30, 2005, compared with $1,883 million at December 31, 2004, primarily as a result of the retirement of commercial paper.

Long-term debt was $5.9 billion at September 30, 2005 compared to $8.5 billion at December 31, 2004. During the second quarter of 2005, the Company repurchased all of its outstanding $2.5 billion aggregate principal amount 4.75% Notes due 2006, and incurred an aggregate pre-tax loss of approximately $69 million in connection with the early redemption of the Notes and termination of related interest rate swaps. The Moody’s Investors Service (Moody’s) long-term and short-term credit ratings for the Company are currently A1 and Prime-1, respectively. On November 1, 2005, Moody’s placed the long-term A1 senior rating of the Company’s debt under review for possible downgrade, while affirming the short-term Prime-1 rating. Standard & Poor’s (S&P) long-term and short-term credit ratings for the Company are currently A+ and A-1, respectively. S&P’s long-term credit rating remains on negative outlook. Fitch Ratings Ltd. (Fitch) long-term and short-term credit ratings for the Company are currently A+ and F1, respectively. On September 16, 2005, Fitch’s long-term credit rating on the Company was changed from negative to stable outlook.

In August 2005, a wholly-owned subsidiary of the Company entered into a new $2.5 billion term loan facility with a syndicate of lenders. Borrowings under this facility will be guaranteed by the Company, the subsidiaries of the borrower and by certain European subsidiaries of the Company. This facility contains a five-year tranche of up to $2.0 billion and a two-year tranche of up to $500 million. The Company is subject to substantially the same covenants as those included in its December 2004 Revolving Credit facility. The Company is also subject to further restrictions, including certain financial covenants. Prior to borrowing any proceeds against the facility, the Company obtained a waiver from the lenders for a covenant default under this facility due to a one-time intercompany distribution. In October 2005, the Company, through its subsidiary, borrowed $2 billion against this facility.

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The following is a discussion of working capital and cash flow activities:

	September 30, 2005			December 31, 2004
	(dollars in millions)
Working capital	$	3,523		$	4,958
	Nine Months Ended September 30,
	2005			2004
	(dollars in millions)
Cash flow provided by/(used in):
Operating activities	$	1,511		$	2,493
Investing activities		2,514			(1,509	)
Financing activities		(5,562	)		(97	)

• The decrease in working capital of $1,435 million from December 31, 2004 to September 30, 2005 was primarily due to: a reduction in net cash (cash, cash equivalents and marketable securities less short-term borrowings) primarily used for the early redemption of the $2.5 billion Notes; lower receivables resulting from collection of foreign withholding taxes and lower sales volume; higher reserves for litigation matters; and unfavorable translation impact due to the strengthening of the U.S. Dollar; partially offset by lower accrued liability for royalties, product liability and lower unrealized losses from derivatives resulting from the weakening of the Euro; reduction in income taxes payable resulting from payments related to the repatriation of special dividends under the AJCA; and higher inventories due to increased demand of newer products and existing key brands.

• Net cash provided by operating activities was $1,511 million in the first nine months of 2005 and $2,493 million in the first nine months of 2004. The $982 million decrease is mainly attributable to lower earnings and higher usage of working capital. The significant changes in operating assets and liabilities between 2005 and 2004 are: a $926 million decrease in income tax payable primarily related to the settlement of examinations by the Internal Revenue Service for the years 1998 through 2001 and the payment of taxes related to the repatriation of special dividends under the AJCA; a $611 million decrease in accounts payable and accrued expenses primarily due to vendor payments prior to the sale of the OTN business and lower accrued rebates and returns, interest and royalties; a $178 million increase in inventories due to the growth of newer products and in anticipation of new product launches; and a $857 million decrease in receivables primarily due to lower sales volume and foreign withholding taxes.

• Net cash provided by investing activities was $2,514 million in the first nine months of 2005 compared to net cash used of $1,509 million in the first nine months of 2004. The $4,023 million increase is attributable to the sale of marketable securities in 2005, proceeds from sale of the Consumer Medicines business for $646 million in 2005 and a one time $250 million milestone payment to ImClone in 2004.

• Net cash used in financing activities was $5,562 million in the first nine months of 2005 and $97 million in the first nine months of 2004. The $5,465 million decrease was mainly attributable to the retirement of commercial paper and long-term debt in 2005.

During the nine months ended September 30, 2005 and 2004, the Company did not purchase any of its common stock.

For each of the three and nine month periods ended September 30, 2005 and 2004, dividends declared per common share were $.28 and $.84, respectively. The Company paid $549 million and $1,639 million in dividends for the three and nine months of 2005 and $544 million and $1,630 million for the three and nine months of 2004, respectively. Dividend decisions are made on a quarterly basis by the Board of Directors.

Contractual Obligations

For a discussion of the Company’s contractual obligations, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2004 Form 10-K.

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SEC Consent Order and Deferred Prosecution Agreement

As previously disclosed, on August 4, 2004, the Company entered into a final settlement with the SEC, concluding an investigation concerning certain wholesaler inventory and accounting matters. The settlement was reached through a Consent, a copy of which was attached as Exhibit 10s to the Company’s quarterly report on Form 10-Q for the period ended September 30, 2004.

Under the terms of the Consent, the Company has agreed, subject to certain defined exceptions, to limit sales of all products sold to its direct customers (including wholesalers, distributors, hospitals, retail outlets, pharmacies and government purchasers) based on expected demand or on amounts that do not exceed approximately one month of inventory on hand, without making a timely public disclosure of any change in practice. The Company has also agreed in the Consent to certain measures that it has implemented including: (a) establishing a formal review and certification process of its annual and quarterly reports filed with the SEC; (b) establishing a business risk and disclosure group; (c) retaining an outside consultant to comprehensively study and help re-engineer the Company’s accounting and financial reporting processes; (d) publicly disclosing any sales incentives offered to direct customers for the purpose of inducing them to purchase products in excess of expected demand; and (e) ensuring that the Company’s budget process gives appropriate weight to inputs that come from the bottom to the top, and not just those that come from the top to the bottom, and adequately documenting that process.

Further, the Company agreed in the Consent to retain an “Independent Adviser” through the date that the Company’s Form 10-K for the year ended 2005 is filed with the SEC. The Consent defines certain powers and responsibilities of the Independent Adviser. The Consent includes a process for the Independent Adviser to make recommendations regarding the Company’s compliance with applicable federal securities laws and corporate obligations. The Company has agreed in the Consent to adopt the Independent Adviser’s recommendations regarding compliance with applicable federal securities laws and corporate obligations.

As previously disclosed, on June 15, 2005, the Company entered into a Deferred Prosecution Agreement (DPA) with the United States Attorney’s Office (USAO) for the District of New Jersey resolving the investigation by USAO of the Company relating to wholesaler inventory and various accounting matters covered by the Company’s settlement with the SEC. Pursuant to the DPA, the USAO filed a criminal complaint against the Company alleging conspiracy to commit securities fraud, but will defer prosecution of the Company and dismiss the complaint after two years if the Company satisfies all of the requirements of the DPA. A copy of the DPA was filed as Exhibit 99.2 to a Form 8-K filed by the Company on June 16, 2005 and is incorporated by reference hereto as Exhibit 10w.

Under the DPA, among other things, the Company has agreed to include in its Forms 10-Q and 10-K filed with SEC and in its annual report to shareholders the following information: (a) estimated wholesaler/direct customer inventory levels of the top fifteen (15) products sold by the U.S. Pharmaceuticals business; (b) for major non-U.S. countries, estimated aggregate wholesaler/direct-customer inventory levels of the top fifteen (15) pharmaceutical products sold in such countries taken as a whole measured by aggregate annual sales in such countries; (c) arrangements with and policies concerning wholesaler/direct customers and other distributors for these products, including efforts by the Company to control and monitor wholesaler/distributor inventory levels; and (d) data concerning prescriptions or other measures of end-user demand for these products. Pursuant to the DPA, the Company also will include in such filings and reports information on acquisition, divestiture, and restructuring reserve policies and activity, and rebate accrual policies and activity.

Under the DPA, the Company also agreed to implement remedial measures already undertaken or mandated in the Consent and in the settlements of the derivative litigation and the federal securities class action relating to wholesaler inventory and various accounting matters. In addition, the Company agreed to undertake additional remedial actions, corporate reforms and other actions, including: (a) appointing an additional non-executive Director acceptable to the USAO; (b) establishing and maintaining a training and education program on topics that include corporate citizenship and financial reporting obligations; (c) making an additional $300 million payment into the shareholder compensation fund established in connection with the Consent; (d) not engaging in or attempting to engage in any criminal conduct as that term is defined in the DPA; (e) continuing to cooperate with the USAO, including with respect to the ongoing investigation regarding individual current and former employees of the Company; and (f) retaining an independent Monitor. Also as part of the DPA, the Board of Directors separated the roles of Chairman and Chief Executive Office of the Company and on June 15, 2005, elected a Non-Executive Chairman.

The independent Monitor, who also serves as the Independent Advisor pursuant to the Consent, has defined powers and responsibilities under the DPA, including the responsibility to oversee at least through April 2007, the Company’s compliance with all of the terms of the DPA, the Consent and the settlements of the derivative action and the federal securities class action. The Monitor has the authority to require the Company to take any steps he believes necessary to comply with the terms of the DPA and the Company is required to adopt all recommendations made by the Monitor, unless the Company objects to the recommendation and

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the USAO agrees that adoption of the recommendation should not be required. In addition, the independent Monitor will report to the USAO, on at least a quarterly basis, as to the Company’s compliance with the DPA and the implementation and effectiveness of the internal controls, financial reporting, disclosure processes and related compliance functions of the Company.

The Company has established a company-wide policy to limit its sales to direct customers for the purpose of complying with the Consent. This policy includes the adoption of various procedures to monitor and limit sales to direct customers in accordance with the terms of the Consent. These procedures include a governance process to escalate to appropriate management levels potential questions or concerns regarding compliance with the policy and timely resolution of such questions or concerns. In addition, compliance with the policy will be monitored on a regular basis.

The Company maintains inventory management agreements (IMAs) with most of its U.S. pharmaceutical wholesalers which account for nearly 100% of total gross sales of U.S. pharmaceutical products. Under the current terms of the IMAs, the Company’s three largest wholesaler customers provide the Company with weekly information with respect to months on hand product level inventories and the amount of out-movement of products. These three wholesalers currently account for over 90% of total gross sales of U.S. pharmaceutical products. The inventory information received from these wholesalers, together with the Company’s internal information, is used to estimate months on hand product level inventories at these wholesalers. The Company estimates months on hand product inventory levels for its U.S. Pharmaceutical business’s wholesaler customers other than the three largest wholesalers by extrapolating from the months on hand calculated for three largest wholesalers. The Company considers whether any adjustments are necessary to these extrapolated amounts based on such factors as historical sales of individual products made to such other wholesalers and third-party market research data related to prescription trends and patient demand. In contrast, for the Company’s Pharmaceutical business outside of the United States, Nutritionals and Related Healthcare business units around the world, the Company has significantly more direct customers, limited information on direct customer product level inventory and corresponding out movement information and the reliability of third party demand information, where available, varies widely. Accordingly, the Company relies on a variety of methods to estimate months on hand product level inventories for these business units.

The Company will disclose for each of its top fifteen (15) pharmaceutical products sold by the U.S. Pharmaceutical business (based on 2004 net sales) the amount of net sales and the estimated number of months on hand in the U.S. wholesaler distribution channel as of the end of the immediately preceding quarter and as of the end of the applicable quarter in its quarterly and annual reports on Forms 10-Q and 10-K. This information for the quarter ended September 30, 2005 is included in Management Discussion and Analysis in this Form 10-Q. The Company will disclose corresponding information for the top fifteen (15) pharmaceutical products sold within its major non-U.S. countries, as described above. For all other business units, the Company will continue to disclose on a quarterly basis the key product level inventories. The information required to estimate months on hand product level inventories in the direct customer distribution for the non-U.S. Pharmaceutical businesses is not available prior to the filing of the quarterly report on Form 10-Q for an applicable quarter. Accordingly, the Company will disclose this information on its website approximately 60 days after the end of the applicable quarter, and in the Company’s Form 10-Q for the following quarter. Information for these products for the quarter ended September 30, 2005 is expected to be disclosed on the Company’s website on or about November 30, 2005 and in the Company’s Form 10-K for the quarter ended December 31, 2005. In addition to the foregoing quarterly disclosure, the Company will include all the foregoing information for all business units for each quarter in its Annual Report on Form 10-K. For non-key products, if the inventory at direct customers exceeds approximately one month on hand, the Company will disclose the estimated months on hand for such product(s), except where the impact on the Company is de minimis.

The Company has and will continue to enhance its methods to estimate months on hand product inventory levels for the U.S. Pharmaceutical business and for the non-U.S. Pharmaceutical businesses around the world, taking into account the complexities described above. The Company also has and will continue to take steps to expedite the receipt and processing of data for the non-U.S. Pharmaceutical businesses.

The Company believes the above-described procedures provide a reasonable basis to ensure compliance with both the Consent Order and the DPA and provides sufficient information to comply with disclosure requirements of both.

Critical Accounting Policies

For a discussion of the Company’s critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2004 Form 10-K.

Outlook

As previously disclosed, although anticipated sales declines due to continued exclusivity losses during 2005 and 2006 are expected to be more or less offset by growth in sales of the Company’s in-line, recently launched and potential new products during the same period, changes in product mix will adversely impact gross margins because the products that have lost or are expected to lose exclusivity generally have higher margins. In addition, earnings will be adversely affected by the Company’s investments to support the introduction of new products and the development and launch of additional new compounds. In 2007, based on management’s

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current estimates of growth of the Company’s in-line and recently launched products and a risk-adjusted assessment of potential new product launches, the Company expects earnings growth that should be sustained for a period of time will resume. The Company has and will continue to rationalize its cost base in line with its strategy to increase its sales and marketing emphasis on specialists and high value primary care physicians.

As previously disclosed, the Company has experienced substantial revenue losses in the last few years due to the expiration of market exclusivity protection for certain of its products. The Company expects substantial incremental revenue losses in each of 2005, 2006 and 2007 representing continuing declines in revenues of those products as well as declines in revenues of certain additional products that will lose market exclusivity primarily in 2005 and 2006. For 2005, the Company estimates reductions of net sales in the range of $1.4 billion to $1.5 billion from the 2004 levels for products which have lost or will lose exclusivity protection in 2003, 2004 or 2005, specifically MONOPRIL in the United States, Canada and Europe, GLUCOPHAGE* XR and GLUCOVANCE* in the United States, CEFZIL in the United States, PARAPLATIN in the United States, VIDEX EC in the United States, TAXOL^® in Europe and PRAVACHOL in Europe. The Company also expects substantial incremental revenue losses in each of 2006 and 2007 representing continuing declines in net sales of the products that lost exclusivity protection in 2002, 2003 and 2004 and additional declines attributable to products that will lose exclusivity protection primarily in 2005 and 2006. These products (and the years in which they lose exclusivity protection) include GLUCOPHAGE*/GLUCOVANCE*/GLUCOPHAGE*XR in the United States (2002 to 2004), TAXOL^® in Europe and Japan (2003), PRAVACHOL in the United States (2006) and in Europe (2002 to 2007), PARAPLATIN in the United States (2004), MONOPRIL in the United States (2003), Canada (2003) and Europe (2001 to 2008), ZERIT in the United States (2008) and in Europe (2007 to 2011), CEFZIL in the United States (2005) and in Europe (2004 to 2009) and VIDEX/VIDEX EC (2004 to 2009). The timing and amounts of sales reductions from exclusivity losses, their realization in particular periods and the eventual levels of remaining sales revenues are uncertain and dependent on the levels of sales at the time exclusivity protection ends, the timing and degree of development of generic competition (speed of approvals, market entry and impact) and other factors.

PRAVACHOL, an HMG Co-A reductase inhibitor (statin), had net sales of $1.7 billion in the first nine months of 2005. The Company continues to experience increased competition for PRAVACHOL from established brands and new entrants. U.S. prescriptions for PRAVACHOL declined 16% in the first nine months of 2005 compared to 2004. While the product has begun to lose exclusivity in some markets between now and its anticipated loss of U.S. exclusivity in April 2006, its expected rate of decline in sales and in market share could be accelerated by increased competition from established brands and new entrants.

The Company’s expectations for future sales growth include substantial expected increases in sales of PLAVIX*, which had net sales of $3.3 billion for 2004, and is currently the Company’s largest product ranked by net sales. The composition of matter patent for PLAVIX*, which expires in 2011, is currently the subject of litigation in the United States. Similar proceedings involving PLAVIX* have been instituted outside the United States. The Company continues to believe that the patent is valid and that it is infringed, and with its alliance partner and patent-holder Sanofi, is vigorously pursuing these cases. It is not possible at this time reasonably to assess the outcome of these litigations, or if there were an adverse determination in these litigations, the timing of potential generic competition for PLAVIX*.

The Company and its subsidiaries are the subject of a number of significant pending lawsuits, claims, proceedings and investigations. It is not possible at this time reasonably to assess the final outcome of these investigations or litigations. Management continues to believe, as previously disclosed, that during the next few years, the aggregate impact, beyond current reserves, of these and other legal matters affecting the Company is reasonably likely to be material to the Company’s results of operations and cash flows, and may be material to its financial condition and liquidity. The Company’s expectations for the next several years described above do not reflect the potential impact of litigation on the Company’s results of operations.

Cautionary Factors that May Affect Future Results

This quarterly report on Form 10-Q (including documents incorporated by reference) and other written and oral statements the Company makes from time to time contain certain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by the fact they use words such as “should”, “expect”, “anticipate”, “estimate”, “target”, “may”, “will”, “project”, “guidance”, “intend”, “plan”, “believe” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes to differ materially from current expectations. These statements are likely to relate to, among other things, the Company’s goals, plans and projections regarding its financial position, results of operations, cash flows, market position, product development, product approvals, sales efforts, expenses, performance or results of current and anticipated products and the outcome of contingencies such as legal proceedings, and financial results, which are based on current expectations that involve inherent risks and uncertainties, including internal or external factors that could delay, divert or change any of them in the next several years.

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Although it is not possible to predict or identify all factors, they may include but are not limited to the following:

• Competitive factors, such as (i) new products developed by competitors that have lower prices or superior performance features or that are otherwise competitive with the Company’s current products; (ii) generic competition as the Company’s products mature and patents expire on products; (iii) technological advances and patents attained by competitors; (iv) problems with licensors, suppliers and distributors; and (v) business combinations among the Company’s competitors or major customers.

• Difficulties and delays inherent in product development, manufacturing and sale, such as (i) products that may appear promising in development but fail to reach market or be approved for additional indications for any number of reasons, including efficacy or safety concerns, the inability to obtain necessary regulatory approvals and the difficulty or excessive cost to manufacture; (ii) failure of any of our products to achieve or maintain commercial viability; (iii) seizure or recalls of pharmaceutical products or forced closings of manufacturing plants; (iv) the failure to obtain, the imposition of limitations on the use of, or loss of patent and other intellectual property rights; (v) failure of the Company or any of its vendors or suppliers to comply with Current Good Manufacturing Practices and other application regulations and quality assurance guidelines that could lead to temporary manufacturing shutdowns, product shortages and delays in product manufacturing; and (vi) other manufacturing or distribution problems including changes in manufacturing production sites and manufacturing capacity due to regulatory requirements, changes in types of products produced, such as biologics, or physical limitations that could impact continuous supply.

• New government laws and regulations, such as (i) health care reform initiatives in the United States at the state and federal level and in other countries; (ii) changes in the FDA and foreign regulatory approval processes that may cause delays in approving, or preventing the approval of, new products; (iii) tax changes such as the phasing out of tax benefits heretofore available in the United States and certain foreign countries; (iv) new laws, regulations and judicial decisions affecting pricing or marketing within or across jurisdictions; and (v) changes in intellectual property law.

• Legal difficulties, including lawsuits, claims, proceedings and investigations, any of which can preclude or delay commercialization of products or adversely affect operations, profitability, liquidity or financial condition, including (i) intellectual property disputes, including the outcome of the PLAVIX* litigation in the U.S.; (ii) sales and marketing practices in the U.S. and internationally; (iii) adverse decisions in litigation, including product liability and commercial cases; (iv) the inability to obtain adequate insurance with respect to this type of liability; (v) recalls or withdrawals of pharmaceutical products or forced closings of manufacturing plants; (vi) the failure to fulfill obligations under supply contracts with the government and other customers which may result in liability; (vii) government investigations including those relating to wholesaler inventory, financial restatement and product pricing and promotion; (viii) claims asserting violations of securities, antitrust, federal and state pricing and other laws; (ix) environmental, health and safety matters; (x) tax liabilities; and (xi) compliance with the Deferred Prosecution Agreement. There can be no assurance that there will not be an increase in scope of these matters or that any future lawsuits, claims, proceedings or investigations will not be material.

• Increasing pricing pressures worldwide, including rules and practices of managed care groups and institutional and governmental purchasers, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform and potential impact of importation legislative or otherwise, pharmaceutical reimbursement and pricing in general.

• Fluctuations in buying patterns and inventory levels of major distributors, retail chains and other trade buyers, which may result from seasonality, pricing, wholesaler buying decisions (including the effect of incentives offered), the Company’s wholesaler inventory management policies (including the workdown or other changes in wholesaler inventory levels) or other factors.

• Reliance of the Company on vendors, partners and other third parties to meet their contractual, regulatory and other obligations in relation to their arrangements with the Company.

• Greater than expected costs and other difficulties, including unanticipated effects and difficulties of acquisitions, dispositions and other events, including obtaining regulatory approvals in connection with evolving business strategies, legal defense costs, insurance expense, settlement costs and the risk of an adverse decision related to litigation.

• Changes to advertising and promotional spending and other categories of spending that may affect sales.

• Changes in product mix that may affect margins.

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• Changes in the Company’s structure, operations, revenues, costs, staffing or efficiency resulting from acquisitions, divestitures, mergers, alliances, restructurings or other strategic initiatives, and the need to obtain governmental approvals, as appropriate.

• Economic factors over which the Company has no control such as changes of business and economic conditions including, but not limited to, changes in interest rates and fluctuation of foreign currency exchange rates.

• Changes in business, political and economic conditions due to political or social instability, military or armed conflict, nationalization of assets, debt or payment moratoriums, other restrictions on commerce, and actual or threatened terrorist attacks in the United States or other parts of the world and related military action.

• Changes in accounting standards promulgated by the FASB, the SEC or the AICPA, which may require adjustments to financial statements.

• Capacity, efficiency, reliability, security and potential breakdown, invasion, destruction or interruption of information systems.

• Results of clinical studies relating to the Company’s or a competitor’s products.

Although the Company believes it has been prudent in its plans and assumptions, no assurance can be given that any goal or plan set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. The Company undertakes no obligation to release publicly any revisions to forward-looking statements as a result of new information, future events or otherwise.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of the Company’s market risk, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the Company’s 2004 Form 10-K.

In the nine months ended September 30, 2005, the Company sold $463 million notional amount of forward contracts (in several currencies) to partially hedge the exchange impact primarily related to forecasted intercompany inventory purchases for up to the next 21 months. In addition, the Company bought $415 million notional amount of Japanese yen forward contracts to hedge the exchange impact related to Japanese yen denominated third party payables and sold a net $5,715 million notional amount of forward contracts (in several currencies) to partially hedge the exchange impact primarily related to non-functional currency denominated intercompany loans. As of September 30, 2005 exposures related to these forward contracts have been largely eliminated.

In April 2005, in connection with the early redemption of its $2.5 billion Notes due 2006, the Company terminated $2.0 billion notional amount of fixed-to-floating interest rate swap agreements and incurred a loss of $28 million. In June 2005, the Company terminated $500 million notional amount of fixed-to-floating interest rate swap agreements related to its $2.5 billion Notes due 2011, and incurred a loss of $23 million. This loss will be amortized to interest expense over the remaining life of the Notes, due 2011. In September 2005, the Company also terminated $350 million notional amount of fixed-to-floating interest rate swap agreements related to its $350 million Debentures due 2026, and received a gain of $39 million. This gain will be amortized to interest expense over the remaining life of the Debentures due 2026.

Item 4. CONTROLS AND PROCEDURES

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures. Based on their evaluation, as of the end of the period covered by this Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective. There have been no significant changes in internal control over financial reporting, for the period covered by this report, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Information pertaining to legal proceedings can be found in “Item 1. Final Statements—Note 17. Legal Proceedings and Contingencies,” to the interim consolidated financial statements, and is incorporated by reference herein.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes the surrenders of the Company’s equity securities in connection with stock option and restricted stock programs during the nine-month period ended September 30, 2005:

Period	Total Number of Shares Purchased(a)	Average Price Paid per Share(a)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(b)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(b)
					(dollars in millions)
January 1 to 31, 2005	31,445	$	25.38	372,351,413	$	2,220
February 1 to 28, 2005	42,276	$	24.11	372,351,413	$	2,220
March 1 to 31, 2005	246,720	$	25.44	372,351,413	$	2,220
Three months ended March 31, 2005	320,441			372,351,413
April 1 to 30, 2005	9,798	$	25.52	372,351,413	$	2,220
May 1 to 31, 2005	9,880	$	25.77	372,351,413	$	2,220
June 1 to 30, 2005	5,162	$	25.43	372,351,413	$	2,220
Three months ended June 30, 2005	24,840			372,351,413
July 1 to 31, 2005	30,322	$	25.17	372,351,413	$	2,220
August 1 to 31, 2005	43,398	$	25.09	372,351,413	$	2,220
September 1 to 30, 2005	4,648	$	24.60	372,351,413	$	2,220
Three months ended September 30, 2005	78,368			372,351,413
Nine months ended September 30, 2005	423,649			372,351,413

(a) Reflects the following transactions during the first nine months of 2005: (i) the deemed surrender to the Company of 343,968 shares of Common Stock to pay the exercise price and to satisfy tax withholding obligations in connection with the exercise of employee stock options, and (ii) the surrender to the Company of 79,681 shares of Common Stock to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees.

(b) In June 2001, the Company announced that the Board of Directors authorized the purchase of up to $14 billion of Company common stock. During the first nine months of 2005, no shares were repurchased pursuant to this program and no purchases of any shares under this program are expected for the remainder of 2005.

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Item 6. EXHIBITS

Exhibits (listed by number corresponding to the Exhibit Table of Item 601 in Regulation S-K).

