SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C.  20549
                               FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934
                                                                 
For the fiscal year ended December 31, 1993     Commission File Number 1-6351



                              ELI LILLY AND COMPANY
                 (Exact name of Registrant as specified in its charter)


                                             LILLY CORPORATE CENTER
    INDIANA              35-0470950          INDIANAPOLIS, INDIANA  46285
(State or other         (IRS Employer        (Address of principal  (Zip Code)
jurisdiction of incor-   Identification No.)  executive offices)
poration or organization)


Registrant's telephone number, including area code:   317-276-2000


          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                               NAME OF EACH EXCHANGE
    TITLE OF EACH CLASS                        ON WHICH REGISTERED 

       Common Stock                           New York Stock Exchange
                                               Pacific Stock Exchange

   Contingent Payment Obligation Units        American Stock Exchange

     Preferred Stock Purchase Rights          New York Stock Exchange
                                               Pacific Stock Exchange


      SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:   None

Indicate by check mark whether the Registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months, and (2) has been subject to such filing 
requirements for the past 90 days. Yes   X   No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the 
best of Registrant's knowledge, in the definitive proxy statement incorporated 
by reference in Part III of this Form 10-K or any amendment to this Form 10-
K.[]

The aggregate market value of voting stock of the Registrant held by non-
affiliates as of February 21, 1994 (Common Stock):  $13,447,757,840.  

The number of shares of common stock outstanding as of February 21, 1994:

                CLASS                  NUMBER OF SHARES OUTSTANDING

               Common                           292,665,649

Portions of the following documents have been incorporated by reference into 
this report:

          DOCUMENT                            PARTS INTO WHICH INCORPORATED

Registrant's Annual Report to Shareholders     Parts I, II, and IV
    for fiscal year ended December 31, 1993

Registrant's Proxy Statement dated March 
     14, 1994                                  Part III

                         

<PAGE>



PART I


Item 1.     BUSINESS

Eli Lilly and Company was incorporated in 1901 under the laws of Indiana 
to succeed to the drug manufacturing business founded in Indianapolis, 
Indiana, in 1876 by Colonel Eli Lilly.  The Company*, including its 
subsidiaries, is engaged in the discovery, development, manufacture, and sale 
of products in one industry segment - Life Sciences.  Products are 
manufactured or distributed through owned or leased facilities in the United 
States, Puerto Rico, and 27 other countries, in 19 of which the Company owns 
or has an interest in manufacturing facilities.  Its products are sold in 
approximately 120 countries.

Most of the Company's products were discovered or developed through the 
Company's research and development activities, and the success of the 
Company's business depends to a great extent on the introduction of new 
products resulting from these research and development activities.  Research 
efforts are primarily directed toward the discovery of products to diagnose 
and treat diseases in human beings and animals and to increase the efficiency 
of animal food production.  Research efforts are also directed toward 
developing medical devices.


                FINANCIAL INFORMATION RELATING TO INDUSTRY
                    SEGMENTS AND CLASSES OF PRODUCTS

Financial information relating to industry segments and classes of 
products, set forth in the Company's 1993 Annual Report at pages 18-19 under 
"Review of Operations - Segment Information" (pages 12-13 of Exhibit 13 to 
this Form 10-K), is incorporated herein by reference.

Due to several factors, including the introduction of new products by the 
Company and other manufacturers, the relative contribution of any particular 
Company product to consolidated net sales is not necessarily constant from 
year to year, and its contribution to net income is not necessarily the same 
as its contribution to consolidated net sales.

PRODUCTS

Pharmaceutical Products

    Pharmaceutical products include

Anti-infectives, including the oral cephalosporin antibiotics Ceclor
(Registered), Keflex(Registered), and Keftab(Registered), used in 
the treatment of a wide range of bacterial infections; the oral 
carbacephem antibiotic Lorabid(Trademark), used to treat a variety of 
infections; the injectable cephalosporin antibiotics Mandol(Registered), 
Tazidime(Registered), Kefurox(Registered), and Kefzol(Registered), used 
to treat a wide range of infections in the hospital setting; 
Nebcin(Registered), an injectable aminoglycoside antibiotic used in 
hospitals to treat a broad range of infections caused by staphylococci 
and Gram-negative bacteria; and Vancocin(Registered) HCl, an antibiotic 
used primarily to treat staphylococcal infections; 

Central-nervous-system agents, including the antidepressant agent 
Prozac(Registered), a highly specific serotonin uptake inhibitor, 
indicated for the treatment of depression and, in certain countries, for 
bulimia and obsessive-compulsive disorder; and the analgesic Darvocet-
N(Registered) 100, which is indicated for the relief of mild-to-moderate 
pain;

* The terms "Company" and "Registrant" are used interchangeably 
  herein to refer to Eli Lilly and Company or to Eli Lilly and Company
  and its consolidated subsidiaries, as the context requires.

                                -1-

<PAGE>

Diabetic care products, including Iletin(Registered) (insulin) in its 
various pharmaceutical forms; and Humulin(Registered), human insulin 
produced through recombinant DNA technology;

Oncolytic agents, including Oncovin(Registered), indicated for 
treatment of acute leukemia and, in combination with other oncolytic 
agents, for treatment of several different types of advanced cancers; 
Velban(Registered), used in a variety of malignant neoplastic 
conditions; and Eldisine(Registered), indicated for treatment of acute 
childhood leukemia resistant to other drugs;

An antiulcer agent, Axid(Registered), an H2 antagonist, indicated for 
the treatment of active duodenal ulcer, for maintenance therapy for 
duodenal ulcer patients after healing of an active duodenal ulcer, and 
for reflux esophagitis; and

Additional pharmaceuticals, including cardiovascular therapy 
products, principally Dobutrex(Registered); hormones, including 
Humatrope(Registered), human growth hormone produced by recombinant DNA 
technology; and sedatives.

Medical Devices and Diagnostic Products

Medical devices include patient vital-signs measurement and 
electrocardiography systems, intravenous fluid-delivery and control systems, 
implantable cardiac pacemakers and implantable cardioverter/defibrillators, 
cardiac defibrillators and monitors, coronary angioplasty catheter systems, 
peripheral and coronary atherectomy catheter systems, and devices for use 
during minimally-invasive surgery procedures.

Diagnostic products include monoclonal-antibody-based diagnostic tests for 
colon, prostate, and testicular cancer, as well as for infertility, 
pregnancy, heart attack, thyroid deficiencies, allergies, anemia, dwarfism, 
and infectious diseases.

Animal Health Products

Animal health products include Tylan(Registered), an antibiotic used to 
control certain diseases in cattle, swine, and poultry and to improve feed 
efficiency and growth; Rumensin(Registered), a cattle feed additive that 
improves feed efficiency and growth; Compudose(Registered), a controlled-
release implant that improves feed efficiency and growth in cattle; 
Coban(Registered), Monteban(Registered) and Maxiban(Registered), 
anticoccidial agents for use in poultry; Apralan(Registered), an antibiotic 
used to control enteric infections in calves and swine; Micotil(Registered), 
an antibiotic used to treat bovine respiratory disease; and other products 
for livestock and poultry.

MARKETING

Most of the Company's major products are marketed worldwide.

In the United States, the Company's Pharmaceutical Division distributes 
pharmaceutical products principally through approximately 225 wholesale 
distributing outlets.  Marketing policy is designed to assure immediate 
availability of these products to physicians, pharmacies, hospitals, and 
appropriate health care professionals throughout the country.  Four wholesale 
distributing companies in the United States accounted for approximately 11%, 
9%, 6%, and 5% respectively, of consolidated net sales in 1993.  No other 
distributor accounted for as much as 5% of consolidated net sales.  The 
Company also makes direct sales of its pharmaceutical products to the United 
States government and to other manufacturers, but those direct sales do not 
constitute a material portion of consolidated net sales.

The Company's pharmaceutical products are promoted in the United States 
under the Lilly and Dista trade names by one hospital and three retail 
sales forces employing salaried sales representatives.  These sales 
representatives, approximately half of whom are registered pharmacists, 
call upon physicians, wholesalers, hospitals, managed-care organizations, 
retail pharmacists, and other health care professionals.  Their efforts 
are supported by the Company through advertising in medical and drug 
journals, distribution of literature and samples of certain products 
to physicians, and exhibits for use at medical meetings.  In the past 
few years, large purchasers of pharmaceuticals, such 

                                   -2-


<PAGE>

as managed-care groups and government and long-term care institutions, 
have begun to account for an increasing portion of total pharmaceutical 
purchases in the United States.  In 1992, reflecting these changes, the 
Company created special sales groups to service government and long-term 
care institutions, and expanded its managed-care sales organization.  In 
response to competitive pressures, the Company has entered into arrangements 
with a number of these organizations providing for discounts or rebates on 
one or more Company products.  

Pharmaceutical products are promoted outside the United States by salaried 
sales representatives.  While the products marketed vary from country to 
country, anti-infectives constitute the largest single group in total volume.  
Distribution patterns vary from country to country.

IVAC Corporation markets its patient temperature-measuring and vital-signs 
products and intravenous fluid-infusion systems principally to hospitals in 
the United States.  Sales in the United States are conducted by a direct 
sales force.  Sales outside the United States are conducted by both direct 
sales representatives and independent distributors.

Cardiac Pacemakers, Inc. markets pacemaker products and automatic 
implantable cardioverter/defibrillators to physicians and hospitals.  Sales 
are conducted by direct sales representatives and by independent distributors 
both inside and outside the United States.

Physio-Control Corporation markets cardiac defibrillators and monitors, 
electrocardiography systems, and vital-signs-measurement equipment to 
hospitals and emergency care units.  In the United States, sales are 
conducted by direct sales representatives.  Sales outside the United States 
are conducted by both direct sales representatives and independent 
distributors.  Physio-Control suspended production in May 1992 following an 
inspection of its operations by the U.S. Food and Drug Administration 
("FDA").  During 1993, Physio-Control received FDA authorization to resume 
shipments of the majority of its product line.  Physio-Control is seeking FDA 
authorization to resume shipments of its remaining products.

Advanced Cardiovascular Systems, Inc. primarily markets coronary 
dilatation balloon catheter systems to cardiologists to open obstructed 
coronary arteries.  In the United States, sales are conducted by a direct 
sales force.  Sales outside the United States are conducted by both direct 
sales representatives and independent distributors.

Devices for Vascular Intervention, Inc. markets atherectomy catheter 
systems for the treatment of coronary vascular disease by the removal of 
atherosclerotic plaque.  In the United States, sales are conducted by direct 
sales representatives.  Sales outside the United States are conducted by 
independent distributors.

Origin Medsystems, Inc., acquired by the Company in 1992, markets devices 
for use in minimally invasive surgical procedures.  Sales in the United 
States are conducted by direct sales representatives.  Sales outside the 
United States are conducted by independent distributors and a direct sales 
force.

Heart Rhythm Technologies, Inc. is developing catheter-based ablation 
systems to correct faulty signals at the heart, using a less-invasive 
approach than current therapy.  Heart Rhythm Technologies has no products 
currently approved for marketing.

Hybritech Incorporated and Pacific Biotech, Inc. market their 
immunodiagnostic products to hospitals, commercial laboratories, clinics, and 
physicians.  Sales are conducted by direct sales representatives and by 
independent distributors both inside and outside the United States.

Elanco Animal Health, a division of the Company, employs field salespeople 
throughout the United States to market animal health products.  Sales are 
made to wholesale distributors, retailers, feed manufacturers, or producers 
in conformance with varying distribution patterns applicable to the various 
types of products.  The Company also has an extensive sales force outside the 
United States to market its animal health products.

                                   -3-


<PAGE>

                            RAW MATERIALS

Most of the principal materials used by the Company in manufacturing 
operations are chemical, plant, and animal products that are available from 
more than one source.  Certain raw materials are available or are purchased 
principally from only one source.  Unavailability of certain materials from 
present sources could cause an interruption in production pending 
establishment of new sources or, in some cases, implementation of alternative 
processes.

Although the major portion of the Company's sales abroad are of products 
manufactured wholly or in part abroad, a principal source of active 
ingredients for these manufactured products continues to be the Company's 
facilities in the United States.

                           PATENTS AND LICENSES

The Company owns, has applications pending for, or is licensed under, a 
substantial number of patents, both in the United States and in other 
countries, relating to products, product uses, and manufacturing processes.  
There can be no assurance that patents will result from the Company's pending 
applications.  Moreover, patents relating to particular products, uses, or 
processes do not preclude other manufacturers from employing alternative 
processes or from successfully marketing substitute products to compete with 
the patented products or uses.

Patent protection of certain products, processes, and uses - particularly 
that relating to Ceclor, Dobutrex, Humulin, Prozac, Axid, and Lorabid - is 
considered to be important to the operations of the Company.  The United 
States product patent covering Ceclor, the Company's second largest selling 
product, expired in December 1992.  The Company holds a U.S. patent on a key 
intermediate material that remains in force until December 1994.  It has been 
reported that several abbreviated new drug applications for generic 
formulations of cefaclor (the active ingredient in Ceclor) have been filed in 
the U.S. and regulatory submissions have been made in other countries.  Small 
quantities of a generic formulation are currently being marketed in India.  
Although the Company cannot predict the ultimate effect on the sales of 
Ceclor or the Company's results of operations, the Company believes that the 
expiration of the U.S. product and intermediate patents will not have a 
material adverse effect on the Company's near-term consolidated financial 
position.  The United States patent covering Dobutrex expired in October 
1993.  Prior to the expiration, U.S. sales of Dobutrex accounted for 
approximately 2% of the Company's worldwide sales.  The patent expiration
has resulted in a significant decline in U.S. Dobutrex sales, and the 
Company expects this decline to continue.  During the first two months of 
1994, U.S. sales of the product declined approximately 75%.  The 
contribution of Dobutrex to the Company's net income is greater than its
contribution to net sales.  The Company is unable to predict the effect
of the expiration on the Company's consolidated results of operations;
however, the Company believes the expiration will not have a material
adverse effect on its consolidated financial position. The United States 
patent covering Humulin expires in 2000, the Prozac patent expires in 
2001, the Axid patent expires in 2002, and the Lorabid patent expires in 2004.

The Company also grants licenses under patents and know-how developed by 
the Company and manufactures and sells products and uses technology and know-
how under licenses from others.  Royalties received by the Company in 
relation to licensed pharmaceuticals, medical devices, and diagnostic 
products amounted to approximately $56.7 million in 1993, and royalties paid 
by it in relation to pharmaceuticals, medical devices, and diagnostic 
products amounted to approximately $92.5 million in 1993.

                             COMPETITION

The Company's pharmaceutical products compete with products manufactured 
by numerous other companies in highly competitive markets in the United 
States and throughout the world.  Its medical devices compete with 
numerous domestic and foreign manufacturers of conventional mercury-glass 
thermometers, implantable cardiac pacemakers, cardiac defibrillators and 
monitors, electronic temperature-measuring systems, vital-signs measuring 
systems, intravenous systems, angioplasty catheter systems, and minimally-
invasive surgery devices.  The Company's diagnostic products 

                                  -4-

<PAGE>

compete with conventional immunodiagnostic assays as well as with 
monoclonal-antibody-based products marketed by numerous foreign and domestic 
manufacturers.  Its animal health products compete on a worldwide basis 
with products of pharmaceutical, chemical, and other companies that operate 
animal health divisions or subsidiaries.

Important competitive factors include price and cost-effectiveness, 
product characteristics and dependability, service, and research and 
development of new products and processes.  The introduction of new products 
and the development of new processes by domestic and foreign companies can 
result in progressive price reductions or decreased volume of sales of 
competing products, or both.  New products introduced with patent protection 
usually must compete with other products already on the market at the time of 
introduction or products developed by competitors after introduction.  The 
Company believes its competitive position in these markets is dependent upon 
its research and development endeavors in the discovery and development of 
new products, together with increased productivity resulting from improved 
manufacturing methods, marketing efforts, and customer service.  There can be 
no assurance that products manufactured or processes used by the Company will 
not become outmoded from time to time as a result of products or processes 
developed by its competitors.

                            GOVERNMENTAL REGULATION

The Company's operations have for many years been subject to extensive 
regulation by the federal government, to some extent by state governments, 
and in varying degrees by foreign governments.  The Federal Food, Drug, and 
Cosmetic Act, other federal statutes and regulations, various state statutes 
and regulations, and laws and regulations of foreign governments govern 
testing, approval, production, labeling, distribution, post-market 
surveillance, advertising, promotion, and in some instances, pricing, of most 
of the Company's products.  In addition, the Company's operations are subject 
to complex federal, state, local, and foreign environmental laws and 
regulations.  It is anticipated that compliance with regulations affecting 
the manufacture and sale of current products and the introduction of new 
products will continue to require substantial scientific and technical 
effort, time, and expense and significant capital investment.  

In the United States, the federal administration has identified health 
care reform as a priority and introduced legislation that, if enacted, would 
make fundamental changes in the health care delivery system.  In addition, a 
number of reform measures have been proposed by members of Congress.  Many 
state legislatures are also considering health care reform measures.  The 
nature of the changes that may ultimately be enacted and their impact on the 
Company and the pharmaceutical industry are unknown.  However, several of the 
measures currently under discussion, if enacted, could affect the industry 
and the Company by, among other things, increasing pressures on pricing, 
restricting physicians' choice of therapies, raising effective tax rates, and 
reducing incentives to invest in research and development.  Outside the 
United States, governments in several countries, including Germany, Italy, 
and the United Kingdom, are implementing health care cost-control measures 
that may adversely affect pharmaceutical industry revenues.  The Company is 
unable to predict the extent to which its business may be affected by these 
or other future legislative and regulatory developments.

                            RESEARCH AND DEVELOPMENT

The Company's research and development activities are responsible for the 
discovery or development of most of the products offered by the Company 
today.  Its commitment to research and development dates back more than 100 
years.  The growth in research and development expenditures and personnel 
over the past several years demonstrates both the continued vitality of the 
Company's commitment and the increasing costs and complexity of bringing new 
products to the market.  At the end of 1993, approximately 5,600 people, 
including a substantial number who are physicians or scientists holding 
graduate or postgraduate degrees or highly skilled technical personnel, were 
engaged in research and development activities.  The Company expended $766.9 
million on research and development activities in 1991, $924.9 million in 
1992, and $954.6 million in 1993.

The Company's research is concerned primarily with the effects of 
synthetic chemicals and natural products on biological systems.  The 
results of that research are applied to the development of 

                                     -5-

<PAGE>

products for use by or on humans and animals, and for other uses.  Major 
effort is devoted to pharmaceutical products.  In late 1993, the Company 
decided to concentrate its pharmaceutical research and development efforts 
on the search for compounds that will cure or treat diseases in five 
categories:  central nervous system and related diseases; endocrine diseases, 
including diabetes and osteoporosis; infectious diseases; cancer; and 
cardiovascular diseases.  The Company is engaged in biotechnology research 
programs involving recombinant DNA and monoclonal antibodies.  The Company's 
biotechnology research is supplemented through its Hybritech and Pacific 
Biotech subsidiaries, which conduct research using monoclonal-antibody-based 
product technology for diagnosis of certain diseases or medical conditions.

In addition to the research activities carried on in the Company's own 
laboratories, the Company sponsors and underwrites the cost of research and 
development by independent organizations, including educational institutions 
and research-based human health care companies, and contracts with others for 
the performance of research in their facilities.  It utilizes the services of 
physicians, hospitals, medical schools, and other research organizations in 
the United States and numerous other countries to establish through clinical 
evidence the safety and effectiveness of new products.

IVAC, Cardiac Pacemakers, Advanced Cardiovascular Systems, Physio-Control, 
Devices for Vascular Intervention, Origin Medsystems, and Heart Rhythm 
Technologies conduct research and development in the area of medical devices.

Extensive work is also conducted in the animal sciences, including animal 
nutrition and physiology and veterinary medicine.  Certain of the Company's 
research and development activities relating to pharmaceutical products may 
be applicable to animal health products.  An example is the search for agents 
that will cure infectious disease.

                               QUALITY ASSURANCE

The Company's success depends in great measure upon customer confidence in 
the quality of the Company's products and in the integrity of the data that 
support their safety and effectiveness.  The quality of the Company's 
products arises from the total commitment to quality in all parts of the 
Company, including research and development, purchasing, facilities planning, 
manufacturing, and distribution.  Quality-assurance procedures have been 
developed relating to the quality and integrity of the Company's scientific 
information and production processes.  

With respect to pharmaceutical, diagnostic, and animal health products, 
control of production processes involves rigid specifications for 
ingredients, equipment, facilities, manufacturing methods, packaging 
materials, and labeling.  Control tests are made at various stages of 
production processes and on the final product to assure that the product 
meets the Company's standards.  These tests may involve chemical and physical 
chemical analyses, microbiological testing, testing in animals, or a 
combination of these tests.  Additional assurance of quality is provided by a 
corporate quality-assurance group that monitors existing pharmaceutical and 
animal health manufacturing procedures and systems in the parent company, 
subsidiaries, and affiliates.

The quality of medical devices is assured through specifications of 
components and finished products, inspection of certain components, 
certification of certain vendors, control of the manufacturing environment, 
and use of statistical process controls.  Final products are tested to assure 
conformance with specifications.  

                      EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information regarding the executive 
officers of the Company.  All but three of the executive officers have been 
employed by the Company in executive or managerial positions during the last 
five years.  

Randall L. Tobias became Chairman of the Board and Chief Executive Officer 
in June 1993.  He had served as Vice Chairman of the Board of American 
Telephone and Telegraph Company from 1986 until he assumed his present 
position.  He has been a member of the Board of Directors of the Company 
since 1986.  August M. Watanabe joined the Company in 1990 as Vice 

                                -6-


<PAGE>

President of Lilly Research Laboratories.  Previously he had served as 
Chairman of the Department of Medicine at Indiana University School of 
Medicine from 1983 through 1990.  From 1987 until he joined the Company in 
August 1990, Mitchell E. Daniels, Jr., President, North American 
Pharmaceutical Operations, Pharmaceutical Division, served as President 
and Chief Executive Officer of the Hudson Institute and was of counsel to 
Baker & Daniels.  From 1985 to 1987 he served on former President Reagan's 
staff as Assistant to the President for Political and Intergovernmental 
Affairs.  

Except as indicated in the table below, the term of office for each 
executive officer indicated herein expires on the date of the annual meeting 
of the Board of Directors, to be held on April 18, 1994, or on the date his 
successor is chosen and qualified.  No director or executive officer of the 
Company has a "family relationship" with any other director or executive 
officer of the Company, as that term is defined for purposes of this 
disclosure requirement.  There is no understanding between any executive 
officer of the Company and any other person pursuant to which the executive 
officer was selected.


     NAME                      AGE                    OFFICES               

Randall L. Tobias              52    Chairman of the Board and Chief Executive
                                     Officer (since June 1993) and a Director

Mel Perelman, Ph.D.            63    Executive Vice President (since December 
                                     1986) and a Director(1) 

Sidney Taurel                  45    Executive Vice President (since January 
                                     1993) and a Director

Joseph C. Cook, Jr.            52    Group Vice President, Manufacturing, 
                                     Engineering, and Corporate Quality 
                                       (since June 1992)(2)  

James M. Cornelius             50    Vice President, Finance and Chief 
                                     Financial Officer (since January 1983) 
                                     and a Director

Mitchell E. Daniels, Jr.       44    President, North American Pharmaceutical
                                     Operations, Pharmaceutical Division 
                                     (since April 1993)(3) 

Ronald W. Dollens              47    President, Medical Devices and 
                                     Diagnostics Division (since July 1991)(3)

Michael L. Eagle               46    Vice President, Manufacturing (since 
                                     January 1994)(4) 

Brendan P. Fox                 50    President, Elanco Animal Health Division 
                                     (since January 1991)(3)

Pedro P. Granadillo            46    Vice President, Human Resources (since 
                                     April 1993)

J. B. King                     64    Vice President and General Counsel 
                                     (since October 1987)

Stephen A. Stitle              48    Vice President, Corporate Affairs (since 
                                     April 1993) and a Director

W. Leigh Thompson, Ph.D., M.D. 55    Chief Scientific Officer (since January 
                                     1993)(3)

August M. Watanabe, M.D.       52    Vice President (since January 1994) and 
                                     a Director(4)

- --------------------
1  Retired as an officer and director effective December 31, 1993
2  Retired as an officer effective December 31, 1993
3  Serves in office until his successor is appointed
4  Became executive officer January 1994

                                   -7-


<PAGE>

                                   EMPLOYEES

At the end of 1993, the Company had approximately 32,700 employees, 
including approximately 11,000 employees outside the United States.  A 
substantial number of the Company's employees have long records of continuous 
service.  Approximately 2,600 employees, including 1,900 U.S. employees, are 
retiring under voluntary early retirement programs announced in the fourth 
quarter of 1993.

       FINANCIAL INFORMATION RELATING TO FOREIGN AND DOMESTIC OPERATIONS

Financial information relating to foreign and domestic operations, set 
forth in the Company's 1993 Annual Report at pages 18-19 under "Review of 
Operations - Segment Information" (pages 12-13 of Exhibit 13), is incorporated 
herein by reference.

Eli Lilly International Corporation, a subsidiary, coordinates the 
Company's manufacture and sale of products outside the United States.

Local restrictions on the transfer of funds from branches and subsidiaries 
located abroad (including the availability of dollar exchange) have not to 
date been a significant deterrent in the Company's overall operations abroad.  
The Company cannot predict what effect these restrictions or the other risks 
inherent in foreign operations, including possible nationalization, might 
have on its future operations or what other restrictions may be imposed in 
the future.

                             RECENT DEVELOPMENTS

On January 18, 1994, the Company announced its intent to divest itself of 
its medical device and diagnostics ("MDD") businesses.  The final form of 
the divestiture has not been resolved.  It will depend on tax, market, and 
other considerations, including the nature of any offers the Company may 
receive from prospective purchasers of one or more of the businesses.  Current 
plans call for the creation of a new holding company comprising six of the 
businesses and the divestiture of the new company through a spin-off to 
Company shareholders, one or more public offerings of the holding 
company's shares, or a combination of these methods.  These six 
businesses are Advanced Cardiovascular Systems, Cardiac Pacemakers, Devices 
for Vascular Intervention, Heart Rhythm Technologies, IVAC, and Origin 
Medsystems.  The Company currently intends to sell separately the three other 
businesses in the MDD division - Hybritech, Pacific Biotech, and Physio-
Control.  The agreements under which the Company acquired Hybritech, Pacific 
Biotech, and Origin Medsystems include provisions that could affect the 
timing of these transactions.  

On March 8, 1994, the Company announced that it had signed a letter of 
intent with Sphinx Pharmaceuticals Corporation for  the acquisition of Sphinx 
by the Company.  Sphinx is engaged in drug discovery and development by 
generating combinatorial chemistry libraries of small organic molecules and 
by high-throughput screening of compounds for biological activity.  The 
transaction is subject to the signing of a definitive agreement, applicable 
government approval, and approval by Sphinx shareholders.  Three purported 
class actions have been filed by shareholders of Sphinx seeking, among other 
things, to enjoin the transaction.


I
tem 2.     PROPERTIES

The Company's principal domestic and international executive offices are 
located in Indianapolis.  At December 31, 1993, the Company owned 14 
production plants and facilities in the United States and Puerto Rico.  
These plants and facilities contain an aggregate of approximately 12 million 
square feet of floor area.  Most of the plants and facilities involve 
production of both pharmaceutical and animal health products.  The Company 
owns manufacturing, research, and administrative facilities for medical 
devices and diagnostic products, containing an aggregate of approximately 
1.9 million square feet, in seven cities in the United States and Puerto 
Rico.  The Company's Medical Devices and Diagnostics Division leases 
manufacturing, research, and administrative facilities in the United 

                                -8-


<PAGE>

States containing an aggregate of approximately 800,000 square feet.  The 
Company also leases sales offices in a number of cities located in the 
United States.

The Company has 25 production plants and facilities in 19 countries 
outside the United States, containing an aggregate of approximately 3.9 
million square feet of floor space.  Leased production and warehouse 
facilities are utilized in some of these countries as well as in nine other 
countries including Puerto Rico.

The Company's main research and development laboratories in Indianapolis 
and Greenfield, Indiana, consist of approximately 2.8 million square feet.  
Its major research and development facilities abroad are located in 
Belgium and the United Kingdom and contain approximately 435,000 square feet.  
The Company also owns two tracts of land, containing an aggregate of 
approximately 1,700 acres, a portion of which is used for field studies 
of products.

The Company believes that none of its properties is subject to any 
encumbrance, easement, or other restriction that would detract materially 
from its value or impair its use in the operation of the business of the 
Company.  The buildings owned by the Company are of varying ages and in good 
condition.


Item 3.     LEGAL PROCEEDINGS

The Company is currently a defendant in a variety of product and patent 
litigation matters.  In approximately 205 actions, plaintiffs seek to recover 
damages on behalf of children or grandchildren of women who ingested 
diethylstilbestrol during pregnancy.  In another approximately 170 actions, 
plaintiffs seek to recover damages as a result of the ingestion of Prozac.  
In the patent suits, it is asserted that one or more Company products or 
processes infringe issued patents.  The holders of those patents seek 
monetary damages and injunctions against further infringement.  Products 
involved include Humulin, Humatrope, bovine somatotropin and certain medical 
devices.  

A federal grand jury in Baltimore, Maryland is conducting an inquiry into 
the Company's compliance with the Food and Drug Administration's regulatory 
requirements affecting the Company's pharmaceutical manufacturing operations.  
The Company is cooperating fully with the inquiry.

The Company has been named in approximately ten of more than 40 lawsuits 
filed in various federal courts against a number of U.S. pharmaceutical 
manufacturers and in some cases wholesalers.  Most of the suits in which the 
Company is a defendant purport to be class actions on behalf of all retail 
pharmacies in the United States and allege an industry-wide agreement to deny 
favorable pricing on sales to certain retail pharmacies.  At least one also 
alleges price discrimination.  The suits are in an early procedural stage.  

The Company is also a defendant in other litigation, including product 
liability suits, of a character regarded as normal to its business.  

While it is not possible to predict or determine the outcome of the legal 
actions pending against the Company, in the opinion of the Company such 
actions will not ultimately result in any liability that would have a 
material adverse effect on its consolidated financial position.


Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of 1993, no matters were submitted to a vote of 
security holders.

                                   -9-


<PAGE>



                                 PART II


Item 5.     MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER 
            MATTERS

Information relating to the principal market for the Company's common 
stock and related stockholder matters, set forth in the Company's 1993 Annual 
Report under "Review of Operations - Selected Quarterly Data (unaudited)," at 
page 20 (page 14 of Exhibit 13), is incorporated herein by reference.


Item 6.     SELECTED FINANCIAL DATA

Selected financial data for each of the Company's five most recent fiscal 
years, set forth in the Company's 1993 Annual Report under "Review of 
Operations - Selected Financial Data (unaudited)," at page 21 (page 15 of 
Exhibit 13), are incorporated herein by reference.


Item 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND 
            FINANCIAL CONDITION 

Management's discussion and analysis of results of operations and 
financial condition, set forth in the Company's 1993 Annual Report under 
"Review of Operations - Operating Results" (pages 9-13), "Review of 
Operations - Financial Condition" (pages 13 and 16), and "Review of 
Operations - Environmental and Legal Matters" (page 16) (together, pages 
1-7 of Exhibit 13), is incorporated herein by reference.


I
tem 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the Company and its subsidiaries, 
listed in Item 14(a)1 and included in the Company's 1993 Annual Report at 
pages 12, 14, 15, and 17 (Consolidated Statements of Income, Consolidated 
Balance Sheets, and Consolidated Statements of Cash Flows), pages 18-19 
(Segment Information), and pages 22-33 (Notes to Consolidated Financial 
Statements) (together, pages 8-13 and 16-30 of Exhibit 13), and the Report of 
Independent Auditors set forth in the Company's 1993 Annual Report at page 34 
(page 31 of Exhibit 13), are incorporated herein by reference.

Information on quarterly results of operations, set forth in the Company's 
1993 Annual Report under "Review of Operations - Selected Quarterly Data 
(unaudited)," at page 20 (page 14 of Exhibit 13), is incorporated herein by 
reference.


Item 9.     DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


                                 PART III


Item 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information relating to the Company's directors, set forth in the 
Company's Proxy Statement dated March 14, 1994, under "Election of 
Directors - Nominees for Election," at pages 2-5, is incorporated herein by 
reference.  Information relating to the Company's executive officers is set 
forth at pages 6-7 of this Form 10-K under "Executive Officers of the 
Company."  Additional information with respect to the Company's directors 
and certain of its officers, set forth in the Company's Proxy Statement 
dated March 14, 1994, under "Other Matters," at page 25, is incorporated 
herein by reference.  

                                     -10-

<PAGE>



Item 11.     EXECUTIVE COMPENSATION

Information relating to executive compensation, set forth in the Company's 
Proxy Statement dated March 14, 1994, under "Election of Directors - 
Executive Compensation," at pages 9-20, is incorporated herein by reference, 
except that the Compensation and Management Development Committee Report and 
Performance Graph are not so incorporated.


Item 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information relating to ownership of the Company's common stock by persons 
known by the Company to be the beneficial owners of more than 5% of the 
outstanding shares of common stock and by management, set forth in the 
Company's Proxy Statement dated March 14, 1994, under "Election of 
Directors - Common Stock Ownership by Directors and Executive Officers," 
at pages 6-7, and "Election of Directors - Principal Holders of Common 
Stock," at page 8, is incorporated herein by reference.


Item 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.


                                    PART IV


Item 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)1.     Financial Statements

The following consolidated financial statements of the Company and its 
subsidiaries, included in the Company's 1993 Annual Report at the pages 
indicated in parentheses, are incorporated by reference in Item 8:

Consolidated Statements of Income - Years Ended December 31, 1993, 1992, 
and 1991 (page 12) (page 8 of Exhibit 13)

Consolidated Balance Sheets - December 31, 1993 and 1992 (pages 14-15) 
(pages 9-10 of Exhibit 13)

Consolidated Statements of Cash Flows - Years Ended December 31, 1993, 
1992, and 1991 (page 17) (page 11 of Exhibit 13)

Segment Information (pages 18-19) (pages 12-13 of Exhibit 13)

Notes to Consolidated Financial Statements (pages 22-33) (pages 16-30 of 
Exhibit 13)

(a)2.     Financial Statement Schedules

The following consolidated financial statement schedules of the Company 
and its subsidiaries are included in this Form 10-K:

Schedule I     Marketable Securities - Other Investments (page F-1)

Schedule V     Property, Plant, and Equipment (page F-2)

Schedule VI    Accumulated Depreciation, Depletion, and Amortization of 
               Property, Plant, and Equipment (page F-3)

                                   -11-

<PAGE>


Schedule VII   Guarantees of Securities of Other Issuers (page F-4)

Schedule VIII  Valuation and Qualifying Accounts (page F-5)

Schedule IX    Short-Term Borrowings (page F-6)

Schedule X     Supplementary Income Statement Information (page F-7)

All other schedules (Nos. II, III, IV, XI, XII, XIII, and XIV) for which 
provision is made in the applicable accounting regulation of the Securities 
and Exchange Commission are not required under the related instructions, are 
inapplicable, or are adequately explained in the financial statements and, 
therefore, have been omitted.

Financial statements of interests of 50% or less, which are accounted for 
by the equity method, have been omitted because they do not, considered in 
the aggregate as a single subsidiary, constitute a significant subsidiary.


The report of the Company's independent auditors with respect to the 
schedules listed above is contained herein as a part of Exhibit 23, Consent 
of Independent Auditors.  

(a)3.     Exhibits

3.1     Amended Articles of Incorporation 

3.2     By-laws 

4.1     Form of 7% Bond 1984-1994/96 of Eli Lilly Overseas Finance N.V. 

4.2     Form of Guarantee dated as of January 9, 1984, by Eli Lilly and 
        Company to Holders of 7% Bonds 1984-1994/96 of Eli Lilly 
        Overseas Finance N.V. 

4.3     Form of Letter Agreement dated as of January 9, 1984, between 
        Eli Lilly and Company, Eli Lilly Overseas Finance N.V., and 
        Swiss Bank Corporation

4.4     Form of Bond Purchase Agreement dated as of December 3, 1984, 
        including form of Bond, between City of Clinton, Indiana, Eli 
        Lilly and Company, and Chemical Bank*  

4.5     Form of Loan Agreement dated as of December 3, 1984, between Eli 
        Lilly and Company and City of Clinton, Indiana* 

4.6     Form of Bond Purchase Agreement dated as of December 3, 1984, 
        including form of Bond, between Tippecanoe County, Indiana, Eli 
        Lilly and Company, and Chemical Bank* 

4.7     Form of Loan Agreement dated as of December 3, 1984, between Eli 
        Lilly and Company and Tippecanoe County, Indiana* 

4.8     Form of Indenture dated as of May 15, 1985, between Eli Lilly 
        and Company and Merchants National Bank & Trust Company of 
        Indianapolis, as Trustee 

4.9     Form of Eli Lilly and Company Convertible Debenture due 1994 

4.10    Form of Indenture with respect to Contingent Payment Obligation 
        Units dated March 18, 1986, between Eli Lilly and Company and 
        Harris Trust and Savings Bank, as Trustee

- ---------------------
* Exhibits 4.4-4.7 are not filed with this report.  Copies of these
  exhibits will be furnished to the Securities and Exchange Commission
  upon request.

                                  -12-


<PAGE>

4.11    Rights Agreement dated as of July 18, 1988, between Eli Lilly
        and Company and Bank One, Indianapolis, NA

4.12    Form of Indenture dated as of February 21, 1989, between Eli 
        Lilly and Company and Merchants National Bank & Trust Company of 
        Indianapolis, as Trustee

4.13    Form of Eli Lilly and Company Five Year Convertible Note

4.14    Form of Indenture with respect to Debt Securities dated as of 
        February 1, 1991, between Eli Lilly and Company and Citibank, 
        N.A., as Trustee

4.15    Form of Standard Multiple-Series Indenture Provisions dated, 
        and filed with the Securities and Exchange Commission on, 
        February 1, 1991


4.16    Form of Indenture dated as of September 5, 1991, among the Lilly 
        Savings Plan Master Trust Fund C, as Issuer; Eli Lilly and 
        Company, as Guarantor; and Chemical Bank, as Trustee* 

10.1    1984 Lilly Stock Plan, as amended

10.2    1989 Lilly Stock Plan, as amended

10.3    The Lilly Deferred Compensation Plan, as amended

10.4    The Lilly Directors' Deferred Compensation Plan, as amended

10.5    The Lilly Non-Employee Directors' Deferred Stock Plan, as 
        amended

10.6    Eli Lilly and Company Senior Executive Bonus Plan, as amended

10.7    The Lilly Non-Employee Directors' Retirement Plan

10.8    Letter Agreement dated September 3, 1993, between the Company and 
        Vaughn D. Bryson

11.     Computation of Earnings Per Share on Primary and Fully Diluted 
        Bases

12.     Computation of Ratio of Earnings to Fixed Charges

13.     Annual Report to Shareholders for the Year Ended December 31, 
        1993 (portions incorporated by reference into this Form 10-K)

21.     List of Subsidiaries

23.     Consent of Independent Auditors

99.     Report to Holders of Eli Lilly and Company Contingent Payment 
        Obligation Units

(b)  Reports on Form 8-K

The Company filed no Reports on Form 8-K during the fourth quarter of 
1993.  

- -----------------
* Exhibit 4.16 is not filed with this report.  Copies of this exhibit
  will be furnished to the Securities and Exchange Commission upon
  request.

                                     -13-


<PAGE>


                                 SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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/Randall L. Tobias 
                                      (Randall L. Tobias, Chairman of the 
                                       Board and Chief Executive Officer)

                                                  March 21, 1994

     Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on behalf of the 
Registrant and in the capacities and on the dates indicated.

     SIGNATURE                         TITLE                        DATE 


s/Randall L. Tobias                 Chairman of the Board,      March 21, 1994
(RANDALL L. TOBIAS)                 Chief Executive
                                    Officer, and a Director
                                    (principal executive officer)

s/James M. Cornelius                Vice President, Finance,    March 21, 1994
(JAMES M. CORNELIUS)                Chief Financial Officer,
                                    and a Director (principal
                                    financial officer)

s/Keith E. Brauer                   Chief Accounting Officer    March 21, 1994
(KEITH E. BRAUER)                   (principal accounting officer)

s/Steven C. Beering, M.D.           Director                    March 21, 1994
(STEVEN C. BEERING, M.D.)

s/James W. Cozad                    Director                    March 21, 1994
(JAMES W. COZAD)

                                    Director                    March 21, 1994
(KAREN N. HORN, Ph.D.)

s/J. Clayburn La Force, Jr., Ph.D.  Director                    March 21, 1994
(J. CLAYBURN LA FORCE, JR., Ph.D.)

s/Kenneth L. Lay, Ph.D.             Director                    March 21, 1994
(KENNETH L. LAY, Ph.D.)

