SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of Earliest Event Reported) - July 20, 1998
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ELI LILLY AND COMPANY
(Exact name of registrant as specified in its charter)
Indiana 1-6351 35-0470950
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(State or other jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
Lilly Corporate Center
Indianapolis, Indiana 46285
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(Address of principal executive offices) (Zip Code)
(317) 276-2000
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(Registrant's telephone number, including area code)
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Not applicable
(Former name or address, if changed since last report)
Item 5. Other Events.
On July 20, 1998, the Board of Directors of Eli Lilly and Company (the
"Company") adopted a Shareholder Rights Plan (the "Rights Plan") to replace the
expiring 1988 rights plan. The purpose of the Rights Plan is to deter certain
coercive takeover tactics and enable the Board of Directors to represent
effectively the interest of shareholders in the event of a takeover attempt. The
Rights Plan does not deter negotiated mergers or business combinations that the
Board of Directors determines to be in the best interests of the Company and its
shareholders.
To implement the Rights Plan the Board of Directors declared a dividend of
one preferred share purchase right (a "Right") for each outstanding share of
common stock (the "Common Shares") of the Company. The dividend was paid on July
28, 1998 to the shareholders of record on that date. Each Right entitles the
registered holder to purchase from the Company one one-thousandth of a share of
Series B Junior Participating Preferred Stock of the Company, without par value
(the "Preferred Shares"), at a price of $325 per one one-thousandth of a
Preferred Share, subject to adjustment. The description and terms of the Rights
are set forth in a Rights Agreement (the "Rights Agreement") between the Company
and First Chicago Trust Company of New York, as Rights Agent.
Rights Attach to Common Shares Initially
Initially and until a Distribution Date (as defined below) occurs, the
Rights are attached to all Common Shares and no separate Rights certificates
will be issued. During this initial period,
o the Rights are not exercisable;
o the Rights are transferred with the Common Shares and are not
transferable separately from the Common Shares;
o new Common Share certificates or book entry shares issued will
contain a notation incorporating the Rights Agreement by reference;
and
o the transfer of any Common Shares will also constitute the transfer
of the Rights associated with those Common Shares.
Distribution of Rights
Separate certificates evidencing the Rights will be mailed to holders of
record of the Common Shares on the "Distribution Date." The Distribution Date is
the earlier to occur of the following two events (or such later date as may be
determined by the Board of Directors, upon approval by a majority of Continuing
Directors as defined below):
o the tenth day after a public announcement that a person or group of
affiliated or associated persons has acquired 15% or more of the
outstanding Common Shares (thereby becoming an "Acquiring Person"
under the Rights Plan); or
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o such date as may be determined by the Board of Directors of the
Company, upon approval of a majority of the Continuing Directors
after the commencement or announcement of a tender or exchange offer
by a person or group for 15% or more of the outstanding Common
Shares.
Acquisitions by the following persons will not result in the person
becoming an Acquiring Person: The Company, any subsidiary or employee benefit
plan of the Company, Lilly Endowment, Inc., or any other person approved in
advance by the Board of Directors and the Continuing Directors.
After the Distribution Date, the Rights will be tradable separately from
the Common Shares. After the Distribution Date and after the Company's right to
redeem (as described below) has expired, the Rights will be exercisable in two
different ways depending on the circumstances as set forth below.
Right to Purchase Lilly Stock
If a person or group acquires 15% or more of the outstanding Common Shares
(thereby becoming an Acquiring Person) and the Company's redemption right has
expired, each holder of a Right (except those held by the Acquiring Person and
its affiliates and associates) will have the right to purchase, upon exercise,
Common Shares (or, in certain circumstances, Preferred Shares or other similar
securities of the Company) having a value equal to two times the exercise price
of the Right. In other words, the Rights holders other than the Acquiring Person
may purchase Common Shares at a 50% discount.
For example, at the exercise price of $325 per Right, each Right not owned
by an Acquiring Person would entitle its holder to purchase $650 worth of Common
Shares (or other consideration, as noted above) for $325. Assuming a value of
$65 per Common Share at such time, the holder of each valid Right would be
entitled to purchase ten Common Shares for $325.
