FILED PURSUANT TO RULE 424(b)(2)
                                                      REGISTRATION NO. 333-16375

          PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 13, 1996
                                 $150,000,000
 
                           [LOGO OF AVERY DENNISON]
 
                          MEDIUM-TERM NOTES, SERIES D
               DUE FROM 9 MONTHS TO 30 YEARS FROM DATE OF ISSUE
 
                                --------------
 
  Avery Dennison Corporation (the "Company") may offer from time to time its
Medium-Term Notes, Series D, due from 9 months to 30 years from the date of
issue (the "Notes"), as selected by the purchaser and agreed to by the
Company, at an aggregate initial offering price not to exceed $150,000,000 or
its equivalent in another currency or composite currency.
 
  The Notes may be denominated in U.S. dollars or in such foreign currencies,
currency units or composite currencies, as may be designated by the Company at
the time of offering. The specific currency, currency unit or composite
currency, issue price and maturity date of any Note, as well as certain
federal income tax considerations, will be set forth in a Pricing Supplement
to this Prospectus Supplement. Unless otherwise specified in the applicable
Pricing Supplement, Notes denominated in other than U.S. dollars or ECUs (as
defined herein) will not be sold in, or to residents of, the country issuing
the Specified Currency. See "Description of Notes."
 
  Unless otherwise specified in the applicable Pricing Supplement, the Notes
will bear interest at a fixed rate or rates (a "Fixed Rate Note") or at a
floating rate (a "Floating Rate Note") determined by reference to the
Commercial Paper Rate, the Prime Rate, LIBOR, the Treasury Rate, the CD Rate,
the Federal Funds Rate or such other interest rate formula as set forth in the
applicable Pricing Supplement, as adjusted by the Spread or Spread Multiplier,
if any, applicable to such Notes. Interest rates and interest rate formulas
are subject to change by the Company, but no such change will affect any Notes
already issued or as to which an offer to purchase has been accepted by the
Company. Unless otherwise specified in the applicable Pricing Supplement,
interest on the Fixed Rate Notes will be payable on each July 15 and January
15 and at maturity. Interest on the Floating Rate Notes will be payable on the
dates specified therein and in the applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. Unless a Redemption Commencement Date
or a Repayment Commencement Date is specified in the applicable Pricing
Supplement, the Notes will not be redeemable or repayable prior to their
Stated Maturity. If a Redemption Commencement Date or a Repayment Commencement
Date is so specified, the Notes will be redeemable at the option of the
Company, or repayable at the option of the holder, or both (as specified
therein) at any time on or after such date as described herein.
 
  The Notes offered hereby will be issued in global or definitive form in a
minimum denomination of $100,000 or the approximate equivalent thereof in the
Specified Currency, as specified in the applicable Pricing Supplement. A
global Note representing Book-Entry Notes will be registered in the name of
the nominee of The Depository Trust Company, which will act as depositary (the
"Depositary"). Interests in Book-Entry Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary
(with respect to participants' interests) and its participants. Except as
described herein under "Description of Notes--Book-Entry System," owners of
beneficial interests in a global Note will not be entitled to receive physical
delivery of Notes in definitive form, and no global Note will be exchangeable
except for another global Note of like denomination and terms to be registered
in the name of the Depositary or its nominee. See "Description of Notes".
 
                                --------------
 
   THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND 
        EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS 
  THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION 
   PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY 
    PRICING SUPPLEMENT HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE 
                        CONTRARY IS A CRIMINAL OFFENSE.
                                --------------
 


                     PRICE TO         AGENTS'               PROCEEDS TO
                    PUBLIC (1)    COMMISSIONS (2)          COMPANY (2)(3)
                    ----------    ---------------          --------------
                                            
Per Note..........     100%         .125%--.750%          99.875%--99.250%
Total (4)......... $150,000,000 $187,500--$1,125,000 $149,812,500--$148,875,000

- -------
(1) Notes will be issued at 100% of their principal amount, unless otherwise
    specified in the applicable Pricing Supplement.
(2) The Company will pay the Agents a commission of from .125% to .750%,
    depending on maturity, of the principal amount of any Notes sold through
    them as Agents. Unless otherwise specified in the applicable Pricing
    Supplement, any Note sold to an Agent as principal will be purchased by
    such Agent at a price equal to 100% of the principal amount thereof less a
    percentage equal to the commission applicable to an agency sale of a Note
    of identical maturity, and may be resold by such Agent. The Company has
    agreed to indemnify the Agents against certain liabilities, including
    liabilities under the Securities Act of 1933, as amended.
(3) Before deducting estimated expenses of $225,000 payable by the Company,
    including expenses of the Agents to be reimbursed by the Company.
(4) Or the equivalent thereof in foreign currencies or currency units.
 
                                --------------
 
  Offers to purchase Notes are being solicited, on a reasonable efforts basis,
from time to time by the Agents on behalf of the Company. Notes may be sold to
the Agents on their own behalf at negotiated discounts. The Company reserves
the right to sell Notes directly on its own behalf. The Company also reserves
the right to withdraw, cancel or modify the offering contemplated hereby
without notice. No termination date for the offering of the Notes has been
established. The Company or the Agents may reject any order as a whole or in
part. See "Supplemental Plan of Distribution".
 
