RULE NO. 424(b)(5)
                                                       REGISTRATION NO. 33-49539

PROSPECTUS SUPPLEMENT
(To Prospectus dated August 17, 1994)
 
                                  $200,000,000
 
                                      LOGO
 
LOGO
                          MEDIUM-TERM NOTES, SERIES B
       DUE FROM THREE YEARS TO 10 YEARS AND ONE MONTH FROM DATE OF ISSUE
 
                                ---------------
 
  R.R. Donnelley & Sons Company (the "Company") may offer from time to time its
Medium-Term Notes, Series B (the "Notes"), having an aggregate initial offering
price not to exceed $200,000,000 (or the equivalent thereof in foreign
currencies or currency units), subject to reduction under certain circumstances
as a result of the sale of other Debt Securities of the Company under the
Prospectus to which this Prospectus Supplement relates. The Notes will be
offered in varying maturities from three years to ten years and one month from
their date of issue and may be subject to redemption at the option of the
Company or repayment at the option of the Holder, in each case, in whole or in
part prior to the maturity date (as further defined below, the "Stated
Maturity") thereof as set forth in a Pricing Supplement to this Prospectus
Supplement (a "Pricing Supplement"). Each Note will be denominated in U.S.
dollars or in other currencies or currency units (the "Specified Currency") as
may be designated by the Company and set forth in the applicable Pricing
Supplement (the "Multi-Currency Notes"). See "Special Provisions Relating to
Multi-Currency Notes" and "Foreign Currency Risks." The Notes may be issued as
"Amortizing Notes," "Original Issue Discount Notes," "Reset Notes," "Currency
Indexed Notes" or "Commodity Indexed Notes." See "Description of Notes."
                                                        (Continued on next page)
 
                                ---------------
 
 THESE SECURITIES HAVE NOT BEEN APPROVED  OR DISAPPROVED BY THE SECURITIES AND
  EXCHANGE  COMMISSION  OR  ANY  STATE  SECURITIES  COMMISSION  NOR  HAS  THE
   COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
    ADEQUACY OF THIS  PROSPECTUS SUPPLEMENT, ANY  PRICING SUPPLEMENT HERETO
     OR THE PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY  IS A CRIMINAL
      OFFENSE.
 
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- --------------------------------------------------------------------------------


                                                        AGENTS' COMMISSION OR         PROCEEDS TO
                                 PRICE TO PUBLIC(1)          DISCOUNT(2)             COMPANY(2)(3)
- ----------------------------------------------------------------------------------------------------
                                                                       
Per Note....................            100%                  .350%-.625%            99.650%-99.375%
- ----------------------------------------------------------------------------------------------------
                                                                                     $199,300,000-
Total.......................        $200,000,000         $700,000-$1,250,000          $198,750,000
- ----------------------------------------------------------------------------------------------------

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(1) Unless otherwise indicated in the applicable Pricing Supplement, Notes will
    be sold at 100% of their principal amount.
(2) The Company will pay Lehman Brothers, Lehman Brothers Inc. (including its
    affiliate, Lehman Government Securities Inc.), Merrill Lynch & Co., Merrill
    Lynch, Pierce, Fenner & Smith Incorporated or J.P. Morgan Securities Inc.
    (each an "Agent," and, collectively, the "Agents") a commission ranging
    from .350% to .625% of the principal amount of any Note, depending on its
    Stated Maturity, sold through such Agent. Any Agent, acting as principal,
    may also purchase Notes at a discount for resale to one or more investors
    or one or more broker-dealers (acting as principal for purposes of resale)
    at varying prices related to prevailing market prices at the time of
    resale, as determined by such Agent, or, if so agreed, at a fixed public
    offering price. The Company has agreed to reimburse the Agents for certain
    expenses. The Company has agreed to indemnify the Agents against certain
    liabilities, including liabilities under applicable federal and state
    securities laws.
(3) Before deducting offering expenses payable by the Company estimated at U.S.
    $200,000.
 
                                ---------------
 
  The Notes are offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable efforts to solicit
offers to purchase the Notes. The Company has reserved the right to sell Notes
directly to investors on its own behalf, and on such sales no commissions will
be paid. The Notes will not be listed on any securities exchange, and there can
be no assurance that the Notes will be sold or that there will be a secondary
market for the Notes. The Company reserves the right to withdraw, cancel or
modify the offer made hereby without notice. The Company or the Agent that
solicits an offer to purchase may reject any such offer to purchase Notes in
whole or in part. See "Supplemental Plan of Distribution."
 
                                ---------------
 
LEHMAN BROTHERS
 
                   MERRILL LYNCH & CO.
 
                                                     J.P. MORGAN SECURITIES INC.
           The Date of this Prospectus Supplement is August 17, 1994.

 
(from preceding page)
  Each Note will bear interest at a fixed rate (a "Fixed Rate Note"), which may
be zero in the case of certain Notes issued at a price representing a discount
from the principal amount payable at maturity (a "Zero-Coupon Note"), or at a
variable rate (a "Floating Rate Note") determined by reference to the
Commercial Paper Rate, CD Rate, Federal Funds Rate, CMT Rate, 11th District
Cost of Funds Rate, Kenny Rate, LIBOR, Prime Rate or Treasury Rate or such
other interest rate formula (the "Interest Rate Basis") as may be indicated in
the accompanying Pricing Supplement, as adjusted by a Spread or Spread
Multiplier, if any, applicable to such Notes. See "Description of Notes."
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable either semiannually on each May 15 and
November 15 or annually on May 15 (each an "Interest Payment Date" with respect
to such Fixed Rate Notes) and at Stated Maturity. Interest on Floating Rate
Notes will be payable on such dates indicated in the applicable Pricing
Supplement (each an "Interest Payment Date" with respect to such Floating Rate
Notes).
 
  Each Note will be represented by either a Global Security (a "Book-Entry
Note") registered in the name of a nominee of The Depository Trust Company
("DTC") or other depositary (DTC or such other depositary as is indicated in
the applicable Pricing Supplement is referred to herein as the "U.S.
Depositary"), or a certificate issued in definitive form (a "Certificated
Note"), as indicated in the applicable Pricing Supplement. Beneficial interests
in Book-Entry Notes will be shown on, and transfers thereof will be effected
only through, records maintained by the U.S. Depositary and its participants.
Owners of beneficial interests in Book-Entry Notes will be entitled to physical
delivery of Certificated Notes only under the limited circumstances described
herein. See "Description of Notes--Book-Entry System." Unless otherwise
indicated in the applicable Pricing Supplement, Notes denominated in U.S.
dollars will be issued in denominations of $100,000 and integral multiples of
$1,000 in excess thereof. If the Notes are to be issued in a foreign currency
or units of a foreign composite currency, the authorized denominations and
currency exchange rate information will be set forth in the applicable Pricing
Supplement.
 
                                      S-2

 
  IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
                               ----------------
 
                              DESCRIPTION OF NOTES
 
  THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES OFFERED HEREBY
SUPPLEMENTS AND, TO THE EXTENT INCONSISTENT THEREWITH REPLACES, THE DESCRIPTION
OF THE GENERAL TERMS AND PROVISIONS OF THE DEBT SECURITIES (AS DEFINED IN THE
ACCOMPANYING PROSPECTUS) SET FORTH UNDER THE HEADING "DESCRIPTION OF DEBT
SECURITIES" IN THE ACCOMPANYING PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS
HEREBY MADE. THE PROVISIONS OF THE NOTES SUMMARIZED HEREIN WILL APPLY TO EACH
NOTE UNLESS OTHERWISE INDICATED IN THE APPLICABLE PRICING SUPPLEMENT.
CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS SPECIFIED IN
THE INDENTURE AND/OR THE NOTES.
 
GENERAL
 
  The Notes offered hereby will be issued under the Indenture referred to in
the accompanying Prospectus. The summary contained herein of certain provisions
of the Notes does not purport to be complete and is qualified in its entirety
by reference to the provisions of the Indenture and the forms of Notes, each of
which has been filed as an exhibit to the Registration Statement (the
"Registration Statement"), of which the accompanying Prospectus is a part, to
which exhibits reference is hereby made.
 
  The Notes constitute a single series for purposes of the Indenture and are
limited to an aggregate initial offering price of U.S. $200,000,000 (or the
equivalent thereof in the Specified Currency, calculated on the applicable
trade date). Unless otherwise indicated in the applicable Pricing Supplement,
currency amounts in this Prospectus Supplement, the accompanying Prospectus and
any Pricing Supplement are stated in United States dollars ("$," "dollars" or
"U.S. $").
 
  The Notes will constitute unsecured and unsubordinated indebtedness of the
Company and will rank on a parity with the Company's other unsecured and
unsubordinated indebtedness.
 
  The Notes are offered on a continuing basis and will mature on a Business Day
(as defined below) from three years to 10 years and one month from their date
of issue, as selected by the initial purchaser and agreed to by the Company,
and may be subject to redemption at the option of the Company or repayment at
the option of the Holder prior to Maturity. See "Redemption and Repayment"
below. Floating Rate Notes will mature on an Interest Payment Date specified in
the Pricing Supplement applicable thereto.
 
  Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars, and payments of principal of, premium, if
any, and any interest on the Notes will be made in U.S. dollars. If any of the
Notes are to be denominated other than in U.S. dollars, or if the principal of,
or premium, if any, or any interest on any of the Notes is to be payable at the
option of the Holder or the Company in a currency or composite currency unit
other than that in which such Notes are denominated, the applicable Pricing
Supplement will provide additional information, including authorized
denominations and applicable exchange rate information pertaining to the terms
of such Notes and certain other matters of interest to the Holders thereof. See
"Special Provisions Relating to Multi-Currency Notes."
 
  Each note will be issued initially as either a Book-Entry Note or a
Certificated Note. Except as set forth under "Book-Entry System" below, Book-
Entry Notes will not be issuable in certificated form. Unless otherwise
specified in the applicable Pricing Supplement or as provided below with
respect to Multi-Currency Notes, Notes will be issued in denominations of
$100,000 and integral multiples of $1,000 in excess thereof.
 
  Payments of interest and principal (and premium, if any) to Beneficial Owners
(as defined below) of Book-Entry Notes are expected to be made in accordance
with the U.S. Depositary's and its participants' procedures in effect from time
to time as described below under "Book-Entry System."
 
                                      S-3

 
  Unless otherwise specified in the applicable Pricing Supplement, payments of
interest and, in the case of Amortizing Notes, principal with respect to any
Certificated Note (other than interest and, in the case of Amortizing Notes,
principal payable at Stated Maturity) will be made by mailing a check to the
Holder at the address of such Holder appearing on the security register for the
Notes on the applicable Regular Record Date. Notwithstanding the foregoing, at
the option of the Company, all payments of interest and, in the case of
Amortizing Notes, principal on the Notes may be made by wire transfer of
immediately available funds to an account at a bank located within the United
States as designated by each Holder not less than 15 calendar days prior to the
applicable Interest Payment Date. A Holder of $10,000,000 or more in aggregate
principal amount of Notes of like tenor and terms with the same Interest
Payment Date may demand payment by wire transfer but only if appropriate
payment instructions have been received in writing by the Trustee, not less
than 15 calendar days prior to the applicable Interest Payment Date. In the
event that payment is so made in accordance with instructions of the Holder,
such wire transfer shall be deemed to constitute full and complete payment of
such interest and principal on the Notes. Payment of the principal of (and
premium, if any) and interest due with respect to any Certificated Note at
Maturity will be made in immediately available funds upon surrender of such
Note at the principal office of the Trustee in the Borough of Manhattan, The
City of New York accompanied by wire transfer instructions, provided that the
Certificated Note is presented to the Trustee in time for the Trustee to make
such payments in such funds in accordance with its normal procedures.
 
  Notwithstanding anything in this Prospectus Supplement to the contrary,
unless otherwise specified in the applicable Pricing Supplement, if a Note is
an Original Issue Discount Note, the amount payable on such Note in the event
the principal thereof is declared to be due and payable immediately as
described in the accompanying Prospectus under "Description of Debt
Securities--Events of Default" or in the event of the redemption or repayment
thereof prior to its Stated Maturity shall be the Amortized Face Amount of such
Note as of the date of declaration, redemption or repayment, as the case may
be. The "Amortized Face Amount" of an Original Issue Discount Note shall be the
amount equal to (i) the principal amount of such Note multiplied by the Issue
Price set forth in the applicable Pricing Supplement plus (ii) the portion of
the difference between the dollar amount determined pursuant to the preceding
clause (i) and the principal amount of such Note that has accrued at the yield
to maturity set forth in the Pricing Supplement (computed in accordance with
generally accepted United States bond yield computation principles) to such
date of declaration, redemption or repayment, but in no event shall the
Amortized Face Amount of an Original Issue Discount Note exceed its principal
amount.
 
  The Pricing Supplement relating to each Note will describe, among other
things, the following items: (i) the Specified Currency with respect to such
Note (and, if such Specified Currency is other than U.S. dollars, certain other
terms relating to such Note, including the authorized denominations); (ii) the
price (expressed as a percentage of the aggregate principal amount thereof) at
which such Note will be issued (the "Issue Price"); (iii) the date on which
such Note will be issued (the "Original Issue Date"); (iv) the date on which
such Note will mature (the "Stated Maturity") and whether the Stated Maturity
may be extended by the Company, and if so, the Extension Periods and the Final
Maturity Date (each as defined below); (v) whether such Note is a Fixed Rate
Note or a Floating Rate Note; (vi) if such Note is a Fixed Rate Note, the rate
per annum at which such Note will bear interest, if any, the interest payment
date or dates, if different from those set forth below under "Fixed Rate Notes"
and whether such rate may be changed by the Company prior to Stated Maturity;
(vii) if such Note is a Floating Rate Note, the Initial Interest Rate, the
Interest Rate Basis, the Interest Reset Dates, the Interest Payment Dates, the
Index Maturity, the maximum interest rate, if any, the minimum interest rate,
if any, the Spread, if any, the Spread Multiplier, if any (all as defined
herein), and any other terms relating to the particular method of calculating
the interest rate for such Note, and whether any such Spread and/or Spread
Multiplier may be changed by the Company prior to Stated Maturity; (viii)
whether such Note is an Original Issue Discount Note, and if so, the yield to
maturity; (ix) whether such Note is a Currency Indexed Note or a Commodity
Indexed Note and if so, the specific terms thereof; (x) whether such Note is an
Amortizing Note (as defined below), and if so, the basis or formula for the
amortization of principal and the payment dates for such periodic principal
payments; (xi) the regular
 
                                      S-4

 
record date or dates (a "Regular Record Date") if other than as set forth
below; (xii) whether such Note may be redeemed at the option of the Company, or
repaid at the option of the Holder, prior to Stated Maturity and, if so, the
provisions relating to such redemption or repayment; (xiii) whether such Note
will be issued initially as a Book-Entry Note or a Certificated Note; and (xiv)
any other terms of such Note not inconsistent with the provisions of the
Indenture.
 
  Certificated Notes may be presented for registration of transfer or exchange
at the Corporate Trust Office of the Trustee in the Borough of Manhattan, The
City of New York.
 
  All percentages resulting from any calculation with respect to any Notes will
be rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all
dollar amounts used in or resulting from such calculation on any Notes will be
rounded to the nearest cent with one half cent being rounded upward.
 
  As used herein, "Business Day" means, unless otherwise specified in the
applicable Pricing Supplement, any Monday, Tuesday, Wednesday, Thursday or
Friday that in The City of New York is not a day on which banking institutions
are authorized or required by law, regulation or executive order to close and,
with respect to Notes as to which LIBOR (as defined below) is an applicable
Base Rate (as defined below), is also a London Business Day, provided, however,
that with respect to Multi-Currency Notes, such day is also not a day on which
banking institutions are authorized or required by law, regulation or executive
order to close in the principal financial center of the country of such
Specified Currency (or, in the case of ECUs, is not a day designated as an ECU
Non-Settlement Day by the ECU Banking Association in Paris or otherwise
generally regarded in the ECU interbank market as a day on which payments on
ECUs shall not be made). As used herein, "London Business Day" means any day
(a) if the Designated LIBOR Currency is other than the ECU, on which dealings
in deposits in such Designated LIBOR Currency are transacted in the London
interbank market or (b) if the Designated LIBOR Currency is the ECU, that is
not designated as an ECU Non-Settlement Day by the ECU Banking Association in
Paris or otherwise generally regarded in the ECU interbank market as a day on
which payments on ECUs shall not be made.
 
  The Notes are referred to in the accompanying Prospectus as the "Debt
Securities." For a description of the rights attaching to different series of
Debt Securities under the Indenture, see "Description of Debt Securities" in
the Prospectus. Unless otherwise indicated in the applicable Pricing
Supplement, the Notes will have the terms described below.
 
INTEREST AND INTEREST RATES
 
  Each Note (other than a Zero-Coupon Note) will bear interest from its
Original Issue Date or from and including the most recent Interest Payment Date
to which interest on such Note has been paid or duly provided for at a fixed
rate per annum or at a rate per annum determined pursuant to an Interest Rate
Basis, stated therein and in the applicable Pricing Supplement, that may be
adjusted by a Spread and/or Spread Multiplier, until the principal thereof is
paid or made available for payment. The Pricing Supplement relating to each
Note will indicate whether interest shall accrue on any overdue principal and
on any overdue installment of interest (to the extent that the payment of such
interest is legally enforceable) and at what rate any such interest will
accrue. Unless otherwise set forth in the applicable Pricing Supplement,
interest will be payable on each Interest Payment Date and at Maturity.
"Maturity" means the date on which the principal of a Note becomes due and
payable in full in accordance with its terms and the terms of the Indenture,
whether at Stated Maturity, upon acceleration, redemption, repayment or
otherwise. Interest (other than defaulted interest which may be paid on a
special record date) will be payable to the Holder at the close of business on
the Regular Record Date next preceding such Interest Payment Date; provided,
however, that the first payment of interest on any Note originally issued
between a Regular Record Date and the next Interest Payment Date will be made
on the Interest Payment Date following the next succeeding Regular Record Date
to the Holder on such next succeeding Regular Record Date. The United States
Internal Revenue Service might take the position that any such Note should be
treated as having been issued with original issue discount for Federal income
tax purposes, which could affect the reporting of income by certain holders.
See "United States Federal Income Tax Consequences."
 
                                      S-5

 
  Interest rates, interest rate formulae and other variable terms of the Notes
are subject to change by the Company from time to time, but no such change will
affect any Note already issued or as to which an offer to purchase has been
accepted by the Company. Unless otherwise indicated in the applicable Pricing
Supplement, the Interest Payment Dates and the Regular Record Dates for Fixed
Rate Notes shall be as described below under "Fixed Rate Notes." The Interest
Payment Dates for Floating Rate Notes shall be as indicated in the applicable
Pricing Supplement, and unless otherwise indicated in the applicable Pricing
Supplement, each Regular Record Date for a Floating Rate Note will be the
fifteenth day (whether or not a Business Day) preceding each Interest Payment
Date.
 