                                    -14-

<PAGE>

s/Ben F. Love                       Director                    March 21, 1994
(BEN F. LOVE)

s/Stephen A. Stitle                 Director                    March 21, 1994
(STEPHEN A. STITLE)

s/Sidney Taurel                     Director                    March 21, 1994
(SIDNEY TAUREL)

s/August M. Watanabe, M.D.          Director                    March 21, 1994
(AUGUST M. WATANABE, M.D.)

s/Alva O. Way                       Director                    March 21, 1994
(ALVA O. WAY)

s/Richard D. Wood                   Director                    March 21, 1994
(RICHARD D. WOOD)


                                    -15-

<PAGE>


TRADEMARKS

Apralan(Registered) (apramycin sulfate, Elanco)
Axid(Registered) (nizatidine, Lilly)
Ceclor(Registered) (cefaclor, Lilly)
Coban(Registered) (monensin sodium, Elanco)
Compudose(Registered) (estradiol controlled-release implant, 
Elanco)
Darvocet-N(Registered) (propoxyphene napsylate with 
acetaminophen, Lilly)
Dobutrex(Registered) (dobutamine hydrochloride, Lilly)
Eldisine(Registered) (vindesine sulfate, Lilly)
Humatrope(Registered) (somatropin of recombinant DNA origin, 
Lilly)
Humulin(Registered) (human insulin of recombinant DNA origin, 
Lilly)
lletin(Registered) (insulin, Lilly)
Keflex(Registered) (cephalexin, Dista)
Keftab(Registered) (cephalexin hydrochloride, Dista)
Kefurox(Registered) (cefuroxime sodium, Lilly)
Kefzol(Registered) (cefazolin sodium, Lilly)
Lorabid(Trademark) (loracarbef, Lilly)
Mandol(Registered) (cefamandole nafate, Lilly)
Maxiban(Registered) (narasin and nicarbazine, Elanco)
Micotil(Registered) (tilmicosin phosphate, Elanco)
Monteban(Registered) (narasin, Elanco)
Nebcin(Registered) (tobramycin sulfate, Lilly)
Oncovin(Registered) (vincristine sulfate, Lilly)
Prozac(Registered) (fluoxetine hydrochloride, Dista)
Rumensin(Registered) (monensin sodium, Elanco)
Tazidime(Registered) (ceftazidime, Lilly)
Tylan(Registered) (tylosin, Elanco)
Vancocin(Registered) (vancomycin hydrochloride, Lilly)
Velban(Registered) (vinblastine sulfate, Lilly)




                ELI LILLY AND COMPANY AND SUBSIDIARIES
      SCHEDULE I.  MARKETABLE SECURITIES - OTHER INVESTMENTS
                         DECEMBER 31, 1993

   Col. A                 Col. B      Col. C   Col. D     Col. E
   ------                 ------      ------   ------     ---------
                                                          Amount at
                                                          Which Each
                          Number                          Portfolio of
                          of Shares                       Equity
                          or Units-            Market     Security Issues
                          Principal            Value of   and Each Other
                          Amount of   Cost of  Issue at   Security Issue
Name of Issuer            Bonds       Each     Balance    Carried in the
and Title of Issue        and Notes   Issue    Sheet Date  Balance Sheet
- ------------------------------------------------------------------------
                                         (Dollars in millions)

CERTIFICATES OF DEPOSIT, TIME
   DEPOSITS, AND
   INTEREST-BEARING DEMAND
   DEPOSITS               $ 491.8     $ 491.8    $ 492.1       $ 491.8

REPURCHASE AGREEMENTS
   Collateralized by U.S.
   government or U.S.
   government agency
   securities                28.0        28.0       28.0          28.0

   Collateralized by other
   investments               42.3        42.3       42.3          42.3

EQUITY INVESTMENTS AND
  LIMITED PARTNERSHIPS      216.5       216.5      221.3         204.0

EURO COMMERCIAL PAPER
   AND BONDS                390.4       390.4      388.5         386.0

   TOTALS                $1,169.0    $1,169.0   $1,172.2      $1,152.1
                          =======     =======    =======       =======
Classified as:
  Current asset - Cash equivalent                             $  482.9
                - Short-term investments                         447.5

  Noncurrent asset                                               221.7
                                                                 -----
   TOTAL                                                      $1,152.1
                                                               =======

Securities classified as cash equivalents                     $  482.9
Cash                                                              56.7
                                                                 -----
Cash and cash equivalents                                     $  539.6
                                                                 =====


                                     F-1

<PAGE>



                ELI LILLY AND COMPANY AND SUBSIDIARIES

               SCHEDULE V.  PROPERTY, PLANT, AND EQUIPMENT

    Col. A       Col. B     Col. C    Col. D        Col E          Col. F
    ------       ------     ------    ------  -------------------  -------
                                                           Other
               Balance at                                 Changes
               Beginning    (A)              Add (Deduct)  Add     Balance
               of         Additions          Translation  (Deduct) At End
Classification Period     At Cost  Retirements Adjustments Describe of Period

                            (Dollars in millions)

Year Ended
  Dec 31, 1991
   Land        $  102.1     $ 8.8   $    -  $    .6  $        - $   111.5
   Buildings    1,141.3     228.0      9.2     (2.3)          -   1,357.8
   Equipment    2,376.9     500.2     76.2     (5.6)          -   2,795.3
   Construction-
     in-progress  895.5     405.4        -      3.1           -   1,304.0
                 ------     -----     -----    -----              -------
       TOTALS  $4,515.8 $1, 142.4   $ 85.4  $  (4.2) $        - $ 5,568.6
                =======  ========     ====      ====              =======
Year Ended
  Dec 31, 1992
   Land        $  111.5  $   3.1    $ 0.3  $  (0.4)  $ (1.1)(B) $  112.8
   Buildings    1,357.8    371.6     30.8    (30.4)   (12.8)(B)  1,655.4
   Equipment    2,795.3    756.5    126.6    (83.6)     2.7 (B)  3,344.3
   Construction-
    in-progress 1,304.0   (218.3)       -    (16.9)   (33.2)(B)  1,035.6
                -------   ------   -----   -------   ------      -------
TOTALS        $5,568.6  $ 912.9   $157.7  $(131.3)  $(44.4)(B) $ 6,148.1
               =======    =====    =====   =======    =====      =======
Year Ended
  Dec 31, 1993
   Land        $  112.8   $ 15.4   $  0.1  $   0.2   $  1.9 (B) $  130.2
   Buildings    1,655.4    312.3     10.4    (14.7)    14.7 (B)  1,957.3
   Equipment    3,344.3    563.3     60.9    (39.6)   (35.4)(B)  3,771.7
   Construction-
    in-progress 1,035.6   (257.5)       -    (14.5)   (56.3)(B)    707.3
                -------    -----     ----    ------   ------     -------     
        TOTALS $6,148.1   $633.5   $ 71.4  $ (68.6)  $(75.1)(B) $6,566.5
                =======    =====     ====    ======   ======     =======

- -----------------
NOTE A   Additions represent cash expenditures for projects in numerous
locations both inside and outside the United States.  In 1992 and 1993
there were no major projects for which cash expenditures exceeded 2% of
total assets at either the beginning or the end of the year.  In 1991
the 2% threshold was exceeded by one major project relating to an anticipated
new product launch.  Expenditures for this project were primarily for
additions at Indiana locations.

NOTE B   Amounts shown are attributable to corporate restructuring,
acquisitions, divestitures and miscellaneous reclassifications.

The range of annual rates used in computing provisions for depreciation was 2
percent to 10 percent for buildings and generally 4 percent to 25 percent for
equipment.

                                         F-2

<PAGE>


                ELI LILLY AND COMPANY AND SUBSIDIARIES

   SCHEDULE VI.  ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION
                      OF PROPERTY, PLANT, AND EQUIPMENT


    Col. A   Col. B     Col. C    Col. D        Col E               Col. F
    ------   ------     ------    ------    --------------------    ------
                                                           Other
             Balance at Additions                          Changes
             Beginning  Charged to            Add (Deduct) Add       Balance
             of         Costs and             Translation  (Deduct)  At End
Description  Period     Expenses  Retirements Adjustments  Describe  of Period
- ----------------------------------------------------------------------------
                            (Dollars in millions)



Year Ended
  Dec 31, 1991
  Buildings   $  377.1   $ 48.9   $ 6.3        $. 1    $   -      $ 419.8
  Equipment    1,202.0    218.5    52.5        (1.7)       -      1,366.3
               -------    -----    ----       ------     -----    -------
     TOTALS   $1,579.1   $267.4   $58.8      $( 1.6)   $   -     $1,786.1
               =======   ======    ====       =====      =====    =======
Year Ended
  Dec 31, 1992
  Buildings   $  419.8   $ 62.3  $ 21.3      $ (8.4)   $ 32.2(A) $  484.6
  Equipment    1,366.3    268.3    97.6       (40.4)     94.8(A)  1,591.4
               -------    -----   -----        -----    -----     -------
     TOTALS   $1,786.1   $330.6  $118.9      $(48.8)   $127.0(A) $2,076.0
               =======    =====   =====       ======    =====     =======
Year Ended
  Dec 31, 1993
  Buildings   $  484.6   $ 74.1   $ 4.9      $ (4.6)   $  9.2(A) $  558.4
  Equipment    1,591.4    294.5    58.9       (20.1)      1.0(A)  1,807.9
               -------    -----   -----       ------      ----    -------
   TOTALS     $2,076.0   $368.6   $63.8      $(24.7)   $ 10.2(A) $2,366.3
               =======    =====    ====       ======     ====     =======

NOTE A - Amounts shown are primarily attributable to corporate
         restructuring, divestitures and transfers between accounts.


                                   F-3



<PAGE>

               ELI LILLY AND COMPANY AND SUBSIDIARIES

        SCHEDULE VII.  GUARANTEES OF SECURITIES OF OTHER ISSUERS


   Col. A   Col. B     Col. C     Col. D      Col. E     Col. F     Col. G
   ------   ------     ------     ------      ------     ------  -----------
                                                                   Nature of
                                                                   any default
                                                                   by issuer of
                                                                   securities
                                                                   guaranteed
                                                                   in principal
Name of                                                            interest,
Issuer of                                                          sinking fund
securities Title of               Amount owned                     or
guaranteed Issue      Total       by person   Amount in            redemption
by person  of each    amount      or persons  treasury of          provisions,
for which class of    guaranteed  for which   issuer of            or
statement securities  and         statement   securities Nature of payments of
is filed  guaranteed  outstanding is filed    guaranteed guarantee dividends


- ----------------------------------------------------------------------------

The          Harding St.
Indianapolis Project                                   Debt
Local Public Bonds   $35,451,123   -0-                 Service      None
Improvement
Bond Bank

                                      F-4


<PAGE>


                  ELI LILLY AND COMPANY AND SUBSIDIARIES

            SCHEDULE VIII.  VALUATION AND QUALIFYING ACCOUNTS



      Col. A    Col. B       Col. C                    Col. D     Col.E
      ------    ------       ------                    -------     ------
                            Additions
                              (1)         (2)
                 Balance at Charged to Charged to                 Balance
                 Beginning  Costs and  Other Accounts-Deductions- at End
    Description  of Period  Expenses   Describe       Describe    of Period
- ----------------------------------------------------------------------------
                             (Dollars in millions)

                                 (A)       (A)           (A)

Year Ended
December 31, 1991
Allowance for
cash discounts
and returns        $ 6.2                                         $ 6.6
Allowance for
doubtful accounts   17.1                                          21.0
                    ----                                          ----
  TOTALS           $23.3                                         $27.6
                    ====                                          ====
Year Ended
December 31, 1992
Allowance for
cash discounts
and returns       $ 6.6                                          $ 8.1
Allowance for
doubtful accounts  21.0                                           26.9
                   ----                                           ----
      TOTALS      $27.6                                          $35.0
                   ====                                           ====
Year Ended
December 31, 1993
Allowance for
cash discounts
and returns      $ 8.1                                          $ 8.6
Allowance for
doubtful accounts 26.9                                           23.7
                  ----                                           ----
  TOTALS         $35.0                                          $32.3
                  ====                                           ====
NOTE A -   The information called for under columns C and D is not
given, as the additions, deductions, and balances are not
individually significant.

                                     F-5


<PAGE>

                    ELI LILLY AND COMPANY AND SUBSIDIARIES

                    SCHEDULE IX.  SHORT-TERM BORROWINGS


       Col. A          Col. B    Col. C    Col. D      Col. E    Col.F
       ------          ------    ------    ------      ------    --------
                                                                  Weighted
                                                      Average     Average
                                         Maximum      Amount      Interest
                       Balance Weighted  Amount       Outstanding Rate
                       at      Average   Outstanding  During      During
Category of Aggregate  End of  Interest  During the   the         the
Short-Term Borrowings  Period  Rate      Period       Period(C)   Period(D)
- ---------------------------------------------------------------------------
                            (Dollars in millions)

Year Ended
December 31, 1991
 Payable to banks (A)  $315.0   6%      $ 324.4      $ 188.5        7%
 Commercial paper (B)   375.2   5%      1,160.6        482.7        6%
                        -----
 Short-term
   borrowings          $690.2   6%


Year Ended
December 31, 1992
 Payable to banks (A)  $174.9   6%       $350.4      $ 287.3        7%
 Commercial paper (B)   416.3   3%        837.2        541.6        4%
                        -----
 Short-term
   borrowings          $591.2   4%

Year Ended
December 31, 1993
 Payable to banks (A)  $178.4   7%       $195.2       $114.7        9%
 Commercial paper (B)   346.4   3%        877.6        434.7        3%
                        -----
 Short-term
  borrowings           $524.8   4%

- -----------------------

NOTE A -   Amounts payable to banks represent worldwide borrowings
           under lines-of-credit and the current portion of long-
           term debt.

NOTE B -   Commercial paper is issued in the United States for
           periods up to 270 days.

NOTE C -   Average of daily balances.

NOTE D -   Total interest divided by average borrowings
           outstanding.


                                   F-6

<PAGE>



                 ELI LILLY AND COMPANY AND SUBSIDIARIES

          SCHEDULE X.  SUPPLEMENTARY INCOME STATEMENT INFORMATION

- ---------------------------------------------------------------------------
             Col. A                         Col. B
             -------                   --------------------------------
               Item                    Charged to Costs and Expenses
                                          Year Ended December 31
                                       -------------------------------
                                              1993   1992   1991
                                       -------------------------------
                                            (Dollars in millions)


Maintenance and repairs                    $178.8   $193.4   $178.7

Taxes, other than payroll and income         77.7     77.4     57.3

Advertising costs                            29.6     24.3     21.0

Royalty expense                             107.2     87.0     79.4

Amounts for depreciation and amortization of intangible assets
are presented in the Statements of Cash Flows.






                                      F-7


INDEX TO EXHIBITS

     The following documents are filed as part of this report:


Exhibit                                   Location
- -------                                   --------

                                    
3.1     Amended Articles of               Incorporated by reference
        Incorporation                     from Exhibit 3(i) to the
                                          Company's Registration
                                          Statement on Form S-8,
                                          Registration No. 33-50783
                                                                     
3.2     By-laws                           Filed herewith
                                     
                                     
4.1     Form of 7% Bond 1984-1994/96      Incorporated by reference
        of Eli Lily Overseas Finance      from Exhibit 4.1 to the
        N.V.                              Company's Report on Form
                                          10-K for the fiscal year
                                          ended December 31, 1990
                                     
4.2     Form of Guarantee dated as        Incorporated by reference
        of January 9, 1984, by Eli        from Exhibit 4.2 to the
        Lilly and Company to Holders      Company's Report on Form
        of 7% Bonds 1984-1994/96 of       10-K for the fiscal year
        Eli Lilly Overseas Finance        ended December 31, 1990
        N.V.                         
                                     
4.3     Form of Letter Agreement          Incorporated by reference
        dated as of January 9, 1984,      from Exhibit 4.3 to the
        between Eli Lilly and             Company's Report on Form
        Company, Eli Lilly Overseas       10-K for the fiscal year
        Finance N.V., and Swiss Bank      ended December 31, 1990
        Corporation
        
4.4     Form of Bond Purchase             *
        Agreement dated as of
        December 3, 1984, including
        form of Bond, between City
        of Clinton, Indiana, Eli
        Lilly and Company, and
        Chemical Bank
        
4.5     Form of Loan Agreement dated      *
        as of December 3, 1984,
        between Eli Lilly and
        Company and City of Clinton,
        Indiana
        
4.6     Form of Bond Purchase             *
        Agreement dated as of
        December 3, 1984, including
        form of Bond, between
        Tippecanoe County, Indiana,
        Eli Lilly and Company, and
        Chemical Bank
                                            
4.7     Form of Loan Agreement dated      *
        as of December 3, 1984,
        between Eli Lilly and
        Company and Tippecanoe
        County, Indiana

- ------------------
* Exhibits 4.4-4.7 are not filed with this report.  Copies of these exhibits
  will be furnished to the Securities and Exchange Commission upon request.

        

4.8     Form of Indenture dated as        Incorporated by reference
        of May 15, 1985, between Eli      from Exhibit 4(a) to the
        Lilly and Company and             Company's Registration
        Merchants National Bank &         Statement on Form S-15,
        Trust Company of                  Registration No. 2-96799
        Indianapolis, as Trustee     
                                     
4.9     Form of Eli Lilly and             Incorporated by reference
        Company Convertible               from Exhibit 4(b) to the
        Debenture due 1994                Company's Registration
                                          Statement on Form S-15,
                                          Registration No. 2-96799
                                     
4.10    Form of Indenture with            Incorporated by reference
        respect to Contingent             from Exhibit 4.3 to the
        Payment Obligation Units          Company's Registration
        dated March 18, 1986,             Statement on Form S-4,
        between Eli Lilly and             Registration No. 33-3330
        Company and Harris Trust and
        Savings Bank, as Trustee
        
4.11    Rights Agreement dated as of      Filed herewith
        July 18, 1988, between Eli   
        Lilly and Company and Bank
        One, Indianapolis, N.A.
        
4.12    Form of Indenture dated as        Incorporated by reference
        of February 21, 1989,             from Exhibit 4.16 to the
        between Eli Lilly and             Company's Report on Form
        Company and Merchants             10-K for the fiscal year
        National Bank & Trust             ended December 31, 1988
        Company of Indianapolis, as
        Trustee
        
4.13    Form of Eli Lilly and             Incorporated by reference
        Company Five Year                 from Exhibit 4.17 to the
        Convertible Note                  Company's Report on Form
                                          10-K for the fiscal year
                                          ended December 31, 1988
                                     
4.14    Form of Indenture with            Incorporated by reference
        respect to Debt Securities        from Exhibit 4.1 to the
        dated as of February 1,           Company's Registration
        1991, between Eli Lilly and       Statement on Form S-3,
        Company and Citibank, N.A.,       Registration No. 33-38347
        as Trustee
        
                                    
4.15    Form of Standard Multiple-        Incorporated by reference
        Series Indenture Provisions       from Exhibit 4.2 to the
        dated, and filed with the         Company's Registration
        Securities and Exchange           Statement on Form S-3,
        Commission on, February 1,        Registration No. 33-38347
        1991
        
4.16    Form of Indenture dated as        *
        of September 5, 1991, among
        the Lilly Savings Plan
        Master Trust Fund C, as
        Issuer; Eli Lilly and
        Company, as Guarantor; and
        Chemical Bank, as Trustee

- ---------------------
* Exhibit 4.16 is not filed with this report.  Copies of this exhibit
  will be furnished to the Securities and Exchange Commission upon request.

        
10.1    1984 Lilly Stock Plan, as         Incorporated by reference
        amended                           from Exhibit 10.2 to the
                                          Company's Report on Form
                                          10-K for the fiscal year
                                          ended December 31, 1988

10.2    1989 Lilly Stock Plan, as         Filed herewith
        amended                      

10.3    The Lilly Deferred                Incorporated by reference
        Compensation Plan, as             from Exhibit 10.4 to the
        amended                           Company's Report on Form
                                          10-K for the fiscal year
                                          ended December 31, 1991
                                     
10.4    The Lilly Directors'              Incorporated by reference
        Deferred Compensation Plan,       from Exhibit 10.5 to the
        as amended                        Company's Report on Form
                                          10-K for the fiscal year
                                          ended December 31, 1991
                                     
10.5    The Lilly Non-Employee            Incorporated by reference
        Directors' Deferred Stock         from Exhibit 10.6 to the
        Plan, as amended                  Company's Report on Form
                                          10-K for the fiscal year
                                          ended December 31, 1991
                                     
10.6    Eli Lilly and Company Senior      Filed herewith
        Executive Bonus Plan, as     
        amended                      

10.7    The Lilly Non-Employee            Incorporated by reference
        Directors' Retirement Plan        from Exhibit 10.7 to the
                                          Company's Report on Form
                                          10-K for the fiscal year
                                          ended December 31, 1988
                                                                         
10.8    Letter Agreement dated            Filed herewith
        September 3, 1993, between
        the Company and Vaughn D.
        Bryson
        
11.     Computation of Earnings Per       Filed herewith
        Share on Primary and Fully
        Diluted Bases
        
12.     Computation of Ratio of           Filed herewith
        Earnings to Fixed Charges
        

13.     Annual Report to                  Filed herewith
        Shareholders for the Year
        Ended December 31, 1993
        (portions incorporated by
        reference in this Form 10-K)
        
21.     List of Subsidiaries              Filed herewith
        
23.     Consent of Independent            Filed herewith
        Auditors                     

99.     Report to Holders of Eli          Filed herewith
        Lilly and Company Contingent
        Payment Obligation Units






                              
                              
                              
                              
                           ELI LILLY AND COMPANY
                              
                              
                              
                              
                              
                              
                              
                              

                                 BY-LAWS
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                             As Amended through
                              
                            December 20, 1993
                              
                              

<PAGE>
                      ELI LILLY AND COMPANY

                              BY-LAWS
                              
                              INDEX
                              
                            ARTICLE I

                         The Shareholders
                              
                                                            
                                                         Page

Section 1.0. Annual Meetings..............................1
Section 1.1. Special Meetings.............................1
Section 1.2. Time and Place of Meetings...................1
Section 1.3. Notice of Meetings...........................1
Section 1.4. Quorum.......................................1
Section 1.5. Voting.......................................1
Section 1.6. Voting Lists.................................2
Section 1.7. Fixing of Record Date........................2


                         ARTICLE II
                              
                     Board of Directors

Section 2.0. General Powers...............................2
Section 2.1. Number and Qualifications....................2
Section 2.2. Classes of Directors and Terms...............3
Section 2.3. Election of Directors........................3
Section 2.4. Meetings of Directors........................3
             a. Annual Meetings...........................3
             b. Regular Meetings..........................3
             c. Special Meetings..........................3
Section 2.5. Quorum and Manner of Acting..................4
Section 2.6  Resignations.................................4
Section 2.7. Removal of Directors ........................4
Section 2.8. Action without a Meeting ....................4
Section 2.9. Attendance and Failure to Object.............4
Section 2.10.Special Standing Committees..................5
Section 2.11.Appointment of Auditors......................5
Section 2.12.Transactions with Corporation................5
Section 2.13.Compensation of Directors....................5

                        ARTICLE III
                              
                          Officers

Section 3.0. Officers, General Authority and Duties.......6
Section 3.1. Election, Term of Office, Qualifications   ..6
Section 3.2. Other Officers, Election or Appointment......6
Section 3.3. Resignation..................................6
Section 3.4. Removal......................................7

Section 3.5. Vacancies....................................7
Section 3.6. Honorary Chairman of the Board of Directors..7
Section 3.7. Chairman of the Board of Directors...........7
Section 3.8. President....................................7
Section 3.9  Executive Vice Presidents....................7
Section 3.10 Group Vice Presidents........................7
Section 3.11 Vice Presidents..............................7
Section 3.12 Secretary....................................7
Section 3.13.Assistant Secretaries........................8
Section 3.14.Chief Financial Officer......................8
Section 3.15.Treasurer....................................8
Section 3.16.Assistant Treasurers.........................9
Section 3.17.Chief Accounting Officer.....................9
Section 3.18.General Counsel..............................9
Section 3.19.Other Officers or Agents.....................9
Section 3.20.Compensation.................................9
Section 3.21.Surety Bonds.................................10

                              
                         ARTICLE IV
                              
            Execution of Instruments and Deposit
                     of Corporate Funds

Section 4.0. Execution of Instruments Generally...........10
Section 4.1. Notes, Checks, Other Instruments ............10
Section 4.2. Proxies......................................10

                              
                         ARTICLE V
                              
                           Shares
                              

Section 5.0. Certificates for Shares .....................10
Section 5.1. Transfer of Shares ..........................11
Section 5.2. Regulations..................................11
Section 5.3. Transfer Agents and Registrars...............11
Section 5.4. Lost or Destroyed Certificates...............11
Section 5.5. Redemption of Shares Acquired in Control Share
     Acquisitions.........................................11


                         ARTICLE VI
                              
                       Miscellaneous

Section 6.0. Corporate Seal...............................12
Section 6.1. Fiscal Year..................................12
Section 6.2. Amendment of By-laws.........................12





<PAGE>                 


                             BY-LAWS

                               of

                      ELI LILLY AND COMPANY

                    (An Indiana Corporation)
                                
                                
                            ARTICLE I
                                
                        The Shareholders
     
     SECTION 1.0.   Annual  Meetings.   The annual meeting of the
shareholders of the Corporation for the election of directors and
for the  transaction of  such other business as properly may come
before the  meeting shall be held on the third Monday in April in
each year,  if not  a legal holiday, or, if a legal holiday, then
on the next succeeding day not a legal holiday.
     
     
     SECTION 1.1.   Special  Meetings.   Special meetings  of the
shareholders may be called at any time by the Board of Directors,
the Chairman of the Board of Directors, or the President.
     
     
     SECTION 1.2.   Time  and Place of Meetings.  Each meeting of
the shareholders  shall be  held at  such time  of day and place,
either within  or without  the State  of  Indiana,  as  shall  be
determined by  the Board  of Directors. Each adjourned meeting of
the shareholders  shall be  held at such time and place as may be
provided in the motion for adjournment.
     
     
     SECTION 1.3.  Notice of Meetings.  The Secretary shall cause
a written  or printed  notice of  the place, day and hour and the
purpose or  purposes of  each meeting  of the  shareholders to be
delivered or  mailed at  least ten  (10) but  not more than sixty
(60) days  prior to  the meeting,  to each  shareholder of record
entitled to  vote at the meeting, at the shareholder's post office
address as  the same  appears on  the records  maintained by  the
Corporation. Notice  of any  such  shareholders  meeting  may  be
waived by  any shareholder  by delivering a written waiver to the
Secretary before or after such meeting. Attendance at any meeting
in person  or by proxy when the instrument of proxy sets forth in
reasonable detail  the purpose  or purposes for which the meeting
is called,  shall constitute  a waiver of notice thereof.  Notice
of any  adjourned meeting  of the shareholders of the Corporation
shall not  be required  to be  given unless otherwise required by
statute.

     
     SECTION 1.4.   Quorum.  At any meeting of the shareholders a
majority of  the outstanding  shares entitled to vote on a matter
at such  meeting,  represented  in  person  or  by  proxy,  shall
constitute a quorum for action on that matter.  In the absence of
a quorum,  the holders  of a  majority of  the shares entitled to
vote present  in person  or  by  proxy,  or,  if  no  shareholder
entitled to  vote is  present in  person or by proxy, any officer
entitled to  preside at  or act as Secretary of such meeting, may
adjourn such  meeting from  time to time, until a quorum shall be
present. At  any such  adjourned meeting at which a quorum may be
present any  business may  be transacted  which might  have  been
transacted at the meeting as originally called.
     
     
     SECTION 1.5.   Voting.   Except  as  otherwise  provided  by
statute or  by the  Articles of Incorporation, at each meeting of
the shareholders  each holder  of shares  entitled to  vote shall
have the  right to  one vote  for  each  share  standing  in  the
shareholder's name  on the  books of the Corporation on the record
date fixed  for the  meeting under  Section 1.7. Each shareholder
entitled to  vote shall be entitled to vote in person or by proxy
executed in  writing (which  shall include telegraphing, cabling,
or  facsimile   transmission)  by   the  shareholder  or  a  duly
authorized attorney  in fact.  The vote of shareholders approving
any matter  to which  the provisions  of Article  9(c) or 9(d) or
Article 13  of the Articles of Incorporation or of  a statute  are 
applicable  shall  require  the percentage of  affirmative  vote 
therein  specified.  All  other matters, except the election of 
directors, shall require that the votes cast  in favor of the matter 
exceed the votes cast opposing the matter  at a  meeting at  which 
a  quorum is  present. In the event that more than one group of 
shares is entitled to vote as a separate voting group, the vote of 
each group shall be considered and decided separately.
     
     
     SECTION 1.6. Voting Lists. The Secretary shall make or cause
to be made, after a record date for a meeting of shareholders has
been fixed  under Section  1.7 and  at least five (5) days before
such meeting,  a complete  list of  the shareholders  entitled to
vote at  such meeting,  arranged in  alphabetical order, with the
address of  each such  shareholder and  the number  of shares  so
entitled to  vote held by each which list shall be on file at the
principal office  of the Corporation and subject to inspection by
any shareholder  entitled to vote at the meeting. Such list shall
be produced  and kept  open at  the time and place of the meeting
and subject  to the inspection of any such shareholder during the
holding of  such meeting  or any adjournment. Except as otherwise
required by  law, such  list shall be the only evidence as to who
are the  shareholders entitled  to vote  at any  meeting  of  the
shareholders.  In the event that more than one group of shares is
entitled to vote as a separate voting group at the meeting, there
shall be a separate listing of the shareholders of each group.
     

     SECTION 1.7.  Fixing of  Record Date.  For  the  purpose  of
determining shareholders  entitled to notice of or to vote at any
meeting of  shareholders or  any adjournment thereof, or entitled
to receive  payment of  any dividend,  or  in  order  to  make  a
determination of  shareholders for  any other proper purpose, the
Board of Directors shall fix in advance a date as the record date
for any such determination of shareholders, not more than seventy
(70) days  prior to  the date  on  which  the  particular  action
requiring this determination of shareholders is to be taken. When
a determination  of shareholders  entitled to vote at any meeting
of shareholders  has been  made as  provided in this section, the
determination shall, to the extent permitted by law, apply to any
adjournment thereof.
     
     
                           ARTICLE II
                                
                       Board of Directors
     
     SECTION 2.0.  General  Powers.  The  property,  affairs  and
business of  the Corporation shall be managed under the direction
of the Board of Directors.
     
     
     SECTION  2.1.  Number  and  Qualifications.  The  number  of
directors which  shall constitute  the whole  Board of  Directors
shall be  sixteen (16),  which number  may be either increased or
diminished by  resolution adopted  by not less than a majority of
the directors then in office; provided that the number may not be
diminished below  nine (9)  and no reduction in number shall have
the effect  of shortening  the term of any incumbent director. In
the event  that the  holders of  shares of preferred stock become
entitled to  elect two directors, the number of directors and the
minimum number  of directors  shall be increased by two.  Neither
ownership of  stock of the Corporation nor residence in the State
of Indiana shall be required as a qualification for a director.
     
     SECTION 2.2.  Classes of Directors and Terms.  The directors
shall be  divided into three classes as nearly equal in number as
possible. Except  as provided  in Article  9 of  the Articles  of
Incorporation fixing  one, two,  and three  year  terms  for  the
initial classified  board,  each  class  of  directors  shall  be
elected for  a term  of three (3) years. In the event of vacancy,
either by  death, resignation,  or removal  of a  director, or by
reason  of   an  increase   in  the  number  of  directors,  each
replacement or  new director  shall serve  for the balance of the
term of  the class  of the director he or she succeeds or, in the
event of  an increase in the number of directors, of the class to
which he  or she  is assigned.  All directors  elected for a term
shall continue  in office until the election and qualification of
their respective  successors, their  death, their  resignation in
accordance with  Section 2.6,  their removal  in accordance  with
Section 2.7,  or if  there has  been a reduction in the number of
directors and no successor is to be elected, until the end of the
term.
     
     Directors elected  by preferred  shareholders  voting  as  a
class shall  not be  members of  any of the foregoing classes and
shall hold office until the next annual meeting of shareholders.
     
     
     SECTION 2.3.  Election of  Directors. At each annual meeting
of shareholders,  the class  of directors  to be  elected at  the
meeting shall  be chosen  by a plurality of the votes cast by the
holders of  shares entitled  to  vote  in  the  election  at  the
meeting, provided  a quorum is present. The election of directors
by the shareholders shall be by written ballot if directed by the
chairman of  the meeting or if the number of nominees exceeds the
number of directors to be elected.
     
     Any vacancy on the Board of Directors shall be filled by the
affirmative vote of a majority of the remaining directors.
     
     If the  holders of preferred stock are entitled to elect two
directors, those directors shall be elected by a plurality of the
votes cast  by the  holders of shares of preferred stock entitled
to vote  in the  election at  the meeting,  provided a  quorum is
present, voting separately as a class.
     
     
     SECTION 2.4. Meetings of Directors.
     
     a.   Annual Meeting. Unless otherwise provided by resolution
of the  Board of  Directors, the  annual meeting  of the Board of
Directors shall be held at the place of and immediately following
the  annual   meeting  of   shareholders,  for   the  purpose  of
organization, the  election of  officers and  the transaction  of
such other  business as  properly may come before the meeting. No
notice of  the meeting  need be  given, except  in  the  case  an
amendment to the By-laws is to be considered.
     
     b.   Regular Meetings.  The Board of Directors by resolution
may provide  for the  holding of regular meetings and may fix the
times and  places (within  or outside  the State  of Indiana)  at
which those  meetings shall  be held.  Notice of regular meetings
need not  be given  except when an amendment to the By-laws is to
be considered.  Whenever the  time or  place of  regular meetings
shall be  fixed or changed, notice of this action shall be mailed
promptly to  each director not present when the action was taken,
addressed to  the director at his or her residence or usual place
of business.
     
     c.   Special Meetings.   Special  meetings of  the Board  of
Directors may  be called  by the  Chairman of  the Board  or  the
President and  shall be called by the Secretary at the request of
any three (3) directors. Except as otherwise required by statute,
notice of  each special  meeting shall be mailed to each director
at his or her residence or usual place of business at least three
(3) days  before the  day on  which the meeting is to be held, or
shall be  sent  to  the  director  at  such  place  by  telegram,
facsimile transmission,  or cable,  or telephoned  or  personally
delivered, not  later than  the day  before the  day on which the
meeting is  to be held. The notice shall state the time and place
(which may  be within  or outside  the State  of Indiana)  of the
meeting but,  unless otherwise  required by statute, the Articles
of Incorporation  or the  By-laws, need  not state  the  purposes
thereof.
     
     Notice of  any meeting  need not  be given  to any director,
however, who  shall attend the meeting, or who shall waive notice
thereof, before,  at the  time of,  or after  the meeting,  in  a
writing signed  by the director and delivered to the Corporation.
No notice  need be  given of any meeting at which every member of
the Board of Directors shall be present.
     
     
     SECTION 2.5.  Quorum and Manner of Acting. A majority of the
actual number  of directors  established pursuant to Section 2.1,
from time  to time, shall be necessary to constitute a quorum for
the transaction  of any  business except the filling of vacancies
on the  Board of  Directors under  Section 2.3  or  voting  on  a
conflict of  interest transaction under Section 2.12.  The act of
a majority  of the  directors present  at a  meeting at  which  a
quorum is  present, shall  be the  act of the Board of Directors,
unless the act of a greater number is required by statute, by the
Articles  of  Incorporation,  or  by  the  By-laws.    Under  the
provisions of  Article  13  of  the  Articles  of  Incorporation,
certain actions  by the  Board  of  Directors  therein  specified
require not  only approval  by the  Board of  Directors, but also
approval by  a majority  of the  Continuing Directors, as therein
defined. Any or all directors may participate in a meeting of the
Board of  Directors by means of a conference telephone or similar
communications equipment  by which  all persons  participating in
the meeting may simultaneously hear each other, and participation
in this  manner  shall  constitute  presence  in  person  at  the
meeting.  In the absence of a quorum, a majority of the directors
present may  adjourn the meeting from time to time until a quorum
shall be  present.   No notice  of any  adjourned meeting need be
given.
     
     
     SECTION 2.6.  Resignations. Any  director may  resign at any
time by  giving written  notice of  resignation to  the Board  of
Directors, the  Chairman of  the Board,  the  President,  or  the
Secretary.  Unless otherwise specified in the written notice, the
resignation shall take effect upon receipt thereof.
     
     
     SECTION 2.7.  Removal of Directors. Any director, other than
a director  elected by  holders of  preferred stock  voting as  a
class, may  be removed from office at any time but only for cause
and only  upon the  affirmative vote of at least 80% of the votes
entitled to  be cast  by holders of all of the outstanding shares
of Voting  Stock (as  defined in  Article 13  of the  Articles of
Incorporation), voting together as a single class.
     
     
     SECTION 2.8.  Action without a Meeting. Any action required
or permitted to be taken at any meeting of the Board of Directors
or of  any committee  thereof may  be taken without a meeting, if
taken by all members of the Board of Directors or such committee,
as the  case may be, evidenced by a written consent signed by all
such  members   and  effective  on  the  date,  either  prior  or
subsequent to  the date  of the consent, specified in the written
consent, or  if no  effective date  is specified  in the  written
consent, the  date on which the consent is filed with the minutes
of proceedings of the Board of Directors or committee.
     
     
     SECTION 2.9.  Attendance and  Failure to Object. A director,
who is  present at  a meeting of the Board of Directors, at which
action on  any corporate  matter is  taken, shall  be presumed to
have assented  to the  action taken,  unless  (a)  the  director's
dissent shall  be entered  in the minutes of the meeting, (b) the
director shall  file a  written dissent  to such  action with the
Secretary of  the meeting  before adjournment thereof, or (c) the
director shall  forward such  dissent by  registered mail  to the
Secretary immediately after adjournment of the meeting. The right
of dissent  provided for  by the  preceding sentence shall not be
available, in respect of any matter acted upon at any meeting, to
a director who voted in favor of such action.
     
     
     SECTION 2.10.  Special Standing  Committees.  The  Board  of
Directors, by  resolution adopted  by a  majority of  the  actual
number of  directors elected  and qualified,  may designate  from
among its  members  one or more committees. Such committees shall
have those  powers of  the Board of Directors which may by law be
delegated to  such committees  and are specified by resolution of
the Board of Directors.
     
     
     SECTION  2.11.   Appointment  of   Auditors.  The  Board  of
Directors, prior  to each  annual meeting  of shareholders, shall
appoint a  firm of  independent public accountants as auditors of
the Corporation.  Such appointment  shall  be  submitted  to  the
shareholders  for   ratification  at   the  annual  meeting  next
following such  appointment. Should  the holders of a majority of
the outstanding  shares entitled  to  vote  fail  to  ratify  the
appointment of any firm as auditors of the Corporation, or should
the Board  of Directors  for any  reason determine  that any such
appointment be  terminated, the  Board of Directors shall appoint
another firm of independent public accountants to act as auditors
of the Corporation and such appointment shall be submitted to the
shareholders  for   ratification  at   the  annual   or   special
shareholders meeting next following such appointment.
     
     
     SECTION 2.12. Transactions with Corporation.  No transaction
with the  Corporation in which one or more of its directors has a
direct or  indirect interest  shall be  either void  or  voidable
because of  such interest  or because  such director or directors
are present  at the  meeting of  the  Board  of  Directors  or  a
committee thereof  which authorizes,  approves or  ratifies  such
transaction or  because the  votes of  such director or directors
are counted for such purposes, if:
     
     (a) the material facts of the transaction and the director's
interest are  disclosed or  known to  the Board  of Directors  or
committee which authorizes, approves, or ratifies the transaction
by the affirmative vote or consent of a majority of the directors
(or committee members) who have no direct or indirect interest in
the transaction  and in  any event, of at least two directors (or
committee members);
     
     (b) the material facts of the transaction and the director's
interest are  disclosed or  known to the shareholders entitled to
vote and  they authorize,  approve or  ratify such transaction by
vote; or
     
     (c) the transaction is fair to the Corporation.
     
     If a majority of the directors or committee members who have
no direct  or  indirect  interest  in  the  transaction  vote  to
authorize, approve,  or  ratify  the  transaction,  a  quorum  is
present for purposes of taking action under this section.
     
     
     SECTION  2.13.  Compensation  of  Directors.  The  Board  of
Directors is  empowered and  authorized to  fix and determine the
compensation of  directors and  additional compensation  for such
additional services  any of  such directors  may perform  for the
Corporation.
     
                                
                           ARTICLE III
                                
                            Officers
     
    
     SECTION 3.0.  Officers, General  Authority and  Duties.  The
officers of the Corporation shall be a Chairman of the Board, a
President, two (2) or more Vice Presidents,  a  Secretary,  a  
Chief  Financial  Officer,  a Treasurer, a Chief Accounting Officer, 
and such other officers as may be  elected or appointed in accordance 
with the provisions of Section 3.2. One or more of the Vice Presidents 
may be designated by the  Board to serve as Executive Vice Presidents 
or Group Vice Presidents. Any  two (2)  or more offices may be held 
by the same person. All officers and agents of the Corporation, as 
between themselves and the Corporation, shall have  such authority and
perform such duties in the management of the Corporation as may
be provided in the By-laws or as may be determined by resolution
of the Board of Directors not inconsistent with the Bylaws.
     
     
     SECTION 3.1.  Election, Term of Office, Qualifications.  Each  
officer (except  such officers  as  may  be appointed in  accordance 
with  the provisions  of Section 3.2. of this Article  III) shall be 
elected by the Board of Directors at each annual  meeting. Each  
such officer  (whether elected  at an annual meeting of the Board 
of Directors or to fill a vacancy or otherwise) shall  hold office  
until the  officer's  successor  is chosen and qualified, or until 
death, or until the officer shall resign in  the manner  provided in  
Section 3.3. or be removed in the manner provided in Section 3.4.  The 
Chairman of the Board and the President shall be chosen
from among the directors. Any other officer may but need not be a
director of  the  Corporation.  Election  or  appointment  of  an
officer or agent shall not of itself create contract rights.
     
     
     SECTION 3.2.  Other Officers,  Election or  Appointment. The
Board of  Directors from  time  to  time  may  elect  such  other
officers  or   agents  (including  one  or  more  Assistant  Vice
Presidents, one  or  more  Assistant  Secretaries,  one  or  more
Assistant Treasurers,  a Controller,  and one  or more  Assistant
Controllers) as  it may deem necessary or advisable. The Board of
Directors may  delegate to  any officer  the power to appoint any
such officers  or agents  and to prescribe their respective terms
of office, powers and duties.


     SECTION 3.3. Resignation. Any officer may resign at any time
by giving  written notice  of such  resignation to  the Board  of
Directors, the  Chairman of  the  Board,  the  President  or  the
Secretary of  the Corporation. Unless otherwise specified in such
written notice,  such resignation  shall take effect upon receipt
thereof and  unless otherwise  specified in it, the acceptance of
the resignation shall not be necessary to make it effective.
     