                                --------------
GOLDMAN, SACHS & CO.                                          J.P. MORGAN & CO.
 
         The date of this Prospectus Supplement is December 16, 1996.

 
  IN CONNECTION WITH THE DISTRIBUTION OF THE NOTES, THE AGENTS MAY EFFECT
TRANSACTIONS IN THE NOTES WITH A VIEW TO STABILIZING OR MAINTAINING THE MARKET
PRICES OF THE NOTES AT LEVELS OTHER THAN THOSE WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN ANY OVER-THE-COUNTER
MARKET OR OTHERWISE AND, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
                               ----------------
 
                                USE OF PROCEEDS
 
  The Company intends to use the net proceeds from the sales of the Notes to
reduce domestic variable-rate short-term borrowings, to reduce or retire from
time to time other indebtedness and for other general corporate purposes.
 
                             DESCRIPTION OF NOTES
 
GENERAL
 
  The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of Debt Securities set forth
in the accompanying Prospectus, to which description reference is hereby made.
Capitalized terms not otherwise defined herein have the meanings set forth in
the accompanying Prospectus.
 
  The Notes constitute a single series for purposes of the Indenture and are
limited in amount as set forth on the cover page hereof. The foregoing limit,
however, may be increased by the Company if in the future it determines that
it may wish to sell additional Notes. For a description of the rights
attaching to different series of Debt Securities under the Indenture, see
"Description of Debt Securities" in the Prospectus.
 
  Unless previously redeemed, a Note will mature on the date ("Stated
Maturity") from 9 months to 30 years from its date of issue that is specified
on the face thereof and in the applicable Pricing Supplement or, if such Note
is a Floating Rate Note (as defined below) and such specified date is not a
Market Day with respect to such Note, the next succeeding Market Day (or, in
the case of a LIBOR Note (as defined below), if such next succeeding Market
Day falls in the next calendar month, the next preceding Market Day). As used
herein, the term "Market Day" means (a) with respect to any Note (other than
any LIBOR Note), any Business Day, and (b) with respect to any LIBOR Note, any
such day on which dealings in deposits in U.S. dollars are transacted in the
London interbank market. The term "Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday, which is (i) not a day on which banking
institutions generally are authorized or obligated by law or executive order
to close in the Place of Payment (as defined in the Indenture), and (ii) if
the Note is denominated in a Specified Currency (as defined below) other than
U.S. dollars, not a day on which banking institutions are authorized or
obligated by law or executive order to close in the financial center of the
country issuing the Specified Currency (which in the case of European Currency
Units ("ECUs") shall be Brussels, in which case "Business Day" shall not
include any day that is a non-ECU clearing day as determined by the ECU
Banking Association in Paris).
 
  Each Note will be denominated in a currency, currency unit or composite
currency ("Specified Currency") as specified on the face thereof and in the
applicable Pricing Supplement, which may include U.S. dollars or any other
currency or composite currency set forth in the applicable Pricing Supplement.
Purchasers of the Notes are required to pay for them by delivery of the
requisite amount
 
                                      S-2

 
of the Specified Currency to an Agent (as defined herein), unless other
arrangements have been made. Unless otherwise specified in the applicable
Pricing Supplement, payments on the Notes will be made in the applicable
Specified Currency; provided that, at the election of the holder thereof and
in certain circumstances at the option of the Company, payments on Notes
denominated in other than U.S. dollars may be made in U.S. dollars. See
"Payment of Principal and Interest".
 
  Each Note will be represented by either a global security (a "Global
Security") registered in the name of a nominee of the Depositary (each such
Note represented by a Global Security being herein referred to as a "Book-
Entry Note") or a certificate issued in definitive registered form, without
coupons (a "Certificated Note"), as set forth in the applicable Pricing
Supplement. Except as set forth under "Book-Entry System" below, Book-Entry
Notes will not be issuable in certificated form. So long as the Depositary or
its nominee, as the case may be, is the registered owner of any Global
Security, the Depositary or its nominee, as the case may be, will be
considered the sole owner or holder of the Book-Entry Note or Notes
represented by such Global Security for all purposes under the Indenture and
the Book-Entry Notes except as otherwise noted therein. The Company
understands, however, that under existing industry practice, the Depositary
will authorize the persons on whose behalf it holds a Global Security to
exercise certain rights of holders of Notes, and the Indenture provides that
the Company, the Trustee and their respective agents will treat as the holder
of a Note the persons specified in a written statement of the Depositary with
respect to such Global Security for purposes of obtaining any consents or
directions required to be given by holders of the Notes pursuant to the
Indenture. It is currently contemplated that only Notes that have a Specified
Currency of U.S. dollars will be issued as Book-Entry Notes. See "Book-Entry
System" below.
 
  Unless otherwise specified in the applicable Pricing Supplement, the
authorized denominations of any Note denominated in U.S. dollars will be
$100,000 and integral multiples of $1,000 in excess thereof. The authorized
denominations of any Note denominated in other than U.S. dollars will be the
amount of the Specified Currency for such Note equivalent, at the noon buying
rate for cable transfers in The City of New York for such Specified Currency
(the "Exchange Rate") on the sixth Business Day next preceding the date on
which the Company accepts the offer to purchase such Note, to U.S. $100,000
(rounded down to an integral multiple of 10,000 units of such Specified
Currency) and any greater amount that is an integral multiple of 10,000 units
of such Specified Currency, unless otherwise specified in the applicable
Pricing Supplement.
 