Right to Purchase Acquiring Person Stock
Alternatively, if, in a transaction not approved by the Board of Directors
and the Continuing Directors, the Company is acquired in a merger or other
business combination or 50% or more of its assets or earning power are sold
after a person or group has become an Acquiring Person, and the Company's
redemption right has expired, proper provision will be made so that each holder
of a Right will thereafter have the right to purchase, upon exercise, that
number of shares of common stock of the acquiring company as have a market value
of two times the exercise price of the Right. In other words, a Rights holder
may purchase the acquiring company's common stock at a 50% discount.
Exchange of Lilly Stock for Rights
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At any time after any person or group becomes an Acquiring Person and
before the Acquiring Person acquires 50% or more of the outstanding Common
Shares, the Board of Directors may exchange the Rights (other than Rights owned
by the Acquiring Person which will have become void), in whole or in part, at an
exchange ratio of one Common Share, or one one-thousandth of a Preferred Share
(or of a share of a class or series of the Company's preferred stock having
equivalent rights, preferences and privileges), per Right (subject to
adjustment).
Redemption
The Rights are redeemable by the Company in whole but not in part at a
price of $.005 per Right at any time up to and including the tenth day after the
time that a person or a group has become an Acquiring Person, subject to
extension of this redemption period by the Board of Directors. Immediately upon
redemption the right to exercise will terminate and the only right of holders
will be to receive the redemption price.
Expiration of Rights
The Rights will expire on July 28, 2008 unless the expiration date is
extended by amendment as described below or unless the Rights are earlier
redeemed or exchanged by the Company as described above.
Amendments
As long as the Rights are redeemable, the terms of the Rights may be
amended by the Board of Directors (upon the approval of a majority of the
Continuing Directors) in its discretion without the consent of the Rights
holders. After that time, no amendment may adversely affect the interests of the
Rights holders (other than the Acquiring Person).
Miscellaneous
"Continuing Director" means a member of the Board of Directors, who is not
an Acquiring Person or a representative or nominee of an Acquiring Person, and
who either (i) was a member of the Board of Directors on the date of the Rights
Agreement or (ii) thereafter became a member of the Board of Directors, and
whose nomination for election or election to the Board of Directors was
recommended or approved by a majority of the Continuing Directors then on the
Board of Directors.
The number of outstanding Rights and the number of one one-thousandths of
a Preferred Share issuable upon exercise of each Right are subject to adjustment
under certain circumstances.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-thousandth interest in a Preferred Share
that may be
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purchased upon exercise of each Right should approximate the value of one Common
Share.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
July 21, 1998. A copy of the Rights Agreement is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibit 1 Rights Agreement, dated as of July 20, 1998, between Eli
Lilly and Company and First Chicago Trust Company of New
York, as Rights Agent. The Rights Agreement includes the
Form of Articles of Amendment setting forth terms of
Series B Junior Preferred Stock as Exhibit A, the form
of Rights Certificate as Exhibit B and the Summary of
Rights as Exhibit C.
Exhibit 2 Press Release, dated July 20, 1998, announcing adoption
of the Stockholder Rights Plan.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
ELI LILLY AND COMPANY
By: /s/ Edwin W. Miller
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Name: Edwin W. Miller
Title: Vice President and Treasurer
Dated: July 21, 1998
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EXHIBIT INDEX
Sequentially
Exhibit No. Description Numbered Page
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1 Rights Agreement, dated
as of July 20, 1998,
between Eli Lilly and
Company and First Chicago
Trust Company of New York,
as Rights Agent. The
Rights Agreement includes
the Form of Articles of
Amendment setting forth
terms of Certificate of
Designations of Series B
Junior Preferred Stock as
Exhibit A, the form of
Rights Certificate as
Exhibit B and the Summary
of Rights as Exhibit C.
2 Press Release, dated July
20, 1998, announcing
adoption of the Stockholder
Rights Plan.
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STATEMENT OF DIFFERENCES
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The section symbol shall be expressed as.............................. 'SS'