     
     SECTION 3.4.  Removal. The  officers specifically designated
in Section  3.0. may be removed, either for  or without  cause, at  
any meeting  of the  Board  of Directors called for the purpose, by 
the vote of a majority of the actual number  of directors elected and  
qualified. The officers and agents elected or appointed in accordance 
with the provisions of Section  3.2. may  be removed, either for or 
without cause, at any meeting  of the  Board of  Directors at  which  
a  quorum  be present, by  the vote  of a  majority of the directors 
present at such meeting,  by any superior officer  upon whom such power 
of removal shall  have been  conferred by the Board of Directors, or
by any officer to whom the power to appoint such officer has been
delegated by  the Board of Directors pursuant to Section 3.2.  Any
removal shall  be without  prejudice to  the contract  rights, if
any, of the person so removed.
     
     
     SECTION 3.5. Vacancies. A vacancy in any office by reason of 
death, resignation, removal, disqualification or any other cause, 
may be filled by the Board of Directors or by an officer authorized 
under Section 3.2. to appoint to such office.
     
     
     SECTION 3.6.  Honorary Chairman  of the  Board of Directors.
The Board  of Directors may elect or appoint an Honorary Chairman
of the  Board of  Directors, who  shall be  vested with and shall
perform all  such powers  and duties  as may be prescribed by the
Board.
     
     
     SECTION 3.7.  Chairman of the Board of Directors.  The Chairman
of the Board shall be the chief executive officer of the Corporation
and, subject to the control of the Board of Diectors, shall have 
general supervision over the management and direction of the business
of the Corporation.  He or she shall see that all orders and 
resolutions of the Board of Directors are carried into effect.  The
Chairman of the Board shall preside at all meetings of the 
shareholders and of the Board of Directors if present and shall have
such powers and perform such duties as are assigned to him by the By-laws
and by the Board of Directors.  He or she shall, in the abence or 
incapacity of the President, perform all the duties and the functions
and exercise the powers of the President.  The Chairman shall be 
chosen by the Board of Directors at each annual meeting from among the
directors and shall serve until a successor is chosen and qualified,
or until resignation or death.


     SECTION 3.8.  President.  The President shall have such powers 
and perform such duties as are assigned to him by the Board of
Directors.  The President shall, in the absence or incapacity or
the Chairman of the Board, perform all the duties and functions
and exercise the powers of the Chairman of the Board.
     
     SECTION 3.9.  Executive Vice Presidents.  Each Executive
Vice President shall have such powers and perform such duties as
may be assigned to him or her by the Chairman of the Board, the 
President or the Board of Directors.  In the case of the death 
or incapacity of the Chairman of the Board and the President,
the Executive Vice Presidents, if one or more be designated,
shall, in the order of their seniority in office as Executive
Vice Presidents, perform the duties and exercise the powers
of the President.     
     
     SECTION  3.10.   Group  Vice  Presidents.  Each  Group  Vice
President shall  perform such  duties and have such powers as may
be assigned to him or her by the  Chairman of the Board, the 
President or  the  Board  of Directors. In  the  case  of  the  death  
or  incapacity  of  the Chairman of the Board, President and  the 
Executive  Vice  Presidents,  the  Group  Vice Presidents shall,  
in the  order of  their seniority in office as Group Vice Presidents, 
perform the duties and exercise the powers of the  President  unless  
otherwise  ordered  by  the  Board  of Directors.
     
     
     SECTION 3.11.  Vice Presidents.  Each Vice  President  shall
perform such  duties and  have such  powers as may be assigned to
him or her by the Chairman of the Board, the President or the Board 
of Directors.
     
     
     SECTION 3.12. Secretary. The Secretary shall:
     
     (a) record  all the  proceedings  of  the  meetings  of  the
shareholders and  Board of Directors in books to be kept for such
purposes;
     
     (b) cause  all notices  to be  duly given in accordance with
the provisions of these By-laws and as required by statute;
     
     (c) be  custodian of  the Seal of the Corporation, and cause
such Seal  to be  affixed to all certificates representing shares
of the  Corporation  prior  to  the  issuance  thereof  (subject,
however, to the provisions of Section 5.0) and to all instruments
the execution  of which  on behalf  of the  Corporation under its
Seal shall  have been  duly authorized  in accordance  with these
By-laws;
     
     (d)  subject   to  the   provisions  of  Section  5.0,  sign
certificates representing  shares of the Corporation the issuance
of which  shall have  been authorized  by the Board of Directors;
and
     
     (e) in general, perform all duties incident to the office of
Secretary and  such other duties as are given to the Secretary by
these By-laws  or as  may be  assigned  to  him  or  her  by  the
Chairman of the Board, the President or the Board of Directors.
     
     
     SECTION  3.13.   Assistant   Secretaries.   Each   Assistant
Secretary shall  assist the  Secretary in  his or her duties, and
shall perform  such other  duties as  the Board  of Directors may
from time  to time  prescribe or the Chairman of the Board or the 
President may from time to time delegate.   At  the request of 
the Secretary, any Assistant Secretary may temporarily act in the 
Secretary's place in the performing of  part or all of the duties of 
the Secretary. In the case of  the death  of the  Secretary, or  
in  the  case  of  the Secretary's absence  or inability to act 
without having designated an Assistant  Secretary to  act temporarily  
in his or her place, the Assistant  Secretary who is to perform the  
duties  of  the Secretary shall  be designated  by the Chairman of the 
Board, the President or the Board of Directors.
     
     
     SECTION 3.14.  Chief Financial Officer.  The Chief Financial
Officer shall:
     
     (a) have  supervision over and be responsible for the funds,
securities, receipts, and disbursements of the Corporation;
     
     (b) cause to be kept at the principal business office of the
Corporation and  preserved for  review  as  required  by  law  or
regulation records of financial transactions and correct books of
account using appropriate accounting principles;
     
     (c)  be   responsible  for  the  establishment  of  adequate
internal control  over the  transactions and  books of account of
the Corporation;
     
     (d) be  responsible for rendering to the proper officers and
the Board  of Directors upon request, and to the shareholders and
other  parties  as  required  by  law  or  regulation,  financial
statements of the Corporation; and
     
     (e) in general perform all duties incident to the office and
such other  duties as  are given  by the  By-laws or  as  may  be
assigned by the Chairman of the Board, the President or the Board 
of Directors.

     
     SECTION 3.15. Treasurer. The Treasurer shall:
     
     (a) have  charge of  the  funds,  securities,  receipts  and
disbursements of the Corporation;
     
     (b) cause  the moneys  and other  valuable  effects  of  the
Corporation to  be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers
or other  depositories as  shall be  selected in  accordance with
resolutions adopted by the Board of Directors;
     
     (c) cause  the funds of the Corporation to be disbursed from
the authorized  depositories of  the Corporation, and cause to be
taken and preserved proper records of all moneys disbursed; and
     
     (d) in general, perform all duties incident to the office of
Treasurer and  such other duties as are given to the Treasurer by
the By-laws or as may be assigned to him or her by the Chairman 
of the Board, the President, the Chief Financial Officer, or the 
Board of Directors.
     
     
     SECTION 3.16. Assistant Treasurers. Each Assistant Treasurer
shall assist  the Treasurer  in his  or  her  duties,  and  shall
perform such other duties as the Board of Directors may from time
to time prescribe or the Chairman of the Board, the President or 
the Chief Financial Officer may from time to time delegate.  At 
the request of the Treasurer, any Assistant  Treasurer may temporarily 
act  in the  Treasurer's place in  performing part  or all of the
duties of the Treasurer.  In the  case of the death of the Treasurer, 
or in the case of the Treasurer's absence or inability to act without 
having designated an Assistant  Treasurer to act in his or her place, 
the Assistant Treasurer who is to perform the duties of the Treasurer 
shall be designated by the Chairman of the Board, the President or the 
Board of Directors.
     
     
     SECTION  3.17.   Chief  Accounting   Officer.  The     Chief
Accounting Officer shall:
     
     (a)  keep   full  and   accurate  accounts  of  all  assets,
liabilities, commitments, revenues, costs and expenses, and other
financial transactions  of the  Corporation in books belonging to
the Corporation,  and conform them to sound accounting principles
with adequate internal control;
     
     (b) cause  regular audits  of these  books and records to be
made;
     
     (c) see  that all  expenditures are  made in accordance with
procedures  duly   established,  from   time  to   time,  by  the
Corporation;
     
     (d) render  financial statements  upon the  request  of  the
Board of  Directors, and  a full  financial report  prior to  the
annual meeting  of shareholders,  as well as such other financial
statements as are required by law or regulation; and
     
     (e) in  general, perform all the duties ordinarily connected
with the office of Chief Accounting Officer and such other duties
as may  be assigned  to him  or her  by the Chairman of the Board,
the President, the Chief Financial Officer, or the Board of Directors.
     
     
     SECTION 3.18.  General Counsel.   The Board of Directors may
appoint a  general counsel  who shall have general control of all
matters of legal import concerning the Corporation.
     
     
     SECTION 3.19.  Other Officers or Agents.  Any other officers
or agents elected or appointed pursuant to Section 3.2 shall have
such duties  and responsibilities  as may  be fixed  from time to
time by  the By-laws  or as  may  be  assigned  to  them  by  the
Chairman of the Board, the President or the Board of Directors.
     
     
     SECTION 3.20.  Compensation.   The compensation of executive
officers of the  Corporation shall be fixed from time to time by the
Compensation Committee  established  pursuant  to  Section  2.10.
Unless  the   Board  of  Directors  by  resolution  shall  direct
otherwise, the  Salary Committee  shall have the power to fix the
compensation of  employees who  are not executive officers of the 
Corporation.  No employee shall  be prevented  from receiving such 
compensation by reason of being a director of the Corporation.
     
     
     SECTION 3.21.  Surety Bonds.  In case the Board of Directors
shall so  require, any  officer or agent of the Corporation shall
execute to  the Corporation  a bond  in such  sum and  with  such
surety  or  sureties  as  the  Board  of  Directors  may  direct,
conditioned upon the faithful performance of his or her duties to
the Corporation,  including responsibility for negligence and for
the accounting  of all  property,  funds  or  securities  of  the
Corporation which the officer or agent may handle.
     
     
                           ARTICLE IV
                                
     Execution of Instruments and Deposit of Corporate Funds
     
     SECTION 4.0.  Execution of Instruments Generally. All deeds,
contracts, and  other  instruments  requiring  execution  by  the
Corporation may be signed by the Chairman of the Board, the 
President or any Vice President.  Authority  to  sign  any  deed,  
contract,  or  other  instrument requiring execution  by the  
Corporation may  be conferred by the Board of Directors upon any 
person or persons whether or not such person or  persons be officers 
of the Corporation. Such person or persons may  delegate,  from  
time  to  time,  by  instrument  in writing, all or any part of 
such authority to any other person or persons if authorized so to 
do by the Board of Directors.
     
     
     SECTION 4.1.  Notes, Checks,  Other Instruments.  All notes,
drafts, acceptances,  checks, endorsements,  and all evidences of
indebtedness of  the Corporation  whatsoever, shall  be signed by
such  officer  or  officers  or  such  agent  or  agents  of  the
Corporation and  in such  manner as  the Board  of Directors from
time to  time may  determine. Endorsements  for  deposit  to  the
credit  of   the  Corporation  in  any  of  its  duly  authorized
depositories shall  be made  in  such  manner  as  the  Board  of
Directors from time to time may determine.
     
     
     SECTION 4.2. Proxies. Proxies to vote with respect to shares
of other  corporations owned  by or  standing in  the name of the
Corporation may  be executed  and delivered  from time to time on
behalf of the Corporation by the Chairman of the Board, the 
President or a Vice President or by any  other person or persons 
thereunto authorized by the Board of Directors.
     
     
                            ARTICLE V
                                
                             Shares

     SECTION 5.0.   Certificates  for Shares.   Every  holder  of
shares in the Corporation shall be entitled to have a certificate
evidencing the  shares owned  by the  shareholder, signed  in the
name of  the Corporation by the Chairman of the Board, the President 
or a Vice President and the Secretary or an Assistant Secretary, 
certifying the number of shares  owned   by  the   shareholder  in  
the  Corporation.  The signatures of  the  Chairman of the Board, 
the President,  Vice  President,  Secretary,  and Assistant Secretary,  
the signature  of the  transfer  agent  and registrar, and  the 
Seal of the Corporation may be facsimiles. In case any  officer or  
employee who  shall have  signed, or  whose facsimile signature  or 
signatures  shall have  been used on, any certificate shall  cease to  
be an  officer or  employee  of  the Corporation before  the certificate  
shall have  been issued  and delivered by the Corporation, the 
certificate may nevertheless be adopted by  the Corporation and be 
issued and delivered as though the person  or  persons  who  signed  
the  certificate  or  whose facsimile signature  or signatures  shall 
have  been used thereon had not ceased to be such officer or employee 
of the Corporation; and the  issuance and  delivery by  the Corporation  
of any  such certificate  shall   constitute  an   adoption   thereof.  
Every certificate shall  state on  its face the name of the Corporation
and that  it is organized under the laws of the State of Indiana,
the name  of the  person to whom it is issued, and the number and
class of  shares and  the designation  of the series, if any, the
certificate represents,  and shall  state  conspicuously  on  its
front or  back that the Corporation will furnish the shareholder,
upon written  request  and  without  charge,  a  summary  of  the
designations,  relative   rights,  preferences   and  limitations
applicable  to   each  class   and  the   variations  in  rights,
preferences and  limitations determined  for each series (and the
authority of  the Board  of Directors to determine variations for
future series). Every certificate shall state whether such shares
have been  fully paid  and are  nonassessable. If any such shares
are not  fully paid,  the certificate shall be legibly stamped to
indicate the  percentum which  has been  paid up,  and as further
payments are  made thereon,  the  certificate  shall  be  stamped
accordingly. Subject  to the  foregoing provisions,  certificates
representing shares  in the  Corporation shall be in such form as
shall be  approved by  the Board  of Directors.  There  shall  be
entered upon  the stock  books of  the Corporation at the time of
the issuance  or  transfer  of  each  share  the  number  of  the
certificates representing  such share,  the name  of  the  person
owning the  shares represented  thereby, the  class of such share
and the date of the issuance or transfer thereof.
     
     
     SECTION 5.1.  Transfer of  Shares. Transfer of shares of the
Corporation shall  be made on the books of the Corporation by the
holder  of  record  thereof,  or  by  the  shareholder's  attorney
thereunto duly authorized in writing and filed with the Secretary
of the  Corporation  or  any  of  its  transfer  agents,  and  on
surrender of  the certificate  or certificates  representing such
shares. The  Corporation and  its transfer agents and registrars,
shall be  entitled to  treat the holder of record of any share or
shares  the   absolute  owner   thereof  for  all  purposes,  and
accordingly shall  not be bound to recognize any legal, equitable
or other claim to or interest in such share or shares on the part
of any  other person whether or not it or they shall have express
or other  notice thereof,  except as otherwise expressly provided
by the  statutes of  the State  of  Indiana.  Shareholders  shall
notify the  Corporation  in  writing  of  any  changes  in  their
addresses from time to time.
     
     
     SECTION 5.2.  Regulations. Subject to the provisions of this
Article V  the  Board  of  Directors  may  make  such  rules  and
regulations as  it may  deem expedient  concerning the  issuance,
transfer  and  regulation  of  certificates  for  shares  of  the
Corporation.
     
     
     SECTION 5.3.  Transfer Agents  and Registrars.  The Board of
Directors may  appoint one  or more  transfer agents, one or more
registrars, and one or more agents to act in the dual capacity of
transfer agent  and registrar  with respect  to the  certificates
representing shares of the Corporation.
     
     
     SECTION 5.4.  Lost or Destroyed Certificates. The holders of
any shares  of  the  Corporation  shall  immediately  notify  the
Corporation or  one of  its transfer agents and registrars of any
loss or destruction of the certificate representing the same. The
Corporation may  issue a  new certificate  in the  place  of  any
certificate theretofore issued by it alleged to have been lost or
destroyed upon  such terms  and under  such regulations as may be
adopted by the Board of Directors, and the Board of Directors may
require the  owner of  the lost  or destroyed  certificate or the
owners legal  representatives to  give the  Corporation a bond in
such form  and for  such amount  as the  Board of  Directors  may
direct, and  with such  surety or sureties as may be satisfactory
to the  Board of  Directors to  indemnify the Corporation and its
transfer agents and registrars against any claim that may be made
against it  or any such transfer agent or registrar on account of
the alleged  loss or  destruction of  any such certificate or the
issuance of such new certificate. A new certificate may be issued
without requiring  any bond when, in the judgment of the Board of
Directors, it is proper so to do.
     
     
     SECTION 5.5.  Redemption of Shares Acquired in Control Share
Acquisitions. Any  or all  control shares  acquired in  a control
share  acquisition   shall  be   subject  to  redemption  by  the
Corporation, if either:
     
     (a) No  acquiring person  statement has  been filed with the
Corporation with respect to the control share acquisition, or

     (b) The  control shares  are not accorded full voting rights
by the Corporation's shareholders as provided in IC 23-1-42-9.
     
     A redemption  pursuant to  Section 5.5(a) may be made at any
time during  the period  ending sixty (60) days after the date of
the last  acquisition of  control shares by the acquiring person.
A redemption  pursuant to  Section 5.5(b) may be made at any time
during the  period ending  two (2)  years after  the date  of the
shareholder vote with respect to the voting rights of the control
shares in  question. Any  redemption pursuant to this Section 5.5
shall be  made at  the fair  value  of  the  control  shares  and
pursuant to  such procedures  for the  redemption as  may be  set
forth in  these By-laws  or adopted by resolution of the Board of
Directors.
     
     As used  in this  Section 5.5,  the terms  "control shares,"
"control share  acquisition," "acquiring  person  statement"  and
"acquiring person" shall have the meanings ascribed to them in IC
23-1-42.
     
     
                           ARTICLE VI
                                
                          Miscellaneous
     
     SECTION 6.0.  Corporate Seal.  The Seal  of the  Corporation
shall consist  of a  circular disk  around the  circumference  of
which shall appear the words:
     
         "ELI LILLY AND COMPANY, INDIANAPOLIS, INDIANA"
                                     
                                     
               and across the center thereof the words:
                                     
              "Established 1876 Incorporated 1901".
     

     SECTION 6.1. Fiscal Year. The fiscal year of the Corporation
shall begin  on the  first day  of January in each year and shall
end on the thirty-first day of the following December.
     
     
     SECTION 6.2.  Amendment of  By-laws. These  By-laws  may  be
amended or  repealed and  new  By-laws  may  be  adopted  by  the
affirmative vote  of at  least a majority of the actual number of
directors elected and qualified at any regular or special meeting
of the Board of Directors, provided  that the notice or waiver of
notice of  such meeting states in effect that consideration is to
be given  at such  meeting to  the amendment  or  repeal  of  the
By-laws or the adoption of new By-laws and; provided further that
no provision  of  these  By-laws  incorporating  a  provision  of
Articles 9  or 13 of the Articles of Incorporation may be amended
except in  a manner consistent with those Articles as they may be
amended in compliance with the requirements stated therein.

     
                           *    *    *





                                  --
                           TABLE OF CONTENTS

                                                       Page
                                                        ----
Section 1.  Certain Definitions.......................    2
Section 2.  Appointment of Rights Agent................   7
Section 3.  Issue of Right Certificates................   7
Section 4.  Form of Right Certificates................   10
Section 5.  Countersignature and Registration.........   12
Section 6.  Transfer, Split Up, Combination and
            Exchange of Right Certificate.............   14
Section 7.  Exercise of Rights........ ...............   16
Section 8.  Cancellation and Destruction of Right
           Certificates...............................   21
Section 9.  Reservation and Availability of Shares
              of Preferred Stock.......................  21
Section 10.  Preferred Stock Record Date................ 24
Section 11.  Adjustment of Purchase Price,
               Number of Shares or Number of Rights......25
Section 12.  Certification of Adjusted Purchase
               Price or Number of Shares.................43
Seection 13.  Consolidation, Merger or Sale or Transfer
               of Assets or Earning Power................44
Section 14.  Fractional Rights and Fractional Shares.....49
Section 15.  Rights of Action.....  .....................51
Section 16.  Agreement of Right Holders..................52
Section 17.  Right Certificate Holder Not Deemed a
             Shareholder...............................  53
Section 18.  Concerning the Rights Agent............ ....53
Section 19.  Merger or Consolidation or Change
               of Name of Rights Agent...................55
Section 20.  Duties of Rights Agent........... ..........56
Section 21.  Change of Rights Agent................... ..60
Section 22.  Issuance of New Right Certificates..........61
Section 23.  Redemption..................................62

Section 24.  Notice of Proposed Actions....... ..........63
Section 25.  Notices.....................................65
Section 26.  Supplements and Amendments..................66
Section 27.  Successors..................................68
Section 28.  Benefits of this Agreement..................68
Section 29.  Governing Law............... ...............68
Section 30.  Counterparts................................69
Section 31.  Severability................................69
Section 32.  Descriptive Headings........................69
Section 33.  Determinations and Actions Taken
               by the Board of Directors.................70
Exhibit A    Form of Right Certificate..................A-1
Exhibit B    Summary of Rights to Purchase Preferred
             Stock......................................B-1
Exhibit C    Form of Amendment to Amended Articles of
               Incorporation of Eli Lilly and Co........C-1



                                   
                                   
                                   
                                   
                                   
                         ELI LILLY AND COMPANY
                                   
                                   
                                   
                                   
                                  and
                                   
                                   
                                   
                                   
                      BANK ONE, INDIANAPOLIS, NA
                                   
                                   
                                   
                                   
                             Rights Agent
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                           Rights Agreement
                                   
                       Dated as of July 18, 1988
                                   
                                   
                                   
                                   
                                   
                                   

                           RIGHTS AGREEMENT

          

          This Agreement, dated as of July 18, 1988 between Eli Lilly

and Company, an Indiana corporation (the "Company"), and Bank One,

Indianapolis, NA, a national banking corporation (the "Rights Agent"):

                          W I T N E S S E T H

          WHEREAS, the Board of Directors of the Company has

authorized and declared a dividend distribution of one right (a

"Right") for each share of Common Stock, par value $.62-1/2 per share,

of the Company ("Common Stock") outstanding on July 28, 1988 and has

authorized the issuance of one Right with respect to each share of

Common Stock that shall become outstanding between July 28, 1988 and

the earlier of the Distribution Date or the Expiration Date (as such

terms are hereinafter defined) or the date, if any, on which such

rights may be redeemed, each Right initially representing the right to

purchase one one-hundredth of a share of Series A Participating

Preferred Stock of the Company ("Preferred Stock") having the rights

and preferences set forth in the form of Certificate of Amendment of

Articles of Incorporation of Eli Lilly and Company attached hereto as

Exhibit C upon the terms and subject to the conditions hereinafter set

forth.

          
          NOW, THEREFORE, in consideration of the premises and the

mutual agreements herein set forth, the parties hereby agree as

follows:

          Section 1.  Certain Definitions.  For purposes of this

Agreement, the following terms have the meanings indicated:

          (a)  "Acquiring Person" shall mean any Person who or which,

     together with all Affiliates and Associates of such Person, shall

     be the Beneficial Owner of a Substantial Block, but shall not

     include (i) the Company, (ii) any Subsidiary of the Company,

     (iii) any employee benefit plan or employee stock plan of the

     Company or of any Subsidiary of the Company or any Person

     organized, appointed, established or holding Voting Stock by, for

     or pursuant to, the terms of any such plan, (iv) any Person who

     acquires a Substantial Block in connection with a transaction or

     series of transactions approved prior to such transaction or

     transactions by the Board of Directors of the Company or (v)

     Lilly Endowment, Inc.

          (b)   "Affiliate" and "Associate" shall have the respective

     meanings ascribed to such terms in Rule 12b-2 of the General

     Rules and Regulations under the Securities Exchange Act of 1934,

     as in effect as of the date hereof.

          (c)  A Person shall be deemed the "Beneficial Owner" of, and

     shall be deemed to "Beneficially Own," any securities:

               (i)  which such Person or any of such Person's

          Affiliates or Associates beneficially owns, directly or

          indirectly;

             (ii)  which such Person or any of such Person's

          Affiliates or Associates has (A) the right to acquire

          (whether such right is exercisable immediately or only after

          the passage of time) pursuant to any agreement, arrangement

          or understanding, or upon the exercise of any conversion,

          exchange or purchase rights (other than the Rights),

          warrants or options, or otherwise, provided, however, that a

          Person shall not be deemed the Beneficial Owner of

          securities tendered pursuant to a tender or exchange offer

          made by or on behalf of such Person or any of such Person's

          Affiliates or Associates until such tendered securities are

          accepted for payment, or (B) the right to vote pursuant to

          any agreement, arrangement or understanding; or

            (iii)  which are beneficially owned, directly or

          indirectly, by any other Person with which such Person or

          any of such Person's Affiliates or Associates has any

          agreement, arrangement or understanding for the purpose of

          acquiring, holding, voting or disposing of any securities of

          the Company;

        provided, however, that a Person shall not be deemed the

     Beneficial Owner of, or to Beneficially Own, any security if the

     agreement, arrangement or understanding to vote such security

     arises solely from a revocable proxy or consent given to such

     Person in response to a public proxy or consent solicitation made

     pursuant to, and in accordance with, the applicable rules and

     regulations of the Securities Exchange Act of 1934, as amended

     (the "Exchange Act"), and provided, further, that nothing in this

     paragraph (c) shall cause a person engaged in business as an

     underwriter of securities to be the Beneficial Owner of, or to

     Beneficially Own, any securities acquired through such person's

     participation in good faith in a firm commitment underwriting

     until the expiration of forty days after the date of such

     acquisition.

          (d)   "Business Day " shall mean any day other than a

     Saturday, Sunday or day on which banking institutions in the

     State of Indiana are authorized or obligated by law or executive

     order to close.

          (e)   "Close of Business " on any given date shall mean

     5:00 P.M., Indianapolis time, on such date; provided, however,

     that if such date is not a Business Day it shall mean 5:00 P.M.,

     Indianapolis time, on the next succeeding Business Day.

          (f)   "Common Stock " shall have the meaning assigned to it

     in the recital, and  "common stock " (i) when used with reference

     to any Person other than the Company shall mean the capital stock

     with the greatest voting power of such Person or, if such Person

     is a Subsidiary of another Person, the Person which ultimately

     controls such first-mentioned Person and (ii) when used with

     reference to any Person other than the Company which shall not be

     organized in corporate form shall mean units of beneficial

     interest which (A) shall represent the right to participate

     generally in the profits and losses of such Person (including,

     without limitation, any flow-through tax benefits resulting from

     an ownership interest in such Person) and which (B) shall be

     entitled to exercise the greatest voting power of such Person or,

     in the case of a limited partnership, shall have the power to

     remove the general partner or partners.

          (g)  "Continuing Director" shall mean any member of the

     Board of Directors of the Company (while such Person is a member

     of the Board) who is not an Acquiring Person, or an Affiliate or

     Associate of an Acquiring Person, or a representative of an

     Acquiring Person or of any such Affiliate or Associate, and who

     either (i) was a member of the Board prior to the time that any

     Person became an Acquiring Person, or (ii) became a member of the

     board subsequent to the time that any Person became an Acquiring

     Person, if such Person's nomination for election or election to

     the board was recommended or approved by a majority of the

     Continuing Directors then in office.

          (h)  "Distribution Date" shall have the meaning assigned to

     it in Section 3.

          (i)  "Equivalent Stock" shall have the meaning assigned to

     it in Section 7.

          (j)  "Exchange Act" shall have the meaning assigned to it in

     Section l(c).

          (k)  "Expiration Date" shall have the meaning assigned to it

     in Section 7.

          (l)  "Person" shall mean any individual, firm, corporation

     or other entity and shall include any successor by merger or

     otherwise of such entity.

          (m)  "Preferred Stock" shall have the meaning assigned to it

     in the recital.

          (n)  "Purchase Price" shall have the meaning assigned to it

     in Section 4.

          (o)  "Redemption Price" shall have the meaning assigned to

     it in Section 23.

          (p)  "Stock Acquisition Date" shall mean the first date of

     public announcement by the Company or an Acquiring Person that an

     Acquiring Person has become such.

          (q) "Subsidiary" shall mean, with respect to any Person, any

     corporation or other entity of which securities or other

     ownership interests having ordinary voting power sufficient, in

     the absence of contingencies, to elect a majority of the board of

     directors or other persons performing similar functions are at

     the time directly or indirectly owned by such Person and any

     Affiliate of such Person.

          (r)  "Substantial Block" shall mean a number of shares of

     Voting Stock having in the aggregate 20% or more of the general

     voting power (or which would have such voting power but for the

     application of the Indiana Control Share Statute).

          (s)  "Trading Day" shall have the meaning assigned to it in

     Section 11(d).

          (t)  "Voting Stock" shall mean shares of the Company's

     capital stock the holders of which have general voting power

     under ordinary circumstances to elect at least a majority of the

     board of directors of the Company and shall include any shares of

     the Company's capital stock during any period such shares may be

     subject to the voting limitation provisions of the Indiana

     Control Share Statute.

               

          Section 2.  Appointment of Rights Agent.  The Company hereby

appoints the Rights Agent to act as agent for the Company and the

holders of the Rights (who, in accordance with Section 3, shall prior

to the Distribution Date also be the holders of Common Stock) in

accordance with the terms and conditions hereof, and the Rights Agent

hereby accepts such appointment.  The Company may from time to time

appoint such Co-Rights Agent or Agents as it may deem necessary or

desirable.

          

          Section 3.  Issue of Right Certificates.

          (a)  The  "Distribution Date " shall mean the earlier of (i)

     the tenth Business Day after the date of the commencement of a

     tender or exchange offer (as determined by reference to Rule 14d-

     2(a) (or any successor rule) under the Exchange Act) by any

     Person (other than the Company, any Subsidiary of the Company,

     Lilly Endowment, Inc., or any employee benefit plan or employee

     stock plan of the Company or any Subsidiary of the Company) for a

     number of shares of the outstanding Voting Stock having 30% or

     more of the general voting power or (ii) the tenth Business Day

     after a Stock Acquisition Date provided, however, that the

     Company's Board of Directors in its discretion may extend the

     time periods referred to clauses (i) and (ii) above during which

     period of extension the Board may determine the day that shall

     constitute the Distribution Date, if any.  Up to and including

     the Distribution Date, (x) the Rights will be evidenced by the

     certificate for Common Stock registered in the names of the

     holders of Common Stock (which certificates for Common Stock

     shall be deemed also to be Right Certificates) and not by

     separate Right Certificates, and (y) the right to receive Right

     Certificates will be transferable only in connection with the

     transfer of Common Stock.  As soon as practicable after the

     Distribution Date, the Rights Agent will mail, by first-class,

     insured, postage prepaid mail, to each record holder of Common

     Stock as of the Close of Business on the Distribution Date, as

     shown by the records of the Company at the Close of Business on

     the Distribution Date, at the address of such holder shown on

     such records, a Right Certificate, in substantially the form of

     Exhibit A hereto, evidencing one Right for each share of Common

     Stock so held.

          (b)  On July 29, 1988 or as soon as practicable thereafter,

     the Company will send a copy of a Summary of Rights to Purchase

     Preferred Stock ( "Summary of Rights "), in substantially the

     form attached hereto as Exhibit B, by first-class mail, postage

     prepaid, to each record holder of Common Stock as of the Close of

     Business on July 28, 1988, at the address of such holder shown on

     the records of the Company.

          (c)  As soon as practicable, the Company will cause

     certificates for Common Stock issued after the date of this

     Agreement, but prior to the earlier of the Distribution Date or

     the Expiration Date or the date, if any, on which the Rights may

     be redeemed, to have impressed on, printed on, written on or

     otherwise affixed to them the following legend:

       

          This certificate also entitles the holder hereof to
          certain Rights as set forth in a Rights Agreement
          between Eli Lilly and Company and Bank One,
          Indianapolis, NA, dated as of July 18, 1988, as the
          same shall be amended from time to time (the  "Rights
          Agreement "), the terms of which are hereby
          incorporated herein by reference and a copy of which is
          on file at the principal executive offices of Eli Lilly
          and Company.  Under certain circumstances, as set forth
          in the Rights Agreement, such Rights will be evidenced
          by separate certificates and will no longer be
          evidenced by this certificate.  Eli Lilly and Company
          will mail to the holder of this certificate a copy of
          the Rights Agreement without charge after receipt of a
          written request therefor.  Under certain circumstances
          set forth in the Rights Agreement, Rights issued to, or
          held by, any Person who is, was or becomes an Acquiring
          Person or any Affiliate or Associate thereof (as such
          terms are defined in the Rights Agreement) or one of
          certain transferees thereof, whether currently held by
          or on behalf of such Person or by any subsequent
          holder, may be limited as provided in Section 7(e) of
          the Rights Agreement.
          
          With respect to such certificates containing the foregoing

     legend, until the Distribution Date, the Rights associated with

     Common Stock represented by such certificates shall be evidenced

     by such certificates alone, and the surrender for transfer of any

     such certificate shall also constitute the transfer of the Rights

     associated with the Common Stock certificate.

          (d)  Until the Distribution Date, the surrender for transfer

     of any of the certificates for Common Stock outstanding on or

     after July 28, 1988, with or without a copy of the Summary of

     Rights attached thereto, shall also constitute the transfer of

     the Rights associated with Common Stock represented by such

     certificates.  After the Distribution Date, the Rights will be

     evidenced solely by the Right Certificates.

          

          Section 4.  Form of Right Certificates.

          (a)  The Right Certificates (and the forms of assignment and

     of election to purchase shares to be printed on the reverse

     thereof) shall be in substantially the form of Exhibit A hereto

     and may have such marks of identification or designation and such

     legends, summaries or endorsements printed thereon as the Company

     may deem appropriate and as are not inconsistent with the

     provisions of this Agreement, or as may be required to comply

     with any law or with any rule or regulation made pursuant thereto

     or with any rule or regulation of any stock exchange on which the

     Rights may from time to time be listed, or to conform to usage.

     Subject to the provisions of Section 11, Section 13 and Section

     22, the Right Certificates, whenever issued, shall be dated as of

     July 28, 1988, and on their face shall entitle the holders

     thereof to purchase such number of shares of Preferred Stock as

     shall be set forth therein at the price per one one-hundredth of

     a share set forth therein (the "Purchase Price"), but the amount

     and type of securities purchasable upon the exercise of each

     Right and the Purchase Price thereof shall be subject to

     adjustment as provided herein.      (b)  Any Right Certificate

     issued pursuant to Section 3(a) or Section 22 that represents

     Rights Beneficially Owned by:

               (i)  an Acquiring Person or any Associate or Affiliate

          of an Acquiring Person,

             (ii)  a transferee of an Acquiring Person (or of any

          such Associate or Affiliate) who becomes a transferee after

          the Acquiring Person becomes such, or

            (iii)  a transferee of an Acquiring Person (or of any

          such Associate or Affiliate) who becomes a transferee prior

          to or concurrently with the Acquiring Person becoming such

          and receives such Rights pursuant to either (A) a transfer

          (whether or not for consideration) from the Acquiring Person

          to holders of equity interests in such Acquiring Person or

          to any Person with whom such Acquiring Person has any

          continuing agreement, arrangement or understanding regarding

          the transferred Rights or (B) a transfer which the Board of

          Directors of the Company has determined is part of a plan,

          arrangement or understanding which has as a primary purpose

          or effect avoidance of Section 7(e), and any Right

          Certificate issued pursuant to Section 6 or Section 11 upon

          transfer, exchange, replacement or adjustment of any other

          Right Certificate referred to in this sentence, shall

          contain (to the extent feasible and reasonably identifiable

          as such) the following legend:

          

               The Rights represented by this Right Certificate
               are or were beneficially owned by a Person who was
               or became an Acquiring Person or an Affiliate or
               Associate of an Acquiring Person (as such terms
               are defined in the Rights Agreement? or one of
               certain transferees thereof.  Accordingly, under
               certain circumstances as provided in the Rights
               Agreement, this Right Certificate and the Rights
               represented hereby may be limited as provided in
               Section 7(e) of such Agreement.
               
               
          Section 5.  Countersignature and Registration.

          (a)  The Right Certificates shall be executed on behalf of

     the Company by its President or any Vice President, either

     manually or by facsimile signature, and have affixed thereto the

     Company's seal or a facsimile thereof which shall be attested by

     the Secretary or an Assistant Secretary of the Company, either

     manually or by facsimile signature.  The Right Certificates shall

     be manually countersigned by the Rights Agent and shall not be

     valid for any purpose unless so countersigned.  In case any

     officer of the Company who shall have signed any of the Right

     Certificates shall cease to be such officer of the Company before

     countersignature by the Rights Agent and issuance and delivery by

     the Company, such Right Certificates, nevertheless, may be

     countersigned by the Rights Agent, issued and delivered with the

     same force and effect as though the person who signed such Right

     Certificates had not ceased to be such officer of the Company;

     and any Right Certificate may be signed on behalf of the Company

     by any person who, at the actual date of the execution of such

     Right Certificate, shall be a proper officer of the Company to

     sign such Right Certificate, although at the date of the

     execution of this Rights Agreement any such person was not such

     an officer.

          (b)  Following the Distribution Date, the Rights Agent will

     keep or cause to be kept, at its principal stock transfer office,

     which as of the date hereof is located at 111 Monument Circle,

     Indianapolis, Indiana 46277, books for registration and transfer

     of the Right Certificates issued hereunder.  Such books shall

     show the names and addresses of the respective holders of the

     Right Certificates, the number of Rights evidenced on its face by

     each Right Certificate, the date of each Right Certificate and

     the number of each Right Certificate.

          

          Section 6.  Transfer, Split Up, Combination and Exchange of

Right Certificates; Mutilated, Destroyed, Lost or Stolen Right

Certificates.

          (a)  Subject to the provisions of Section 4(b), Section 7(e)

     and Section 14, at any time after the Close of Business on the

     Distribution Date, and prior to the Close of Business on the

     Expiration Date or the day prior to the day, if any, on which the

     Rights are to be redeemed pursuant to Section 23, any Right

     Certificate or Certificates may be transferred, split up,

     combined or exchanged for another Right Certificate or Right

     Certificates, entitling the registered holder to purchase such

     number of shares of Preferred Stock as the Right Certificate or

     Right Certificates surrendered then entitled such holder to

     purchase.  Any registered holder desiring to transfer, split up,

     combine or exchange any Right Certificate shall make such request

     in writing, signed by the registered holder with such signature

     guaranteed in such manner as is reasonably satisfactory to the

     Rights Agent, delivered to the Rights Agent, and shall surrender

     the Right Certificate or Right Certificates to be transferred,

     split up, combined or exchanged at the principal stock transfer

     office of the Rights Agent.  Neither the Rights Agent nor the

     Company shall be obligated to take any action whatsoever with

     respect to the transfer of any such surrendered Right Certificate

     until the registered holder shall have completed and signed the

     certificate contained in the form of assignment on the reverse

     side of such Right Certificate and shall have provided such

     additional evidence of the identity of the Beneficial Owner (or

     former Beneficial Owner) or Affiliates or Associates thereof as

     the Company shall reasonably request.  Thereupon the Rights Agent

     shall, subject to Section 4(b), Section 7(e) and Section 14,

     countersign and deliver to the person entitled thereto a Right

     Certificate or Right Certificates, as the case may be, as so

     requested.  The Company may require payment of a sum sufficient

     to cover any tax or governmental charge that may be imposed in

     connection with any transfer, split up, combination or exchange

     of Right Certificates.

          (b)  Upon receipt by the Company and the Rights Agent of

     evidence reasonably satisfactory to them of the loss, theft,

     destruction or mutilation of a Right Certificate, and, in case of

     loss, theft or destruction, of indemnity or security reasonably

     satisfactory to them, and reimbursement to the Company and the

     Rights Agent of all reasonable expenses incidental thereto, and

     upon surrender to the Rights Agent and cancellation of the Right

     Certificate, if mutilated, the Company will execute and deliver a

     new Right Certificate of like tenor to the Rights Agent for

     delivery to the registered owner in lieu of the Right Certificate

     so lost, stolen, destroyed or mutilated.

          

          Section 7.  Exercise of Rights; Purchase Price; Expiration

Date of Rights.

          (a)  Subject to Section 7(e) and unless previously redeemed,

     the registered holder of any Right Certificate may exercise the

     Rights evidenced thereby (except as otherwise provided herein

     including, without limitation, the restrictions on exercisability

     set forth in Section 9 and Section 23) in whole or in part at any

     time after the date on which the Company's right to redeem has

     expired pursuant to Section 23, upon surrender of the Right

     Certificate, with the form of election to purchase on the reverse

     side thereof duly executed, to the Rights Agent at the principal

     stock transfer office of the Rights Agent, together with payment

     of the Purchase Price for each one one-hundredth of a share of

     Preferred Stock (or other securities or property as the case may

     be) as to which the Rights are exercised, at or prior to the

     Close of Business on July 28, 1998 (such date being hereinafter

     referred to as the  "Expiration Date ").  If at any time after

     the Rights become exercisable hereunder but prior to the

     Expiration Date the Company is prohibited by its Articles of

     Incorporation from issuing Preferred Stock or Common Stock upon

     the exercise of all of the outstanding Rights, the Company may

     issue upon the exercise of the Rights shares of stock or other

     securities of the Company of equivalent value to the Preferred

     Stock or Common Stock ( "Equivalent Stock "), as determined by

     the Board of Directors.  For purposes of this Section 7(a), any

     exercise shall be effective as of the Wednesday of the calendar

     week immediately succeeding the calendar week in which the Rights

     Agent receives the Right Certificate.

          (b)  The Purchase Price for each one one-hundredth of a

     share of Preferred Stock pursuant to the exercise of a Right

     shall initially be $325, shall be subject to adjustment from time

     to time as provided in Sections 11 and 13 and shall be payable in

     lawful money of the United States of America.