  Each Note (other than a Zero-Coupon Note) will bear interest at either (a) a
fixed rate or (b) a floating rate determined by reference to an Interest Rate
Basis which may be adjusted by a Spread and/or Spread Multiplier. Any Floating
Rate Note may also have either or both of the following: (i) a maximum
numerical interest rate limitation, or ceiling, on the rate of interest which
may accrue during any interest period, and (ii) a minimum numerical interest
rate limitation, or floor, on the rate of interest which may accrue during any
interest period. The applicable Pricing Supplement relating to each Note will
designate either a fixed rate of interest per annum on the applicable Fixed
Rate Note or one of the following Interest Rate Bases as applicable to the
relevant Floating Rate Note: (a) the CD Rate, in which case such Note will be a
"CD Rate Note," (b) the Commercial Paper Rate, in which case such Note will be
a "Commercial Paper Rate Note," (c) the Federal Funds Rate, in which case such
Note will be a "Federal Funds Rate Note," (d) LIBOR, in which case such Note
will be a "LIBOR Note," (e) the Treasury Rate, in which case such Note will be
a "Treasury Rate Note," (f) the Prime Rate, in which case such Note will be a
"Prime Rate Note," (g) the CMT Rate, in which case such Note will be a "CMT
Rate Note," (h) the 11th District Cost of Funds Rate, in which case such Note
will be an "11th District Cost of Funds Rate Note," (i) the Kenny Rate, in
which case such Note will be a "Kenny Rate Note," or (j) such other Interest
Rate Basis as is set forth in such Pricing Supplement.
 
  Notwithstanding the determination of the interest rate as provided below, the
interest rate on the Notes for any interest period shall not be greater than
the maximum interest rate, if any, or less than the minimum interest rate, if
any, specified in the applicable Pricing Supplement. The interest rate on the
Notes will in no event be higher than the maximum rate permitted by New York or
other applicable law, as the same may be modified by United States law of
general application. Under present New York law, the maximum rate of interest
is 25% per annum on a simple interest basis. This limit may not apply to Notes
in which $2,500,000 or more has been invested.
 
FIXED RATE NOTES
 
  Each Fixed Rate Note (other than a Zero-Coupon Note) will bear interest from
its date of issue at the annual rate stated on the face thereof, as specified
in the applicable Pricing Supplement. Payments of interest on any Fixed Rate
Note with respect to any Interest Payment Date will include interest accrued
from and including the Original Issue Date, or from and including the next
preceding Interest Payment Date, to but excluding the applicable Interest
Payment Date or Maturity. Fixed Rate Notes may bear one or more annual rates of
interest during the periods or under the circumstances specified therein and in
the applicable Pricing Supplement. Interest on Fixed Rate Notes will be
computed and paid on the basis of a 360-day year of twelve 30-day months.
 
  Unless otherwise specified in the applicable Pricing Supplement, the Interest
Payment Dates for Fixed Rate Notes (other than Amortizing Notes) will be either
semiannually on each May 15 and November 15 or annually on May 15 and the
Regular Record Dates will be each May 1 and November 1 or May 1, as the case
may be (whether or not a Business Day). Unless otherwise specified in the
applicable Pricing Supplement, payments of principal and interest on Fixed Rate
Amortizing Notes will be made either quarterly on each February 15, May 15,
August 15 and November 15, semiannually on each May 15 and November 15 or
annually on each May 15, as set forth in the applicable Pricing Supplement, and
at Maturity. Unless otherwise
 
                                      S-6

 
specified in the applicable Pricing Supplement, Regular Record Dates with
respect to Fixed Rate Amortizing Notes will be the 15th day (whether or not a
Business Day) next preceding each Interest Payment Date. If the Interest
Payment Date or Maturity for any Fixed Rate Note is a day that is not a
Business Day, all payments to be made on such day will be made on the next
succeeding Business Day with the same force and effect as if made on the due
date, and no additional interest shall be payable as a result of such delayed
payment.
 
  Payments with respect to Fixed Rate Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information in
respect of each Fixed Rate Amortizing Note will be provided to the original
purchaser thereof and will be available, upon request, to subsequent Holders.
 
FLOATING RATE NOTES
 
  The interest rate on each Floating Rate Note will be equal to either (i) the
interest rate calculated by reference to the specified Interest Rate Basis plus
or minus the Spread, if any, or (ii) the interest rate calculated by reference
to the specified Interest Rate Basis multiplied by the Spread Multiplier, if
any. The "Spread" is the number of basis points (one basis point equals one-
hundredth of a percentage point) specified in the applicable Pricing Supplement
as being applicable to such Note, and the "Spread Multiplier" is the percentage
specified in the applicable Pricing Supplement as being applicable to such
Note. The applicable Pricing Supplement will specify the Interest Rate Basis
and the Spread or Spread Multiplier, if any, and the maximum or minimum
interest rate limitation, if any, applicable to each Floating Rate Note. In
addition, such Pricing Supplement will contain particulars as to the
Calculation Agent (unless specified in the applicable Pricing Supplement,
Citibank, N.A. (in such capacity, the "Calculation Agent")), Index Maturity,
Original Issue Date, the interest rate in effect for the period from the
Original Issue Date to the first Interest Reset Date set forth in the
applicable Pricing Supplement (the "Initial Interest Rate"), Interest
Determination Dates, Interest Payment Dates, Regular Record Dates and Interest
Reset Dates with respect to such Note.
 
  Except as provided below or in the applicable Pricing Supplement, interest on
Floating Rate Notes, including Floating Rate Amortizing Notes, will be payable,
(i) in the case of Floating Rate Notes that reset daily, weekly or monthly, on
the third Wednesday of each month or on the third Wednesday of March, June,
September and December of each year, as specified on the face thereof and in
the applicable Pricing Supplement; (ii) in the case of Floating Rate Notes,
including Floating Rate Amortizing Notes, that reset quarterly, on the third
Wednesday of March, June, September and December of each year; (iii) in the
case of Floating Rate Notes, including Floating Rate Amortizing Notes, that
reset semiannually, on the third Wednesday of each of two months of each year
specified on the face thereof and in the applicable Pricing Supplement; and
(iv) in the case of Floating Rate Notes, including Floating Rate Amortizing
Notes, that reset annually, on the third Wednesday of one month of each year
specified on the face thereof and in the applicable Pricing Supplement (each
such day being an "Interest Payment Date") and, in each case, at Maturity. If
any Interest Payment Date, other than Maturity, for any Floating Rate Note
would otherwise be a day that is not a Business Day, such Interest Payment Date
shall be postponed to the next day that is a Business Day, except that in the
case of a LIBOR Note, if such Business Day is in the next succeeding calendar
month, such Interest Payment Date shall be the immediately preceding London
Business Day. If the Maturity for any Floating Rate Note falls on a day that is
not a Business Day, payment of principal, premium, if any, and interest with
respect to such Note will be made on the next succeeding Business Day with the
same force and effect as if made on the due date, and no interest shall be
payable on the date of payment for the period from and after the due date.
 
  The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually (such period being the "Reset
Period" for such Note, and the first day of each Reset Period being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement. The
Interest Reset Date will be, in the case of Floating Rate Notes which reset
daily, each Business Day; in the case of
 
                                      S-7

 
Floating Rate Notes (other than Treasury Rate Notes) which reset weekly, the
Wednesday of each week; in the case of Treasury Rate Notes which reset weekly,
the Tuesday of each week, except as provided below; in the case of Floating
Rate Notes which reset monthly, the third Wednesday of each month (with the
exception of monthly reset 11th District Cost of Funds Rate Notes, which will
reset on the first calendar day of the month); in the case of Floating Rate
Notes which reset quarterly, the third Wednesday of each March, June, September
and December; in the case of Floating Rate Notes which reset semiannually, the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes which reset
annually, the third Wednesday of one month of each year specified in the
applicable Pricing Supplement; provided, however, that the interest rate in
effect from the date of issue to the first Interest Reset Date with respect to
a Floating Rate Note will be the Initial Interest Rate (as set forth in the
applicable Pricing Supplement). If any Interest Reset Date for any Floating
Rate Note would otherwise be a day that is not a Business Day for such Floating
Rate Note, the Interest Reset Date for such Floating Rate Note shall be
postponed to the next day that is a Business Day for such Floating Rate Note,
except that in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Reset Date shall be the immediately
preceding Business Day. Each adjusted rate shall be applicable on and after the
Interest Reset Date to which it relates, to, but not including, the next
succeeding Interest Reset Date or until Stated Maturity or the date of
redemption, as the case may be.
 
  The interest rate for each Reset Period will be the rate determined by the
Calculation Agent on the Calculation Date (as defined below) pertaining to the
Interest Determination Date pertaining to the Interest Reset Date for such
Reset Period. Unless otherwise specified in the applicable Pricing Supplement,
the "Interest Determination Date" pertaining to an Interest Reset Date for (a)
a Commercial Paper Rate Note (the "Commercial Paper Interest Determination
Date"), (b) a Federal Funds Rate Note (the "Federal Funds Interest
Determination Date"), (c) a CD Rate Note (the "CD Interest Determination
Date"), (d) a Prime Rate Note (the "Prime Interest Determination Date"), (e) a
CMT Rate Note (the "CMT Interest Determination Date"), or (f) a Kenny Rate Note
(the "Kenny Rate Interest Determination Date") will be the second Business Day
prior to such Interest Reset Date. Unless otherwise specified in the applicable
Pricing Supplement, the Interest Determination Date pertaining to an Interest
Reset Date for an 11th District Cost of Funds Rate Note (the "11th District
Interest Determination Date") will be the last business day of the month
immediately preceding such Interest Reset Date on which the Federal Home Loan
Bank of San Francisco (the "FHLB of San Francisco") publishes the Index (as
defined below). Unless otherwise specified in the applicable Pricing
Supplement, the Interest Determination Date pertaining to an Interest Reset
Date for a LIBOR Note (the "LIBOR Interest Determination Date") will be the
second London Business Day immediately preceding each Interest Reset Date.
Unless otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date pertaining to an Interest Reset Date for a Treasury Rate
Note (the "Treasury Interest Determination Date") will be the day of the week
in which such Interest Reset Date falls on which Treasury bills would normally
be auctioned. Treasury bills are usually sold at auction on Monday of each
week, unless that day is a legal holiday, in which case the auction is usually
held on the following Tuesday, except that such auction may be held on the
preceding Friday. If, as a result of a legal holiday, an auction is so held on
the preceding Friday, such Friday will be the Treasury Interest Determination
Date pertaining to the Reset Period commencing in the next succeeding week. If
an auction date shall fall on any Interest Reset Date for a Treasury Rate Note,
then such Interest Reset Date shall instead be the first Business Day
immediately following such auction date. Unless otherwise specified in the
applicable Pricing Supplement, the "Calculation Date" pertaining to any
Interest Determination Date shall be the earlier of (i) the tenth calendar day
after the Interest Determination Date or, if such day is not a Business Day,
the next succeeding Business Day, or (ii) the Business Day preceding the
applicable Interest Payment Date or Maturity, as the case may be.
 
  "Index Maturity" means, with respect to a Floating Rate Note, the period to
maturity of the instrument or obligation on which the interest rate formula is
based, as specified in the applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, payments
with respect to Floating Rate Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the
 
                                      S-8

 
unpaid principal amount thereof. A table setting forth repayment information in
respect of each Floating Rate Amortizing Note will be provided to the original
purchaser thereof and will be available, upon request, to subsequent Holders.
 
  Unless otherwise indicated in the applicable Pricing Supplement, interest on
Floating Rate Notes will accrue from and including the date of issue or from
and including the immediately preceding Interest Payment Date in respect of
which interest has been paid or duly provided for, as the case may be, to but
excluding the Interest Payment Date or Maturity, as the case may be. With
respect to Floating Rate Notes, accrued interest is calculated by multiplying
the face amount of a Note by an accrued interest factor. This accrued interest
factor is computed by adding the interest factors calculated for each day from
the date of issue, or from the last date to which interest has been paid, to
the date for which accrued interest is being calculated. The interest factor
for each such day is computed by dividing the interest rate applicable to such
day by 360, in the case of Commercial Paper Rate Notes, CD Rate Notes, 11th
District Cost of Funds Rate Notes, Federal Funds Rate Notes, LIBOR Notes and
Prime Rate Notes or by the actual number of days in the year, in the case of
Treasury Rate Notes or CMT Rate Notes, or by 365 days in the case of Kenny Rate
Notes.
 
  The Calculation Agent shall calculate the interest rate on the Floating Rate
Notes, as provided below. The Calculation Agent will, upon the request of the
Holder of any Floating Rate Note, provide the interest rate then in effect and,
if then determined, the interest rate which will become effective as a result
of a determination made with respect to the most recent Interest Determination
Date with respect to such Note. The Trustee shall act as the initial
Calculation Agent for the Notes. For purposes of calculating the rate of
interest payable on Floating Rate Notes, the Company will enter into an
agreement with the Calculation Agent. The Calculation Agent's determination of
any interest rate shall be final and binding in the absence of manifest error.
 
 Commercial Paper Rate Notes
 
  Each Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in the Commercial Paper Rate Note and in
the applicable Pricing Supplement.
 
  Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Commercial Paper Interest Determination
Date, the Money Market Yield (calculated as described below) of the rate on
such date for commercial paper having the Index Maturity specified in the
applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates" or any successor publication of the Board of Governors ("H.15(519)")
under the heading "Commercial Paper." In the event that such rate is not
published prior to 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Commercial Paper Interest Determination Date, then the
Commercial Paper Rate with respect to such Commercial Paper Interest
Determination Date shall be the Money Market Yield of the rate on such
Commercial Paper Interest Determination Date for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release
"Composite 3:30 P.M. Quotations for U.S. Government Securities" or any
successor publication ("Composite Quotations") under the heading "Commercial
Paper." If by 3:00 P.M., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, then the
Commercial Paper Rate for such Commercial Paper Interest Determination Date
shall be calculated by the Calculation Agent and shall be the Money Market
Yield of the arithmetic mean of the offered rates as of 11:00 A.M., New York
City time, on such Commercial Paper Interest Determination Date of three
leading dealers of commercial paper in The City of New York selected by the
Calculation Agent for commercial paper having the Index Maturity designated in
the applicable Pricing Supplement placed for an industrial issuer whose bond
rating is "AA," or the equivalent, from a nationally recognized securities
rating agency;
 
                                      S-9

 
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the Commercial Paper Rate
with respect to such Commercial Paper Interest Determination Date will be the
Commercial Paper Rate in effect immediately prior to such Commercial Paper
Interest Determination Date.
 
  "Money Market Yield" shall be a yield (expressed as a percentage rounded, if
necessary, to the nearest one hundred-thousandth of a percent) calculated in
accordance with the following formula:
 
                                          D X 360
                  Money Market Yield = ------------- X 100
                                       360 - (D X M)
 
where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period for which accrued interest is being calculated.
 
 CD Rate Notes
 
  Each CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in the CD Rate Note and in the applicable Pricing Supplement.
 
  Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the Index Maturity specified
in the applicable Pricing Supplement as published in H.15(519) under the
heading "CDs (Secondary Market)." In the event that such rate is not published
prior to 9:00 A.M., New York City time, on the Calculation Date pertaining to
such CD Interest Determination Date, then the CD Rate with respect to such CD
Interest Determination Date shall be the rate on such CD Interest Determination
Date for negotiable certificates of deposit having the Index Maturity specified
in the applicable Pricing Supplement as published in Composite Quotations under
the heading "Certificates of Deposit." If by 3:00 P.M., New York City time, on
such Calculation Date such rate is not published in either H.15(519) or
Composite Quotations, then the CD Rate on such CD Interest Determination Date
shall be calculated by the Calculation Agent and shall be the arithmetic mean
of the secondary market offered rates as of 10:00 A.M., New York City time, on
such CD Interest Determination Date of three leading nonbank dealers in
negotiable U.S. dollar certificates of deposit in The City of New York selected
by the Calculation Agent for negotiable certificates of deposit of major United
States money market banks (in the market for negotiable certificates of
deposit) with a remaining maturity closest to the Index Maturity designated in
the applicable Pricing Supplement in a denomination of $5,000,000; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent are
not quoting as mentioned in this sentence, the CD Rate with respect to such CD
Interest Determination Date will be the CD Rate in effect immediately prior to
such CD Interest Determination Date.
 
 CMT Rate Notes
 
  Each CMT Rate Note will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in the CMT Rate Note and in the applicable Pricing Supplement.
 
  Unless otherwise indicated in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Interest Determination Date, the rate displayed
on the Designated CMT Telerate Page (as defined below) under the caption ". . .
Treasury Constant Maturities . . . Federal Reserve Board Release H. 15 . . .
Mondays Approximately 3:45 P.M.," under the column for the Designated CMT
Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page
is 7055, the rate on such CMT Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week, or the month, as applicable,
ended
 
                                      S-10

 
immediately preceding the week in which the applicable CMT Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page, or if not displayed by 3:00 P.M., New York City time, on the Calculation
Date pertaining to such CMT Interest Determination Date, then the CMT Rate for
such CMT Interest Determination Date will be such treasury constant maturity
rate for the Designated CMT Maturity Index as published in the relevant H.
15(519). If such rate is no longer published, or if not published by 3:00 P.M.,
New York City time, on the Calculation Date pertaining to such CMT Interest
Determination Date, then the CMT Rate for such CMT Interest Determination Date
will be such treasury constant maturity rate for the Designated CMT Maturity
Index (or other United States Treasury rate for the Designated CMT Maturity
Index) for the CMT Interest Determination Date with respect to such Interest
Reset Date as may then be published by either the Board of Governors of the
Federal Reserve System or the United States Department of the Treasury that the
Calculation Agent determines to be comparable to the rate formerly displayed on
the Designated CMT Telerate Page and published in the relevant H.15(519). If
such information is not provided by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such CMT Interest Determination Date, then the
CMT Rate for the CMT Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic mean
of the secondary market closing offer side prices as of approximately 3:30
P.M., New York City time, on the CMT Interest Determination Date reported,
according to their written records, by three leading primary United States
government securities dealers (each, a "Reference Dealer") in The City of New
York selected by the Calculation Agent (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation (or, in
the event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for the most recently issued direct
noncallable fixed rate obligations of the United States ("Treasury Notes") with
an original maturity of approximately the Designated CMT Maturity Index and a
remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent cannot obtain three such Treasury Note
quotations, the CMT Rate for such CMT Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 P.M., New York City time, on the CMT Interest Determination
Date of three Reference Dealers in The City of New York (from five such
Reference Dealers selected by the Calculation Agent and eliminating the highest
quotation (or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), for Treasury
Notes with an original maturity of the number of years that is the next highest
to the Designated CMT Maturity Index and a remaining term to maturity closest
to the Designated CMT Maturity Index and in an amount of at least $100,000,000.
If three or four (and not five) of such Reference Dealers are quoting as
described above, then the CMT Rate will be based on the arithmetic mean of the
offer prices obtained and neither the highest nor the lowest of such quotes
will be eliminated; provided however, that if fewer than three Reference
Dealers selected by the Calculation Agent are quoting as described herein, the
CMT Rate will be the CMT Rate in effect on such CMT Interest Determination
Date. If two Treasury Notes with an original maturity as described in the third
preceding sentence, have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the quotes for the Treasury Note with the
shorter remaining term to maturity will be used.
 