  Notes will be sold in individual issues of Notes having such interest rate
or interest rate formula, if any, Stated Maturity and date of original
issuance as shall be specified in the applicable Pricing Supplement. Unless
otherwise indicated in the applicable Pricing Supplement, each Note will bear
interest at either (i) a fixed rate (a "Fixed Rate Note") or (ii) a floating
rate (a "Floating Rate Note") determined by reference to the interest rate
formula, which may be adjusted by adding or subtracting the Spread or
multiplying by the Spread Multiplier (each term as defined below).
 
  Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund, and will not be redeemable at the
option of the Company, or repayable at the option of the holders of such
Notes, prior to their Stated Maturity. If the applicable Pricing Supplement
specifies a date on or after which a Note will be redeemable at the option of
the Company (a "Redemption Commencement Date") or a date on or after which a
Note will be repayable at the option of the holder of such Note (a "Repayment
Commencement Date"), the applicable Pricing Supplement will also specify an
initial redemption price (a "Redemption Price") or an initial repayment price
(a "Repayment Price") (in each case expressed as a percentage of the principal
amount of such Note), and an amount by which the initial Redemption Price or
the initial Repayment Price will be reduced on each anniversary of the
Redemption Commencement Date or Repayment Commencement Date, as the case may
be; provided that the Redemption Price or Repayment Price shall not be less
than 100% of the principal amount of the Note. Upon any such repurchase or
redemption of any Note
 
                                      S-3

 
by the Company, the Company will pay any accrued interest on such Note to the
redemption or repayment date. With respect to the redemption of Global
Securities, the Depositary advises that if less than all of the Notes with
like tenor and terms are to be redeemed, the particular interests (in integral
multiples of $1,000) in the Book-Entry Notes representing the Notes to be
redeemed shall be selected by the Depositary's impartial lottery procedures.
 
  The Pricing Supplement relating to each Note will describe the following
terms: (i) the Specified Currency with respect to such Note (and, if such
Specified Currency is other than U.S. dollars, certain other terms relating to
such Note, including the authorized denominations and certain federal income
tax considerations); (ii) the price (expressed as a percentage of the
aggregate principal amount thereof) at which such Note will be issued; (iii)
the date on which such Note will be issued; (iv) the date on which such Note
will mature; (v) whether such Note is a Fixed Rate or a Floating Rate Note;
(vi) if such Note is a Fixed Rate Note, the rate per annum at which such Note
will bear interest and the interest payment date or dates, if different from
those set forth below under "Fixed Rate Notes"; (vii) if such Note is a
Floating Rate Note, the interest rate basis (the "Interest Rate Basis") for
each such Floating Rate Note which will be (a) the Commercial Paper Rate (as
defined below), in which case such Note will be a Commercial Paper Rate Note,
(b) the Prime Rate (as defined below), in which case such Note will be a Prime
Rate Note, (c) the London Interbank Offered Rate ("LIBOR"), in which case such
Note will be a LIBOR Note, (d) the Treasury Rate (as defined below), in which
case such Note will be a Treasury Rate Note, (e) the CD Rate (as defined
below), in which case such Note will be a CD Rate Note, (f) the Federal Funds
Rate (as defined below), in which case such Note will be a Federal Funds Rate
Note, or (g) such other interest rate formula as is set forth in such Pricing
Supplement, and, if applicable, the Calculation Agent, the Index Maturity, the
Spread or Spread Multiplier, the Maximum Rate, the Minimum Rate, the Initial
Interest Rate, the Interest Payment Dates, the Regular Record Dates, the
Calculation Date, the Interest Determination Dates, the Interest Reset Dates
and the Interest Rate Reset Period (each term as defined below) with respect
to such Floating Rate Note; (viii) whether such Note is subject to a sinking
fund, or may be redeemed at the option of the Company, or repaid at the option
of the holder, prior to the Stated Maturity and, if so, the provisions
relating to such sinking fund, redemption or repayment; (ix) whether such Note
will be issued initially as a Book-Entry or a Certificated Note; and (x) any
other terms of such Note not inconsistent with the provisions of the
Indenture.
 
  Certificated Notes may be presented for registration of transfer or exchange
at the corporate trust office of the Trustee in the Borough of Manhattan, The
City of New York.
 
FIXED RATE NOTES
 
  Unless otherwise specified in the applicable Pricing Supplement, each Fixed
Rate Note will bear interest from its date of issue or from the most recent
Interest Payment Date (as defined below) to which interest on such Note has
been paid or duly provided for at the fixed rate per annum stated on the face
thereof and in the applicable Pricing Supplement until the principal thereof
is paid or made available for payment. Unless otherwise indicated in the
applicable Pricing Supplement, interest on such Fixed Rate Note will be
payable semiannually each July 15 and January 15 (each, with respect to a
Fixed Rate Note, an "Interest Payment Date") and at Stated Maturity or upon
earlier redemption or repayment ("Maturity"). Each payment of interest in
respect of an Interest Payment Date will include interest accrued to but
excluding such Interest Payment Date. Unless otherwise specified in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed
on the basis of a 360-day year of twelve 30-day months. Interest will be
payable on each Interest Payment Date and at Maturity as specified below under
"Payment of Principal and Interest".
 