          (c)  Upon receipt of a Right Certificate, with the form of

     election to purchase duly executed, accompanied by payment of the

     Purchase Price for the shares to be purchased and an amount equal

     to any applicable transfer tax in cash, or by certified check or

     money order payable to the order of the Company, the Rights Agent

     shall, subject to Section 20(j) and to the final sentence of

     Section 7(a), thereupon promptly (i) requisition from any

     transfer agent of Preferred Stock or Common Stock (or any

     Equivalent Stock then issuable) a certificate for the number of

     shares of Preferred Stock or Common Stock (or any Equivalent

     Stock then issuable) to be purchased and the Company hereby

     irrevocably authorizes its transfer agent to comply with all such

     requests, (ii) when appropriate, requisition from the Company the

     amount of cash to be paid in lieu of issuance of a fractional

     share in accordance with Section 14 and (iii) promptly after

     receipt of such certificate, cause the same to be delivered to or

     upon the order of the registered holder of such Right

     Certificate, registered in such name or names as may be

     designated by such holder, and, when appropriate, after receipt

     promptly deliver such cash to or upon the order of the registered

     holder of such Right Certificate.

          (d)  In case the registered holder of any Right Certificate

     shall exercise less than all the Rights evidenced thereby, a new

     Right Certificate evidencing Rights equivalent to the Rights

     remaining unexercised shall be issued by the Rights Agent to the

     registered holder of such Right Certificate or to his duly

     authorized assigns, subject to the provisions of Section 14.

          (e)  Notwithstanding any provision of this Agreement to the

     contrary, upon the occurrence of any of the events described in

     clauses (a), (b) or (c) of the first sentence of Section 13 or

     subparagraphs (A), (B), (C), or (D) of Section 11(a)(ii), any

     Rights that are at the time of the occurrence of such event

     Beneficially Owned by (i) an Acquiring Person or by any Associate

     or Affiliate of such Acquiring Person or (ii) a transferee of an

     Acquiring Person or of any Associate or Affiliate of such

     Acquiring Person (A) who becomes a transferee after the Acquiring

     Person becomes such, or (B) who becomes a transferee prior to or

     concurrently with the Acquiring Person becoming such and receives

     such Rights pursuant to either (1) a transfer (whether or not for

     consideration) from the Acquiring Person to holders of equity

     interests in such Acquiring Person or to any Person with whom

     such Acquiring Person has any continuing agreement, arrangement

     or understanding regarding the transferred Rights or (2) a

     transfer which the Board of Directors of the Company has

     determined is part of a plan, arrangement or understanding which

     has as a primary purpose or effect the avoidance of this Section

     7(e), shall be exercisable for shares of Common Stock (if Section

     11(a)(ii) is applicable) or shares of common stock of the

     Principal Party (as defined in Section 13) (if Section 13 is

     applicable) without regard to the adjustments with respect to the

     amount of securities issuable otherwise provided for in Section

     11(a)(ii) or Section 13.

          In lieu of such adjustments:

               (i)  If Section 11(a)(ii) is applicable, each holder of

          such Rights shall thereafter have the right to receive upon

          exercise thereof at the then current Purchase Price in

          accordance with the terms of this Agreement, in lieu of a

          number of one-hundredths of a share of Preferred Stock, such

          number of shares of Common Stock of the Company as shall

          equal the result obtained by (x) multiplying the then

          current Purchase Price per one one-hundredths of a share of

          Preferred Stock by the number of one one-hundredths of a

          share of Preferred Stock for which a Right is then

          exercisable and dividing that product by (y) 100% of the

          then current market price per share of Common Stock

          (determined pursuant to Section 11(d) hereof) on the date of

          the occurrence of any of the events listed in Section

          11(a)(ii); and

             (ii)  If Section 13 is applicable, each holder of such

          Rights shall thereafter have the right to receive, upon the

          exercise thereof at the then current Purchase Price in

          accordance with the terms of this Agreement, such number of

          shares of common stock of the Principal Party (as defined in

          Section 13) as shall, based on the current market price per

          share of the common stock of the Principal Party (determined

          in the same manner as the current market price of Common

          Stock is determined under Section 11(d) hereof) on the date

          of consummation of the events described in Section 13, have

          a value equal to the Purchase Price.

               The Company shall use all reasonable efforts to ensure

     that the provisions of this Section 7(e) and Section 4(b) are

     complied with, but shall have no liability to any holder of Right

     Certificates or other Person as a result of its making or failing

     to make any determinations with respect to an Acquiring Person or

     its Affiliates, Associates or transferees hereunder.

          (f)  Notwithstanding anything in this Agreement to the

     contrary, neither the Rights Agent nor the Company shall be

     obligated to undertake any action with respect to a registered

     holder upon the occurrence of any purported exercise as set forth

     in this Section 7 unless such registered holder shall have (i)

     completed and signed the certificate contained in the form of

     election to purchase set forth on the reverse side of the Right

     Certificate surrendered for such exercise, and (ii) provided such

     additional evidence of the identity of the Beneficial Owner (or

     former Beneficial Owner) or Affiliates or Associates thereof as

     the Company shall reasonably request.

          

          Section 8.  Cancellation and Destruction of Right

Certificates.  All Right Certificates surrendered for the purpose of

exercise, transfer, split up, combination or exchange shall, if

surrendered to the Company or to any of its agents, be delivered to

the Rights Agent for cancellation or in canceled form, or, if

surrendered to the Rights Agent, shall be canceled by it, and no Right

Certificates shall be issued in lieu thereof except as expressly

permitted by this Agreement.  The Company shall deliver to the Rights

Agent for cancellation and retirement, and the Rights Agent shall so

cancel and retire, any other Right Certificate purchased or acquired

by the Company otherwise than upon the exercise thereof.  The Rights

Agent shall deliver all canceled Right Certificates to the Company.

          

          Section 9.  Reservation and Availability of Shares of

Preferred Stock.  The Company covenants and agrees that it shall from

time to time (a) cause to be reserved and kept available out of its

authorized and unissued shares of Preferred Stock or its authorized

and issued shares of Preferred Stock held in its treasury (and,

following the occurrence of any event set forth in Section 11(a)(ii)

hereof, out of its authorized and unissued shares of Common Stock

and/or other securities or shares held in its treasury), the number of

shares of Preferred Stock (and, following the occurrence of any event

set forth in Section 11(a)(ii) hereof, Common Stock and/or other

securities) that will be sufficient to permit the exercise in full of

all outstanding Rights, (b) take all such action as may be necessary

to insure that all shares of Preferred Stock or Common Stock and/or

other securities delivered upon exercise of Rights shall, at the time

of delivery of the certificates for such shares (subject to payment of

the Purchase Price), be duly and validly authorized and issued and

fully paid and non assessable, (c) pay when due and payable any and

all federal and state transfer taxes and charges which may be payable

in respect of the issuance or delivery of the Right Certificates or of

any shares of Preferred Stock or Common Stock and/or other securities

upon the exercise of Rights and (d) take all such action, from and

after the date the Rights become exercisable hereunder, as may be

necessary to permit the exercise of the Rights for Preferred Stock or

Common Stock and/or other securities, including any required

registration under the Securities Act of 1933, as amended (the  "1933

Act"), and, in connection therewith and if deemed desirable by the

Company, use its best efforts to list (or continue the listing of) the

Preferred Stock or Common Stock and/or other securities on a national

securities exchange and to cause all shares of Preferred Stock

reserved for issuance upon exercise of Rights to be listed on such

exchange upon official notice of issuance upon such exercise.  The

Company will also take such action as may be appropriate under, or to

ensure compliance with, the securities or  "blue sky " laws of the

various states in connection with the exercisability of the Rights.

The Company may temporarily suspend, for a period of time not to

exceed ninety (90) days, the exercisability of the Rights in order to

comply with all applicable federal and state securities laws.  Upon

any such suspension, the Company shall issue a public announcement

(and shall provide written notice to the Rights Agent) stating that

the exercisability of the Rights has been temporarily suspended, as

well as a public announcement at such time as the suspension is no

longer in effect.  Notwithstanding any provision of this Agreement to

the contrary, the Rights shall not be exercisable in any jurisdiction

unless the requisite qualification in such jurisdiction shall have

been obtained and until a registration statement has been declared

effective.  Notwithstanding the provisions of clause (c) of the first

sentence of this Section 9, the Company shall not be required to pay

any transfer tax which may be payable in respect of any transfer

involved in the transfer or delivery of Right Certificates or the

issuance or delivery of certificates for Preferred Stock or Common

Stock and/or other securities in a name other than that of the

registered holder of the Right Certificate evidencing Rights

surrendered for exercise or to issue or deliver any certificates for

shares of Preferred Stock or Common Stock and/or other securities upon

the exercise of any Rights until any such tax shall have been paid

(any such tax being payable by the holder of such Right Certificate at

the time of surrender) or until it has been established to the

Company's satisfaction that no such tax is due.

          

          Section 10.  Preferred Stock Record Date.  Each Person in

whose name any certificate for shares of Preferred Stock (or Common

Stock or other securities, as the case may be) is issued upon the

exercise of Rights shall for all purposes be deemed to have become the

holder of record of the Preferred Stock (or Common Stock or other

securities, as the case may be) represented thereby on, and such

certificate shall be dated, the date upon which the Right Certificate

evidencing such Rights was duly surrendered and payment of the

Purchase Price (and any applicable transfer taxes) was made; provided,

however, that if the date of such surrender and payment is a date upon

which the Preferred Stock (or Common Stock or other securities, as the

case may be) transfer books of the Company are closed, such Person

shall be deemed to have become the record holder of such shares on,

and such certificate shall be dated, the next succeeding Business Day

on which the Preferred Stock (or Common Stock or other securities, as

the case may be) transfer books of the Company are open.  Prior to the

exercise of the Rights evidenced thereby, the holder of a Right

Certificate shall not be entitled to any rights of a shareholder of

the Company with respect to shares for which the Rights shall be

exercisable, including, without limitation, the right to vote, to

receive dividends or other distributions or to exercise any preemptive

rights, and shall not be entitled to receive any notice of any

proceedings of the Company, except as provided herein.

          

          Section 11.  Adjustment of Purchase Price, Number of Shares

or Number of Rights.  The Purchase Price, the number and kind of

shares covered by each Right and the number of Rights outstanding are

subject to adjustment from time to time as provided in this Section

11.

          (a)(i)  In the event the Company shall at any time after the

     date of this Agreement (A) declare a dividend on Common Stock

     payable in shares of Common Stock, (B) subdivide the outstanding

     Common Stock, (C) combine the outstanding Common Stock into a

     smaller number of shares or (D) issue any shares of its capital

     stock in a reclassification of the Common Stock (including any

     such reclassification in connection with a consolidation or

     merger in which the Company is the surviving corporation), except

     as otherwise provided in this Section 11(a), then and in each

     such event the number of shares issuable upon the exercise of a

     Right and the Purchase Price payable after such event shall be

     the number of shares issuable immediately prior to such event

     multiplied by a fraction the numerator of which is the number of

     Rights outstanding immediately prior to such event and the

     denominator of which is the number of Rights outstanding

     immediately after such event and the Purchase Price after such

     event shall be the Purchase Price in effect immediately prior to

     such event multiplied by such fraction.  If an event occurs which

     would require an adjustment under both Section 11(a)(i) and

     Section 11(a)(ii), the adjustment provided for in Section

     11(a)(i) shall be in addition to, and shall be made prior to, any

     adjustment required pursuant to Section 11(a)(ii).

               (ii)  In the event on or at any time after a Stock

          Acquisition Date

                    (A)(1) any Person (other than a wholly owned

               Subsidiary of the Company), directly or indirectly,

               shall merge into the Company or any of its Subsidiaries

               or otherwise combine with the Company or any of its

               Subsidiaries and the Company or such Subsidiary shall

               be the continuing or surviving corporation of such

               merger or combination, or (2) any Person, directly or

               indirectly, shall sell or otherwise transfer, in one or

               more transactions, assets to the Company or any of its

               Subsidiaries in exchange for 50% or more of the shares

               of any class of capital stock of the Company or any of

               its Subsidiaries, and Common Stock of the Company shall

               remain outstanding and unchanged,

                    (B)  any Acquiring Person, directly or indirectly,

               shall (1) in one or more transactions, transfer any

               assets to the Company or any of its Subsidiaries in

               exchange (in whole or in part) for shares of any class

               of capital stock of the Company or any of its

               Subsidiaries or for securities exercisable for or

               convertible into shares of any class of capital stock

               of the Company or any of its Subsidiaries or otherwise

               obtain from the Company or any of its Subsidiaries,

               with or without consideration, any additional shares of

               any class of capital stock of the Company or any of its

               Subsidiaries or other securities exercisable for or

               convertible into shares of any class of capital stock

               of the Company or any of its Subsidiaries (other than

               as part of a pro rata distribution to all holders of

               Common Stock), (2) sell, purchase, lease, exchange,

               mortgage, pledge, transfer or otherwise dispose of (in

               one or more transactions), to, from or with, as the

               case may be, the Company or any of its Subsidiaries,

               assets on terms and conditions less favorable to the

               Company or such Subsidiary than the Company or such

               Subsidiary would be able to obtain in arm's-length

               negotiation with an unaffiliated third party, (3)

               receive any compensation from the Company or any of the

               Company's Subsidiaries other than compensation for full-

               time employment as a regular employee, or fees for

               serving as director, at rates in accordance with the

               Company's (or its Subsidiaries') past practices, or (4)

               receive the benefit, directly or indirectly (except

               proportionately as a shareholder), of any loans,

               advances, guarantees, pledges or other financial

               assistance provided by the Company or any of its

               Subsidiaries on terms and conditions less favorable to

               the Company or such Subsidiary than the Company or such

               Subsidiary would be able to obtain in arm's-length

               negotiation with an unaffiliated party,

                    (C)  there shall be any reclassification of

               securities (including any reverse stock split), or

               recapitalization of the Company, or any merger or

               consolidation of the Company with any of its

               Subsidiaries or any other similar transaction or series

               of transactions involving the Company or any of its

               Subsidiaries (whether or not with or into or otherwise

               involving an Acquiring Person) which has the effect,

               directly or indirectly, of increasing by more than 1%

               the proportionate share of the outstanding shares of

               any class of equity securities or of securities

               exercisable for or convertible into equity securities

               of the Company or any of its Subsidiaries which is

               directly or indirectly owned by any Acquiring Person or

               any Associate or Affiliate of any Acquiring Person or

                    (D)  any Person (other than the Company, Lilly

               Endowment, Inc., any Subsidiary of the Company, any

               employee benefit plan or employee stock plan of the

               Company or of any Subsidiary of the Company or any

               Person organized, appointed, established or holding

               Voting Stock by, for or pursuant to, the terms of any

               such plan or any Person who acquires a Substantial

               Block in connection with a transaction or series of

               transactions approved prior to such transaction or

               transactions by the Board of Directors of the Company),

               who or which alone or together with its Affiliates and

               Associates become the Beneficial Owner of a number of

               shares of the outstanding Voting Stock having 25% or

               more of the general voting power of the Company; then,

               and in each such case, proper provision shall be made

               so that each holder of a Right, except as provided

               below and in Section 7(e), shall thereafter have the

               right to receive, upon exercise thereof at the then

               current Purchase Price in accordance with the terms of

               this Agreement, in lieu of a number of one-hundredths

               of a share of Preferred Stock, such number of shares of

               Common Stock of the Company as shall equal the result

               obtained by (x) multiplying the then current Purchase

               Price per one one-hundredth of a share of Preferred

               Stock by the number of one one-hundredths of a share of

               Preferred Stock for which a Right is then exercisable

               and dividing that product by (y) 50% of the current

               market price per share of Common Stock (determined

               pursuant to Section 11(d) hereof) on the date of the

               occurrence of any of the events listed above in this

               subparagraph (ii); provided, however, that if the

               transaction that would otherwise give rise to the

               foregoing adjustment is also subject to the provisions

               of Section 13, then only the provisions of Section 13

               shall apply and no adjustment shall be made pursuant to

               this Section 11(a)(ii).  The Company shall not

               consummate any such merger, combination, transfer or

               transaction unless prior thereto there shall be

               sufficient authorized but unissued Common Stock and

               authorized and issued Common Stock held in its treasury

               to permit the exercise in full of the Rights in

               accordance with the foregoing sentence; provided,

               however, that in no case may the Company consummate any

               such merger, combination, transfer or transaction if at

               the time of or immediately after such transaction there

               are any rights, warrants or other instruments or

               securities outstanding or agreements in effect which

               would substantially diminish or otherwise eliminate the

               benefits intended to be afforded by the Rights.

                    In the event that the issuance of any Common Stock

               pursuant to the exercise of the Rights as required by

               the preceding paragraph is prohibited by any provision

               of the Company's Articles of Incorporation, then upon

               the exercise of a Right in accordance with the

               preceding paragraph, proper provision shall be made so

               that each holder of a Right (except as provided in

               Section 7(e)) shall thereafter have the right to

               receive, upon exercise thereof at the then current

               Purchase Price in accordance with the terms of this

               Agreement, the greater of (x) the number of one one

               hundredths of a share of Preferred Stock to which such

               Right related immediately prior to such event or (y)

               the number of one one-hundredths of a share of

               Preferred Stock as shall, based on the current market

               price per share of Preferred Stock (determined pursuant

               to Section 11(d)) on the date of the occurrence of any

               one of the events listed above in this subparagraph

               (ii), have a value equal to twice the Purchase Price or

               such number of shares or other units of Equivalent

               Stock of the Company as shall equal the result obtained

               by (x) multiplying the then current Purchase Price per

               one one-hundredth of a share of Preferred Stock by the

               number of one one-hundredths of a share of Preferred

               Stock for which a Right is then exercisable and

               dividing that product by (y) 50% of the current market

               price per share or other unit of the Equivalent Stock

               of the Company (determined on substantially the same

               basis as is prescribed by Section 11(d)) on the date of

               consummation of such merger, combination or transfer.

               In the event that at any time the Company should be

               prohibited by law, by any provision of its Articles of

               Incorporation or by any instrument or agreement to

               which the Company is a party or by which it is bound

               from issuing sufficient Equivalent Stock to permit the

               exercise of all outstanding Rights in accordance with

               the foregoing sentence, then, in lieu of issuing such

               Equivalent Stock upon such exercise, the Company shall

               pay to each holder of a Right (except as provided in

               Section 7(e)) upon surrender of the Right as provided

               herein but without payment of the Purchase Price, an

               amount in cash for each Right equal to the Purchase

               Price.

            (iii)  In the event the Company shall at any time after

          the date of this Agreement (A) combine or subdivide the

          outstanding Preferred Stock into a different number of

          shares, or (B) issue any shares of its capital stock in a

          reclassification of the Preferred Stock (including any such

          reclassification in connection with a consolidation or

          merger in which the Company is the continuing or surviving

          corporation), except as otherwise provided in this Section

          11(a) and Section 7(e), the holder of any Right exercised

          after such time shall be entitled to receive, upon payment

          of the Purchase Price, the number of shares of Preferred

          Stock or the number and kind of shares of such other capital

          stock, as the case may be, issuable on the effective date of

          such combination, subdivision or reclassification which such

          holder would have been entitled to receive had such holder

          been the holder of the number of shares of Preferred Stock

          for which such Right was then exercisable immediately prior

          to such effective date.  If an event occurs which would

          require an adjustment under both this Section 11(a)(iii) and

          Section 11(a)(ii), the adjustment provided for in this

          Section 11(a)(iii) shall be in addition to, and shall be

          made prior to, any adjustment required pursuant to Section

          11(a)(ii).

          (b)  In case the Company shall fix a record date for the

     issuance of rights or warrants to all holders of shares of Common

     Stock entitling them (for a period expiring within 45 calendar

     days after such record date) to subscribe for or purchase Common

     Stock or securities convertible into Common Stock at a price per

     share of Common Stock (or having a conversion price per share, if

     a security convertible into Common Stock) less than the current

     market price per share of Common Stock (as defined in Section

     11(d)) on such record date, the Purchase Price to be in effect

     after such record date shall be determined by multiplying the

     Purchase Price in effect immediately prior to such record date by

     a fraction, of which the numerator shall be the number of shares

     of Common Stock outstanding on such record date plus the number

     of shares of Common Stock which the aggregate offering price of

     the total number of shares of Common Stock so to be offered

     (and/or the aggregate initial conversion price of the convertible

     securities so to be offered) would purchase at such current

     market price and of which the denominator shall be the number of

     shares of Common Stock outstanding on such record date plus the

     number of additional shares of Common Stock to be offered for

     subscription or purchase (or into which the convertible

     securities to be offered are initially convertible).  In case

     such subscription price may be paid in a consideration part or

     all of which shall be in a form other than cash, the value of

     such consideration shall be as determined in good faith by the

     Board of Directors of the Company, whose determination shall be

     described in a statement filed with the Rights Agent.  Shares of

     Common Stock owned by or held for the account of the Company

     shall not be deemed outstanding for the purpose of any such

     computation.  Such adjustment shall be made successively whenever

     such a record date is fixed; and in the event that such rights or

     warrants are not so issued, the Purchase Price shall be adjusted

     to be the Purchase Price which would then be in effect if such

     record date had not been fixed.

          (c)  In case the Company shall fix a record date for the

     making of a distribution to all holders of shares of Common Stock

     (including any such distribution made in connection with a

     consolidation or merger in which the Company is the continuing

     corporation) of evidences of indebtedness or assets (other than

     any distribution approved by a majority of the Continuing

     Directors then in office or a regular periodic cash dividend at a

     rate not in excess of 130% of the rate of the last cash dividend

     theretofore paid or a dividend payable in Common Stock) or

     subscription rights or warrants (excluding those referred to in

     Section 11(b)), the Purchase Price to be in effect after such

     record date shall be determined by multiplying the Purchase Price

     in effect immediately prior to such record date by a fraction, of

     which the numerator shall be the current market price per share

     of Common Stock (as defined in Section 11(d)) on such record

     date, less the fair market value (as determined in good faith by

     the Board of Directors of the Company, whose determination shall

     be described in a statement filed with the Rights Agent) of the

     portion of the assets or evidences of indebtedness so to be

     distributed or of such subscription rights or warrants applicable

     to one share of Common Stock, and of which the denominator shall

     be such current market price per share of Common Stock.  Such

     adjustments shall be made successively whenever such a record

     date is fixed; and in the event that such distribution is not so

     made, the Purchase Price shall again be adjusted to be the

     Purchase Price which would then be in effect if such record date

     had not been fixed.

          (d)  For the purpose of any computation hereunder, the

     "current market price" per share of Preferred Stock or Common

     Stock on any date shall be deemed to be the average of the daily

     closing prices per share of such stock for the 30 consecutive

     Trading Days immediately prior to such date; provided, however,

     that in the event that the current market price per share of such

     stock is determined during a period following the announcement by

     the issuer of such stock of a dividend or distribution on such

     stock payable in shares of such stock or securities convertible

     into shares of such stock, and prior to the expiration of 30

     Trading Days after the ex-dividend date for such dividend or

     distribution, then, and in each such case, the current market

     price shall be appropriately adjusted to reflect the current

     market price per share of such stock.  The closing price for each

     day shall be the last sale price, regular way, or, in case no

     such sale takes place on such day, the average of the closing bid

     and asked prices, regular way, in either case as reported in the

     principal consolidated transaction reporting system with respect

     to securities listed or admitted to trading on the New York Stock

     Exchange or, if the shares of such stock are not listed or

     admitted to trading on the New York Stock Exchange, as reported

     in the principal consolidated transaction reporting system with

     respect to securities listed on the principal national securities

     exchange on which the shares of such stock are listed or admitted

     to trading or, if the shares of such stock are not listed or

     admitted to trading on any national securities exchange, the

     average of the high bid and low asked prices in the over-the-

     counter market, as reported by the National Association of

     Securities Dealers, Inc., Automated Quotation System ( "NASDAQ

     ").  If on any such date the shares of such stock are not quoted

     by any such organization, the fair value of such shares on such

     date as determined in good faith by the Board of Directors of the

     Company shall be used.  The term  "Trading Day " shall mean a day

     on which the principal national securities exchange on which the

     shares of such stock are listed or admitted to trading is open

     for the transaction of business or, if the shares of such stock

     are not listed or admitted to trading on any national securities

     exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on

     which banking institutions in the State of Indiana are not

     authorized or obligated by law or executive order to close.  If

     such stock is not publicly held or not so listed or traded,

     "current market price " per share shall mean the fair value per

     share as determined in good faith by the Board of Directors of

     the Company, whose determination shall be described in a

     statement filed with the Rights Agent.

          (e)  Except as hereinafter provided, no adjustment in the

     Purchase Price shall be required unless such adjustment would

     require an increase or decrease of at least 1% in such price;

     provided, however, that any adjustments which by reason of this

     Section 11(e) are not required to be made shall be carried

     forward and taken into account in any subsequent adjustment.  All

     calculations under this Section 11 shall be made to the nearest

     cent or to the nearest one hundredth of a share as the case may

     be.  Notwithstanding the first sentence of this Section 11(e),

     any adjustment required by this Section 11 shall be made no later

     than the earlier of (i) three years from the date of the

     transaction which mandates such adjustment or (ii) the date of

     the expiration of the right to exercise any Rights.

          (f)  In the event that at any time, as a result of an

     adjustment made pursuant to Section 11(a)(ii) or Section 13, the

     holder of any Right thereafter exercised shall become entitled to

     receive any shares of capital stock other than shares of

     Preferred Stock, thereafter the number of such other shares so

     receivable upon exercise of any Right shall be subject to

     adjustment from time to time in a manner and on terms as nearly

     equivalent as practicable to the provisions with respect to the

     shares contained in Section 11(a), (b), (c), (e), (g), (h), (i),

     (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and

     14 with respect to the shares of Preferred Stock shall apply on

     like terms to any such other shares.

          (g)  All Rights originally issued by the Company subsequent

     to any adjustment made to the Purchase Price hereunder shall

     evidence the right to purchase, at the adjusted Purchase Price,

     the number of one one-hundredths of a share of Preferred Stock

     purchasable from time to time hereunder upon exercise of the

     Rights, all subject to further adjustment as provided herein.

          (h)  Unless the Company shall have exercised its election as

     provided in Section 11(i), upon each adjustment of the Purchase

     Price as a result of the calculations made in Section 11(b) and

     (c), each Right outstanding immediately prior to the making of

     such adjustment shall thereafter evidence the right to purchase,

     at the adjusted Purchase Price, that number of one one-hundredths

     of a share (calculated to the nearest one-hundredth) obtained by

     (i) multiplying (x) the number of one one-hundredths of a share

     covered by a Right immediately prior to such adjustment by (y)

     the Purchase Price in effect immediately prior to such adjustment

     of the Purchase Price and (ii) dividing the product so obtained

     by the Purchase Price in effect immediately after such adjustment

     of the Purchase Price.

               (i)  The Company may elect on or after the date of any

     adjustment of the Purchase Price to adjust the number of Rights,

     in substitution for any adjustment in the number of shares of

     Preferred Stock purchasable upon the exercise of a Right.  Each

     of the Rights outstanding after such adjustment of the numbers of

     Rights shall be exercisable for the number of shares of Preferred

     Stock for which a Right was exercisable immediately prior to such

     adjustment.  Each Right held of record prior to such adjustment

     of the number of Rights shall become that number of Rights

     (calculated to the nearest one-hundredth) obtained by dividing

     the Purchase Price in effect immediately prior to adjustment of

     the Purchase Price by the Purchase Price in effect immediately

     after adjustment of the Purchase Price.  The Company shall make a

     public announcement of its election to adjust the number of

     Rights, indicating the record date for the adjustment, and, if

     known at the time, the amount of the adjustment to be made.  This

     record date may be the date on which the Purchase Price is

     adjusted or any day thereafter, but, if the Right Certificates

     have been issued, shall be at least 10 days later than the date

     of the public announcement.  If Right Certificates have been

     issued, upon each adjustment of the number of Rights pursuant to

     this Section 11(i) the Company shall, as promptly as practicable,

     cause to be distributed to holders of record of Right

     Certificates on such record date Right Certificates evidencing,

     subject to Section 14, the additional Rights to which such

     holders shall be entitled as a result of such adjustment, or, at

     the option of the Company, shall cause to be distributed to such

     holders of record in substitution and replacement for the Right

     Certificates held by such holders prior to the date of

     adjustment, and upon surrender thereof, if required by the

     Company, new Right Certificates evidencing all the Rights to

     which such holders shall be entitled after such adjustment.

     Right Certificates so to be distributed shall be issued, executed

     and countersigned in the manner provided for herein (and may

     bear, at the option of the Company, the adjusted Purchase Price)

     and shall be registered in the names of the holders of record of

     Right Certificates on the record date specified in the public

     announcement.

          (j)  Irrespective of any adjustment or change in the

     Purchase Price or the number of one one-hundredths of a share of

     Preferred Stock issuable upon the exercise of the Rights, the

     Right Certificates theretofore and thereafter issued may continue

     to express the Purchase Price per one one-hundredth share and the

     number of shares which were expressed in the initial Right

     Certificates issued hereunder.

          (k)  Before taking any action that would cause an adjustment

     reducing the Purchase Price below the then par value of the

     shares of Preferred Stock issuable upon exercise of the Rights,

     the Company shall take all corporate action which may, in the

     opinion of its counsel, be necessary in order that the Company

     may validly and legally issue fully paid and non assessable

     shares of such Preferred Stock at such adjusted Purchase Price.

          (l)  In any case in which this Section 11 shall require that

     an adjustment in the Purchase Price be made effective as of a

     record date for a specified event, the Company may elect to defer

     until the occurrence of such event the issuing to the holder of

     any Right exercised after such record date the shares of

     Preferred Stock and other capital stock or securities of the

     Company, if any, issuable upon such exercise over and above the

     shares of Preferred Stock and other capital stock or securities

     of the Company, if any, issuable upon such exercise on the basis

     of the Purchase Price in effect prior to such adjustment;

     provided, however, that the Company shall deliver to such holder

     a due bill or other appropriate instrument evidencing such

     holder's right to receive such additional shares and securities

     upon the occurrence of the event requiring such adjustment.

          (m)  Anything in this Section 11 to the contrary

     notwithstanding, the Company shall be entitled to make such

     reductions in the Purchase Price, in addition to those

     adjustments expressly required by this Section 11, as and to the

     extent that it in its sole discretion shall determine to be

     advisable in order that any consolidation or subdivision of the

     Common Stock or Preferred Stock, issuance wholly for cash of any

     Common Stock at less than the current market price, issuance

     wholly for cash of Common Stock or securities which by their

     terms are convertible into or exchangeable for Common Stock,

     stock dividends or issuance of rights, options or warrants

     referred to hereinabove in this Section 11, hereafter made by the

     Company to holders of its Common Stock and/or Preferred Stock

     shall not be taxable to such shareholders.

          

          Section 12.  Certification of Adjusted Purchase Price or

Number of Shares.  Whenever an adjustment is made as provided in

Section 11 or 13, the Company shall (a) promptly prepare a certificate

setting forth such adjustment, and a brief statement of the facts

accounting for such adjustment, (b) promptly file with the Rights

Agent and with each transfer agent for the Preferred Stock or the

Common Stock a copy of such certificate and (c) mail a brief summary

thereof to each holder of a Right Certificate in accordance with

Section 25.  Notwithstanding the foregoing sentence, the failure of

the Company to give such notice shall not affect the validity of, or

the force or effect of, the requirement for such adjustment.

          

          Section 13.  Consolidation, Merger or Sale or Transfer of

Assets or Earning Power.  In the event on or at any time after a Stock

Acquisition Date, directly or indirectly, (a) the Company shall

consolidate with, or merge with and into, any other Person, (b) any

other Person shall consolidate, merge with and into the Company, the

Company shall be the continuing or surviving corporation of such

merger and, in connection with such merger, all or part of the Common

Stock shall be changed into or exchanged for stock or other securities

of any other Person or cash or any other property, or (c) the Company

shall sell or otherwise transfer (or one or more of its Subsidiaries

shall sell or otherwise transfer), in one or more transactions, assets

or earning power aggregating more than 50% of the assets or earning

power of the Company and its Subsidiaries (taken as a whole) to any

other Person (other than a pro rata distribution by the Company of

assets (including securities) of the Company or any of its

Subsidiaries to all holders of the Company's Common Stock), then, and

in each such case:

          (A)  except as provided in Section 7(e), proper provision

     shall be made so that (i) each holder of a Right shall thereafter

     have the right to receive, upon the exercise thereof at the then

     current Purchase Price in accordance with the terms of this

     Agreement, such number of shares of common stock of the Principal

     Party (as hereinafter defined) as shall, based on the current

     market price per share of the common stock of the Principal Party

     (determined in the same manner as the current market price of

     Common Stock is determined under Section 11(d)) on the date of

     consummation of such consolidation, merger, sale or transfer,

     have a value equal to twice the Purchase Price; (ii) the

     Principal Party shall thereafter be liable for, and shall assume,

     by virtue of such consolidation, merger, sale or transfer, all

     the obligations and duties of the Company pursuant to this

     Agreement; (iii) the term  "Company " shall thereafter be deemed

     to refer to such Principal Party; and (iv) the Principal Party

     shall take such steps (including, but not limited to, the

     reservation of a sufficient number of shares of its common stock

     in accordance with Section 9) in connection with such

     consummation as may be necessary to assure that the provisions

     hereof shall thereafter be applicable, as nearly as reasonably

     may be, in relation to the shares of its common stock thereafter

     deliverable upon the exercise of the Rights; provided, however,

     that, upon the subsequent occurrence of any merger,

     consolidation, sale of all or substantially all assets,

     recapitalization, reclassification of shares, reorganization or

     other extraordinary transaction in respect of such Principal

     Party, except as provided in Section 7(e), each holder of a Right

     shall thereupon be entitled to receive, upon exercise of a Right

     and payment of the Purchase Price, such cash, shares, rights,

     warrants and other property which such holder would have been

     entitled to receive had such holder, at the time of such

     transaction, owned the shares of common stock of the Principal

     Party purchasable upon the exercise of a Right, and such

     Principal Party shall take such steps (including, but not limited

     to, reservation of shares of stock) as may be necessary to permit

     the subsequent exercise of the Rights in accordance with the

     terms hereof for such cash, shares, rights, warrants and other

     property.

          (B)  "Principal Party" shall mean

               (1)  in the case of any transaction described in (a) or

          (b) of the first sentence of this Section 13, (i) the Person

          that is the issuer of any securities into which shares of

          Common Stock of the Company are converted in such merger or

          consolidation, or, if there is more than one such issuer,

          the issuer the common stock of which has the greatest market

          value or (ii) if no securities are so issued, (x) the Person

          that is the other party to the merger or consolidation and

          that survives said merger or consolidation, or, if there is

          more than one such Person, the Person the common stock of

          which has the greatest market value or (y) if the Person

          that is the other party to the merger or consolidation does

          not survive the merger or consolidation, the Person that

          does survive the merger or consolidation (including the

          Company if it survives);

               (2)  in the case of any transaction described in (c) of

          the first sentence of this Section 13, the Person that is

          the party receiving the greatest portion of the assets or

          earning power transferred pursuant to such transaction or

          transactions, or, if each Person that is a party to such

          transaction or transactions receives the same portion of the

          assets or earning power so transferred or if the Person

          receiving the greatest portion of the assets or earning

          power cannot be determined, whichever of such Persons as is

          the issuer of common stock having the greatest market value

          of shares outstanding; provided, however, that in any such

          case (w) if the common stock of such Person is not at such

          time and has not been continuously over the preceding 12-

          month period registered under Section 12 of the Exchange

          Act, and such Person is a direct or indirect Subsidiary of

          another corporation the common stock of which is and has

          been so registered,  "Principal Party " shall refer to such

          other corporation, (x) if the common stock of such Person is

          not and has not been so registered and such Person is not a

          direct or indirect Subsidiary of another corporation the

          common stock of which is and has been so registered,

          "Principal Party " shall refer to the corporation which

          ultimately controls such Person, (y) in case such Person is

          a Subsidiary, directly or indirectly, of more than one

          corporation, the common stocks of all of which are and have

          been so registered,  "Principal Party " shall refer to

          whichever of such corporations is the issuer of the common

          stock having the greatest market value of shares held by the

          public, and (z) in case such Person is owned, directly or

          indirectly, by a joint venture formed by two or more Persons

          that are not owned, directly or indirectly, by the same

          Person, the rules set forth in (w) - (y) above shall apply

          to each of the chains of ownership having an interest in

          such joint venture as if such party were a Subsidiary of

          both or all of such joint ventures and the Principal Parties

          in each such chain shall bear the obligations set forth in

          this Section 13 in the same ratio as their direct or

          indirect interests in such Person bear to the total of such

          interests.

               The Company shall not consummate any such

          consolidation, merger, sale or transfer unless prior thereto

          the Company and such issuer shall have executed and

          delivered to the Rights Agent a supplemental agreement

          making valid provision for the result described in

          subsections (A) and (B) above provided, however, that in no

          case may the Company consummate any such consolidation,

          merger, sale or transfer if (i) at the time of or

          immediately after such transaction there are any rights,

          warrants or other instruments or securities outstanding or

          agreements in effect which would substantially diminish or

          otherwise eliminate the benefits intended to be afforded by

          the Rights or (ii) prior to, simultaneously with or

          immediately after such transaction, the shareholders of the

          Person who constitutes, or would constitute, the Principal

          Party for purposes of Section 13 shall have received a

          distribution of Rights previously owned by such Person or

          any of its Affiliates and Associates.  The provisions of

          this Section 13 shall similarly apply to successive mergers

          or consolidations or sales or other transfers.

               

          Section 14.  Fractional Rights and Fractional Shares.

          (a)  The Company shall not be required to issue fractions of

     Rights or to distribute Right Certificates which evidence

     fractional Rights.  If the Company shall determine not to issue

     such fractional Rights, in lieu of such fractional Rights, there

     shall be paid to the registered holders of the Right Certificates

     with regard to which such fractional Rights would otherwise be

     issuable an amount in cash equal to the same fraction of the

     current market value of a whole Right.  For the purposes of this

     Section 14(a), the current market value of a whole Right shall be

     the closing price of the Rights for the Trading Day immediately

     prior to the date on which such fractional Rights would have been

     otherwise issuable.  The closing price for any day shall be the

     last sale price, regular way, or, in case no such sale takes

     place on such day, the average of the closing bid and asked

     prices, regular way, in either case as reported in the principal

     consolidated transaction reporting system with respect to

     securities listed or admitted to trading on the New York Stock

     Exchange or, if the Rights are not listed or admitted to trading

     on the New York Stock Exchange, as reported in the principal

     consolidated transaction reporting system with respect to

     securities listed on the principal national securities exchange

     on which the Rights are listed or admitted to trading or, if the

     Rights are not listed or admitted to trading on any national

     securities exchange, the average of the high bid and low asked

     prices in the over-the-counter market, as reported by NASDAQ.  If

     on any such date the Rights are not quoted by any such

     organization, the fair value of the Rights on such date as

     determined in good faith by the Board of Directors of the Company

     shall be used.

          (b)  The Company shall not be required to issue fractions of

     shares (other than fractions which are integral multiples of the

     fraction of a share for which a Right is then exercisable) upon

     exercise of the Rights or to distribute certificates which

     evidence fractional shares (other than fractions which are

     integral multiples of the fraction of a share for which a Right

     is exercisable).  In lieu of fractional shares that are not

     integral multiples of the fraction for which a Right is then

     exercisable, the Company shall pay to the registered holders of

     Right Certificates at the time such Right Certificates are

     exercised as herein provided an amount in cash equal to the same

     fraction of the current market value of a share of Preferred

     Stock.  For purposes of this Section 14, the current market value

     of a share of Preferred Stock shall be the closing price of a

     share of Preferred Stock (as determined pursuant to the second

     sentence of Section 11(d)) for the Trading Day immediately prior

     to the date of such exercise.

          (c)  The holder of a Right by the acceptance of the Rights

     expressly waives his right to receive any fractional Rights or

     any fractional shares (other than fractions which are integral

     multiples of the fraction of a share for which a Right is then

     exercisable) upon exercise of a Right.

          

          Section 15.  Rights of Action.  All rights of action in

respect of this Agreement are vested in the respective registered

holders of the Right Certificates (and prior to the Distribution Date,

the registered holders of the Common Stock); and any registered holder

of any Right Certificate (or, prior to the Distribution Date, any

registered holder of the Common Stock), without the consent of the

Rights Agent or of the holder of any other Right Certificate (or,

prior to the Distribution Date, any registered holder of the Common

Stock), may, on his own behalf and for his own benefit, enforce, and

may institute and maintain any suit, action or proceeding against the

Company to enforce, or otherwise act in respect of, his right to

exercise the Rights evidenced by such Right Certificate in the manner

provided in such Right Certificate and in this Agreement.  Without

limiting the foregoing or any remedies available to the holders of

Rights, it is specifically acknowledged that the holders of Rights

would not have an adequate remedy at law for any breach of this

Agreement and will be entitled to specific performance of the

obligations under, and injunctive relief against actual or threatened

violations of the obligations of any Person subject to, this

Agreement.

          

          Section 16.  Agreement of Right Holders.  Every holder of a

Right by accepting the same, consents and agrees with the Company and

the Rights Agent and with every other holder of a Right that:

               (a)  up to and including the Distribution Date, the

     Rights will be transferable only in connection with the transfer

     of Common Stock;

               (b)  after the Distribution Date, the Right

     Certificates are transferable only on the registry books of the

     Rights Agent and then if surrendered at the principal stock

     transfer office of the Rights Agent, duly endorsed or accompanied

     by a proper instrument of transfer; and

               (c)  the Company and the Rights Agent may deem and

     treat the person in whose name the Right Certificate (or, prior

     to the Distribution Date, the associated Common Stock

     certificate) is registered as the absolute owner thereof and of

     the Rights evidenced thereby (notwithstanding any notations of

     ownership or writing on the Right Certificate or the associated

     Common Stock certificate made by anyone other than the Company or

     the Rights Agent) for all purposes whatsoever, and neither the

     Company nor the Rights Agent shall be affected by any notice to

     the contrary.

          

          Section 17.  Right Certificate Holder Not Deemed a

Shareholder.  No holder, as such, of any Right Certificate shall be

entitled to vote, receive dividends or be deemed for any purpose the

holder of Preferred Stock or any other securities of the Company which

may at any time be issuable on the exercise of the Rights represented

thereby, nor shall anything contained herein or in any Right

Certificate be construed to confer upon the holder of any Right

Certificate, as such, any of the rights of a shareholder of the

Company or any right to vote for the election of directors or upon any

matter submitted to shareholders at any meeting thereof, or to give or

withhold consent to any corporate action, or to receive notice of

meetings or other actions affecting shareholders (except as provided

in Section 24),or to receive dividends or subscription rights, or

otherwise, until the Right or Rights evidenced by such Right

Certificate shall have been exercised in accordance with the

provisions hereof.