Exhibit Number and Description		Page
10y.	Single Currency Term Facility Agreement for $2,500,000,000 dated August 5, 2005, between BMS Omega Bermuda Holdings Finance Ltd., as a borrower, the entities listed therein as Original Guarantors, BNP Paribas and the Royal Bank if Scotland plc, as arrangers, the financial institutions therein as Original Lenders and the Royal Bank of Scotland plc, as agent.	E-10-1
10z.	Waiver letter relating to the Single Currency Term Facility Agreement for $2,500,000,000 dated September 29, 2005.	E-10-2
10aa.	Separation Agreement between Bristol-Myers Squibb Company and Donald J. Hayden.	E-10-3
15.	Letter Regarding Unaudited Interim Financial Information.	E-15
31a.	Section 302 Certification Letter.	E-31-1
31b.	Section 302 Certification Letter.	E-31-2
32a.	Section 906 Certification Letter.	E-32-1
32b.	Section 906 Certification Letter.	E-32-2

* Indicates, in this Form 10-Q, brand names of products which are registered trademarks not owned by the Company or its subsidiaries. ERBITUX is a trademark of ImClone Systems Incorporated; AVAPRO/AVALIDE (known in the EU as APROVEL/KARVEA) and PLAVIX are trademarks of Sanofi-Synthelabo S.A.; GLUCOPHAGE, GLUCOPHAGE XR and GLUCOVANCE are trademarks of Merck Sante S.A.S., an associate of Merck KGaA of Darmstadt, Germany; and ABILIFY is a trademark of Otsuka Pharmaceutical Company, Ltd.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BRISTOL-MYERS SQUIBB COMPANY (REGISTRANT)
Date: November 2, 2005	By:	/s/ Peter R. Dolan
		Peter R. Dolan
		Chief Executive Officer
Date: November 2, 2005	By:	/s/ Andrew R. J. Bonfield
		Andrew R. J. Bonfield
		Chief Financial Officer

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EX-10.(Y)

EXHIBIT 10y

CONFORMED COPY

Dated 5 August, 2005

SINGLE CURRENCY TERM FACILITY AGREEMENT

$2,500,000,000

FACILITY AGREEMENT

between

BMS OMEGA BERMUDA HOLDINGS FINANCE LTD.

arranged by

BNP PARIBAS

and

THE ROYAL BANK OF SCOTLAND plc

with

THE ROYAL BANK OF SCOTLAND plc

acting as Agent

Counsel to the Lenders [Missing Graphic Reference] 5 Old Broad Street London EC2N 1DW Counsel to the Borrower Slaughter & May One Bunhill Row London EC1Y 8YY

E-10-1

	TABLE OF CONTENTS
		Page
1.	DEFINITIONS AND INTERPRETATION	1
2.	THE FACILITY	17
3.	PURPOSE	17
4.	CONDITIONS OF UTILISATION	17
5.	UTILISATION	18
6.	REPAYMENT	19
7.	PREPAYMENT AND CANCELLATION	19
8.	INTEREST	24
9.	INTEREST PERIODS	25
10.	CHANGES TO THE CALCULATION OF INTEREST	26
11.	FEES	27
12.	TAX GROSS UP AND INDEMNITIES	28
13.	INCREASED COSTS	32
14.	OTHER INDEMNITIES	33
15.	MITIGATION BY THE LENDERS	34
16.	COSTS AND EXPENSES	35
17.	GUARANTEE AND INDEMNITY	35
18.	REPRESENTATIONS	39
19.	INFORMATION UNDERTAKINGS	44
20.	FINANCIAL COVENANTS	48
21.	GENERAL UNDERTAKINGS	50
22.	EVENTS OF DEFAULT	56
23.	CHANGES TO THE LENDERS	61
24.	CHANGES TO THE OBLIGORS	65
25.	ROLE OF THE AGENT AND THE ARRANGERS	66
26.	CONDUCT OF BUSINESS BY THE FINANCE PARTIES	71
27.	SHARING AMONG THE FINANCE PARTIES	72
28.	PAYMENT MECHANICS	73
29.	SET-OFF	76
30.	NOTICES	76
31.	CALCULATIONS AND CERTIFICATES	78
32.	PARTIAL INVALIDITY	78

(i)

33.	REMEDIES AND WAIVERS	78
34.	AMENDMENTS AND WAIVERS	78
35.	COUNTERPARTS	79
36.	CONFIDENTIALITY	79
37.	GOVERNING LAW	80
38.	ENFORCEMENT	80

SCHEDULE 1	THE ORIGINAL PARTIES	82
SCHEDULE 2	CONDITIONS PRECEDENT	84
SCHEDULE 3	REQUESTS	88
SCHEDULE 4	MANDATORY COST FORMULA	90
SCHEDULE 5	FORM OF TRANSFER CERTIFICATE	92
SCHEDULE 6	FORM OF ACCESSION LETTER	94
SCHEDULE 7	FORM OF RESIGNATION LETTER	95
SCHEDULE 8	FORM OF COMPLIANCE CERTIFICATE	96
SCHEDULE 9	TIMETABLES	98
SCHEDULE 10	FORM OF CONFIDENTIALITY UNDERTAKING	99

(ii)

THIS AGREEMENT is dated 5 August, 2005 and made between:

(1) BMS OMEGA BERMUDA HOLDINGS FINANCE LTD., a company incorporated under the laws of Bermuda whose registered office is at Chancery Hall, 52 Reid Street, Hamilton HM12, Bermuda (the “Borrower”);

(2) THE ENTITIES listed in Part 1 of Schedule 1 as original guarantors the “Original Guarantors”);

(3) BNP PARIBAS and THE ROYAL BANK OF SCOTLAND plc as mandated lead arrangers and exclusive bookrunners (the “Arrangers”);

(4) THE FINANCIAL INSTITUTIONS listed in Part 2 of Schedule 1 as lenders (the “Original Lenders”); and

(5) THE ROYAL BANK OF SCOTLAND plc as agent of the other Finance Parties (the “Agent”).

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

In this Agreement:

“Accession Letter” means a document substantially in the form set out in Schedule 6 (Form of Accession Letter).

“Additional Cost Rate” has the meaning given to it in Schedule 4 (Mandatory Cost formula).

“Additional Guarantor” means a Person which becomes an Additional Guarantor in accordance with Clause 24 (Changes to the Obligors).

“Affected Lender” has the meaning given to it in Clause 10.2 (Market disruption).

“Affiliate” means, when used in respect of a specified Person, another Person that directly or indirectly, Controls or is Controlled by or is under common Control with the Person specified.

“Availability Period” means the Tranche A Availability Period or the Tranche B Availability Period as the context requires.

“Available Commitment” means, in relation to a Tranche and a Lender, such Lender’s Commitment minus:

(a) the amount of its participation in any outstanding Loans; and

(b) in relation to any proposed Utilisation, the amount of its participation in any Loans that are due to be made on or before the proposed Utilisation Date.

“Available Facility” means, in relation to a Tranche, the aggregate for the time being of each Lender’s Available Commitment in respect of such Tranche.

“BMS Group” means the Parent Guarantor and its Subsidiaries from time to time.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Board of Directors” means either the board of directors of an Obligor or any duly authorised committee thereof or any committee of officers of such Obligor acting pursuant to authority granted by the board of directors of such Obligor or any committee of such board.

“Borrowing Proceeds” has the meaning given to it in Clause 7.5 (Mandatory Prepayment).

“Break Costs” means the amount (if any) by which:

(a) the interest (excluding Margin) which a Lender would have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;

exceeds:

(b) the amount which that Lender would be able to obtain by placing an amount equal to the total sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery (or on the date of receipt if the Lender had notice that it would receive such sum on that day) and ending on the last day of the current Interest Period.

“Business Day” means a day (other than a Saturday, Sunday or legal holiday in the State of New York) on which banks are open for general business in Bermuda, London, and New York City.

“Capital Lease Obligations” means, in relation to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalised amount thereof at such time determined in accordance with GAAP.

“Change in Control” is deemed to have occurred upon the occurrence of either of the following events:

(a) any Person or group of Persons (other than (i) the Parent Guarantor, (ii) any Subsidiary or (iii) any employee or director benefit plan or stock plan of the Parent Guarantor or a Subsidiary or any trustee or fiduciary with respect to such a plan when acting in that capacity or any trust related to any such plan)

-2-

shall have acquired beneficial ownership of shares representing more than 20% of the combined voting power represented by the outstanding Voting Stock of the Borrower or a Guarantor; or

(b) during any period of 12 consecutive months, commencing before or after the date of this Agreement, individuals who on the first day of such period were directors of the Parent Guarantor (together with any replacement or additional directors who were nominated or elected by a majority of directors then in office) cease to constitute a majority of the Board of Directors of the Parent Guarantor.

“Closing Date” means the date on which the Agent notifies the Borrower and the Lenders pursuant to Clause 4.1 (Initial conditions precedent) that it has received all of the documents and other evidence listed in Part 1 of Schedule 2 (Conditions Precedent).

“Code” means the Internal Revenue Code of 1986 of the United States, as amended from time to time.

“Commitment” means a Tranche A Commitment or a Tranche B Commitment, as the context requires.

“Compliance Certificate” means a certificate substantially in the form set out in Schedule 8 (Form of Compliance Certificate).

“Confidential Information” means any information relating to the Borrower, the Guarantors, the BMS Group, and the Facility including, without limitation, the Information Memorandum, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that (a) is or becomes public knowledge other than as a direct or indirect result of any breach of this Agreement or (b) is known before the date the information is disclosed or is lawfully obtained after that date, other than from a source which is connected with the Lenders or the BMS Group and which, in either case, has not been obtained in violation of, and is not otherwise subject to, any obligation of confidentiality.

“Confidentiality Undertaking” means a confidentiality undertaking substantially in the form set out in Schedule 10 (Form of Confidentiality Undertaking) or in any other form agreed between the Borrower and the Agent.

“Consolidated Capitalisation” has the meaning given to it in Clause 20.2 (Parent Guarantor and Borrower Financial Covenants).

“Consolidated Net Indebtedness” has the meaning given to it in Clause 20.2 (Parent Guarantor and Borrower Financial Covenants).

-3-

“Consolidated Net Tangible Assets” means, with respect to the Parent Guarantor, the total amount of its assets (less applicable reserves and other properly deductible items) after deducting:

(a) all current liabilities (excluding the amount of those which are by their terms extendable or renewable at the option of the obligor to a date more than 12 months after the date as of which the amount is being determined); and

(b) all goodwill, tradenames, trademarks, patents, unamortised debt discount and expense and other like intangible assets, all as set forth on the most recent balance sheet of the Parent Guarantor and its consolidated Subsidiaries and determined on a consolidated basis in accordance with GAAP.

“Control” means, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through ownership of voting securities, by contract or otherwise. “Controlled” and “Controlling” shall be construed accordingly.

“Debt” means:

(a) all obligations represented by notes, bonds, debentures or similar evidences of indebtedness;

(b) all indebtedness for borrowed money or for the deferred purchase price of property or services other than, in the case of any such deferred purchase price, on normal trade terms; and

(c) all rental obligations as lessee under leases which shall have been or should be recorded as Capital Lease Obligations.

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Designated Finance Subsidiary” means Bristol-Myers Squibb Sigma Finance Limited, a company incorporated under the laws of Bermuda whose registered office is at Chancery Hall, 52 Reid Street, Hamilton HM12, Bermuda, and any other Finance Subsidiary which has become an Additional Guarantor.

“Disposal” has the meaning given to it in Clause 7.5 (Mandatory Prepayment).

“Disposal Proceeds” has the meaning given to it in Clause 7.5 (Mandatory Prepayment).

“Dollars” or “$” means the lawful currency of the United States of America.

“Environmental and Safety Laws” means any and all applicable current and future treaties, laws (including without limitation common law), regulations, enforceable requirements, binding determinations, orders, decrees, judgments, injunctions, permits, approvals, authorizations, licenses, permissions, written notices or binding agreements issued, promulgated or entered by any Governmental Authority, relating to the environment, to employee health or safety as it pertains to the use or handling

-4-

of, or exposure to, any Hazardous Substance or contaminant, to preservation or reclamation of natural resources or to the management, release or threatened release of any Hazardous Substance, contaminant, or noxious odour, including without limitation the following laws of the United States of America: the Hazardous Materials Transportation Act, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, the Clean Air Act of 1970, as amended, the Toxic Substances Control Act of 1976, the Occupational Safety and Health Act of 1970, as amended, the Emergency Planning and Community Right-to-Know Act of 1986, the Safe Drinking Water Act of 1974, as amended, any similar or implementing state law, all amendments of any of them, and any regulations promulgated under any of them.

“ERISA” means Employee Retirement Income Security Act of 1974 of the United States, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Parent Guarantor, is treated as a single employer under Section 414 of the Code.

“ERISA Termination Event” means (i) a “Reportable Event” described in Section 4043 of ERISA and the regulations issued thereunder (other than a “Reportable Event” not subject to the provision for 30-day notice to the PBGC under such regulations), or (ii) the withdrawal of the Parent Guarantor or any of its ERISA Affiliates from a “single employer” Plan during a plan year in which it was a “substantial employer”, both of such terms as defined in Section 4001(a) of ERISA, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC or (v) any other event or condition which is reasonably likely to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or (vi) the partial or complete withdrawal of the Parent Guarantor or any ERISA Affiliate of the Parent Guarantor from a Multiemployer Plan as defined in Section 4001(a)(3) of ERISA.

“Event of Default” means any event or circumstance specified as such in Clause 22 (Events of Default).

“Exchange Act” means Securities Exchange Act of 1934 of the United States, as amended.

“Excluded Debt” has the meaning given to it in Clause 7.5 (Mandatory Prepayment).

“Excluded Disposal Proceeds” has the meaning given to it in Clause 7.5 (Mandatory Prepayment).

“Excluded Insurance Proceeds” has the meaning given to it in Clause 7.5 (Mandatory Prepayment).

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“Facility” means the term loan facility made available under this Agreement as described in Clause 2 (The Facility).

“Facility Office” means the office or offices notified by a Lender to the Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five Business Days’ written notice) as the office or offices through which it will perform its obligations under this Agreement.

“Fee Letter” means any letter or letters dated on or about the date of this Agreement between the Arrangers and the Borrower (or the Agent and the Borrower) setting out any of the fees referred to in Clause 11 (Fees).

“Finance Document” means this Agreement, any Fee Letter, any Accession Letter, any Resignation Letter and any other document designated as such by the Agent and the Borrower in writing.

“Finance Party” means the Agent, an Arranger or a Lender.

“Finance Subsidiary” means a wholly owned subsidiary of the Borrower which is engaged solely in the business of financing or facilitating the financing of members of the BMS Group and activities reasonably incidental thereto.

“Funded Debt” means Debt of the Parent Guarantor or a Subsidiary owning Restricted Property maturing by its terms more than one year after its creation and Debt classified as long-term debt under GAAP and, in the case of the Funded Debt of the Parent Guarantor, ranking at least pari passu with its obligations under this Agreement.

“GAAP” means generally accepted accounting principles in the United States of America.

“Governmental Authority” means the government of any nation, including, but not limited to, the United States of America, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Guarantor” means an Original Guarantor or an Additional Guarantor, unless it has ceased to be a Guarantor in accordance with Clause 24 (Changes to the Obligors).

“Hazardous Substances” means any toxic, radioactive, mutagenic, carcinogenic, noxious, caustic or otherwise hazardous substance, material or waste, including petroleum, its derivatives, by-products and other hydrocarbons, including, without limitation, polychlorinated biphenyls (“PCBs”), asbestos or asbestos-containing material, and any substance, waste or material regulated or that could reasonably be expected to result in liability under Environmental and Safety Laws.

“Increased Costs” has the meaning given to it in Clause 13.1 (Increased costs).

“Indenture” means the Indenture dated as of June 1, 1993 between the Parent Guarantor and JPMorgan Chase Bank N.A., as successor to The Chase Manhattan Bank (National Association), as Trustee, as amended, supplemented or otherwise modified from time to time.

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“Information Memorandum” means the document in the form approved by the Borrower concerning the BMS Group and the NL Holdco Group which, at the Borrower’s request and on its behalf, was prepared in relation to this transaction and distributed by the Arrangers to selected financial institutions before the date of this Agreement.

“Insurance Proceeds” has the meaning given to it in Clause 7.5 (Mandatory Prepayment).

“Interest Period” means, in relation to a Loan, each period determined in accordance with Clause 9 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 (Default interest).

“Lender” means:

(a) any Original Lender; and

(b) any bank or financial institution which has become a Party in accordance with Clause 23 (Changes to the Lenders),

which in each case has not ceased to be a Party in accordance with the terms of this Agreement.

“LIBOR” means, in relation to any Loan:

(a) the applicable Screen Rate; or

(b) (if no Screen Rate is available for Dollars or the Interest Period of that Loan) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent at its request quoted by the Reference Banks to leading banks in the London interbank market,

as of the Specified Time on the Quotation Day for the offering of deposits in Dollars and for a period comparable to the Interest Period for that Loan.

“Lien” means any mortgage, lien, pledge, encumbrance, charge or security interest.

“LMA” means the Loan Market Association.

“Loan” means a Tranche A Loan or a Tranche B Loan as the context requires.

“Lux Holdco” means Bristol-Myers Squibb Luxembourg S.à.R.L.

“Lux Holdco Note” means the Euro denominated senior note due November 7, 2014, the form, substance, terms and conditions of which are set forth in the Lux Holdco Note Agreement.

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“Lux Holdco Note Agreement” means the Note Agreement dated as of November 8, 2002 as amended on 28 March 2003, between Lux Holdco and Bristol-Myers Squibb Cayman Ltd.

“Majority Lenders” means:

(a) if there are no Loans then outstanding, a Lender or Lenders whose Commitments aggregate 66 ²/3% or more of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated 66 ²/3% or more of the Total Commitments immediately prior to the reduction); or

(b) at any other time, a Lender or Lenders whose participations in the Loans then outstanding aggregate 66 ²/3% or more of all the Loans then outstanding.

“Mandatory Cost” means the percentage rate per annum calculated by the Agent in accordance with Schedule 4 (Mandatory Cost formula).

“Margin” means, at any time, the rate set out opposite the then applicable Ratings listed in the table below, as determined subject to paragraphs (a) to (d) below:

Ratings (Moody’s / S&P)	Margin (per cent. per annum)
A2 / A or higher	0.25
A3 / A -	0.30
Baa1 / BBB+ or lower	0.35

(a) If the Ratings Agencies do not provide equivalent Ratings, only the highest Rating will be used to calculate the Margin.

(b) If only one Rating Agency provides a Rating, that Rating will be used to calculate the Margin.

(c) If an Event of Default has occurred and is continuing or no Ratings are available, the Margin will be 0.35 per cent. per annum.

(d) Any change in the Margin shall take effect in relation to any Loan made or any Interest Period commencing on or after the date falling one Business Day after the relevant change in the Ratings, provided that if such change in a Rating occurs on the first day of an Interest Period, the corresponding change in the Margin shall be effective as of that date.

“Margin Regulations” means Regulations T, U and X of the Board as from time to time in effect, and all official rulings and interpretations thereunder or thereof.

“Market Disruption Event” has the meaning given to it in Clause 10.2 (Market disruption).

“Material Adverse Effect” means a material adverse effect on the business, operations, properties or financial condition of the BMS Group taken as a whole or, where the context so requires, a material adverse effect on the business, operations, properties or financial condition of the NL Holdco Group taken as a whole.

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“Material Asset” means

(a) any manufacturing facility, or portion thereof, owned or leased by the Parent Guarantor or any Subsidiary which, in the opinion of the Board of Directors of the Parent Guarantor, is of material importance to the business of the Parent Guarantor 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 depreciation) is less than 2% of Consolidated Net Tangible Assets; and

(b) any shares of capital stock or indebtedness of any Subsidiary owning any such manufacturing facility.

As used in this definition “manufacturing facility” means property, plant and equipment used for actual manufacturing and for activities directly related to manufacturing, and it excludes sales offices, research facilities and facilities used only for warehousing, distribution or general administration.

“Maturity” means, when used in respect of any Security, the date on which the principal of such Security becomes due and payable as provided therein or in the Indenture, whether on a date fixed for such repayment pursuant to such Security, at the date specified in such Security as the fixed date on which the principal of such Security or such instalment of principal or interest is due and payable thereof or by declaration of acceleration, call for redemption or otherwise.

“Month” means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

(a) (subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;

(b) if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and

(c) if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end.

The above rules (a), (b) and (c) will only apply to the last Month of any period.

“Moody’s” means Moody’s Investors Service, Inc. or any successor thereto.

“NL Holdco Cash Flow” has the meaning given to it in Clause 20.1 (Primary Guarantor Financial Covenants).

“NL Holdco Group” means the Primary Guarantor and its subsidiaries from time to time.

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“NL Holdco Group Net Indebtedness” has the meaning given to it in Clause 20.1 (Primary Guarantor Financial Covenants).

“NL Holdco Group New Indebtedness” has the meaning given to it in Clause 20.1 (Primary Guarantor Financial Covenants).

“NL Holdco Intercompany Indebtedness” has the meaning given to it in Clause 20.1 (Primary Guarantor Financial Covenants).

“Obligor” means the Borrower or a Guarantor.

“Original Issue Discount Security” means (i) any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof, and (ii) any other Security deemed to be an Original Issue Discount Security for United States Federal income tax purposes.

“Original Obligor” means the Borrower or an Original Guarantor.

“Parent Guarantor” means Bristol-Myers Squibb Company, a Delaware corporation whose registered office is at CT Corporation, 1209 Orange Street, Wilmington, DE, U.S.A..

“Parent Guarantor Quarter Date” has the meaning given to it in Clause 20.2 (Parent Guarantor and Borrower Financial Covenants).

“Participating Member State” means any member state of the European Communities that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union.

“Party” means a party to this Agreement.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan as defined in Section 4001(a)(3) of ERISA), subject to the provisions of Title IV of ERISA or Section 412 of the Code that is maintained for current or former employees, or any beneficiary thereof, of the Parent Guarantor or any ERISA Affiliate.

“Prepayment Percentage” has the meaning given to it in Clause 7.5 (Mandatory Prepayment).

“Prepayment Threshold” has the meaning given to it in Clause 7.5 (Mandatory Prepayment).

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“Primary Guarantor” means BMS Pharmaceuticals Netherlands Holdings B.V., a company incorporated under the laws of the Netherlands whose registered office is at Vijzelmolenlaan 9, 3447 GX, Woerden, The Netherlands.

“Primary Guarantor Quarter Date” has the meaning given to it in Clause 20.1 (Primary Guarantor Financial Covenants).

“Protected Party” has the meaning given to it in Clause 12.1 (Tax Definitions).

“Qualifying NL Holdco Notes” means unsubordinated indebtedness owed by the Primary Guarantor to the Borrower or a Designated Finance Subsidiary.

“Quotation Day” means, in relation to any period for which an interest rate is to be determined, two Business Days before the first day of that period unless market practice differs in the Relevant Interbank Market in which case the Quotation Day will be determined by the Agent in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).

“Rating Agencies” means Moody’s and S&P.

“Ratings” means the ratings from time to time established by the Rating Agencies for senior, unsecured, non-credit-enhanced long-term debt of the Parent Guarantor.

“Reference Banks” means the principal London offices of BNP Paribas, The Royal Bank of Scotland plc and Deutsche Bank AG or such other banks as may be appointed by the Agent in consultation with the Borrower.

“Regulation FD” means Regulation FD promulgated by the SEC.

“Relevant Interbank Market” means the London interbank market.

“Repayment Date” means the Tranche A Repayment Date or the Tranche B Repayment Date as the context requires.

“Repeating Representations” means each of the representations set out in Clauses 18.1 (Organisation; Powers), 18.2 (Authorisations), 18.3 (Enforceability), 18.4 (Governmental Approvals), 18.8 (Federal Reserve Regulations) and 18.14 (Investment and Holding Company Status).

“Resignation Letter” means a letter substantially in the form set out in Schedule 7 (Form of Resignation Letter).

“Restricted Payment” means, as to any Person, any dividend or other distribution (whether in cash, securities or other property) with respect to any shares of any class of capital stock or other equity interests of such Person, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such shares of capital stock or other equity interests of such Person or any option, warrant or other right to acquire any such shares of capital stock or other equity interests of such Person.

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“Restricted Property” means:

(a) any manufacturing facility, or portion thereof, owned or leased by the Parent Guarantor or any Subsidiary and located within the continental United States of America which, in the opinion of the Board of Directors of the Parent Guarantor, is of material importance to the business of the Parent Guarantor 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 depreciation) is less than 2% of Consolidated Net Tangible Assets; and

(b) any shares of capital stock or indebtedness of any Subsidiary owning any such manufacturing facility.

As used in this definition “manufacturing facility” means property, plant and equipment used for actual manufacturing and for activities directly related to manufacturing, and it excludes sales offices, research facilities and facilities used only for warehousing, distribution or general administration.

“S&P” means Standard & Poor’s Ratings Group or any successor thereto.

“Sale and Leaseback Transaction” means any arrangement with any Person pursuant to which the Parent Guarantor or any Subsidiary leases any Restricted Property that has been or is to be sold or transferred by the Parent Guarantor or the Subsidiary to such Person, other than:

(a) temporary leases for a term, including renewals at the option of the lessee, of not more than three years;

(b) leases between the Parent Guarantor and a Subsidiary or between Subsidiaries;

(c) leases of Restricted Property executed by the time of, or within 12 months after the latest of, the acquisition, the completion of construction or improvement, or the commencement of commercial operation, of such Restricted Property; and

(d) arrangements pursuant to any provision of law with an effect similar to that under former Section 168(f)(8) of the Internal Revenue Code of 1954 of the United States.

“Screen Rate” means the British Bankers’ Association Interest Settlement Rate for Dollars for the relevant period, displayed on the appropriate page of the Reuters screen. If the agreed page is replaced or service ceases to be available, the Agent may specify a reasonable alternative page or service displaying the appropriate rate after consultation with the Borrower and the Lenders.

“SEC” means the Securities and Exchange Commission of the United States.

“Security” shall mean any note, bond, debenture, or any other evidences of indebtedness, of any series authenticated and delivered from time to time under the Indenture. “Securities” shall be construed accordingly.

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“Selection Notice” means a notice substantially in the form set out in Part 2 of Schedule 3 (Requests) given in accordance with Clause 9 (Interest Periods).

“Share Issue” has the meaning given to it in Clause 7.5 (Mandatory Prepayment).

“Share Issue Proceeds” has the meaning given to it in Clause 7.5 (Mandatory Prepayment).

“Specified Time” means a time determined in accordance with Schedule 9 (Timetables).

“subsidiary” means with respect to any Person (the “parent”) at any date:

(a) for the purposes of Clauses 21.8 (Encumbrances on Restricted Properties securing debt) and 21.9 (Limitation on Sale and Leaseback Transactions) only, any Person, the majority of the outstanding Voting Stock of which is owned, directly or indirectly, by the parent or one or more subsidiaries of the parent of such Person; and

(b) for all other purposes under this Agreement, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held.

“Subsidiary” means a subsidiary of the Parent Guarantor.

“Tax” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

“Tax Credit” has the meaning given to it in Clause 12.1 (Tax Definitions).

“Tax Deduction” has the meaning given to it in Clause 12.1 (Tax Definitions).

“Tax Payment” has the meaning given to it in Clause 12.1 (Tax Definitions).

“Third Parties Act” has the meaning given to it in Clause 1.3 (Third party rights).

“Total Commitments” means the aggregate of the Tranche A Total Commitments and the Tranche B Total Commitments, being $2,500,000,000 at the date of this Agreement.

“Total Net Indebtedness of the Borrower and the Designated Finance Subsidiaries” has the meaning given to it in Clause 20.2 (Parent Guarantor and Borrower Financial Covenants).

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“Tranche” means Tranche A or Tranche B, as the context requires.

“Tranche A” means a $2,000,000,000 tranche of the Facility.

“Tranche A Availability Period” means the period from and including the date of this Agreement to and including the date falling 90 days after the date of this Agreement.

“Tranche A Available Commitment” means, in relation to a Lender, such Lender’s Available Commitment with respect to Tranche A.

“Tranche A Commitment” means:

(a) in relation to an Original Lender, the amount set opposite its name under the heading “Tranche A Commitment” in Part 2 of Schedule 1 (The Original Parties) and the amount of any other Tranche A Commitment transferred to it under this Agreement; and

(b) in relation to any other Lender, the amount of any Tranche A Commitment transferred to it under this Agreement, to the extent not cancelled, reduced or transferred by it under this Agreement.

“Tranche A Loan” means a Loan made under Tranche A or the principal amount outstanding for the time being of that Loan.

“Tranche A Repayment Date” means the date falling on the fifth anniversary of the date of this Agreement.

“Tranche A Total Commitments” means the aggregate for the time being of the Lenders’ Tranche A Commitments, being $2,000,000,000 at the date of this Agreement.

“Tranche B” means a $500,000,000 tranche of the Facility.

“Tranche B Availability Period” means the period from and including the date of this Agreement to and including 31 December 2005.

“Tranche B Available Commitment” means, in relation to a Lender, such Lender’s Available Commitment with respect to Tranche B.