  "Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as published in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as published in H.15(519).
If no such page is specified in the applicable Pricing Supplement, the
Designated CMT Telerate Page shall be 7052, for the most recent week.
 
  "Designated CMT Maturity Index" means the original period to maturity of the
Treasury Notes (either one, two, three, five, seven, ten, twenty or thirty
years) specified in the applicable Pricing Supplement with respect to which the
CMT Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
 
 
                                      S-11

 
 Federal Funds Rate Notes
 
  Each Federal Funds Rate Note will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in the Federal Funds Rate Note and in the
applicable Pricing Supplement.
 
  Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Federal Funds Rate Interest
Determination Date, the rate on such date for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)." In the event that such
rate is not published prior to 9:00 A.M., New York City time, on the
Calculation Date pertaining to such Federal Funds Interest Determination Date,
then the Federal Funds Rate with respect to such Federal Funds Interest
Determination Date shall be the rate on such Federal Funds Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not published in either H.15(519) or Composite
Quotations, then the Federal Funds Rate with respect to such Federal Funds
Interest Determination Date shall be calculated by the Calculation Agent and
shall be the arithmetic mean (each as rounded, if necessary, to the nearest one
hundred-thousandth of a percent) of the rates as of 9:00 A.M., New York City
time, on such Federal Funds Interest Determination Date for the last
transaction in overnight Federal Funds arranged by three leading brokers of
Federal Funds transactions in The City of New York selected by the Calculation
Agent; provided, however, that if the brokers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Federal
Funds Rate with respect to such Federal Funds Interest Determination Date will
be the Federal Funds Rate in effect immediately prior to such Federal Funds
Interest Determination Date.
 
 11th District Cost of Funds Rate Notes
 
  Each 11th District Cost of Funds Rate Note will bear interest at the interest
rate (calculated with reference to the 11th District Cost of Funds Rate and the
Spread and/or Spread Multiplier, if any) specified in the 11th District Cost of
Funds Rate Note and in the Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, "11th
District Cost of Funds Rate" means, with respect to any 11th District Interest
Determination Date, the rate equal to the monthly weighted average cost of
funds for the calendar month preceding such 11th District Cost of Funds Rate
Interest Determination Date as set forth under the caption "11th District" on
Telerate Page 7058 as of 11:00 A.M., San Francisco time, on such 11th District
Interest Determination Date. If such rate does not appear on Telerate Page 7058
on any related 11th District Interest Determination Date, the 11th District
Cost of Funds Rate for such 11th District Interest Determination Date shall be
the monthly weighted average cost of funds paid by member institutions of the
Eleventh Federal Home Loan Bank District that was most recently announced (the
"Index") by the FHLB of San Francisco as such cost of funds for the calendar
month preceding the date of such announcement. If the FHLB of San Francisco
fails to announce such rate for the calendar month next preceding such 11th
District Interest Determination Date, then the 11th District Cost of Funds Rate
for such 11th District Interest Determination Date will be the 11th District
Cost of Funds Rate then in effect on such 11th District Interest Determination
Date.
 
 Kenny Rate Notes
 
  Each Kenny Rate Note will bear interest at the interest rate (calculated with
reference to the Kenny Rate and the Spread and/or Spread Multiplier, if any)
specified in the applicable Kenny Rate Note and in the Pricing Supplement.
 
                                      S-12

 
  Unless otherwise indicated in the applicable Pricing Supplement, "Kenny Rate"
means, with respect to any Kenny Rate Interest Determination Date, the high
grade weekly index (the "Weekly Index") on such date made available by Kenny
Information Systems ("Kenny") to the Calculation Agent. The Weekly Index is,
and shall be, based upon 30 day yield evaluations at par of bonds, the interest
on which is exempt from Federal income taxation under the Internal Revenue Code
of 1986, as amended, of not less than five high grade component issuers
selected by Kenny which shall include, without limitation, issuers of general
obligation bonds. The specific issuers included among the component issuers may
be changed from time to time by Kenny in its discretion. The bonds on which the
Weekly Index is based shall not include any bonds on which the interest is
subject to a minimum tax or similar tax under the Internal Revenue Code of
1986, as amended, unless all tax-exempt bonds are subject to such tax. In the
event Kenny ceases to make available such Weekly Index, a successor indexing
agent will be selected by the Calculation Agent, such index to reflect the
prevailing rate for bonds rated in the highest short-term rating category by
Moody's Investors Service, Inc. and Standard & Poor's Corporation in respect of
issuers most closely resembling the high grade component issuers selected by
Kenny for its Weekly Index, the interest on which is (A) variable on a weekly
basis, (B) exempt from Federal income taxation under the Internal Revenue Code
of 1986, as amended, and (C) not subject to a minimum tax or similar tax under
the Internal Revenue Code of 1986, as amended, unless all tax-exempt bonds are
subject to such tax. If such successor indexing agent is not available, the
rate for any Kenny Rate Interest Determination Date shall be 67% of the rate
determined if the Treasury Rate option had been originally selected.
 
 LIBOR Notes
 
  Each LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified
in the LIBOR Note and in the applicable Pricing Supplement.
 
  Unless otherwise indicated in the applicable Pricing Supplement, "LIBOR"
means, with respect to any LIBOR Interest Determination Date, the rate
determined in accordance with the following provisions:
 
    (i) With respect to any LIBOR Interest Determination Date, LIBOR will be
  either: (a) if "LIBOR Reuters" is specified in the Note and the applicable
  Pricing Supplement, the arithmetic mean of the offered rates (unless the
  specified designated LIBOR Page (as defined below) by its terms provides
  only for a single rate, in which case such single rate shall be used) for
  deposits in the Designated LIBOR Currency (as defined below) having the
  Index Maturity designated in the Note and the applicable Pricing
  Supplement, commencing on the second London Business Day immediately
  following the LIBOR Interest Determination Date, which appear on the
  Designated LIBOR Page specified in the Note and the applicable Pricing
  Supplement as of 11:00 A.M., London time, on that LIBOR Interest
  Determination Date, if at least two such offered rates appear (unless, as
  aforesaid, only a single rate is required) on such Designated LIBOR Page,
  or (b) if "LIBOR Telerate" is specified in the Note and the applicable
  Pricing Supplement, the rate for deposits in the Designated LIBOR Currency
  (as defined below) having the Index Maturity designated in the Note and the
  applicable Pricing Supplement, commencing on the second London Business Day
  immediately following such LIBOR Interest Determination Date, which appears
  on the Designated LIBOR Page specified in the Note and the applicable
  Pricing Supplement as of 11:00 A.M. London time on that LIBOR Interest
  Determination Date. Notwithstanding the foregoing, if fewer than two
  offered rates appear on the Designated LIBOR Page with respect to LIBOR
  Reuters (unless the specified Designated LIBOR Page with respect to LIBOR
  Reuters by its terms provides only for a single rate, in which case such
  single rate shall be used), or if no rate appears on the Designated LIBOR
  Page with respect to LIBOR Telerate, whichever may be applicable, LIBOR in
  respect of the related LIBOR Interest Determination Date will be determined
  as if the parties had specified the rate described in clause (ii) below.
 
    (ii) With respect to any LIBOR Interest Determination Date on which fewer
  than two offered rates appear on the Designated LIBOR Page with respect to
  LIBOR Reuters (unless the Designated LIBOR Page by its terms provides only
  for a single rate, in which case such single rate shall be used), or if no
 
                                      S-13

 
  rate appears on the Designated LIBOR Page with respect to LIBOR Telerate,
  as the case may be, the Calculation Agent will request the principal London
  office of each of four major banks in the London interbank market selected
  by the Calculation Agent to provide the Calculation Agent with its offered
  rate quotation for deposits in the Designated LIBOR Currency (as defined
  below) for the period of the Index Maturity designated in the Note and the
  applicable Pricing Supplement, commencing on the second London Business Day
  immediately following such LIBOR Interest Determination Date, to prime
  banks in the London interbank market as of 11:00 A.M., London time, on such
  LIBOR Interest Determination Date and in a principal amount that is
  representative for a single transaction in such Designated LIBOR Currency
  in such market at such time. If at least two such quotations are provided,
  LIBOR determined on such LIBOR Interest Determination Date will be the
  arithmetic mean of such quotations. If fewer than two quotations are
  provided, LIBOR determined on such LIBOR Interest Determination Date will
  be the arithmetic mean of the rates quoted as of 11:00 A.M. in the
  applicable Principal Financial Center (as defined below), on such LIBOR
  Interest Determination Date by three major banks in such Principal
  Financial Center selected by the Calculation Agent for loans in the
  Designated LIBOR Currency to leading banks, having the Index Maturity
  designated in the Note and the applicable Pricing Supplement in a principal
  amount that is representative for a single transaction in such Designated
  LIBOR Currency in such market at such time; provided, however, that if the
  banks so selected by the Calculation Agent are not quoting as mentioned in
  this sentence, LIBOR determined on such LIBOR Interest Determination Date
  will be LIBOR in effect on such LIBOR Interest Determination Date.
 
  "Designated LIBOR Currency" means, as with respect to any LIBOR Note, the
currency (including a composite currency), if any, designated in the Note and
the applicable Pricing Supplement as the Designated LIBOR Currency. If no such
currency is designated in the Note and the applicable Pricing Supplement, the
Designated LIBOR Currency shall be U.S. dollars.
 
  "Designated LIBOR Page" means either (a) the display on the Reuters Monitor
Money Rates Service for the purpose of displaying the London interbank rates of
major banks for the applicable Designated LIBOR Currency (if "LIBOR Reuters" is
designated in the Note and the applicable Pricing Supplement), or (b) the
display on the Dow Jones Telerate Service for the purpose of displaying the
London interbank rates of major banks for the applicable designated LIBOR
Currency (if "LIBOR Telerate" is designated in the Note and the applicable
Pricing Supplement). If neither LIBOR Reuters nor LIBOR Telerate is specified
in the Note and applicable Pricing Supplement, LIBOR for the applicable
Designated LIBOR Currency will be determined as if LIBOR Telerate (and, if the
U.S. dollar is the Designated LIBOR Currency, page 3750) had been chosen.
 
  "Principal Financial Center" means, with respect to any LIBOR Note, unless
otherwise specified in the Note and the applicable Pricing Supplement, the
capital city of the country that issues as its legal tender the Designated
LIBOR Currency of such Note, except that with respect to U.S. dollars and ECUs,
the Principal Financial Center shall be The City of New York and Brussels,
respectively.
 
 Prime Rate Notes
 
  Each Prime Rate Note will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any)
specified in the Prime Rate Note and in the applicable Pricing Supplement.
 
  Unless otherwise indicated in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Prime Interest Determination Date, the rate set
forth on such date in H.15(519) under the heading "Bank Prime Loan." In the
event that such rate is not published prior to 9:00 A.M., New York City time,
on the Calculation Date pertaining to such Prime Interest Determination Date,
then the Prime Rate with respect to such Prime Interest Determination Date
shall be the arithmetic mean of the rates of interest publicly
 
                                      S-14

 
announced by each bank that appears on the Reuters Screen NYMF Page as such
bank's prime rate or base lending rate as in effect for that Prime Interest
Determination Date. If fewer than four such rates appear on the Reuters Screen
NYMF Page for the Prime Interest Determination Date, the Prime Rate with
respect to such Prime Interest Determination Date shall be the arithmetic mean
of the prime rates quoted on the basis of the actual number of days in the year
divided by 360 as of the close of business on such Prime Interest Determination
Date by at least two of the three major money center banks in The City of New
York selected by the Calculation Agent. If fewer than two quotations are
provided, the Prime Rate with respect to such Prime Interest Determination Date
shall be determined on the basis of the rates furnished in The City of New York
by the appropriate number of substitute banks or trust companies organized and
doing business under the laws of the United States, or any State thereof,
having total equity capital of at least U.S. $500 million and being subject to
supervision or examination by Federal or State authority, selected by the
Calculation Agent to provide such rate or rates; provided, however, that if the
bank or trust company selected as aforesaid is not quoting as mentioned in this
sentence, the Prime Rate with respect to such Prime Interest Determination Date
will be the Prime Rate in effect immediately prior to such Prime Interest
Determination Date. "Reuters Screen NYMF Page" means the display designated as
page "NYMF" on the Reuters Monitor Money Rate Service (or such other page as
may replace the NYMF page on the service for the purpose of displaying the
prime rate or base lending rate of major banks).
 
 Treasury Rate Notes
 
  Each Treasury Rate Note will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any) specified in the Treasury Rate Note and in the applicable Pricing
Supplement.
 
  Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
for the most recent auction of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable
Pricing Supplement as published in H.15(519) under the heading, "Treasury
bills--auction average (investment)" or, if not so published by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Treasury Interest
Determination Date, the average auction rate (expressed as a bond equivalent,
on the basis of a year of 365 or 366 days, as applicable, and applied on a
daily basis) as otherwise announced by the United States Department of the
Treasury. In the event that such rate is not available by 3:00 P.M., New York
City time, on such Treasury Interest Determination Date, or if no such auction
is held in a particular week, then the Treasury Rate with respect to such
Treasury Interest Determination Date shall be calculated by the Calculation
Agent and shall be a yield to maturity (expressed as a bond equivalent, on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 P.M., New York City time, on such Treasury Interest
Determination Date, of three leading primary U.S. government securities dealers
selected by the Calculation Agent for the issue of Treasury bills with a
remaining maturity closest to the Index Maturity designated in the applicable
Pricing Supplement; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Treasury Rate with respect to such Treasury Interest
Determination Date will be the Treasury Rate in effect immediately prior to
such Treasury Interest Determination Date.
 
CURRENCY INDEXED NOTES
 
 General
 
  The Company may from time to time offer Notes, the principal amount payable
at Maturity and/or the interest rate of which is determined by a formula which
makes reference to the rate of exchange between one currency ("Currency I") and
another currency ("Currency II"; together with Currency I, the "Selected
Currencies," both as specified in the applicable Pricing Supplement), neither
of which need be the Specified
 
                                      S-15

 
Currency of such Notes (the "Currency Indexed Notes"). Unless otherwise
specified in the applicable Pricing Supplement, Holders of Currency Indexed
Notes will be entitled to receive (i) an amount in respect of principal equal
to the principal amount of the Currency Indexed Notes plus an adjustment, which
may be negative or positive, based on the change in the relationship between
Selected Currencies or (ii) an amount of interest calculated at the stated rate
of interest on their Currency Indexed Note plus an adjustment, which may be
negative or positive, based on the change in the relationship between the
Selected Currencies, in each case determined as described below under "Payment
of Principal and Interest." As specified in the Pricing Supplement, the
exchange rate designated as the base exchange rate (the "Base Exchange Rate")
will be the initial rate at which Currency I can be exchanged for Currency II
and from which the change in such exchange rate will be measured.
 
 Payment of Principal and Interest
 
  Unless otherwise specified in the applicable Pricing Supplement, the payment
of principal at Maturity and interest on each Interest Payment Date (until the
payment thereof is paid or made available for payment) will be payable in the
Specified Currency in amounts calculated in the manner described below.
 
  Unless otherwise specified in the applicable Pricing Supplement, principal at
Maturity, if indexed, will be payable in an amount equal to the principal
amount of the Currency Indexed Note, plus or minus an amount determined by
reference to the difference between the Base Exchange Rate specified in the
applicable Pricing Supplement and the rate at which Currency I can be exchanged
for Currency II on the second Business Day prior to the Maturity (the
"Determination Date") of such Currency Indexed Note, as determined by the
determination agent specified in the applicable Pricing Supplement (the
"Determination Agent"). Unless otherwise specified in the applicable Pricing
Supplement, the interest payable on any Interest Payment Date, if indexed, will
be payable in an amount equal to the stated interest rate of the Currency
Indexed Note, plus or minus a rate adjustment determined by reference to the
difference between the Base Exchange Rate specified in the applicable Pricing
Supplement and the rate at which Currency I can be exchanged for Currency II on
the second Business Day prior to the Interest Payment Date (the "Indexed
Interest Determination Date") of such Currency Indexed Note, as determined by
the Determination Agent, applied to the average principal amount outstanding of
such Note for the period being measured. For the purpose of this section, such
rate of exchange on the Determination Date or the Indexed Interest
Determination Date, as the case may be, will be the average of quotations for
settlement on the Maturity Date or the relevant Interest Payment Date, as the
case may be, obtained by the Determination Agent from three Reference Dealers
in The City of New York at approximately 11:00 A.M., New York City time, on
either the Determination Date or the relevant Indexed Interest Determination
Date, as the case may be.
 
  The formulas to be used by the Determination Agent to determine the principal
amount and/or the stated interest rate of a Currency Indexed Note payable at
Maturity or any Interest Payment Date will be specified in the applicable
Pricing Supplement by reference to the appropriate formula and will be as
follows:
 
 Principal
 
  A. If principal is to increase when the Spot Rate exceeds the Base Exchange
Rate, and if principal is to decrease when the Spot Rate is less than the Base
Exchange Rate, the formula to determine the principal amount of a Currency
Indexed Note payable at Maturity shall equal:
 
  Principal Amount + (Principal Amount X F X [Spot Rate--Base Exchange Rate])
                                                     Spot Rate
 
  To determine the "Spot Rate" for use in this formula, each Reference Dealer's
quotation will be the rate at which such Reference Dealer will sell Currency I
in exchange for a single unit of Currency II.
 
                                      S-16

 
  B. If principal is to increase when the Base Exchange Rate exceeds the Spot
Rate, and if principal is to decrease when the Base Exchange Rate is less than
the Spot Rate, the formula to determine the principal amount of a Currency
Indexed Note payable at Maturity shall equal:

                                             [Base Exchange Rate--Spot Rate]
  Principal Amount + (Principal Amount X F X -------------------------------)
                                                        Spot Rate
 
  To determine the "Spot Rate" for use in this formula, each Reference Dealer's
quotation will be the rate at which such Reference Dealer will purchase
Currency I in exchange for a single unit of Currency II.
 
 Interest
 
  A. If interest is to increase when the Spot Rate exceeds the Base Exchange
Rate, and if interest is to decrease when the Spot Rate is less than the Base
Exchange Rate, the formula to determine the interest rate payable on any
Interest Payment Date on a Currency Indexed Note shall equal:
 
                                      (Spot Rate--Base Exchange Rate)
           Stated Interest Rate + F X -------------------------------
                                                 Spot Rate
 
  To determine the "Spot Rate" for use in this formula, each Reference Dealer's
quotation will be the rate at which such Reference Dealer will sell Currency I
in exchange for a single unit of Currency II.
 