          

          Section 18.  Concerning the Rights Agent.

          (a)  The Company agrees to pay to the Rights Agent

     reasonable compensation for all services rendered by it hereunder

     and, from time to time, on demand of the Rights Agent, its

     reasonable expenses and counsel fees and other disbursements

     incurred in the administration and execution of this Agreement

     and the exercise and performance of its duties hereunder.  The

     Company also agrees to indemnify the Rights Agent for, and to

     hold it harmless against, any loss, liability, or expense,

     incurred without gross negligence, bad faith or willful

     misconduct on the part of the Rights Agent, for anything done or

     omitted by the Rights Agent in connection with the acceptance and

     administration of this Agreement, including the costs and

     expenses of defending against any claim of liability in the

     premises.

               (b)  The Rights Agent shall be protected and shall

     incur no liability for or in respect of any action taken,

     suffered or omitted by it in connection with its administration

     of this Agreement in reliance upon any Right Certificate or

     certificate for Common Stock or for other securities of the

     Company, instrument of assignment or transfer, power of attorney,

     endorsement, affidavit, letter, notice, direction, consent,

     certificate, statement, or other paper or document believed by it

     to be genuine and to be signed, executed and, where necessary,

     verified or acknowledged, by the proper person or persons.

          

          Section 19.  Merger or Consolidation or Change of Name of

Rights Agent.

          (a)  Any corporation into which the Rights Agent or any

     successor Rights Agent may be merged or with which it may be

     consolidated, or any corporation resulting from any merger or

     consolidation to which the Rights Agent or any successor Rights

     Agent shall be a party, or any corporation succeeding to the

     stock transfer business of the Rights Agent or any successor

     Rights Agent, shall be the successor to the Rights Agent under

     this Agreement without the execution or filing of any paper or

     any further act on the part of any of the parties hereto,

     provided that such corporation would be eligible for appointment

     as a successor Rights Agent under the provisions of Section 21.

     In case at the time such successor Rights Agent shall succeed to

     the agency created by this Agreement, any of the Right

     Certificates shall have been countersigned but not delivered, any

     such successor Rights Agent may adopt the countersignature of the

     predecessor Rights Agent and deliver such Right Certificates so

     countersigned, and in case at that time any of the Right

     Certificates shall not have been countersigned, any successor

     Rights Agent may countersign such Right Certificates either in

     the name of the predecessor Rights Agent or in the name of the

     successor Rights Agent; and in all such cases such Right

     Certificates shall have the full force provided in the Right

     Certificates and in this Agreement.

               (b)  In case at any time the name of the Rights Agent

     shall be changed and at such time any of the Right Certificates

     shall have been countersigned but not delivered, the Rights Agent

     may adopt the countersignature under its prior name and deliver

     Right Certificates so countersigned; and in case at that time any

     of the Right Certificates shall not have been countersigned, the

     Rights Agent may countersign such Right Certificates either in

     its prior name or in its changed name; and in all such cases such

     Right Certificates shall have the full force provided in the

     Right Certificates and in this Agreement.

          

          Section 20.  Duties of Rights Agent.  The Rights Agent

undertakes the duties and obligations imposed by this Agreement upon

the following terms and conditions, by all of which the Company and

the holders of Right Certificates, by their acceptance thereof, shall

be bound:

          (a)  The Rights Agent may consult with legal counsel (who

     may be legal counsel for the Company), and the opinion of such

     counsel shall be full and complete authorization and protection

     to the Rights Agent as to any action taken or omitted by it in

     good faith and in accordance with such opinion.

          (b)  Whenever in the performance of its duties under this

     Agreement the Rights Agent shall deem it necessary or desirable

     that any fact or matter be proved or established by the Company

     prior to taking or suffering any action hereunder, such fact or

     matter (unless other evidence in respect thereof be herein

     specifically prescribed) may be deemed to be conclusively proved

     and established by a certificate signed by the President, any

     Vice President, the Treasurer, any Assistant Treasurer, the

     Secretary or any Assistant Secretary of the Company and delivered

     to the Rights Agent; and such certificate shall be full

     authorization to the Rights Agent for any action taken or

     suffered in good faith by it under the provisions of this

     Agreement in reliance upon such certificate.

          (c)  The Rights Agent shall be liable hereunder only for its

     own gross negligence, bad faith or willful misconduct.

          (d)  The Rights Agent shall not be liable for or by reason

     of any of the statements of fact or recitals contained in this

     Agreement or in the Right Certificates (except its

     countersignature thereof) or be required to verify the same, but

     all such statements and recitals are and shall be deemed to have

     been made by the Company only.

          (e)  The Rights Agent shall not be under any responsibility

     in respect of the validity of this Agreement or the execution and

     delivery hereof (except the due execution hereof by the Rights

     Agent) or in respect of the validity or execution of any Right

     Certificate (except its countersignature thereof); nor shall it

     be responsible for any breach by the Company of any covenant or

     condition contained in this Agreement or in any Right Certificate

     nor shall it be responsible for any adjustment required under the

     provisions of Section 11 or 13 or responsible for the manner,

     method or amount of any such adjustment or the ascertaining of

     the existence of facts that would require any such adjustment

     (except with respect to the exercise of Rights evidenced by Right

     Certificates after actual notice of any such adjustment); nor

     shall it by any act hereunder be deemed to make any

     representation or warranty as to the authorization or reservation

     of any shares of Preferred Stock to be issued pursuant to this

     Agreement or any Right Certificate or as to whether any shares of

     Preferred Stock will, when issued, be validly authorized and

     issued, fully paid and non assessable.

          (f)  The Company agrees that it will perform, execute,

     acknowledge and deliver or cause to be performed, executed,

     acknowledged and delivered all such further and other acts,

     instruments and assurances as may reasonably be required by the

     Rights Agent for the carrying out or performing by the Rights

     Agent of the provisions of this Agreement.

          (g)  The Rights Agent is hereby authorized and directed to

     accept instructions with respect to the performance of its duties

     hereunder from the President, any Vice President, the Secretary,

     any Assistant Secretary, the Treasurer or any Assistant Treasurer

     of the Company, and to apply to such officers for advice or

     instructions in connection with its duties, and it shall not be

     liable for any action taken or suffered to be taken by it in good

     faith in accordance with instructions of any such officer.

          (h)  The Rights Agent and any shareholder, director, officer

     or employee of the Rights Agent may buy, sell or deal in any of

     the Rights or other securities of the Company or become

     pecuniarily interested in any transaction in which the Company

     may be interested, or contract with or lend money to the Company

     or otherwise act as fully and freely as though it were not Rights

     Agent under this Agreement.  Nothing herein shall preclude the

     Rights Agent from acting in any other capacity for the Company or

     for any other legal entity.

          (i)  The Rights Agent may execute and exercise any of the

     rights or powers hereby vested in it or perform any duty

     hereunder either itself or by or through its attorneys or agents,

     and the Rights Agent shall not be answerable or accountable for

     any act, default, neglect or misconduct of any such attorneys or

     agents or for any loss to the Company resulting from any such

     act, default, neglect or misconduct, provided reasonable care was

     exercised in the selection and continued employment thereof.

          (j)  If, with respect to any Right Certificate surrendered

     to the Rights Agent for exercise or transfer, the certificate

     attached to the form of assignment or form of election to

     purchase, as the case may be, has either not been completed or

     indicates an affirmative response to clause 1 and/or 2 thereof,

     the Rights Agent shall not take any further action with respect

     to such requested exercise of transfer without first consulting

     with the Company.

          

          Section 21.  Change of Rights Agent.  The Rights Agent or

any successor Rights Agent may resign and be discharged from its

duties under this Agreement upon 30 days' notice in writing mailed to

the Company and to each transfer agent of Common Stock and Preferred

Stock by registered or certified mail, and to the holders of the Right

Certificates by first-class mail.  The Company may remove the Rights

Agent or any successor Rights Agent upon 30 days' notice in writing,

mailed to the Rights Agent or successor Rights Agent, as the case may

be, and to each transfer agent of Common Stock and Preferred Stock by

registered or certified mail, and to the holders of the Right

Certificates by first-class mail.  If the Rights Agent shall resign or

be removed or shall otherwise become incapable of acting, the Company

shall appoint a successor to the Rights Agent.  If the Company shall

fail to make such appointment within a period of 30 days after such

removal or after it has been notified in writing of such resignation

or incapacity by the resigning or incapacitated Rights Agent or by the

holder of a Right Certificate (who shall, with such notice, submit his

Right Certificate for inspection by the Company), then such registered

holder of any Right Certificate may apply to any court of competent

jurisdiction for the appointment of a new Rights Agent.  Any successor

Rights Agent whether appointed by the Company or by such a court,

shall be a corporation organized and doing business under the laws of

the United States or of a state of the United States in good standing,

which is authorized under such laws to exercise stock transfer powers

and is subject to supervision or examination by federal or state

authority and which has at the time of its appointment as Rights Agent

a combined capital and surplus of at least $50,000,000.  After

appointment, the successor Rights Agent shall be vested with the same

powers, rights, duties and responsibilities as if it had been

originally named as Rights Agent without further act or deed; but the

predecessor Rights Agent shall deliver and transfer to the successor

Rights Agent any property at the time held by it hereunder, and

execute and deliver any further assurance, conveyance, act or deed

necessary for the purpose.  Not later than the effective date of any

such appointment the Company shall file notice thereof in writing with

the predecessor Rights Agent and each transfer agent of Common Stock

and Preferred Stock, and mail a notice thereof in writing to the

registered holders of the Right Certificates.  Failure to give any

notice provided for in this Section 21, however, or any defect

therein, shall not affect the legality or validity of the resignation

or removal of the Rights Agent or the appointment of the successor

Rights Agent, as the case may be.

          

          Section 22.  Issuance of New Right Certificates.

Notwithstanding any of the provisions of this Agreement or of the

Rights to the contrary, the Company may, at its option, issue new

Right Certificates evidencing Rights in such form as may be approved

by its Board of Directors to reflect any adjustment or change in the

Purchase Price per share and the number or kind or class of shares of

stock or other securities or property purchasable under the Right

Certificates made in accordance with the provisions of this Agreement.

          

          Section 23.  Redemption.  The Board of Directors may, at its

option and as provided herein, elect to redeem all but not less than

all the then outstanding Rights at a redemption price of $.01 per

Right; as such amount may be appropriately adjusted to reflect any

combination or subdivision of the outstanding Common Stock, any

dividend payable in Common Stock in respect of the outstanding Common

Stock or any other similar transaction occurring after the date hereof

(such redemption price being hereinafter referred to as the

"Redemption Price ") at any time up to and including the tenth

Business Day after a Stock Acquisition Date; provided, however, that

the Board of Directors of the Company may extend the time during which

the Rights may be redeemed to be at any time as may be determined by

the Board of Directors of the Company; and provided, further, that if

the Board of Directors of the Company authorizes redemption of the

Rights or an extension of the time period during which the Rights may

be redeemed after the time that any Person becomes an Acquiring

Person, then there must be Continuing Directors then in office and

such authorization or extension shall require the concurrence of a

majority of such Continuing Directors.  Promptly upon the action of

the Board of Directors of the Company electing to redeem the Rights,

the Company shall make a public announcement thereof, and from and

after the date of such announcement, without any further action and

without any further notice, the only right of the holders of Rights

shall be to receive the Redemption Price.  As soon as practicable

after the action of the Board of Directors ordering the redemption of

the Rights, the Company shall give notice of such redemption to the

holders of the then outstanding Rights by mailing such notice to all

such holders at their last addresses as they appear upon the registry

books of the Rights Agent.  Any notice which is mailed in the manner

herein provided shall be deemed given, whether or not the holder

receives the notice.  Each such notice of redemption will state the

method by which the payment of the Redemption Price will be made.

Notwithstanding anything contained in this Agreement to the contrary,

the Rights shall not be exercisable prior to the expiration of the

Company's right of redemption hereunder.

          

          Section 24.  Notice of Proposed Actions.

          (a) In case the Company, after the Distribution Date, shall

     propose (1) to pay any dividend payable in stock of any class to

     the holders of its Common Stock or Preferred Stock or to make any

     other distribution to the holders of its Common Stock or

     Preferred Stock (other than any distribution approved by a

     majority of the Continuing Directors then in office or a regular

     periodic cash dividend at a rate not in excess of 130% of the

     rate of the last cash dividend theretofore paid), or (2) to offer

     to the holders of its Common Stock or Preferred Stock rights or

     warrants to subscribe for or to purchase any additional shares of

     Common Stock or Preferred Stock or shares of stock of any class

     or any other securities, rights or options, or (3) to effect any

     reclassification of its Common Stock or Preferred Stock (other

     than a reclassification involving only the subdivision of

     outstanding shares of Common Stock), or (4) to effect any

     consolidation or merger into or with, or to effect any sale or

     other transfer (or to permit one or more of its Subsidiaries to

     effect any sale or other transfer), in one or more transactions,

     of more than 50% of the assets or earning power of the Company

     and its Subsidiaries (taken as a whole) to, any other Person, or

     (5) to effect the liquidation, dissolution or winding up of the

     Company, then, in each such case, the Company shall give to each

     holder of a Right, in accordance with Section 25, a notice of

     such proposed action, which shall specify the record date for the

     purposes of such stock dividend, distribution of rights or

     warrants, or the date on which such reclassification,

     consolidation, merger, sale, transfer, liquidation, dissolution,

     or winding up is to take place and the date of participation

     therein by the holders of Common Stock and/or Preferred Stock, if

     any such date is to be fixed, and such notice shall be so given

     in the case of any action covered by clause (a) or (b) above at

     least twenty days prior to the record date for determining

     holders of Common Stock and/or Preferred Stock for purposes of

     such action, and in the case of any such other action, at least

     twenty days prior to the date of the taking of such proposed

     action or the date of participation therein by the holders of

     Common Stock and/or Preferred Stock, whichever shall be the

     earlier.  The failure to give notice required by this Section 24

     or any defect therein shall not affect the legality or validity

     of the action taken by the Company or the vote upon any such

     action.

          (b) In case any of the events set forth in Section 11(a)(ii)

     hereof shall occur, then, in any such case, the Company shall as

     soon as practicable thereafter give to each holder of a Right to

     the extent feasible and in accordance with Section 25 hereof, a

     notice of the occurrence of such event, which shall specify the

     event and the consequences of the event to holders of Rights

     under Section 11(a)(ii) hereof.

          

          Section 25.  Notices.  Notices or demands authorized by this

Agreement to be given or made by the Rights Agent or by the holder of

any Right Certificate to or on the Company shall be sufficiently given

or made if sent by first-class mail, postage prepaid, addressed (until

another address is filed in writing with the Rights Agent) as follows:

          

               Eli Lilly and Company
               Lilly Corporate Center
               Indianapolis, Indiana 46285
               
               Attention:  Secretary
               
          Subject to the provisions of Section 21, any notice or

demand authorized by this Agreement to be given or made by the Company

or by the holder of any Right Certificate to or on the Rights Agent

shall be sufficiently given or made if sent by first-class mail,

postage prepaid, addressed (until another address is filed in writing

with the Company) as follows:

          

               Bank One, Indianapolis, NA
               111 Monument Circle
               Indianapolis, Indiana 46277
               
               Attention: Security Holder Services Department
               
          Notices or demands authorized by this Agreement to be given

or made by the Company or the Rights Agent to the holder of any Right

Certificate shall be sufficiently given or made if sent by first-class

mail, postage prepaid, addressed to such holder at the address of such

holder as shown on the registry books of the Rights Agent.

          

          Section 26.  Supplements and Amendments.  Prior to the

Distribution Date and subject to the penultimate sentence of this

Section 26, the Company and the Rights Agent shall, if the Company so

directs, supplement or amend any provision of this Agreement without

the approval of any holders of certificates representing shares of

Common Stock.  From and after the Distribution Date and subject to the

penultimate sentence of this Section 26, the Company and the Rights

Agent shall, if the Company so directs, supplement or amend this

Agreement without the approval of any holders of Right Certificates in

order (i) to cure any ambiguity, (ii) to correct or supplement any

provision contained herein which may be defective or inconsistent with

any other provisions herein, (iii) to shorten or lengthen any time

period hereunder (which lengthening or shortening, after the time that

any Person becomes an Acquiring Person, shall be effective only if

there are Continuing Directors and shall require the concurrence of a

majority of such Continuing Directors), or (iv) to change or

supplement the provisions hereof in any manner which the Company may

deem necessary or desirable and which shall not adversely affect the

interests of the holders of Right Certificates; provided this

Agreement may not be supplemented or amended to lengthen, pursuant to

clause (iii) of this sentence, (A) a time period relating to when the

Rights may be redeemed at such time as the Rights are not then

redeemable, or (B) any other time period, unless such lengthening is

for the purpose of protecting, enhancing or clarifying the rights of,

and/or the benefits to, the holders of Rights.  Upon the delivery of a

certificate from an appropriate officer of the Company which states

that the proposed supplement or amendment is in compliance with the

terms of this Section 26, the Rights Agent shall execute such

supplement or amendment.  Notwithstanding anything contained in this

Agreement to the contrary, no supplement or amendment shall be made

which changes the Redemption Price, the Expiration Date, the Purchase

Price or the number of shares of Preferred Stock for which a Right is

exercisable.  Prior to the Distribution Date, the interests of the

holders of Rights shall be deemed coincident with the interests of the

holders of Common Stock.

          

          Section 27.  Successors.  All the covenants and provisions

of this Agreement by or for the benefit of the Company or the Rights

Agent shall bind and inure to the benefit of their respective

successors and assigns hereunder.

          

          Section 28.  Benefits of this Agreement.  Nothing in this

Agreement shall be construed to give to any person or corporation

other than the Company, the Rights Agent and the registered holders of

the Right Certificates any legal or equitable right, remedy or claim

under this Agreement; but this Agreement shall be for the sole and

exclusive benefit of the Company, the Rights Agent and the registered

holders of the Right Certificates.

          

          Section 29.  Governing Law.  This Agreement and each Right

Certificate issued hereunder shall be deemed to be a contract made

under the laws of the State of Indiana and for all purposes shall be

governed by and construed in accordance with the laws of such State

applicable to contracts to be made and performed entirely within such

State.

          

          Section 30.  Counterparts.  This Agreement may be executed

in any number of counterparts and each of such counterparts shall for

all purposes be deemed to be an original, and all such counterparts

shall together constitute but one and the same instrument.

          

          Section 31.  Severability.  If any term, provision, covenant

or restriction of this Agreement is held by a court of competent

jurisdiction or other authority to be invalid, illegal, or

unenforceable, (a) such invalid, illegal or unenforceable term,

provision, covenant or restriction shall nevertheless be valid, legal

and enforceable to the extent, if any, provided by such court or

authority, and (b) the remainder of the terms, provisions, covenants

and restrictions of this Agreement shall remain in full force and

effect and shall in no way be affected, impaired or invalidated.

          

          Section 32.  Descriptive Headings.  Descriptive headings of

the several Sections of this Agreement are inserted for convenience

only and shall not control or affect the meaning or construction of

any of the provisions hereof.

          

          Section 33.  Determinations and Actions Taken by the Board

of Directors.  For all purposes of this Agreement, any calculation of

the number of shares of Common Stock or of any other class of capital

stock outstanding at any particular time, including for purposes of

determining the particular percentage of the outstanding Common Stock

of which any Person is the Beneficial Owner, shall be made in

accordance with the last sentence of Rule 13d-3(d)(1)(i) (as in effect

on the date of this Agreement) of the General Rules and Regulations

under the Exchange Act.  The Board of Directors of the Company shall

have the exclusive power and authority to administer this Agreement

and to exercise all rights and powers specifically granted to the

Board or to the Company, or as may be necessary or advisable in the

administration of this Agreement, including, without limitation, the

right and power to (i) interpret the provisions of this Agreement, and

(ii) make all determinations deemed necessary or advisable for the

administration of this Agreement (including a determination to redeem

or not redeem the Rights or to amend the Agreement); provided,

however, that any determination or action by the Board of Directors of

the Company pursuant to this Section 33 shall be made by a vote of a

majority of the Continuing Directors then in office.

          

          IN WITNESS WHEREOF, the parties hereto have caused this

Agreement to be duly executed and their respective corporate seals to

be hereunto affixed and attested, all as of the day and year first

above written.

Exhibit A





                      [Form of Right Certificate]

Certificate No. R-                                          Rights

          

          

          NOT EXERCISABLE AFTER PUBLIC ANNOUNCEMENT OF REDEMPTION IS
          MADE.  THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION
          OF THE COMPANY, AT $.01 PER RIGHT (SUBJECT TO ADJUSTMENT) ON
          THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.  IN THE EVENT
          THAT THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE ISSUED
          TO A PERSON WHO IS AN ACQUIRING PERSON OR AN ASSOCIATE OR
          AFFILIATE THEREOF (AS DEFINED IN THE RIGHTS AGREEMENT) OR
          CERTAIN TRANSFEREES THEREOF, THIS RIGHT CERTIFICATE AND THE
          RIGHTS REPRESENTED HEREBY MAY BE SUBJECT TO CERTAIN
          LIMITATIONS IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
          OF THE RIGHTS AGREEMENT.
                           RIGHT CERTIFICATE

                         ELI LILLY AND COMPANY

          This certifies that                     , or registered

assigns, is the registered owner of the number of Rights set forth

above, each of which entitles the owner thereof, subject to the terms,

provisions and conditions of the Rights Agreement, dated as of July

18, 1988 (the "Rights Agreement"), between Eli Lilly and Company, an

Indiana corporation (the  "Company "), and Bank One, Indianapolis, NA,

a national banking corporation (the  "Rights Agent "), to purchase

from the Company, unless the Rights have been previously redeemed, at

any time after the date on which the Company's right to redeem has

expired and prior to the Expiration Date (as such term is defined in

the Rights Agreement), at the principal stock transfer office of the

Rights Agent, or its successors as Rights Agent, one one-hundredth

(1/100) of a fully paid non assessable share of the Series A

Participating Preferred Stock of the Company ( "Preferred Stock "), at

a purchase price of $325 per one one-hundredth of a share (the

"Purchase Price ") upon presentation and surrender of this Right

Certificate with the Form of Election to Purchase duly executed.  The

number of Rights evidenced by this Right Certificate (and the number

of shares which may be purchased upon exercise thereof) set forth

above, and the Purchase Price per one one-hundredth of a share set

forth above, are the number and Purchase Price as of July 28, 1988

based on the shares of Common Stock of the Company as constituted at

such date.

          Upon the occurrence of an event described in clauses (a),

(b) or (c) of the first sentence of Section 13 or subparagraphs (A),

(B), (C) or (D) of Section 11(a)(ii) of the Rights Agreement, the

holder of any Rights that are, or were, beneficially owned by an

Acquiring Person or an Associate or Affiliate thereof (as defined in

the Rights Agreement) or certain transferees thereof shall not be

entitled to the benefit of the adjustments described in Section

11(a)(ii) and Section 13.

          As provided in the Rights Agreement, the Purchase Price and

the number and kind of shares of Preferred Stock or other securities

which may be purchased upon the exercise of the Rights evidenced by

this Right Certificate are subject to modification and adjustment upon

the happening of certain events.

          This Right Certificate is subject to all of the terms,

provisions and conditions of the Rights Agreement, which terms,

provisions and conditions are hereby incorporated herein by reference

and made a part hereof and to which Rights Agreement reference is

hereby made for a full description of the rights, limitations of

rights, obligations, duties and immunities hereunder of the Rights

Agent, the Company and the holders of the Right Certificates, which

limitations of rights include the temporary suspension of the

exercisability of such Rights under the specific circumstances set

forth in the Rights Agreement.  Copies of the Rights Agreement are on

file at the principal stock transfer office of the Rights Agent and at

the principal office of the Company.

          This Right Certificate, with or without other Right

Certificates, upon surrender at the principal stock transfer office of

the Rights Agent, may be exchanged for another Right Certificate or

Right Certificates of like tenor and date evidencing Rights entitling

the holder to purchase such number of shares of Preferred Stock as the

Rights evidenced by the Right Certificate or Right Certificates

surrendered shall have entitled such holder to purchase.   If this

Right Certificate shall be exercised in part, the holder shall be

entitled to receive upon surrender hereof another Right Certificate or

Right Certificates for the number of whole Rights not exercised.

          Subject to the provisions of the Rights Agreement, the

Rights evidenced by this Certificate may be redeemed by the Company at

its option at a redemption price of $.01 per Right, which amount is

subject to adjustment as provided in the Rights Agreement.

          No fractional shares of Preferred Stock (other than

fractions which are integral multiples of the fraction of a share for

which a Right is then exercisable) will be issued upon the exercise of

any Right or Rights evidenced hereby, but in lieu thereof a cash

payment shall be made, as provided in the Rights Agreement.

          No holder of this Right Certificate shall be entitled to

vote or receive dividends or be deemed for any purpose the holder of

Preferred Stock or of any other securities of the Company which may at

any time be issuable on the exercise hereof, nor shall anything

contained in the Rights Agreement or herein be construed to confer

upon the holder hereof, as such, any of the rights of a stockholder of

the Company or any right to vote for the election of directors or upon

any matter submitted to stockholders at any meeting thereof, or to

give or withhold consent to any corporate action, or, to receive

notice of meetings or other actions affecting shareholders (except as

provided in the Rights Agreement), or to receive dividends or

subscription rights, or otherwise, until the Right or Rights evidenced

by this Right Certificate shall have been exercised as provided in the

Rights Agreement.

          This Right Certificate shall not be valid or obligatory for

any purpose until it shall have been countersigned by the Rights

Agent.

          WITNESS the facsimile signature of the proper officers of

the Company and its corporate seal.  Dated as of          , 1988.



ATTEST:                             ELI LILLY AND COMPANY


                                    By
                                    Title:

Countersigned:


BANK ONE, INDIANAPOLIS, NA


By
   Authorized Signature

              [Form of Reverse Side of Right Certificate]

          

          

                          FORM OF ASSIGNMENT

          

          

           (To be executed by the registered holder if such
          holder desires to transfer the Right Certificate.)
          

          

          FOR VALUE RECEIVED

hereby sells, assigns and transfers unto

          (Please print name and address of transferee)
this Right Certificate, together with all right, title and interest

therein, and does hereby irrevocably constitute and appoint

Attorney to transfer the within Right Certificate on the books of the

within-named Rights Agent, with full power of substitution.



Dated: ----------------, 19---



                                   
                                   Signature


Signature Guaranteed:

                              Certificate

          The undersigned hereby certifies (after due inquiry and to

the best knowledge of the undersigned) by checking the appropriate

boxes that:

          (1) this Right Certificate [ ] is [ ] is not being sold,

     assigned and transferred by or on behalf of a Person who is or

     was an Acquiring Person or an Affiliate or Associate of an

     Acquiring Person (as such terms are defined in the Rights

     Agreement);

          (2) the undersigned [ ] did [ ] did not acquire the Rights

     evidenced by this Right Certificate from any Person who is, was

     or subsequently became an Acquiring Person or an Affiliate or

     Associate of an Acquiring Person.




Dated: ------------, 19----

                                    Signature


Signature Guaranteed:

                                NOTICE



          The signature to the foregoing Assignment must correspond to

the name as written upon the face of this Right Certificate in every

particular, without alteration or enlargement or any change

whatsoever.

                     FORM OF ELECTION TO PURCHASE
                                   
                 (To be executed if holder desires to
                   exercise the Right Certificate.)
                                   
To Eli Lilly and Company:

          The undersigned hereby irrevocably elects to exercise

                    Rights represented by this Right Certificate to

purchase the shares of Preferred Stock issuable upon the exercise of

such Rights and requests that certificates for such shares be issued

in the name of:



Please insert social security
or other identifying number


                                   
                    (Please print name and address)




If such number of rights shall not be all the Rights evidenced by this

Right Certificate, a new Right Certificate for the balance remaining

of such Rights shall be registered in the name of and delivered to:


Please insert social security
or other identifying number

                                   
                    (Please print name and address)
                                   


Dated: --------------, 19-----

                                        Signature
Signature Guaranteed:

                              Certificate

          

          The undersigned hereby certifies (after due inquiry and to

the best knowledge of the undersigned) by checking the appropriate

boxes that:

          (1) the Rights evidenced by this Right Certificate [ ] are [

] are not being exercised by or on behalf of a Person who is or was an

Acquiring Person or an Affiliate or Associate of an Acquiring Person

(as such terms are defined in the Rights Agreement);

          (2) the undersigned [ ] did [ ] did not acquire the Rights

evidenced by this Right Certificate from any person who is, was or

subsequently became an Acquiring Person or an Affiliate or Associate

of an Acquiring Person.



Dated:               , 19
                                     Signature

Signature Guaranteed:
                                   

                                NOTICE

          The signature to the foregoing Election to Purchase and

Certificate must correspond to the name as written upon the face of

this Right Certificate in every particular, without alteration or

enlargement or any change whatsoever.

                                                         Exhibit B




             SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK


          On July 18, 1988, the Board of Directors of Eli Lilly and
Company (the  "Company ") declared a distribution of one Right for
each outstanding share of Common Stock, par value $.62-1/2 per share,
of the Company ( "Common Stock ").  The distribution is payable to the
shareholders of record as of the close of business on July 28, 1988,
and, in addition, the Company has authorized the issuance of one Right
with respect to each share of Common Stock that shall become
outstanding after July 28, 1988, and until the earlier of the
Distribution Date or Expiration Date (as such terms are hereinafter
defined) or the date on which Rights are redeemed.  When exercisable,
each Right initially entitles the registered holder to purchase from
the Company one one-hundredth of a share of a new series of the
Company's preferred stock designated as Series A Participating
Preferred Stock ( "Preferred Stock ") at a price of $325 per one one-
hundredth of a share (the  "Purchase Price "), subject to adjustment.
The description and terms of the Rights are set forth in a Rights
Agreement (the  "Rights Agreement ") between the Company and Bank One,
Indianapolis, NA, as Rights Agent (the  "Rights Agent ").

          Up to and including the Distribution Date, the Rights will
be evidenced, with respect to any of the Common Stock certificates
outstanding as of the close of business on July 28, 1988, by such
Common Stock certificates, and the Rights will be transferred with and
only with Common Stock.  In addition, (i) new Common Stock
certificates issued after July 28, 1988, upon transfer or new issuance
of Common Stock, will contain a notation incorporating the Rights
Agreement by reference and (ii) the surrender for transfer of any
certificates for Common Stock outstanding after July 28, 1988, will
also constitute the transfer of the Rights associated with Common
Stock represented by such certificate.  As soon as practicable
following the Distribution Date, separate certificates evidencing the
Rights ( "Right Certificates ") will be mailed to holders of record of
Common Stock as of the close of business on the Distribution Date and
such separate Right Certificates alone will evidence the Rights.

          Under the Rights Agreement, the Distribution Date is defined
as the earlier of the tenth business day after (i) the commencement of
a tender or exchange offer by any person (other than the Company, any
subsidiary of the Company, Lilly Endowment, Inc., or any employee
benefit plan or employee stock plan of the Company or of any
subsidiary of the Company) for a number of the outstanding shares of
the Company's stock having in the aggregate 30% or more of the general
voting power of the Company or (ii) the date of a public announcement
by the Company or an Acquiring Person (as hereinafter defined) that an
Acquiring Person has become such (the "Stock Acquisition Date"),
unless, in the case of either clause (i) or clause (ii) above, the
Board extends such day to a later date.  In general, under the Rights
Agreement an acquiring Person is a person or group of affiliated or
associated persons (other than the Company, any subsidiary of the
Company, any employee benefit plan or employee stock plan of the
Company or of any subsidiary of the Company, Lilly Endowment, Inc., or
any person who acquires shares of the Company's stock in connection
with a transaction or series of transactions approved in advance by
the Board) who has acquired or obtained the right to acquire
beneficial ownership of a number of the outstanding shares of the
Company's stock having in the aggregate 20% or more of the general
voting power of the Company (or which would have such voting power but
for the Indiana Control Share Statute).

          The Rights are not exercisable until after the date on which
the Company's right to redeem has expired.  The Rights will expire on
July 28, 1998 (the "Expiration Date"), unless earlier redeemed by the
Company as described below.

          The Preferred Stock will be non-redeemable and will rank on
a parity in respect of the preference as to dividends and the
distribution of assets with all other classes or series of the
Company's preferred stock, unless the terms thereof shall provide
otherwise.  Each share of Preferred Stock will have a minimum
preferential quarterly dividend rate of $0.05 per share but will be
entitled to an aggregate of 100 times the cash and non-cash (payable
in kind) dividends and distributions (other than dividends and
distributions payable in Common Stock) declared on the Company's
Common Stock.  In the event of liquidation, the holders of Preferred
Stock will be entitled to receive a liquidation payment in an amount
equal to the greater of $100 per share or 100 times the payment made
per share of Common Stock, plus an amount equal to accrued and unpaid
dividends and distributions thereon.  Shares of Preferred Stock will
have voting rights only in the event of certain arrearages in
dividends, and as required by applicable law.  In the event of any
merger, consolidation, or other transaction in which shares of Common
Stock are exchanged, each share of Preferred Stock will be entitled to
receive 100 times the amount received per share of Common Stock.  The
rights of the Preferred Stock as to dividends and liquidation are
protected by antidilution provisions.

          The Purchase Price payable and number of shares of Preferred
Stock or other securities or property issuable upon exercise of the
Rights are subject to adjustment from time to time to prevent
dilution.

          In the event that, at any time after a Stock Acquisition
Date, the Company is acquired in a merger or other business
combination transaction (in which any shares of the Company's Common
Stock are changed into or exchanged for other securities or assets) or
50% or more of the assets or earning power of the Company and its
subsidiaries (taken as a whole) are sold, proper provision shall be
made so that each holder of a Right (except as described herein) shall
thereafter have the right to receive, upon the exercise thereof at the
then current exercise price of the Right, that number of shares of
common stock of the acquiring company which at the time of such
transaction would have a market value of two times the Purchase Price.
The holder of any Rights that are, or were, beneficially owned by an
Acquiring Person or an affiliate or associate thereof or certain
transferees thereof shall not be entitled to the benefit of the
adjustment with respect to the number of shares described in this
paragraph.

          In the event that at any time after a Stock Acquisition
Date, (i) the Company is the surviving corporation in a merger or
other business combination and its Common Stock remains outstanding
and unchanged, (ii) an Acquiring Person engages in one or more self-
dealing transactions specified in the Rights Agreement, (iii) a Person
becomes the beneficial owner of a number of the outstanding shares of
the Company's stock having in the aggregate 25% or more of the general
voting power of the Company or (iv) any of certain events specified in
the Rights Agreement occurs which results in such Acquiring Person's
ownership interest being increased by more than 1%, then, and in each
such case, proper provision shall be made so that each holder of a
Right (except as described herein) will thereafter have the right to
receive, upon payment of the Purchase Price, that number of shares of
Common Stock having a market value of two times the Purchase Price.
The holder of any Rights that are, or were, beneficially owned by an
Acquiring Person or an affiliate or associate thereof or certain
transferees thereof which engaged in, or realized the benefit of, an
event or transaction or transactions described in this paragraph,
shall not be entitled to the benefit of the adjustment with respect to
the number of shares described in this paragraph.

          Up to and including the tenth business day after a Stock
Acquisition Date or such later date as may be determined by the Board
of Directors, the Company may redeem the rights in whole, but not in
part, at a price of $.01 per Right, which amount may be adjusted as
provided in the Rights Agreement (the "Redemption Price ").  Under
certain circumstances set forth in the Rights Agreement, the decision
to redeem shall require the concurrence of a majority of the
Continuing Directors (as defined below).  Promptly upon the action of
the Board of Directors electing to redeem the Rights, the Company
shall make an announcement thereof and, upon such announcement, the
right to exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.

          The term "Continuing Directors " means any member of the
Board of Directors of the Company who was a member of the Board
immediately prior to the time that any Person became an Acquiring
Person, or any member of the Board of Directors who becomes a member
of the Board subsequent to the time that any Person shall become an
Acquiring Person if such person is recommended or approved by a
majority of the Continuing Directors then in office, but shall not
include an Acquiring Person, or any representative of such Acquiring
Person.

          Other than those provisions relating to the principal
economic terms of the Rights, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company
prior to the Distribution Date.  From and after the Distribution Date,
the provisions of the Rights Agreement may be amended by the Board in
order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights, or to shorten or lengthen
any time period under the Rights Agreement; provided, however, that
the Expiration Date may not be changed, and the time period for
redemption may not be lengthened when the Rights are not redeemable.

          Until a Right is exercised, the holder thereof, as such,
will have no rights as a stockholder of the Company with respect to a
Right held, including, without limitation, the right to vote or to
receive dividends.

          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 19, 1988.  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 incorporated in this Summary by reference.
                                                             EXHIBIT C
                                   
                                   
                                   
                                   
                                   
                                FORM OF

                             AMENDMENT TO
                   AMENDED ARTICLES OF INCORPORATION
                                  OF
                         ELI LILLY AND COMPANY



          The Amended Articles of Incorporation of Eli Lilly and
Company are hereby amended by the addition of a new Article 14, to
read in its entirety as follows:

          14.  A total of 1,400,000 shares of the 5,000,000 shares of
authorized Preferred Stock are designated as  "Series A Participating
Preferred Stock" (the  "Series A Preferred Stock "), which shall
possess the rights, preferences, qualifications, limitations, and
restrictions set forth below:

               (a)  The holders of shares of Series A Preferred Stock
shall have the following rights to dividends and distributions:

                    (i)  The holders of shares of Series A Preferred
Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of April, July,
October and January in each year (each such date being referred to
herein as a  "Quarterly Dividend Payment Date "), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a
share or fraction of a share of Series A Preferred Stock, in an amount
per share (rounded to the nearest cent) equal to the greater of (i)
$0.05 or (ii) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends,
and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend or
distribution payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock, par value $.62-1/2 per share, of the
Corporation (the  "Common Stock") since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share
or fraction of a share of Series A Preferred Stock.  If on any
Quarterly Dividend Payment Date the Corporation's Articles of
Incorporation shall limit the amount of dividends which may be paid on
the Series A Preferred Stock to an amount less than that provided
above, such dividends will accrue and be paid in the maximum
permissible amount and the shortfall from the amount provided above
shall be a cumulative dividend requirement and be carried forward to
subsequent Quarterly Dividend Payment Dates.

                    (ii)  In the event the Corporation shall at any
time declare or pay any dividend on Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under
the second preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

                    (iii)  When, as and if the Corporation shall
declare a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock), the Corporation shall at
the same time declare a dividend or distribution on the Series A
Preferred Stock as provided in this paragraph (a) and no such dividend
or distribution on the Common Stock shall be paid or set aside for
payment on the Common Stock unless such dividend or distribution on
the Series A Preferred Stock shall be simultaneously paid or set aside
for payment; provided that, in the event no dividend or distribution
shall have been declared on the Common Stock during the period between
any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the Series A
Preferred Stock shall nevertheless be payable, when, as and if
declared by the Board of Directors, on such subsequent Quarterly
Dividend Payment Date.

                    (iv)  Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Preferred Stock from the
date of issue of such shares of Series A Preferred Stock, unless the
date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in which event such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date.  Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding.  The Board of
Directors may fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be
no more than 60 days prior to the relevant Quarterly Dividend Payment
Date.

               (b)  The holders of shares of Series A Preferred Stock
shall have the following voting rights:

                    (i)  The holders of outstanding Series A Preferred
     Stock shall be entitled to vote as a class for the election of
     two (2) directors if the Corporation shall fail for six quarters
     to pay the dividend payable with respect to such shares pursuant
     to paragraph (a) hereof.  Such limited voting rights may be
     exercised at the next annual meeting of shareholders following
     the failure to pay a dividend for the sixth quarter and at each
     succeeding annual meeting of shareholders until payment of all
     such preferred dividends which are in arrears has been made or
     provided for (the  "Dividend Date"), at which time the right to
     vote for election of two directors conferred upon the holders of
     the outstanding Series A Preferred Stock shall cease.  Each of
     such two directors shall be elected to one of the three classes
     of directors so that the three classes shall be as equal in
     number as may be feasible and shall be elected to hold office for
     a term expiring at the earlier of (i) the expiration of the term
     of the class to which he is elected or (ii) the Dividend Date.
     In addition to the conditional right to vote for election of two
     directors, any proposal to amend the relative rights and
     privileges of shares of Series A Preferred Stock (including those
     conferred by this paragraph (b)(i) upon which the holders of such
     Series A Preferred Stock are entitled by the provisions of the
     Indiana Business Corporation Law to vote upon as a class shall
     require, instead of a vote of the holders of a majority of such
     shares, the affirmative vote of the holders of two-thirds (2/3)
     of such shares.
                    
                    (ii)  Except as specified in paragraph (b)(i)
     above, the holders of Series A Preferred Stock shall not be
     entitled to any vote on any matter, including questions of
     merger, consolidation, and the sale of all or substantially all
     of the assets of the Corporation.