“Tranche B Commitment” means:

(a) in relation to an Original Lender, the amount set opposite its name under the heading “Tranche B Commitment” in Part 2 of Schedule 1 (The Original Parties) and the amount of any other Tranche B Commitment transferred to it under this Agreement; and

(b) in relation to any other Lender, the amount of any Tranche B Commitment transferred to it under this Agreement, to the extent not cancelled, reduced or transferred by it under this Agreement.

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“Tranche B Loan” means a Loan made under Tranche B or the principal amount outstanding for the time being of that Loan.

“Tranche B Repayment Date” means the date falling on the second anniversary of the date of this Agreement.

“Tranche B Total Commitments” means the aggregate for the time being of the Lenders’ Tranche B Commitments, being $500,000,000 at the date of this Agreement.

“Transactions” means the execution and delivery by each Obligor of the Finance Documents to which it is a party, the performance by each Obligor of the Finance Documents to which it is a party, the borrowing of the Loans and the use and proceeds thereof.

“Transfer Certificate” means a certificate substantially in the form set out in Schedule 5 (Form of Transfer Certificate) or any other form agreed between the Agent and the Borrower.

“Transfer Date” means, in relation to a transfer, the later of:

(a) the proposed Transfer Date specified in the Transfer Certificate; and

(b) the date on which the Agent executes the Transfer Certificate.

“Unpaid Sum” means any sum due and payable but unpaid by an Obligor under the Finance Documents.

“Utilisation” means a utilisation of the Facility.

“Utilisation Date” means the date of a Utilisation, being the date on which the relevant Loan is to be made.

“Utilisation Request” means a notice substantially in the form set out in Part 1 of Schedule 3 (Requests).

“Value” means with respect to a Sale and Leaseback Transaction, an amount equal to the present value of the lease payments with respect to the term of the lease remaining on the date on which the amount is being determined, without regard to any renewal or extension options contained in the lease, discounted by the weighted average interest rate on the Securities of all series (including the effective interest rate on any Original Issue Discount Securities) which are outstanding on the effective date of such Sale and Leaseback Transaction and have the benefit of Section 1007 of the Indenture under which the Securities are issued.

“VAT” means value added tax as provided for in the Value Added Tax Act 1994 or any regulations promulgated thereunder or any Tax of a similar nature.

“Voting Stock” means, as applied to the stock of any corporation, stock of any class or classes (however designated) having by the terms thereof ordinary voting power to elect a majority of the members of the board of directors (or other governing body) of such corporation other than stock having such power only by reason of the happening of a contingency.

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1.2 Construction

(a) Unless a contrary indication appears, any reference in this Agreement to:

(i) the “Agent”, an “Arranger”, any “Finance Party”, any “Lender”, any “Obligor” or any “Party” shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

(ii) “assets” includes present and future properties, revenues and rights of every description;

(iii) a “Finance Document” or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended or novated;

(iv) “indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

(v) a “regulation” includes any regulation, rule or official directive request or guideline (whether or not having the force of law but, if not having the force of law, being of a type which any person to which it applies is expected or required to comply) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other similar authority or organisation;

(vi) a provision of law is a reference to that provision as amended or re-enacted; and

(vii) a time of day is a reference to London time.

(b) Section, Clause and Schedule headings are for ease of reference only.

(c) Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

(d) A Default (including an Event of Default) is “continuing” if it has not been remedied or waived.

1.3 Third party rights

(a) Unless expressly provided to the contrary in a Finance Document a person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 (the “Third Parties Act”) to enforce or to enjoy the benefit of any term of this Agreement.

(b) Notwithstanding any term of any Finance Document, the consent of any person who is not a Party is not required to rescind or vary this Agreement at any time.

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2. THE FACILITY

2.1 The Facility

Subject to the terms of this Agreement, the Lenders make available to the Borrower a Dollar term loan facility divided into:

(a) Tranche A which is available during the Tranche A Availability Period in an aggregate amount equal to the Tranche A Total Commitments; and

(b) Tranche B which is available during the Tranche B Availability Period in an aggregate amount equal to the Tranche B Total Commitments.

2.2 Finance Parties’ rights and obligations

(a) The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.

(b) The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor shall be a separate and independent debt.

(c) A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.

3. PURPOSE

3.1 Purpose

The Borrower shall apply all amounts borrowed by it under the Facility towards the general corporate purposes of the BMS Group.

3.2 Monitoring

No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.

4. CONDITIONS OF UTILISATION

4.1 Initial conditions precedent

The Borrower may not deliver a Utilisation Request unless the Agent has received all of the documents and other evidence listed in Part 1 of Schedule 2 (Conditions precedent) in form and substance satisfactory to the Agent acting reasonably. The Agent shall notify the Borrower and the Lenders promptly upon being so satisfied.

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4.2 Further conditions precedent

The Lenders will only be obliged to comply with Clause 5.4 (Lenders’ participation) if:

(a) on the date of the Utilisation Request and on the proposed Utilisation Date no Default is continuing or will result from the proposed Loan; and

(b) in the case of any Utilisation, on the date of the Utilisation Request, the representations set out in Clauses 18.1 (Organisation; Powers), 18.2 (Authorisations), 18.3 (Enforceability), 18.4 (Governmental Approvals), 18.5(a) (Financial Statements), 18.7 (No filing or stamp taxes), 18.8 (Federal Reserve Regulations), 18.9 (Use of Proceeds), 18.10 (Taxes), 18.13 (Properties), 18.14 (Investment and Holding Company Status), 18.15 (Ownership and Status of Designated Finance Subsidiaries), 18.16 (Pari Passu Ranking) and 18.17 (Ranking of Qualifying NL Holdco Notes) are true in all material respects (or, in the case of a representation which is already qualified as to materiality, it is true in all respects).

4.3 Maximum number of Loans

(a) The Borrower may not deliver a Utilisation Request if as a result of the proposed Utilisation more than five Loans would be outstanding.

(b) The Borrower may not request that a Loan be divided if, as a result of the proposed division, more than five Loans would be outstanding.

5. UTILISATION

5.1 Delivery of a Utilisation Request

The Borrower may utilise the Facility by delivery to the Agent of a duly completed Utilisation Request not later than the Specified Time.

5.2 Completion of a Utilisation Request

(a) Each Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:

(i) the proposed Utilisation Date is a Business Day within the Availability Period for the Tranche under which the Utilisation is to be made;

(ii) the currency and amount of the Utilisation comply with Clause 5.3 (Currency and amount);

(iii) the proposed Utilisation is in respect of either Tranche A or Tranche B so that each Utilisation Request and Utilisation may only be in respect of a single Tranche; and

(iv) the proposed Interest Period complies with Clause 9 (Interest Periods).

(b) Only one Loan may be requested in each Utilisation Request.

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5.3 Currency and amount

(a) The currency specified in a Utilisation Request must be Dollars.

(b) The amount of the proposed Loan must be an amount which is not more than the Available Facility and which is a minimum of $10,000,000 and an integral multiple of $1,000,000 or, if less, the Available Facility.

5.4 Lenders’ participation

(a) If the conditions set out in this Agreement have been met, each Lender shall make its participation in each Loan available by the Utilisation Date through its Facility Office.

(b) The amount of each Lender’s participation in each Loan will be equal to the proportion borne by its Available Commitment to the Available Facility immediately prior to making the Loan.

(c) The Agent shall notify each Lender of the amount of each Loan and the amount of its participation in that Loan by the Specified Time.

5.5 Cancellation following Availability Period

(a) At 5 p.m. on the last day of the Tranche A Availability Period, the Tranche A Available Commitment of each Lender shall be cancelled and reduced to zero.

(b) At 5 p.m. on the last day of the Tranche B Availability Period, the Tranche B Available Commitment of each Lender shall be cancelled and reduced to zero.

6. REPAYMENT

6.1 Repayment of Loans

The Borrower shall, on the relevant Repayment Date, repay:

(a) all Tranche A Loans in full, together with all unpaid interest accrued thereon; and

(b) all Tranche B Loans in full, together with all unpaid interest accrued thereon.

6.2 Reborrowing

The Borrower may not reborrow any part of the Facility which is repaid.

7. PREPAYMENT AND CANCELLATION

7.1 Illegality

(a) If it becomes unlawful in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in any Loan that Lender shall promptly notify the Agent upon becoming aware of that event. Following such notification having been given, that Lender may require either or both of the following:

(i) the Tranche A Commitment and Tranche B Commitment of that Lender be immediately cancelled; or

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(ii) the Borrower repay that Lender’s participation in the Loans on the last day of the Interest Period for each Loan occurring after the Agent has notified the Borrower or, if earlier, the date specified by the Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law).

(b) If a Lender requires repayment in accordance with Clause 7.1(a)(ii) above, the Borrower shall elect to either:

(i) repay that Lender’s participation in accordance with the terms set out in that Clause; or

(ii) replace that Lender in accordance with paragraph (b) of Clause 7.4 (Right of repayment and cancellation in relation to a single Lender) on or before the date for repayment under Clause 7.1(a)(ii) in relation to each Loan.

(c) If it becomes unlawful in any applicable jurisdiction for the Borrower to perform any of its material obligations as contemplated by this Agreement:

(i) the Borrower shall promptly notify the Agent upon becoming aware of that event; and

(ii) the Borrower shall repay each Loan made to it on the last day of the Interest Period for that Loan occurring after the Agent has notified the Lenders or, if earlier, the last day of any applicable grace period permitted by law.

7.2 Voluntary cancellation

The Borrower may, if it gives the Agent not less than three Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (but, if in part, being a minimum amount of $5,000,000) of the Available Facility in respect of Tranche A or Tranche B as specified in such notice. Any cancellation under this Clause 7.2 shall reduce the Tranche A Commitment or Tranche B Commitment of the Lenders rateably.

7.3 Voluntary prepayment of Loans

(a) The Borrower may, if it gives the Agent not less than three Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of any Loan (but, if in part, being an amount that reduces the amount of the Loan by a minimum amount of $5,000,000).

(b) A Loan may be prepaid before the last day of the relevant Tranche’s Availability Period if at the same time the Commitments of the Lenders are cancelled in the same or a greater amount but otherwise a Loan may only be prepaid after the last day of the relevant Tranche’s Availability Period.

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7.4 Right of repayment and cancellation in relation to a single Lender

(a) If:

(i) any sum payable or which will become payable on the next date on which the Borrower is obliged to pay an amount of interest pursuant to Clause 8.2 (Payment of interest) to any Lender by an Obligor is or will be required to be increased under paragraph (c) of Clause 12.2 (Tax gross-up); or

(ii) the Borrower receives a notice from the Agent under Clause 12.3 (Tax indemnity) or Clause 13.1 (Increased costs); or

(iii) any Lender notifies the Agent of its Additional Cost Rate under paragraph 3 of Schedule 4 (Mandatory Cost formula),

the Borrower may, while (in the case of paragraph (i) above) the circumstance giving rise to such increase continues, (in the case of paragraph (ii) above) at any time after the receipt of the notice, or (in the case of paragraph (iii) above) if that Additional Cost Rate is greater than zero, give the Agent notice of cancellation of the Tranche A Commitment and Tranche B Commitment of that Lender and its intention to procure the repayment of that Lender’s participation in the Loans.

(b) The Borrower may, in the circumstances set out in paragraph (a) above or pursuant to paragraph (b) of Clause 7.1 (Illegality), replace an Existing Lender (as defined in Clause 23 (Changes to the Lenders)) with one or more other Lenders (which need not be Existing Lenders) which have agreed to purchase all or part of the Commitment and Loans of that Existing Lender pursuant to an assignment or transfer in accordance with the provisions of Clause 23, on condition that:

(i) each assignment or transfer under this paragraph (b) shall be arranged by the Borrower (with such reasonable assistance from the Existing Lender as the Borrower may reasonably request); and

(ii) no Existing Lender shall be obliged to make any assignment or transfer pursuant to this paragraph (b) unless and until it has received payment from the New Lender (as defined in Clause 23 (Changes to the Lenders) or New Lenders in an aggregate amount equal to the outstanding principal amount of the Loans owing to the Existing Lender, together with accrued and unpaid interest and fees (including, without limitation, any Break Costs to the date of payment) and all other amounts payable to the Existing Lender under this Agreement.

(c) On receipt of a notice from the Borrower referred to in paragraph (a) above, the Tranche A Commitment and Tranche B Commitment of that Lender shall immediately be cancelled and reduced to zero.

(d) Unless the Borrower has replaced an Existing Lender in accordance with paragraph (b) above, on the last day of each Interest Period which ends after the Borrower has given notice under paragraph (a) above (or, if earlier, the date specified by the Borrower in that notice), the Borrower shall repay that Lender’s participation in all outstanding Loans.

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(e) Paragraphs (a) and (b) do not in any way limit the obligations of any Finance Party under Clause 15.1 (Mitigation)

7.5 Mandatory Prepayment

(a) The Borrower shall prepay Loans at the times contemplated by paragraph (b) in an amount equal to:

(i) any Borrowing Proceeds;

(ii) the Prepayment Percentage of any Disposal Proceeds;

(iii) the Prepayment Percentage of any Insurance Proceeds; and

(iv) the Prepayment Percentage of any Share Issue Proceeds.

(b) A prepayment made under paragraph (a) shall be applied in prepayment of Loans within ten Business Days of receipt of Borrowing Proceeds, Disposal Proceeds, Insurance Proceeds, or Share Issue Proceeds (as the case may be), except that no such prepayment shall be required with respect to Disposal Proceeds or Insurance Proceeds expected to be Excluded Disposal Proceeds or Excluded Insurance Proceeds until 10 Business Days after the applicable 12 month period (or such longer period) referred to in the definition thereof. A prepayment under paragraph (a) shall prepay the Loans in amounts which will reduce each of the Tranche A Loans and each of the Tranche B Loans by the same proportion.

For the purposes of this Clause 7.5:

“Borrowing Proceeds” means the cash proceeds of any Debt other than Excluded Debt received by the Borrower or any member of the NL Holdco Group after the Closing Date after deducting any reasonable expenses in relation to that Debt which are incurred by the Borrower or such member of the NL Holdco Group.

“Disposal” means a sale, lease, licence, transfer, loan or other disposal by the Borrower or any member of the NL Holdco Group of any Material Assets to any Person other than a member of the NL Holdco Group (whether by a voluntary or involuntary single transaction or series of transactions) but excluding sales in the ordinary course of the business.

“Disposal Proceeds” means the cash consideration in excess of the Prepayment Threshold received by the Borrower or any member of the NL Holdco Group for any Disposal except for Excluded Disposal Proceeds and after deducting:

(a) reasonable expenses incurred by the Borrower or the relevant member of the NL Holdco Group with respect to that Disposal; and

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(b) any Tax incurred and required to be paid by the seller in connection with that Disposal (as reasonably determined by the seller, on the basis of existing rates and taking account of any available credit, deduction or allowance).

“Excluded Debt” means Debt:

(a) incurred under the Facility;

(b) owed to any member of the BMS Group; or

(c) not otherwise prohibited by the Facility.

“Excluded Disposal Proceeds” means any consideration received for any Disposal which is applied or is committed to be so applied within 12 months of the date of receipt of such consideration to replace the asset disposed of or invest in the purchase of assets to be used by the NL Holdco Group.

“Excluded Insurance Proceeds” means any proceeds of an insurance claim which are applied:

(a) to meet a third party claim; or

(b) to the replacement, reinstatement and/or repair of the asset in respect of which the relevant insurance claim was made,

within 12 months of the date of receipt by the Borrower or any member of the NL Holdco Group of such Excluded Insurance Proceeds, or such longer period as the Majority Lenders may agree.

“Insurance Proceeds” means the cash proceeds in excess of the Prepayment Threshold of any insurance claim in relation to a Material Asset received by the Borrower or any member of the NL Holdco Group except for Excluded Insurance Proceeds and after deducting any reasonable expenses in relation to that claim which are incurred by the Borrower or the relevant member of the NL Holdco Group.

“Prepayment Percentage” means fifty per cent.

“Prepayment Threshold” means $1,000,000,000.

“Share Issue” means an issue of ordinary shares by the Borrower or the Primary Guarantor (when making a Share Issue, each being an “Issuer”), paid for in full cash upon issue and which by their terms are not redeemable and where such shares are of the same class and on the same terms as those initially issued by the Issuer but excluding shares issued to any member of the BMS Group.

“Share Issue Proceeds” means the cash consideration in excess of the Prepayment Threshold received by an Issuer for any Share Issue after deducting:

(a) reasonable expenses incurred by the Issuer with respect to that Share Issue; and

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(b) any Tax incurred and required to be paid by the Issuer in connection with that Share Issue (as reasonably determined by the Issuer, on the basis of existing rates and taking account of any available credit, deduction or allowance).

7.6 Restrictions

(a) Any notice of cancellation or prepayment given by any Party under this Clause 7 (Prepayment and Cancellation) shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.

(b) Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.

(c) The Borrower may not reborrow any part of the Facility which is prepaid.

(d) The Borrower shall not repay or prepay all or any part of the Loans or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.

(e) No amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.

(f) If the Agent receives a notice under this Clause 7 (Prepayment and Cancellation) it shall promptly forward a copy of that notice to either the Borrower or the affected Lender, as appropriate.

8. INTEREST

8.1 Calculation of interest

The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:

(a) Margin;

(b) LIBOR; and

(c) Mandatory Cost, if any.

8.2 Payment of interest

The Borrower shall pay accrued interest on each Loan on the last day of each Interest Period (and, if the Interest Period is longer than six Months, on the dates falling at six monthly intervals after the first day of the Interest Period).

8.3 Default interest

(a) If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date

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up to the date of actual payment (both before and after judgment) at a rate which, subject to paragraph (b) below, is 1 per cent. higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Agent (acting reasonably). Any interest accruing under this Clause 8.3 shall be immediately payable by the Obligor on demand by the Agent.

(b) If any overdue amount consists of all or part of a Loan which became due on a day which was not the last day of an Interest Period relating to that Loan:

(i) the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Loan; and

(ii) the rate of interest applying to the overdue amount during that first Interest Period shall be 1 per cent. higher than the rate which would have applied if the overdue amount had not become due.

(c) Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

8.4 Notification of rates of interest

The Agent shall promptly notify the Lenders and the Borrower of the determination of a rate of interest under this Agreement.

9. INTEREST PERIODS

9.1 Selection of Interest Periods

(a) The Borrower may select an Interest Period for a Loan in the Utilisation Request for that Loan or (if the Loan has already been borrowed) in a Selection Notice.

(b) Each Selection Notice for a Loan is irrevocable and must be delivered to the Agent by the Borrower not later than the Specified Time.

(c) If the Borrower fails to deliver a Selection Notice to the Agent in accordance with paragraph (b) above, the relevant Interest Period will be one Month.

(d) Subject to this Clause 9, the Borrower may select an Interest Period of 1, 2, 3 or 6 Months or any other period agreed between the Borrower and the Agent (acting on the instructions of all the Lenders).

(e) An Interest Period for a Tranche A Loan shall not extend beyond the Tranche A Repayment Date and an Interest Period for a Tranche B Loan shall not extend beyond the Tranche B Repayment Date.

(f) Each Interest Period for a Loan shall start on the Utilisation Date or (if already made) on the last day of its preceding Interest Period.

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9.2 Non-Business Days

If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

9.3 Consolidation and division of Loans

(a) Subject to paragraph (b) below, if two or more Interest Periods:

(i) relate to Loans made under the same Tranche; and

(ii) end on the same date;

those Loans will, unless the Borrower specifies to the contrary in the Selection Notice for the next Interest Period, be consolidated into, and treated as, a single Loan on the last day of the Interest Period.

(b) Subject to Clause 4.3 (Maximum number of Loans) and Clause 5.3 (Currency and amount), if the Borrower requests in a Selection Notice that a Loan be divided into two or more Loans, that Loan will, on the last day of its Interest Period, be so divided into the amounts specified in that Selection Notice, being an aggregate amount equal to the amount of the Loan immediately before its division.

10. CHANGES TO THE CALCULATION OF INTEREST

10.1 Absence of quotations

Subject to Clause 10.2 (Market disruption), if LIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by the Specified Time on the Quotation Day, the applicable LIBOR shall be determined on the basis of the quotations of the remaining Reference Banks.

10.2 Market disruption

(a) If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate of interest on each Affected Lender’s share of that Loan for the Interest Period shall be the rate per annum which is the sum of:

(i) the Margin;

(ii) the rate notified to the Agent by that Affected Lender as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that Affected Lender of funding its participation in that Loan from whatever source it may reasonably select; and

(iii) the Mandatory Cost, if any, applicable to that Affected Lender’s participation in the Loan.

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(b) In this Agreement “Market Disruption Event” means:

(i) at or about noon on the Quotation Day for the relevant Interest Period the Screen Rate is not available and none or only one of the Reference Banks supplies a rate to the Agent to determine LIBOR for Dollars for the relevant Interest Period; or

(ii) before close of business in London on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in a Loan exceed 50 per cent. of that Loan) that the cost to it or them of obtaining matching deposits in the Relevant Interbank Market would be in excess of LIBOR.

(c) In this Agreement “Affected Lender” means:

(i) in relation to a Market Disruption Event in paragraph (b)(i) above, all the Lenders; and

(ii) in relation to a Market Disruption Event in paragraph (b)(ii) above, those Lenders which notify the Agent under that paragraph.

10.3 Alternative basis of interest or funding

(a) If a Market Disruption Event occurs and the Agent or the Borrower so requires, the Agent and the Borrower shall enter into negotiations (for a period of not more than thirty days) with a view to agreeing a substitute basis for determining the rate of interest.

(b) Any alternative basis agreed pursuant to paragraph (a) above shall, with the prior consent of all the Lenders and the Borrower, be binding on all Parties.

10.4 Break Costs

(a) The Borrower shall, within five Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of a Loan or Unpaid Sum being paid by the Borrower on a day other than the last day of an Interest Period for that Loan or Unpaid Sum.

(b) Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue and showing their calculation.

11. FEES

11.1 Commitment fee

(a) No Commitment fee shall be payable in relation to Tranche A and no Commitment fee shall be payable in relation to Tranche B during the Tranche A Availability Period.

(b) The Borrower shall pay to the Agent (for the account of each Lender) a fee in relation to the Tranche B Commitments for the period commencing after the

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end of the Tranche A Availability Period until the expiry of the Tranche B Availability Period, at a rate equal to 35% of the applicable Margin on that Lender’s Available Commitment under Tranche B.

(c) The accrued Commitment fee is payable in arrear on the last day of each successive period of three Months which ends during the Tranche B Availability Period, on the last day of the Tranche B Availability Period and, if a Lender’s Tranche B Commitment is cancelled in full, on the amount of that cancelled Commitment at the time the cancellation is effective.

11.2 Agency fee

The Borrower shall pay to the Agent (for its own account) an agency fee in the amount and at the times agreed in a Fee Letter.

11.3 Other Fees

The Borrower shall pay to the Agent all other fees in an amount and at the times agreed in a Fee Letter.

12. TAX GROSS UP AND INDEMNITIES

12.1 Tax Definitions

(a) In this Agreement:

“Protected Party” means a Finance Party which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.

“Tax Credit” means a credit against, relief or remission for, or repayment of any Tax.

“Tax Deduction” means a deduction or withholding for or on account of Tax from a payment under a Finance Document.

“Tax Payment” means either the increase in a payment made by an Obligor to a Finance Party under Clause 12.2 (Tax gross-up) or a payment under Clause 12.3 (Tax indemnity).

(b) Unless a contrary indication appears, in this Clause 12 a reference to “determines” or “determined” means a determination made in the absolute discretion of the Person making the determination (acting in good faith).

12.2 Tax gross-up

(a) Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.

(b) The Borrower shall promptly upon becoming aware that the Borrower (or other Obligor, as appropriate) must make a Tax Deduction (or that there is any

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change in the rate or the basis of a Tax Deduction) notify the Agent accordingly. Similarly, a Lender shall promptly notify the Agent on becoming so aware in respect of a payment payable to that Lender. If the Agent receives such notification from a Lender it shall promptly notify the Borrower and that Obligor.

(c) If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required, provided, however, that the amount of the payment due from that Obligor shall not be increased to the extent that a Tax Deduction is attributable to any Finance Party’s failure to comply with Clause 12.2(f).

(d) If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

(e) Within thirty days of making any payment required in connection with a Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party entitled to the payment, the original, a duplicate original, or a duly certified copy of the receipts evidencing such payment or, if the practice of the relevant taxing authority is not to supply such receipts, evidence reasonably satisfactory to that Finance Party that any appropriate payment has been paid to the relevant taxing authority.

(f) Any Finance Party that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower (or other Obligor, as appropriate) is located, or any treaty to which such jurisdiction is a party, with respect to payments under a Finance Document shall deliver to the Borrower (or other Obligor, as appropriate) (with a copy to the Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Obligor as will permit such payments to be made without withholding or at a reduced rate, provided that such Finance Party is legally entitled to complete, execute and deliver such documentation and in such Finance Party’s reasonable judgement such completion, execution or submission would not materially prejudice the legal position of such Finance Party.

12.3 Tax indemnity

(a) The Borrower shall (within five Business Days of written demand by the Agent, which written demand shall be made within 60 days of the date that such Protected Party determines it has suffered a loss, liability or cost the subject of this Clause) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.

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(b) Any Protected Party making a claim under paragraph (a) above shall provide documentation satisfactory to the Borrower (or other Obligor, as appropriate), at the same time as the demand for Payment made by the Agent, acting reasonably, of such loss, liability or cost suffered, provided, however, that no Protected Party shall be required to make available any of its Tax returns (or any other information that it deems to be confidential or proprietary).

(c) Paragraph (a) above shall not apply:

(i) with respect to any Tax assessed on a Finance Party:

(A) under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or

(B) under the law of the jurisdiction in which that Finance Party’s Facility Office is located in respect of amounts received or receivable in that jurisdiction,

if that Tax is imposed on or calculated by reference to the net income received or receivable (or deemed to be received or receivable) by that Finance Party; or

(ii) with respect to any Tax assessed on a Finance Party that is attributable to such Finance Party’s failure to comply with Clause 12.2(f); or

(iii) with respect to a loss, liability or cost to the extent that it is compensated for by an increased payment under Clause 12.2 (Tax gross-up) or would be compensated but for a specific exclusion in that Clause.

(d) A Protected Party making, or intending to make a claim under paragraph (a) above shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall notify the Borrower.

(e) A Protected Party shall, on receiving a payment from an Obligor under this Clause 12.3, notify the Agent.

12.4 Tax Credit

If an Obligor makes a Tax Payment and the relevant Finance Party determines that:

(a) a Tax Credit is attributable either to an increased payment of which that Tax Payment forms part, or to that Tax Payment; and

(b) that Finance Party has obtained, utilised and retained that Tax Credit in whole or in part,

the Finance Party shall pay an amount to the Obligor which that Finance Party determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment, or the part of the Tax Payment referable to that part of the Tax Credit which has been obtained, utilised and retained by the Finance Party (as the case may be), not been required to be made by the Obligor.

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12.5 Stamp taxes

The Borrower shall within five Business Days of demand, pay and indemnify each Finance Party against any cost, loss or liability that such Finance Party incurs in the jurisdiction in which an Obligor is incorporated, organised, managed and controlled or considered to have its seat or otherwise has a connection (other than a connection as a result of entering into this Agreement, performing any obligations hereunder, receiving any payments hereunder or enforcing any rights hereunder) in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document in that jurisdiction other than in respect of an assignment, transfer, sub-participation or change in Facility Office (other than pursuant to Clause 15.1 (Mitigation)) by a Lender.