                                      S-4

 
FLOATING RATE NOTES
 
  Each Floating Rate Note will bear interest from its date of issue or from
the most recent Interest Payment Date to which interest on such Note has been
paid or duly provided for, or if the applicable Interest Reset Period (as
defined below) is weekly, from the day following the date of issue or the most
recent Regular Record Date, at the rate per annum determined pursuant to the
interest rate formula stated therein and in the applicable Pricing Supplement
until the principal thereof is paid or made available for payment. Interest
will be payable on each Interest Payment Date (as defined under "Payment of
Principal and Interest" with respect to Floating Rate Notes) and at Maturity
as specified below under "Payment of Principal and Interest".
 
  The interest rate for each Floating Rate Note will be determined by
reference to an Interest Rate Basis which may be adjusted by adding or
subtracting the Spread or multiplying by the Spread Multiplier (both terms as
defined below). A Floating Rate Note may also have either or both of the
following: (a) a maximum numerical interest rate limitation, or ceiling, on
the rate of interest which may accrue during any interest period (a "Maximum
Rate"); and (b) a minimum numerical interest rate limitation, or floor, on the
rate of interest which may accrue during any interest period (a "Minimum
Rate"). The "Spread" is the number of basis points specified in the applicable
Pricing Supplement as being applicable to the interest rate for such Note, and
the "Spread Multiplier" is the percentage specified in the applicable Pricing
Supplement as being applicable to the interest rate for such Note. "Index
Maturity" means, with respect to a Floating Rate Note, the period to maturity
of the instrument or obligation on which the interest rate formula is based,
as specified in the applicable Pricing Supplement. Unless otherwise provided
in the applicable Pricing Supplement, the Trustee will be the calculation
agent (the "Calculation Agent") with respect to the Floating Rate Notes.
 
  Unless otherwise specified in the applicable Pricing Supplement, the rate of
interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semi-annually or annually (each an "Interest Reset Period"), as
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, the date on which the rate of interest on a
Floating Rate Note resets (each an "Interest Reset Date") will be, in the case
of Floating Rate Notes which reset daily, each Market Day; in the case of
Floating Rate Notes (other than Treasury Rate Notes) which reset weekly, the
Wednesday of each week; in the case of Treasury Rate Notes which reset weekly,
the Tuesday of each week (except as provided below); in the case of Floating
Rate Notes which reset monthly, the third Wednesday of each month; in the case
of Floating Rate Notes which reset quarterly, the third Wednesday of March,
June, September and December; in the case of Floating Rate Notes which reset
semi-annually, the third Wednesday of two months of each year as specified in
the applicable Pricing Supplement; and in the case of Floating Rate Notes
which reset annually, the third Wednesday of one month of each year as
specified in the applicable Pricing Supplement; provided, however, that,
unless otherwise specified in the applicable Pricing Supplement, (a) the
interest rate in effect from the date of issue to the first Interest Reset
Date with respect to a Floating Rate Note will be the initial interest rate as
set forth in the applicable Pricing Supplement (the "Initial Interest Rate")
and (b) with respect to Floating Rate Notes that reset daily or weekly, the
interest rate in effect for each day following the second Market Day prior to
an Interest Payment Date to, but excluding, such Interest Payment Date, and
for each day following the second Market Day prior to Maturity, shall be the
rate in effect on such second Market Day. If any Interest Reset Date for any
Floating Rate Note would otherwise be a day that is not a Market Day with
respect to such Floating Rate Note, the Interest Reset Date for such Floating
Rate Note shall be postponed to the next day that is a Market Day with respect
to such Floating Rate Note, except that in the case of a LIBOR Note, if such
Market Day is in the next succeeding calendar month, such Interest Reset Date
shall be the immediately preceding Market Day.
 
  The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination
Date"), for a Prime Rate Note (the "Prime Rate Interest Determination Date"),
for a CD Rate Note (the "CD Rate Interest Determination Date") and
 
                                      S-5

 
for a Federal Funds Rate Note (the "Federal Funds Rate Interest Determination
Date") will be the second Market Date preceding such Interest Reset Date. The
Interest Determination Date pertaining to an Interest Reset Date for a LIBOR
Note (the "Libor Interest Determination Date") will be the second Market Day
preceding such Interest Reset Date. The Interest Determination Date pertaining
to an Interest Reset Date for a Treasury Rate Note (the "Treasury Interest
Determination Date") will be the day of the week in which such Interest Reset
Date falls on which Treasury bills would normally be auctioned. Treasury bills
are usually sold at auction on the Monday of each week, unless that day is a
legal holiday, in which case the auction is usually held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Treasury Interest Determination Date pertaining to the
Interest Reset Date occurring in the next succeeding week, and the Interest
Reset Date in such next succeeding week will be the Monday in such week. If an
auction date shall fall on any Interest Reset Date for a Treasury Rate Note,
then such Interest Reset Date shall instead be the first Market Day
immediately following such auction date. The Interest Determination Date for
any other Floating Rate Note will be as specified in the applicable Pricing
Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date" pertaining to any Interest Determination Date will be the
earlier of (i) the tenth calendar day after such Interest Determination Date
or, if such day is not a Market Day, the next succeeding Market Day or (ii)
the Market Day immediately preceding the applicable Interest Payment Date or
Maturity, as the case may be.
 