               (c)  The Corporation shall be subject to the following
restrictions:

                    (i)  Whenever quarterly dividends or other
     dividends or distributions payable on the Series A Preferred
     Stock as provided in paragraph (a) of this Article 14 are in
     arrears, thereafter and until all accrued and unpaid dividends
     and distributions, whether or not declared, on shares of Series A
     Preferred Stock outstanding shall have been paid in full, the
     Corporation shall not
                    
                         a.  declare or pay dividends on, make any
          other distributions on, or redeem or purchase or otherwise
          acquire for consideration any shares of stock ranking junior
          (either as to dividends or upon liquidation, dissolution or
          winding up) to the Series A Preferred Stock;
                         
                         b.  declare or pay dividends on or make any
          other distributions on any shares of stock ranking on a
          parity (either as to dividends or upon liquidation,
          dissolution or winding up) with the Series A Preferred
          Stock, except dividends paid ratably on the Series A
          Preferred Stock and all such parity stock on which dividends
          are payable or in arrears in proportion to the total amounts
          to which the holders of all such shares are then entitled;
                         
                         c.  except as permitted by subparagraph d of
          this paragraph (c)(i), redeem or purchase or otherwise
          acquire for consideration shares of any stock ranking on a
          parity (either as to dividends or upon liquidation,
          dissolution or winding up) with the Series A Preferred
          Stock, provided that the Corporation may at any time redeem,
          purchase or otherwise acquire shares of any such parity
          stock in exchange for shares of any stock of the Corporation
          ranking junior (either as to dividends or upon dissolution,
          liquidation or winding up) to the Series A Preferred Stock;
          or
                         
                         d.  purchase or otherwise acquire for
          consideration any shares of Series A Preferred Stock, or any
          shares of stock ranking on a parity with the Series A
          Preferred Stock, except in accordance with a purchase offer
          made in writing or by publication (as determined by the
          Board of Directors) to all holders of such shares upon such
          terms as the Board of Directors, after consideration of the
          respective annual dividend rates and other relative rights
          and preferences of the respective series and classes, shall
          determine in good faith will result in fair and equitable
          treatment among the respective series or classes, provided
          that the Corporation may at any time purchase or otherwise
          acquire shares of any such parity stock in exchange for
          shares of any stock of the Corporation ranking junior
          (either as to dividends or upon dissolution, liquidation or
          winding up) to the Series A Preferred Stock.
                         
                             (ii)  The Corporation shall not permit
               any subsidiary of the Corporation to purchase or
               otherwise acquire for consideration any shares of stock
               of the Corporation unless the Corporation could, under
               subparagraph (i) of this paragraph (c), purchase or
               otherwise acquire shares at such time and in such
               manner.
                             
                             (iii)  The Corporation shall not issue
               any shares of Series A Preferred Stock except upon
               exercise of Rights issued pursuant to that certain
               Rights Agreement dated as of July 18, 1988 between the
               Corporation and Bank One, Indianapolis, NA, a copy of
               which is on file with the Secretary of the Corporation
               at its principal executive office and shall be made
               available to shareholders of record without charge upon
               written request therefor addressed to said Secretary.
               Notwithstanding the foregoing sentence, nothing
               contained herein shall prohibit or restrict the
               Corporation from issuing for any purpose any series of
               preferred stock with rights and privileges similar to
               or different from those of the Series A Preferred
               Stock.

               (d)  Any shares of Series A Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation without designation as
to series, become authorized but unissued shares of preferred stock
and may be reissued as part of a new series of preferred stock to be
created by resolution or resolutions of the Board of Directors,
subject to the conditions and restrictions on issuance set forth
herein.

               (e)  Upon any voluntary liquidation, dissolution or
winding up of the Corporation, no distribution shall be made (i) to
the holders of shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received, subject to adjustment as
hereinafter provided, an aggregate amount equal to (a) $100 per share,
plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment or (b)
if greater, an aggregate amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate
amount to be distributed per share to holders of Common Stock plus an
amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, or (ii)
to the holders of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all other such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled
upon such liquidation, dissolution or winding up, disregarding for
this purpose the amounts referred to in clause (i)(b) of this
paragraph (e).  In the event the Corporation shall at any time declare
or pay any dividend or make any distribution on Common Stock payable
in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the aggregate amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to
such event under the provision in clause (i) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.

               (f)  In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case
proper provision shall be made so that the shares of Series A
Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 100 times the aggregate
amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged.  The Corporation shall not
consummate any such consolidation, merger, combination or other
transaction unless prior thereto the Corporation and the other party
or parties to such transaction shall have so provided in any agreement
relating thereto.  In the event the Corporation shall at any time
declare or pay any dividend on Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.
               
               (g)  The shares of Series A Preferred Stock shall not
be redeemable.  Notwithstanding the foregoing sentence, the
Corporation may acquire shares of Series A Preferred Stock in any
other manner permitted by law, hereby and the Articles of
Incorporation of the Corporation, as from time to time amended.

               (h)  The Articles of Incorporation of the Corporation
shall not be amended in any manner which would increase or decrease
the aggregate number of authorized shares of Series A Preferred Stock,
increase or decrease the par value of the shares of Series A Preferred
Stock, or alter or change the powers, preferences or special rights of
the shares of Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of two-thirds or more of
the outstanding shares of Series A Preferred Stock, voting together as
a single class.
                                   

                                   

                                   

                                   


                               EXHIBIT 2

                             July 18, 1988
                              Immediately
                            (317) 276-3655



             LILLY BOARD DECLARES THIRD-QUARTER DIVIDEND,
                    ADOPTS SHAREHOLDER RIGHTS PLAN


The Board of Directors of Eli Lilly and Company today declared a third-

quarter dividend for 1988 of 57.5 cents a share on outstanding common

stock.  The dividend is payable September 10, 1988, to shareholders of

record at the close of business on

August 15, 1988.



This is the same as the previous quarterly rate and brings to $1.72-

1/2 the total dividends declared for 1988.



The Company also announced that the Board of Directors today adopted a

Shareholder Rights Plan.  The plan is designed to help ensure that

Lilly shareholders receive fair treatment in the event of an

unsolicited attempt to acquire control of the Company and to

discourage certain abusive takeover techniques being utilized by

raiders in the current acquisition environment.



Under the plan, each shareholder of record at the close of business on

July 28, 1988, will receive a distribution of one preferred stock

purchase right with an exercise price of $325 for each share of Lilly

common stock owned.  If the rights become exercisable, they entitle

the holder, under certain circumstances to acquire shares in the

Company or in the acquiring corporation at a substantial discount.



Richard D. Wood, chairman of the Board, stated that "the plan was not

adopted in response to any effort to acquire control of the Company.

Rather, it is a precautionary step that will increase the Board's

ability to represent effectively the interests of the shareholders in

the event of an unsolicited takeover attempt.  This plan in not

unique.  Similar plans have been adopted by a large number of

corporations throughout the country."



Details of the plan will be mailed to shareholders.



                               #   #   #










                 EXHIBIT 10.2.  1989 STOCK PLAN, AS AMENDED

                        1989 LILLY STOCK PLAN
                  (as amended through October 18, 1993)


The 1989 Lilly Stock Plan ("1989 Plan") authorizes the 
Compensation Committee ("Committee") to provide officers and 
other key executive and management employees of Eli Lilly and 
Company and its subsidiaries ("Company") with certain rights to 
acquire shares of the Company's common stock.  The Company 
believes that this incentive program will cause those persons to 
contribute materially to the growth of the Company, thereby 
benefiting its shareholders.

1.  Administration.

The 1989 Plan shall be administered and interpreted by the 
Committee consisting of not less than three persons appointed by 
the Board of Directors of the Company from among its members.  A 
person may serve on the Committee only if he is not eligible and 
has not been eligible to receive a Grant under the 1989 Plan or 
the 1984 Plan for at least one year before his appointment.  The 
Committee shall determine the fair market value of the Company's 
common stock ("Lilly Stock") for purposes of the 1989 Plan.  The 
Committee's decisions shall be final and conclusive with respect 
to the interpretation and administration of the 1989 Plan and any 
Grant made under
 it.

2.  Grants.

Incentives under the 1989 Plan shall consist of incentive 
stock options, nonqualified stock options, stock appreciation 
rights, performance awards, and restricted stock grants 
(collectively, "Grants").  All Grants shall be subject to the 
terms and conditions set out herein and to such other terms and 
conditions consistent with this 1989 Plan as the Committee deems 
appropriate.  The Committee shall approve the form and provisions 
of each Grant.  Grants under a particular section of the 1989 
Plan need not be uniform and Grants under two or more sections 
may be combined in one instrument.

3.  Eligibility for Grants.

Grants may be made to any employee of the Company who is an 
officer or other key executive, professional, or administrative 
employee, including a person who is also a member of the Board of 
Directors ("Eligible Employee").  The Committee shall select the 
persons to receive Grants ("Grantees") from among the Eligible 
Employees and determine the number of shares subject to any 
particular Grant.

4.  Shares Available for Grant.

(a) Shares Subject to Issuance or Transfer.  Subject to 
adjustment as provided in Section 4(b), the aggregate number of 
shares of Lilly Stock that may be issued or transferred under the 
1989 Plan is 10,000,000.  The shares may be authorized but 
unissued shares or treasury shares.  The number of shares 
available for Grants at any given time shall be 10,000,000, 
reduced by the aggregate of all shares previously issued or 
transferred and of shares which may become subject to issuance or 
transfer under then-outstanding Grants.  Payment in cash in lieu 
of shares shall be deemed to be an issuance of the shares.

(b) Recapitalization Adjustment.  If any subdivision or 
combination of shares of Lilly Stock or any stock dividend, 
capital reorganization, recapitalization, consolidation, or 
merger with the Company as the surviving corporation occurs after 
the adoption of the 1989 Plan, the Committee shall make such 
adjustments as it determines appropriate in the number of shares 
of Lilly Stock that may be issued or transferred in the future 
under Section 4(a).  The Committee shall also adjust the number 
of shares and Option Price in all outstanding Grants made before 
the event.

5.  Stock Options.

The Committee may grant options qualifying as incentive stock 
options under the Internal Revenue Code of 1986, as amended 
("Incentive Stock Options"), and nonqualified options 
(collectively, "Stock Options").  The following provisions are 
applicable to Stock Options:

(a) Option Price.  The price at which Lilly Stock may 
be purchased by the Grantee under a Stock Option ("Option 
Price") shall be the fair market value of Lilly Stock on the 
date of the Grant.

(b) Option Exercise Period.  The Committee shall 
determine the option exercise period of each Stock Option.  
The period shall not exceed ten years from the date of the 
Grant.

(c) Exercise of Option.  A Grantee may exercise a Stock 
Option by delivering a notice of exercise to the Company, 
either with or without accompanying payment of the Option 
Price.  The notice of exercise, once delivered, shall be 
irrevocable.

(d) Satisfaction of Option Price.  The Grantee shall 
pay the Option Price in cash, or with the Committee's 
permission, by delivering shares of Lilly Stock already 
owned by the Grantee and having a fair market value on the 
date of exercise equal to the Option Price, or a combination 
of cash and shares.  The Grantee shall pay the Option Price 
not later than thirty (30) days after the date of a 
statement from the Company following exercise setting forth 
the Option Price, fair market value of Lilly Stock on the 
exercise date, the number of shares of Lilly Stock that may 
be delivered in payment of the Option Price, and the amount 
of withholding tax due, if any.  If the Grantee fails to pay 
the Option Price within the thirty (30) day period, the 
Committee shall have the right to take whatever action it 
deems appropriate, including voiding the option exercise.  
The Company shall not issue or transfer shares of Lilly 
Stock upon exercise of a Stock Option until the Option Price 
is fully paid.

(e) Share Withholding.  With respect to any 
nonqualified option, the Committee may, in its discretion 
and subject to such rules as the Committee may adopt, permit 
the Grantee to satisfy, in whole or in part, any withholding 
tax obligation which may arise in connection with the 
exercise of the nonqualified option by electing to have the 
Company withhold shares of Lilly Stock having a fair market 
value equal to the amount of the withholding tax.

(f) Limits on Incentive Stock Options.  The aggregate 
fair market value of the stock covered by Incentive Stock 
Options granted under the 1989 Plan or any other stock 
option plan of the Company or any subsidiary or parent of 
the Company that become exercisable for the first time by 
any employee in any calendar year shall not exceed $100,000.  
The aggregate fair market value will be determined at the 
time of grant.  An Incentive Stock Option shall not be 
granted to any Eligible Employee who, at the time of grant, 
owns stock possessing more than 10 percent of the total 
combined voting power of all classes of stock of the Company 
or any subsidiary or parent of the Company.

6.  Stock Appreciation Right.

The Committee may grant a Stock Appreciation Right ("SAR") 
with respect to any Stock Option granted under the 1989 Plan 
either at the time of grant of the option or thereafter and may 
also grant an SAR with respect to any outstanding option granted 
under a prior plan of the Company ("Prior Stock Option").  The 
following provisions are applicable to each SAR:

(a) Options to Which Right Relates.  Each SAR shall 
specify the Stock Option or Prior Stock Option to which the 
right is related, together with the Option Price and number 
of option shares subject to the SAR at the time of its 
grant.

(b) Requirement of Employment.  An SAR may be exercised 
only while the Grantee is in the employment of the Company, 
except that the Committee may provide for partial or 
complete exceptions to this requirement as it deems 
equitable.

(c) Exercise.  A Grantee may exercise an SAR in whole 
or in part by delivering a notice of exercise to the 
Company.  The notice of exercise once given shall be 
irrevocable.  An SAR may be exercised only to the extent 
that the Stock Option or Prior Stock Option to which it 
relates is exercisable.  If a Grantee exercises an SAR, he 
agrees to forgo the right to purchase the number of shares 
under the related Stock Option or Prior Stock Option with 
respect to which the SAR has been exercised.

(d) Payment and Form of Settlement.  If a Grantee 
exercises an SAR, he shall receive the aggregate of the 
excess of the fair market value of each share of Lilly Stock 
with respect to which the SAR is being exercised over the 
Option Price of each such share.  Payment may be made in 
cash, Lilly Stock at fair market value, or a combination of 
the two, in the discretion of the Committee.  The fair 
market value shall be determined as of the date of exercise.

(e) Expiration and Termination.  Each SAR shall expire 
on a date determined by the Committee at the time of grant.  
If a Stock Option or Prior Stock Option is exercised in 
whole or in part, the SAR related to the shares purchased 
shall terminate immediately.

7.  Performance Awards.

The Committee may grant Performance Awards under which 
payment shall be made in shares of Lilly Stock ("Performance 
Shares"), or in cash, if the financial performance of the Company 
or any subsidiary or division of the Company ("Business Unit") 
selected by the Committee during the Award Period meets certain 
financial goals established by the Committee.  The following 
provisions are applicable to Performance Awards:

(a) Award Period.  The Committee shall determine and 
include in the Grant the period of time (which shall be four 
(4) or more consecutive fiscal quarters) for which a 
Performance Award is made ("Award Period").  Grants of 
Performance Awards need not be uniform with respect to the 
length of the Award Period.  A Performance Award may not be 
granted for a given Award Period after one half (1/2) or 
more of such period has elapsed.  

(b) Performance Goals and Payment.  Before a Grant is 
made, the Committee shall establish objectives ("Performance 
Goals") that must be met by the Business Unit during the 
Award Period as a condition to payment being made under the 
Performance Award.  The Performance Goals, which must be set 
out in the Grant, may include earnings per share, return on 
shareholders' equity, return on assets, net income, 
divisional income, or any other financial measurement 
established by the Committee.  The Committee shall also 
establish the method of calculating the amount of payment to 
be made under a Performance Award if the Performance Goals 
are met, including the fixing of a maximum payment.

(c) Computation of Payment.  After an Award Period, the 
financial performance of the Business Unit during the period 
shall be measured against the Performance Goals.  If the 
Performance Goals are not met, no payment shall be made 
under a Performance Award.  If the Performance Goals are met 
or exceeded, the Committee shall determine the number of 
Performance Shares payable under a Performance Award.  The 
Committee, in its sole discretion, may elect to pay the 
Performance Award in cash in lieu of issuing or transferring 
part or all of the Performance Shares.  The cash payment 
shall be based on the fair market value of Lilly Stock on 
the date of payment.  The Company shall promptly notify each 
Grantee of the number of Performance Shares and the amount 
of cash he or she is to receive.

(d) Revisions for Significant Events.  At any time 
before payment is made, the Committee may revise the 
Performance Goals and the computation of payment if 
unforeseen events occur during an Award Period which have a 
substantial effect on the financial performance of the 
Business Unit and which in the judgment of the Committee 
make the application of the Performance Goals unfair unless 
a revision is made.

(e) Requirement of Employment.  To be entitled to 
receive payment under a Performance Award, a Grantee must 
remain in the employment of the Company to the end of the 
Award Period, except that the Committee may provide for 
partial or complete exceptions to this requirement as it 
deems equitable.

8.  Restricted Stock Grants.

The Committee may issue or transfer shares of Lilly Stock to 
a Grantee under a Restricted Stock Grant.  Upon the issuance or 
transfer, the Grantee shall be entitled to vote the shares and to 
receive any dividends paid.  The following provisions are 
applicable to Restricted Stock Grants:

(a) Requirement of Employment.  If the Grantee's 
employment terminates during the period designated in the 
Grant as the "Restricted Period," the Restricted Stock Grant 
terminates and the shares of Lilly Stock must be returned 
immediately to the Company.  However, the Committee may 
provide for partial or complete exceptions to this 
requirement as it deems equitable.

(b) Restrictions on Transfer and Legend on Stock 
Certificate.  During the Restriction Period, a Grantee may 
not sell, assign, transfer, pledge, or otherwise dispose of 
the shares of Lilly Stock except to a Successor Grantee 
under Section 10(a).  Each certificate for shares issued or 
transferred under a Restricted Stock Grant shall contain a 
legend giving appropriate notice of the restrictions in the 
Grant.

(c) Lapse of Restrictions.  All restrictions imposed 
under the Restricted Stock Grant shall lapse upon the 
expiration of the Restriction Period if all conditions 
stated in Sections 8(a) and (b) have been met.  The Grantee 
shall then be entitled to have the legend removed from the 
certificate.

9.  Amendment and Termination of the 1989 Plan.

(a) Amendment.  The Company's Board of Directors may 
amend or terminate the 1989 Plan, subject to shareholder 
approval to the extent necessary for the continued 
applicability of Rule 16b-3 under the Securities Exchange 
Act of 1934, but no amendment shall withdraw from the 
Committee the right to select Grantees under Section 3.

(b) Termination of 1989 Plan.  The 1989 Plan shall 
terminate on the fifth anniversary of its effective date 
unless terminated earlier by the Board or unless extended by 
the Board.

(c) Termination and Amendment of Outstanding Grants.  A 
termination or amendment of the 1989 Plan that occurs after 
a Grant is made shall not result in the termination or 
amendment of the Grant unless the Grantee consents or unless 
the Committee acts under Section 10(e).  The termination of 
the 1989 Plan shall not impair the power and authority of 
the Committee with respect to outstanding Grants.  Whether 
or not the 1989 Plan has terminated, an outstanding Grant 
may be terminated or amended under Section 10(e) or may be 
amended by agreement of the Company and the Grantee 
consistent with the 1989 Plan.

10.  General Provisions.

(a) Prohibitions Against Transfer.  Only a Grantee or 
his authorized representative may exercise rights under a 
Grant.  Such persons may not transfer those rights.  When a 
Grantee dies, the personal representative or other person 
entitled under a Prior Stock Option or a Grant under the 
1989 Plan to succeed to the rights of the Grantee 
("Successor Grantee") may exercise the rights.  A Successor 
Grantee must furnish proof satisfactory to the Company of 
his or her right to receive the Grant under the Grantee's 
will or under the applicable laws of descent and 
distribution.

(b) Substitute Grants.  The Committee may make a Grant 
to an employee of another corporation who becomes an 
Eligible Employee by reason of a corporate merger, 
consolidation, acquisition of stock or property, 
reorganization or liquidation involving the Company in 
substitution for a stock option, stock appreciation right, 
performance award, or restricted stock grant granted by such 
corporation ("Substituted Stock Incentive").  The terms and 
conditions of the substitute Grant may vary from the terms 
and conditions required by the 1989 Plan and from those of 
the Substituted Stock Incentives.  The Committee shall 
prescribe the exact provisions of the substitute Grants, 
preserving where possible the provisions of the Substituted 
Stock Incentives.  The Committee shall also determine the 
number of shares of Lilly Stock to be taken into account 
under Section 4.

(c) Subsidiaries.  The term "subsidiary" means a 
corporation of which the Company owns directly or indirectly 
50% or more of the voting power.

(d) Fractional Shares.  Fractional shares shall not be 
issued or transferred under a Grant, but the Committee may 
pay cash in lieu of a fraction or round the fraction.

(e) Compliance with Law.  The 1989 Plan, the exercise 
of Grants, and the obligations of the Company to issue or 
transfer shares of Lilly Stock under Grants shall be subject 
to all applicable laws and to approvals by any governmental 
or regulatory agency as may be required.  The Committee may 
revoke any Grant if it is contrary to law or modify a Grant 
to bring it into compliance with any valid and mandatory 
government regulation.  The Committee may also adopt rules 
regarding the withholding of taxes on payment to Grantees.

(f) Ownership of Stock.  A Grantee or Successor Grantee 
shall have no rights as a shareholder of the Company with 
respect to any shares of Lilly Stock covered by a Grant 
until the shares are issued or transferred to the Grantee or 
Successor Grantee on the Company's books.

(g) No Right to Employment.  The 1989 Plan and the 
Grants under it shall not confer upon any Grantee the right 
to continue in the employment of the Company or affect in 
any way the right of the Company to terminate the employment 
of a Grantee at any time.

(h) Effective Date of the 1989 Plan.  The 1989 Plan 
shall become effective upon its approval by the Company's 
shareholders at the annual meeting to be held on April 17, 
1989, or any adjournment of the meeting.






                  
                 EXHIBIT 10.6. ELI LILLY AND COMPANY SENIOR
                      EXECUTIVE BONUS PLAN, AS AMENDED
 
                          ELI LILLY AND COMPANY
                        SENIOR EXECUTIVE BONUS PLAN
                     (As Amended Through July 1, 1993)

Section 1.  Purpose

The purpose of the Senior Executive Bonus Plan is to recognize certain 
Senior Executives for contributions to the Company and to provide a 
financial incentive to continue their efforts toward more effective 
Company operations by a bonus payment based on Company performance.

Section 2.  Definitions

The following words and phrases as used in this Plan shall 
have the following meanings unless a different meaning is clearly 
required by the context:

2.1.    "Board of Directors" means the Board of Directors of Lilly.

2.2.    "Bonus" means the annual bonus determined under Section 5.

2.3.    "Committee" means the Compensation Committee of the Board of 
        Directors.

2.4.    "Company" means Eli Lilly and Company or each subsidiary 
        corporation as the case may be.

2.5.     "CNI" means, for any year, the consolidated net income of Lilly 
         and its consolidated subsidiaries, after provision for all taxes 
         for such year, as set forth in the "Consolidated Statements of 
         Income" as determined by Lilly and certified by its independent 
         accountants,

     a.  including the effect on net income
 of the amount included 
          therein as a charge for payments made under this Plan for 
          such year, and

     b.  excluding to the extent the Committee shall deem proper the 
          whole or any part of any extraordinary or unusual gains, 
          losses, charges or credits.

2.6. "CNS" means, for any year, the consolidated net sales of Lilly and 
     its consolidated subsidiaries as determined by Lilly and certified 
     by its independent accountants, adjusted to the extent the 
     Committee shall deem proper for the effect on sales of acquisitions 
     or dispositions of businesses during the year.

2.7. "Lilly" means Eli Lilly and Company.

2.8. "Plan" means the Senior Executive Bonus Plan as set forth herein 
      and as hereafter modified or amended from time to time.

2.9. "Senior Executive" means, the Chairman of the Board of Lilly and 
      other key executives of the Company selected by the Committee.

Section 3.  Administration

3.1. Committee.  The Plan shall be administered by the Compensation 
     Committee, the members of which shall be selected by the Board of 
     Directors from among its members.  No member of the Committee shall 
     be a salaried employee of the Company.

3.2. Powers of Committee.  The Committee shall have the right:

     (i)  to select key executives (including members of the 
          Board of Directors who are salaried employees of the 
          Company) for participation in the Plan and to determine 
          the level of participation of each such key executive;

     (ii) to interpret the terms and provisions of the Plan and 
          to determine any and all questions arising under the 
          Plan, including, without limitation, the right to 
          remedy possible ambiguities, inconsistencies, or 
          omissions by a general rule or particular decision; and

    (iii) to adopt rules consistent with the Plan.

3.3.  Finality of Committee Determinations.  Determination by 
      the Committee of the amount of the Bonus for any year and any 
      interpretation, rule, or decision adopted by the Committee under 
      the Plan or in carrying out or administering the Plan shall be 
      final and binding for all purposes and upon all interested 
      persons, their heirs, and personal representatives.  The 
      Committee may rely conclusively on determinations by the auditors 
      of the Company for the amounts of CNS and CNI.

3.4. Powers of the Salary Committee.  The Salary Committee 
     shall have the right to select key executives (other than 
     executive officers of the Company or members of the Board of 
     Directors who are salaried employees of the Company) for 
     participation in the Plan and to determine the level of 
     participation of each such key executive.

Section 4.  Participation in the Plan

4.1. General Rule.  Only a Senior Executive may participate 
     in the Plan.  A Senior Executive may not receive payment under 
     this Plan attributable to any period of a year for which he is 
     entitled to receive payment under the Contingent Compensation 
     Plan.

4.2.  Commencement of Participation.  A senior Executive's participation 
     in the Plan will commence on such date the Committee shall determine.

Section 5.  Executive Bonus

5.1. Computation of Bonus.  The Bonus of each Senior Executive shall 
     be computed as follows: 

          Level of Participation       Senior Executive Bonus Formula

                    I                 .004745% CNS plus .03796%  CNI
                    II                .002497% CNS plus .01998%  CNI
                    III               .001864% CNS plus .01491%  CNI
                    IV                .001218% CNS plus .009746% CNI
                    V                 .000836% CNS plus .006688% CNI
                    VI                .000688% CNS plus .005506% CNI
                    VII               .000392% CNS plus .003136% CNI


5.2. Consideration for Payment.  Payment of the Bonus is 
     made in consideration of services rendered by the Senior 
     Executive to the time of payment.  If the employment of a Senior 
     Executive shall terminate because of retirement (normal or 
     early), disability or death, the Senior Executive or the personal 
     representative, as the case may be, shall be entitled to a bonus 
     adjusted for that period of the year during which the Senior 
     Executive was an active employee of the Company.  If a Senior 
     Executive shall cease to be an employee of the Company before 
     payment of the Bonus for reasons other than retirement, 
     disability or death, the Senior Executive shall receive a Bonus 
     in such amount, if any, as may be determined by the Committee in 
     its sole discretion.

5.3. Time of Payment.  Payment of the Bonus will be made before March l 
     of the year next following the year for which the Bonus was earned.

5.4. Deferred Pavement.  A senior Executive who is eligible to participate 
     in The Lilly Deferred Compensation Plan (the "Deferred Compensation 
     Plan") may elect, on or before January 31, 1978 and on or before 
     each December 31 thereafter, to defer receipt of all or part of the 
     Bonus to be earned respectively, (i) during the last eleven months 
     of 1978 and (ii) during the year ending on December 31, following 
     the year in which the election is made, subject to limitations set 
     forth in the Deferred Compensation Plan.  In the event of such 
     deferral, the Company will credit the account of the Senior Executive 
     maintained pursuant to the Deferred Compensation Plan.  Upon 
     crediting such account, all rights of the Senior Executive with 
     respect to the amount of the Bonus deferred will be determined 
     under the Deferred Compensation Plan exclusively.

Section 6.  Miscellaneous

6.1.  No Vested Right.  No Senior Executive shall have a vested right to 
      the Bonus or any part thereof until payment is made.

6.2.  No Employment Rights.  No provision of the Plan, or any 
      action taken by the Company, the Board of Directors or the 
      Committee shall give a Senior Executive, or any other person, any 
      right to be retained in the employ of the Company or to continued 
      participation in the Plan.

6.3.  No Adjustments.  After the amount of the Bonus has been 
      determined by the Committee for any year, no adjustments shall be 
      made to reflect any subsequent change in accounting, the effect 
      of federal, state, or municipal taxes later assessed or 
      determined or otherwise.

6.4.  Non-alienation.  Except as provided in Subsection 5.4, 
      no Senior Executive or other person shall have any right or 
      power, by draft, assignment, or otherwise, to mortgage, pledge, 
      or otherwise encumber in advance any payment under the plan; and 
      every attempted draft, assignment, or other disposition thereof 
      shall be absolutely void.

Section 7.  Amendment, Suspension, or Termination

The Board of Directors shall have the right, from time to time, to amend, 
suspend or terminate the Plan.  The Committee shall also have the right 
to amend the Plan, except that the Committee may not amend Subsection 
3.1 or this Section 7.

Section 8.  Effective Date

The Plan shall become effective July l, 1977.







          EXHIBIT 10.8.  LETTER AGREEMENT DATED SEPTEMBER 3, 1993
              BETWEEN THE COMPANY AND VAUGHN D. BRYSON


                                   September 3, 1993


Mr. Vaughn D. Bryson
3533 Bay Road, North Drive
Indianapolis, IN 46240

Dear Vaughn:

This letter will confirm our agreement effective as of
August 31, 1993, concerning the conditions under which
you will retire from employment at Eli Lilly and
Company (the "Company" herein).

1.   Retirement and Resignation

     a.   You will retire as an employee of the Company
effective August 31, 1993.

     b.   You will resign from the Board of Directors
of the Company effective August 31, 1993.

2.   Severance Pay and Benefits

     a.   Upon signing this agreement you will be paid
the amount of $2,462,073, subject to withholding for
any income or employment taxes that the Company
determines to be due, which you and I have agreed
represents the net present value of (i) your current
salary through December 31, 1994; (ii) your Company
provided term life insurance through December 31, 1994;
(iii) the Company's match (at a level of 80%) of your
contribution to the Lilly Savings Plan through December
31, 1994; and (iv) a projected bonus of $1,500,000 for
the calendar years 1993 and 1994.

     b.   You and the Company have agreed to
modification of any of your stock option grants that
remain
 outstanding as of August 31, 1993, to eliminate
any limitation on the option exercise period that is
related to your retirement.  Incentive stock options
will convert to non-qualified options, as required by
law.

     c.   You will be reimbursed by the Company for
fees you have incurred for lawyers, accountants and
consultants incident to the negotiation of this
agreement in an amount not to exceed $150,000.

3.   Retirement

     a.   Beginning January 1, 1995, you will receive a
monthly payment for life in the amount of $60,000 (as
may be adjusted in accordance with paragraph 3(c)),
subject to applicable withholding taxes that the
Company determines to be due, which will be the
combination of the following:

          (i)   Your monthly pension under the Lilly
Retirement Plan and the Excess Benefits Plan (the
"Plans" herein) which you have agreed to commence
receiving effective January 1, 1995; and

          (ii)   A supplemental monthly payment which
will be paid by the Company in an amount equal to the
difference between $60,000 (as may be adjusted in
accordance with paragraph 3(c)) and the monthly pension
payment as provided in paragraph 3(a)(i).

     You agree to complete the appropriate election
forms with respect to the pension payments specified in
paragraph 3(a)(i) within ninety (90) days prior to
January 1, 1995.

     b.   In the event of your death prior to January
1, 1995, your surviving spouse, Nancy, will receive no
payment until January, 1995; but beginning in January,
1995, she will receive for her life a monthly survivor
benefit equivalent to 50% of the aggregate of the
monthly benefit from the Plans and the supplemental
payment from the Company to which you would have been
entitled under this agreement had you been alive as of
January 1, 1995.  In the event you die before Nancy
after January 1, 1995, she will receive for her life a
monthly survivor benefit equivalent to 50% of the
aggregate of the monthly benefit from the Plans and the
supplemental payment from the Company that you were
receiving at the time of your death.  In either event,
the adjustment to your monthly pension under the Plans
referred to in paragraph 3(c) below will also be
applicable to the benefit payable to Nancy.

     c.   Upon your retirement on August 31, 1993, you
will be entitled to all other benefits available to
retirees.  Your monthly pension under the Plans will be
adjusted from time to time for cost-of-living increases
in the same manner as is applicable to retirees
generally, including any adjustment made after August
31, 1993, and prior to January 1, 1995; the
supplemental payment will not be adjusted.

     d.   The Company will indemnify and defend you
from any claim, demand, action or cause of action
asserted against you arising out of your employment
with, or service as an officer and member of the Board
of Directors of, the Company to the same extent as for
any former employee, officer and director.  The Company
will also continue your coverage under the directors'
and officers' liability insurance policy to the extent
the Company provides such coverage for its former
officers and directors.

4.   Cooperation

     You will cooperate with the Company upon request
in responding to or defending any claim, investigation
(internal or external), administrative proceeding and
lawsuit to the extent reasonably required by the
Company, taking into account your other business and
personal commitments.  You will be reimbursed for any
travel expenses or other expenses reasonably incurred
in complying with this obligation.

5.   Trade Secrets

     During your employment by the Company you have had
access to confidential information concerning the
Company's plans, strategies, products, processes,
inventions, customers and suppliers.  You have had
access also to the Company's trade secrets.  You agree
not to disclose to anyone outside the Company any such
confidential information or trade secret, except (i) in
the course of complying with your obligations under
paragraph 4 or (ii) when required to do so by a court
of competent jurisdiction, by any governmental agency
having supervisory authority over the business of the
Company, or by any administrative or legislative body
(including a committee thereof) with purported or
apparent jurisdiction to order you to divulge, disclose
or make accessible such information.  Confidential
information and trade secrets protected by this
paragraph do not include information that is or becomes
available to the public other than through your breach
of this agreement.  You agree that disclosure of any
such confidential information or trade secret to
persons outside the Company may cause the Company
serious and irreparable harm for which monetary damages
would be inadequate and difficult to prove.
Accordingly, you agree the Company shall be entitled to
injunctive relief against any such disclosure or
threatened disclosure.

6.   Restrictive Covenants

     a.   During the period prior to January  1, 1997,
you will not solicit, induce or encourage, directly or
indirectly, on behalf of yourself or another, any
person whom you know to be an employee of the Company
to terminate his or her employment by the Company.  For
purposes of this paragraph, "solicit," "induce," or
"encourage" shall not include general advertising for
personnel to which an employee of the Company responds
or discussions with an employee of the Company who has
been notified by the Company that his or her employment
will be terminated.

     b.   During the period prior to January 1, 1997,
you will not personally solicit, induce or encourage,
on behalf of yourself or another, any customer,
distributor or supplier of the Company to cease doing
business with the Company or to decrease the volume of
business being done with the Company.  For the purpose
of this paragraph 6(b), "personally solicit, induce or
encourage" does not include actions by your
subordinates.

     c.   Neither you nor the Company, directly or
through anyone acting at your or its direction, will
denigrate or disparage the other, or any of the
Company's current or former officers, directors or
employees, in the media or any other public forum;
provided, however, this restraint shall not be
applicable to any truthful statement required of either
party in any legal proceeding or government or
regulatory investigation.

     d.   You will refrain for a period of ten (10)
years from the date of this agreement from soliciting
or joining anyone else in soliciting proxies involving
the Company with respect to a meeting of its
shareholders.

7.   Release and Covenant

     a.   In consideration of the Company's
undertakings herein, on behalf of yourself, your heirs,
successors and assigns, you hereby release and forever
discharge the Company and all other persons, firms and
companies, and each of them, from any claim, demand,
action or cause of action, which you have or may have
on account of or arising out of (a) the circumstances
surrounding your resignation from your position as
President and Chief Executive Officer of the Company
and as a member of its Board of Directors, (b) the
termination of your employment by the Company, and (c)
your employment by the Company, including without being
limited to, claims arising under Title VII of the Civil
Rights Act of 1964, the Age Discrimination in
Employment Act, the Rehabilitation Act of 1973, the
Americans with Disabilities Act, and any and all other
federal, state and local laws, ordinances and
regulations prohibiting discrimination in employment on
the basis of age, race, color, religion, sex, national
origin or physical or mental disability; provided,
however, this release does not affect (i) any vested
right you may have under an employee benefit plan
maintained by the Company; (ii) the Company's
obligations under this agreement; (iii) any rights you
may have to indemnification under the articles of
incorporation of the Company or under any agreement of
the Company; or (iv) any right you may have to obtain
contribution in the event of the entry of judgment
against you as a result of any act or failure to act
for which you and the Company are jointly responsible.

     b.   You acknowledge you have been represented by
an attorney throughout the negotiations leading up to
this agreement, you have been advised in writing to
consult with your attorney prior to signing this
agreement, and you have been given a period of up to
twenty-one (21) days within which to consider the
agreement before doing so.

     c.   For a period of seven (7) days after the date
of execution of this agreement you may revoke the
agreement by giving written notice of your revocation
and returning to the Company any sum(s) paid pursuant
to the agreement.  This agreement shall not become
effective or enforceable until the revocation period
has expired.

     d.   You further covenant that you will not
initiate any action, claim or proceeding against any of
those hereby released for any of the foregoing.

8.   Conditions of Company Obligations

     In the event of a material breach by you of the
covenants in paragraphs 4, 5, 6 and 7(d) above, the
Company will have no further obligations to you under
this agreement, including without limitation, the
payment of the supplemental payment described above in
paragraph 3(a)(ii).

9.   Announcement

     Neither you nor the Company will issue any press
release concerning your retirement or resignation from
the Board of Directors without the prior written
approval of the other, which approval shall not be
unreasonably withheld.

10.   Representation

     The Company represents and warrants that it is
fully authorized and empowered to enter into this
agreement and that the performance of its obligations
under this agreement will not violate any agreement
between it and any other person, firm or organization.

11.   Miscellaneous Provisions

     a.   This agreement constitutes the entire
understanding between you and the Company concerning
its subject matter.  You acknowledge that in executing
this agreement you are not relying upon any
representation or statement made by the Company or any
of its officers, employees or agents with regard to the
subject matter, basis or effect of this agreement,
other than those things set forth in writing in this
document and in the employee benefit plan documents
relating to the pension and health care plans.

     b.   This agreement is binding upon and shall
inure to the parties hereto and their respective
successors, heirs, legal representatives and assigns.

     c.   This agreement shall be governed by and
construed in accordance with the laws of the State of
Indiana without reference to principles of conflict of
laws.

     d.   This agreement or any provision thereof may
not be revoked or revised except by an instrument in
writing and duly executed by both parties.  No waiver
by either party of any breach by the other party of any
condition or provision contained in this agreement to
be performed by such other party shall be deemed a
waiver of a similar or dissimilar condition or
provision at the same or any prior or subsequent time.
Any waiver must be in writing and signed by you or the
Company, as the case may be.

     e.   The headings of the paragraphs contained in
this agreement are for convenience only and shall not
be deemed to control or affect the meaning or
construction of any provision of this agreement.

If the foregoing is in accordance with your
understanding and accurately describes your obligations
to the Company, please so indicate by signing in the
space provided below and returning an executed copy to
the undersigned.  Thank you.

                                   Sincerely,

                                   ELI LILLY AND COMPANY



                                   s/W. P. Bruen




I, Vaughn D. Bryson, hereby accept and agree to the
terms and conditions of the foregoing agreement
including but not limited to my commitment to abide by
and comply with the covenants and provisions of
paragraphs 4, 5, 6 and 7(d).

September 3, 1993

     s/Vaughn D. Bryson
By:  ---------------------------
     Vaughn D. Bryson





        	EXHIBIT 11.  COMPUTATION OF EARNINGS PER SHARE ON PRIMARY
	                           AND FULLY DILUTED BASES

                   Eli Lilly and Company and Subsidiaries

                                               	  Year Ended December 31
                                           1993        1992          1991
   	  (Dollars in millions, except per-share data; shares in thousands)

PRIMARY:

Net income                                 $480.2     $  708.7     $1,314.7

Add tax benefit on dividends paid to ESOP     -             -           9.1
                                            -----         -----      -------

Adjusted net income                        $480.2      $  708.7     $1,323.8
                                            =====         =====      =======
Average number of common shares 
   outstanding                            292,673       292,593      288,976

Add incremental shares:
   Stock plans and contingent
   payments                                 1,178         1,885        3,118
   Warrants                                   -             -          1,813
                                            -----         -----        -----

Adjusted average shares                   293,851       294,478      293,907
                                          =======       =======      =======
Primary earnings per share               $   1.63      $   2.41      $  4.50



FULLY DILUTED:

Net income                               $  480.2      $  708.7     $1,314.7

Add incremental net income:-
   Tax benefit on dividends paid to ESOP     -             -             9.1
                                            -----         -----      -------
Adjusted net income                      $  480.2      $  708.7     $1,323.8
                                            =====         =====      =======
Average number of common shares
   outstanding                            292,673       292,593      288,976

Add incremental shares:
     Stock plans and contingent payments    1,616         1,885        3,449
     Warrants                                 -             -          1,819
                                            -----         -----        -----
Adjusted average shares                   294,289       294,478      294,244
                                          =======       =======      =======

Fully diluted earnings per share         $   1.63       $  2.41     $   4.50






EXHIBIT 12.  STATEMENT RE:  COMPUTATION OF RATIO OF 		
            	EARNINGS TO FIXED CHARGES

             Eli Lilly and Company and Subsidiaries


                                           Years Ended December 31,

                               1993      1992      1991      1990      1989
                               ----      ----      ----      ----      ----
Consolidated Pretax Income
  Before Changes in 
  Accounting Principles      $701.9  $1,182.3  $1,879.2  $1,599.0  $1,329.9

Interest                      96.7      109.1      88.9      93.8      57.1

Less Interest Capitalized 
  During the Period         (25.5)     (37.4)    (49.1)     (27.4)    (15.8)
                            ------    -------   -------   -------    ------- 
Earnings                    $773.1   $1,254.0  $1,919.0  $1,665.4   $1,371.2
                             =====    =======   =======   =======    =======
Fixed Charges:

  Interest Expense          $ 96.7   $  109.1  $   88.9  $   93.8   $   57.1
                              ====      =====      ====      ====       ====  
Ratio of Earnings to 
   Fixed Charges               8.0       11.5      21.6      17.8       24.0
                              ====       =====     ====      ====       ====







EXHIBIT 13. ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
            ENDED DECEMBER 31, 1993
            (portions incorporated by reference in this Form 10-K)


REVIEW OF OPERATIONS


OPERATING RESULTS--1993

Worldwide sales rose 5 percent in 1993, to $6.5 billion.  The factor that
contributed most to the increase was a 6 percent rise in unit volume; price
contributed a modest 1 percent increase, while exchange rates decreased sales
growth by 2 percent.

The company achieved sales increases both in the United States and abroad.
Sales in the United States were $4.0 billion, a 4 percent increase.  Sales
outside the United States were $2.5 billion, an increase of 6 percent from
the previous year.