12.6 VAT

(a) All amounts set out, or expressed to be payable under a Finance Document by any Party to a Finance Party which (in whole or in part) constitute the consideration for VAT purposes shall be deemed to be exclusive of any amount in respect of any applicable VAT which is chargeable on such supply, and accordingly, subject to paragraph (c) below, if VAT is chargeable on any supply made by any Finance Party to any Party under a Finance Document, that Party shall pay to the Finance Party (in addition to and at the same time as paying the consideration) an amount equal to the amount of the VAT (and such Finance Party shall promptly provide an appropriate VAT invoice to such Party).

(b) If VAT is chargeable on any supply made by any Finance Party (the “Supplier”) to any other Finance Party (the “Recipient”) under a Finance Document, and any Party (the “Relevant Party”) is required by the terms of any Finance Document to pay an amount equal to the consideration for such supply to the Supplier (rather than being required to reimburse the Recipient in respect of that consideration), such Party shall also pay to the Supplier (in addition to and at the same time as paying such amount) an amount equal to the amount of such VAT. The Recipient will promptly pay to the Relevant Party an amount equal to any credit or repayment from the relevant tax authority which it reasonably determines relates to the VAT chargeable on that supply.

(c) Where a Finance Document requires any Party to reimburse a Finance Party for any costs or expenses, that Party shall also at the same time pay and indemnify the Finance Party against all amounts in respect of VAT incurred by the Finance Party in respect of the costs or expenses to the extent that the Finance Party reasonably determines that neither it nor any other member of the group of which it is a member for VAT purposes is entitled to credit or repayment from the relevant tax authority in respect of the VAT.

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13. INCREASED COSTS

13.1 Increased costs

(a) Subject to Clause 13.3 (Exceptions) the Borrower shall, within ten Business Days of a demand by the Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application by any government body or regulatory authority of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Agreement (in each case, whether or not having the force of law but, if not, being of a type with which that Finance Party or Affiliate is expected or required to comply).

(b) In this Agreement “Increased Costs” means:

(i) a reduction in the rate of return from the Facility or on a Finance Party’s (or its Affiliate’s) overall capital;

(ii) an additional or increased cost; or

(iii) a reduction of any amount due and payable under any Finance Document,

which is (a) material and (b) incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitment or funding or performing its obligations under any Finance Document.

13.2 Increased cost claims

(a) A Finance Party may not make a claim pursuant to Clause 13.1 (Increased costs) unless it has within sixty days notified the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrower of any such notification from a Finance Party.

(b) Each Finance Party shall provide a certificate confirming the amount of its Increased Costs and setting out the calculation of the amount in reasonable detail.

13.3 Exceptions

(a) Clause 13.1 (Increased costs) does not apply to the extent any Increased Cost is:

(i) attributable to a Tax Deduction required by law to be made by an Obligor;

(ii) attributable to a Market Disruption Event;

(iii) the subject of a claim under Clause 12.3 (Tax indemnity) (or would have been the subject of a claim under Clause 12.3 (Tax indemnity) but for any of the exclusions in paragraph (b) of Clause 12.3 (Tax indemnity));

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(iv) any of the types of cost dealt with by Schedule 4 (Mandatory Cost formula);

(v) attributable to the non-compliance by the relevant Finance Party or any of its Affiliates with any law or regulation; or

(vi) attributable to the application of or compliance with the International Covergence of Capital Measurement Standards published by the Basel Committee on Banking Supervision in June 2004, as such implementation or transposition is envisaged to take place as at the date of this Agreement (“Basel II”), or any implementation or transposition thereof, whether by an EC Directive or the FSA Integrated Prudential Sourcebook or other law or regulation, including (without limitation) any Increased Cost attributable to Pillar 2 (The Supervisory Review Process) of Basel II or to any change by a Finance Party from one method of calculating capital adequacy to another.

(b) In this Clause 13.3, a reference to a “Market Disruption Event” has the same meaning given to the term in Clause 10.2 (Market Disruption) and a reference to a “Tax Deduction” has the same meaning given to the term in Clause 12.1 (Tax Definitions).

14. OTHER INDEMNITIES

14.1 Indemnity to each Finance Party

(a) The Parent Guarantor agrees to indemnify the Agent, each Lender, each of their Affiliates and the directors, officers, employees and agents of the foregoing (each such Person being called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees and expenses, incurred by or asserted against any Indemnitee arising out of:

(i) the Transactions; or

(ii) any claim, litigation, investigation or proceeding relating to the Transactions, whether or not any Indemnitee is a party thereto; provided that:

(A) such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence or wilful misconduct of such Indemnitee; and

(B) such indemnity shall not apply to losses, claims, damages, liabilities or related expenses that result from disputes solely between Lenders.

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(b) The provisions of this Clause 14 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any investigation made by or on behalf of any Agent or any Lender. All amounts due under this Clause 14 shall be payable on written demand therefor.

14.2 Currency Indemnity

(a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given.

(b) The obligations of any Obligor in respect of any sum due to any Finance Party shall, notwithstanding any judgment in a currency (the “Judgment Currency”), other than the currency in which such sum is stated to be due hereunder (the “Agreement Currency”), be discharged only to the extent that, on the Business Day following receipt by the Finance Party of any sum adjudged to be so due in the Judgment Currency, the Finance Party may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency, if the amount of the Agreement Currency so purchased is less than the sum originally due to the Finance Party in the Agreement Currency, such Obligor agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Finance Party against such loss. The obligations of the Obligors contained in this Clause 14.2 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder.

14.3 Indemnity to the Agent

The Parent Guarantor shall within five Business Days of demand indemnify the Agent against any cost, loss or liability incurred by the Agent (acting reasonably) as a result of:

(a) investigating any event which it reasonably believes is a Default; or

(b) acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised by an Obligor.

15. MITIGATION BY THE LENDERS

15.1 Mitigation

(a) Each Finance Party shall, in consultation with the Borrower, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled

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pursuant to, any of Clause 7.1 (Illegality), Clause 12 (Tax gross-up and indemnities), Clause 13 (Increased costs) or Schedule 4 (Mandatory Cost formula) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.

(b) Paragraph (a) above does not in any way limit the obligations of any Obligor under the Finance Documents.

(c) Each Finance Party shall notify the Agent promptly upon becoming aware that any circumstances of the kind described in paragraph (a) above has arisen or may arise. The Agent shall notify the Borrower promptly of any such notification from a Finance Party.

15.2 Limitation of liability

(a) The Borrower shall indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 15.1 (Mitigation).

(b) A Finance Party is not obliged to take any steps under Clause 15.1 (Mitigation) if, in the opinion of that Finance Party (acting reasonably), to do so would be disadvantageous to it, provided that the incurring of any costs and expenses by a Finance Party as a result of any steps taken by it under Clause 15.1 (Mitigation) shall not be disadvantageous to such Finance Party for the purposes of this Clause 15.2(b).

16. COSTS AND EXPENSES

16.1 Transaction expenses, amendment and enforcement costs

The Parent Guarantor agrees to pay all reasonable out-of-pocket expenses incurred by the Arrangers or the Agent in connection with the entering into of the Finance Documents or in connection with any amendments, modifications or waivers of the provisions of the Finance Documents (including the reasonable fees, disbursements and other charges of a single counsel), or incurred by any of the Finance Parties in connection with the enforcement of their rights in connection with the Finance Documents or in connection with the Loans made thereunder, including the fees and disbursements of counsel to the Agent and, in the case of enforcement, each Finance Party.

17. GUARANTEE AND INDEMNITY

17.1 Guarantee and indemnity

Each Guarantor irrevocably and unconditionally jointly and severally:

(a) guarantees to each Finance Party punctual performance by the Borrower of all of its obligations under the Finance Documents;

(b) undertakes with each Finance Party that whenever the Borrower does not pay any amount when due under or in connection with any Finance Document, that Guarantor shall within three Business Days of demand pay that amount as if it was the principal obligor; and

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(c) indemnifies each Finance Party within three Business Days of demand against any cost, loss or liability suffered by that Finance Party if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which that Finance Party would otherwise have been entitled to recover.

17.2 Continuing guarantee

This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.

17.3 Reinstatement

If any payment by an Obligor or any discharge given by a Finance Party (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event:

(a) the liability of each Obligor shall continue as if the payment, discharge, avoidance or reduction had not occurred; and

(b) each Finance Party shall be entitled to recover the value or amount of that security or payment from each Obligor, as if the payment, discharge, avoidance or reduction had not occurred.

17.4 Waiver of defences

The obligations of each Guarantor under this Clause 17 (Guarantee and Indemnity) will not be affected by an act, omission, matter or thing which, but for this Clause, would reduce, release or prejudice any of its obligations under this Clause 17 (without limitation and whether or not known to it or any Finance Party) including:

(a) any time, waiver or consent granted to, or composition with, any Obligor or other Person;

(b) the release of any other Obligor or any other Person under the terms of any composition or arrangement with any creditor of any member of the BMS Group;

(c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other Person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

(d) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other Person;

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(e) any amendment (however fundamental) or replacement of a Finance Document or any other document or security;

(f) any unenforceability, illegality or invalidity of any obligation of any Person under any Finance Document or any other document or security; or

(g) any insolvency or similar proceedings.

17.5 Immediate recourse

Each Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any Person before claiming from that Guarantor under this Clause 17 (Guarantee and Indemnity). This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.

17.6 Appropriations

Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may:

(a) refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and

(b) hold in an interest-bearing suspense account any moneys received from any Guarantor or on account of any Guarantor’s liability under this Clause 17 (Guarantee and Indemnity).

17.7 Deferral of Guarantors’ rights

Whilst any amounts remain outstanding under or in connection with the Finance Documents and unless the Agent otherwise directs, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents:

(a) to be indemnified by an Obligor;

(b) to claim any contribution from any other guarantor of any Obligor’s obligations under the Finance Documents; and/or

(c) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by any Finance Party.

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17.8 Release of Guarantors’ right of contribution

If any Guarantor (a “Retiring Guarantor”) ceases to be a Guarantor in accordance with the terms of the Finance Documents then on the date such Retiring Guarantor ceases to be a Guarantor:

(a) that Retiring Guarantor is released by each other Guarantor from any liability (whether past, present or future and whether actual or contingent) to make a contribution to any other Guarantor arising by reason of the performance by any other Guarantor of its obligations under the Finance Documents; and

(b) each other Guarantor waives any rights it may have by reason of the performance of its obligations under the Finance Documents to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under any Finance Document or of any other security taken pursuant to, or in connection with, any Finance Document where such rights or security are granted by or in relation to the assets of the Retiring Guarantor.

17.9 Additional security

This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by any Finance Party.

17.10 Limitation on Dutch Guarantors

The obligations of any Guarantor incorporated in the Netherlands under this Agreement shall exclude and shall not be or be construed as any guarantee, indemnity or security, to the extent that this would be deemed “ultra vires” within the meaning of Section 2.7 of the Dutch Civil Code.

17.11 Limitation on Luxembourg Guarantors

The liabilities of each Guarantor incorporated in Luxembourg (a “Luxembourg Guarantor”), under this Clause 17 shall be limited, at any time, to a maximum aggregate amount equal to (i) the market value of the assets of such Luxembourg Guarantor at the moment when the guarantee created pursuant to this Clause 17 is enforced, determined in accordance with the accounting principles generally accepted in Luxembourg and having regard to the status of the Luxembourg Guarantor as a group company, whose assets are assets forming part of the BMS Group, by a Luxembourg réviseur d’entreprises appointed by the president of the Institut Luxembourgeois des Réviseurs d’Entreprises upon request by the Agent less (ii) all liabilities incurred from time to time, by such Luxembourg Guarantor as reflected from time to time in the books of such Luxembourg Guarantor (but for the avoidance of doubt excluding the liability of such Luxembourg Guarantor under this Agreement). No Luxembourg Guarantor shall secure liabilities pursuant to this Agreement which would result in such Luxembourg Guarantor not complying with Luxembourg financial assistance regulations as set forth in Luxembourg corporate law.

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18. REPRESENTATIONS

Each Obligor (except where certain Obligors are specified, in which case, each specified Obligor) makes the representations and warranties set out in this Clause 18 to each Finance Party on the date of this Agreement.

18.1 Organisation; Powers

(a) It is a corporation duly organised, validly existing and in good standing under the laws of the jurisdiction of its organisation.

(b) It has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted.

(c) It is qualified to do business in every jurisdiction where such qualification is required, except where the failure so to qualify would not result in a Material Adverse Effect in relation to the BMS Group.

(d) It has the corporate power and authority to execute and deliver this Agreement and any Finance Documents to which it is a party, to perform its obligations under this Agreement and (in relation to the Borrower) to borrow hereunder.

18.2 Authorisations

The Transactions:

(a) are within its corporate powers and have been duly authorized by all requisite corporate action; and

(b) will not:

(i) violate:

(A) any provision of any law, statute, rule or regulation (including, without limitation, the Margin Regulations);

(B) any provision of its certificate of incorporation or other constitutive documents or by-laws;

(C) any order of any Governmental Authority; or

(D) any provision of any indenture, agreement or other instrument to which it is a party or by which it or any of its property is or may be bound,

(ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any such indenture, agreement or other instrument referred to in Clause 18.2(b)(i)(D), or

(iii) result in the creation or imposition of any Lien over any of its property or assets,

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other than, in the case of paragraphs (i)(A), (i)(C), (i)(D), (ii) and (iii), any such violations, conflicts, breaches, defaults or Liens that, individually or in the aggregate, would not have a Material Adverse Effect in relation to the BMS Group.

18.3 Enforceability

Each Finance Document constitutes or, when executed and delivered, will constitute a legal, valid and binding obligation of each Obligor party thereto, enforceable in accordance with its terms (subject, as to enforceability, to applicable bankruptcy, insolvency, reorganisation, moratorium or other similar laws affecting creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity)).

18.4 Governmental Approvals

(a) No action, consent or approval of, registration or filing with or other action by any Governmental Authority located in Bermuda, Luxembourg, the Netherlands, the United Kingdom, or the United States of America is required in connection with the Transactions (other than those that have been obtained or made).

(b) No action, consent or approval of, registration or filing with or other action by any Governmental Authority (other than those referred to in paragraph (a)) is required in connection with the Transactions other than such action, consent, approval of registration or filing with or other action the absence of which would not have a Material Adverse Effect.

18.5 Financial Statements; No Material Adverse Change

(a) The Borrower has furnished to the Agent copies of the Parent Guarantor’s:

(i) audited consolidated financial statements for the years ended December 31, 2003 and December 31, 2004, respectively, which were included in its annual report on Form 10-K as filed with the SEC under the Exchange Act on March 4, 2005; and

(ii) unaudited consolidated financial statements for the quarter ended March 31, 2005 which were included in its quarterly report on Form 10-Q, as filed with the SEC under the Exchange Act on May 9, 2005.

Such financial statements present fairly, in all material respects, the financial condition and the results of operations of the Parent Guarantor and the Subsidiaries, taken as a whole, as of, and for accounting periods ending on, such dates in accordance with GAAP (subject, in the case of unaudited statements, to normal year-end audit adjustments and the absence of footnotes).

(b) Since December 31, 2004, there has been no Material Adverse Effect on the business, operations, properties or financial condition of the NL Holdco Group or the BMS Group, each taken as a whole; provided, that no representation or warranty is made with respect to matters disclosed in the most recent 10-K or in any 10-Q or current report on Form 8-K of the Parent Guarantor filed with the SEC under the Exchange Act subsequent to December 31, 2004.

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18.6 Material Litigation; Compliance with Laws.

(a) Except as disclosed in either the most recent 10-K or the most recent 10-Q of the Parent Guarantor, as of the date of this Agreement, there are no actions, proceedings or investigations filed or (to the knowledge of the Parent Guarantor) threatened against the Parent Guarantor or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal, which question the validity or legality of this Agreement, the Transactions or any action taken or to be taken pursuant to this Agreement and no order or judgment has been issued or entered restraining or enjoining the Parent Guarantor from the execution, delivery or performance of this Agreement nor is there any other action, proceeding or investigation filed or (to the knowledge of the Parent Guarantor) threatened against the Parent Guarantor or any Subsidiary in any court before any Governmental Authority or arbitration board or tribunal which would be reasonably likely to result in a Material Adverse Effect on the BMS Group.

(b) Neither the Parent Guarantor nor any Subsidiary is in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default would be reasonably likely to result in a Material Adverse Effect on the BMS Group.

18.7 No filing or stamp taxes

Under the law of the jurisdiction in which it is incorporated, organised, managed and controlled or considered to have its seat or otherwise has a connection (other than a connection as a result of entering into this Agreement, performing any obligations hereunder, receiving any payments hereunder or enforcing any rights hereunder) it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents.

18.8 Federal Reserve Regulations

No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose which entails a violation of, or which is inconsistent with, the provisions of the Margin Regulations.

18.9 Use of Proceeds

All proceeds of the Loans shall be used for the purposes referred to in Clause 3.1 (Purpose) of this Agreement.

18.10 Taxes

It has filed or caused to be filed all Tax returns which are required to be filed by it, and has paid or caused to be paid all Taxes shown to be due and payable on such

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returns or on any assessments received by it, other than any Taxes or assessments the validity of which is being contested in good faith by appropriate proceedings, and with respect to which appropriate accounting reserves have, to the extent required by GAAP, been set aside.

18.11 Employee Benefit Plans

(a) The Parent Guarantor represents that the present aggregate value of accumulated benefit obligations of all Plans and all foreign employee pension benefit plans (based on those assumptions used for disclosure of such obligations in corporate financial statements in accordance with GAAP) did not, as of the most recent statements available, exceed the aggregate value of the assets for all such plans.

(b) Except as would not individually or in the aggregate have a Material Adverse Effect on the BMS Group:

(i) no ERISA Termination Event has occurred; or

(ii) each Plan has been established and administered in accordance with its terms and in compliance with the applicable provisions of ERISA, the Code and other applicable laws, rules and regulations.

18.12 Environmental and Safety Matters

The Parent Guarantor represents that other than exceptions to any of the following that would not in the aggregate have a Material Adverse Effect on the BMS Group:

(a) the Parent Guarantor and the Subsidiaries comply and have complied with all applicable Environmental and Safety Laws;

(b) there are and have been no Hazardous Substances at any property owned, leased or operated by the Parent Guarantor now or in the past, or at any other location, that could reasonably be expected to result in liability of the Parent Guarantor or any Subsidiary under any Environmental and Safety Law or result in costs to any of them arising out of any Environmental and Safety Law;

(c) there are no past, present, or, to the knowledge of the Parent Guarantor and its Subsidiaries, anticipated future events, conditions, circumstances, practices, plans, or legal requirements that could reasonably be expected to prevent the Parent Guarantor or any of its Subsidiaries from, or increase the costs to the Parent Guarantor or any of its Subsidiaries of, complying with applicable Environmental and Safety Laws or obtaining or renewing all material permits, approvals, authorisations, licenses or permissions required of any of them pursuant to any such law; and

(d) neither the Parent Guarantor nor any of its Subsidiaries has retained or assumed, by contract or operation of law, any liability, fixed or contingent, under any Environmental and Safety Law.

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18.13 Properties

The Parent Guarantor represents that:

(a) each of the Parent Guarantor and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property that are material to the business of the Parent Guarantor and its Subsidiaries taken as a whole, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes; and

(b) each of the Parent Guarantor and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property that are material to the business of the Parent Guarantor and its Subsidiaries taken as a whole, and the use thereof by the Parent Guarantor and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect on the BMS Group.

18.14 Investment and Holding Company Status

The Parent Guarantor represents that neither the Parent Guarantor nor any of its Subsidiaries is:

(a) an “investment company” as defined in, or subject to regulation under the Investment Company Act of 1940 of the United States, or

(b) a “holding company” as defined in, or subject to regulation under the Public Utility Holding Company Act of 1935 of the United States.

18.15 Ownership and Status of Designated Finance Subsidiaries

The Borrower represents that each Designated Finance Subsidiary is:

(a) a wholly owned subsidiary of the Borrower; and

(b) a corporation duly organised, validly existing and in good standing under the laws of the jurisdiction of its incorporation.

18.16 Pari passu ranking

Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

18.17 Ranking of Qualifying NL Holdco Notes

The Primary Guarantor represents that its payment obligations under the Qualifying NL Holdco Notes rank at least pari passu with claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

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18.18 Information Memorandum

The Borrower represents that:

(a) except as disclosed in writing to the Arrangers, as at the date thereof, the Information Memorandum did not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading, it being understood and agreed that for purposes of this Clause, such factual information and data shall not include projections and pro forma financial information; and

(b) the projections and pro forma financial information contained in the Information Memorandum were based on then recent historical information and good faith estimates and assumptions believed by such Persons to be reasonable at the time made, it being recognised by the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results.

18.19 Repetition

The Repeating Representations are deemed to be made by each Obligor (except where certain Obligors are specified, in which case, the specified Obligors) by reference to the facts and circumstances then existing on:

(a) the first day of each Interest Period; and

(b) in the case of an Additional Guarantor, the day on which the Person becomes an Additional Guarantor.

19. INFORMATION UNDERTAKINGS

The undertakings in this Clause 19 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.

19.1 The Borrower shall supply to the Agent in sufficient copies for all of the Lenders the following documents:

(a) within 95 days after the end of each fiscal year, the Parent Guarantor’s annual report on Form 10-K as filed with the SEC, including its consolidated balance sheet and the related consolidated earnings statement showing its consolidated financial condition as of the close of such fiscal year and the consolidated results of its operations during such year, all audited by PriceWaterhouseCoopers LLP or other independent certified public accountants of recognised standing selected by the Parent Guarantor and accompanied by an opinion of such accountants (without a “going concern” qualification or exception and without any qualification or exception with respect to the scope of such opinion) to the effect that such consolidated financial statements fairly present the Parent Guarantor’s financial condition and results of operations on a consolidated basis in accordance with GAAP;

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(b) within 50 days after the end of each of the first three fiscal quarters of each fiscal year, the Parent Guarantor’s quarterly report on Form 10-Q as filed with the SEC, including its unaudited consolidated balance sheet and related consolidated earnings statement, showing its consolidated financial condition as of the close of such fiscal quarter and the consolidated results of its operations during such fiscal quarter and the then elapsed portion of the fiscal year (and each delivery of such statements shall be deemed a representation that such statements fairly present the Parent Guarantor’s financial condition and results of operations on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes);

(c) with any delivery of financial statements under paragraph (a) or (b) above:

(i) a Compliance Certificate from the Parent Guarantor certifying that the Parent Guarantor has complied with the financial covenants applicable to it set out in Clause 20 (Financial Covenants) (or giving details of any non-compliance, whether non-compliance is continuing and any steps taken to remedy non-compliance); and

(ii) a Compliance Certificate from each of the Borrower and the Primary Guarantor (in each case, endorsed by the Parent Guarantor) certifying that each of the Borrower and the Primary Guarantor has complied with the financial covenants applicable to it set out in Clause 20 (Financial Covenants) (or giving details of any non-compliance, whether non-compliance is continuing and any steps taken to remedy non-compliance);

(d) promptly after the same become publicly available, copies of all reports on Form 8-K filed by the Parent Guarantor with the SEC, or any Governmental Authority succeeding to any of or all the functions of the SEC, or copies of all reports distributed to its shareholders, as the case may be; and

(e) promptly, from time to time, such other information as any Lender shall reasonably request through the Agent.

Each Compliance Certificate referred to above shall be signed by a duly authorised officer of the Parent Guarantor and (in the case of each Compliance Certificate from the Borrower and the Primary Guarantor) by a duly authorised officer of the Borrower or the Primary Guarantor (as appropriate).

19.2 Litigation and Other Notices

The Borrower or the Parent Guarantor shall give the Agent written notice of the following within five Business Days after any executive officer of the Borrower or the Parent Guarantor obtains knowledge thereof:

(a) the filing or commencement of any action, suit or proceeding which the Borrower or the Parent Guarantor reasonably expects to result in a Material Adverse Effect in relation to the BMS Group as a whole;

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(b) any Event of Default or Default, specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto; and

(c) any change in any of the Ratings.

19.3 Use of websites

(a) The Borrower may satisfy its obligation under this Agreement to deliver any information in relation to those Lenders (the “Website Lenders”) who accept this method of communication by posting this information onto an electronic website designated by the Borrower and the Agent (the “Designated Website”) if:

(i) the Agent expressly agrees (after consultation with each of the Lenders) that it will accept communication of the information by this method;

(ii) both the Borrower and the Agent are aware of the address of and any relevant password specifications for the Designated Website; and

(iii) the information is in a format previously agreed between the Borrower and the Agent.

If any Lender (a “Paper Form Lender”) does not agree to the delivery of information electronically then the Agent shall notify the Borrower accordingly and the Borrower shall supply the information to the Agent (in sufficient copies for each Paper Form Lender) in paper form. In any event the Borrower shall supply the Agent with at least one copy in paper form of any information required to be provided by it.

(b) The Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by the Borrower and the Agent.

(c) The Borrower shall promptly upon becoming aware of its occurrence notify the Agent if:

(i) the Designated Website cannot be accessed due to technical failure;

(ii) the password specifications for the Designated Website change;

(iii) any new or amended information which is required to be provided under this Agreement is posted onto the Designated Website; or

(iv) the Borrower becomes aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software.

If the Borrower notifies the Agent under paragraph (c)(i) or paragraph (c)(iv) above, all information to be provided by the Borrower under this Agreement after the date of that notice shall be supplied in paper form unless and until the Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing.

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(d) Any Website Lender may request, through the Agent, one paper copy of any information required to be provided under this Agreement which is posted onto the Designated Website. The Borrower shall comply with any such request within ten Business Days.

19.4 “Know your customer” checks

(a) If:

(i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;

(ii) any change in the status of an Obligor or (save in relation to the Parent Guarantor) the composition of its Shareholders after the date of this Agreement; or

(iii) a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,

obliges the Agent or any Lender (or, in the case of paragraph (iii) above, any prospective new Lender) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, each Obligor shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or, in the case of the event described in paragraph (iii) above, on behalf of any prospective new Lender) in order for the Agent, such Lender or, in the case of the event described in paragraph (iii) above, any prospective new Lender to carry out and be satisfied that it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to the transactions contemplated in the Finance Documents.

(b) Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

(c) The Borrower shall, by not less than 10 Business Days’ prior written notice to the Agent, notify the Agent (which shall promptly notify the Lenders) of its intention to request that one of the Finance Subsidiaries becomes an Additional Guarantor pursuant to Clause 24 (Changes to the Obligors).

(d) Following the giving of any notice pursuant to paragraph (c) above, if the accession of such Additional Guarantor obliges the Agent or any Lender to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrower shall promptly upon the request of the Agent or any Lender

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supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or on behalf of any prospective new Lender) in order for the Agent or such Lender or any prospective new Lender to carry out and be satisfied it has complied with the results of all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the accession of such Subsidiary to this Agreement as an Additional Guarantor.

(e) Each Lender agrees that its “know your customer” or other similar checks will be completed as soon as reasonably practicable.

20. FINANCIAL COVENANTS

20.1 Primary Guarantor Financial Covenants

The Primary Guarantor shall ensure that from the date of this Agreement and for so long as any amount is outstanding under the Finance Documents or any Commitment is in force:

(a) the ratio of NL Holdco Group Net Indebtedness to NL Holdco Cash Flow will be calculated on each Primary Guarantor Quarter Date and:

(i) shall not exceed 3.5:1 on any two consecutive Primary Guarantor Quarter Dates during the 24 months commencing on the date of this Agreement; and

(ii) thereafter shall not exceed 3:1 on any Primary Guarantor Quarter Date.

(b) NL Holdco Group New Indebtedness shall not exceed $1,000,000,000 at any time.

(c) NL Holdco Intercompany Indebtedness shall not at any time exceed by more than $1,000,000,000 the amount of NL Holdco Intercompany Indebtedness as calculated at the date of this Agreement.

In this Clause 20.1:

“NL Holdco Cash Flow” means all cash received by the Primary Guarantor by way of distributions from its subsidiaries during the 12 month period ending on each Primary Guarantor Quarter Date.