  All percentages resulting from any calculations referred to in this
Prospectus Supplement will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point with five one-millionths of a
percentage point rounded upward (e.g., 9.876546% (or .09876546) being rounded
to 9.87655% (or .0987655)), and all U.S. dollar amounts used in or resulting
from such calculations will be rounded to the nearest cent (with one-half cent
or more being rounded upwards).
 
  Upon the request of the holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if determined, the
interest rate which will become effective on the next Interest Reset Date with
respect to such Floating Rate Note. The Calculation Agent's determination of
any interest rate will be final and binding in the absence of manifest error.
 
 COMMERCIAL PAPER RATE NOTES
 
  Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread or
Spread Multiplier, if any), and will be payable on the dates, specified on the
face of the Commercial Paper Rate Note and in the applicable Pricing
Supplement.
 
  Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Reset Date, the Money Market
Yield (calculated as described below) of the per annum rate (quoted on a bank
discount basis) for the relevant Commercial Paper Interest Determination Date
for commercial paper having the specified Index Maturity as such rate is
published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates" or any successor
publication of the Board of Governors of the Federal Reserve System
("H.15(519)") under the heading "Commercial Paper". In the event that such
rate is not published by 3:00 P.M., New York City time, on the relevant
Calculation Date, then the Commercial Paper Rate with respect to such Interest
Reset Date shall be the Money Market Yield on such Commercial Paper Interest
Determination Date for commercial paper having the specified Index Maturity as
published by the Federal Reserve Bank of New York in its daily statistical
release, "Composite 3:30 P.M. Quotations for U.S. Government Securities", or
any successor publication published by the Federal Reserve Bank of New York
("Composite Quotations") under the heading
 
                                      S-6

 
"Commercial Paper" (with an Index Maturity of one month or three months being
deemed to be equivalent to an Index Maturity of 30 days or 90 days,
respectively). If by 3:00 P.M., New York City time, on such Calculation Date
such rate is not yet published in either H.15(519) or Composite Quotations,
the Commercial Paper Rate with respect to such Interest Reset Date shall be
calculated by the Calculation Agent and shall be the Money Market Yield of the
arithmetic mean of the offered per annum rates (quoted on a bank discount
basis), as of 11:00 A.M., New York City time, on such Commercial Paper
Interest Determination Date, of three leading dealers of U.S. dollar
commercial paper in The City of New York (which may include the Agents)
selected by the Calculation Agent for U.S. dollar commercial paper having the
specified Index Maturity placed for an industrial issuer whose bond rating is
"AA", or the equivalent, from a nationally recognized rating agency; provided,
however, that if fewer than three dealers selected as aforesaid by the
Calculation Agent are quoting as mentioned in this sentence, the Commercial
Paper Rate with respect to such Interest Reset Date will be the Commercial
Paper Rate in effect on the day prior to such Commercial Paper Interest
Determination Date (or, if the Initial Interest Rate is then in effect, the
Commercial Paper Rate will be the Initial Interest Rate and will not be
adjusted by any Spread or Spread Multiplier).
 
  "Money Market Yield" shall be a yield (expressed as a percentage) calculated
in accordance with the following formula:
 
 
                                              360 X D  
                Money Market Yield = 100 X -------------
                                           360 - (D X M) 
                                             
 
where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period from, and including, the Interest Reset Date to, but
excluding, the day that numerically corresponds to such Interest Reset Date
(or, if there is not any such numerically corresponding day, the last day) in
the calendar month that is the number of months corresponding to the specified
Index Maturity after the month in which such Interest Reset Date occurs.
 
 PRIME RATE NOTES
 
  Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any), and
will be payable on the dates specified on the face of the Prime Rate Note and
in the applicable Pricing Supplement.
 
  Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Reset Date, the rate set forth for
the relevant Prime Rate Interest Determination Date in H.15(519) under the
heading "Bank Prime Loan". In the event that such rate is not published prior
to 9:00 A.M., New York City time, on the relevant Calculation Date, then the
Prime Rate with respect to such Interest Reset Date will be determined by the
Calculation Agent and will be the arithmetic mean of the rates of interest
publicly announced by each bank that appears on the display designated as page
"USPRIME1" on the Reuters Monitor Money Rates Service (or such other page as
may replace the USPRIME1 page on that service for the purpose of displaying
prime rates or base lending rates of major United States banks) ("Reuters
Screen USPRIME1 Page") as such bank's prime rate or base lending rate as in
effect for such Prime Rate Interest Determination Date. If fewer than four
such rates appear on the Reuters Screen USPRIME1 Page on such Prime Rate
Interest Determination Date, the Prime Rate will be determined by the
Calculation Agent and will be the arithmetic mean of the prime rates or base
lending rates (quoted on the basis of the actual number of days in the year
divided by a 360-day year) as of the close of business on such Prime Rate
Interest Determination Date of three major banks in The City of New York
selected by the Calculation Agent; provided, however, that if fewer than three
banks selected as aforesaid by the Calculation Agent are quoting as mentioned
in this sentence, the Prime Rate with respect to such Interest Reset Date will
be the Prime Rate in effect on such Prime Rate Interest Determination Date
(or, if the Initial Interest Rate
 
                                      S-7

 
is then in effect, the Prime Rate will be the Initial Interest Rate and will
not be adjusted by any Spread or Spread Multiplier).
 