  B. If interest is to increase when the Base Exchange Rate exceeds the Spot
Rate, and if interest is to decrease when the Base Exchange Rate is less than
the Spot Rate, the formula to determine the interest rate payable on any
Interest Payment Date on a Currency Indexed Note shall equal:

                                      (Base Exchange Rate--Spot Rate)
           Stated Interest Rate + F X -------------------------------
                                                 Spot Rate
 
  To determine the "Spot Rate" for use in this formula, each Reference Dealer's
quotation will be the rate at which such Reference Dealer will purchase
Currency I in exchange for a single unit of Currency II.
 
  In each of the above formulas "F" will be the leverage factor, if any, used
in such formula.
 
  An investment in Notes indexed, as to principal or interest or both, to one
or more values of currencies indices (including exchange rates between
currencies) entails significant risks that are not associated with similar
investments in a conventional fixed-rate debt security. If the interest rate of
such a Note is so indexed, it may result in an interest rate that is less than
that payable on a conventional fixed-rate debt security issued at the same
time, including the possibility that no interest will be paid, and, if the
principal amount of such a Note is so indexed, the principal amount payable at
Maturity may be less than the original purchase price of such Note if allowed
pursuant to the terms of such Note, including the possibility that no principal
will be paid. The secondary market for such Notes will be affected by a number
of factors, independent of the creditworthiness of the Company and the value of
the applicable currency index, including the volatility of the applicable
currency index, the time remaining to the maturity of such Notes, the amount
outstanding of such Notes and market interest rates. The value of the
applicable currency index depends on a number of interrelated factors,
including economic, financial and political events, over which the Company has
no control. Additionally, if the formula used to determine the principal amount
or interest payable with respect to such Notes contains a multiple or leverage
factor, the effect of any change in the applicable currency index may be
increased. The historical experience of the relevant currencies indices should
not be taken as an indication of future performance of such currencies indices
during the term of any Note. Accordingly, prospective investors should consult
their own financial and legal advisors as to the risks entailed by an
investment in such Notes and the suitability of such Notes in light of their
particular circumstances.
 
                                      S-17

 
COMMODITY INDEXED NOTES
 
  The Pricing Supplement relating to a Commodity Indexed Note will set forth
the method by which the amount of interest payable and the amount payable at
Stated Maturity in respect of such Commodity Indexed Note will be determined,
the tax consequences to holders of Commodity Indexed Notes, a description of
certain risks associated with investments in Commodity Indexed Notes and other
information relating to such Commodity Indexed Notes.
 
ORIGINAL ISSUE DISCOUNT NOTES
 
  The Company may from time to time offer Original Issue Discount Notes. The
Pricing Supplement applicable to certain Original Issue Discount Notes may
provide that Holders of such Notes will not receive periodic payments of
interest. For purposes of determining whether Holders of the requisite
principal amount of Notes outstanding under the Indenture have made a demand or
given a notice or waiver or taken any other action, the outstanding principal
amount of Original Issue Discount Notes shall be deemed to be the amount of the
principal that would be due and payable upon declaration of acceleration of the
Stated Maturity thereof as of the date of such determination. See "--General."
 
  "Original Issue Discount Note" means, (i) a Note that has a stated redemption
price at Maturity that exceeds its Issue Price (as defined for U.S. Federal
income tax purposes) by at least 0.25% of its stated redemption price at
maturity multiplied by the number of full years from the Original Issue Date to
the Stated Maturity for such Notes and (ii) any other Note designated by the
Company as issued with original issue discount for U.S. federal income tax
purposes.
 
AMORTIZING NOTES
 
  The Company may from time to time offer Notes for which payments of principal
and interest are made in installments over the life of the Note ("Amortizing
Notes"). Interest on each Amortizing Note will be computed as set forth in a
Pricing Supplement or in the Book-Entry Note representing such Amortizing Note.
Unless otherwise provided in such Pricing Supplement or in such Book-Entry
Note, payments with respect to Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information with
respect to each Amortizing Note will be provided to the original purchaser of
such Note and will be available upon request to the subsequent holders thereof.
 
RESET NOTES
 
  The Pricing Supplement relating to each Note will indicate whether the
Company has the option with respect to such Note to reset the interest rate, in
the case of a Fixed Rate Note, or to reset the Spread and/or Spread Multiplier,
in the case of a Floating Rate Note (in each case, a "Reset Note"), and, if so,
(i) the date or dates on which such interest rate or such Spread and/or Spread
Multiplier, as the case may be, may be reset (each an "Optional Interest Reset
Date") and (ii) the basis or formula, if any, for such resetting.
 
  The Company may exercise such option with respect to a Note by notifying the
Trustee of such exercise at least 45 but not more than 60 calendar days prior
to an Optional Interest Reset Date for such Note. If the Company so notifies
the Trustee of such exercise, not later than 40 calendar days prior to such
Optional Interest Reset Date, the Trustee will send by telegram, telex,
facsimile transmission or letter (first class, postage prepaid) to the Holder
of such Note a notice (the "Reset Notice") indicating (i) that the Company has
elected to reset the interest rate, in the case of a Fixed Rate Note, or the
Spread and/or Spread Multiplier, in the case of a Floating Rate Note, (ii) such
new interest rate or such new Spread and/or Spread Multiplier, as the case may
be, and (iii) the provisions, if any, for redemption during the period from
such Optional Interest Reset Date to the next Optional Interest Reset Date or,
if there is no such next Optional Interest Reset Date, to the Stated Maturity
of such Note (each such period a "Subsequent Interest Period"), including the
date or dates on which or the period or periods during which and the price or
prices at which such redemption may occur during such Subsequent Interest
Period.
 
                                      S-18

 
  Notwithstanding the foregoing, not later than 20 calendar days prior to an
Optional Interest Reset Date for a Note, the Company may, at its option, revoke
the interest rate, in the case of a Fixed Rate Note, or the Spread and/or
Spread Multiplier, in the case of a Floating Rate Note, provided for in the
Reset Notice and establish a higher interest rate, in the case of a Fixed Rate
Note, or a higher Spread and/or Spread Multiplier, in the case of a Floating
Rate Note, for the Subsequent Interest Period commencing on such Optional
Interest Reset Date by causing the Trustee to send by telegram, telex,
facsimile transmission or letter (first class, postage prepaid) notice of such
higher interest rate or higher Spread and/or Spread Multiplier, as the case may
be, to the Holder of such Note. Such notice shall be irrevocable. All Notes
with respect to which the interest rate or Spread and/or Spread Multiplier is
reset on an Optional Interest Reset Date will bear such higher interest rate,
in the case of a Fixed Rate Note, or higher Spread and/or Spread Multiplier, in
the case of a Floating Rate Note, whether or not tendered for repayment as
provided in the next paragraph.
 
  If the Company elects prior to an Optional Interest Reset Date to reset the
interest rate or the Spread and/or Spread Multiplier of a Note, the Holder of
such Note will have the option to elect repayment of such Note by the Company
on such Optional Interest Reset Date at a price equal to the principal amount
thereof plus any accrued interest to such Optional Interest Reset Date. In
order for a Note to be so repaid on an Optional Interest Reset Date, the Holder
thereof must follow the procedures set forth below under "Redemption and
Repayment" for optional repayment, except that the period for delivery of such
Note or notification to the Trustee shall be at least 25 but not more than 35
calendar days prior to such Optional Interest Reset Date. A Holder who has
tendered a Note for repayment following receipt of a Reset Notice may revoke
such tender for repayment by written notice to the Trustee received prior to
5:00 P.M., New York City time, on the tenth calendar day prior to such Optional
Interest Reset Date.
 
EXTENSION OF MATURITY
 
  The Pricing Supplement relating to each Note will indicate whether the
Company has the option to extend the Stated Maturity of such Note for one or
more periods of from one to five whole years (each an "Extension Period") up to
but not beyond the date (the "Final Maturity Date") set forth in such Pricing
Supplement.
 
  The Company may exercise such option with respect to a Note by notifying the
Trustee of such exercise at least 45 but not more than 60 calendar days prior
to Stated Maturity of such Note in effect prior to the exercise of such option
(the "Original Stated Maturity Date"). If the Company so notifies the Trustee
of such exercise, not later than 40 calendar days prior to the Original Stated
Maturity Date, the Trustee will send by telegram, telex, facsimile transmission
or letter (first class, postage prepaid) to the Holder of such Note a notice
(the "Extension Notice") relating to such Extension Period, indicating (i) that
the Company has elected to extend the Stated Maturity of such Note, (ii) the
new Stated Maturity, (iii) in the case of a Fixed Rate Note, the interest rate
applicable to the Extension Period or, in the case of a Floating Rate Note, the
Spread or Spread Multiplier applicable to the Extension Period, and (iv) the
provisions, if any, for redemption during the Extension Period, including the
date or dates on which or the period or periods during which and the price or
prices at which such redemption may occur during the Extension Period. Upon the
sending by the Trustee of an Extension Notice to the Holder of a Note, the
Stated Maturity of such Note shall be extended automatically, and, except as
modified by the Extension Notice and as described in the next two paragraphs,
such Note will have the same terms as prior to the sending of such Extension
Notice.
 
  Notwithstanding the foregoing, not later than 20 calendar days prior to the
Original Stated Maturity Date for a Note, the Company may, at its option,
revoke the interest rate, in the case of a Fixed Rate Note, or the Spread or
Spread Multiplier, in the case of a Floating Rate Note, provided for in the
Extension Notice and establish a higher interest rate, in the case of a Fixed
Rate Note, or a higher Spread or Spread Multiplier, in the case of a Floating
Rate Note, for the Extension Period by causing the Trustee to send by telegram,
telex, facsimile transmission or letter (first class, postage prepaid) notice
of such higher interest rate or higher Spread or Spread Multiplier, as the case
may be, to the Holder of such Note. Such notice shall be irrevocable. All Notes
with respect to which the Stated Maturity is extended will bear such higher
interest rate, in the case of a Fixed Rate Note, or higher Spread or Spread
Multiplier, in the case of a Floating Rate Note, for the Extension Period,
whether or not tendered for repayment as provided in the next paragraph.
 
                                      S-19

 
  If the Company elects to extend the Stated Maturity of a Note, the Holder of
such Note will have the option to elect repayment of such Note by the Company
on the Original Stated Maturity Date at a price equal to the principal amount
thereof plus any accrued and unpaid interest to such date. In order for a Note
to be so repaid on the Original Stated Maturity Date, the Holder thereof must
follow the procedures set forth below under "Redemption and Repayment" for
optional repayment, except that the period for delivery of such Note or
notification to the Trustee shall be at least 25 but not more than 35 calendar
days prior to the Original Stated Maturity Date. A Holder who has tendered a
Note for repayment following receipt of an Extension Notice may revoke such
tender for repayment by written notice to the Trustee received prior to the
close of business on the tenth calendar day prior to the Original Stated
Maturity Date.
 
RENEWABLE NOTES
 
  The applicable Pricing Supplement will indicate whether a Note (other than an
Amortizing Note) will mature at its Original Stated Maturity Date unless the
term of all or any portion of any such Note is renewed by the Holder in
accordance with the procedures described in such Supplement.
 
COMBINATION OF PROVISIONS
 
  If so specified in the applicable Pricing Supplement, any Note may be subject
to all of the provisions, or any combination of the provisions, described above
under "Reset Notes," "Extension of Maturity" and "Renewable Notes."
 
REDEMPTION AND REPAYMENT
 
  Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of the Company prior to the Stated Maturity only if an Initial
Redemption Date is specified in the applicable Pricing Supplement ("Initial
Redemption Date"). If so specified, the Notes will be subject to redemption at
the option of the Company on any date on and after the applicable Initial
Redemption Date in whole or from time to time in part in increments of $1,000
or the minimum denomination specified in such Pricing Supplement (provided that
any remaining principal amount thereof shall be at least $1,000 or such minimum
denomination), at the applicable Redemption Price (as defined below) on notice
given not more than 60 nor less than 30 days prior to the date of redemption
and in accordance with the provisions of the Indenture. "Redemption Price,"
with respect to a Note, means an amount equal to the sum of (i) the Initial
Redemption Percentage specified in such Pricing Supplement (as adjusted by the
Annual Redemption Percentage Reduction, if applicable (as specified in such
Pricing Supplement)) multiplied by the unpaid principal amount or the portion
to be redeemed plus (ii) accrued interest to the date of redemption. The
Initial Redemption Percentage, if any, applicable to a Note shall decline at
each anniversary of the Initial Redemption Date by an amount equal to the
applicable Annual Redemption Percentage Reduction, if any, until the Redemption
Price is equal to 100% of the unpaid principal amount thereof or the portion
thereof to be redeemed.
 
  The Pricing Supplement relating to each Note will indicate either that such
Note cannot be repaid prior to Stated Maturity or that such Note will be
repayable at the option of the Holder on a date or dates specified prior to
Stated Maturity at a price or prices set forth in the applicable Pricing
Supplement, together with accrued interest to the date of repayment.
 
  In order for a Note that is repayable at the option of the Holder to be
repaid prior to Stated Maturity, the Paying Agent (initially, the Company has
appointed the Trustee as Paying Agent) must receive at least 30 but not more
than 45 calendar days prior to the repayment date (i) the Note with the form
entitled "Option to Elect Repayment" on the reverse of the Note duly completed
or (ii) a telegram, telex, facsimile transmission or letter (first class,
postage prepaid) from a member of a national securities exchange or the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company in the United States setting forth the name of the Holder of the Note,
the principal amount of the Note, the principal amount of the
 
                                      S-20

 
Note to be repaid, the certificate number or a description of the tenor and
terms of the Note, a statement that the option to elect repayment is being
exercised thereby and a guarantee that the Note to be repaid with the form
entitled "Option to Elect Repayment" on the reverse of the Note duly completed
will be received by the Paying Agent not later than five Business Days after
the date of such telegram, telex, facsimile transmission or letter and such
Note and form duly completed are received by the Paying Agent by such fifth
Business Day. Exercise of the repayment option by the Holder of a Note shall be
irrevocable, except that a Holder who has tendered a Note for repayment may
revoke such tender for repayment by written notice to the Paying Agent received
prior to the close of business on the tenth calendar day prior to the repayment
date. The repayment option may be exercised by the Holder of a Note for less
than the entire principal amount of the Note provided that the principal amount
of the Note remaining outstanding after such repayment is an authorized
denomination.
 
  While the Book-Entry Notes are represented by the Global Securities held by
or on behalf of the U.S. Depositary, and registered in the name of the U.S.
Depositary or the U.S. Depositary's nominee, the option for repayment may be
exercised by the applicable Participant (as defined herein) that has an account
with the U.S. Depositary, on behalf of the beneficial owners of the Global
Security or Securities representing such Book-Entry Notes, by delivering a
written notice substantially similar to the above mentioned form to the Trustee
at its Corporate Trust Office (or such other address of which the Company shall
from time to time notify the Holders), not more than 60 nor less than 30 days
prior to the date of repayment. Notices of elections from Participants on
behalf of beneficial owners of the Global Security or Securities representing
such Book-Entry Notes to exercise their option to have such Book-Entry Notes
repaid must be received by the Trustee by 5:00 P.M., New York City time, on the
last day for giving such notice. In order to ensure that a notice is received
by the Trustee on a particular day, the beneficial owner of the Global Security
or Securities representing such Book-Entry Notes must so direct the applicable
Participant before such Participant's deadline for accepting instructions for
that day. Different firms may have different deadlines for accepting
instructions from their customers. Accordingly, beneficial owners of the Global
Security or Securities representing Book-Entry Notes should consult the
Participants through which they own their interest therein for the respective
deadlines for such Participants. All notices shall be executed by a duly
authorized officer of such Participant (with signatures guaranteed) and shall
be irrevocable. In addition, beneficial owners of the Global Security or
Securities representing Book-Entry Notes shall effect delivery at the time such
notices of election are given to the Depositary by causing the applicable
Participant to transfer such beneficial owner's interest in the Global Security
or Securities representing such Book-Entry Notes, on the Depositary's records,
to the Trustee. See "Book-Entry System."
 
  If applicable, the Company will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended, and any other securities
laws or regulations in connection with any such repayment.
 
REPURCHASE
 
  The Company may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by the Company may be held or resold
or, at the discretion of the Company, may be surrendered to the Trustee for
cancellation.
 
OTHER PROVISIONS
 
  Any provisions with respect to the determination of an interest rate basis,
the specifications of interest rate basis, calculation of the interest rate
applicable to, or the principal payable at Maturity on, any Note, its Interest
Payment Dates or any other matter relating thereto may be modified by the terms
as specified under "Other Provisions" on the face of such Note, or in an
addendum relating thereto if so specified on the face thereof, and in the
applicable Pricing Supplement.
 
 
                                      S-21

 
BOOK-ENTRY SYSTEM
 
  DTC will act as securities depositary for the Book-Entry Notes. The Book-
Entry Notes will be issued as fully-registered securities registered in the
name of Cede & Co. (DTC's partnership nominee). One fully-registered Global
Security will be issued for each issue of the Notes, each in the aggregate
principal amount of such issue, and will be deposited with DTC. If, however,
the aggregate principal amount of any issue exceeds $150 million, one Global
Security will be issued with respect to each $150 million of principal amount
and an additional Global Security will be issued with respect to any remaining
principal amount of such issue.
 
  DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants ("Direct Participants") include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to DTC's system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Securities and Exchange Commission.
 
  Purchases of Book-Entry Notes under DTC's system must be made by or through
Direct Participants, which will receive a credit for the Book-Entry Notes on
DTC's records. The ownership interest of each actual purchaser of each Book-
Entry Note ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Book-Entry Notes are to be accomplished by entries
made on the books of Participants acting on behalf of the Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Book-Entry Notes, except in the event that use of the book-entry
system for one or more Book-Entry Notes is discontinued.
 
  To facilitate subsequent transfers, all Global Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Global Securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Book-Entry Notes; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Book-Entry Notes are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
 
  Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
 
  Redemption notices shall be sent to Cede & Co. If less than all of the Book-
Entry Notes within an issue are being redeemed, DTC's current practice is to
determine by lot the amount of the interest of each Direct Participant in such
issue to be redeemed.
 
                                      S-22

 
  Neither DTC nor Cede & Co. will consent or vote with respect to Book-Entry
Notes. Under its usual procedures, DTC will mail an "Omnibus Proxy" to the
Company as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
 
  Principal and interest payments on the Book-Entry Notes will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the payable date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on the payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as in the case of securities held for the
accounts of customers in bearer form or registered in "street name," and will
be the responsibility of such Participant and not of DTC, or the Company,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to DTC is the responsibility of
the Company, disbursement of such payments to Direct Participants shall be the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants.
 
  A Beneficial Owner shall give notice to elect to have its Book-Entry Notes
purchased or tendered, through its Participant, to the Paying Agent, and shall
effect delivery of such Book-Entry Notes by causing the Direct Participant to
transfer the Participant's interest in the Book-Entry Notes, on DTC's records,
to the Paying Agent. The requirement for physical delivery of Book-Entry Notes
in connection with a demand for purchase or a mandatory purchase will be deemed
satisfied when the ownership rights in the Book-Entry Notes are transferred by
a Direct Participant on DTC's records.
 