“NL Holdco Group Net Indebtedness” means the aggregate amount of the Debt of the members of the NL Holdco Group, less their cash, cash equivalents, time deposits and other marketable securities. This includes (without double counting) the Primary Guarantor’s guarantee under this Agreement and all other Debt of the NL Holdco Group to third parties, but will exclude all Debt of any member of the NL Holdco Group to any member of the BMS Group or to any other member of the NL Holdco Group.

“NL Holdco Group New Indebtedness” means the aggregate amount of outstanding Debt falling within the definition of NL Holdco Group Net

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Indebtedness, which is incurred after the date of this Agreement (including, for the avoidance of doubt, any such Debt incurred by members of the NL Holdco Group under commercial paper programs), but excluding:

(i) the Facility;

(ii) Debt which is subordinated to the Facility; and

(iii) Debt to the extent it refinances the Facility or Debt which existed at the date of this Agreement and any subsequent refinancings thereof.

“NL Holdco Intercompany Indebtedness” means the aggregate outstanding Debt of the Primary Guarantor to other members of the BMS Group, but excluding:

(i) Debt incurred after the date of this Agreement which is subordinated to the Facility; and

(ii) Qualifying NL Holdco Notes.

“Primary Guarantor Quarter Date” means the last date of each fiscal quarter of the Primary Guarantor (or such other dates as agreed by the Primary Guarantor and the Agent).

For the avoidance of doubt, references in this Clause 20.1 to “Debt” shall be construed as excluding, in the case of indebtedness for borrowed money, advances in the nature of overdrafts that are repaid within three Business Days.

20.2 Parent Guarantor and Borrower Financial Covenants

From the date of this Agreement and for so long as any amount is outstanding under the Finance Documents or any Commitment is in force:

(a) the Parent Guarantor shall ensure that the ratio of Consolidated Net Indebtedness to Consolidated Capitalisation shall not exceed 0.50 to 1.0, tested on each Parent Guarantor Quarter Date;

(b) the Borrower or one or more Designated Finance Subsidiaries shall hold Qualifying NL Holdco Notes in an aggregate principal amount that is equal to or greater than 150% of the aggregate principal amount of the Total Net Indebtedness of the Borrower and the Designated Finance Subsidiaries.

In this Clause 20.2:

“Consolidated Capitalisation” means at any time the sum of short term borrowings, long-term debt and shareholders’ equity, all as shown at such time in the Parent Guarantor’s consolidated balance sheet determined in accordance with GAAP.

“Consolidated Net Indebtedness” means at any time (i) the sum of short-term borrowings and long-term debt less (ii) cash, cash equivalents, time

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deposits and marketable securities, all as shown at such time on the Parent Guarantor’s consolidated balance sheet determined in accordance with GAAP.

“Parent Guarantor Quarter Date” means the last date of each fiscal quarter of the Parent Guarantor (or such other dates as agreed by the Parent Guarantor and the Agent).

“Total Net Indebtedness of the Borrower and the Designated Finance Subsidiaries” means the aggregate amount of the Debt of the Borrower and the Designated Financial Subsidiaries, including the Facility, less their:

(i) aggregate cash, cash equivalents, time deposits and other marketable securities; and

(ii) Debt owed to any member of the BMS Group.

21. GENERAL UNDERTAKINGS

The undertakings in this Clause 21 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.

21.1 Existence

Each Obligor shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and its rights and franchises that are material to the business of the Parent Guarantor and its Subsidiaries as a whole, except as expressly permitted under Clause 21.7 (Consolidations, Amalgamations and Mergers), and except in the case of any Subsidiary where the failure to do so would not result in a Material Adverse Effect in relation to the BMS Group.

21.2 Compliance with Laws; Maintenance of Business and Properties

Each Obligor shall:

(a) comply in all respects with all applicable laws, rules, regulations and orders of any Governmental Authority (including Environmental and Safety Laws and ERISA), whether now in effect or hereafter enacted except instances that could not, in the aggregate, reasonably be expected to result in a Material Adverse Effect in relation to the BMS Group; and

(b) at all times maintain and preserve all property material to the conduct of the business of the Parent Guarantor and the Subsidiaries as a whole and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times, except where the failure to do so would not result in a Material Adverse Effect in relation to the BMS Group.

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21.3 Insurance

Each Obligor shall keep its insurable properties adequately insured at all times by financially sound and reputable insurers (which may include captive insurers), and maintain such other insurance or self insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies similarly situated and in the same or similar businesses.

21.4 Obligations and Taxes

Each Obligor shall pay and discharge promptly when due all material taxes, assessments and governmental charges imposed upon it or upon its income or profits or in respect of its property, in each case before the same shall become delinquent or in default and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith by appropriate proceedings and adequate reserves with respect thereto shall, to the extent required by GAAP, have been set aside.

21.5 Books and Records

Each Obligor shall keep proper books of record and account in which full, true and correct entries are made of all material dealings and transactions in relation to its business and activities.

21.6 Pari Passu Ranking

Each Obligor shall do all things reasonably necessary to ensure that its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

21.7 Consolidations, Amalgamations and Mergers

No Obligor shall consolidate, amalgamate or merge with or into any other Person or liquidate, wind up or dissolve (or suffer any liquidation or dissolution) provided that:

(a) an Obligor may merge, amalgamate or consolidate with another Person if (i) the corporation surviving such merger (or in the case of an Obligor subject to the laws of Bermuda, the resulting entity) is (x) in the case of a merger or consolidation of the Parent Guarantor, the Parent Guarantor, (y) in the case of a merger, amalgamation or consolidation of any Obligor other than the Parent Guarantor, an Obligor or (z) in the case of a merger or consolidation of an Obligor other than the Parent Guarantor or the Primary Guarantor, a member of the NL Holdco Group and (ii) immediately after giving effect to such merger, amalgamation or consolidation, no Default or Event of Default shall have occurred and be continuing; and

(b) an Obligor other than the Parent Guarantor, the Primary Guarantor or the Borrower may liquidate, wind-up or dissolve if immediately after giving effect to such liquidation, winding-up or dissolution no Default or Event of Default shall have occurred and be continuing.

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21.8 Encumbrances on Restricted Properties securing debt

The Parent Guarantor shall not (and will not permit any of the Subsidiaries to) create, assume or suffer to exist any Lien upon any Restricted Property to secure any Debt of the Parent Guarantor, any Subsidiary or any other Person, without making effective provision whereby the Loans that may then or thereafter be outstanding shall be secured by such Lien equally and rateably with (or prior to) such Debt for so long as such Debt shall be so secured, except that the foregoing shall not prevent the Parent Guarantor or any Subsidiary from creating, assuming or suffering to exist any of the following Liens:

(a) Liens existing on the date of this Agreement;

(b) any Lien existing on property owned or leased by any Person at the time it becomes a Subsidiary;

(c) any Lien existing on property at the time of the acquisition thereof by the Parent Guarantor or any Subsidiary;

(d) any Lien to secure any Debt incurred prior to, at the time of, or within 12 months after the acquisition of any Restricted Property for the purpose of financing all or any part of the purchase price thereof and any Lien to the extent that it secures Debt which is in excess of such purchase price and for the payment of which recourse may be had only against such Restricted Property;

(e) any Lien to secure any Debt incurred prior to, at the time of, or within 12 months after the completion of the construction, alteration, repair or improvement of any Restricted Property for the purpose of financing all or any part of the cost thereof and any Lien to the extent that it secures Debt which is in excess of such cost and for the payment of which recourse may be had only against such Restricted Property;

(f) any Liens securing Debt of a Subsidiary owing to the Parent Guarantor or to another Subsidiary;

(g) any Liens securing industrial development, pollution control or similar revenue bonds;

(h) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any Lien referred to in paragraphs (a) through (g) above, so long as the principal amount of the Debt secured thereby does not exceed the principal amount of Debt so secured at the time of such extension, renewal or replacement (except that, where an additional principal amount of Debt is incurred to provide funds for the completion of a specific project, the additional principal amount, and any related financing costs, may be secured by the Lien as well) and such Lien is limited to the same property subject to the Lien so extended, renewed or replaced (and improvements on such property); and

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(i) any Lien not permitted by paragraphs (a) through (h) above securing Debt which, together with the aggregate outstanding principal amount of all other Debt of the Parent Guarantor and its Subsidiaries owning Restricted Property which would otherwise be subject to the foregoing restrictions and the aggregate Value of existing Sale and Leaseback Transactions which would be subject to the restrictions of Clause 21.9 (Limitation on Sale and Leaseback Transactions) but for this paragraph (i), does not at any time exceed 10% of Consolidated Net Tangible Assets.

21.9 Limitation on Sale and Leaseback Transactions

The Parent Guarantor shall not enter into any Sale and Leaseback Transaction, or permit any Subsidiary owning Restricted Property to do so, unless either:

(a) the Parent Guarantor or such Subsidiary would be entitled to incur Debt, in a principal amount at least equal to the Value of such Sale and Leaseback Transaction, which is secured by Liens on the property to be leased (without equally and rateably securing the Loans) without violating Clause 21.8 (Encumbrances on Restricted Properties securing debt); or

(b) the Parent Guarantor, during the six months immediately following the effective date of such Sale and Leaseback Transaction, causes to be applied to (A) the acquisition of Restricted

Property or (B) the voluntary retirement of Funded Debt (whether by redemption, defeasance, repurchase, or otherwise) an amount equal to the Value of such Sale and Leaseback Transaction.

21.10 Change of Business

The Parent Guarantor shall procure that no substantial change is made to the general nature of the business of the BMS Group from that carried on at the date of this Agreement.

21.11 Encumbrances on the Qualifying NL Holdco Notes

No Obligor (other than the Parent Guarantor) shall create or permit to subsist any Lien over its entitlement under the Qualifying NL Holdco Notes.

21.12 Encumbrances on other assets of the Borrower and any Designated Finance Subsidiaries

The Borrower shall ensure that neither it nor any Designated Finance Subsidiary shall create or permit to subsist any Lien over any of its assets securing Debt the principal amount of which, when aggregated, exceeds $1,000,000,000 other than: (a) bankers’ Liens, rights of set-off and other similar Liens existing solely with respect to cash, cash equivalents, time deposits or other marketable securities in one or more accounts maintained by the Borrower or any Designated Finance Subsidiary in the ordinary course of business in favour of the bank or banks with which such accounts are maintained; and (b) Liens securing amounts due under the Facility.

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21.13 Activities of the Borrower and the Designated Finance Subsidiaries

The Borrower shall ensure that it and any Designated Finance Subsidiaries engage only in the following types of business:

(a) issuing further shares fully paid up to any member of the BMS Group;

(b) receiving capital contributions or loans from any member of the BMS Group;

(c) performing obligations and exercising rights under or arising out of any Finance Document to which it is a party;

(d) facilitating or providing the financing (by any means) of any members of the BMS Group;

(e) authorising and paying dividends on any of its issued shares provided that it has first made adequate provision or reserve for its liabilities;

(f) paying Taxes and complying with any legal or statutory obligation (whether or not relating to Tax) which it may be required to discharge;

(g) investing in cash, cash equivalents, time deposits and other marketable securities;

(h) all other things necessary to maintain its corporate identity; and

(i) any activity not falling within paragraphs (a)-(h) above but which is reasonably incidental thereto.

21.14 Restricted Payments

No Obligor (other than the Parent Guarantor) shall declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment except:

(a) any Obligor may make Restricted Payments to another Obligor; and

(b) any Obligor may:

(i) declare and pay dividends with respect to its shares payable solely in additional shares of its ordinary share capital; and

(ii) make Restricted Payments so long as after giving effect to the making of such Restricted Payment, no Default shall have occurred and be continuing.

21.15 Indebtedness for Borrowed Money

No Obligor (other than the Parent Guarantor and the Primary Guarantor) shall incur any Debt to the extent that, after giving effect to such incurrence, such Debt could reasonably be expected to have a Material Adverse Effect provided that Debt which is permitted in accordance with the terms of Clause 20 (Financial Covenants) shall not be restricted by this Clause 21.15.

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21.16 Transactions with Affiliates

Each Obligor (other than the Parent Guarantor) shall only enter into transactions with other members of the BMS Group that are bona fide and arm’s length in nature except (a) transactions entered into prior to the date hereof or contemplated by any agreement entered into prior to the date hereof, (b) transactions between or among the Borrower and the Designated Finance Subsidiaries or between or among any Obligors or between or among any members of the NL Holdco Group (c) any arrangements with officers, directors, representatives or other employees of such Obligor (other than the Parent Guarantor) relating specifically to employment and (d) transactions that are otherwise permitted by this Agreement including (without limitation) transactions permitted under Clauses 21.7 (Consolidations, Amalgamations and Mergers), 21.13 (Activities of the Borrower and the Designated Finance Subsidiaries), 21.14 (Restricted Payments), 21.15 (Indebtedness for Borrowed Money), 21.17 (Investments) and 21.18 (Asset Disposals).

21.17 Investments

No Obligor (other than the Parent Guarantor and the Primary Guarantor) shall enter into any transaction to acquire any assets (other than: (a) any transaction to acquire assets having a fair market value of less than $1,000,000,000; (b) any transaction to acquire assets from another Obligor or member of the NL Holdco Group; (c) investments in cash, cash equivalents, time deposits and other marketable securities; or (d) any transaction to acquire assets from a member of the BMS Group made on an arm’s length basis) if, before or after giving effect to the commitment thereto, such transaction could reasonably be expected to have a Material Adverse Effect.

21.18 Asset disposals

(a) Neither the Parent Guarantor nor the Primary Guarantor shall sell, or otherwise transfer (in one transaction or a series of transactions), or permit any Subsidiary to sell, or otherwise transfer (in one transaction or a series of transactions), all or substantially all of the assets of the Parent Guarantor and the Subsidiaries or the Primary Guarantor and its subsidiaries, in each case taken as a whole, to any other Person.

(b) No Obligor (other than the Parent Guarantor) shall enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of all or substantially all of its assets.

(c) Paragraph (b) above does not apply to any sale, lease, transfer or other disposal:

(i) of assets in exchange for other assets comparable or superior as to type, value and quality;

(ii) of cash, cash equivalents, time deposits and other marketable securities not otherwise prohibited by the Finance Documents;

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(iii) comprising any dividend or distribution not otherwise prohibited by the Finance Documents;

(iv) between any Obligor and any other Obligor; or

(v) made bona fide on an arm’s length basis to any member of the BMS Group.

21.19 Covenants relating to the Lux Holdco Note

The Primary Guarantor shall:

(a) procure timely compliance by Lux Holdco with all of its obligations under the Lux Holdco Note and Lux Holdco Note Agreement;

(b) promptly notify the Agent in the event that:

(i) (A) Lux Holdco becomes unable, or admits inability, to pay its debts generally as they fall due; (B) a moratorium is declared in respect of any of Luxco’s material indebtedness; or (C) Lux Holdco passes a resolution for its dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise), commences negotiations regarding a composition, compromise, assignment or arrangement with, or suspends making payments to, its creditors generally, has a liquidator, receiver, administrator, administrative receiver, compulsory manager or other similar officer appointed to it (or over all or substantially all of its assets), an application is made or a petition presented to a court, a notice is given or filed in relation to the appointment of such an officer or has any analogous procedure or step taken in any jurisdiction;

(ii) an event of default occurs under the Lux Holdco Note or the Lux Holdco Note Agreement; or

(iii) any acceleration or other enforcement action is taken in relation to the Lux Holdco Note or the Lux Holdco Note Agreement and shall keep the Agent fully informed during any enforcement process; and

(c) procure that no voluntary prepayments of the Lux Holdco Note are made in whole or in part by Lux Holdco after the date of this Agreement.

21.20 Parent Guarantor Ratings

The Parent Guarantor shall use reasonable endeavours to ensure that at least one of Moody’s and S&P provides a rating for the Parent Guarantor’s senior, unsecured, non-credit-enhanced long term debt.

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22. EVENTS OF DEFAULT

Each of the events or circumstances set out in Clause 22 is an Event of Default.

22.1 Non-payment

(a) A default is made in the payment of any principal amount of any Loan when and as the same shall become due and payable, whether at the due date thereof or any other date fixed for prepayment thereof or by acceleration thereof or otherwise; or

(b) a default is made in the payment of any interest on any Loan or any fee or any other amount (other than an amount referred to in paragraph (a) above) due hereunder, when and as the same shall become due and payable, and such default shall continue unremedied for a period of three Business Days.

22.2 Misrepresentation

Any representation or warranty made or deemed made in or in connection with the execution and delivery of this Agreement or the Loans or under any Finance Document shall prove to have been false or misleading in any material respect when so made, deemed made or furnished.

22.3 Breach of other obligations

(a) Any Obligor fails to comply with any of its obligations under paragraphs (a) and (b) of Clause 19.2 (Litigation and Other Notices) and Clauses 21.7 (Consolidations, Amalgamations and Mergers), 21.8 (Encumbrances on Restricted Properties securing debt), 21.9 (Limitation on Sale and Leaseback Transactions), 21.10 (Change of Business), 21.11 (Encumbrances on Qualifying NL Holdco Notes), 21.12 (Encumbrances on other assets of the Borrower and any Designated Finance Subsidiaries), 21.13 (Activities of the Borrower and the Designated Finance Subsidiaries), 21.14 (Restricted Payments), 21.15 (Indebtedness for Borrowed Money), 21.16 (Transactions with Affiliates), 21.17 (Investments), 21.18 (Asset disposals) and 21.19 (Covenants relating to the Lux Holdco Note); or

(b) a default is made in the due observance or performance of any covenant, condition or agreement contained herein (other than those specified in Clauses 22.1 (Non-payment) or 22.3(a) above) and such default shall continue unremedied for a period of 30 days after notice thereof from the Agent or any Lender to the Borrower.

22.4 Cross-defaults

The Parent Guarantor or any Subsidiary:

(a) fails to pay any principal or interest, regardless of amount, due in respect of one or more items of Debt in an aggregate principal amount greater than or equal to $100,000,000, as and when the same shall become due and payable (giving effect to any applicable grace period), or

(b) fails to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Debt if the effect of any failure referred to in this paragraph (b) is to cause such Debt to become due prior to its stated maturity.

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22.5 Insolvency of the Borrower or any Guarantor (other than the Parent Guarantor)

The Borrower or any Guarantor (other than the Parent Guarantor):

(a) is unable or admits inability to pay its debts generally as they fall due; or

(b) has a moratorium declared in respect of any material indebtedness.

22.6 Insolvency proceedings of the Borrower or any Guarantor (other than the Parent Guarantor)

The Borrower or any Guarantor (other than the Parent Guarantor):

(a) passes a resolution for its dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise);

(b) commences negotiations regarding a composition, compromise, assignment or arrangement with, or suspends making payments to, its creditors generally;

(c) has a liquidator, receiver, administrator, administrative receiver, compulsory manager or other similar officer appointed to it (or over all or substantially all of its assets) or an application is made or a petition presented to a court, or a notice is given or filed, in relation to the appointment of such an officer; or

(d) has any analogous procedure or step taken in any jurisdiction,

and any such proceedings or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered.

22.7 Parent Guarantor involuntary proceedings

An involuntary proceeding is commenced or an involuntary petition is filed in a court of competent jurisdiction seeking:

(a) relief in respect of the Parent Guarantor, or of a substantial part of the property or assets of the Parent Guarantor, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other United States Federal or state bankruptcy, insolvency, receivership or similar law;

(b) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Parent Guarantor or for a substantial part of the property or assets of the Parent Guarantor; or

(c) the winding up or liquidation of the Parent Guarantor,

and such proceedings or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered.

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22.8 Parent Guarantor voluntary proceedings

The Parent Guarantor:

(a) voluntarily commences any proceedings or files any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other United States Federal or state bankruptcy, insolvency, receivership or similar law;

(b) consents to the institution of, or fails to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in Clause 22.7 (Parent Guarantor involuntary proceedings) above;

(c) applies for or consents to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Parent Guarantor or for a substantial part of the property or assets of the Parent Guarantor;

(d) files an answer admitting the material allegations of a petition filed against it in any such proceeding;

(e) makes a general assignment for the benefit of creditors;

(f) becomes unable, admits in writing its inability or fails generally to pay its debts as they become due; or

(g) takes any action for the purpose of effecting any of the foregoing.

22.9 Judgments

One or more judgments for the payment of money in an aggregate amount equal to or greater than $100,000,000 (exclusive of any amount thereof covered by insurance) shall be rendered against the Parent Guarantor, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed (for this purpose, a judgment shall be effectively stayed during a period when it is not yet due and payable), or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Parent Guarantor or any Subsidiary to enforce any such judgment.

22.10 ERISA Events

(a) A Plan of the Parent Guarantor shall fail to maintain the minimum funding standard required by Section 412 of the Code for any plan year or a waiver of such standard is sought or granted under Section 412(d); or

(b) an ERISA Termination Event shall have occurred with respect to the Parent Guarantor or an ERISA Affiliate has incurred or is reasonably likely to incur a liability to or on account of a Plan under Section 4062, 4063, 4064, 4201 or 4204 of ERISA; or

(c) the Parent Guarantor or any ERISA Affiliate shall engage in any prohibited transaction described in Sections 406 of ERISA or 4975 of the Code for which a statutory or class exemption is not available or a private exemption has not been previously obtained from the United States Department of Labor; or

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(d) the Parent Guarantor or any ERISA Affiliate shall fail to pay any required instalment or any other payment required to be paid by such entity under Section 412 of the Code on or before the due date for such instalment or other payment; or

(e) the Parent Guarantor or any ERISA Affiliate shall fail to make any contribution or payment to any Multiemployer Plan (as defined in Section 4001(a)(3) of ERISA) which the Parent Guarantor or any ERISA Affiliate is required to make under any agreement relating to such Multiemployer Plan or any law pertaining thereto, and there shall result from any such event or events either a liability or a material risk of incurring a liability to the PBGC or a Plan which will have a Material Adverse Effect in relation to the BMS Group.

22.11 Change of control

A Change in Control shall occur.

22.12 Invalidity

At any time while this Agreement is in effect:

(a) the guarantee in Clause 17.1 (Guarantee and Indemnity) shall cease to be, or shall be asserted by any Guarantor not to be, a valid and binding obligation on the part of any of the Guarantors;

(b) any Qualifying NL Holdco Note shall cease to be, or shall be asserted by the Primary Guarantor not to be, a valid and binding obligation on the part of the Primary Guarantor; or

(c) the Lux Holdco Note ceases to be legally and beneficially held by a member of the BMS Group.

22.13 Acceleration

On and at any time after the occurrence of an Event of Default (other than Events of Default listed in Clause 22.7 (Parent Guarantor involuntary proceedings) and Clause 22.8 (Parent Guarantor voluntary proceedings) which is continuing, the Agent, at the request of the Majority Lenders, shall, by notice to the Borrower, take any of the following actions, at the same or different times:

(a) terminate forthwith the Commitments;

(b) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued fees and all other liabilities of the Obligors accrued hereunder, shall become forthwith due and payable, without presentment, demand, protect or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding; and/or

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(c) declare that all or part of the Loans be payable on demand, whereupon they shall immediately become payable on demand by the Agent on the instructions of the Majority Lenders.

22.14 Automatic Acceleration

On and at any time after the occurrence of an Event of Default listed in Clauses 22.7 (Parent Guarantor involuntary proceedings) and 22.8 (Parent Guarantor voluntary proceedings), the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued fees and all other liabilities accrued hereunder shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding.

23. CHANGES TO THE LENDERS

23.1 Assignments, transfers, sub-participations and changes in Facility Office by the Lenders

Subject to this Clause 23, a Lender (the “Existing Lender”) may:

(a) assign any of its rights; or

(b) transfer by novation any of its rights and obligations,

to another bank or financial institution (the “New Lender”), or sub-participate any of its rights or obligations to another bank or financial institution, or change its Facility Office.

23.2 Conditions of assignment, transfer or change in Facility Office

(a) The consent of the Borrower (not to be unreasonably withheld or delayed) is required for an assignment or transfer by an Existing Lender, (unless the assignment or transfer is to another Lender or an Affiliate of a Lender or any Event of Default pursuant to Clauses 22.5 (Insolvency of the Borrower or any Guarantor (other than the Parent Guarantor)), 22.6 (Insolvency proceedings of the Borrower or any Guarantor (other than the Parent Guarantor)), 22.7 (Parent Guarantor involuntary proceedings) or 22.8 (Parent Guarantor voluntary proceedings) has occurred and is continuing).

(b) The Borrower will be deemed to have given its consent ten (10) Business Days after the Existing Lender has requested it unless consent is expressly refused by the Borrower within that time.

(c) An assignment will only be effective on:

(i) receipt by the Agent of written confirmation from the New Lender (in form and substance satisfactory to the Agent) that the New Lender will assume the same obligations to the other Finance Parties as it would have been under if it was an Original Lender; and

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(ii) performance by the Agent of all “know your customer” or other checks relating to any person that it is required to carry out in relation to such assignment to a New Lender, the completion of which the Agent shall promptly notify to the Existing Lender and the New Lender.

(d) A transfer will only be effective if the procedure set out in Clause 23.5 Procedure for transfer) is complied with.

(e) If:

(i) a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and

(ii) as a result of circumstances existing at the date the assignment, transfer or change occurs, an Obligor would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 12 (Tax gross-up and indemnities) or Clause 13 (Increased Costs),

then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred.

(f) Any assignment or transfer of part of the Existing Lender’s rights and/or obligations must be for a minimum amount of US$ 10,000,000 (unless the Borrower and the Agent agree otherwise).

23.3 Assignment or transfer fee

The New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Agent (for its own account) a fee of US$ 3,000.

23.4 Limitation of responsibility of Existing Lenders

(a) Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:

(i) the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents;

(ii) the financial condition of any Obligor;

(iii) the performance and observance by any Obligor of its obligations under the Finance Documents or any other documents; or

(iv) the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document, and any representations or warranties implied by law are excluded.

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(b) Each New Lender confirms to the Existing Lender and the other Finance Parties that it:

(i) has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender in connection with any Finance Document; and

(ii) will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.

(c) Nothing in any Finance Document obliges an Existing Lender to:

(i) accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this Clause 23; or

(ii) support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Finance Documents or otherwise.

23.5 Procedure for transfer

(a) Subject to the conditions set out in Clause 23.2 (Conditions of assignment, transfer or sub-participation or change in Facility Office) a transfer is effected in accordance with paragraph (c) below when the Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to paragraph (b) below, as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, and notify the Borrower of the date of the transfer and name of the New Lender. Each Finance Party and each Obligor irrevocably authorises the Agent to sign such a Transfer Certificate on its behalf.

(b) The Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to the transfer to such New Lender.

(c) On the Transfer Date:

(i) to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and obligations under the Finance Documents each of the Obligors and the Existing Lender shall be released from further obligations towards one another under the

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Finance Documents and their respective rights against one another under the Finance Documents shall be cancelled (being the “Discharged Rights and Obligations”);

(ii) each of the Obligors and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Obligor and the New Lender have assumed and/or acquired the same in place of that Obligor and the Existing Lender;

(iii) the Agent, the Arrangers, the New Lender and other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Agent, the Arrangers and the Existing Lender shall each be released from further obligations to each other under the Finance Documents; and

(iv) the New Lender shall become a Party as a “Lender”.

23.6 Copy of Transfer Certificate to Borrower

The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate, send to the Borrower a copy of that Transfer Certificate.

23.7 Disclosure of information

Any Lender may disclose to any of its Affiliates and any other Person:

(a) to (or through) whom that Lender assigns or transfers (or may potentially assign or transfer) all or any of its rights and obligations under this Agreement; or

(b) with (or through) whom that Lender enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, this Agreement or any Obligor;

any information about any Obligor, the BMS Group and the Finance Documents as that Lender shall consider appropriate if the Person to whom the information is to be given has entered into a Confidentiality Undertaking prior to such disclosure.