 LIBOR NOTES
 
  LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any), and will be
payable on the dates specified on the face of the LIBOR Note and in the
applicable Pricing Supplement.
 
  Unless otherwise indicated in the applicable Pricing Supplement, LIBOR, with
respect to any Interest Reset Date, will be determined by the Calculation
Agent in accordance with the following provisions:
 
  (i) On the relevant LIBOR Interest Determination Date, LIBOR will be, as
specified in the applicable Pricing Supplement, either (a) the arithmetic mean
of the offered rates for deposits in U.S. dollars having the specified Index
Maturity that appears on the Reuters Screen LIBO Page as of 11:00 A.M., London
time, on such LIBOR Interest Determination Date, if at least two such offered
rates appear on the Reuters Screen LIBO Page ("LIBOR Reuters"), or (b) the
offered rate for deposits in U.S. dollars having the specified Index Maturity
that appears on the Telerate Page 3750 as of 11:00 A.M., London time, on such
LIBOR Interest Determination Date ("LIBOR Telerate"). "Reuters Screen LIBO
Page" means the display designated as page "LIBO" on the Reuters Monitor Money
Rates Service (or such other page as may replace page LIBO on that service for
the purpose of displaying London interbank offered rates of major banks).
"Telerate Page 3750" means the display designated as "3750" on the Telerate
Service (or such other page as may replace the 3750 page on that service or
such other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank offered rates for
U.S. dollar deposits). If neither LIBOR Reuters nor LIBOR Telerate is
specified in the applicable Pricing Supplement, LIBOR will be determined as if
LIBOR Telerate had been specified. If fewer than two offered rates appear on
the Reuters Screen LIBO Page, or if no rate appears on the Telerate Page 3750,
as applicable, LIBOR in respect of such Interest Reset Date will be determined
as if the parties had specified the rate described in (ii) below.
 
  (ii) On any LIBOR Interest Determination Date on which fewer than two
offered rates for the applicable Index Maturity appear on the Reuters Screen
LIBO Page as specified in (i)(a) above or on which no rate for the applicable
Index Maturity appears on the Telerate Page 3750, as specified in (i)(b)
above, as applicable, the Calculation Agent will request the principal London
offices of four major banks in the London interbank market, as selected by the
Calculation Agent (the "Reference Banks"), to provide the Calculation Agent
with their offered quotations for deposits in U.S. dollars having the
specified Index Maturity to prime banks in the London interbank market at
approximately 11:00 A.M., London time, commencing on the second Market Day
immediately following such LIBOR Interest Determination Date and in a
principal amount equal to an amount that, in the Calculation Agent's judgment,
is representative for a single transaction in such market at such time. If at
least two such quotations are provided, LIBOR in respect of such Interest
Reset Date will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR in respect of such Interest Reset Date will be
the arithmetic mean of the rates quoted at approximately 11:00 A.M., New York
City time, on such Interest Reset Date by three major banks in The City of New
York selected by the Calculation Agent for loans in U.S. dollars to leading
European banks, having the specified Index Maturity, such loans commencing on
the Interest Reset Date and in a principal amount equal to an amount that, in
the Calculation Agent's judgment, is representative for a single transaction
in such market at such time; provided, however, that if the banks in The City
of New York selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR with respect to such Interest Reset Date
will be LIBOR in effect on the day prior to such LIBOR Interest Determination
Date (or, if the Initial
 
                                      S-8

 
Interest Rate is then in effect, LIBOR will be the Initial Interest Rate and
will not be adjusted by any Spread or Spread Multiplier).
 
 TREASURY RATE NOTES
 
  Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if
any) and will be payable on the dates specified on the face of the Treasury
Rate Note and in the applicable Pricing Supplement.
 
  Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Reset Date, the rate for the auction
on the relevant Treasury Interest Determination Date of direct obligations of
the United States ("Treasury bills") having the specified Index Maturity as
published in H.15(519) under the heading "U.S. Government Securities--Treasury
Bills--Auction Average (Investment)" or, if not so published by 9:00 A.M., New
York City time, on the relevant Calculation Date, the Bond Equivalent Yield
(as defined below) of the auction average rate for such auction as otherwise
announced by the United States Department of the Treasury. In the event that
the results of the auction of Treasury bills having the specified Index
Maturity are not otherwise reported as provided above by 3:00 P.M., New York
City time, on such Calculation Date, or if no such auction is held in a
particular week, then the Treasury Rate shall be the rate set forth in H.15
(519) for the relevant Treasury Interest Determination Date for the specified
Index Maturity under the heading "U.S. Government Securities/Treasury
Bills/Secondary Market." In the event such rate is not published by 3:00 P.M.,
New York City time, on the relevant Calculation Date, then the Treasury Rate
with respect to such Interest Reset Date shall be calculated by the
Calculation Agent and shall be the Bond Equivalent Yield of the arithmetic
mean of the secondary market bid rates, as of approximately 3:30 P.M., New
York City time, on such Treasury Interest Determination Date, of three primary
United States government securities dealers in The City of New York selected
by the Calculation Agent for the issue of Treasury bills with a remaining
maturity closest to the specified Index Maturity; provided, however, that if
any of the dealers selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, the Treasury Rate with respect to such
Interest Reset Date will be the Treasury Rate in effect on the day prior to
such Treasury Interest Determination Date (or, if the Initial Interest Rate is
then in effect, the Treasury Rate will be the Initial Interest Rate and will
not be adjusted by any Spread or Spread Multiplier).
 