  DTC may discontinue providing its services as securities depositary with
respect to the Book-Entry Notes at any time by giving reasonable notice to the
Company or the Agents. Under such circumstances, in the event that a successor
securities depositary is not obtained, Certificated Notes will be printed and
delivered in exchange for the Book-Entry Notes represented by the Global
Securities held by DTC.
 
  The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
Certificated Notes will be printed and delivered in exchange for the Book-Entry
Notes represented by the Global Securities held by DTC.
 
  The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
 
  Neither the Company, the Trustee, any Paying Agent nor the registrar for the
Notes will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
 
DEFEASANCE
 
  Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be subject to defeasance and discharge as described under "Description of
Debt Securities--Defeasance" in the Prospectus.
 
              SPECIAL PROVISIONS RELATING TO MULTI-CURRENCY NOTES
 
GENERAL
 
  Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, premium (if
any) and interest on the Notes will be made in U.S. dollars. If any of the
Notes are to be denominated in a currency or currency unit other than U.S.
dollars, the following provisions shall apply, which are in addition to, and to
the extent inconsistent therewith replace, the description of general terms and
provisions of Notes set forth in the accompanying Prospectus and elsewhere in
this Prospectus Supplement.
 
                                      S-23

 
  Multi-Currency Notes are issuable in registered form only, without coupons.
The authorized denominations for Multi-Currency Notes will be specified in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, payment of the purchase price of Multi-Currency Notes will
be made in immediately available funds.
 
CURRENCIES
 
  Unless otherwise indicated in the applicable Pricing Supplement, purchasers
are to pay for Multi-Currency Notes in the Specified Currency in immediately
available funds. At the present time there are limited facilities in the United
States for converting U.S. dollars into the Specified Currencies and vice
versa, and banks do not offer non-U.S. dollar checking or savings account
facilities in the United States. However, if requested by a prospective
purchaser of a Multi-Currency Note on or prior to the fifth Business Day
preceding the date of delivery of the Multi-Currency Note, or by such other day
as determined by the Agent who presented such offer to purchase the Multi-
Currency Note to the Company, such Agent is prepared to arrange for the
conversion of U.S. dollars into the applicable Specified Currency to enable
such purchaser to pay for the Multi-Currency Notes. Each such conversion will
be made by the Agent on such terms and subject to such conditions, limitations
and charges as the Agent may from time to time establish in accordance with
their regular foreign exchange practices. All costs of exchange will be borne
by the purchasers of the Multi-Currency Notes.
 
  Specific information about the foreign currency or currency units in which a
particular Multi-Currency Note is denominated, including historical exchange
rates and a description of the currency and any exchange controls, will be set
forth in the applicable Pricing Supplement. See "Foreign Currency Risks".
 
PAYMENT OF PRINCIPAL AND INTEREST
 
  Unless otherwise specified in the applicable Pricing Supplement, payments of
interest and principal (and premium, if any) with respect to any Multi-Currency
Note will be made by wire transfer to such account with a bank located in the
country issuing the Specified Currency (or, with respect to Multi-Currency
Notes denominated in ECUs, Brussels) or other jurisdiction acceptable to the
Company and the Trustee as shall have been designated at least 15 days prior to
the Interest Payment Date or Maturity, as the case may be, by the Holder of
such Multi-Currency Note on the relevant Regular Record Date or at Maturity,
provided that, in the case of payment of principal of (and premium, if any) and
any interest due at Maturity, the Multi-Currency Note is presented to the
Paying Agent in time for the Paying Agent to make such payments in such funds
in accordance with its normal procedures. Such designation shall be made by
filing the appropriate information with the Trustee at its Corporate Trust
Office, and, unless revoked, any such designation made with respect to any
Multi-Currency Note by a Holder will remain in effect with respect to any
further payments with respect to such Multi-Currency Note payable to such
Holder. If a payment with respect to any such Multi-Currency Note cannot be
made by wire transfer because the required designation has not been received by
the Trustee on or before the requisite date or for any other reason, a notice
will be mailed to the Holder at its registered address requesting a designation
pursuant to which such wire transfer can be made and, upon the Trustee's
receipt of such a designation, such payment will be made within 15 days of such
receipt. The Company will pay any administrative costs imposed by banks in
connection with making payments by wire transfer, but any tax, assessment or
governmental charge imposed upon payments will be borne by the Holders of the
Multi-Currency Notes in respect of which such payments are made.
 
  If so specified in the applicable Pricing Supplement, except as provided
below, payments of interest and principal (and premium, if any) with respect to
any Multi-Currency Note will be made in U.S. dollars if the Holder of such
Multi-Currency Note on the relevant Regular Record Date or at Maturity, as the
case may be, has transmitted a written request for such payment in U.S. dollars
to the Paying Agent at its principal office on or prior to such Regular Record
Date or the date 15 days prior to Maturity, as the case may be. Such request
may be delivered by mail, by hand or by cable, telex or any other form of
facsimile transmission.
 
                                      S-24

 
Any such request made with respect to any Multi-Currency Note by a Holder will
remain in effect with respect to any further payments of interest and principal
(and premium, if any) with respect to such Multi-Currency Note payable to such
Holder, unless such request is revoked by written notice received by the Paying
Agent on or prior to the relevant Regular Record Date or the date 15 days prior
to Maturity, as the case may be (but no such revocation may be made with
respect to payments made on any such Multi-Currency Note if an Event of Default
has occurred with respect thereto or upon the giving of a notice of
redemption). Holders of Multi-Currency Notes whose Multi-Currency Notes are
registered in the name of a broker or nominee should contact such broker or
nominee to determine whether and how an election to receive payments in U.S.
dollars may be made.
 
  The U.S. dollar amount to be received by a Holder of a Multi-Currency Note
who elects to receive payments in U.S. dollars will be based on the highest
indicated bid quotation for the purchase of U.S. dollars in exchange for the
Specified Currency obtained by the Currency Determination Agent (as defined
below) at approximately 11:00 A.M., New York City time, on the second Business
Day next preceding the applicable payment date (the "Conversion Date") from the
bank composite or multicontributor pages of the Quoting Source for three (or
two if three are not available) major banks in The City of New York. The first
three (or two) such banks selected by the Currency Determination Agent which
are offering quotes on the Quoting Source will be used. If fewer than two such
bid quotations are available at 11:00 A.M., New York City time, on the second
Business Day next preceding the applicable payment date, such payment will be
based on the Market Exchange Rate as of the second Business Day next preceding
the applicable payment date. If the Market Exchange Rate for such date is not
then available, such payment will be made in the Specified Currency. As used
herein, the "Quoting Source" means Reuters Monitor Foreign Exchange Service, or
if the Currency Determination Agent determines that such service is not
available, Telerate Monitor Foreign Exchange Service, or if the Currency
Determination Agent determines that neither service is available, such
comparable display or other comparable manner of obtaining quotations as shall
be agreed between the Company and the Currency Determination Agent. All
currency exchange costs associated with any payment in U.S. dollars on any such
Multi-Currency Note will be borne by the Holder thereof by deductions from such
payment. The currency determination agent (the "Currency Determination Agent")
with respect to any Multi-Currency Notes will be specified in the applicable
Pricing Supplement for such Multi-Currency Notes.
 
  If payment in respect of a Multi-Currency Note is required to be made in any
currency unit (e.g. ECUs) and such currency unit is unavailable, in the good
faith judgment of the Company, due to the imposition of exchange controls or
other circumstances beyond the Company's control, then all payments in respect
of such Multi-Currency Note shall be made in U.S. dollars until such currency
unit is again available. The amount of each payment of U.S. dollars shall be
computed on the basis of the equivalent of the currency unit in U.S. dollars,
which shall be determined by the Currency Determination Agent on the following
basis. The component currencies of the currency unit for this purpose (the
"Component Currencies") shall be the currency amounts that were components of
the currency unit as of the Conversion Date. The equivalent of the currency
unit in U.S. dollars shall be calculated by aggregating the U.S. dollar
equivalents of the Component Currencies. The U.S. dollar equivalent of each of
the Component Currencies shall be determined by the Currency Determination
Agent on the basis of the Market Exchange Rate for each such Component Currency
as of the Conversion Date. "Market Exchange Rate" means the noon buying rate in
The City of New York for cable transfers of such Specified Currency as
certified for customs purposes by the Federal Reserve Bank of New York.
 
  If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
 
                                      S-25

 
  All determinations referred to above made by the Currency Determination Agent
shall be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on Holders of Multi-Currency Notes.
 
OUTSTANDING MULTI-CURRENCY NOTES
 
  For purposes of calculating the principal amount of any Multi-Currency Note
payable in a Specified Currency for any purpose under the Indenture, the
principal amount of such Multi-Currency Note at any time outstanding shall be
deemed to be the U.S. dollar equivalent, at the Market Exchange Rate determined
as of the date of the original issuance of such Multi-Currency Note, of the
principal amount of such Multi-Currency Note.
 
                             FOREIGN CURRENCY RISKS
 
GENERAL
 
  Exchange Rates and Exchange Controls. An investment in Multi-Currency Notes
entails significant risks that are not associated with a similar investment in
a security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in the rate of exchange between the U.S.
dollar and the Specified Currency and the possibility of the imposition or
modification of foreign exchange controls by either the United States or
foreign governments. Such risks generally depend on economic and political
events over which the Company has no control. In recent years, rates of
exchange between the U.S. dollar and certain foreign currencies have been
highly volatile and such volatility may be expected in the future. The exchange
rate between the U.S. dollar and a foreign currency or currency unit is at any
moment a result of the supply of and demand for such currencies, and changes in
the rate result over time from the interaction of many factors, among which are
rates of inflation, interest rate levels, balances of payments and the extent
of governmental surpluses or deficits in the countries of such currencies.
These factors are in turn sensitive to the monetary, fiscal and trade policies
pursued by such governments and those of other countries important to
international trade and finance. Fluctuations in any particular exchange rate
that have occurred in the past are not necessarily indicative, however, of
fluctuations in the rate that may occur during the term of any Multi-Currency
Note. Depreciation of the Specified Currency applicable to a Multi-Currency
Note against the U.S. dollar would result in a decrease in the U.S. dollar-
equivalent yield of such Note, in the U.S. dollar-equivalent value of the
principal repayable at Maturity of such Note and, generally, in the U.S.
dollar-equivalent market value of such Note.
 
  Foreign exchange rates can either be fixed by sovereign governments or float.
Exchange rates of most economically developed noncommunist nations are
permitted to fluctuate in value relative to the U.S. dollar. Sovereign
governments, however, rarely voluntarily allow their currencies to float freely
in response to economic forces. In fact, such governments use a variety of
techniques, such as intervention by a country's central bank or imposition of
regulatory controls or taxes, to affect the exchange rate of their currencies.
Governments may also issue a new currency to replace an existing currency or
alter the exchange rate or relative exchange characteristics by devaluation or
revaluation of a currency. Thus, a special risk in purchasing Notes that are
denominated in a foreign currency or currency unit is that their U.S. dollar-
equivalent yields could be affected by governmental actions which could change
or interfere with a theretofore freely determined currency valuation, by
fluctuations in response to other market forces and by the movement of
currencies across borders. There will be no adjustment or change in the terms
of the Multi-Currency Notes in the event that exchange rates should become
fixed, or in the event of any devaluation or revaluation or imposition of
exchange or other regulatory controls or taxes, or in the event of other
developments, affecting the U.S. dollar or any applicable currency or currency
unit.
 
  THE PROSPECTUS, INCLUDING THIS PROSPECTUS SUPPLEMENT, DOES NOT DESCRIBE ALL
RISKS OF AN INVESTMENT IN MULTI-CURRENCY NOTES THAT RESULT FROM SUCH NOTES
BEING DENOMINATED IN A FOREIGN CURRENCY OR CURRENCY UNIT EITHER AS
 
                                      S-26

 
SUCH RISKS EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY
CHANGE FROM TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN
FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN
MULTI-CURRENCY NOTES. MULTI-CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT
FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY
TRANSACTIONS.
 
  Unless otherwise indicated in the applicable Pricing Supplement, Multi-
Currency Notes will not be sold in, or to residents of, the country of the
Specified Currency in which particular Multi-Currency Notes are denominated.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, premium,
if any, and interest on Multi-Currency Notes. Such persons should contact their
own legal advisors with regard to such matters.
 
  Judgments. The Notes will be governed by and construed in accordance with the
laws of the State of New York. A judgment for money damages by courts in the
United States, including money damages based on an obligation expressed in a
foreign currency, will ordinarily be rendered only in U.S. dollars. New York
statutory law provides that in an action based on an obligation expressed in a
currency other than U.S. dollars a court shall render a judgment or decree in
the foreign currency of the underlying obligation and that the judgment or
decree shall be converted into U.S. dollars at the exchange rate prevailing on
the date of entry of the judgment or decree.
 
  Exchange Controls, Etc. Governments have imposed from time to time exchange
controls and may in the future impose or revise exchange controls at or prior
to a Note's Maturity. Even if there are no exchange controls, it is possible
that the Specified Currency for any particular Multi-Currency Note would not be
available at such Note's Maturity. In that event, the Company will pay in U.S.
dollars on the basis of the Market Exchange Rate on the second day prior to
such payment, or if such Market Exchange Rate is not then available, on the
basis of the most recently available Market Exchange Rate. See "Special
Provisions Relating to Multi-Currency Notes--Payment of Principal and
Interest."
 
  An applicable Pricing Supplement with respect to the applicable Specified
Currency (which includes information with respect to applicable current foreign
exchange controls, if any) will be delivered and will become part of this
Prospectus and Prospectus Supplement. The information concerning exchange rates
is furnished as a matter of information only and should not be regarded as
indicative of the range of or trends in fluctuations in currency exchange rates
that may occur in the future.
 
                 UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
 
  The following summary describes the principal United States federal income
tax consequences of the acquisition, ownership and disposition of the Notes.
This summary is based on the Internal Revenue Code of 1986, as amended to the
date hereof (the "Code"), administrative pronouncements, judicial decisions,
and existing, proposed and temporary Treasury Regulations (including final
Treasury Regulations released by the Internal Revenue Service on January 27,
1994 (the "OID Regulations"), which set forth rules applicable to debt
instruments issued with "original issue discount"), changes to any of which
subsequent to the date of this Prospectus Supplement may affect the tax
consequences described herein.
 
  This summary discusses only the principal United States federal income tax
consequences to those holders holding Notes as capital assets within the
meaning of Section 1221 of the Code. It does not discuss all of the tax
consequences that may be relevant to a holder in light of the holder's
particular circumstances or to holders subject to special rules, such as
certain financial institutions, insurance companies, dealers in securities or
foreign currencies, persons holding Notes as a hedge against, or which are
hedged against,
 
                                      S-27

 
currency risks, or holders whose functional currency (as defined in Section 985
of the Code) is not the United States dollar. Further, this summary does not
discuss Original Issue Discount Notes (as defined below) which qualify as
"applicable high-yield discount obligations" under Section 163(i) of the Code.
 
  PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR TAX ADVISORS
WITH REGARD TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO
THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES TO THEM ARISING
UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
 
TAX CONSEQUENCES TO UNITED STATES HOLDERS
 
  As used herein, the term "United States Holder" means a beneficial owner of a
Note who or which is for United States federal income tax purposes either (i) a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source. The term also includes certain former citizens of the United States
whose income and gain on the Notes will be subject to United States taxation.
 
Payments of Interest
 
  Interest paid on a Note, to the extent considered "qualified stated interest"
(as defined below), will generally be taxable to a United States Holder as
ordinary interest income at the time it accrues or is received in accordance
with the United States Holder's method of accounting for United States federal
income tax purposes. Interest paid on a Note that is not considered qualified
stated interest will be taxed in the manner described below under "Original
Issue Discount Notes."
 
Original Issue Discount Notes
 
  United States Holders of Original Issue Discount Notes will be required to
include original issue discount in income for federal income tax purposes as it
accrues, in accordance with a constant yield method based on a compounding of
interest, before the receipt of cash payments attributable to such income.
Under this method, United States Holders of Original Issue Discount Notes
generally will be required to include in income increasingly greater amounts of
original issue discount in successive accrual periods.
 
  The "issue price" of a Note will equal the first price at which a substantial
amount of Notes of the same issue is sold for money (excluding sales to bond
houses, brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers). The "stated redemption price at
maturity" of a Note will equal the sum of all payments required under the Note
other than certain contingent payments and "qualified stated interest"
payments.
 
  United States Holders of Original Issue Discount Notes will be required to
include qualified stated interest payments in income at the time they accrue or
are received in accordance with such Holder's method of accounting for United
States federal income tax purposes. "Qualified stated interest" payments are
defined as stated interest that is unconditionally payable (or that will be
constructively received under Section 451 of the Code) in cash or property
(other than debt instruments of the issuer) at least annually during the entire
term of the Note at (i) a single fixed rate, (ii) a single "qualified floating
rate" or (iii) a single "objective rate," provided that the single rate
appropriately takes into account the length of the interval between payments,
or certain combinations of the foregoing described below.
 
  Subject to certain exceptions, a variable rate of interest is a "qualified
floating rate" if variations in the value of the rate can reasonably be
expected to measure contemporaneous fluctuations in the cost of newly
 
                                      S-28

 
borrowed funds in the currency in which the Note is denominated. A variable
rate will be considered a qualified floating rate if the variable rate equals
(i) the product of an otherwise qualified floating rate and a fixed multiple
(i.e., a Spread Multiplier) that is greater than zero but not more than 1.35 or
(ii) an otherwise qualified floating rate (or the product described in clause
(i)) plus or minus a fixed rate (i.e., a Spread). If the variable rate equals
the product of an otherwise qualified floating rate and a single fixed
multiplier greater than 1.35, however, such rate will generally constitute an
"objective rate," described more fully below. A variable rate will not be
considered a qualified floating rate if the variable rate is subject to a cap,
floor, governor (i.e., a restriction on the amount of increase or decrease in
the stated interest rate) or similar restriction that is reasonably expected as
of the issue date to cause the yield on the Note to be significantly more or
less than the expected yield determined without the restriction (other than a
cap, floor or governor that is fixed throughout the term of the Note).
 
  Subject to certain exceptions, an "objective rate" is defined as a rate
(other than a qualified floating rate) that is determined using a single fixed
formula and that is based on (i) one or more qualified floating rates, (ii) one
or more rates where each rate would be a qualified floating rate for a Note
denominated in a currency other than the currency in which the Note is
denominated, (iii) the yield or changes in the price of one or more items of
personal property (other than stock or debt of the Company or a related party)
that is "actively traded" or (iv) a combination of the rates described in
clauses (i), (ii) and (iii) of this sentence. A variable rate of interest on a
Note will not be considered an objective rate if it is reasonably expected that
the average value of the rate during the first half of the Note's term will be
either significantly less than or significantly greater than the average value
of the rate during the final half of the Note's term.
 