23.8 Sub Participations

Each Finance Party agrees that:

(a) no Obligor shall incur any additional cost or expense (including, without limitation, pursuant to Clause 12 (Tax Gross-Up and Indemnities), 13 (Increased Costs), 14 (Other Indemnities) or 16 (Costs and Expenses)) as a result of a Finance Party entering into a sub-participation arrangement in relation to this Agreement;

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(b) third parties to a sub-participation arrangement entered into with a Finance Party shall have no rights under the Third Parties Act to enforce or to enjoy the benefit of any term of this Agreement; and

(c) it will not enter into any sub-participation arrangement which in any way restricts its ability to exercise or refrain from exercising any or all of its voting rights arising under or in connection with the Finance Documents in relation to matters which constitute Defaults or which would require the consent of the Majority Lenders or of all the Lenders in accordance with the terms of this Agreement.

24. CHANGES TO THE OBLIGORS

24.1 Assignments and transfer by Obligors

No Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

24.2 Additional Guarantors

(a) Subject to compliance with the provisions of paragraphs (c) and (d) of Clause 19.4 (“Know your Customer Checks”) the Borrower may request that any of its Finance Subsidiaries become an Additional Guarantor. That Finance Subsidiary shall become an Additional Guarantor if:

(i) the Borrower delivers to the Agent a duly completed and executed Accession Letter; and

(ii) the Agent has received all of the documents and other evidence listed in Part 2 of Schedule 2 (Conditions precedent) in relation to that Additional Guarantor, each in form and substance satisfactory to the Agent.

(b) The Agent shall notify the Borrower and the Lenders promptly upon being satisfied that it has received (in form and substance satisfactory to it) all the documents and other evidence listed in Part 2 of Schedule 2 (Conditions precedent).

24.3 Repetition of Representations

Delivery of an Accession Letter constitutes confirmation by the relevant Finance Subsidiary that the Repeating Representations are true in all material respects (or, in the case of a representation which is already qualified as to materiality, it is true in all respects) as at the date of delivery as if made by reference to the facts and circumstances then existing.

24.4 Resignation of a Guarantor

(a) The Borrower may request that a Guarantor (other than the Parent Guarantor or Primary Guarantor) cease to be a Guarantor by delivering to the Agent a Resignation Letter.

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(b) The Agent shall accept a Resignation Letter and notify the Borrower and the Lenders of its acceptance if:

(i)	no Default is continuing or will result from the acceptance of the Resignation Letter (and the Borrower has confirmed this is the case); and
(ii)	(A)	in the case of a Guarantor (other than the Parent Guarantor or the Primary Guarantor) which has any interest in Qualifying NL Holdco Notes, the Majority Lenders have consented thereto; or
	(B)	in the case of any other Guarantor (other than the Parent Guarantor or the Primary Guarantor) such resignation is (x) in connection with a transaction permitted under Clause 21.7 (Consolidations, Amalgamations and Mergers) involving such Guarantor or (y) the Majority Lenders have consented thereto.

25. ROLE OF THE AGENT AND THE ARRANGERS

25.1 Appointment of the Agent

(a) Each other Finance Party appoints the Agent to act as its agent under and in connection with the Finance Documents.

(b) Each other Finance Party authorises the Agent to exercise the rights, powers, authorities and discretions specifically given to the Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.

25.2 Duties of the Agent

(a) The Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Agent for that Party by any other Party.

(b) Except where a Finance Document specifically provides otherwise, the Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.

(c) If the Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the Finance Parties.

(d) If the Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Agent or the Arrangers) under this Agreement it shall promptly notify the other Finance Parties.

(e) The Agent’s duties under the Finance Documents are solely mechanical and administrative in nature.

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25.3 Role of the Arrangers

Except as specifically provided in the Finance Documents, the Arrangers have no obligations of any kind to any other Party under or in connection with any Finance Document.

25.4 No fiduciary duties

(a) Nothing in this Agreement constitutes the Agent or the Arrangers as a trustee or fiduciary of any other Person.

(b) Neither the Agent nor the Arrangers shall be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account.

25.5 Business with the BMS Group

The Agent and the Arrangers may accept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the BMS Group.

25.6 Rights and discretions of the Agent

(a) The Agent may rely on:

(i) any representation, notice or document believed by it to be genuine, correct and appropriately authorised; and

(ii) any statement made by a director, authorised signatory or employee of any Person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify.

(b) The Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders) that:

(i) no Default has occurred (unless it has actual knowledge of a Default arising under paragraphs (a) or (b) of Clause 22.1 (Non-payment);

(ii) any right, power, authority or discretion vested in any Party or the Majority Lenders has not been exercised; and

(iii) any notice or request made by the Borrower (other than a Utilisation Request or Selection Notice) is made on behalf of and with the consent and knowledge of all the Obligors.

(c) The Agent may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts.

(d) The Agent may act in relation to the Finance Documents through its personnel and agents.

(e) The Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement.

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(f) Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor an Arranger is obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.

25.7 Majority Lenders’ instructions

(a) Unless a contrary indication appears in a Finance Document, the Agent shall (i) exercise any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by the Majority Lenders (or, if so instructed by the Majority Lenders, refrain from exercising any right, power, authority or discretion vested in it as Agent) and (ii) not be liable for any act (or omission) if it acts (or refrains from taking any action) in accordance with an instruction of the Majority Lenders.

(b) Unless a contrary indication appears in a Finance Document, any instructions given by the Majority Lenders will be binding on all the Finance Parties.

(c) The Agent may refrain from acting in accordance with the instructions of the Majority Lenders (or, if appropriate, the Lenders) until it has received such security as it may require for any cost, loss or liability (together with amounts in respect of any associated VAT) which it may incur in complying with the instructions.

(d) In the absence of instructions from the Majority Lenders, (or, if appropriate, the Lenders) the Agent may act (or refrain from taking action) as it considers to be in the best interest of the Lenders.

(e) The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender’s consent) in any legal or arbitration proceedings relating to any Finance Document.

25.8 Responsibility for documentation

Neither the Agent nor either Arranger:

(a) is responsible for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by an Obligor or any other Person given in or in connection with any Finance Document or the Information Memorandum; or

(b) is responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Finance Document.

25.9 Exclusion of liability

(a) Without limiting paragraph (b) below, the Agent will not be liable for any action taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.

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(b) No Party (other than the Agent) may take any proceedings against any officer, employee or agent of the Agent in respect of any claim it might have against the Agent or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document and any officer, employee or agent of the Agent may rely on this Clause subject to Clause 1.3 (Third party rights) and the provisions of the Third Parties Act.

(c) The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Agent if the Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Agent for that purpose.

(d) Nothing in this Agreement shall oblige the Agent or the Arranger to carry out any “know your customer” or other checks in relation to any person on behalf of any Lender and each Lender confirms to the Agent and the Arranger that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent or the Arrangers.

25.10 Lenders’ indemnity to the Agent

Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Agent, within three Business Days of demand, against any cost, loss or liability incurred by the Agent (otherwise than by reason of the Agent’s gross negligence or wilful misconduct) in acting as Agent under the Finance Documents (unless the Agent has been reimbursed by an Obligor pursuant to a Finance Document).

25.11 Resignation of the Agent

(a) The Agent may resign and appoint one of its Affiliates acting through an office in the United Kingdom as successor by giving notice to the other Finance Parties and the Borrower.

(b) Alternatively, the Agent may resign by giving notice to the other Finance Parties and the Borrower, in which case the Majority Lenders (may with the prior written consent of the Borrower, such consent not to be unreasonably withheld or delayed) appoint a successor Agent.

(c) If the Majority Lenders have not appointed a successor Agent in accordance with paragraph (b) above within 30 days after notice of resignation was given, the Agent may (with the prior written consent of the Borrower , such consent not to be unreasonably withheld or delayed) appoint a successor Agent (acting through an office in the United Kingdom).

(d) The retiring Agent shall, at its own cost, make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent under the Finance Documents.

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(e) The Agent’s resignation notice shall only take effect upon the appointment of a successor.

(f) Upon the appointment of a successor, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 25 (Role of the Agent and the Arrangers). Its successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.

(g) After consultation with the Borrower, the Majority Lenders may, by notice to the Agent, require it to resign in accordance with paragraph (b) above. In this event, the Agent shall resign in accordance with paragraph (b) above.

25.12 Confidentiality

(a) In acting as agent for the Finance Parties, the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.

(b) If information is received by another division or department of the Agent, it may be treated as confidential to that division or department and the Agent shall not be deemed to have notice of it.

25.13 Relationship with the Lenders

(a) The Agent may treat each Lender as a Lender, entitled to payments under this Agreement and acting through its Facility Office unless it has received not less than five Business Days prior notice from that Lender to the contrary in accordance with the terms of this Agreement.

(b) Each Lender shall supply the Agent with any information required by the Agent in order to calculate the Mandatory Cost in accordance with Schedule 4 (Mandatory Cost formula).

25.14 Credit appraisal by the Lenders

Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms to the Agent and the Arrangers that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including but not limited to:

(a) the financial condition, status and nature of each Obligor;

(b) the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document;

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(c) whether that Lender has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; and

(d) the adequacy, accuracy and/or completeness of the Information Memorandum and any other information provided by the Agent, any Party or by any other Person under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document.

25.15 Reference Banks

If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Agent shall (in consultation with the Borrower) appoint another Lender or an Affiliate of a Lender to replace that Reference Bank.

25.16 Deduction from amounts payable by the Agent

If any Party owes an amount to the Agent under the Finance Documents the Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted.

26. CONDUCT OF BUSINESS BY THE FINANCE PARTIES

No provision of this Agreement will:

(a) subject to the specific obligations of the Finance Parties hereunder, interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

(b) oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

(c) oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

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27. SHARING AMONG THE FINANCE PARTIES

27.1 Payments to Finance Parties

If a Finance Party (a “Recovering Finance Party”) receives or recovers any amount from an Obligor other than in accordance with Clause 28 (Payment mechanics) and applies that amount to a payment due under the Finance Documents then:

(a) the Recovering Finance Party shall, within three Business Days, notify details of the receipt or recovery, to the Agent;

(b) the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Agent and distributed in accordance with Clause 28 (Payment mechanics), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and

(c) the Recovering Finance Party shall, within three Business Days of demand by the Agent, pay to the Agent an amount (the “Sharing Payment”) equal to such receipt or recovery less any amount which the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 28.5 (Partial payments).

27.2 Redistribution of payments

The Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) in accordance with Clause 28.5 (Partial payments).

27.3 Recovering Finance Party’s rights

(a) On a distribution by the Agent under Clause 27.2 (Redistribution of payments), the Recovering Finance Party will be subrogated to the rights of the Finance Parties which have shared in the redistribution.

(b) If and to the extent that the Recovering Finance Party is not able to rely on its rights under paragraph (a) above, the relevant Obligor shall be liable to the Recovering Finance Party for a debt equal to the Sharing Payment which is immediately due and payable.

27.4 Reversal of redistribution

If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:

(a) each Finance Party which has received a share of the relevant Sharing Payment pursuant to Clause 27.2 (Redistribution of payments) shall, upon request of the Agent, pay to the Agent for account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay); and

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(b) that Recovering Finance Party’s rights of subrogation in respect of any reimbursement shall be cancelled and the relevant Obligor will be liable to the reimbursing Finance Party for the amount so reimbursed.

27.5 Exceptions

(a) This Clause 27 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause, have a valid and enforceable claim against the relevant Obligor.

(b) A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:

(i) it notified that other Finance Party of the legal or arbitration proceedings; and

(ii) that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.

28. PAYMENT MECHANICS

28.1 Payments to the Agent

(a) On each date on which an Obligor or a Lender is required to make a payment under a Finance Document, that Obligor or Lender shall make the same available to the Agent (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

(b) Payment shall be made to such account in the principal financial centre of the country of that currency with such bank as the Agent specifies.

28.2 Distributions by the Agent

Each payment received by the Agent under the Finance Documents for another Party shall, subject to Clause 28.3 (Distributions to an Obligor) and Clause 28.4 (Clawback) be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Agent by not less than five Business Days’ notice with a bank in the principal financial centre of the country of that currency.

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28.3 Distributions to an Obligor

The Agent may (with the consent of the Obligor or in accordance with Clause 29 (Set-off)) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.

28.4 Clawback

(a) Where a sum is to be paid to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.

(b) If the Agent pays an amount to another Party and it proves to be the case that the Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Agent shall on demand refund the same to the Agent together with interest on that amount from the date of payment to the date of receipt by the Agent, calculated by the Agent to reflect its cost of funds.

28.5 Partial payments

(a) If the Agent receives a payment that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents, the Agent shall apply that payment towards the obligations of that Obligor under the Finance Documents in the following order:

(i) first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent under the Finance Documents;

(ii) secondly, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement;

(iii) thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and

(iv) fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

(b) The Agent shall, if so directed by the Majority Lenders, vary the order set out in paragraphs (a)(ii) to (iv) above.

(c) Paragraphs (a) and (b) above will override any appropriation made by an Obligor.

28.6 No set-off by Obligors

All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

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28.7 Business Days

(a) Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

(b) During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.

28.8 Currency of account

(a) Subject to paragraphs (b) and (c) below, Dollars is the currency of account and payment for any sum due from an Obligor under any Finance Document.

(b) Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

(c) Any amount expressed to be payable in a currency other than Dollars shall be paid in that other currency.

28.9 Change of currency

(a) Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:

(i) any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent (after consultation with the Borrower); and

(ii) any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Agent (acting reasonably).

(b) If a change in any currency of a country occurs, the Parties will enter negotiations in good faith with a view to agreeing any amendment which may be necessary to this Agreement to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.

28.10 USA Patriot Act

Each Lender hereby notifies the Obligors that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107.56 (signed into law October 26, 2001)) (the “Act”), it may be required to obtain, verify and record information that identifies the Obligors, which information includes the name and address of each Obligor and other information that will allow such Lender to identify the Obligors in accordance with the Act.

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29. SET-OFF

At any time after an Event of Default has occurred which is continuing, a Finance Party may on giving notice to the Obligor set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

30. NOTICES

30.1 Communications in writing

Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.

30.2 Addresses

The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:

(a) in the case of the Borrower, that identified with its name below;

(b) in the case of each Lender or any other Original Obligor, that notified in writing to the Agent on or prior to the date on which it becomes a Party; and

(c) in the case of the Agent, that identified with its name below,

or any substitute address or fax number or department or officer as the Party may notify to the Agent (or the Agent may notify to the other Parties, if a change is made by the Agent) by not less than five Business Days’ notice.

30.3 Delivery

(a) Any communication or document made or delivered by one Person to another under or in connection with the Finance Documents will only be effective:

(i) if by way of fax, when received in legible form; or

(ii) if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address;

and, if a particular department or officer is specified as part of its address details provided under Clause 30.2 (Addresses), if addressed to that department or officer.

(b) Any communication or document to be made or delivered to the Agent will be effective only when actually received by the Agent and then only if it is

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expressly marked for the attention of the department or officer identified with the Agent’s signature below (or any substitute department or officer as the Agent shall specify for this purpose).

(c) All notices from or to an Obligor shall be sent through the Agent.

(d) Any communication or document made or delivered to the Borrower in accordance with this Clause will be deemed to have been made or delivered to each of the Obligors.

30.4 Notification of address and fax number

Promptly upon receipt of notification of an address or fax number or change of address or fax number pursuant to Clause 30.2 (Addresses) or changing its own address or fax number, the Agent shall notify the other Parties.

30.5 Electronic communication

(a) Any communication to be made between the Agent and a Lender under or in connection with the Finance Documents may be made by electronic mail or other electronic means, if the Agent and the relevant Lender:

(i) agree that, unless and until notified to the contrary, this is to be an accepted form of communication;

(ii) notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and

(iii) notify each other of any change to their address or any other such information supplied by them.

(b) Any electronic communication made between the Agent and a Lender will be effective only when actually received in readable form and in the case of any electronic communication made by a Lender to the Agent only if it is addressed in such a manner as the Agent shall specify for this purpose.

30.6 English language

(a) Any notice given under or in connection with any Finance Document must be in English.

(b) All other documents provided under or in connection with any Finance Document must be:

(i) in English; or

(ii) if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.

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31. CALCULATIONS AND CERTIFICATES

31.1 Accounts

In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.

31.2 Certificates and Determinations

Any certification or determination by a Finance Party of a rate or amount under any Finance Document is, in the absence of manifest or proven error, prima facie evidence of the matters to which it relates.

31.3 Day count convention

Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days or, in any case where the practice in the Relevant Interbank Market differs, in accordance with that market practice.

32. PARTIAL INVALIDITY

If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

33. REMEDIES AND WAIVERS

No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

34. AMENDMENTS AND WAIVERS

34.1 Required consents

(a) Subject to Clause 34.2 (Exceptions) any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and the Obligors and any such amendment or waiver will be binding on all Parties.

(b) The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause.

34.2 Exceptions

(a) An amendment or waiver that has the effect of changing or which relates to:

(i) the definition of “Majority Lenders” in Clause 1.1 (Definitions);

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(ii) an extension to the date of payment of any amount under the Finance Documents;

(iii) a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable;

(iv) an increase in or an extension of any Commitment;

(v) a change to the Borrower or Guarantors other than in accordance with Clause 24 (Changes to the Obligors);

(vi) any provision which expressly requires the consent of all the Lenders; or

(vii) Clause 2.2 (Finance Parties’ rights and obligations), Clause 23 (Changes to the Lenders) or this Clause 34,

shall not be made without the prior consent of all the Lenders.

(b) An amendment or waiver which relates to the rights or obligations of the Agent or the Arrangers may not be effected without the consent of the Agent or an Arranger.

35. COUNTERPARTS

Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

36. CONFIDENTIALITY

36.1 Each of the Finance Parties expressly agrees, for the benefit of the Parent Guarantor and the Subsidiaries, to maintain the confidentiality of the Confidential Information, except that Confidential Information may be disclosed:

(a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Confidential Information and instructed to keep such Confidential Information confidential);

(b) to the extent requested by any regulatory or self-regulatory authority;

(c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process;

(d) to any other Party;

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(e) in connection with the exercise of any remedies under this Agreement or any suit, action or proceeding relating to this Agreement or the enforcement of rights under this Agreement;

(f) subject to Clause 23.7 (Disclosure of information) and an express agreement for the benefit of the Parent Guarantor and the Subsidiaries containing provisions substantially the same as those of this Clause, to any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement;

(g) with the consent of the Parent Guarantor or the Subsidiaries, as applicable; or

(h) to the extent such Confidential Information:

(i) becomes publicly available other than as a result of a breach of this Agreement; or

(ii) becomes available to any Finance Party on a non confidential basis from a source other than the Parent Guarantor or the Subsidiaries.

36.2 Any Person required to maintain the confidentiality of Confidential Information as provided in this Clause 36 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Confidential Information as such Person would accord to its own confidential information; provided, however, that with respect to disclosures pursuant to sub-clauses 36.1(b) and 36.1(c), unless prohibited by law or applicable court order, each Finance Party shall attempt to notify the Parent Guarantor of any request by any Government Authority or representative thereof or other Person for disclosure of Confidential Information after receipt of such request, and if reasonable, practicable and permissible, before disclosure of such Confidential Information. It is understood and agreed that the Parent Guarantor, the Subsidiaries and their respective Affiliates may rely upon this Clause 36 for any purpose, including without limitation to comply with Regulation FD.

37. GOVERNING LAW

This Agreement is governed by English law.

38. ENFORCEMENT

38.1 Jurisdiction

(a) The courts of England have non-exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a “Dispute”).

(b) The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.

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(c) Notwithstanding paragraphs (a) and (b) above, no Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Parties may take concurrent proceedings in any number of jurisdictions.

38.2 Service of process

Without prejudice to any other mode of service allowed under any relevant law, each Obligor (other than an Obligor incorporated in England and Wales):

(a) irrevocably appoints Bristol-Myers Squibb Pharmaceuticals Limited as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and

(b) agrees that failure by a process agent to notify the relevant Obligor of the process will not invalidate the proceedings concerned.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

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SCHEDULE 1

THE ORIGINAL PARTIES

Part 1 The Original Obligors

Name of Original Borrower	Registration number (or equivalent, if any)
BMS Omega Bermuda Holdings Finance Ltd.	EC 32796
Name of Original Guarantor	Registration number (or equivalent, if any)
Bristol-Myers Squibb Company BMS Pharmaceuticals Netherlands Holdings B.V. Bristol-Myers Squibb Luxembourg International SCA Bristol-Myers Squibb Sigma Finance Limited	N/A 30184186 B-89.590 EC 36445

Part 2 The Original Lenders

Name of Original Lender	Tranche A Commitment (US$)	Tranche B Commitment (US$)
BNP Paribas Ireland	160,000,000	40,000,000
The Royal Bank of Scotland plc	160,000,000	40,000,000
Deutsche Bank AG, London Branch	120,000,000	30,000,000
HSBC Bank USA, National Association	120,000,000	30,000,000
The Bank of Tokyo-Mitsubishi, Ltd., NY Branch	120,000,000	30,000,000
ABN AMRO Bank N.V.	84,000,000	21,000,000
BANCO SANTANDER	84,000,000	21,000,000

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CENTRAL HISPANO, S.A.
Bank of America, N.A.	84,000,000	21,000,000
Barclays Bank PLC	84,000,000	21,000,000
Calyon	84,000,000	21,000,000
Citibank, N.A.	84,000,000	21,000,000
Fortis Bank SA/NV	84,000,000	21,000,000
JPMorgan Chase Bank	84,000,000	21,000,000
Mizuho Corporate Bank (USA)	84,000,000	21,000,000
MORGAN STANLEY BANK	84,000,000	21,000,000
SANPAOLO IMI S.p.A.	84,000,000	21,000,000
UBS AG, London Branch	84,000,000	21,000,000
Wachovia Bank, National Association	84,000,000	21,000,000
Banco Bilbao Vizcaya Argentaria S.A	48,000,000	12,000,000
The Governor and Company of the Bank of Ireland	48,000,000	12,000,000
WILLIAM STREET CREDIT CORPORATION	48,000,000	12,000,000
Banca Monte dei Paschi di Siena S.P.A.	36,000,000	9,000,000
Banca Intesa S.p.A., London Branch	24,000,000	6,000,000
The Bank of New York	24,000,000	6,000,000
Totals:	2,000,000,000	500,000,000

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SCHEDULE 2

CONDITIONS PRECEDENT

Part 1 Conditions Precedent to Initial Utilisation

(a) The Borrower and the Guarantors shall have executed and delivered the Finance Documents.

(b) The Agent shall have received:

(i) audited consolidated financial statements of the Parent Guarantor for the two most recent fiscal years ended prior to the Closing Date; and

(ii) unaudited interim consolidated financial statements of the Parent Guarantor for each quarterly period ended subsequent to the date of the latest financial statements delivered pursuant to paragraph (i) above as to which such financial statements are available.

(c) The Lenders shall have received the legal opinions listed below (addressed to the Finance Parties and substantially in the form distributed to the Original Lenders prior to signing this Agreement), any other legal opinions, documents and other instruments or certificates as are customary for transactions of this type or as they may reasonably request:

(i) A legal opinion of White & Case, legal advisers to the Arrangers and the Agent in England as to the enforceability of this Agreement;

(ii) A legal opinion of Mello, Jones & Martin, legal advisers to the Arranger and the Agent in Bermuda as to capacity and due execution of those Obligors incorporated in Bermuda and the enforceability of this Agreement;

(iii) A legal opinion of Loyens &Loeff, legal advisers to the Arrangers and the Agent in The Netherlands as to capacity and due execution of those Obligors incorporated in The Netherlands and the enforceability of this Agreement;

(iv) A legal opinion of Linklaters Loesch, legal advisers to the Borrower in Luxembourg as to capacity and due execution of those Obligors incorporated in Luxembourg and the enforceability of this Agreement;

(v) A legal opinion of in-house legal counsel to the Parent Guarantor in the United States as to its capacity to enter into and due execution of this Agreement; and

(vi) A legal opinion of White & Case LLP, legal advisors to Arrangers and the Agent in the United States as to the enforceability of this Agreement.

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(d) The Agent shall have received a certificate, dated as at a date on or after the date of this Agreement and on or prior to the Closing Date and signed by the president, a vice president or a financial officer of the Borrower and each of the Original Guarantors, confirming:

(i) that the representations and warranties in the Finance Documents shall be true and correct in all material respects (provided that representations and warranties with a materiality qualification shall be true and correct) on and as of the Closing Date;

(ii) that there is no continuing Default under the Finance Documents or continuing default under the Qualifying NL Holdco Notes or the Lux Holdco Note at the date of such certificate or immediately after giving effect to the Finance Documents;

(iii) that each copy document provided is correct, complete and in full force and effect;

(iv) the entering into of the Facility would not cause any borrowing or guaranteeing limit in the constitutional documents of the Borrower or any Original Guarantor to be exceeded; and

(v) the solvency of the Borrower and each of the Original Guarantors.

(e) The Arrangers, the Lenders and the Agent shall have received all fees due and payable on or prior to the Closing Date and all out-of-pocket expenses required to be reimbursed or paid by the Borrower or the Original Guarantors for which invoices have been presented not less than two Business Days before the Closing Date.

(f) The Agent shall have received:

(i) copies of the Borrower’s and each Original Guarantor’s constitutional documents, certificates of incorporation and a certificate of good standing (if applicable);

(ii) a copy of a resolution of the Board of Directors of the Borrower and each Original Guarantor:

(A) approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Finance Documents to which it is a party;

(B) authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and

(C) authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, any Utilisation Request and Selection Notice) to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party;

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(iii) to the extent such resolutions are required by local corporate law, a copy of a resolution of the shareholders of each Original Guarantor and a copy of a board resolution of any corporate shareholder of any Original Guarantor, in each case approving the terms of, and the transactions contemplated by, the Finance Documents; and

(iv) a specimen of the signature of each Person authorised on behalf of the Borrower and each Original Guarantor to execute or witness the execution of any Finance Document or to sign or send any document or notice in connection with any Finance Document.

(g) The Borrower and each Original Guarantor shall have provided the Agent with evidence of the appointment of an agent for service of process in England and Wales.

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Part 2 Conditions Precedent Required to be Delivered by an Additional Guarantor

1. An Accession Letter, duly executed by the Additional Guarantor and the Borrower.

2. A copy of the constitutional documents of the Additional Guarantor.

3. A copy of a resolution of the board of directors of the Additional Guarantor:

(A) approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Accession Letter;

(B) authorising a specified person or persons to execute the Accession Letter on its behalf; and

(C) authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with the Accession Letter.

4. To the extent that it is required by local corporate law, a copy of a resolution of the shareholders of the Additional Guarantor and a copy of a board resolution of any corporate shareholder of the Additional Guarantor, in each case approving the terms of, and the transactions contemplated by, the Finance Documents.

5. A specimen of the signature of each Person authorised on behalf of the Additional Guarantor to execute or witness the execution of Accession Letter or to sign or send any document or notice in connection with it.

6. A certificate of the Additional Guarantor (signed by a director) confirming that guaranteeing the Total Commitments would not cause any guaranteeing limit in its constitutional documents to be exceeded.

7. A certificate of an authorised signatory of the Additional Guarantor certifying that each copy document listed in this Part 2 of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of the Accession Letter.

8. A legal opinion of the legal advisers to the Arrangers and the Agent in England.

9. If the Additional Guarantor is incorporated in a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Arrangers and the Agent in the jurisdiction in which the Additional Guarantor is incorporated.

10. If the proposed Additional Guarantor is incorporated in a jurisdiction other than England and Wales, evidence that the process agent specified in Clause 38.2 (Service of process), if not an Obligor, has accepted its appointment in relation to the proposed Additional Guarantor.