Pharmaceutical sales for the year increased approximately 7 percent, to $4.7
billion,  led by the antiulcer drug Axid (registered) and the antidepressant 
Prozac.  Other products contributing to worldwide pharmaceutical sales growth 
included Humatrope (registered), Humulin (registered), and Vancocin 
(registered).  HCl.  Sales also benefited from the first
full year of sales of Lorabid, an oral antibiotic,  which was launched in
September 1992.  Ceclor sales declined slightly in 1993, as good sales growth
abroad was offset by intense competition from other oral antibiotics
 in the
U.S.  Sales of central-nervous-system and diabetic-care products, as
therapeutic classes, increased from 1992 levels; however, sales of anti-
infectives decreased slightly.  U.S. pharmaceutical sales, which were $2.9
billion in 1993, continue to be negatively affected by increased
participation in managed-care programs and by federally mandated rebates to
the states on sales to Medicaid recipients.  For 1993 these rebates totaled
$156 million, a 44 percent increase over 1992.  The company anticipates a
decline in the rate of growth of these rebates under the current Medicaid
legislation.  Pharmaceutical sales outside the U.S. were $1.8 billion in
1993.

The United States product patent on Ceclor, the company's second largest
selling product, expired in December 1992.  U.S. Ceclor sales accounted for
approximately 8 percent of the company's worldwide sales.  The company holds
a United States patent on a key intermediate material that remains in force
until December 1994, as well as process and product patents in many other
countries with various expiration dates.  It has been reported that several
abbreviated new drug applications for generic formulations of cefaclor have
been filed in the United States and regulatory submissions have been made in
other countries.  To date, the company is not aware of commercially
significant sales of generic cefaclor.  However, small quantities of a
generic formulation are currently being marketed in India.  Although the
company cannot predict the ultimate effect on Ceclor sales or the company's
results of operations, the company believes that the expiration of the U.S.
product and intermediate patents will not have a material adverse effect on
its near-term consolidated financial position.

The U.S. patent for the cardiovascular agent Dobutrex (registered) expired 
on October 19, 1993.  Prior to the expiration, U.S. sales of Dobutrex 
accounted for approximately 2 percent of the company's worldwide sales.  
Generic substitution caused a significant decline in U.S. sales of the 
product during the fourth quarter of 1993, and the company expects this 
trend to continue in 1994.
                                  -1- 

<PAGE>

However, the company does not believe that the patent expiration will have a
material adverse effect on its near-term consolidated results of operations.

Medical devices and diagnostic products sales increased approximately 4
percent in 1993, to $1.3 billion.  All companies within the group except
Hybritech Incorporated posted sales gains over 1992.  During 1993, several of
the companies continued to experience strong competition, which caused the
rate of sales growth to be lower than 1992 levels.  The division's sales
benefited from particularly strong growth from Devices for Vascular
Intervention, Inc., and from the resumption of shipments by Physio-Control
Corporation of the Lifepak (registered) 10 external defibrillator in May 
1993 after a suspension of approximately one year due to regulatory 
problems.  Approval from the U.S. Food and Drug Administration (FDA) to 
resume shipment of the Lifepak 9 was received in December 1993.  Sales 
of Hybritech products declined due to continued competitive pressures.

Worldwide sales of Elanco Animal Health products increased 3 percent, to $439
million.  Sales in the United States increased 12 percent over 1992.
However, this increase was partially offset by a decrease of 4 percent in
sales outside the United States due primarily to exchange rate comparisons
and the recession in Europe.  Strong worldwide sales growth of Micotil 
(registered) more than offset a decline in sales of Tylan (registered), 
primarily in Europe.

In the fourth quarter, as a result of a comprehensive review of the company's
global operations, the company's board of directors approved several
streamlining initiatives.  These initiatives included a voluntary early-
retirement program.  Approximately 2,600 employees worldwide are retiring
under the program.  The company hopes to eliminate another 1,400 positions
over the next several years by restricting its use of temporary and contract
workers and consultants and through ongoing normal attrition and strict 
hiring practices.

In January 1994, following the review of operations, the company announced a
series of strategic actions designed to allow it to enhance its core
competencies and set the stage for necessary changes to enable the company to
deliver more clinical and economic value to its customers worldwide.  As part
of these actions, the company announced its intent to divest itself of the
Medical Devices and Diagnostics (MDD) Division along with a number of
initiatives to further streamline its pharmaceutical operations.  The final
form of the divestiture of the MDD businesses has not been resolved.  It will
depend on tax, market, and other considerations, including the nature of any
offers that the company may receive from prospective purchasers.  Current
plans call for the creation of a new holding company comprising six of the
businesses and the divestiture of the new company through a spin-off to Lilly
shareholders, one or more public offerings of the holding company's shares,
or a combination of these methods.  These six businesses are Advanced
Cardiovascular Systems, Inc.; Cardiac Pacemakers, Inc.; Devices for Vascular
Intervention, Inc.; Heart Rhythm Technologies, Inc.; IVAC Corporation; and
Origin Medsystems, Inc.  Lilly intends to sell separately the three other
businesses in the division: Hybritech Incorporated; Pacific Biotech, Inc.;
and Physio-Control Corporation.

The strategic actions to streamline the pharmaceutical business, together
with the early-retirement programs, resulted in 1993 restructuring, special,
and other charges of approximately $1.2 billion before tax and $856 million
after tax ($2.91 per share).  Costs associated with the early-retirement
programs were approximately $535 million before tax.  Other actions include
consolidation of certain manufacturing and distribution operations and
streamlining of various other operations ($365 million before tax).  In
addition, anticipated expenses of $300 million, before tax, were recorded
relating to impaired manufacturing assets, write-offs of certain acquired
intangibles, and certain patent and 

                                  -2-


<PAGE>

product liability matters.  Of the total charges, approximately $130 
million were paid in cash as of December 31, 1993.  Of the remainder, 
approximately 75 percent will be paid in cash and 25 percent represent 
noncash charges.  The amount to be paid in cash will be funded from 
operations over an extended period because a significant portion
is pension related.  The company expects the restructuring actions to result
in operating expense savings (salaries and wages, employee benefits, and
depreciation and amortization) in the near-term.  See Note 2 to the
consolidated financial statements for further discussion.

Manufacturing costs, operating expenses, and other income and deductions for
1992 reflected additional expenses, including restructuring and special charges,
relating to various strategic actions taken by the company in 1992.
Accordingly, year-to-year comparisons are difficult.

Research and development expenses increased 3 percent in 1993.  Global
clinical trial expenses more than doubled, compared with 1992, reflecting the
movement of several compounds into the later and most costly stages of
clinical trials.  As part of the company's new strategic initiatives, the
company decided in December to refocus its research and development efforts
from eight therapeutic areas to five.  The company anticipates that research
and development expenses will grow at a rate in excess of sales for the next
two years, primarily as a result of compounds moving into the more costly
stages of clinical research.

Marketing and administrative expenses increased 5 percent in 1993.  Marketing
costs increased due to a number of factors: continued globalization of the
company's products, including the U.S. launch of Lorabid Pediatric; the full-
year impact of the 1992 expansion of the pharmaceutical sales forces outside
the United States; a realignment of sales forces in the U.S.; and the
inclusion of a full year of expenses of Lilly-Beiersdorf G.m.b.H. and Origin
Medsystems, Inc., two 1992 acquisitions.  Administrative expenses declined in
1993, compared with 1992.  This decrease was largely attributable to a number
of one-time expenses recognized in 1992 in connection with the 1992 strategic
actions and to various cost-containment measures initiated in 1993.

Net other income in 1993 increased from 1992 levels due primarily to the
additional charges recognized in connection with the 1992 strategic actions.
However, net other income in 1993 was negatively affected by lower interest
income on investments.

The effective tax rate for 1993 was 30.0 percent, the same as 1992.  The
company's effective tax rate was not increased by the Omnibus Budget
Reconciliation Act of 1993 (OBRA) because the effect of the corporate rate
increase was largely offset by the retroactive restoration of the research
tax credit.  OBRA is expected to increase the company's effective tax rate in
1994 by one to three percentage points.

(See Graph #1, "Research and Development Expenses", in the Appendix to this
Exhibit 13.)

Fundamental changes continued to reshape the traditional patterns of health
care delivery in the United States and certain other countries in 1993.
Further changes are expected during the next several years.  In the United
States, managed-care organizations, buying groups, and other large customers
of pharmaceuticals account for an increasing portion of total pharmaceutical
purchases.  These customers are exerting increasing pricing pressures on 
the pharmaceutical industry and the company.  The health-care-reform 
debate also continued in the United States during 1993.  A number of 
competing health-care-reform bills have been introduced in Congress.  
The current proposals generally 

                                   -3-


<PAGE>


would expand access to health care coverage, and several proposals
could lead to the establishment of more comprehensive pharmaceutical
benefits; however, the Clinton administration's proposal and certain others
call for expanded rebates on pharmaceuticals and other forms of government
mandates affecting pricing and choice of therapy.  It is uncertain when
health-care-reform legislation will be adopted or what form it may take.
Major changes in health care delivery and pharmaceutical reimbursement
policies are also occurring outside the United States, most notably in
Germany and Italy, where government health care cost-control measures have
adversely affected pharmaceutical industry revenues.

The company is continuing to adapt its operations to the changing market
conditions and government cost-containment efforts.  It has significantly
expanded its efforts to serve its managed-care customers and is working with
its evolving customer base to deliver greater clinical and economic value
through combinations of products, services, and information.  As described
above, the company has also made a number of strategic decisions to
streamline its operations, reduce its work force, and focus its research and
development program on a smaller number of therapeutic areas that hold the
greatest promise.  Most significantly, the company is refocusing its
resources on its core business, the research-based pharmaceutical business.
This focus is intended to allow the company to invest its resources in an
effort to increase the productivity of its research programs and develop a
broad product portfolio, to grow geographically, and to continue developing
the capabilities needed to deliver more clinical and economic value to its
customers.

As in 1993, the company has pledged voluntarily to hold the increase in the
weighted-average transaction price of its U.S. pharmaceutical products in
1994 to the projected rate of inflation and to limit increases in the prices
of individual products to the forecasted increase in the Consumer Price Index
for all urban consumers, all items (CPI-U), during the year plus 2 percent.
This policy, as in the past, will be contingent upon stable market conditions
and governmental policies recognizing, acknowledging, and supporting
innovation.

OPERATING RESULTS--1992

Worldwide sales rose 8 percent in 1992, to $6.2 billion. Unit volume provided
a 4 percent increase, while price increases and the impact of exchange rates
contributed increases of 3 percent and 1 percent, respectively.

In 1992, the company achieved sales increases both in the United States and
abroad.  Sales in the United States were $3.84 billion, a 6 percent increase.
Sales outside the United States were $2.33 billion, a gain of 11 percent from
the previous year.

Pharmaceutical sales increased 10 percent, to $4.5 billion, in 1992.  The
1992 sales increase was led by Axid and Prozac.  Other products contributing
to worldwide pharmaceutical sales growth included Dobutrex, Humatrope,
Humulin, and Vancocin HCl.  Sales benefited from the U.S. launch of Lorabid
as well as the inclusion of the sales of Beiersdorf-Lilly G.m.b.H., in
Germany, beginning in May 1992.  Sales of anti-infectives and central-nervous-
system and diabetic-care products, as therapeutic classes, increased from
1991 levels.  Ceclor sales declined slightly in 1992 due to increased global
competition from the introduction of several new oral antibiotics and lower
incidence of flu in the United States, compared with 1991.  In addition, U.S.
pharmaceutical sales were also negatively affected by Medicaid rebates.
These rebates totaled $108 million in 1992, an amount nearly double that of
1991.

                                     -4-


<PAGE>

Medical devices and diagnostics products sales increased 1 percent in 1992,
to $1.2  billion.  All companies within this group except Physio-Control
Corporation had sales increases from 1991.  However, during 1992, several of
the companies experienced increased competition, which reduced the rate of
sales growth from 1991.  In May 1992, Physio-Control halted production as a
consequence of an inspection of its operations by the FDA.  Due to the
production halt, Physio-Control's sales in 1992 declined $79 million from
1991.

Worldwide sales of Elanco Animal Health products increased 10 percent, to
$427 million, in 1992.  The increase was largely due to the introduction of
Micotil.  The remaining growth was balanced across the product line.

Manufacturing costs, operating expenses, and other income and deductions for
1992 reflect additional expenses, including restructuring and special
charges, relating primarily to various strategic actions taken by the company
in the third quarter.  Those actions centered around a streamlining of the
global manufacturing operations, an aggressive response to regulatory
initiatives relating to several of the medical devices companies, and other
actions designed to enhance the company's competitiveness.  The total impact
of those and other actions described below was approximately $720 million,
substantially all of which was before taxes.  See Note 2 to the consolidated
financial statements for further discussion.

Gross profits for 1992 increased at a lower rate than sales because of
certain one-time charges taken as part of the strategic actions discussed
above, production and start-up costs associated with new production
facilities for Humulin and Lorabid, and costs associated with modifications
to existing production facilities to comply with environmental regulations.
Cost of sales also increased because of the production halt at Physio-
Control.  Worldwide cost of sales in 1992 increased to 30.8 percent of sales,
from 30 percent in 1991.

Research and development expenses increased 21 percent in 1992.  The increase
reflected the company's continued commitment to life-sciences research and
development, including alliances with Centocor, Inc., and Oclassen
Pharmaceuticals, Inc.  During 1992, the company  incurred expenses in excess
of $66 million on new external research collaborations.

The 10 percent growth in marketing and administrative expenses was greater
than the sales growth rate in 1992.  The increase in marketing costs was
primarily associated with the continued worldwide introduction of the
company's newer products.  Also, 1992 expenses reflected an expansion and
realignment of the pharmaceutical sales forces.  The 1992 growth in
administrative expenses was largely attributable to a number of one-time
expenses in connection with the previously noted strategic actions, to
increased legal expenses, and to the inclusion of the expenses of Origin
Medsystems, Inc., which was acquired in February 1992, and of  Beiersdorf-
Lilly G.m.b.H., in which Lilly acquired a majority interest.

Other income in 1992 decreased significantly from 1991 levels due primarily
to reduced net interest income resulting from lower interest rates on
investments and higher debt levels.  Other income also declined as a result
of the company's special charges, including the write-off of certain fixed
assets.  These declines were offset in part by the gain on the sale of the
company's worldwide capsule business.

The effective tax rate for 1992 remained at the 1991 level of 30 percent.

                                    -5-


<PAGE>

Effective January 1, 1992, the company adopted two Financial Accounting
Standards Board (FAS) pronouncements.  The adoption of FAS 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," resulted in a
pretax charge of $269 million.  The adoption of FAS 109, "Accounting for
Income Taxes," produced a $49 million benefit to net income.  The net-of-tax 
effect of the accounting changes, a charge of $118.9 million, has been 
reflected in the company's results of operations for the year.

Both 1992 net income and earnings per share declined from 1991 levels by 46
percent.  The declines were primarily the result of the impacts of the
company's strategic business actions on costs and expenses, the cumulative
effect of the accounting changes, the growth in Medicaid rebates, the
production halt at Physio-Control, and the write-down of Centocor-related
investments.


FINANCIAL CONDITION

The company maintained its sound financial position in 1993 despite the
impacts of the restructuring and special charges taken in both 1993 and 1992.
The cash generated from operations provided the resources to fund capital
expenditures, dividends, and acquisitions.  In 1993, the company issued
additional long-term debt of $350 million to take advantage of favorable long-
term interest rates.

Capital expenditures  during 1993  were approximately $279 million less than
in 1992, as work progressed toward completion of new manufacturing
facilities, including environmental control systems, and development,
research, and administrative facilities.   The company expects a continued
decline in near-term capital-expenditure requirements.  Sufficient liquidity
exists to meet these near-term capital-expenditure requirements.

(See Graph #2, "Capital Expenditures", in the Appendix to this Exhibit 13)

The company is a 40 percent partner with The Dow Chemical Company in
DowElanco, a global agricultural products joint venture.  The company holds a
put option, which can be exercised after October 31, 1994, requiring Dow to
purchase the company's interest in DowElanco at a fair market value.

The company's strong financial position contributes to its ability to finance
growth.  Liquidity is substantial as evidenced by the company's ability to
generate cash from operations, debt-to-equity ratio, and substantial debt
capacity.  These factors give the company the ability and flexibility to meet
its obligations, to pay dividends, and to continue to invest in growth
opportunities.  The highest long-term debt rating of AAA for the company was
reaffirmed by Standard & Poor's in December 1993; however, the company's long-
term debt rating was lowered to Aa1 from AAA by Moody's in January 1994.

Dividends of $2.42 per share were paid in 1993, a 10 percent increase from
the $2.20 per share paid in 1992.  Dividends of $2.20 per share were paid in
1992, a 10 percent increase from the $2.00 per share paid in 1991.  The year
1993 was the 109th consecutive year that the company made dividend payments
and the 26th consecutive year in which dividends have been increased.

(See Graph #3, "Dividends Per Share", in the Appendix to this Exhibit 13)

                                    -6-


<PAGE>

ENVIRONMENTAL AND LEGAL MATTERS

As with other industrial enterprises, the company's operations are subject to
increasingly complex and changing federal, state, and local environmental
laws and regulations, which will continue to require capital investment and
operational expenses.  The company also has been designated a potentially
responsible party under the Comprehensive Environmental Response,
Compensation, and Liability Act, commonly known as Superfund, with respect to
approximately 10 sites with which the company had varying degrees of
involvement.  Further, the company continues remediation of certain of its
own properties consistent with current environmental practices.  The company
has accrued for estimated Superfund costs and remediation of its own
properties, taking into account, as applicable, available information
regarding site conditions, potential cleanup methods, estimated costs, and
the extent to which other parties can be expected to contribute to those
costs, and has also accrued for certain other environmental matters.  While
it is not feasible to predict the ultimate cost of  Superfund liability,
remediation of its own sites, or compliance with evolving regulations, the
company continues to believe that such costs will not have a material adverse
effect on its consolidated financial position.

During 1993, the company continued to be named as a defendant in lawsuits
involving Prozac.  The number of new case filings in 1993 declined from the
1992 level.  In addition, the company has been named in approximately 10 of
more than 40 lawsuits filed in various federal courts against a number of
U.S. pharmaceutical manufacturers and in some cases wholesalers.  The suits
in which the company is a defendant generally allege an industrywide
agreement to deny favorable pricing on sales to certain retail pharmacies.
Some also allege price discrimination.  The suits purport to be class actions
on behalf of all retail pharmacies in the United States.  The suits are in a
very early procedural stage.  While it is not feasible to predict the outcome
of these actions, the company believes they will not have a material adverse
effect on its consolidated financial position.  For additional information on
litigation and environmental matters,  see Note 11 to the consolidated
financial statements.

                                   -7-


<PAGE>

Consolidated Statements of Income
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions, except per-share data)

            Year Ended December 31           1993       1992     1991
- ---------------------------------------------------------------------
Net sales                                  $6,452.4  $6,167.3 $5,725.7

Cost of sales                              1,959.0   1,897.0  1,717.7
Research and development                     954.6     924.9    766.9
Marketing and administrative               1,713.5   1,624.2  1,472.8
Restructuring and special charges(Note 2)  1,172.7     565.7      -
Other income--net                            (49.3)    (26.8)  (110.9)
                                           -------   -------  -------
                                           5,750.5   4,985.0  3,846.5
                                           -------   -------  -------
Income before income taxes and cumulative
  effect of changes in accounting principles 701.9   1,182.3  1,879.2

Income taxes (Note 8)                        210.8     354.7    564.5
                                             -----     -----    -----
Income before cumulative effect of changes
  in accounting principles                   491.1     827.6  1,314.7

Cumulative effect of changes in accounting
   principles (net of taxes) (Note 3)        (10.9)   (118.9)     -
                                              ----     -----  -------

Net income                                $  480.2   $ 708.7 $1,314.7
                                             =====     =====  =======

Earnings per share:
  Income before cumulative effect of
    changes in accounting principles         $1.67   $  2.81 $   4.50

  Cumulative effect of accounting changes     (.04)     (.40)       -
                                              ----      ----     ----
  Net income                                 $1.63     $2.41    $4.50
                                              ====      ====     ====

See notes to consolidated financial statements.

                                  -8-


<PAGE>

Consolidated Balance Sheets
Eli lilly and company and subsidiaries
(Dollars in millions)

                  December 31                1993            1992
- ------------------------------------------------------------------
Assets

Current Assets
Cash and cash equivalents                  $  539.6       $  432.4
Short-term investments                        447.5          295.9
Accounts receivable, net of allowances of
   $32.3 (1993) and $35.0 (1992)              950.1          898.6
Inventories (Note 1)                        1,103.0          938.4
Deferred  income taxes (Note 8)               334.0          175.6
Other current assets                          322.9          265.1
                                            -------        -------
  Total current assets                      3,697.1        3,006.0


Other Assets
Prepaid retirement (Note 9)                   266.0          381.0
Investments--at cost                          221.7          242.5
Goodwill and other intangibles, net of
 allowances for amortization of $289.9 (1993)
   and $283.6 (1992) (Note 1)                 405.0          460.1
Sundry                                        833.6          511.1
                                            -------        -------
                                            1,726.3        1,594.7

Property and Equipment  (Note 1)            4,200.2        4,072.1
                                            -------        -------
                                           $9,623.6       $8,672.8
                                            =======        =======

                                   -9-


<PAGE>

Consolidated Balance Sheets
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions)

                                    December 31      1993       1992
- --------------------------------------------------------------------
Liabilities and Shareholders' Equity

Current Liabilities
Short-term borrowings (Note 6)                    $  524.8   $  591.2
Accounts payable                                     329.6      323.6
Employee compensation                                328.6      272.8
Dividends payable                                    183.3      175.9
Other liabilities                                  1,115.7      575.3
Income taxes payable                                 446.0      459.8
                                                   -------    -------
   Total current liabilities                       2,928.0    2,398.6

Other Liabilities
Long-term debt  (Note 6)                             835.2      582.3
Deferred income taxes (Note 8)                       127.5      169.7
Retiree medical benefit
  obligation (Note 9)                                183.9      137.9
Other noncurrent liabilities                         980.2      492.2
                                                   -------    -------
                                                   2,126.8    1,382.1
Shareholders' Equity  (Notes 5 and 7)
Common stock--no par value
   Authorized shares: 800,000,000
   Issued shares:     292,807,644                    183.0      183.0
Additional paid-in capital                           294.6      307.9
Retained earnings                                  4,500.9    4,743.1
Deferred costs--ESOP                                (242.8)    (263.9)
Currency translation adjustments                    (163.5)     (70.2)
                                                    -------    -------
                                                   4,572.2    4,899.9

Less cost of common stock in treasury:
1993 --  59,277 shares
1992 -- 122,120 shares                                 3.4        7.8
                                                   -------    -------
                                                   4,568.8    4,892.1
                                                   -------    -------
                                                  $9,623.6   $8,672.8
                                                   =======    =======
See notes to consolidated financial statements.

                                   -10-


<PAGE>

Consolidated Statements of Cash Flows
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions)

                  Year Ended December 31      1993      1992      1991
- -----------------------------------------------------------------------
Cash Flows from Operating Activities

Net income                                 $  480.2   $ 708.7  $1,314.7
Adjustments to Reconcile Net Income to
   Cash Flows from Operating Activities
   Depreciation and amortization              398.3      368.1    299.5
   Change in deferred taxes                  (231.6)    (184.3)   (13.7)
   Restructuring and special
      charges--net of payments              1,041.3      565.7        -
   Cumulative effect of changes in
      accounting principles                    10.9      118.9        -   
Other noncash (income)--net                   (53.1)     (16.2)    (8.7)
                                            --------   -------  -------
                                            1,646.0    1,560.9  1,591.8

   Changes in operating assets and liabilities:
   Receivables--(increase) decrease           (32.1)      28.1   (122.2)
   Inventories--increase                     (192.3)    (198.4)  (116.1)
   Other assets--increase                    (104.5)     (48.8)  (140.3)
   Accounts payable and other
      liabilities--increase                   199.8      141.7     41.4
                                             ------      -----    -----
                                             (129.1)     (77.4)  (337.2)

Net Cash Flows from Operating Activities    1,516.9    1,483.5  1,254.6
Cash Flows from Investing Activities
Additions to property and equipment          (633.5)    (912.9)(1,142.4)
Disposals of property and equipment             5.4       10.6     28.5
Additions to intangibles and other assets     (70.1)     (59.6)  (100.9)
Net proceeds from divestiture                    -        98.9       -
Reductions of investments                     889.3      764.2  1,301.7
Additions to investments                   (1,001.7)    (740.2)  (942.6)
Acquisitions                                  (56.1)     (89.2)     -
                                             ------     -------  ------
Net Cash Used for Investing Activities       (866.7)    (928.2)  (855.7)

Cash Flows from Financing Activities
Dividends paid                               (708.4)    (643.7)  (582.7)
Warrant exercises                               -           -     955.7
Purchase of common stock and other
   capital transactions                       (25.8)     (68.5)   (69.2)
Issuance under stock plans                     19.8       26.0     39.3
Decrease in short-term borrowings            (152.7)    (104.9)  (713.9)
Additions to long-term debt                   383.8      205.5    152.6
Reductions of long-term debt                  (39.8)      (3.0)   (60.0)
                                              ------    -------  -------
Net Cash Used for Financing Activities       (523.1)    (588.6)  (278.2)

Effect of exchange rate changes on cash       (19.9)     (13.5)     8.3
                                              ------     ------   -----
Net increase (decrease) in cash and
   cash equivalents                           107.2      (46.8)   129.0
Cash and cash equivalents at the beginning
   of year                                    432.4      479.2    350.2
                                              -----      -----    -----
Cash and cash equivalents at end of year    $ 539.6    $ 432.4  $ 479.2
                                              =====      =====    =====
See notes to consolidated financial statements.

                                  -11-


<PAGE>

Segment Information


Industry Data     (Dollars in millions)   1993       1992       1991
- --------------------------------------------------------------------
Net sales--to unaffiliated customers
  Life-sciences products
   Anti-infectives                       $1,731.4  $1,735.9  $1,723.8
   Central nervous system                 1,393.6   1,290.0   1,109.6
   Medical devices and diagnostics        1,254.0   1,204.3   1,192.3
   Diabetic care                            687.4     641.8     583.5
   Animal health                            439.1     426.5     388.0
   All other                                946.9     868.8     728.5
                                          -------   -------   -------
Net sales                                $6,452.4  $6,167.3  $5,725.7
                                          =======   =======   =======

Life-sciences products include a broad range of pharmaceuticals,
diagnostics, and medical devices used for the treatment of human and
animal diseases.  The largest category of the products is the anti-
infectives, which include Ceclor, Keflex (registered), Kefzol (registered), 
Lorabid, Nebcin (registered), Tazidime (registered), and Vancocin HCl.  
Central-nervous-system agents include Prozac and Darvon (registered).  
Medical devices and diagnostics include intravenous fluid-delivery and 
control systems, implantable cardiac pacemakers and defibrillators, external 
cardiac defibrillators and monitors, coronary angioplasty catheter systems, 
peripheral and coronary atherectomy catheter systems, patient vital-signs 
measurement and monitoring systems, and diagnostic products that include 
tests incorporating monoclonal antibodies, of which Tandem (registered) 
PSA and Tandem Icon (registered) HCG are the largest.    Other major
groups are diabetic-care products, of which Humulin and Iletin (registered) 
are the largest, and animal health products that include a nonhormonal 
cattle feed additive, Rumensin (registered), which improves feed efficiency 
and growth; Micotil, an antibiotic for bovine respiratory disease; Tylan, 
an antibiotic for promoting feed efficiency and growth in swine and cattle; 
anticoccidial agents for use in broilers and layer replacements, the largest 
of which is Coban (registered); and other products for livestock and poultry.
Major products in the all-other category include cardiovascular therapy 
products, of which Dobutrex is the largest; an antiulcer agent known as 
Axid; hormone products, the largest of which is Humatrope; and other 
products, including cancer-therapy and other miscellaneous pharmaceutical 
products.

Most of the pharmaceutical products are distributed through wholesalers that
serve physicians, dentists, pharmacies, and hospitals.  In 1993, one
wholesaler accounted for approximately 11 percent of consolidated net sales.
The medical devices and diagnostic products are marketed to physicians,
hospitals, clinics, and medical laboratories through distributors and on a
direct basis.  Animal health products are sold to wholesale distributors,
retailers, manufacturers, and producers.

                                  -12-


<PAGE>

Geographic Information (Dollars in millions) 1993     1992      1991
- --------------------------------------------------------------------
Net sales
  United States
   Sales to unaffiliated customers        $3,981.0  $3,835.4  $3,624.9
   Transfers to other geographic areas       552.3     443.6     432.2
                                           -------   -------   -------
                                           4,533.3   4,279.0   4,057.1

  Europe, Middle East, and Japan
   Sales to unaffiliated customers         1,846.3   1,786.8   1,606.7
   Transfers to other geographic areas       218.6     207.2     196.9
                                             -----   -------   -------
                                           2,064.9   1,994.0   1,803.6

  Other
   Sales to unaffiliated customers           625.1     545.1     494.1
   Transfers to other geographic areas         3.9       4.9       2.3
                                             -----     -----     -----
                                             629.0     550.0     496.4

  Eliminations--transfers between
    geographic areas                        (774.8)   (655.7)   (631.4)
                                           -------   -------   -------
                                          $6,452.4  $6,167.3  $5,725.7
                                           =======   =======   =======
Income before income taxes and cumulative
  effect of changes in accounting principles
   United States                          $  457.9  $  716.1  $1,299.6
   Europe, Middle East, and Japan            185.0     372.7     479.8
   Other                                      75.1      97.1     100.8
   Eliminations and adjustments              (16.1)     (3.6)     (1.0)
                                             -----   -------   --------
                                          $  701.9  $1,182.3  $1,879.2
                                             =====   =======   =======
Total assets
   United States                          $7,187.8  $6,564.8  $6,319.0
   Europe, Middle East, and Japan          2,507.1   2,215.9   2,056.1
   Other                                     382.5     330.3     302.9
   Eliminations and adjustments             (453.8)   (438.2)   (379.4)
                                            ------    ------   -------
                                          $9,623.6  $8,672.8  $8,298.6
                                           =======   =======   =======

Transfers between geographic areas are made at prices that, in general, are
calculated to reflect a profit attributable to manufacturing operations.  Net
assets relating to operations outside the United States amounted to
approximately $1,604.3 million at the end of 1993 and $1,550.8 million at the
end of 1992.  Remittances to the United States are subject to various
regulations of the respective governments as well as to fluctuations in 
exchange rates.

                                    -13-


<PAGE>

Selected Quarterly Data (unaudited)
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions, except per-share data)

<TABLE>
<CAPTION>
                           1993                           1992
            --------------------------------------------------------------------
            Fourth*   Third      Second    First     Fourth*    Third*    Second   First
            --------------------------------------------------------------------
<S>        <C>       <C>       <C>       <C>       <C>       <C>       <C>        <C>
Net sales  $1,800.8  $1,530.6  $1,561.0  $1,560.0  $1,655.4 $1,476.5 $1,478.3  $1,557.1
Cost of      
 sales        575.5     467.4     469.5     446.6     483.8    532.5    445.6     435.1
Operating    
 expenses     778.1     650.1     634.8     605.1     680.2    731.8    595.2     541.9
Restruc-
turing and
 special
 charges    1,172.7        -          -         -      46.1     519.6         -        -
Other income
 (loss)-net   (11.9)      4.5      35.2      21.5      (.8)     (78.2)     49.0     56.8
Income (loss)
 before cumula-
 tive effect of
 changes in
 accounting
 principles  (523.6)    294.4     346.8     373.5     311.2    (268.5)    340.2     444.7

Cumulative effect
 of accounting
 changes          -         -         -     (10.9)        -         -         -       (118.9)
Net income  
 (loss)      (523.6)    294.4     346.8     362.6     311.2    (268.5)    340.2        325.8
Earnings (loss)
 per share:
 Income (loss)
 before cumulative
 effect of changes
 in accounting
 principles  (1.77)       1.00     1.18       1.27       1.06    (.91)      1.16         1.51
 Net income  
 (loss)      (1.77)       1.00     1.18       1.23       1.06    (.91)      1.16         1.10
Dividends paid
   per share   .605        .605     .605       .605       .55     .55        .55          .55

Common stock prices:
    High     60.75       50.63    52.13      62.00      65.50   72.00      74.63        87.75
    Low      50.13       43.63    45.00      45.13      57.75   61.25      63.63        69.50
</TABLE>


*Reflects impact of restructuring and special charges.  (See Note 2 to
consolidated financial statements.)

First-quarter dividends are declared in December of the preceding year.
It is the present intention of the board of directors to continue to
consider quarterly the payment of a cash dividend, the payment and amount
thereof to be dependent on the net earnings, financial condition and
requirements of the company, and other relevant considerations.

The company's common stock is listed on the New York, Tokyo, London, and
other stock exchanges.  The number of shareholders of record as of
December 31, 1993, was 59,300.

                                     -14-


<PAGE>

Selected Financial Data (unaudited)
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions, except per-share data)


<TABLE>
<CAPTION>

                                   1993*     1992*   1991     1990     1989
                                   ----      ----    ----     ----     ----
<S>                              <C>      <C>      <C>      <C>       <C>
Operations
Net sales                        $6,452.4 $6,167.3 $5,725.7 $5,191.6  $4,175.6
Research and development expenses   954.6    924.9    766.9    702.7     605.4
Other operating costs and expenses3,672.5  3,521.2  3,190.5  2,949.5   2,405.4
Restructuring and special charges 1,172.7    565.7     -         -          -
Other income--net                    49.3     26.8    110.9     59.6     165.1
Income before taxes and changes in
   accounting principles            701.9  1,182.3  1,879.2  1,599.0   1,329.9
Income taxes                        210.8    354.7    564.5    471.7     390.4
Cumulative effect of accounting
   changes                           10.9    118.9     -         -          -
Net income                          480.2    708.7  1,314.7  1,127.3     939.5
As a percent of sales:
   Net income                         7.4%    11.5%    23.0%    21.7%    22.5%
   Research and development          14.8     15.0     13.4     13.5     14.5
Per-share data:
   Before effect of accounting
   changes                           $1.67    $2.81    $4.50  $  3.90    $3.20
   Net income                         1.63     2.41     4.50     3.90     3.20
   Dividends declared                 2.44     2.255    2.05     1.73   1.4225
   Dividends paid                     2.42     2.20     2.00     1.64     1.35
Average number of shares and share
   equivalents (thousands)        294,289   294,478  294,244  289,993  294,507
                                  ============================================
Financial Position
Current assets                   $3,697.1 $3,006.0  $2,939.3 $2,501.3 $2,274.4
Current liabilities               2,928.0  2,398.6   2,272.0  2,817.6  1,328.8
Working capital                     769.1    607.4     667.3   (316.3)   945.6
Current ratio                         1.3      1.3       1.3       .9      1.7
Other assets                     $1,726.3 $1,594.7  $1,576.8 $1,704.8 $1,459.0
Property and equipment            4,200.2  4,072.1   3,782.5  2,936.7  2,114.6
Total assets                      9,623.6  8,672.8   8,298.6  7,142.8  5,848.0
Long-term debt                      835.2    582.3     395.5    277.0    269.5
Deferred income taxes               127.5    169.7     415.6    351.2    300.4
Other noncurrent liabilities      1,164.1    630.1     249.4    229.5    192.2
Shareholders' equity              4,568.8  4,892.1   4,966.1  3,467.5  3,757.1
Long-term debt as a percent
   of equity                        18.3%     11.9%    8.0%      8.0%      7.2%
                                  ============================================  
Supplementary Data
Return on shareholders' equity      10.2%    14.4%    31.2%    31.2%      26.9%
Return on assets                     5.2%     8.3%    17.2%    17.5%      17.0%
Number of employees                32,700** 32,200   30,800  29,500     27,800
Net sales per
   employee (thousands)          $  197.3 $  191.5 $  185.9  $176.0     $150.2
Net income per
   employee (thousands)              14.7     22.0     42.7     38.2      33.8
Capital expenditures                633.5    912.9  1,142.4  1,007.3     554.5
Depreciation and amortization       398.3    368.1    299.5    247.5     229.3
Effective tax rate                   30.0%    30.0%    30.0%   29.5%      29.4%
Number of shareholders             59,300   53,900   46,000   39,300    36,000
                                   ===========================================
</TABLE>
 

*Reflects impact of restructuring, special charges, and accounting changes.
(See Notes 2 and 3 to consolidated financial statements.)
**Does not reflect the impact of the special retirement programs since the
retirements were generally effective January 1, 1994.  Approximately 2,600 
people will be retiring under the programs.  (See Note 2 to consolidated 
financial statements.)

                                      -15-


<PAGE>


Notes to Consolidated Financial Statements
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions, except per-share data)


Note 1:  Summary of Significant Accounting Policies

Basis of Presentation:  The accounts of all wholly owned and majority-
owned subsidiaries are included in the consolidated financial statements.
All intercompany balances and transactions have been eliminated.

Cash Equivalents:  The company considers all highly liquid investments,
generally with a maturity of three months or less, to be cash equivalents.
The cost of these investments approximates fair value.

Inventories:  The company states all its inventories at the lower of cost
or market.  The company uses the last-in, first-out (LIFO) cost method for
a significant portion of its inventories located in the continental United
States, or approximately 50 percent of its total inventories.  Other
inventories are valued by the first-in, first-out (FIFO) method.
Inventories at December 31, 1993 and 1992, consisted of the following:

                                           1993        1992
                                           ----        ----

   Finished products                    $  272.5   $  272.2
   Work in process                         667.7      530.9
   Raw materials and supplies              271.5      222.2
                                         -------    -------
                                         1,211.7    1,025.3
   Less reduction to LIFO cost             108.7       86.9
                                         -------     ------
                                        $1,103.0   $  938.4
                                         =======     ======

Intangible Assets:  Intangible assets arising from acquisitions and
research alliances are amortized over their estimated useful lives,
ranging from 5 to 40 years, using the straight-line method.

Property and Equipment:  Property and equipment is stated on the basis of
cost.  Provisions for depreciation of buildings and equipment are computed
generally by the straight-line method at rates based on their estimated
useful lives.  At December 31, 1993 and 1992, property and equipment
consisted of the following:

                                            1993       1992
                                            ----       ----

   Land                                  $  130.2   $  112.8
   Buildings                              1,957.3    1,655.4
   Equipment                              3,771.7    3,344.3
   Construction in progress                 707.3    1,035.6
                                          -------    -------
                                          6,566.5    6,148.1
   Less allowances for depreciation       2,366.3    2,076.0
                                          -------    -------
                                         $4,200.2   $4,072.1
                                          =======    =======

Approximately $25.5 million, $37.4 million, and $49.1 million of interest
costs were capitalized as part of property and equipment in 1993, 1992, and 
1991, respectively.  The estimated cost to complete significant construction 
projects in progress at December 31, 1993, approximated $472 million. 
Total rental expense for all leases, including contingent rentals (not
material), amounted to approximately $97.0 million for 1993, $86.3

                                  -16-


<PAGE>

million for 1992, and $75.3 million for 1991.  Capital leases
included in property and equipment in the consolidated balance sheets and
future minimum rental commitments are not material.

Foreign Currency Swaps, Options, and Forward Contracts:  The company
enters into a variety of forward contracts, options, and swaps in its
management of foreign currency exposures and interest rate risk.  Realized
and unrealized gains and losses on contracts that qualify as designated
hedges are deferred.  Those contracts that do not qualify as hedges for
accounting purposes are marked to market, and the resulting gains and
losses are recognized in other income.

Income Taxes:  Deferred taxes are recognized for the future tax effects of
temporary differences between financial and income tax reporting based on
enacted tax laws and rates.  Federal income taxes are provided on the
portion of the income of foreign subsidiaries that is expected to be
remitted to the United States and be taxable.

Earnings per Share:  Earnings per share are calculated on a fully diluted
basis.  They are based on the weighted average number of outstanding
common shares and common share equivalents (primarily stock options).
Primary earnings per share have not been presented because they do not
differ significantly from the reported earnings per share computed on a
fully diluted basis.

Note 2:  Restructuring and Special Charges

In both 1993 and 1992, the company took actions designed to enhance the
company's competitiveness in the changing health care environment, reduce
expenses, and improve efficiencies.  As a result of these actions, the
company recognized restructuring and special charges amounting to $1,172.7
million and $565.7 million in 1993 and 1992, respectively.  Restructuring
costs include those amounts that arose as a direct result of management's
commitment to revised strategic actions.  Special charges represent
unusual, generally nonrecurring expense items.  Significant components of
these charges are summarized as follows (dollars in millions):

                                                 Special
                                 Restructuring   Charges   Total
                                 -------------   -------   -----
1993

Work force reductions               $545.4         -       $545.4
Manufacturing consolidations
   and other closings                249.9         -        249.9
Revised distribution strategies       71.7         -         71.7
Pharmaceutical streamlining           35.3         -         35.3
Intangibles write-downs               18.7     $ 56.5        75.2
Asset write-downs, legal
   accruals, and other                 2.4      192.8       195.2
                                    -----------------------------
                                    $923.4     $249.3    $1,172.7
                                    =============================

                                     -17-


<PAGE>

                                                  Special
                                 Restructuring    Charges  Total
                                 ------------     -------  -----
1992

Global manufacturing strategy        $218.9         -       $218.9
Provision for redirection--
  Medical Devices and
  Diagnostics Division               161.3         -        161.3
Legal, environmental, and
  asbestos abatement                   -         $139.4     139.4
Research investment expenses           -           46.1      46.1
                                    -----------------------------
                                    $380.2       $185.5    $565.7
                                    =============================


The 1993 restructuring actions consisted principally of early-retirement
programs instituted in various countries that resulted in more than 2,600
employee positions being eliminated.  The related provision for work force
reductions includes cash termination benefits, pension enhancements, and
other costs associated with these and other severance programs.  In
addition, the company took actions to consolidate certain manufacturing
operations around the world, close certain European headquarters
operations, and discontinue its efforts to develop the imaging and
therapeutic product lines at its Hybritech subsidiary.  The company also
approved plans to implement revised product distribution strategies in
certain markets outside the United States and to streamline its core
pharmaceutical operations.  The company took special charges to write down
certain operating assets and acquired intangibles as the result of recent
developments in pharmaceutical markets and to provide for certain patent
and product liability matters.