  "Bond Equivalent Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:

                                               D X N     
             Bond Equivalent Yield = 100 X -------------- 
                                            360 - (D X M)  
                                             
 
where "D" refers to the per annum rate for Treasury bills, quoted on a bank
discount basis and expressed as a decimal; "N" refers to 365 or 366, as the
case may be; and "M" refers to the actual number of days in such period and,
otherwise, the actual number of days in the period from, and including, the
Interest Reset Date to, but excluding, the day that numerically corresponds to
that Interest Reset Date (or, if there is not any such numerically
corresponding day, the last day) in the calendar month that is the number of
months corresponding to the specified Index Maturity after the month in which
that Interest Reset Date occurs.
 
 CD RATE NOTES
 
  CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any), and
will be payable on the dates specified on the face of the CD Rate Note and in
the applicable Pricing Supplement.
 
                                      S-9

 
  Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Reset Date, the rate for the relevant CD
Rate Interest Determination Date for negotiable certificates of deposit having
the specified Index Maturity as published in H.15(519) under the heading "CDs
(Secondary Market)". In the event that such rate is not published by 9:00
A.M., New York City time, on the relevant Calculation Date, then the CD Rate
shall be the rate on such CD Rate Interest Determination Date for negotiable
certificates of deposit having the specified Index Maturity as published in
Composite Quotations under the heading "Certificates of Deposit". If by 3:00
P.M., New York City time, on such Calculation Date such rate is not published
in either H.15(519) or Composite Quotations, the CD Rate shall be calculated
by the Calculation Agent and shall be the arithmetic mean of the secondary
market offered rates, as of 10:00 A.M., New York City time, on such CD Rate
Interest Determination Date, of three leading nonbank dealers of negotiable
U.S. dollar certificates of deposit in The City of New York selected by the
Calculation Agent for negotiable U.S. dollar certificates of deposit of major
United States money market banks with a remaining maturity closest to the
specified Index Maturity in an amount that, in the Calculation Agent's
judgment, is representative for a single transaction in such market at such
time; provided, however, that if any of the dealers selected as aforesaid by
the Calculation Agent are not quoting as mentioned in this sentence, the CD
Rate with respect to such Interest Reset Date will be the CD Rate in effect on
the day prior to such CD Rate Interest Determination Date (or, if the Initial
Interest Rate is then in effect, the CD Rate will be the Initial Interest Rate
and will not be adjusted by any Spread or Spread Multiplier).
 
  CD Rate Notes, like other Notes, are not deposit obligations of a bank and
are not insured by the Federal Deposit Insurance Corporation.
 
 FEDERAL FUNDS RATE NOTES
 
  Federal Funds Rate Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any), and will be payable on the dates specified on the face of
the Federal Funds Rate Note and in the applicable Pricing Supplement.
 
  Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Reset Date, the rate on the
relevant Federal Funds Rate Interest Determination Date for Federal Funds as
published in H.15(519) under the heading "Federal Funds (Effective)". In the
event that such rate is not published prior to 9:00 A.M., New York City time,
on the relevant Calculation Date, then the Federal Funds Rate will be the rate
on such Federal Funds Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate". If by 3:00 P.M.,
New York City time, on such Calculation Date such rate is not published in
either H.15(519) or Composite Quotations, then the Federal Funds Rate for such
Interest Reset Date shall be calculated by the Calculation Agent and shall be
the arithmetic mean of such rates, as of 9:00 A.M., New York City time, on
such Federal Funds Interest Determination Date, for the last transaction in
overnight Federal Funds arranged by three leading brokers of U.S. dollar
Federal Funds transactions in The City of New York selected by the Calculation
Agent; provided, however, that if any of the brokers selected as aforesaid by
the Calculation Agent are not quoting as mentioned in this sentence, the
Federal Funds Rate with respect to such Interest Reset Date will be the
Federal Funds Rate in effect on the day prior to such Federal Funds Interest
Determination Date (or, if the Initial Interest Rate is then in effect, the
Federal Funds Rate will be the Initial Interest Rate and will not be adjusted
by any Spread or Spread Multiplier).
 
 FOREIGN CURRENCY AND INDEX-LINKED NOTES
 
  If any Note is not to be denominated in U.S. dollars, certain provisions
with respect thereto will be set forth in a foreign currency Pricing
Supplement which will indicate the Specified Currency in which the principal,
premium, if any, and interest with respect to such Note are to be paid, along
with any other terms relating to the Specified Currency. The Pricing
Supplement also will specify specific historic
 
                                     S-10

 
exchange rate information, certain currency risks relating to the specific
currencies selected, certain investment considerations and certain additional
tax considerations.
 