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SCHEDULE 3

REQUESTS

Part 1 Utilisation Request

From: BMS Omega Bermuda Holdings Finance Ltd.

To: The Royal Bank of Scotland plc

Dated            

Dear Sirs

BMS Omega Bermuda Holdings Finance Ltd.- $2,500,000,000 Facility Agreement

dated 5 August 2005 (the “Agreement”)

1. We refer to the Agreement. This is a Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.

2. We wish to borrow a [Tranche A/Tranche B] Loan on the following terms:

Proposed Utilisation Date:             [    ] (or, if that is not a Business Day, the next Business Day)

Amount:             [    ] or, if less, the Available Facility

Interest Period:             [        ]

3. We confirm that each applicable condition specified in Clause 4.2 (Further conditions precedent) is satisfied on the date of this Utilisation Request.

4. The proceeds of this Loan should be credited to [account].

5. This Utilisation Request is irrevocable.

Yours faithfully

authorised signatory for

BMS Omega Bermuda Holdings Finance Ltd.

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Part 2 Selection Notice

From: BMS Omega Bermuda Holdings Finance Ltd.

To: The Royal Bank of Scotland plc

Dated            

Dear Sirs

BMS Omega Bermuda Holdings Finance Ltd. - $2,500,000,000 Facility Agreement

dated 5 August 2005 (the “Agreement”)

1. We refer to the Agreement. This is a Selection Notice. Terms defined in the Agreement have the same meaning in this Selection Notice unless given a different meaning in this Selection Notice.

2. We refer to the following [Tranche A/Tranche B^• ] Loan[s] with an Interest Period ending on [ ]^*.

3. [We request that the above Loan[s] be divided into [            ] Loans with the following amounts and Interest Periods:] ^**

or

[We request that the next Interest Period for the above Loan[s] is [ ]].^***

4. This Selection Notice is irrevocable.

Yours faithfully

authorised signatory for

BMS Omega Bermuda Holdings Finance Ltd.

• Only Loans under the same Tranche can be the subject of a Selection Notice.

^* Insert details of all Loans which have an Interest Period ending on the same date.

^** Use this option if division of Loans is requested.

^*** Use this option if sub-division is not required.

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SCHEDULE 4

MANDATORY COST FORMULA

1. The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

2. On the first day of each Interest Period (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the “Additional Cost Rate”) for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders’ Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.

3. The Additional Cost Rate for any Lender lending from a Facility Office in a Participating Member State will be the percentage notified by that Lender to the Agent. This percentage will be certified by that Lender in its notice to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender’s participation in all Loans made from that Facility Office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that Facility Office.

4. The Additional Cost Rate for any Lender lending from a Facility Office in the United Kingdom will be calculated by the Agent as follows:

E x 0.01 per cent. per annum.

300

Where:

E is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Agent pursuant to paragraph 6 below and expressed in pounds per £1,000,000.

5. For the purposes of this Schedule:

(a) “Special Deposits” has the meaning given to it from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

(b) “Fees Rules” means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

(c) “Fee Tariffs” means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate); and

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(d) “Tariff Base” has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.

6. Each rate calculated in accordance with the formula set out in paragraph 4 above, will, if necessary, be rounded upwards to four decimal places.

7. If requested by the Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Agent, the rate of charge payable by that Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by that Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.

8. Each Lender shall supply any information required by the Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:

(a) the jurisdiction of its Facility Office; and

(b) any other information that the Agent may reasonably require for such purpose.

Each Lender shall promptly notify the Agent of any change to the information provided by it pursuant to this paragraph.

9. The rates of charge of each Reference Bank for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a Lender notifies the Agent to the contrary, each Lender’s obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office.

10. The Agent shall have no liability to any Person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.

11. The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to paragraphs 3, 7 and 8 above.

12. Any determination by the Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest or proven error, be conclusive and binding on all Parties.

13. The Agent may from time to time, after consultation with the Borrower and the Lenders, determine and notify to all Parties any amendments which are required to be made to the formula set out in paragraph 4 of this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest or proven error, be conclusive and binding on all Parties.

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SCHEDULE 5

FORM OF TRANSFER CERTIFICATE

To: The Royal Bank of Scotland plc as Agent

From: [The Existing Lender] (the “Existing Lender”) and [The New Lender] (the “New Lender”)

Dated            

BMS Omega Bermuda Holdings Finance Ltd. - $2,500,000,000 Facility Agreement

dated 5 August 2005 (the “Agreement”)

1. We refer to the Agreement. This is a Transfer Certificate. Terms defined in the Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.

2. We refer to Clause 23.5 (Procedure for transfer):

(a) The Existing Lender and the New Lender agree to the Existing Lender transferring to the New Lender by novation all or part of the Existing Lender’s Commitment, rights and obligations referred to in the Schedule in accordance with Clause 23.5 (Procedure for transfer).

(b) The proposed Transfer Date is [            ].

(c) The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 30.2 (Addresses) are set out in the Schedule.

3. The New Lender expressly acknowledges the limitations on the Existing Lender’s obligations set out in paragraph (c) of Clause 23.4 (Limitation of responsibility of Existing Lenders).

4. This Transfer Certificate may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Transfer Certificate.

5. This Transfer Certificate is governed by English law.

6. We confirm that [we have received the consent of the Borrower to the transfer the subject of this Transfer Certificate/consent of the Borrower was requested on [ ] being at least ten (10) Business Days prior to the date hereof and such consent not having been expressly refused, the Borrower is deemed to have given its consent/consent of the Borrower is not required pursuant to paragraph (a) of Clause 23.2 (Conditions of assignment, transfer or change in Facility Office) in the circumstances of this transfer].*delete as necessary

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THE SCHEDULE

Commitment/rights and obligations to be transferred

[insert relevant details]

[Facility Office address, fax number and attention details for notices and account details for payments,]

[Existing

Lender]

[New Lender]

By:

            By:

This Transfer Certificate is accepted by the Agent and the Transfer Date is confirmed as [            ].

The Royal Bank of Scotland plc

By:

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SCHEDULE 6

FORM OF ACCESSION LETTER

To: The Royal Bank of Scotland plc as Agent

From: [Finance Subsidiary] and BMS Omega Bermuda Holdings Finance Ltd.

Dated            

Dear Sirs

BMS Omega Bermuda Holdings Finance Ltd. - $2,500,000,000 Facility Agreement

dated 5 August 2005 (the “Agreement”)

1. We refer to the Agreement. This is an Accession Letter. Terms defined in the Agreement have the same meaning in this Accession Letter unless given a different meaning in this Accession Letter.

2. [Finance Subsidiary] agrees to become an Additional Guarantor and to be bound by the terms of the Agreement as an Additional Guarantor pursuant to Clause 24.2 (Additional Guarantors) of the Agreement. [Finance Subsidiary] is a company duly incorporated under the laws of [name of relevant jurisdiction].

3. [Finance Subsidiary’s] administrative details are as follows:

Address:

Fax No:

Attention:

4. This Accession Letter is governed by English law.

[This Guarantor Accession Letter is entered into by deed.]

BMS Omega Bermuda Holdings Finance Ltd.            [Finance Subsidiary]

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SCHEDULE 7

FORM OF RESIGNATION LETTER

To: The Royal Bank of Scotland plc as Agent

From: [resigning Obligor] and BMS Omega Bermuda Holdings Finance Ltd.

Dated            

Dear Sirs

BMS Omega Bermuda Holdings Finance Ltd. - $2,500,000,000 Facility Agreement

dated 5 August 2005 (the “Agreement”)

1. We refer to the Agreement. This is a Resignation Letter. Terms defined in the Agreement have the same meaning in this Resignation Letter unless given a different meaning in this Resignation Letter.

2. Pursuant to Clause 24.4 (Resignation of a Guarantor), we request that [resigning Obligor] be released from its obligations as a Guarantor under the Agreement.

3. We confirm that no Default is continuing or would result from the acceptance of this request.

4. This Resignation Letter is governed by English law.

BMS Omega Bermuda Holdings Finance Ltd.

[resigning Guarantor]

By:

            By:

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SCHEDULE 8

FORM OF COMPLIANCE CERTIFICATE

To: The Royal Bank of Scotland plc as Agent

From: [Parent Guarantor/Primary Guarantor/Borrower]

Dated            

Dear Sirs

BMS Omega Bermuda Holdings Finance Ltd. - $2,500,000,000 Facility Agreement

dated 5 August 2005 (the “Agreement”)

1. We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning in this Compliance Certificate unless given a different meaning in this Compliance Certificate.

2. We confirm that:

Primary Guarantor Financial Covenants

The Primary Guarantor [has/has not] complied with the Financial Covenants applicable to it set out in Clause 20.1 (Primary Guarantor Financial Covenants).

[If the Primary Guarantor has not complied with the Financial Covenants applicable to it set out in Clause 20.1 (Primary Guarantor Financial Covenants), give details of non-compliance, whether non-compliance is continuing and any steps taken to remedy non-compliance:]

Parent Guarantor Financial Covenant

The Parent Guarantor [has/has not] complied with the Financial Covenant applicable to it set out in Clause 20.2 (Parent Guarantor and Borrower Financial Covenants).

[If the Parent Guarantor has not complied with the Financial Covenant applicable to it set out in Clause 20.2 (Parent Guarantor and Borrower Financial Covenants), give details of non-compliance, whether non-compliance is continuing and any steps taken to remedy non-compliance:]

Borrower Financial Covenant

The Borrower [has/has not] complied with the Financial Covenant applicable to it set out in Clause 20.2 (Parent Guarantor and Borrower Financial Covenants).

[If the Borrower has not complied with the Financial Covenant applicable to it set out in Clause 20.2 (Parent Guarantor and Borrower Financial Covenants), give details of non-compliance, whether non-compliance is continuing and any steps taken to remedy non-compliance:]

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Signed:

Director of

[Parent Guarantor/Primary Guarantor/Borrower]

[Endorsed by the Parent Guarantor

Director of Parent Guarantor]

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SCHEDULE 9

TIMETABLES

Delivery of a duly completed Utilisation Request (Clause 5.1 (Delivery of a Utilisation Request)	3 p.m., three Business Days prior to the Utilisation Date (in relation to a Utilisation Request)
or
a Selection Notice (Clause 9.1 (Selection of Interest Periods))	3 p.m., three Business Days prior to the end of the current Interest Period (in relation to a Selection Notice)
Agent notifies the Lenders of the Loan in accordance with Clause 5.4 (Lenders’ participation)	5 p.m., three Business Days prior to the Utilisation Date (in relation to a Utilisation Request)
LIBOR is fixed	Quotation Day as of 11:00 a.m. London time

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SCHEDULE 10

FORM OF CONFIDENTIALITY UNDERTAKING

From: [Existing Lender]

To:

[insert name of Potential Lender]

Re:

Borrower:	BMS Omega Bermuda Holdings Finance Ltd (the “Borrower”).
Guarantors:	BMS Pharmaceutical Netherlands Holdings B.V. (the “Primary Guarantor”), Bristol-Myers Squibb Company (the “Parent Guarantor”) and Bristol-Myers Squibb Luxembourg International SCA.
Facility:	US$ 2,500,000,000 Term Loan Facility

Dear Sirs

We understand that you are considering acquiring an interest in the Facility. In consideration of us agreeing to make available to you certain information, by your signature of a copy of this letter you agree as follows:

1. Confidentiality Undertaking

You undertake:

(a) to keep the Confidential Information confidential and not to disclose it to anyone except as provided for by paragraph 2 below and to ensure that the Confidential Information is protected with security measures and a degree of care that would apply to your own confidential information;

(b) to keep confidential and not disclose to anyone the fact that the Confidential Information has been made available or that discussions or negotiations are taking place or have taken place between us in connection with the Facility;

(c) to use the Confidential Information only for the Permitted Purpose;

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(d) to use all reasonable endeavours to ensure that any person to whom you pass any Confidential Information (unless disclosed under paragraph 2(b) below) acknowledges and complies with the provisions of this letter as if that person were also a party to it.

2. Permitted Disclosure

We agree that you may disclose Confidential Information:

(a) to members of the Participant Group and their officers, directors, employees and professional advisers to the extent necessary for the Permitted Purpose and to any auditors of members of the Participant Group;

(b) where requested or required by any court of competent jurisdiction or any competent judicial, governmental, supervisory or regulatory body, (ii) where required by the rules of any stock exchange on which the shares or other securities of any member of the Participant Group are listed or (iii) where required by the laws or regulations of any country with jurisdiction over the affairs of any member of the Participant Group; or

(c) with the prior written consent of us and the Company.

3. Notification of Required or Unauthorised Disclosure

You agree (to the extent permitted by law) to inform us and the Borrower of the full circumstances of any disclosure under paragraph 2(b) or upon becoming aware that Confidential Information has been disclosed in breach of this letter.

4. Return of Copies

Should you decide not to acquire an interest in the Facility, you shall return to us all Confidential Information supplied to you by us and destroy or permanently erase all copies of Confidential Information made by you and use all reasonable endeavours to ensure that anyone to whom you have supplied any Confidential Information destroys or permanently erases such Confidential Information and any copies made by them, in each case save to the extent that you or the recipients are required to retain any such Confidential Information by any applicable law, rule or regulation or by any competent judicial, governmental, supervisory or regulatory body, or where the Confidential Information has been disclosed under paragraph 2(b) above.

5. Continuing Obligations

The obligations in this letter are continuing and, in particular, shall survive the termination of any discussions or negotiations between you and us. Notwithstanding the previous sentence, the obligations in this letter shall cease (a) if you become a party to or otherwise acquire (by assignment or transfer) a direct interest in the Facility or (b) (where (a) does not apply) twelve months after you have returned all Confidential Information supplied to you by us and destroyed or permanently erased all copies of Confidential Information made by you (other than any such Confidential Information or copies which have been disclosed under paragraph 2 above (other than sub-paragraph 2(a)) or which, pursuant to paragraph 4 above, are not required to be returned or destroyed).

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6. No Representation; Consequences of Breach, etc

You acknowledge and agree that:

(a) neither we nor any of our officers, employees or advisers nor (except as provided in the Facility) the members of the Group or any of their officers, employees or advisers (each a “Relevant Person”) (i) make any representation or warranty, express or implied, as to, or assume any responsibility for, the accuracy, reliability or completeness of any of the Confidential Information or any other information supplied by us or any member of the Group or the assumptions on which it is based or (ii) shall be under any obligation to update or correct any inaccuracy in the Confidential Information or any other information supplied by us or any member of the Group or be otherwise liable to you or any other person in respect to the Confidential Information or any such information; and

(b) we or members of the Group may be irreparably harmed by the breach of the terms of this letter and damages may not be an adequate remedy; each Relevant Person or member of the Group may be granted an injunction or specific performance for any threatened or actual breach of the provisions of this letter by you.

7. No Waiver; Amendments, etc

This letter sets out the full extent of your obligations of confidentiality owed to us and the Borrower in relation to the information which is the subject of this letter. No failure or delay in exercising any right, power or privilege under this letter will operate as a waiver thereof nor will any single or partial exercise of any right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privileges under this letter. The terms of this letter and your obligations under this letter may only be amended or modified by written agreement between you, us and the Borrower.

8. Material Non-public Information

You acknowledge that some or all of the Confidential Information is or may be price-sensitive or material non-public information and that the use of such information may be regulated or prohibited by applicable legislation, including legislation relating to insider dealing, and you undertake to use any Confidential Information only in accordance with your compliance policies and contractual obligations and applicable law, including United States federal and state securities laws.

9. Nature of Undertakings

The undertakings given by you under this letter are given to us and (without implying any fiduciary obligations on our part) are also given for the benefit of, and may be enforced and relied upon by, the Borrower, the Guarantors and each other member of the Group.

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10. Third party rights

(a) Subject to paragraph 6 and paragraph 9 the terms of this letter may be enforced and relied upon only by you and us and the operation of the Contracts (Rights of Third Parties) Act 1999 is excluded.

(b) Notwithstanding any provisions of this letter, the parties to this letter do not require the consent of any Relevant Person or any member of the Group other than the Borrower to rescind or vary this letter at any time.

11. Governing Law and Jurisdiction

This letter (including the agreement constituted by your acknowledgement of its terms) shall be governed by and construed in accordance with the English law and the parties submit to the non-exclusive jurisdiction of the English court, [which shall have jurisdiction over all litigations relating to the present undertaking].

12. Definitions

In this Confidentiality Undertaking (including the acknowledgement set out below) capitalised terms not defined in this paragraph have the meanings attributed to them in the Facility Agreement. To the extent of any inconsistency between a term defined in this Confidentiality Agreement and in the Facility Agreement, the term as defined in this Confidentiality Agreement shall prevail and:

“Confidential Information” means any information relating to the Borrower, the Guarantors, the Group, and the Facility including, without limitation, the information package, provided to you by us or any of our affiliates or advisers, in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that (a) is or becomes public knowledge other than as a direct or indirect result of any breach of this letter or (b) is known by you before the date the information is disclosed to you by us or any of our affiliates or advisers or is lawfully obtained by you after that date, other than from a source which is connected with us or the Group and which, in either case, as far as you are aware, has not been obtained in violation of, and is not otherwise subject to, any obligation of confidentiality;

“Facility Agreement” means the agreement entered into in relation to the provision of the Facility to the Borrower;

“Group” means the Parent Guarantor and its subsidiaries from time to time;

“Participant Group” means you, each of your holding companies and subsidiaries and each subsidiary of each of your holding companies (as each such term is defined in the Companies Act 1985); and

“Permitted Purpose” means considering and evaluating whether to enter into the Facility.

Please acknowledge your agreement to the above by signing and returning the enclosed copy.

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Yours faithfully

[Existing Lender]

To: [Existing Lender]:

The Company and each other member of the Group

We acknowledge and agree to the above:

For and on behalf of

[Potential Lender]

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SIGNATORIES

The Borrower

Signed by: RODERICK FORREST duly authorised

for and on behalf of BMS OMEGA BERMUDA HOLDINGS FINANCE LTD.

in the presence of: IAN STONE

Borrower’s Address: Chancery Hall, 52 Reid Street, Hamilton HM12, Bermuda

Fax: 441 292 8899

Attention: Roderick Forrest

The Original Guarantors

Signed for and on behalf of

BRISTOL-MYERS SQUIBB COMPANY

By:	/s/ E.M. DWYER	By:	/s/ SANDRA LEUNG
Name:	E.M. Dwyer	Name:	Sandra Leung
Title:	V-P Treasurer	Title:	Vice President and Corporate Secretary

Signed for and on behalf of

BMS PHARMACEUTICALS NETHERLANDS HOLDINGS B.V.

By:	/s/ M.E. DOESWIJK
Name:	M. E. Doeswijk
Title:	Director
Date:	August 5th, 2005

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BRISTOL-MYERS SQUIBB LUXEMBOURG INTERNATIONAL SCA

Represented By:	/s/ MR PATRICK VAN DENZEN
Name:	Mr Patrick Van Denzen
Title:	Authorized Officer

Signed by: RODERICK FORREST duly authorised

for and on behalf of BRISTOL-MYERS SQUIBB SIGMA FINANCE LIMITED

in the presence of:

Witness: IAN STONE

The Arrangers

BNP PARIBAS

By:	/s/ SIMON ALLOCCA	By:	/s/ MARK WATERS
Name:	Simon Allocca	Name:	Mark Waters

THE ROYAL BANK OF SCOTLAND plc

By:	/s/ KIERAN RYAN
Name:	Kieran Ryan
Title:	Senior Director, Loan Markets

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The Agent

THE ROYAL BANK OF SCOTLAND plc

By:	/s/ TONY BENNETT
Name:	Tony Bennett
Title:	Associate Director

Address: LONDON CORPORATE SERVICE CENTRE

PO BOX 39952

3RD FLOOR

21/2 DEVONSHIRE SQUARE

LONDON EC2M 4XJ

Fax: +44 20 7615 7673

Attention: LOANS ADMINISTRATION - AGENCY

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The Original Lenders

BNP PARIBAS IRELAND

By:	/s/ FRANCOIS VAN DEN BOSCH	By:	/s/ DEIRDRE GEOGHEGAN
Name:	Francois Van Den Bosch	Name:	Deirdre Geoghegan
Title:	Head Of Territory	Title:	Head Of Offshore

THE ROYAL BANK OF SCOTLAND plc

By:	/s/ IAIN STEWART
Name:	Iain Stewart
Title:	Senior Vice President

DEUTSCHE BANK AG, LONDON BRANCH

By:	/s/ MICHAEL STARMER-SMITH	By:	/s/ ANDREAS BUBENZER
Name:	Michael Stramer-Smith	Name:	Andreas Bubenzer
Title:	Managing Director	Title:	Assistant Vice President

HSBC BANK USA, NATIONAL ASSOCIATION

By:	/s/ JEFFREY WIESER
Name:	Jeffrey Wieser
Title:	Senior Vice President

THE BANK OF TOKYO-MITSUBISHI, LTD., NY BRANCH

By:	/s/ SPENCER HUGHES
Name:	Spencer Hughes
Title:	Authorized Signatory

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ABN AMRO BANK N.V.

By:	/s/ ROBERT H. STEELMAN	By:	/s/ KEVIN LEGALLO
Name:	Robert H. Steelman	Name:	Kevin Legallo
Title:	Director	Title:	Assistant Vice President

BANCO SANTANDER CENTRAL HISPANO, S.A.

By:	/s/ FRANK G. ENGLISH, IV	By:	/s/ KAREN WAGNER
Name:	Frank G. English, IV	Name:	Karen Wagner
Title:	Managing Director Global Corporate Banking	Title:	Vice President

BANK OF AMERICA, N.A.

By:	/s/ CRAIG MURLLESS
Name:	Craig Murlless
Title:	Senior Vice President

BARCLAYS BANK PLC

By:	/s/ ALISON MCGUIGAN
Name:	Alison Mcguigan
Title:	Associate Director

CALYON

By:	/s/ P. SHARP	By:	/s/ GLEN BARNES
Name:	P. Sharp	Name:	Glen Barnes
Title:	Chief Analyst	Title:	Deputy Head, Risk Management

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CITIBANK, N.A.

By:	/s/ CHRISTOPHER L. SNIDER
Name:	Christopher Ll. Snider
Title:	Vice President, GRB Consumer And Healthcare

FORTIS BANK SA/NV

By:	/s/ INGE VAKTSKJOLD	By:	/s/ GEOFF MURISON
Name:	Inge Vaktskjold	Name:	Geoff Murison
Title:	Director	Title:	Director

JPMORGAN CHASE BANK

By:	/s/ STEPHANIE PARKER
Name:	Stephanie Parker
Title:	Vice President

MIZUHO CORPORATE BANK (USA)

By:	/s/ RAYMOND VENTURA
Name:	Raymond Ventura
Title:	Senior Vice President

MORGAN STANLEY BANK

By:	/s/ DANIEL TWENGE
Name:	Daniel Twenge
Title:	Vice President

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SANPAOLO IMI S.p.A.

By:	/s/ CATHY R. LESSE	By:	/s/ RENATO CARDUCCI
Name:	Cathy R. Lesse	Name:	Renato Carducci
Title:	Vice President	Title:	General Manager

UBS AG, LONDON BRANCH

By:	/s/ A. SUDLOW	By:	/s/ J. CAMPBELL
Name:	A. Sudlow	Name:	J. Campbell
Title:	Executive Director	Title:	Director

WACHOVIA BANK, NATIONAL ASSOCIATION

By:	/s/ JEANETTE A. GRIFFIN
Name:	Jeanette A. Griffin
Title:	Director

BANCO BILBAO VIZCAYA ARGENTARIA S.A.

By:	/s/ GIAMPAOLO CONSIGLIERE	By:	/s/ HECTOR O. VILLEGAS
Name:	Giampaolo Consigliere	Name:	Hector O. Villegas
Title:	Vice President	Title:	Vice President

THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND

By:	/s/ CIARAN DOYLE	By:	/s/ GARETH MAGEE
Name:	Ciaran Doyle	Name:	Gareth Magee
Title:	Deputy Manager	Title:	Manager

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WILLIAM STREET CREDIT CORPORATION

By:	/s/ MARK WALTON
Name:	Mark Walton
Title:	Assistant Vice President

BANCA MONTE DEI PASCHI DI SIENA S.P.A

By:	/s/ PIERO MANFRIANI
Name:	Piero Manfriani
Title:	Senior Executive Vice President

BANCA INTESA S.p.A., LONDON BRANCH

By:	/s/ STEPHEN BYRNE	By:	/s/ UZLIWDA HARRIS
Name:	Stephen Byrne	Name:	Uzliwda Harris
Title:	Manager	Title:	Manager

THE BANK OF NEW YORK

By:	/s/ THOMAS J. MCCORMACK
Name:	Thomas J. McCormack
Title:	Vice President

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EX-10.(Z)

Exhibit 10z

[LOGO OF THE ROYAL BANK OF SCOTLAND]

The Royal Bank of Scotland

	Structured Finance
	Syndicated Loans Agency
	Level 7
Jeffrey Galik	135 Bishopsgate
BMS Omega Bermuda Holdings Finance Ltd	London EC2M 3UR
Chancery Hall	Telephone: +44 (0)20 7085 5000
52 Reid Street	Facsimile: +44 (0)20 7085 4564
Hamilton, HM 121
Bermuda	www.rbs.co.uk

cc: Mr. Edward Dwyer - Treasurer - Bristol-Myers Squibb Company.

30 September 2005

Dear Jeff,

We refer to the USD 2,500,000,000 Facility Agreement dated 5 August 2005 between, among others, BMS Omega Bermuda Holdings Finance Ltd. as Borrower and BNP Paribas and The Royal Bank of Scotland plc as Arrangers (the “Facility Agreement”).

Terms defined in the Facility Agreement have the same meaning when used in this letter.

In accordance with Clause 34.1 (Required consents) of the Facility Agreement, the Agent confirms that it has received unanimous consent of the Lenders to the matters referred to in the waiver request circulated by the Agent to the Lenders on 22 September, 2005. Accordingly, the Agent (on behalf of the Finance Parties):

(a) waives any default caused by the Primary Guarantor’s breach of Clause 21.19(c) of the Facility Agreement following the voluntary prepayment of a Lux Holdco Note on 7 September 2005 by Lux Holdco to Bristol-Myers Squibb Cayman Limited; and

(b) consents to the inclusion of an amount equal to USD 1,298,679,657.62 (being the amount of the voluntary prepayment of the Lux Holdco Note made by Lux Holdco to Bristol-Myers Squibb Cayman Ltd) in the definition of NL Holdco Cash Flow for the purposes of the calculating the ratio of NL Holdco Group Net Indebtedness to NL Holdco Cash Flow (as required by Clause 20.1(a) of the Facility Agreement) for any period that includes 7 September 2005.

Yours sincerely

/s/ Tony Bennett

Tony Bennett

Associate Director

Syndicated Loans Agency

The Royal Bank of Scotland plc. Registered in Scotland No. 90312. Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB.

Regulated by the Financial Services Authority.

Agency agreements exist between members of The Royal Bank of Scotland Group.

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EX-10.(AA)

Exhibit 10aa

September 25, 2005

Donald J. Hayden, Jr.

9 Larkspur Lane

Newton, PA 18940

Dear Don:

This will confirm the terms and conditions of your employment and separation from Bristol-Myers Squibb Company (the “Company”) if you agree to enter into this Letter Agreement. Subject to all of the following terms and conditions, you will receive and/or be eligible for the following compensation and benefits:

1. Term of Employment. Effective September 20, 2005, you will no longer be Executive Vice President, & President, Americas, Bristol-Myers Squibb Company. You will continue to report to the Chief Executive Officer (CEO) as Executive Vice President with responsibilities that will include, but are not limited to, (a) managing ongoing initiatives related to the Company’s interest in a partnership with Bayer for the development and commercialization of art over-the-counter formulation of Pravachol and the Company’s interest in IV-APAP; (b) working with the CEO to address industry issues including access and the overall image and reputation of industry companies; (c) special projects concerning the Company’s strategy and execution of the Company’s strategic plan; (d) ensuring a smooth transition of all current businesses and related responsibilities; and (e) any additional services to the Company or responsibilities as directed by the CEO and/or the CEO’s designee. Unless you are terminated for cause pursuant to paragraph 21, your employment will terminate on March 2, 2006 or on an earlier date mutually agreed upon by you and the Company (“Separation Date”).