The 1992 actions centered around a streamlining of the global
manufacturing operations and an aggressive response to regulatory
initiatives relating to several of the medical devices and diagnostics
companies.  The revised manufacturing strategy was undertaken in response
to a comprehensive review of the global business and manufacturing
operations.  These actions will result in significant changes to the
nature and/or location of future manufacturing operations.  The charge for
the Medical Devices and Diagnostics Division relates principally to the
write-down of certain intangible assets and costs associated with
responding to regulatory initiatives.  Special charges include accruals
for an accelerated asbestos abatement program, other environmental and
legal matters, and a charge for the write-down of the company's investment
in Centocor, Inc., following the suspension of clinical trials of HA-1A
(trademark)/Centoxin.

In 1993 and 1992, the company also recognized other charges of
approximately $30 million and $204 million, respectively, representing
miscellaneous unusual items covering a variety of other operational
matters.  These charges are reflected in the applicable operating expense
lines in the statements of income.

Note 3:  Accounting Changes

Effective January 1, 1993, the company elected the early adoption of
Financial Accounting Standards Board (FAS) 112, "Employers' Accounting for
Postemployment Benefits."  FAS 112 requires employers to recognize
currently the obligation to provide postemployment benefits to former or
inactive employees and others.  The company's adoption of FAS 112 resulted
in a pretax charge of $17.3 million ($10.9 million after tax; $.04 per
share) relating primarily to disability benefits.  Prior to 1993, the
company expensed these obligations when paid.

                                   -18-


<PAGE>

In 1992, the company elected the early adoption of two Financial
Accounting Standards Board pronouncements.  The adoption of FAS 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
resulted in a pretax charge of $268.9 million ($167.5 million after tax;
$.57 per share).  The adoption of FAS 109, "Accounting for Income Taxes,"
produced a $48.6 million benefit to net income ($.17 per share).  The
effective date of adoption of both standards was January 1, 1992.  The
company elected to report the cumulative effect on prior years of the
changes as a charge to income in 1992 of $118.9 million.

Note 4:  Acquisitions

In September 1993, IVAC Corporation, a wholly owned subsidiary, completed
the acquisition of certain of the assets of the MiniMed III product line,
a three-channel infusion pump system, from Siemens Infusion Systems, Ltd.
The purchase price was approximately $38 million, which includes
guaranteed minimum royalties payable annually from 1996 through 1999.
Under provisions of the acquisition agreement, if the royalties are in
excess of the guaranteed minimums, IVAC will incur additional
consideration, which will be accounted for as goodwill and amortized using
the straight-line method.

In 1992, the company acquired Origin Medsystems, Inc. (OMI), a company
specializing in devices for use in laparoscopic surgery.  The purchase
price, including subsequent contingent payments earned through December
31, 1993, totaled $66 million.  Depending on the annual performance of OMI
and other conditions over the period ending December 31, 1997, additional
cash up to $165 million may be paid to holders of OMI common stock.  Such
additional consideration would be accounted for as goodwill.  Goodwill
recognized in the acquisition is being amortized over 15 years using the
straight-line method.

Note 5:  Stock Plans

Stock options and performance awards have been granted to officers and
other executive and key employees.  Stock options are granted at prices
equal to 100 percent of the fair market value at the dates of grant.

In April 1993, the company announced the GlobalShares program, under which
essentially all employees were given an option to buy 100 shares of stock.
Options to purchase approximately 3 million shares were granted under the
program.

Stock-option activity during 1993 and 1992 is summarized below:

                                              Number of Shares
                                               1993        1992
                                               ----        ----
Unexercised at January 1                   8,359,206   8,065,473
Granted                                    6,964,325   1,227,300
Exercised                                   (671,038)   (895,113)
Terminated                                  (200,675)    (38,454)
                                          ----------   ---------
Unexercised at December 31                14,451,818   8,359,206
                                          ==========   =========
Exercisable at December 31                 5,617,344   4,883,569
                                           =========   =========

                                     -19-


<PAGE>

The per-share price range of unexercised options at December 31, 1993  and
1992, was $9.14 to $81.88 and $9.00 to $81.88, respectively.  Options were
exercised at prices ranging from $9.00 to $47.06 in 1993 ($9.14 to $81.88
in 1992).  At December 31, 1993, additional options, performance awards,
stock appreciation rights, or restricted stock grants may be granted under
the Lilly Stock Plan for not more than 145,595 shares (1992--4,147,202
shares).

Note 6:  Borrowings

Long-term debt at December 31, 1993 and 1992, consisted of the following:

                                            1993           1992
                                            ----           ----

8.18 percent ESOP debentures (due in 2006)  $159.1        $175.0
4.00 to 8.06 percent medium-term
   notes (due 1994-1999)                     225.8         200.8
6.25 percent notes (due in 2003)             200.0            -
6.75 percent notes (due in 1999)             100.0         100.0
5.5 percent Eurodollar bonds (due in 1998)   150.0             -
7 percent bonds sold through Swiss
   banks (due in 1996)                        61.9          60.7
Other, including capitalized leases           42.2          72.2
                                             -----         -----
                                             939.0         608.7
Less current portion                         103.8          26.4
                                             -----         -----
                                            $835.2        $582.3
                                             =====         =====

The 8.18 percent Employee Stock Ownership Plan (ESOP) debentures are
obligations of the ESOP but are shown on the consolidated balance sheet
because they are guaranteed by the company.  The principal and interest on
the debt will be funded by contributions from the company and by dividends
received on certain shares held by the ESOP.  Because of the amortizing
feature of the ESOP debt, bondholders will receive both interest and
principal payments each quarter.

During 1991, the company entered into a currency swap related to $50
million of the medium-term notes, lowering the effective interest rate on
these notes to approximately 7 percent.

The 7 percent bonds sold through Swiss banks have an effective rate of 9
percent.  These bonds were called at their carrying value in January 1994.
The aggregate amounts of maturities on long-term debt for the next five
years are as follows: 1994, $103.8 million; 1995, $43.0 million; 1996,
$100.3 million; 1997, $79.1 million; and 1998, $164.7 million.

At December 31, 1993, short-term borrowings included $346.4 million of
commercial paper and $74.6 million of notes payable to banks.  At December
31, 1992, commercial paper and notes payable to banks totaled $416.3
million and $148.5 million, respectively.  Interest expense as reported in
the financial statements was $71.2 million, $71.7 million, and $39.8
million in 1993, 1992, and 1991, respectively.  Cash payments of interest
on all borrowings totaled $63.7 million, $72.6  million, and $53.1 million
in 1993, 1992, and 1991, respectively.

At December 31, 1993, unused committed lines of credit approximated $600
million.  Compensating balances and commitment fees are not material, and
there are no significant conditions under which the lines may be
withdrawn.

                                   -20-


<PAGE>

Note 7:  Shareholders' Equity

Changes in the components of shareholders' equity were as follows:
                                                           Common Stock in
                          Additional           Deferred    Treasury
                          Paid-in    Retained  Costs-      ---------------
                          Capital    Earnings  ESOP        Shares Amount
                          -------    --------  -------     ---------------
                 

Balance at January 1,1991    -     $4,548.7  $(109.9) 15,743,256 $1,177.5
Net income                          1,314.7
Cash dividends declared
   per share: $2.05                  (599.9)
Purchase for treasury                                  1,170,000     89.7
Exercise of warrants     $370.8      (560.5)         (15,231,234)(1,139.2)
Issuance of stock under
   employee stock plans   (39.8)      (10.8)          (1,496,064)  (113.4)
ESOP transactions           9.1               (176.3)
Other                                    .8                 (993)     (.1)
                          ------------------------------------------------
Balance at Dec. 31, 1991  340.1     4,693.0   (286.2)    184,965     14.5
Net income                            708.7
Cash dividends declared
   per share: $2.255                 (658.6)
Purchase for treasury                                    970,000     72.5
Issuance of stock under
   employee stock plans   (35.2)                      (1,021,375)   (78.3)
ESOP transactions           2.9                 22.3
Other                        .1                          (11,470)     (.9)
                          ------------------------------------------------
Balance at Dec. 31, 1992  307.9     4,743.1   (263.9)    122,120      7.8
                          ------------------------------------------------
Net income                            480.2
Cash dividends declared
   per share: $2.44                  (715.7)
Purchase for treasury                                    550,000     29.8
Issuance of stock under
   employee stock plans   (16.3)                        (585,103)   (32.5)
ESOP transactions           3.6                  21.1
Other                       (.6)       (6.7)             (27,740)    (1.7)
                         ------------------------------------------------
Balance at Dec. 31, 1993 $294.6    $4,500.9   $(242.8)    59,277     $3.4
                          ===============================================

The company has 292,807,644 issued shares of common stock without par value.
In addition, the company has 5,000,000 authorized and unissued shares of
preferred stock without par value.

In 1989, the company established an Employee Stock Ownership Plan (ESOP) as a
funding vehicle for the existing employee savings plan.  The ESOP used the
proceeds of a loan from the company to purchase 2,200,000 shares of common
stock from the treasury for $129.8 million.  In September 1991, the ESOP
issued $200 million of third-party debt, repayment of which was guaranteed by
the company (see Note 6).  The proceeds were used to purchase shares of the
company's common stock on the open market.  Shares of common stock held by
the ESOP will be allocated to participating employees annually through 2006
as part of the company's savings plan contribution.  The cost of shares
allocated each period is recognized as expense on a first-in, first-out
basis.

                                   -21-


<PAGE>

Generally, the assets and liabilities of foreign operations are translated
into U.S. dollars using the current exchange rate.  For those operations,
changes in exchange rates generally do not affect cash flows; therefore,
resulting translation adjustments are made to shareholders' equity rather
than to income.  Following is an analysis of currency translation
adjustments reflected in shareholders' equity:

                                              1993      1992       1991
                                              ----      ----       ----

Balance (negative amount) at January 1      $ (70.2)   $ 50.7   $  28.6
Translation adjustments and gains
   (losses) from intercompany transactions    (93.3)   (121.0)     17.4
Allocated income taxes                           -         .1       4.7
                                              ------   ------     -----
Balance (negative amount) at
   December 31                              $(163.5)   $(70.2)  $  50.7
                                             ======      =====    =====

In 1988, the company adopted a Shareholder Rights Plan.  Under the terms of
the plan, all shareholders of common stock received for each share owned a
preferred stock purchase right entitling them to purchase from the company
one two-hundredth of a share of Series A Participating Preferred Stock at an
exercise price of $162.50.  The rights are not exercisable until after the
date on which the company's right to redeem has expired.  The company may
redeem the rights for $.005 per right up to and including the 10th business
day after the date of a public announcement that a person (the "Acquiring
Person") has acquired ownership of stock having 20 percent or more of the
company's general voting power (the "Stock Acquisition Date").

The plan provides that, if the company is acquired in a business combination
transaction at any time after a Stock Acquisition Date, generally each
holder of a right will be entitled to purchase at the exercise price a
number of the acquiring company's shares having a market value of twice the
exercise price.  The plan also provides that in the event of certain other
business combinations, certain self-dealing transactions, or the acquisition
by a person of stock having 25 percent or more of the company's general
voting power, generally each holder of a right will be entitled to purchase
at the exercise price a number of shares of the company's common stock
having a market value of twice the exercise price.  Any rights beneficially
owned by an Acquiring Person shall not be entitled to the benefit of the
adjustments with respect to the number of shares described above.  The
rights will expire on July 28, 1998, unless redeemed earlier by the company.

                                   -22-


<PAGE>

Note 8:  Income Taxes

Following is the composition of income taxes.  The 1993 and 1992 amounts
reflect use of the liability method under FAS 109, while the 1991  amounts
reflect accounting using the deferred method, which was required under the
previous rules.

                                          1993     1992     1991
                                          ----     ----     ----
Current:
   Federal                               $329.8   $385.7   $330.1
   Foreign                                 80.5     88.7    104.2
   State                                   42.5     55.4     87.3
                                          -----    -----    -----
                                          452.8    529.8    521.6

Deferred:
   Federal                               (112.7)  (124.1)    43.4
   Foreign                                (89.5)   (35.1)    (5.5)
   State                                  (39.8)   (15.9)     5.0
                                          -----    -----      ---
                                         (242.0)  (175.1)    42.9
                                          -----    -----     ----
Income taxes                             $210.8   $354.7   $564.5
                                          =====    =====    =====
1991 deferred income tax provision:
   Accelerated depreciation                                $ 18.6
   Employee benefit plans                                    32.8
   Vacation liability                                        (3.5)
   Other timing differences                                  (5.0)
                                                             ----
Total deferred income tax provision                       $  42.9
                                                             ====

At December 31, 1993, the company had net operating loss carryforwards 
for income tax purposes of $294 million, of which $8 million will expire
within 5 years.  The majority of the remaining carryforwards do not
expire.

Significant components of the company's deferred tax assets and
liabilities as of December 31 are as follows:

                                                    1993     1992
                                                    ----     ----
Deferred tax assets:
   Restructuring and special charges--other      $361.2    $154.3
   Compensation and benefits                      179.0     149.0
   Inventory                                      103.1      96.9
   Litigation, environmental and asbestos          99.2      93.7
   Net operating losses of subsidiaries            59.1       4.5
   Other                                          179.8     123.1
                                                  -----     -----
                                                  981.4     651.5

   Valuation allowances                          (104.0)    (20.4)
                                                 ------     ------
      Total deferred tax assets                   877.4     631.1
                                                  -----     -----
Deferred tax liabilities:
   Property and equipment                        (435.6)   (345.7)
Prepaid employee benefits                        (122.9)   (208.2)
Other                                             (52.8)    (53.1)
                                                   ----      ----
Total deferred tax liabilities                   (611.3)   (607.0)
                                                  -----     -----

Deferred tax assets--net                         $266.1    $ 24.1
                                                  =====     =====

                                -23-


<PAGE>

Unremitted earnings of foreign subsidiaries that have been, or are
intended to be, permanently reinvested for continued use in foreign
operations and which, if distributed, would result in taxes at
approximately the U.S. statutory rate, aggregated $976 million at December
31, 1993 ($788 million at December 31, 1992).  Cash payments of taxes
totaled $455 million, $484 million, and $489 million in 1993, 1992, and
1991, respectively.

Following is a reconciliation of the effective income tax rate:

                                              1993     1992   1991
                                              ----     ----   ----
United States federal statutory tax rate      35.0%   34.0%   34.0%
Add (deduct):
   State taxes, net of federal tax benefit      .3     2.2     3.2
   Tax savings from operations in Puerto Rico(10.0)   (7.5)   (4.7)
   Research tax credit                        (2.4)    (.3)    (.7)
   Effect of international operations          1.7     (.8)   (2.4)
   Nondeductible impact of restructuring       2.8     1.8      -
   Sundry                                      2.6      .6      .6
                                              ----    ----    ----
Effective income tax rate                     30.0%   30.0%   30.0%
                                              ====    ====    ====

Note 9:  Retirement Benefits

Pension Plans:

The company has noncontributory defined benefit retirement plans that
cover substantially all United States employees and a majority of
employees in other countries.  Benefits under the domestic plans are
calculated by using one of several formulas.  These formulas are based on
a combination of the following:  (1) years of service, (2) final average
earnings, (3) primary social security benefit, and (4) age.  The benefits
for the company's plans in countries other than the United States are
based on years of service and compensation.

The company's funding practice for all plans is consistent with local
governmental and tax funding regulations.  Generally, pension costs
accrued are funded.  Plan assets consist primarily of equity and fixed
income instruments.

Net pension expense for the company's retirement plans included the
following components:

                                               1993     1992      1991
                                               ----     ----      ----
   Service cost--benefits earned during the
       year                                  $  65.5  $  69.4  $  58.8
   Interest cost on projected benefit
       obligations                             129.0    121.5    119.7
   Actual return on assets                    (283.3)  (197.2)  (246.2)
   Net amortization and deferral                91.6     18.1     78.3
                                               -----    -----     ----
   Net annual pension cost                   $   2.8  $  11.8  $  10.6
                                               =====    =====     ====

In addition to the net pension cost above, the 1993 restructuring charges
include curtailment losses and special termination costs resulting from
the early-retirement programs of $133.3 million and $113.4 million,
respectively.

                                     -24-


<PAGE>

The funded status and amounts recognized in the consolidated balance
sheets for the company's defined benefit retirement plans at December 31
were as follows:

                                 Plans in Which         Plan in Which
                                 Assets Exceed          Accumulated Benefits
                                 Accumulated Benefits   Exceed Assets

                                    1993      1992      1993   1992
                                    ----      ----      ----   ----
Plan assets at fair
  value                           $2,033.8  $1,806.9   $ 0.0  $ 0.0
Actuarial present value
  of benefit obligations
    Vested benefits                1,532.6   1,097.1   111.4   29.4
    Nonvested benefits               149.0     108.6     1.6    2.5
                                   -------   ------    -----   ----
Accumulated benefit
  obligation                       1,681.6   1,205.7   113.0   31.9
Effect of projected future
  salary increases                   395.8     367.6     4.0    7.2
                                   -------   -------   -----   ----
Projected benefit
  obligation                       2,077.4   1,573.3   117.0   39.1
                                   -------   -------   -----   ----
Funded status                        (43.6)    233.6  (117.0) (39.1)
Unrecognized net loss                174.1     119.3    15.6   13.7
Unrecognized prior
  service cost                       128.0      25.6     9.1    5.2
Unrecognized net
  obligation at
  January 1, 1986                      3.8       4.1     2.8    3.4
Additional minimum
  liability                            0.0       0.0   (23.5)  (9.5)
                                     -----     -----   -----   -----
Prepaid (accrued) pension
  cost                            $  262.3    $382.6 $(113.0)$(26.3)
                                     =====    =====   =======  ====

The assumptions used to develop net periodic pension expense and the
actuarial present value of projected benefit obligations are shown below:

                                        (percents)   1993   1992   1991
                                                     ----   ----   ----

Weighted-average discount rate                        7.6    8.7   9.2
Rate of increase in future compensation levels    4.5-9.5 6.0-9.5 5.5-9.5
Weighted-average expected long-term rate of
   return on plan assets                             11.0   11.0   11.0

The reduction in the discount rate at December 31, 1993 increased the
projected benefit obligation by approximately $210.4 million.

The company has defined contribution savings plans that cover its eligible
employees worldwide.  The purpose of these defined contribution plans is
generally to provide additional financial security during retirement by
providing employees with an incentive to make regular savings.  Company
contributions to the plans are based on employee contributions and the level
of company match.  Expense under the plans totaled $32.9 million, $24.1
million, and $28.6 million for the years 1993, 1992, and 1991, respectively.

                                     -25-


<PAGE>

Retiree Health Benefits:

The company's noncontributory defined benefit postretirement plans provide
health benefits for the majority of the United States retirees and their
eligible dependents.  Certain of the company's non-U.S. subsidiaries have
similar plans for retirees.  Eligibility for these benefits is based upon
retirement from the company.  Effective October 1, 1992, the plan was
modified such that the start date of an eligible employee's credited service
period begins when the combination of an employee's age and years of service
equals 60.

The company's funding practice for all plans is consistent with local
governmental and tax funding regulations.  Plan assets consist primarily of
equity and fixed income instruments.

Net postretirement benefit expense for the company included the following
components:

                                                    1993     1992
                                                    ----     ----

Service cost--benefits earned during the year      $ 10.7   $  7.2
Interest cost on accumulated postretirement benefit
  obligations                                        19.8     21.8
Actual return on assets                             (11.2)    (4.6)
Net amortization and deferral                       (10.2)   (11.0)
                                                    ------   -----
Net periodic postretirement benefit cost           $  9.1   $ 13.4
                                                    =====    =====


Prior to 1992, the annual expense associated with these benefits was
recognized when incurred.  The expense of these benefits was $13.4 million
in 1991.

The funded status and amounts recognized in the consolidated balance sheet
for the company's defined benefit postretirement plans at December 31 were
as follows:

                                                 1993        1992
                                                 ----        ----
Accumulated postretirement benefit obligation:
   Retirees                                      $217.8    $131.5
   Fully eligible active plan participants         61.0      45.8
   Other active plan participants                  75.7      56.6
                                                  -----     -----  
                                                  354.5     233.9
Plan assets at fair value                         142.6     119.3
                                                  -----     -----
Accumulated postretirement benefit obligation
   in excess of plan assets                       211.9     114.6
Unrecognized benefit of plan amendment             37.6      46.6
Unrecognized net loss                             (66.5)    (18.9)
                                                  -----     -----
Accrued postretirement benefit cost              $183.0    $142.3
                                                  =====     =====
In connection with the company's early-retirement programs, restructuring
charges include curtailment and termination costs relating to these plans of
$52.4 million and $7.0 million, respectively.

                                -26-


<PAGE>

The assumptions used to develop the net postretirement benefit expense and
the present value of benefit obligations are shown below:

                                         (percents)   1993   1992
                                                      -----  ----

Weighted-average discount rate                         7.5   8.5
Expected long-term rate of return                     11.0  11.0
Health care cost trend rate for participants
   Under age 65                                        8.0   8.0
   Over age 65                                         6.0   6.0

If these trend rates were to be increased by 1 percentage point each year,
the December 31, 1993, accumulated postretirement benefit obligation would
increase by 12 percent and the aggregate of the service and interest cost
components of 1993 annual expense would increase by 20 percent.  The
reduction in the discount rate at December 31, 1993, increased the
accumulated postretirement benefit obligation by approximately $30.0
million.

Note 10:  Financial Instruments

Fair Value of Financial Instruments and Off-Balance-Sheet Risk:  The methods
and assumptions used to estimate the fair value of the following classes of
financial instruments were:

Short-Term and Long-Term Debt:  The carrying amount of the company's short-
term borrowings approximates its fair value.  The fair values of the
company's long-term debt, including the current portion, are estimated using
discounted cash flow analyses, based on the company's current incremental
borrowing rates for similar types of borrowing arrangements.
A significant portion of long-term debt consists of noncallable notes and
bonds.

Investments:  The fair values for marketable debt and equity securities are
based on quoted market prices.  The fair values of nonmarketable equity
securities, which represent either equity investments in start-up technology
companies or partnerships that invest in start-up technology companies, are
estimated based on the fair value information provided by these ventures.
The fair value of nonmarketable debt securities is based on quoted market
prices of similar securities.

The company is a limited partner in certain investments for which the
determination of fair value is not practicable.  The carrying value of such
investments is $73.6 million as of December 31, 1993.

Risk-Management Instruments:  The fair values of the company's foreign
exchange and interest rate risk-management instruments (forwards, options,
and swaps) are estimated, based on quoted market prices of comparable
contracts.

                                   -27-


<PAGE>

The carrying amounts and fair values of the company's outstanding financial
instruments at December 31 were as follows:

                                             1993               1992
                                      ----------------   ----------------
                                      Carrying    Fair   Carrying    Fair
                                       Value     Value     Value    Value
                                       -----     -----     -----    -----

Long-term debt                         $928.7   $964.5   $596.9   $620.4

Short-term investments                  447.5    460.0    295.9    300.6

Noncurrent investments
   Marketable equity                     63.0     69.8     80.0     98.4
   Debt securities                       49.8     49.2    124.3    125.9
   Nonmarketable equity                  35.3     36.5     38.2     40.5

Risk-management instruments              12.0      5.4      2.8       .1

Off-Balance-Sheet Risk:  The company enters into forward exchange contracts,
option contracts, and foreign currency swaps to hedge foreign currency
transactions on a continuing basis for periods consistent with its foreign
currency exposures.  The effect of this practice is to reduce the impact of
foreign exchange rate movements on the company's operating results.  The
company's hedging activities do not create exchange rate risk because gains
and losses on these contracts generally offset losses and gains on the
assets, liabilities, and transactions being hedged.  In addition, the company
enters into interest rate swaps to manage its interest rate risk.

At December 31, the stated, or notional, amounts of the company's outstanding
off-balance-sheet financial instruments were as follows:

                                             1993             1992
                                             ----             ----

Forward exchange contracts                  $790.7          $458.6
Foreign currency options issued               -               40.0
Currency swaps                                39.2            94.1
Interest rate swaps                          225.0           100.0

Of the company's forward exchange contracts outstanding at December 31, 1993
and 1992, those which were denominated in European currencies amounted to 85
percent and 95 percent, respectively.  The forward exchange contracts
generally have maturities that do not exceed 12 months and require the
company to exchange currencies at rates agreed to at inception of the
contracts upon maturity. The foreign currency options represent one part of
an overall strategy designed to hedge certain foreign currency exposures.

Concentrations of Credit Risk:  Financial instruments that potentially
subject the company to credit risk consist principally of trade receivables
and interest-bearing investments.  Wholesale distributors of life-sciences
products account for a substantial portion of trade receivables; collateral
is generally not required.  The risk associated with this concentration is
limited due to the large number of wholesalers and their geographic
dispersion.

The company places substantially all its interest-bearing investments with
major financial institutions and, by policy, limits the amount of credit
exposure to any one financial institution.

                                  -28-


<PAGE>


Note 11:  Contingencies

The company has been named as a defendant in numerous product liability
lawsuits involving primarily two products, diethylstilbestrol and Prozac.
The company has accrued for its estimated exposure, including costs of
litigation, with respect to all current product liability claims.  In
addition, the company has accrued for certain future anticipated product
liability claims to the extent the company can formulate a reasonable
estimate of their costs.  The company's estimates of these expenses are based
primarily on historical claims experience and data regarding product usage.
The company expects the cash amounts related to the accruals to be paid out
over the next several years.  The majority of costs associated with defending
and disposing of these suits are covered by insurance.  The company's
estimate of insurance recoveries is based on existing deductibles, coverage
limits, and the existing and projected future level of insolvencies among its
insurance carriers.

The company is a party to various patent litigation matters involving
Humatrope, Humulin, bovine somatotropin, and various products within the
Medical Devices and Diagnostics Division.  Based upon historical and industry
data, the company has accrued for the anticipated cost of resolution of the
claims.

Under the Comprehensive Environmental Response, Compensation, and Liability
Act, commonly known as Superfund, the company has been designated as one of
several potentially responsible parties with respect to certain sites.  Under
Superfund, each responsible party may be jointly and severally liable for the
entire amount of the cleanup.  The company also continues remediation of
certain of its own sites.  The company has accrued for estimated Superfund
cleanup costs, remediation, and certain other environmental matters, taking
into account, as applicable, available information regarding site conditions,
potential cleanup methods, estimated costs, and the extent to which other
parties can be expected to contribute to those costs.  The company has
reserved its right to pursue claims for insurance with respect to certain
environmental liabilities.  However, because of uncertainties with respect to
the timing and ultimate realization of those claims, the company has not
recorded any environmental insurance recoveries.

The product, patent, and environmental liabilities have been reflected in the
company's consolidated balance sheet at a gross amount of approximately $505
million.  Estimated insurance recoverables of approximately $185 million
appear as assets in the consolidated balance sheet.

While it is not possible to predict or determine the outcome of the patent,
product liability, or other legal actions brought against the company, or the
ultimate cost of environmental matters, the company continues to believe the
costs associated with all such matters will not have a material adverse
effect on its consolidated financial position.

                                    -29-


<PAGE>

Note 12:  Subsequent Event

In January 1994, the company announced that it intends to divest itself of
the Medical Devices and Diagnostics (MDD) Division, a global high technology
organization of nine companies.  The final form of the divestiture will
depend on tax, market, and other considerations including the nature of any
offers that the company may receive.  Under current plans, the company
expects to divest itself of six businesses in the MDD division through the
spin-off to shareholders of a new medical-devices holding company, through
one or more public offerings of the holding company's shares, or through a
combination of these methods.  These six businesses include Advanced
Cardiovascular Systems, Inc.; Cardiac Pacemakers, Inc.; Devices for Vascular
Intervention, Inc.; Heart Rhythm Technologies, Inc.; IVAC Corporation; and
Origin Medsystems, Inc.  The company intends to sell separately the MDD
division's three other businesses: Hybritech Incorporated; Pacific Biotech,
Inc.; and Physio-Control Corporation.

                                    -30-

<PAGE>


Report of Independent Auditors
Board of Directors and Shareholders,
Eli Lilly and Company


We have audited the accompanying consolidated balance sheets of Eli Lilly
and Company and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of income and cash flows for each of the
three years in the period ended December 31, 1993.  These financial
statements are the responsibility of the company's management.  Our
responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Eli Lilly
and Company and subsidiaries at December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.

As discussed in Note 3 to the financial statements, in 1992 the company
changed its methods of accounting for income taxes and postretirement health
benefits.


ERNST & YOUNG

Indianapolis, Indiana
February 1, 1994


                                     -31-


<PAGE>

Appendix to Exhibit 13


Graphs in Annual Report to Shareholders
for the Year Ended December 31, 1993


The portions of the Company's 1993 Annual Report to Shareholders that are
contained in this Exhibit 13 include, in their original paper form, three bar
graphs.  The information contained in those graphs is set forth below in
tabular form.  The captions of the graphs are also set forth below.


Graph #1 -- Research and Development (R&D) Expenses

($ millions)

Year            Amount
- ----            ------

1989            $605.4
1990             702.7
1991             766.9
1992             924.9
1993             954.6

Caption:  In 1993, 15 percent of each sales dollar was devoted to R&D
spending.  The company's commitment to a strong R&D effort resulted in global
clinical trial spending more than doubling in 1993.  As a result of these
efforts, the company now has approximately 15 compounds in Phase II or Phase
III clinical trials.


Graph #2 -- Capital Expenditures

($ millions)

Year           Amount
- -----          ------

1989         $  554.5
1990          1,007.3
1991          1,142.4
1992            912.9
1993            633.5

Caption:  Capital expenditures during 1993 were $279 million less than the
1992 level and were at their lowest level in four years.  Major research,
administrative, and manufacturing projects continued to progress toward
completion.  It is expected that the near-term capital expenditure
requirements will be below the 1993 level.

                                   -32-


<PAGE>

Appendix to Exhibit 13 Continued



Graph #3 -- Dividends per Share

($ millions)

Year        Amount
- ----        ------

1989         $1.35
1990          1.64
1991          2.00
1992          2.20
1993          2.42

Caption:  Dividends of $2.42 per share were paid in 1993, which was a 10
percent increase over 1992.  The company also declared a first-quarter
1994 dividend of $.625 per share which represents a 3.3 percent increase over
1993. Nineteen ninety-three was the 26th consecutive year in which dividends
increased.

                                      -33-


<PAGE>








               EXHIBIT 21.  LIST OF SUBSIDIARIES AND AFFILIATES
                                      
                                      
The following are the subsidiaries and affiliated corporations of the Company
                            at December 31, 1993.

                                           State or Jurisdiction
                                          of Incorporation             %
                                          or Organization           Owned
                                          ----------------------    -----

ELI LILLY AND COMPANY   (1)                       Indiana

  Eli Lilly International Corporation             Indiana           100
    Eli Lilly Int'l. Corp.-Branch:                England           100
    Eli Lilly Int'l. Corp.-Branch:                Poland            100
    Eli Lilly Iran, S.A.                          Iran              100
    ELCO Insurance Company, Ltd.                  Bermuda           100

  Eli Lilly Interamerica, Inc.                    Indiana           100
    Eli Lilly Interamerica, Inc.-Branch:          Argentina         100
    Eli Lilly Interamerica, Inc.-Branch:          Columbia          100
    Eli Lilly Interamerica, Inc.-Branch:          Peru              100
    Eli Lilly Interamerica, Inc.-Branch:          Dominican Republic100
    Elanco Quimica Limitada                       Brazil            100
      Eli Lilly do Brasil Limitada                Brazil            100
        Darilor Sociedad Anonima                  Uruguay           100
      Beimirco Sociedad Anonima                   Uruguay           100

  STC Pharmaceuticals, Inc.                       Indiana           100

  Eli Lilly de Centro America, S.A.               Guatemala         100
  Eli Lilly y Compania de Mexico, S.A. de C.V.    Mexico            100
  Dista Mexicana, S.A. de C.V.                    Mexico            100

  Advanced Cardiovascular Systems, Inc.           California        100
  Cardiac Pacemakers, Inc.                        Minnesota         100
    CPI del Caribe, Ltd.                          Minnesota         100
  Devices for Vascular Intervention, Inc.         California        100

  EPCO, Inc.                                      Indiana           100
    DowElanco*
                                    Indiana            40
  Heart Rhythm Technologies, Inc.                 California        100

  Hybritech, Incorporated                         California        100
    Hybritech International, Inc.                 California        100
      Hybritech Europe, S.A.                      Belgium           100
    Hybritech Clinical, Inc.                      California        100
    Hybrigenetics Cancer Research, Inc.           California        100
    Hybritech G.m.b.H.                            Germany           100
    Hybritech International Sales Corp.           California        100

  IVAC Corporation                                Delaware          100
      MIS Scandinavia AB                          Sweden            100
  Origin Medsystems, Inc.                         Delaware          100
  Pacific Biotech, Inc.                           California        100
  Physio-Control Corporation                      Delaware          100
  Eli Lilly Industries, Inc.                      Delaware          100
  Eli Lilly and Company (Taiwan), Inc.            Taiwan            100
  CBI Uniforms, Inc.*                             Delaware           50

  ELCO Management Corporation                     Delaware          100
                                      
ELCO MANAGEMENT CORPORATION                       Delaware          100

  Eli Lilly Australia Pty. Limited                 Australia        100
    Eli Lilly Australia Custodian Pty. Limited     Bermuda          100
    Eli Lilly and Company (N.Z.) Limited           New Zealand      100
      Eli Lilly (NZ) Staff Benefits Custodian Ltd. New Zealand      100

  Eli Lilly Canada, Inc.                           Canada           100
  ELCO Dominicana, S.A.                            Dominican Rep.   100
  ELCO International Sales Corporation             Virgin Islands
                                                    -US Possess.    100

  Eli Lilly Group Limited                          England          100
    Lilly Industries Limited                       England          100
      Dista Products Limited                       England          100
      Eli Lilly and Company Limited                England          100
      Lilly Research Centre Limited                England          100
      Elanco Products Limited                      England          100
      Creative Packaging Limited                   England          100
      Greenfield Pharmaceuticals Limited           England          100
      Lilly Medical Instruments Limited            England          100
      Welmed Limited                               England          100
    Eli Lilly Group Pension Trustees Limited       England          100

  Lilly Deutschland G.m.b.H.                       Germany          100
    Eli Lilly (Suisse) S.A. & Co. KG               Germany          100
      Beiersdorf-Lilly G.m.b.H.                    Germany           51
      Lilly Medizintechnik G.m.b.H.                Germany          100
        Danimed G.m.b.H. & Co. KG                  Germany           49

  Eli Lilly & Co. (Ireland) Limited                Ireland          100

  Eli Lilly Overseas Finance N.V.              Netherlands Antilles 100
    Eli Lilly Overseas Finance II N.V.         Netherlands Antilles 100

  Eli Lilly Asia, Inc.                             Delaware         100
    Eli Lilly Asia, Inc. - Branch                  Hong Kong        100
    Eli Lilly Asia, Inc. - Branch                  Korea            100
    Eli Lilly Asia, Inc. - Branch                  Thailand         100

  Eli Lilly S.A.                                   Switzerland      100

ELI LILLY S.A.                                     Switzerland      100

  Branch                                           Ireland          100
  Eli Lilly Export S.A.                            Switzerland      100
    Puerto Rico - Branch                           Puerto Rico      100
    Regional Office                                Singapore        100
  GEMS Services, S.A.                              Belgium          100
  T. P. Eli Lilly and Elanco D.O.O.                Yugoslavia       100
  Elanco Trustees Limited                          England          100
  DowElanco, B.V. *                                Netherlands       40
  Eli Lilly (Suisse) S.A                           Switzerland      100
    Eli Lilly (Suisse) S.A. - Branch               Iran             100
  Oldfields Financial Management S.A.              Switzerland      100
  Elanco Industrial, S.A.                          Spain            100

  Eli Lilly Nederland B.V.                         Netherlands      100
    Eli Lilly & Elanco Ges.m.b.H.                  Austria          100
      Czech Branch                                 Czech Republic   100
      Romanian Branch                              Romania          100
      Russian Branch                               Russia           100
      Ukraine Branch                               Ukraine          100
      Bulgarian Branch                             Bulgaria         100
      Slovakian Branch                             Slovakia         100
      Slovenian Branch                             Slovenia         100
    Eli Lilly Ges.m.b.H.                           Austria          100
    Lilly Mont-Saint-Guibert Development Centre    Belgium          100
    Lilly-MDD Mont-Saint-Guibert Headquarters S.A. Belgium          100
    MDD European Development Centre S.A.           Belgium          100
    Eli Lilly Benelux, S.A.                        Belgium          100
    Eli Lilly Denmark A/S                          Denmark          100
    OY Eli Lilly Finland Ab                        Finland          100
    Lilly France S.A.                              France           100
      Elsa France, S.A.                            France           100
    BCR & Lilly Co., Ltd.                          Hungary           49
    Lilly Hungaria KFT                             Hungary          100
    Eli Lilly (Philippines), Incorporated          Philippines      100
    Eli Lilly Ranbaxy Limited *                    India          50<51
    Dista Italia S.r.l.                            Italy            100
    Eli Lilly Italia S.p.A.                        Italy            100
    Eli Lilly Japan K.K.                           Japan            100
    Daewoong Lilly Pharmaceutical Co., Ltd.        Korea             50
    Eli Lilly Malaysia Sdn Bhd.                    Malaysia         100
    ELCO Production Services B.V.                  Netherlands      100
    Eli Lilly Norway A.S.                          Norway           100
    Eli Lilly-Gohar (Private) Limited *            Pakistan          30
    Eli Lilly Poland Sp.z.o.o. (Ltd.)              Poland           100
    Dista-Produtos Quimicos & Farmaceuticos, LD    Portugal         100
    Lilly-Farma, Produtos Farmaceuticos, Lda.      Portugal         100
    ELVA Joint Laboratory *                        Russia            50

ELI LILLY S.A.

  Eli Lilly Nederland B.V. (Cont'd)                Netherlands      100
    Eli Lilly (S.A.) (Proprietary) Limited         South Africa     100
    Elancovet, S.A.                                Spain          50<51
      Derly, S.A.                                  Spain          50<51
      Dista, S.A.                                  Spain          50<51
      Lilly, S.A.                                  Spain          50<51
    Elmedin, S.A.                                  Spain          50<51
    Elquiber, S.A.                                 Spain          50<51
    Geserco, S.A.                                  Spain          50<51
    Hybritech, S.A.                                Spain          50<51
    Valquimica, S.A.                               Spain          50<51
    Eli Lilly Sweden AB                            Sweden           100
    Lilly Mustafa Nevzat Saglik
     Urunleri ve llac Tic                          Turkey            90
    Eli Lilly y Compania de Venezuela, S.A.        Venezuela        100


(1)  All of the companies listed, except those that are asterisked, are
     included in the consolidated financial statements.

* Not Consolidated.





        EXHIBIT 23.  CONSENT OF INDEPENDENT AUDITORS
                              
                              
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Eli Lilly and Company of our report
dated February 1, 1994, included in the 1993 Annual Report
to Shareholders of Eli Lilly and Company.

Our audits also included the financial statement schedules
of Eli Lilly and Company listed in Item 14(a).  These
schedules are the responsibility of the Company's
management.  Our responsibility is to express an opinion
based on our audits.  In our opinion, the financial
statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set
forth therein.

We also consent to the incorporation by reference in
Registration Statement Number 33-29482 on Form S-8 dated
June 23, 1989, in Registration Statement Number 33-37341 on
Form S-8 dated October 17, 1990, in Registration Statement
Number 33-38347 on Form S-3 dated December 20, 1990, in
Registration Statement Number 33-56208 on Form S-3 dated
December 23, 1992, in Registration Statement Number 33-58466
on Form S-8 dated February 17,1993 and in Registration
Statement Number 33-50783 on Form S-8 dated October
 27, 1993
of our report dated February 1, 1994 with respect to the
consolidated financial statements incorporated herein by
reference, and our report included in the preceding
paragraph with respect to the financial statement schedules
included in this Annual Report (Form 10-K) of Eli Lilly and
Company.


ERNST & YOUNG


Indianapolis, Indiana
March 18, 1994




EXHIBIT 99.  REPORT TO HOLDERS OF ELI LILLY AND COMPANY 
                CONTINGENT PAYMENT OBLIGATION UNITS



In 1993, sales of Hybritech Incorporated, including royalties, 
decreased to $149.0 million.   Sales (restated to include Pacific 
Biotech, Inc.) in 1992 were $172.9 million, essentially the same as 
1991.

Product sales declined in 1993 due primarily to lower unit volume and 
unfavorable exchange rate comparisons.  Sales of the company's largest 
selling product, Tandem (Registered) PSA, a prostate cancer test, were 
down when compared to 1992 due to competition. 

Hybritech's gross profits declined 19 percent, to $73.2 million in 
1993, compared with $90.7 million and $104.6 million in 1992 and 
1991, respectively.  The gross-profit decline in 1993 was largely 
the result of lower sales, higher costs, and the impact of the 
company's fourth quarter restructuring.

Beginning in 1993, Hybritech combined certain operations with 
Pacific Biotech, Inc. (PBI), another wholly owned subsidiary of Eli 
Lilly and Company; therefore, 1992 and 1991 sales and gross margin 
have been restated to include the impact of PBI in the CPU 
calculation.

Under the terms of the Contingent Payment Obligation Unit, payments 
are earned if the sum of 6 percent of sales and 20 percent
 of gross 
profits exceeds the annual deductible.  The annual deductible was 
originally set in 1986 at $11 million and increases at a compounded 
rate of 35 percent per year thereafter.  The deductibles through 
1995 are as follows:

(Dollars in millions)
1991       1992       1993       1994       1995
- ------------------------------------------------
$49.3      $66.6      $89.9      $121.4     $163.8

In accordance with the formula, no payment was earned in 1993.

Tandem (Registered)(dual monoclonal sandwich assay kits, Hybritech)