  If interest on a Note is stated at a fixed rate for an initial period of less
than one year (e.g., an Initial Interest Rate) followed by a variable rate that
is either a qualified floating rate or an objective rate for a subsequent
period, and the value of the variable rate on the issue date is intended to
approximate the fixed rate, the fixed rate and the variable rate together
constitute a single qualified floating rate or objective rate. In addition, in
order to be treated as qualified stated interest (rather than contingent
payments, as discussed below), the qualified floating rate or objective rate in
effect at a given time for a Note must be set at a value of that rate on any
day that is no earlier than three months prior to the first day on which that
value is in effect and no later than one year following that first day.
 
  If a Note provides for interest at (i) more than one qualified floating rate,
(ii) a single fixed rate and one or more qualified floating rates, or (iii) in
certain cases a single fixed rate and a single objective rate, then all or a
portion of the Note's stated interest may be treated as qualified stated
interest. However, in certain instances a portion of that Note's stated
interest will not be so treated, but instead will be included in the Note's
stated redemption price at maturity. As a result, such Notes may be treated as
being issued with original issue discount. The Company does not currently
expect to issue Notes with the terms described in the first sentence of this
paragraph. In the event such Notes are issued, the United States federal income
tax consequences to purchasers and holders thereof will be discussed in the
applicable Pricing Supplement. Purchasers of such Notes should carefully
examine the Pricing Supplement and should consult their tax advisors regarding
the purchase, ownership and disposition of such Notes.
 
  If the difference between a Note's stated redemption price at maturity and
its issue price is less than a specified de minimis amount, equal to .0025
multiplied by the product of the stated redemption price at maturity and the
number of complete years to maturity (or, in the case of a Note providing for
payments prior to maturity of amounts included in its stated redemption price
at maturity, the weighted average maturity), then the Note will not be
considered to have original issue discount. United States Holders of Notes with
original issue discount less than such de minimis amount will generally include
such de minimis original issue discount in income as capital gain on a pro rata
basis as principal payments are made on the Notes.
 
  The amount of original issue discount includible in income during a taxable
year by a United States Holder of an Original Issue Discount Note will equal
the sum of the daily portions of the original issue discount with respect to
the Original Issue Discount Note for each day during the taxable year on which
such Holder held the Original Issue Discount Note. The daily portion of the
original issue discount on any
 
                                      S-29

 
Original Issue Discount Note is determined by allocating to each day in any
"accrual period" a ratable portion of the original issue discount allocable to
such accrual period. A United States Holder of a Note may use accrual periods
that are of any length and that vary in length over the term of the Note,
provided that each accrual period is not longer than one year and that each
scheduled payment of principal or interest occurs either on the final day of an
accrual period or on the first day of an accrual period. The Company will
specify the accrual period it intends to use in the applicable Pricing
Supplement, but a United States Holder is not required to use the same accrual
period for purposes of determining the amount of original issue discount
includible in its income for a taxable year. The original issue discount
allocable to any accrual period is an amount equal to the excess (if any) of
(i) the product of the Original Issue Discount Note's "adjusted issue price" at
the beginning of such accrual period and its yield to maturity (determined on
the basis of compounding at the close of each accrual period and adjusted for
the length of the accrual period) over (ii) the sum of all payments of
qualified stated interest, if any, payable on such Original Issue Discount Note
and allocable to such accrual period. The "adjusted issue price" of an Original
Issue Discount Note at the beginning of an accrual period is the Original Issue
Discount Note's issue price increased by the amount of original issue discount
includible in the gross income of any holder (without reduction for any
amortized acquisition premium or bond premium, as described below) with respect
to the Original Issue Discount Note for all prior accrual periods, and
decreased by the amount of payments previously made on such Note other than
payments of qualified stated interest.
 
  A United States Holder that purchases an Original Issue Discount Note for an
amount that is greater than its adjusted issue price, but less than or equal to
the sum of all amounts payable on the Note other than payments of qualified
stated interest or certain contingent payments, will be considered to have
purchased such Note at an "acquisition premium." In computing the daily
portions of original issue discount with respect to an Original Issue Discount
Note for such a purchaser, the daily portion for any day is reduced by the
amount that would be the daily portion for such day (computed in accordance
with the rules set forth above) multiplied by a fraction, the numerator of
which is the amount, if any, by which the price paid by such purchaser for that
Note exceeds the adjusted issue price, and the denominator of which is the sum
of the daily portions for that Note (computed in accordance with the rules set
forth above) for all days beginning on the date after the purchase date and
ending on the stated maturity date.
 
  The OID Regulations do not address the treatment of Notes that provide for
contingent payments (e.g., certain payments of interest on Notes that are not
paid or treated as paid at a qualified floating rate or an objective rate, as
described above). However, under proposed Treasury Regulations published on
April 8, 1986, contingent payments will generally be included in income as they
become fixed. Special rules may apply, however, if the contingent payments are
determined with reference to publicly traded property, the contingent payments
are not due within six months of the date their amount becomes fixed or the
Notes provide for contingent principal.
 
  Certain of the Original Issue Discount Notes may be redeemed prior to
maturity. Original Issue Discount Notes containing such a feature may be
subject to rules that differ from the general rules discussed above. Purchasers
of Original Issue Discount Notes with such a feature should carefully examine
the applicable Pricing Supplement and should consult their tax advisors with
respect to such a feature since the tax consequences with respect to original
issue discount will depend, in part, on the particular terms and the particular
features of the purchased Note.
 
  The OID Regulations contain certain language ("aggregation rules") stating in
general that, with some exceptions, if more than one type of Note is issued in
connection with the same transaction or related transactions, such Notes may be
treated together as a single debt instrument with a single issue price,
maturity
date, yield to maturity and stated redemption price at maturity for purposes of
calculating and accruing any original issue discount. Unless otherwise provided
in applicable Pricing Supplement, the Company does not expect to treat
different types of Notes as being subject to the aggregation rules for purposes
of computing original issue discount.
 
                                      S-30

 
Market Discount and Premium
 
  If a United States Holder that acquires a Note has a tax basis in the Note
that is less than its "stated redemption price at maturity" (or, in the case of
an Original Issue Discount Note, less than its "adjusted issue price"), the
amount of the difference will be treated as "market discount" for federal
income tax purposes, unless such difference is less than a specified de minimis
amount. Under the market discount rules of the Code, a United States Holder
will be required to treat any principal payment (or, in the case of an Original
Issue Discount Note, any payment that does not constitute a payment of
qualified stated interest) on, or any gain on the sale, exchange, retirement or
other disposition of, a Note as ordinary income to the extent of the accrued
market discount that has not previously been included in income. If such Note
is disposed of in a nontaxable transaction (other than certain nonrecognition
transactions specified in regulations yet to be issued), accrued market
discount will be includible as ordinary income to the United States Holder as
if such holder had sold the Note at its then fair market value. Market discount
generally accrues on a straight-line basis over the remaining term of a Note
except that, at the election of the United States Holder, market discount may
accrue on a constant yield basis. A United States Holder may not be allowed to
deduct immediately all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or to carry such Note. A United States Holder
may elect to include market discount in income currently, as it accrues (either
on a straight-line basis or, if the United States Holder so elects, on a
constant yield basis), in which case the interest deferral rule set forth in
the preceding sentence will not apply. Such an election will apply to all bonds
acquired by the United States Holder on or after the first day of the first
taxable year to which such election applies and may be revoked only with the
consent of the Internal Revenue Service.
 
  A United States Holder that purchases an Original Issue Discount Note for an
amount that is greater than its adjusted issue price but less than the stated
redemption price at maturity will be considered to have purchased such Note at
an "acquisition premium." Rules applicable to such a Holder are set forth under
"Original Issue Discount Notes" above.
 
  If a United States Holder purchases a Note for an amount that is greater than
the stated redemption price at maturity, such Holder will be considered to have
purchased such Note with "amortizable bond premium" equal in amount to such
excess, and generally will not be required to include any original issue
discount in income. A United States Holder may elect (in accordance with
applicable Code provisions) to amortize such premium, using a constant yield
method, over the remaining term of the Note (where such Note is not callable
prior to its maturity date). If such Note may be called prior to maturity after
the United States Holder has acquired it, the amount of amortizable bond
premium is determined with reference to either the amount payable on maturity
or, if it results in a smaller premium, attributable to the period through the
earlier call date with reference to the amount payable on the earlier call
date. A United States Holder who elects to amortize bond premium must reduce
his tax basis in the Note by the amount of the premium amortized in any year.
An election to amortize bond premium applies to all taxable debt obligations
then owned and thereafter acquired by the United States Holder and may be
revoked only with the consent of the Internal Revenue Service.
 
  Under the OID Regulations, a United States Holder may elect to include in
gross income its entire return on a Note (i.e., in general, the excess of all
payments to be received on the Note over the amount paid for the Note by such
Holder) in accordance with a constant yield method based on the compounding of
interest. Such an election for a Note with amortizable bond premium will result
in a deemed election to amortize
bond premium for all the United States Holder's debt instruments with
amortizable bond premium and may be revoked only with the permission of the
Internal Revenue Service with respect to debt instruments acquired after
revocation. Similarly, such an election for a Note with market discount will
result in a deemed election to accrue market discount in income currently for
such Note and for all other bonds acquired by the United States Holder with
market discount on or after the first day of the taxable year to which such
election first applies, and may be revoked only with the permission of the
Internal Revenue Service.
 
                                      S-31

 
Sale, Exchange or Retirement of the Notes
 
  Upon the sale, exchange or retirement of a Note, a United States Holder will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement (not including any amount
attributable to accrued but unpaid interest) and such Holder's adjusted tax
basis in the Note. To the extent attributable to accrued but unpaid interest,
the amount realized by the United States Holder will be treated as a payment of
interest. See "Payments of Interest," above. A United States Holder's adjusted
tax basis in a Note will equal the cost of the Note to such Holder, increased
by the amount of any market discount, and any original issue discount
previously included in income by such Holder with respect to such Note and
reduced by any amortized bond premium and any principal payments received by
such Holder and, in the case of an Original Issue Discount Note, by the amounts
of any other payments included in the stated redemption price at maturity, as
described above.
 
  Gain or loss realized on the sale, exchange or retirement of a Note that is
not a Foreign Currency Note will be capital gain or loss (except in the case of
any Note acquired with market discount, to the extent of any accrued market
discount not previously included in the Holder's taxable income), and will be
long-term capital gain or loss if at the time of sale, exchange or retirement
the Note has been held for more than one year. See "Original Issue Discount
Notes" and "Market Discount and Premium," above. The excess of net long-term
capital gains over net short-term capital losses is taxed at a lower rate than
ordinary income for certain non-corporate taxpayers. The distinction between
capital gain or loss and ordinary income or loss is also relevant for purposes
of, among other things, limitations on the deductibility of capital losses.
 
Foreign Currency Notes
 
  The United States federal income tax consequences to a United States Holder
of the ownership and disposition of Notes that are denominated in, or provide
for payments determined by reference to, a currency or currency unit other than
the United States dollar ("Foreign Currency Notes") will be summarized in the
applicable Pricing Supplement.
 
Indexed Notes
 
  The United States federal income tax consequences to a United States Holder
of the ownership and disposition of Commodity Indexed Notes and Currency
Indexed Notes will be summarized in the applicable Pricing Supplement.
 
Extendible Notes
 
  If so specified in an applicable Pricing Supplement, the Company may have the
option to extend the maturity of a Note beyond its Original Stated Maturity
Date. See "Description of Notes--Extension of Maturity." A description of the
federal income tax consequences to a United States Holder of the Company's
option to extend the maturity of a Note will be contained in the applicable
Pricing Supplement.
 
Renewable Notes
 
  A Note may be issued wherein the initial maturity of the Note may be extended
beyond its Original Stated Maturity Date at the Holder's option. See
"Description of Notes--Renewable Notes." A description of the federal income
tax consequences to a United States Holder of such Holder's option to renew a
Note will be contained in the applicable Pricing Supplement.
 
Reset Notes
 
  Reset Notes may be subject to special rules for determining interest income
or gain or loss. The United States federal income tax consequences to a United
States Holder of the ownership and disposition of Reset Notes will be
summarized in the applicable Pricing Supplement.
 
                                      S-32

 
Amortizing Notes
 
  The United States federal income tax consequences to a United States Holder
of the ownership and disposition of Amortizing Notes will be summarized in the
applicable Pricing Supplement.
 
Tax Consequences to United States Alien Holders
 
  Under present United States federal income and estate tax law, and subject to
the discussion below concerning backup withholding:
 
    (a) payments of principal, interest (including original issue discount,
  if any) and premium on the Notes by the Company or any paying agent to a
  beneficial owner of a Note that is not a United States Holder, as defined
  above (hereinafter, a "United States Alien Holder"), will not be subject to
  United States federal withholding tax, provided that, in the case of
  interest, (i) such Holder does not own, actually or constructively, ten
  percent or more of the total combined voting power of all classes of stock
  of the Company entitled to vote, (ii) such Holder is not, for United States
  federal income tax purposes, a controlled foreign corporation related,
  directly or indirectly, to the Company through stock ownership, (iii) such
  Holder is not a bank receiving interest described in Section 881(c)(3)(A)
  of the Code, (iv) the certification requirements under Section 871(h) or
  Section 881(c) of the Code and Treasury Regulations thereunder (summarized
  below) are met, and (v) such interest is not interest effectively connected
  with the conduct of a trade or business in the United States or interest
  described in Section 871(h)(4) of the Code (which in general is limited to
  certain types of contingent interest, as summarized below);
 
    (b) a United States Alien Holder of a Note will not be subject to United
  States federal income tax on gain realized on the sale, exchange or other
  disposition of such Note, unless (i) such Holder is an individual who is
  present in the United States for 183 days or more in the taxable year of
  disposition, and certain conditions are met or (ii) such gain is
  effectively connected with the conduct by such Holder of a trade or
  business in the United States; and
 
    (c) a Note held by an individual who is not a citizen or resident of the
  United States at the time of his death will not be subject to United States
  federal estate tax as a result of such individual's death, provided that
  (i) the individual does not own, actually or constructively, ten percent or
  more of the total combined voting power of all classes of stock of the
  Company entitled to vote, (ii) the Note does not provide for interest
  described in Section 871(h)(4) of the Code (as summarized below), and (iii)
  at the time of such individual's death, payments with respect to such Note
  would not have been effectively connected to the conduct by such individual
  of a trade or business in the United States.
 
  Sections 871(h) and 881(c) of the Code and Treasury Regulations thereunder
require that, in order to obtain the exemption from withholding tax described
in paragraph (a) above, either (i) the beneficial owner of a Note must certify,
under penalties of perjury, to the Company or paying agent, as the case may be,
that such owner is a United States Alien Holder and must provide such owner's
name and address, and United States taxpayer identification number, if any, or
(ii) a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business (a "Financial Institution") and holds the Note on behalf of the
beneficial owner thereof must certify, under penalties of perjury, to the
Company or paying agent, as the case may be, that such certificate has been
received from the beneficial owner by it or by a Financial Institution between
it and the beneficial owner and must furnish the payor with a copy thereof. A
certificate described in this paragraph is effective only with respect to
payments of interest (including original issue discount) made to the certifying
United States Alien Holder after issuance of the certificate in the calendar
year of its issuance and the two immediately succeeding calendar years. Under
temporary United States Treasury Regulations, such requirement will be
fulfilled if the beneficial owner of a Note certifies on Internal Revenue
Service Form W-8, under penalties of perjury, that it is not a United States
Holder and provides its name and address, and any Financial Institution holding
the Note on behalf of the beneficial owner, files a statement with the
withholding agent to the effect that it has received such a statement from the
beneficial owner (and furnishes the withholding agent with a copy thereof).
 
                                      S-33

 
  Interest described in Section 871(h)(4) of the Code will be subject to United
States withholding tax at a 30 percent rate (or such lower rate provided by an
applicable treaty). In general, interest described in Section 871(h)(4) of the
Code includes (subject to certain exceptions) any interest the amount of which
is determined by reference to receipts, sales or other cash flow of the Company
or a related person, any income or profits of the Company or a related person,
any change in the value of any property of the Company or a related person or
any dividend, partnership distributions or similar payments made by the Company
or a related person. Interest described in Section 871(h)(4) of the Code may
include other types of contingent interest identified by the Internal Revenue
Service in future Treasury Regulations. The Company does not currently expect
to issue Notes the interest on which is described in Section 871(h)(4) of the
Code, and the United States withholding tax consequences of any such Notes
issued by the Company will be described in the applicable Pricing Supplement.
 
  If a United States Alien Holder of a Note is engaged in a trade or business
in the United States, and if interest (including original issue discount or
market discount) on the Note, or gain realized on the sale, exchange or other
disposition of a Note, is effectively connected with the conduct of such trade
or business, the United States Alien Holder, although exempt from United States
withholding tax, will generally be subject to regular United States income tax
on such interest (including any original issue discount or market discount) or
gain in the same manner as if it were a United States Holder. See "Tax
Consequences to United States Holders" above. In lieu of the certificate
described in the second preceding paragraph, such a holder will be required to
provide to the Company a properly executed Internal Revenue Service Form 4224
in order to claim an exemption from withholding tax. In addition, if such
United States Alien Holder is a foreign corporation, it may be subject to a
branch profits tax equal to 30 percent (or such lower rate provided by an
applicable treaty) of its effectively connected earnings and profits for the
taxable year, subject to certain adjustments. For purposes of the branch
profits tax, interest (including original issue discount or market discount)
on, and any gain recognized on the sale, exchange or other disposition of, a
Note will be included in the earnings and profits of such United States Alien
Holder if such interest is effectively connected with the conduct by the United
States Alien Holder of a trade or business in the United States.
 
BACKUP WITHHOLDING AND INFORMATION REPORTING
 
  Under current United States federal income tax law, a 31 percent backup
withholding tax and information reporting requirements apply to certain
payments of principal, premium and interest (including original issue discount)
made to, and to the proceeds of sale before maturity by, certain holders of the
Notes.
 
  In the case of a non-corporate United States Holder, backup withholding will
apply only if such Holder (i) fails to furnish its Taxpayer Identification
Number ("TIN") which, for an individual, would be his Social Security number,
(ii) furnishes an incorrect TIN, (iii) is notified by the Internal Revenue
Service that it has failed to properly report payments of interest and
dividends or (iv) under certain circumstances, fails to certify, under
penalties of perjury, that it has furnished a correct TIN and has not been
notified by the Internal Revenue Service that it is subject to backup
withholding for failure to report interest and dividend payments. United States
Holders should consult their tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption if applicable.
 
  The amount of any backup withholding from a payment to a United States Holder
will be allowed as a credit against such Holder's United States federal income
tax liability and may entitle such Holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.
 
  In the case of a United States Alien Holder, under current Treasury
Regulations, backup withholding will not apply to payments of principal,
premium or interest made by the Company or any paying agent thereof on a Note
if such Holder has provided the required certification under penalties of
perjury that it is not a United States Holder (as defined above) or has
otherwise established an exemption, provided in each case that the Company or
such paying agent, as the case may be, does not have actual knowledge that the
 
                                      S-34

 
payee is a United States Holder. The Company will, when required, report to
United States Alien Holders of the Notes and the Internal Revenue Service the
amount of any interest paid or original issue discount accruing on the Notes in
each calendar year and the amounts of tax withheld, if any, with respect to
such payments.
 