2. Base Salary, Severance & Pension/Retiree Medical Benefits.

(a) Your current base salary of $693,270 per year will continue to be paid in normal biweekly pay intervals (less applicable withholdings and deductions) until your Separation Date. You will not be eligible for a merit increase in 2006. During the term of your employment under this Letter Agreement, you will remain an active at will employee of the Company, subject to the terms contained herein, and will continue to receive the benefits for which you are eligible and enrolled on that basis up to your Separation Date. You are also eligible for outplacement assistance commensurate with your level with the Company.

(b) Subject to your signing the General Release to this Letter Agreement no earlier than your Separation Date, delivering it to the Company in the manner specified in paragraph 15 and it becoming effective, you will receive severance pay in the total gross amount of $746,598

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(which is equal to fifty-six (56) weeks of your base salary). This severance payment will be subject to applicable withholdings and deductions (“Severance Payments”) and will be payable in a lump sum before March 15, 2006. Also, subject to your signing the General Release attached to this Letter Agreement as an Exhibit no earlier than your Separation Date, delivering it to the Company in the manner specified in paragraph 15 and it becoming effective, you will be eligible to receive Company-subsidized medical and dental plan benefits and company-paid life insurance equal to one times pay consistent with such benefits provided under the Company Severance Plan for up to 56 weeks following your Separation Date (the “Severance Period”). Such coverage is contingent on your making all the required contributions for similarly situated executives and subject to the terms and conditions of the applicable benefit plans as they exist or may change from time to time and in accordance with applicable law.

(c) In addition, in exchange for your signing the General Release attached to this Letter Agreement as an Exhibit no earlier than your Separation Date and delivering it to the Company in the manner specified in paragraph 15, you will be eligible for enhanced pension and retiree medical benefits, as described below.

Enhanced Pension and Retiree Medical Benefits. In order to be considered a retiree of the Company, you must be at least 55 years of age and have at least 10 years of service at the time of your separation. Although you are not eligible as a retiree, as part of your separation arrangement, provided you timely execute the General Release in this Letter Agreement and in the attached Exhibit, you will be eligible to receive enhanced benefits from the Retirement Income Plan (and from the Benefit Equalization Plan/Retirement Plan) based on your age and service with the Company. The enhanced benefit is a pension benefit determined using the same subsidized benefit reduction factors that apply to the calculation of the early retirement benefit under the Retirement Income Plan. For example, you may receive 100% of your accrued pension benefit at age 60, or 80% of your accrued benefit at age 55.

In addition, these enhanced provisions allow you to commence your pension benefit effective as early as the first of the month following your Separation Date; provided, however not earlier than the earliest date prescribed by the American Jobs Creation Act of 2004 (AJCA). To the extent your pension benefit commences prior to age 55, it will be adjusted to reflect early receipt by 6% for each year between ages 50 and 55. You will have the opportunity to continue medical coverage beyond the Severance Period on an unsubsidized basis until age 55. At age 55, you will be eligible to participate in the Company’s Retiree Medical Plan by paying the required contribution for coverage. This access is available to you beyond your Severance Period only if you are not eligible for coverage and for as long as you do not become eligible under another group plan (e.g., as an employee or retiree of another employer, as a dependent under the coverage available from your spouse’s employer).

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Please contact the HR Service Center at 800-897-9700 if you have questions about these arrangements or if you would like to review your benefit and payment options under the Retirement Income Plan. The HR Service Center can also address other employee benefit plan questions or information needs you may have.

(d) You acknowledge that, by entering into this Letter Agreement, you are waiving all benefits for which yon would be otherwise eligible under the terms of any existing Company severance plan or policy, or any separate agreement provided to you by the Company, other than those specifically set forth in this Letter Agreement (such as, but not limited to, your eligibility for enhanced pension and retiree medical benefits and for severance pay set forth above in paragraphs 2(b) & (c)). You further acknowledge and agree that the total payments and benefits set forth herein are valuable consideration for you to enter into this Letter Agreement.

3. Performance Incentive Plan. You will continue to participate in the Performance Incentive Plan (“PIP”) in 2005 and any amount payable to you for 2005 will be made in accordance with the applicable terms of the PIP. You will not receive a Performance Incentive Plan payment for any participation in 2006.

4. Long-Term Performance Award Plan. You will continue to participate in the Long-Term Performance Award Plan (“LTPAP”) through your Separation Date, including the 2003-2005 performance cycle. The award for the 2003-2005 performance cycle is payable in February 2006 under the terms of the LTPAP plan. The award for the 2004-2006 performance cycle is payable in February 2007, and, assuming a March 2, 2006 Separation Date, you will be eligible for a pro-rata payment based on twenty-seven (27) months of participation. The award for the 2005-2007 performance cycle is payable in February 2008, and, assuming a March 2, 2006 Separation Date, you will be eligible for a pro-rata payment based on fifteen (15) months of participation. As with all other eligible executives, your ultimate payout under the plan will be based on the Company’s performance against targets as certified by the Compensation and Management Development Committee and any and all awards are subject to the terms of the LTPAP. As of the date of this Letter Agreement, you will not be eligible to receive any additional LTPAP awards.

5. Vesting of Stock Options. As of the date of this Letter Agreement, you will not be eligible for additional stock option grants through your Separation Date. Any Bristol-Myers Squibb Company stock options granted to you prior to the date of this Letter Agreement will continue to vest in accordance with the terms of the applicable plans during the period of your employment with the Company. All stock options granted to you will be subject to the terms and conditions of the Bristol-Myers Squibb Company 1983 Stock Option Plan, the Bristol-Myers Squibb Company 1997 Stock Incentive Plan and the Bristol-Myers Squibb Company 2002 Stock Incentive Plan. Effective upon your Separation Date, any stock options granted to you by the Company and outstanding for one year will become fully vested provided you sign and do not revoke the General Release attached to this Letter Agreement as an Exhibit, and you will have the full term from the time of the grant in order to exercise all awards, unless you are discharged for cause pursuant to paragraph 21 below.

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For stock options subject to a share price appreciation threshold, that threshold will remain in effect.

6. Restricted Stock. Assuming your Separation Date from the Company is March 2, 2006, you will have 85,000 unvested shares from the restricted stock awards you received on September 10, 2003 (0 shares vested; 50,000 unvested), March 2, 2004 (0 shares vested; 18,333 shares unvested), and March 1, 2005 (0 shares vested; 16,667 shares unvested). As soon as administratively practicable after your Separation Date, unless you are terminated for cause pursuant to paragraph 21 below, you will receive a pro rata distribution of 19,656 shares (13,725 shares from your 2003 award, 4,074 shares from your 2004 award, and 1,857 shares from your 2005 award), and the remaining 65,344 shares will lapse. These awards are subject to the terms and conditions of the Restricted Stock Award Plan and Agreements thereunder.

7. Executive Car Program. You will cease to participate in the Executive Car Program on the earlier of: (a) 90 days from the first of the month following the Separation Date; (b) within 30 days following the date you have commenced other employment; or (c) the date upon which you elect to terminate your participation. You agree that if you continue to participate in the Executive Car Program after March 15, 2006, you are solely and individually responsible for all additional tax obligations that may result, and as may be required by law.

8. Financial Counseling & Tax Preparation. The Company will continue to make available to you participation in financial counseling until March 15, 2006; provided, however, those services are completed and payment for those services is made prior to or on March 15, 2006. Customary and reasonable tax preparation assistance will be made available for your (i) 2005 tax returns; and (ii) 2006 tax returns if you are employed by the Company on or after January 1, 2006, provided however, tax preparation services shall not include tax planning services or audit related services and those services for the 2005 return are completed and payment for those services is made prior to or on March 15, 2006, and those services for your 2006 returns are completed and payment for those services is made prior to December 31, 2007.

9. Deferred Compensation. The American Jobs Creation Act (AJCA), which became law on October 22, 2004, imposes new restrictions on deferred compensation. The AJCA and any Treasury regulations issued to implement the AJCA may result in additional restrictions on your rights relating to compensation considered to be deferred under this Letter Agreement. To ensure that any of your deferrals under this Letter Agreement which are subject to the AJCA will be effective, this Letter Agreement automatically incorporates all applicable restrictions of the AJCA and such regulations, and the Company will amend the Letter Agreement to the extent necessary to comply with those requirements as to such deferrals and, in such event, shall notify you in writing of the amendments applied. The timing under which you will have a right to receive any payments under this Letter Agreement which are subject to the AJCA will be deemed to be automatically modified, and your rights under the Letter Agreement adjusted, to conform to any requirements under the AJCA and such

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regulations. Any such modifications or adjustments shall be adopted so as to provide the minimum possible disruption to your entitlements and shall be in a manner consistent with general industry practice in response to such requirements. You will be notified promptly to the extent that the AJCA regulations modify the timing of any deferred compensation payments which are subject to the AJCA for which you may be eligible under the terms of this Letter Agreement.

10. Vacation Pay. Following your Separation Date, you will be paid for banked and/or accrued unused vacation days, if any, based on your salary in effect as of your Separation Date.

11. Other Company Property. On or before your Separation Date, you agree to return all property belonging to the Company or its affiliates (including, but not limited to any company laptop or computers, and other equipment, documents and property belonging to the Company).

12. Non-Competition. During the period of your employment with the Company, you will not in any way directly or indirectly own, manage, operate, control, commence employment or a consulting position with or otherwise advise or assist or be actively connected with, or have any financial interest in, directly or indirectly, any entity that engages or intends to engage in any Competing Business anywhere in the world. “Competing Business” means any business or other enterprise substantially similar to, or competitive with, the business of the Company or any of its affiliated companies. Questions regarding whether an assignment or activity may be counter to this limitation must be reviewed by the Chief Executive Officer. It is understood that ownership of not more than one percent (1%) of the equity securities of any Competing Business shall in no way be prohibited pursuant to the foregoing provisions, nor shall this paragraph be construed to prohibit you from developing, on your own time, business models or opportunities in connection with your possible future employment that do not otherwise violate your obligations to the Company regarding confidential and proprietary information.

13. Non-Solicitation. For a one-year period following the Separation Date, you agree that you will not in any way, directly or indirectly on your own or as an agent, employee or officer of any corporation, employ, solicit for employment, engage as a consultant, retain in any capacity, or advise or recommend to any other person that they employ, solicit for employment, engage as a consultant or retain in any capacity, any person employed during the one-year period following the Separation Date by the Company, or any of its affiliates, parent companies and subsidiaries.

14. General Release. In exchange for the valuable consideration set forth herein, you hereby waive any and all rights to sue and/or make any claims against Bristol-Myers Squibb Company, and any affiliates, parent companies and subsidiaries, and its and their past, present and future officers, directors, employees, agents, employee benefit plans and its and their administrators and fiduciaries and its and their successors and assigns (collectively the “Released Parties”) based upon any act or event occurring prior to the Effective Date of

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this Letter Agreement. Without limitation, you specifically release the Released Parties from any and all claims arising out of your employment and separation from the Company, whether known, or unknown, including claims based on discrimination under federal anti-discrimination laws such as Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Americans with Disabilities Act, the Equal Pay Act, the Family Medical Leave Act, claims under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (including, without limitation, claims for interference with your rights to benefits under section 510 of ERISA) and/or any other federal, state, or local law (statutory or decisional), regulation or ordinance, including, but not limited to, the New York State Human Rights Law, the Administrative Code of the City of New York, the New Jersey Law Against Discrimination, the New Jersey Conscientious Employee Protection Act, the New Jersey Family Leave Act, New Jersey Wage and Hour Laws, the New Jersey Wage Discrimination Act and the Pennsylvania Human Relations Act. You further acknowledge that the Company has offered to provide you with this Letter Agreement in lieu of those benefits to which you otherwise would have been entitled under any Company severance plan, program or arrangement.

15. Supplemental General Release. Prior to your Separation Date, the Company will provide you or your counsel with an additional copy of the General Release attached hereto. You will have one (1) business day after your Separation Date in which to sign the General Release and deliver it to the Office of the General Counsel, Bristol Myers Squibb Co., 345 Park Avenue, New York, New York 10154. This General Release may not be signed and will not be accepted or become effective if signed before your Separation Date. After you sign the attached General Release, you will have seven (7) days to revoke your signature. Provided you do not sign it prior to your Separation Date and do not revoke your signature, the General Release will become effective on the eighth (8th) day after you sign it (“Effective Date”) at which point you will receive and/or be eligible for the benefits set forth in paragraph 2(b), 2(c) and paragraph 5 subject to the terms and conditions specified therein and as otherwise set forth in this Letter Agreement. The Company advises you to consult with an attorney (at your own expense) before signing the General Release.

16. Claims Not Subject to Release. By entering into this Letter Agreement, you are not giving up any claims that may arise after the Effective Date of this Letter Agreement, claims for enforcement of this Letter Agreement, or claims for any accrued, vested benefits under any employee benefit or pension plan of the Company, subject to the terms and conditions of such plan and applicable law. You are not giving up your right to appeal a denial of a claim for benefits submitted under your medical or dental coverage, life insurance or disability income program maintained by the Company. Further, you are not giving up your right to file a claim for unemployment insurance or your rights, if any, to file a claim for workers’ compensation insurance benefits.

17. Employee Confidentiality Obligation. You may not make use of confidential or proprietary information concerning the Company’s business or affairs, of any nature, that is not otherwise a matter of public record. This obligation continues after the termination of your

6

employment and remains in effect regardless of whether you sign this Letter Agreement. Nothing in this paragraph is intended to prohibit or restrict you in any way from providing truthful information concerning your employment or the Company’s business activities to any government, regulatory or self-regulatory agency or pursuant to a valid subpoena issued by a court of competent jurisdiction.

18. Non-Disparagement. You agree that you will not disparage or encourage or induce others to disparage the Company or any of its employees. For purposes of this Letter Agreement, the term “disparage” includes without limitation, comments or statements to the press and/or media, the Company’s employees, and/or to any individual, customer, client or entity with whom the Company has a business relationship if such statement would adversely affect in any manner the conduct of the business of the Company and/or the business reputation of the Company or its employees. Nothing in this paragraph is intended to prohibit or restrict you from providing truthful information concerning your employment or the Company’s business activities to any government, regulatory or self-regulatory agency or pursuant to a valid subpoena issued by a court of competent jurisdiction.

19. Material Breach. You understand that a breach by you of paragraphs 12, 13, 17 & 18 would be a material breach of your obligations under this Letter Agreement, and that, if any severance payments have been provided to you under the terms of this Letter Agreement prior to any such breach, in addition to any other remedy that may be available to the Company in law or at equity, you will, upon 30 days written notice by the Company, promptly return all such amounts to the Company.

20. Cooperation in Litigation. From time to time the Company finds it necessary or advisable to contact former employees to discuss matters about which they might have knowledge that are relevant to ongoing legal matters of the Company. Accordingly, you agree that you will reasonably cooperate and generally make yourself available to give testimony and assistance in connection with any relevant litigation, arbitration, proceedings, government hearing or investigation involving the Company. In connection with your testimony, cooperation and assistance with current legal matters, the Company will continue to advance or reimburse to you reasonable expenses incurred by you. You further understand any future requests by you to the Company for the advancement of reasonable legal fees and expenses and/or indemnification for any additional legal matters will be considered by the Company and determined in accordance with the Company’s applicable By-laws, Board resolutions and Delaware law. Should the Company determine that such legal fees or expenses are not warranted, you shall not be obligated to provide or continue to provide such services other than as required by law, court order or other legal proceeding.

21. Termination of Letter Agreement for Misconduct. Your employment status prior to the Separation Date as defined in this Letter Agreement may be terminated by the Company prior to the Separation Date if you are discharged for cause. “Cause” is defined as engaging in willful misconduct or activity deemed detrimental to the Company, including but not limited

7

to dishonesty (such as falsification of company documents, etc.), violation of Company policies (including the Alcohol and Drug Free Workplace, Harassment, Internet Usage and Standard of Business Conduct Policies), unauthorized disclosure of Company confidential information and may include conviction of a misdemeanor, other than a traffic violation, or a felony. The determination of “cause” for your discharge shall be solely at the discretion of the Company, but will be within the definition of the above-referenced, non-exhaustive definition of “cause” and/or consistent with Company practice. If you are discharged for cause, this Letter Agreement shall be void and you shall not be entitled to any of the additional compensation and benefits provided pursuant to this Letter Agreement.

22. Enforceability of Letter Agreement. If at any time after the Effective Date (as defined below) of this Letter Agreement any provision is held to be illegal, void, or unenforceable, that provision will have no force and effect. However, the illegality or unenforceability of that provision will not have any effect on, and will not impair the enforceability of, any other provision of this Letter Agreement. However, if a court of competent jurisdiction finds that the General Release is illegal and/or unenforceable, you will be required to execute a General Release that is legal and enforceable.

23. Termination of Letter Agreement Upon Death. In the case of your death while you are an active employee of the Company and prior to your Separation Date, the applicable death provisions in the Company’s existing employment and benefit plans in effect at the time of death will apply. In such event the terms of this Letter Agreement will be deemed void and of no further effect.

24. Amendment/Waiver. No provision in this Letter Agreement may be amended unless such amendment is agreed to in writing and signed by you and an authorized officer of the Company. No waiver by either party of any breach by the other party of any condition or provision contained in this Letter Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by you or, if by the Company, by the CEO, General Counsel or SVP of Human Resources.

25. Supersedes All Prior Agreements. You acknowledge and agree that this Letter Agreement and the terms, benefits and valuable consideration provided herein supersedes any and all prior agreements entered into between you and the Company with regard to your employment or separation from the Company. You also represent and agree that, in signing this Letter Agreement, you are not relying on any promises or representations not contained within this Letter Agreement and acknowledge that you are not entitled to any other compensation or benefits from the Company except as otherwise expressly provided for herein. Nothing contained in this Letter Agreement shall be deemed to affect your existing entitlement to vested benefits under the Bristol-Myers Squibb Company Savings and Investment Program, the Bristol-Myers Squibb Company Retirement Income Plan and the Bristol-Myers Squibb Company Benefit Equalization Plan (or any successor to either plan) or any other vested benefits except as specifically set forth in this Letter Agreement.

8

By signing this Letter Agreement, you acknowledge that you have been given at least twenty-one (21) days to consider and sign. You further acknowledge that you have seven (7) days after signing it to revoke your signature and that provided you do not revoke your signature, it will be effective as of the date of your signature (the “Effective Date”). To revoke your signature, you must notify the Company in writing within seven days of the date you signed this Letter Agreement. Such notice must be delivered by 5:00 p.m. on the seventh day and addressed to Bristol-Myers Squibb Company, Office of the General Counsel, 345 Park Avenue, NY, NY 10154. In the event that yon do not sign this Letter Agreement or if you revoke your signature, you will not be entitled to the payments and benefits set forth above.

YOUR SIGNATURE BELOW ACKNOWLEDGES THAT YOU HAVE READ THE ABOVE, UNDERSTAND WHAT YOU ARE SIGNING, AND ARE SIGNING IT VOLUNTARILY AND ACTING OF YOUR OWN FREE WILL. YOU UNDERSTAND THAT, IF ANY PROVISION OF THIS LETTER AGREEMENT IS FOUND TO BE INVALID OR UNENFORCEABLE, IT WILL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION. YOU FURTHER AGREE THAT THIS LETTER AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW RULES. YOU ALSO ACKNOWLEGE THAT THE COMPANY HAS ADVISED AND HEREBY ADVISES YOU IN WRITING TO CONSULT WITH AN ATTORNEY AND OTHER ADVISORS OF YOUR CHOICE PRIOR TO SIGNING THIS DOCUMENT.

Please indicate your acceptance of this Letter Agreement by signing and returning it to me.

Very truly yours,

/s/ Stephen E. Bear

Stephen E. Bear

Senior Vice President, Human Resources

/s/ Donald J. Hayden, Jr.	Executed: October 27, 2005
Donald J. Hayden, Jr.

9

EXHIBIT

GENERAL RELEASE

General Release by Donald J. Hayden, Jr. (“Mr. Hayden”) in his capacity as an individual and on behalf of his heirs, executors, administrators, attorneys, agents, successors and assigns of all claims against Bristol-Myers Squibb Company (the “Company”), and any affiliates, parent companies and subsidiaries, and their past, present and future officers, directors, employees and agents (collectively the “Released Parties”).

In exchange for the payments and other consideration set forth in paragraphs 2(b), 2(c) and 5 of the Letter Agreement between Mr. Hayden and the Company dated September 25, 2005 (the “Letter Agreement”), and other valuable consideration, Mr. Hayden waives any and all fights to sue and/or make any claims against the Released Parties (as defined in paragraph 14 of the Letter Agreement) based upon any act or event occurring prior to the date of this General Release. Without limitation, Mr. Hayden specifically releases the Released Parties from any and all claims arising out of his employment and separation from the Company, whether known or unknown, including claims based on discrimination under federal anti-discrimination laws such as Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Americans with Disabilities Act, the Equal Pay Act, the Family Medical Leave Act, claims under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (including, without limitation, claims for interference with his rights to benefits under section 510 of ERISA), and/or any other claims under federal, state, or local law (statutory or decisional), regulation or ordinance, including, but not limited to, claims sounding in tort or contract (express or implied) and claims under the New York State Human Rights Law, the Administrative Code of the City of New York, the New Jersey Law Against Discrimination, the New Jersey Conscientious Employee Protection Act, the New Jersey Family Leave Act, New Jersey Wage and Hour Laws, the New Jersey Wage Discrimination Act and the Pennsylvania Human Relations Act. Mr. Hayden further acknowledges that the Company has provided him with the Letter Agreement in lieu of those benefits to which he otherwise would have been entitled under any Bristol-Myers Squibb Company Severance Plan, and hereby waives any entitlement under that plan or any other severance plan or policy of the Company or any prior agreement with the Company.

Mr. Hayden acknowledges that he is not giving up any claims that arise after the Effective Date of this General Release (as defined in paragraph 15 of the Letter Agreement), claims for enforcement of the Letter Agreement or claims for any accrued, vested benefits under any employee benefit or pension plan of the Company, subject to the terms and conditions of such plan and applicable law. Mr. Hayden is further not giving up his right to appeal a denial of a claim for benefits submitted under his medical or dental coverage, life insurance or disability income program maintained by the Company. Mr. Hayden is further not giving up his right to file a claim for unemployment insurance benefits, nor his rights, if any, to file a claim for workers’ compensation insurance benefits.

Mr. Hayden agrees that this General Release is an integral part of the Letter Agreement, and that all provisions of the Letter Agreement are thereby incorporated in this General Release as if fully set forth herein. Mr. Hayden acknowledges that this General Release and the Letter Agreement constitute the full and complete understanding and agreement of the parties with

10

respect to the subject matter hereof, and that neither may be modified except in writing and signed by Mr. Hayden and an authorized officer of the Company. He further represents and agrees that, in signing this General Release, he is not relying on any promises or representations not contained herein and acknowledges that he is not entitled to any other compensation or benefits from the Company except as otherwise expressly provided for in the Letter Agreement and herein.

BY SIGNING BELOW, MR. HAYDEN ACKNOWLEDGES THAT HE HAD AT LEAST 21 DAYS TO CONSIDER THIS GENERAL RELEASE BEFORE SIGNING IT, THAT HE MAY NOT SIGN IT BEFORE HIS SEPARATION DATE, THAT AFTER SIGNING IT, HE HAS 7 DAYS TO REVOKE HIS SIGNATURE AND THAT, PROVIDED HE DOES NOT REVOKE IT, IT WILL BECOME EFFECTIVE ON THE 8^TH DAY AFTER HE SIGNS IT. BY SIGNING BELOW, MR. HAYDEN ALSO ACKNOWLEDGES THAT HE HAS READ THE ABOVE, UNDERSTANDS WHAT HE IS SIGNING, HAS BEEN ADVISED IN WRITING TO CONSULT AN ATTORNEY BEFORE SIGNING IT, AND IS SIGNING IT VOLUNTA-KILY AND OF HIS OWN FREE WILL. HE FURTHER AGREES THAT 1F ANY PROVISION OF THIS GENERAL RELEASE IS FOUND TO BE INVALID OR UNENFORCEABLE, IT WILL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION. HE FURTHER AGREES THAT THIS GENERAL RELEASE WILL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAW RULES AND CONSENTS TO PERSONAL JURISDICTION IN NEW YORK, NEW YORK.

	Executed                     , 2006
Donald J. Hayden, Jr.

11

EX-15

EXHIBIT 15.

Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, D.C. 20549

Commissioners:

We are aware that our report dated November 2, 2005, on our review of interim financial information of Bristol-Myers Squibb Company (the “Company”) for the three and nine month periods ended September 30, 2005 and 2004 and included in the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2005 is incorporated by reference in its Registration Statements on Form S-8 (Nos. 33-30856, 33-38411, 33-38587, 33-44788, 33-52691, 33-30756-02, 33-58187, 333-02873, 333-47403, 333-65424 and 333-107414), Form S-4 (No. 333-09519 and 333-114101) and Form S-3 (Nos. 33-33682, 33-61147, 33-62496, 333-49227, 333-65444, 333-114107 and 333-117818).

Such report is not a “report” or “part” of a registration statement prepared or certified by PricewaterhouseCoopers LLP, an independent registered public accounting firm, within the meaning of Sections 7 and 11 of the Securities Act of 1933 and the independent accountants’ liability under Section 11 does not extend to such report.

Very truly yours,

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

November 2, 2005

E-15

EX-31.(A)

EXHIBIT 31a.

CERTIFICATIONS PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION BY CHIEF EXECUTIVE OFFICER

I, Peter R. Dolan, certify that:

1. I have reviewed Bristol-Myers Squibb Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a. all significant deficiencies and material weaknesses in the design or operation of internal controls, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Date: November 2, 2005

/s/ Peter R. Dolan

Peter R. Dolan

Chief Executive Officer

E-31-1

EX-31.(B)

EXHIBIT 31b.

CERTIFICATION BY CHIEF FINANCIAL OFFICER

I, Andrew R. J. Bonfield, certify that:

1. I have reviewed Bristol-Myers Squibb Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a. all significant deficiencies and material weaknesses in the design or operation of internal controls, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Date: November 2, 2005

/s/ Andrew R. J. Bonfield

Andrew R. J. Bonfield

Chief Financial Officer

E-31-2

EX-32.(A)

EXHIBIT 32a.

Certification by the Chief Executive Officer Pursuant to 18 U. S. C. Section 1350, as

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, I, Peter R. Dolan, hereby certify that, to the best of my knowledge, Bristol-Myers Squibb Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (the “Report”), as filed with the Securities and Exchange Commission on November 2, 2005, fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Bristol-Myers Squibb Company.

/s/ Peter R. Dolan

Peter R. Dolan

Chief Executive Officer

November 2, 2005

E-32-1

EX-32.(B)

EXHIBIT 32b.

Certification by the Chief Financial Officer Pursuant to 18 U. S. C. Section 1350, as

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, I, Andrew R. J. Bonfield, hereby certify that, to the best of my knowledge, Bristol-Myers Squibb Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (the “Report”), as filed with the Securities and Exchange Commission on November 2, 2005, fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Bristol-Myers Squibb Company.

/s/ Andrew R. J. Bonfield

Andrew R. J. Bonfield

Chief Financial Officer

November 2, 2005

E-32-2