  Under current Treasury Regulations, payments on the sale, exchange or other
disposition of a Note made to or through a foreign office of a broker generally
will not be subject to backup withholding. However, if such broker is a United
States person, a controlled foreign corporation for United States tax purposes
or a foreign person 50 percent or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting will be required unless the broker has in its
records documentary evidence that the beneficial owner is not a United States
Holder and certain other conditions are met or the beneficial owner otherwise
establishes an exemption. Under proposed Treasury Regulations, backup
withholding may apply to any payment which such broker is required to report if
such broker has actual knowledge that the payee is a United States Holder.
Payments to or through the United States office of a broker will be subject to
backup withholding and information reporting unless the holder certifies, under
penalties of perjury, that it is not a United States Holder and that certain
other conditions are met or otherwise establishes an exemption.
 
  United States Alien Holders of Notes should consult their tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and
the procedure for obtaining such an exemption, if available. Any amounts
withheld from a payment to a United States Alien Holder under the backup
withholding rules will be allowed as a credit against such Holder's United
States federal income tax liability and may entitle such Holder to a refund,
provided that the required information is furnished to the Internal Revenue
Service.
 
                       SUPPLEMENTAL PLAN OF DISTRIBUTION
 
  The Notes are offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable efforts to solicit
purchases of the Notes. The Company will pay each Agent a commission of from
0.350% to 0.625% of the principal amount of each Note, depending upon its
Stated Maturity, sold through such Agent. The Company will have the sole right
to accept offers to purchase Notes and may reject any such offer in whole or in
part. Each Agent will have the right, in its discretion reasonably exercised,
to reject in whole or in part any offer to purchase Notes received by such
Agent. The Company also may sell Notes to any Agent, acting as principal, at a
discount to be agreed upon at the time of sale, for resale to one or more
investors or to one or more broker-dealers (acting as principal for purposes of
resale) at varying prices related to prevailing market prices at the time of
resale, as determined by such Agent, or, if so agreed, at a fixed public
offering price. Unless otherwise indicated in the applicable Pricing
Supplement, if any Note is resold by an Agent to any broker-dealer at a
discount, such discount will not be in excess of the discount or commission
received by such Agent from the Company. In addition, unless otherwise
indicated in the applicable Pricing Supplement, any Note purchased by an Agent
as principal will be purchased at 100% of the principal amount thereof less a
percentage equal to the commission applicable to an agency sale of a Note
having an identical Stated Maturity. After the initial public offering of the
Notes, the public offering price (in the case of Notes to be resold on a fixed
public offering price basis), the concession and the discount may be changed.
The Company also reserves the right to sell the Notes directly to investors on
its own behalf in those jurisdictions where it is authorized to do so or as
otherwise provided in the applicable Pricing Supplement. In such circumstances,
the Company will have the sole right to accept offers to purchase Notes and may
reject any proposed purchase of Notes in whole or in part. In the case of sales
made directly by the Company, no commission will be payable.
 
  The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify each Agent against certain liabilities, including liabilities under
the Act, or to contribute to payments each Agent may be required to make in
respect thereof. The Company has agreed to reimburse the Agents for certain of
the Agents' expenses, including, but not limited to, the fees and expenses of
counsel to the Agents.
 
                                      S-35

 
  The Company has been advised by each Agent that it may from time to time
purchase and sell Notes in the secondary market, but that it is not obligated
to do so. There can be no assurance that there will be a secondary market for
the Notes or liquidity in the secondary market if one develops. From time to
time, each Agent may make a market in the Notes.
 
  The Agents and their affiliates engage in transactions with and perform
services for the Company in the ordinary course of business.
 
                                      S-36

 
PROSPECTUS
 
        LOGO
 
LOGO
                                DEBT SECURITIES
 
                      -----------
 
  R. R. Donnelley & Sons Company (the "Company") may offer from time to time up
to $500,000,000 (or its equivalent, based on the applicable exchange rate at
the time of sale, in such foreign currencies or composite currencies, as shall
be designated by the Company) aggregate principal amount of its unsecured debt
securities (the "Debt Securities"), consisting of debentures, notes and/or
other unsecured evidences of indebtedness. The Debt Securities may be offered
as separate series in amounts, at prices and on terms to be determined at the
time of sale. The accompanying Prospectus Supplement (the "Prospectus
Supplement") sets forth with regard to the Debt Securities in respect of which
this Prospectus is being delivered (the "Offered Debt Securities") the title,
aggregate principal or initial offering amount, currency or currencies in which
the principal (and premium, if any) and any interest are payable,
denominations, maturity, rate (which may be fixed or variable) and time of
payment of any interest, any terms for redemption at the option of the Company
or the holder, any terms for sinking fund payments, any listing on a securities
exchange and the initial public offering price and other terms in connection
with the offering and sale of the Offered Debt Securities.
 
  The Company may sell Debt Securities to or through underwriters or dealers,
and also may sell Debt Securities directly to other purchasers or through
agents. See "Plan of Distribution." The Prospectus Supplement sets forth the
names of any underwriters or agents involved in the sale of the Offered Debt
Securities and any applicable commissions or discounts.
 
                      -----------
 
  THESE SECURITIES HAVE  NOT BEEN  APPROVED OR DISAP-
   PROVED BY THE SECURITIES  AND EXCHANGE COMMISSION
    OR ANY STATE SECURITIES  COMMISSION NOR HAS THE
     SECURITIES  AND  EXCHANGE COMMISSION  OR  ANY
      STATE  SECURITIES  COMMISSION  PASSED  UPON
       THE  ACCURACY OR  ADEQUACY  OF THIS  PRO-
        SPECTUS.  ANY   REPRESENTATION  TO  THE
         CONTRARY IS A CRIMINAL OFFENSE.
 
                      -----------
 
                 The date of this Prospectus is August 17, 1994

 
  NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
WITH RESPECT TO PARTICULAR OFFERED DEBT SECURITIES, THE PROSPECTUS SUPPLEMENT
RELATING THERETO, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY AGENT,
UNDERWRITER OR DEALER. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT
CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY OR THEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN
OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
 
                             AVAILABLE INFORMATION
 
  The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at 450 5th Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and
Seven World Trade Center, New York, New York 10048. Copies of such material can
be obtained at prescribed rates from the Public Reference Branch of the
Commission, 450 5th Street, N.W., Washington, D.C. 20549. Such reports, proxy
and information statements and other information concerning the Company can
also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, the Chicago Stock Exchange, 440 South LaSalle
Street, Chicago, Illinois 60605, and the Pacific Stock Exchange, 301 Pine
Street, San Francisco, California 94104, on which the Company's Common Stock is
listed.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
  The following documents heretofore filed with the Commission by the Company
under the Exchange Act are incorporated herein by reference:
 
  (a) the Company's Annual Report on Form 10-K for the year ended December 31,
   1993;
 
  (b) the Company's Quarterly Reports on Form 10-Q for the fiscal quarters
   ended March 31, 1994 and June 30, 1994; and
 
  (c) the Company's Current Report on Form 8-K dated January 5, 1994.
 
  All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debt Securities shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is incorporated or deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
 
  The Company will provide without charge to each person to whom a copy of this
Prospectus has been delivered, on the written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference
therein. Written requests or requests by telephone for such copies should be
directed to David C. Hart, Vice President, General Counsel and Secretary, R. R.
Donnelley & Sons Company, 77 West Wacker Drive, Chicago, Illinois 60601
(telephone number 312-326-8000).
 
                                       2

 
                                  THE COMPANY
 
  R. R. Donnelley & Sons Company, incorporated in the state of Delaware in 1956
as the successor to a business founded in 1864, is a major participant in the
information industry, providing a broad range of services in print and digital
media. The Company believes it is the largest supplier of commercial print and
print-related services in the United States. It is a major supplier in the
United Kingdom and also provides services in Latin America, continental Europe
and Asia. Services provided to customers include presswork and binding,
including on-demand customized publications; conventional and digital pre-press
operations, including desktop publishing and filmless color imaging, necessary
to create a printing image; software replication, translation and localization;
list, list enhancement, data base management and mail production services;
design and related creative services; cartographic services; electronic
communication networks for simultaneous worldwide product releases; digital
services to publishers; and the planning for and fulfillment of truck, rail,
mail and air distribution for products of the Company and its customers, as
well as third parties.
 
  The Company's executive offices are located at 77 West Wacker Drive, Chicago,
Illinois 60601, and its telephone number is 312-326-8000.
 
                                USE OF PROCEEDS
 
  Unless otherwise specified in the Prospectus Supplement, the net proceeds to
be received by the Company from the sale of the Debt Securities will be used
for general corporate purposes, which may include the repayment of
indebtedness, working capital, capital expenditures, acquisitions and the
repurchase of shares of the Company's common stock. Pending use for these
purposes, the Company may invest proceeds from the sale of the Debt Securities
in short-term marketable securities.
 
                     RATIO OF EARNINGS TO FIXED CHARGES(1)
 


                                    YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED        ---------------------------------------------------------------------------------
 JUNE 30, 1994          1993                1992             1991             1990             1989
- ----------------        ----                ----             ----             ----             ----
                                                                                
      4.8               4.9(2)              7.3              5.7              11.5             19.8

- --------
(1) For the purposes of calculating the ratio of earnings to fixed charges,
    earnings consist of earnings before income taxes and fixed charges to the
    extent that such charges are included in the determination of earnings.
    Fixed charges consist of interest (whether expensed or capitalized) and
    one-third of minimum rental payments under operating leases (estimated by
    management to be the interest factor of such rentals).
(2) 1993 results include a $90 million restructuring charge recorded in the
    first quarter of 1993 and related primarily to the shutdown of the
    Company's Chicago manufacturing facility following a customer's decision to
    discontinue its catalog operations. The ratio of earnings to fixed charges
    for 1993 would have been 6.2, exclusive of such charge.
 
The ratio of earnings to fixed charges for the twelve months ended June 30,
1994 is 6.0.
 
                                       3

 
                         DESCRIPTION OF DEBT SECURITIES
 
  The following description sets forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement
and the extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating
to such Debt Securities.
 
  The Offered Debt Securities are to be issued under an Indenture, dated as of
November 1, 1990, as supplemented from time to time (the "Indenture"), between
the Company and Citibank, N.A., as Trustee (the "Trustee"), a copy of which is
an exhibit to the Registration Statement of which this Prospectus is a part.
The following summaries of certain provisions of the Debt Securities and the
Indenture do not purport to be complete and are subject to, and are qualified
in their entirety by express reference to, all the provisions of the Indenture,
including the definitions therein of certain terms. Certain terms defined in
the Indenture are capitalized herein. Particular section numbers refer to
sections in the Indenture.
 
GENERAL
 
  The Debt Securities will be unsecured obligations of the Company and will
rank on a parity with all other unsecured and unsubordinated indebtedness of
the Company.
 
  The Indenture does not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provides that Debt Securities may
be issued thereunder from time to time in one or more series (Section 301).
 
  Reference is made to the Prospectus Supplement relating to the Offered Debt
Securities for, among other things, the following terms thereof: (1) the title
of the Offered Debt Securities; (2) any limit on the aggregate principal amount
of the Offered Debt Securities; (3) the date or dates on which the Offered Debt
Securities will mature; (4) the rate or rates (which may be fixed or variable)
per annum at which the Offered Debt Securities will bear interest, if any, and
the date from which such interest will accrue; (5) the dates on which such
interest will be payable and the Regular Record Dates for such Interest Payment
Dates; (6) the dates, if any, on which and the price or prices at which the
Offered Debt Securities may, pursuant to any mandatory or optional sinking fund
provisions, be redeemed by the Company and other detailed terms and provisions
of such sinking funds; (7) the date, if any, after which and the price or
prices at which the Offered Debt Securities may, pursuant to any optional
redemption provisions, be redeemed at the option of the Company or of the
Holder thereof and other detailed terms and provisions of such optional
redemption; and (8) the currency or composite currencies in which the Offered
Debt Securities are denominated and in which principal of, premium, if any, and
any interest on the Offered Debt Securities will or may be payable (Section
301). For a description of the terms of the Offered Debt Securities, reference
must be made to both the Prospectus Supplement relating thereto and to the
description of Debt Securities set forth herein.
 
  Unless otherwise indicated in the Prospectus Supplement relating thereto, the
principal of, and any premium or interest on, the Offered Debt Securities will
be payable, and the Offered Debt Securities will be exchangeable and transfers
thereof will be registerable, at the Corporate Trust Office of the Trustee,
provided that, at the option of the Company, payment of interest may be made by
check mailed to the address of the Person entitled thereto as it appears in the
Security Register (Sections 202, 301, 305 and 1002).
 
  Unless otherwise indicated in the Prospectus Supplement relating thereto, the
Offered Debt Securities will be issued in United States dollars in fully
registered form, without coupons, in denominations of $1,000 or any integral
multiple thereof (Section 302). No service charge will be made for any transfer
or exchange of the Offered Debt Securities, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith (Section 305).
 
  Debt Securities may be issued under the Indenture as Original Issue Discount
Securities to be offered and sold at a substantial discount from the principal
amount thereof. Special federal income tax, accounting and other considerations
applicable to any such Original Issue Discount Securities will be described in
the
 
                                       4

 
Prospectus Supplement relating thereto. "Original Issue Discount Security"
means any security which provides for an amount less than the principal amount
thereof to be due and payable upon the declaration of acceleration of the
Maturity thereof upon the occurrence of an Event of Default and during the
continuation thereof (Section 101).
 
  Unless otherwise indicated in the Prospectus Supplement relating thereto, the
Indenture does not afford holders of Debt Securities of any series protection
against the Company incurring unsecured indebtedness or (except as described in
"Description of Debt Securities--Restrictive Covenants") engaging in corporate
transactions or reorganizations which could result in the Company's involvement
in a highly leveraged transaction.
 
RESTRICTIVE COVENANTS
 
 Restrictions Upon Secured Debt
 
  The Company covenants that it will not, and will not permit any Restricted
Subsidiary to, create, incur, issue, assume or guarantee any indebtedness for
borrowed money (hereafter called "indebtedness") secured by a mortgage,
security interest, pledge or lien (hereafter called "mortgage") of or upon any
Principal Property or on any shares of capital stock or indebtedness of any
Restricted Subsidiary, whether owned at the date of the Indenture or thereafter
acquired, without effectively providing that the Debt Securities (together
with, if the Company shall so determine, any other indebtedness created,
incurred, issued, assumed or guaranteed by the Company or any Restricted
Subsidiary and then existing or thereafter created) shall be secured by such
mortgage equally and ratably with (or, at the option of the Company, prior to)
such indebtedness. The foregoing restrictions, however, shall not apply to any
indebtedness secured by any one or more of the following: (a) mortgages of or
upon any property acquired, constructed or improved by, or of or upon any
shares of capital stock or indebtedness acquired by, the Company or any
Restricted Subsidiary after the date of the Indenture to secure indebtedness
incurred for the purpose of financing or refinancing all or any part of the
purchase price of any property, shares of capital stock or indebtedness or of
the cost of any construction or improvements on such property, which
indebtedness is incurred prior to or within 180 days after such acquisition,
completion of such construction or the commencement of the commercial operation
of such property, as the case may be; (b) mortgages of or upon any property,
shares of capital stock or indebtedness existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary; (c) mortgages of or upon
property of a corporation existing at the time such corporation is merged with
or into or consolidated with the Company or any Restricted Subsidiary or
existing at the time of a sale or transfer of the properties of a corporation
as an entirety or substantially as an entirety to the Company or any Restricted
Subsidiary; (d) mortgages of or upon any property of, or shares of capital
stock or indebtedness of, a corporation existing at the time such corporation
becomes a Restricted Subsidiary; (e) mortgages to secure indebtedness of any
Restricted Subsidiary to the Company or to another Restricted Subsidiary; (f)
mortgages in favor of governmental bodies to secure partial, progress, advance
or other payments pursuant to any contract or statute or to secure indebtedness
incurred or guaranteed to finance or refinance all or any part of the purchase
price of the property, shares of capital stock or indebtedness subject to, or
the cost of constructing or improving the property subject to, such mortgages;
and (g) extensions, renewals or replacements of any mortgage existing on the
date of the Indenture or any mortgage referred to in the foregoing clauses (a)
through (f), inclusive (Section 1006).
 
  Notwithstanding the restrictions outlined above, the Company or any
Restricted Subsidiary may, without equally and ratably securing the Debt
Securities, issue, assume or guarantee indebtedness secured by a mortgage not
excepted under clauses (a) through (g) above, if the aggregate amount of such
indebtedness, together with all other indebtedness of, or indebtedness
guaranteed by, the Company and its Restricted
 
                                       5

 
Subsidiaries existing at such time and secured by mortgages not so excepted and
the Attributable Debt in respect of Sale and Lease-Back Transactions existing
at such time (other than Sale and Lease-Back Transactions in respect of which
an amount not less than the greater of (x) the net proceeds of the sale of such
property or (y) the fair market value (as determined by the Board of Directors)
of such property has been applied, within 180 days after the effective date of
the arrangement, to either the prepayment or retirement (other than any
mandatory prepayment or retirement) of long-term indebtedness or to the
acquisition, construction or improvement of a manufacturing plant or facility
which is, or upon completion will be, a Principal Property and Sale and Lease-
Back Transactions in which the property involved would have been permitted to
be mortgaged under clause (a) or (f) above), does not at the time exceed 10% of
Consolidated Net Tangible Assets (Section 1006).
 
 Restrictions Upon Sale and Lease-Back Transactions
 
  Sale and Lease-Back Transactions by the Company or any Restricted Subsidiary
of any Principal Property are prohibited unless (i) the Company or such
Restricted Subsidiary would (at the time of entering into such arrangement) be
entitled pursuant to clause (a) or (f) under the subsection Restrictions Upon
Secured Debt above, without equally and ratably securing the Debt Securities,
to incur indebtedness secured by a mortgage on the property to be leased, or
(ii) the Company or such Restricted Subsidiary would (at the time of entering
into such arrangement) be entitled, without equally and ratably securing the
Debt Securities, to incur indebtedness secured by a mortgage on such property
in an amount at least equal to the Attributable Debt in respect of the Sale and
Lease-Back Transaction, or (iii) the Company shall apply, within 180 days of
the effective date of the arrangement, an amount not less than the greater of
(x) the net proceeds of the sale of such property or (y) the fair market value
(as determined by the Board of Directors of the Company) of such property to
either the prepayment or retirement (other than any mandatory prepayment or
retirement) of long-term indebtedness of the Company or any Restricted
Subsidiary or to the acquisition, construction or improvement of a
manufacturing plant or manufacturing facility which is, or upon such
acquisition, construction or improvement will be, a Principal Property (Section
1007).
 
 Certain Definitions
 
  The term "Attributable Debt" in respect of a Sale and Lease-Back Transaction
means the present value (discounted at the rate of interest implicit in the
lease involved in such Sale and Lease-Back Transaction, as determined in good
faith by the Company) of the obligation of the lessee thereunder for rental
payments (excluding, however, any amounts required to be paid by such lessee,
whether or not designated as rent or additional rent, on account of maintenance
and repairs, insurance, taxes, assessments, water rates or similar charges or
any amounts required to be paid by such lessee thereunder contingent upon the
amount of sales, maintenance and repairs, insurance, taxes, assessments, water
rates or similar charges) during the remaining term of such lease (including
any period for which such lease has been extended or may, at the option of the
lessor, be extended) (Section 101).
 
  The term "Consolidated Net Tangible Assets" means, as of any particular time,
the total amount of assets (less applicable reserves) after deducting therefrom
(a) all current liabilities (excluding any thereof which are by their terms
extendible or renewable at the option of the obligor thereon to a time more
than 12 months after the time as of which the amount thereof is being computed
and excluding current maturities of long-term indebtedness), and (b) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangible assets, all as shown in the audited
consolidated balance sheet of the Company and subsidiaries contained in the
Company's then most recent annual report to stockholders, except that assets
shall include an amount equal to the Attributable Debt in respect of any Sale
and Lease-Back Transaction not capitalized on such balance sheet (Section 101).
 
  The term "Principal Property" means any manufacturing plant or manufacturing
facility located within the United States of America, having a gross book value
in excess of 1% of Consolidated Net Tangible Assets
 
                                       6

 
at the time of determination thereof and owned by the Company or any Restricted
Subsidiary, in each case other than (1) any such plant or facility which, in
the opinion of the Board of Directors of the Company, is not of material
importance to the total business conducted by the Company and its Restricted
Subsidiaries taken as a whole, or (2) any portion of such a plant or facility
similarly found not to be of material importance to the use or operation
thereof (Section 101).
 
  The term "Restricted Subsidiary" means any Subsidiary (a) substantially all
of the property of which is located, or substantially all of the business of
which is carried on, within the United States of America (other than its
territories or possessions and other than Puerto Rico) and (b) which owns a
Principal Property; provided however that any Subsidiary which is principally
engaged in financing operations outside the United States of America or which
is principally engaged in leasing or in financing installment receivables shall
not be a Restricted Subsidiary (Section 101).
 
  The term "Sale and Lease-Back Transaction" means any arrangement with any
Person providing for the leasing by the Company or any Restricted Subsidiary of
any Principal Property, whether owned at the date of the Indenture or
thereafter acquired (except for temporary leases for a term, including any
renewal thereof, of not more than three years and except for leases between the
Company and any Restricted Subsidiary, between any Restricted Subsidiary and
the Company or between Restricted Subsidiaries), which property has been or is
to be sold or transferred by the Company or such Restricted Subsidiary to such
Person with the intention of taking back a lease of such property (Section
101).
 
  The term "Subsidiary" means any corporation more than 50% of the outstanding
voting stock of which is at the time owned, directly or indirectly, by the
Company and/or one or more of its other Subsidiaries (Section 101).
 
EVENTS OF DEFAULT
 
  The following are Events of Default under the Indenture with respect to Debt
Securities of any series: (a) default in the payment of any interest on any
Debt Security of that series when due, continued for 30 days; (b) default in
the payment of the principal of or premium, if any, on any Debt Security of
that series at Maturity; (c) default in the deposit of any sinking fund payment
in respect of any Debt Security of that series when due; (d) default in the
performance, or breach, of any other covenant or warranty of the Company in the
Indenture (other than a covenant or warranty included in the Indenture solely
for the benefit of series of Debt Securities other than that series), continued
for 90 days after written notice as provided in the Indenture; (e) certain
events of bankruptcy, insolvency or reorganization relating to the Company; and
(f) any other Event of Default provided with respect to Debt Securities of that
series (Section 501).
 
  If an Event of Default with respect to Debt Securities of any series at the
time Outstanding shall occur and be continuing, either the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Debt
Securities of that series may declare the principal amount (or, if the Debt
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of that series) of all
of the Debt Securities of that series to be due and payable immediately.
However, at any time after a declaration of acceleration with respect to Debt
Securities of any series has been made, and before a judgment or decree based
on such acceleration has been obtained, the Holders of a majority in principal
amount of Outstanding Debt Securities of that series may, subject to certain
conditions, rescind and annul such acceleration if all Events of Default, other
than the nonpayment of accelerated principal, with respect to Debt Securities
of that series have been cured or waived as provided in the Indenture (Section
502). For information as to waiver of defaults, see "Modification and Waiver."
Reference is made to the Prospectus Supplement relating to any series of
Offered Debt Securities which are Original Issue Discount Securities for the
particular provisions relating to acceleration of the Maturity of a portion of
the principal amount of such Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof.
 
                                       7

 
  The Indenture provides that, subject to the duties of the Trustee to act with
the required standard of care if an Event of Default shall occur and be
continuing, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
Holders, unless such Holders shall have offered to the Trustee reasonable
security or indemnity (Sections 601 and 603). Subject to such provisions for
security or indemnification of the Trustee and certain other conditions, the
Holders of a majority in principal amount of the Outstanding Debt Securities of
any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to the Debt Securities
of that series (Section 512).
 
  No Holder of any Debt Security of any series will have any right to institute
any proceeding with respect to the Indenture or for any remedy thereunder,
unless such Holder shall have previously given to the Trustee written notice of
a continuing Event of Default with respect to Debt Securities of that series
and unless also the Holders of not less than 25% in principal amount of the
Outstanding Debt Securities of that series shall have made written request, and
offered reasonable security or indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the Holders
of a majority in principal amount of the Outstanding Debt Securities of that
series a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days after the Trustee's receipt of such
notice (Section 507). However, the Holder of any Debt Security will have an
absolute right to receive payment of the principal of (and premium, if any) and
any interest on such Debt Security on or after the due dates expressed in such
Debt Security and to institute suit for the enforcement of any such payment
(Section 508).
 
  The Indenture requires the Company to furnish to the Trustee annually a
statement as to the absence of certain defaults under the Indenture (Section
1008). The Indenture provides that the Trustee may withhold notice to the
Holders of Debt Securities of any series of any default (except defaults in
payment of principal or any premium or interest or in sinking fund payments)
with respect to Debt Securities of that series if it determines the withholding
of such notice is in the interest of the Holders of Debt Securities of that
series (Section 602).
 
MODIFICATION AND WAIVER
 
  Modification and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of each series affected
thereby; provided, however, that no such modification or amendment may, without
the consent of the Holder of each Outstanding Debt Security affected thereby:
(a) change the Stated Maturity of the principal of, or any installment of
principal of or interest on, any Debt Security; (b) reduce the principal amount
of, or the rate of interest on, or any premium payable upon the redemption of,
any Debt Security; (c) reduce the amount of principal of an Original Issue
Discount Security payable upon acceleration of the Maturity thereof; (d) change
the place or currency of payment of principal of, or premium, if any, or
interest on, any Debt Security; (e) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security after the
Stated Maturity; or (f) reduce the percentage in principal amount of
Outstanding Debt Securities of any series, the consent of the Holders of which
is required for modification or amendment of the Indenture, for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults (Section 902).
 
  The Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of any series may on behalf of the Holders of all Debt
Securities of that series waive, insofar as that series is concerned,
compliance by the Company with certain restrictive covenants of the Indenture
(Section 1009). The Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of any series may on behalf of the Holders of
all Debt Securities of that series waive any past default under the Indenture
with respect to that series, except a default in the payment of the principal
of or premium, if any, or any interest on any Debt Security of that series or
in respect of a provision which under the Indenture cannot be modified or
amended without the consent of the Holder of each Outstanding Debt Security of
that series affected (Section 513).
 
                                       8

 
DEFEASANCE
 
  Defeasance and Discharge. If the Debt Securities of any series so provide,
the Company will be discharged (hereinafter, "defeasance") from any and all
obligations in respect of Debt Securities of that series (except for certain
obligations to register the transfer or exchange of Debt Securities of that
series, to replace stolen, lost or mutilated Debt Securities of that series, to
maintain paying agencies, to compensate and indemnify the Trustee and to
furnish the Trustee (if the Trustee is not the registrar) with the names and
addresses of the holders of Debt Securities of that series) upon the
irrevocable deposit with the Trustee, in trust, of money and/or securities of
the government which issued the currency in which the Debt Securities of that
series are payable or securities issued by government agencies backed by the
full faith and credit of such government which, through the payment of interest
and principal in respect thereof in accordance with their terms, will provide
money in an amount sufficient to pay the principal of (and premium, if any) and
the interest on the Debt Securities of that series on the Stated Maturity of
such payments in accordance with the terms of the Debt Securities of that
series (Section 1302). Such a defeasance may be effected only if, among other
things, the Company has delivered to the Trustee an Opinion of Counsel (who may
be an employee of or counsel for the Company) stating that the Company has
received from the Internal Revenue Service a private letter ruling, or that the
Internal Revenue Service has published a revenue ruling pertaining to a
comparable form of transaction, or that since the date of the Indenture there
has been a change in the applicable federal income tax law, in either case to
the effect that Holders of the Debt Securities of that series will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times, as would have been the case if such
defeasance had not occurred (Section 1304). In addition, the Company may also
obtain a discharge of the Indenture with respect to all Debt Securities issued
under the Indenture by depositing with the Trustee, in trust, money sufficient
to pay at Stated Maturity or upon redemption all of such Debt Securities,
provided that such Debt Securities are by their terms to become due and payable
within one year or are to be called for redemption within one year (Section
401).
 
  Defeasance of Certain Covenants and Certain Events of Default. If the Debt
Securities of any series so provide, the Company may omit to comply
(hereinafter, "covenant defeasance") with the restrictive covenants described
under Restrictive Covenants--Restrictions Upon Secured Debt and --Restrictions
Upon Sale and Lease-back Transactions and Consolidation, Merger and Sale of
Assets and such other covenants as may be included in the Prospectus Supplement
for such series, and no Event of Default shall arise with respect to Debt
Securities of such series by reason of any failure to comply therewith, upon
the irrevocable deposit with the Trustee, in trust, of money and/or securities
of the government which issued the currency in which the Debt Securities of
that series are payable or securities issued by government agencies backed by
the full faith and credit of such government which, through the payment of
interest and principal in respect thereof in accordance with their terms, will
provide money in an amount sufficient to pay the principal of (and premium, if
any) and the interest on the Debt Securities of that series on the Stated
Maturity of such payments in accordance with the terms of the Debt Securities
of that series (Sections 1303 and 1304). The obligations of the Company under
the Debt Securities of that series other than with respect to the covenants
referred to above and all Events of Default other than with respect to such
covenants shall remain in full force and effect. Such a covenant defeasance may
be effected only if, among other things, the Company has delivered to the
Trustee an Opinion of Counsel (who may be an employee of or counsel for the
Company) to the effect that the Holders of the Debt Securities of that series
will not recognize income, gain or loss for federal income tax purposes as a
result of such covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times, as would have been
the case if such covenant defeasance had not occurred (Section 1304).
 
  Covenant Defeasance and Certain Other Events of Default. In the event the
Company exercises its option to effect a covenant defeasance with respect to
the Debt Securities of any series as described above and the Debt Securities of
that series are thereafter declared due and payable because of the occurrence
of any Event of Default other than the Event of Default caused by failing to
comply with the covenants which are defeased, the amount of money and
securities on deposit with the Trustee would be sufficient to pay amounts due
on
 
                                       9

 
the Debt Securities of that series at the time of their Stated Maturity but may
not be sufficient to pay amounts due on the Debt Securities of that series at
the time of the acceleration resulting from such Event of Default. However, the
Company would remain liable for such payments.
 
CONSOLIDATION, MERGER AND SALE OF ASSETS
 
  Nothing in the Indenture or in any of the Debt Securities shall prevent any
consolidation of the Company with or merger of the Company into any other
corporation or shall prevent any lease, sale or transfer of all or
substantially all of the property and assets of the Company to any other
Person; provided, however, and the Company covenants and agrees, that any such
consolidation, merger, lease, sale or transfer shall be upon the condition that
(i) the due and punctual payment of the principal of, and premium, if any, and
interest on, all the Debt Securities according to their tenor, and the due and
punctual performance and observance of all the terms, covenants and conditions
of the Indenture to be kept or performed by the Company, shall, by an indenture
supplemental to the Indenture, executed and delivered to the Trustee, be
assumed by the corporation formed by such consolidation or into which the
Company shall have merged, or the Person which shall have acquired by lease,
sale or transfer all or substantially all of the property and assets of the
Company, (ii) after giving effect to such transaction, no Event of Default, and
no event which after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing and (iii) the corporation formed
by such consolidation or into which the Company shall have merged or the Person
which shall have acquired by sale or transfer, or which leases, all or
substantially all of the property or assets of the Company shall be a
corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia. (Section 801).
 
  If, upon any such consolidation or merger, or upon any such lease, sale or
transfer, any Principal Property of the Company or of any Restricted Subsidiary
or any shares of capital stock or indebtedness of any Restricted Subsidiary,
owned immediately prior thereto, would thereupon become subject to any
mortgage, security interest, pledge or lien securing any indebtedness for
borrowed money of, or guaranteed by, such other corporation or Person (other
than any mortgage, security interest, pledge or lien permitted as described
under "Restrictive Covenants--Restrictions Upon Secured Debt" above), the
Company, prior to such consolidation, merger, lease, sale or transfer, will by
indenture supplemental to the Indenture secure the due and punctual payment of
the principal of, and premium, if any, and interest on the Debt Securities
(together with, if the Company shall so determine, any other indebtedness of,
or guaranteed by, the Company or any Restricted Subsidiary and then existing or
thereafter created) equally and ratably with (or, at the option of the Company,
prior to) the indebtedness secured by such mortgage, security interest, pledge
or lien (Section 802).
 
REGARDING THE TRUSTEE
 
  Citibank, N.A., the Trustee under the Indenture, is also trustee with respect
to several series of debt securities issued pursuant to the Indenture. The
Company maintains banking relationships in the ordinary course of business with
Citibank, N.A. and several of its affiliates. Citibank, N.A., through certain
of such affiliates, has committed to lend funds to the Company from time to
time under various credit agreements among the Company and the banks which are
parties thereto.
 
                              PLAN OF DISTRIBUTION
 
  The Company may sell Debt Securities to or through underwriters or dealers,
and also may sell Debt Securities directly to one or more other purchasers or
through agents. The Prospectus Supplement sets forth the names of any
underwriters or agents involved in the sale of the Offered Debt Securities and
any applicable commissions or discounts.
 
  Underwriters, dealers or agents may offer and sell the Debt Securities at a
fixed price or prices, which may be changed, or from time to time at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. In connection with the sale of the Debt
Securities,
 
                                       10

 
underwriters or agents may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of the Debt Securities for whom they may
act as agent. Underwriters or agents may sell the Debt Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters or commissions from the
purchasers for whom they may act as agent.
 
  The Debt Securities, when first issued, will have no established trading
market. Any underwriters or agents to or through whom Debt Securities are sold
by the Company for public offering and sale may make a market in such Debt
Securities, but such underwriters or agents will not be obligated to do so and
may discontinue any market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for any Debt Securities.
 
  Any underwriters, dealers or agents participating in the distribution of the
Debt Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
Debt Securities may be deemed to be underwriting discounts and commissions
under the Securities Act of 1933, as amended (the "Act"). Underwriters, dealers
or agents may be entitled, under agreements entered into with the Company, to
indemnification against or contribution toward certain civil liabilities,
including liabilities under the Act.
 
  If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or agents to solicit offers by certain institutions to purchase
Debt Securities from the Company pursuant to contracts providing for payment
and delivery on a future date. Institutions with which such contracts may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and others, but
in all cases such institutions must be approved by the Company. The obligations
of any purchaser under any such contract will be subject to the condition that
the purchase of the Offered Debt Securities shall not at the time of delivery
be prohibited under the laws of the jurisdiction to which such purchaser is
subject. The underwriters and such other persons will not have any
responsibility in respect of the validity or performance of such contracts.
 
                                 LEGAL OPINIONS
 
  Certain legal matters in connection with the Debt Securities offered hereby
will be passed upon for the Company by David C. Hart, Vice President, General
Counsel and Secretary of the Company, and Sidley & Austin, Chicago, Illinois,
and for any underwriters or agents by Mayer, Brown & Platt, Chicago, Illinois.
As of August 1, 1994, Mr. Hart beneficially owned 12,575 shares of the
Company's common stock and held options to acquire 39,580 shares of such common
stock. Mr. H. Blair White, the sole officer and shareholder of a corporate
partner in Sidley & Austin, is a director of the Company.
 
                                    EXPERTS
 
  The consolidated financial statements and schedules of the Company
incorporated by reference in its Annual Report on Form 10-K for the year ended
December 31, 1993 and incorporated by reference in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen &
Co., independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein by reference in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
 
                                       11

 
- -----------------------------------         -----------------------------------
- -----------------------------------         -----------------------------------
 
  No dealer, salesman or any other                     $200,000,000
person has been authorized to give
any information or to make any                             LOGO
representations, other than those
contained or incorporated by ref-
erence in this Prospectus Supple-
ment (including the accompanying
Pricing Supplement) or the Pro-
spectus in connection with the of-
fer made by this Prospectus Sup-
plement and the Prospectus and, if
given or made, such information or
representations must not be relied
upon as having been authorized by
the Company or any Agent. Neither
the delivery of this Prospectus
Supplement (including the Pricing
Supplement) and the Prospectus nor
any sale made hereunder and there-
under shall under any circum-
stances create an implication that
there has been no change in the
affairs of the Company since the
date hereof. This Prospectus Sup-
plement (including the Pricing
Supplement) and the Prospectus do
not constitute an offer or a so-
licitation by anyone in any juris-
diction in which such offer or so-
licitation is not authorized or in
which the person making such offer
or solicitation is not qualified
to do so or to any person to whom
it is unlawful to make such offer
or solicitation.
 
 
                                               LOGO
 
                                                MEDIUM-TERM NOTES, SERIES B
 
                                                      ---------------
 
                                                   PROSPECTUS SUPPLEMENT
                                                      August 17, 1994
 
                                                      ---------------
 
                                                      LEHMAN BROTHERS
 
                                                    MERRILL LYNCH & CO.
 
                                                J.P. MORGAN SECURITIES INC.
 
                                            -----------------------------------
                                            -----------------------------------
 
      ---------------
 
         TABLE OF CONTENTS
 


                                       Page
                                       ----
 
       PROSPECTUS SUPPLEMENT
                                    
Description of Notes.................  S-3
Special Provisions Relating to Multi-
 Currency Notes......................  S-23
Foreign Currency Risks...............  S-26
United States Federal Income Tax
 Consequences........................  S-27
Supplemental Plan of Distribution....  S-35
 
            PROSPECTUS
Available Information................     2
Documents Incorporated by Reference..     2
The Company..........................     3
Use of Proceeds......................     3
Ratio of Earnings to Fixed Charges...     3
Description of Debt Securities.......     4
Plan of Distribution.................    10
Legal Opinions.......................    11
Experts..............................    11

 
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