  Amounts due on a Note in respect of principal, premium, if any, and interest
may be determined with reference to (a) a currency exchange rate or rates, (b)
a securities or commodities exchange index, (c) the value of a particular
security or commodity or (d) any other index or indices (any such Note being
herein referred to as an "Index-Linked Note"). The Pricing Supplement relating
to an Index-Linked Note will set forth the method and terms on which the
amount of principal payable at Maturity and interest, premium or the amortized
face amount, if any, will be determined, the tax consequences to holders of
Index-Linked Notes, a description of certain risks associated with investments
in Index-Linked Notes and other information relating to such Index-Linked
Notes.
 
PAYMENT OF PRINCIPAL AND INTEREST
 
  Payments of principal of (and premium, if any) and interest on all Book-
Entry Notes will be payable in accordance with the procedures of the
Depositary and its Participants in effect from time to time as described under
"Book-Entry System" below. Unless otherwise specified in the applicable
Pricing Supplement, payments of principal of (and premium, if any) and
interest on all Fixed Rate Notes and Floating Rate Notes will be made in the
applicable Specified Currency; provided, however, that payments of principal
of (and premium, if any) and interest on Notes denominated in other than U.S.
dollars will nevertheless be made in U.S. dollars (i) with respect to
Certificated Notes, at the option of the holders thereof under the procedures
described in the two following paragraphs and (ii) with respect to any Notes,
at the option of the Company in the case of the imposition of exchange
controls or other circumstances beyond the control of the Company as described
in the last paragraph under this heading.
 
  Unless otherwise specified in the applicable Pricing Supplement, and except
as provided in the next paragraph, payments of interest and principal (and
premium, if any) with respect to any Certificated Note denominated in other
than U.S. dollars will be made in U.S. dollars if the registered holder of
such Note on the relevant Regular Record Date (as defined below) or at
Maturity, as the case may be, has transmitted a written request for such
payment in U.S. dollars to the Trustee at its corporate trust office in the
Borough of Manhattan, The City of New York on or prior to such Regular Record
Date or the date 15 calendar days prior to Maturity, as the case may be. Such
request may be in writing (mailed or hand delivered) or by cable or telex or,
if promptly confirmed in writing, by other form of facsimile transmission. Any
such request made with respect to any Certificated Note by a registered holder
will remain in effect with respect to any further payments of interest and
principal (and premium, if any) with respect to such Note payable to such
holder, unless such request is revoked on or prior to the relevant Regular
Record Date or the date 15 calendar days prior to Maturity, as the case may
be. Holders of Certificated Notes denominated in other than U.S. dollars whose
Notes are registered in the name of a broker or nominee should contact such
broker or nominee to determine whether and how an election to receive payments
in U.S. dollars may be made.
 
  Unless otherwise specified in the applicable Pricing Supplement, the U.S.
dollar amount to be received by a holder of a Note (including a Book-Entry
Note) denominated in other than U.S. dollars who elects to receive payment in
U.S. dollars will be based on the highest bid quotation in The City of New
York received by the Exchange Rate Agent (as defined below) as of 11:00 A.M.
New York City time on the second Business Day next preceding the applicable
payment date from three recognized foreign exchange dealers (one of which may
be the Exchange Rate Agent) for the purchase by the quoting dealer of the
Specified Currency for U.S. dollars for settlement on such payment date in the
aggregate amount of the Specified Currency payable to all holders of Notes
electing to receive U.S. dollar payments and at which the applicable dealer
commits to execute a contract. If three such bid quotations are not available
on the second Business Day preceding the date of payment of principal (and
premium, if any) or interest with respect to any Note, such payment will be
made in the Specified
 
                                     S-11

 
Currency. All currency exchange costs associated with any payment in U.S.
dollars on any such Note will be borne by the holder thereof by deductions
from such payment. Unless otherwise provided in the applicable Pricing
Supplement, the Trustee will be the exchange rate agent (the "Exchange Rate
Agent") with respect to the Notes.
 
  Interest will be payable to the person in whose name a Note is registered
(which in the case of Global Securities representing Book-Entry Notes will be
the Depositary or a nominee of the Depositary) at the close of business on the
Regular Record Date next preceding each Interest Payment Date, which, with
respect to Fixed Rate Notes, shall be the close of business on the July 1 or
January 1 immediately preceding such Interest Payment Date or such other
Regular Record Date specified in the applicable Pricing Supplement, and with
respect to Floating Rate Notes, shall be the close of business on the
fifteenth calendar day prior to such Interest Payment Date (the "Regular
Record Date"); provided, however, that interest payable at Maturity will be
payable to the person to whom principal shall be payable (which in the case of
Global Securities representing Book-Entry Notes will be the Depositary or a
nominee of the Depositary). The first payment of interest on any Note
originally issued between a Regular Record Date and an Interest Payment Date
will be made on the Interest Payment Date following the next succeeding
Regular Record Date to the registered owner on such next succeeding Regular
Record Date.
 
  Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable, in the case of Floating Rate
Notes which reset daily, on the dates specified in the applicable Pricing
Supplement; in the case of Floating Rate Notes which reset weekly or monthly,
on the third Wednesday of each month or on the third Wednesday of March, June,
September and December of each year (as indicated in the applicable Pricing
Supplement); in the case of Floating Rate Notes which reset quarterly, on the
third Wednesday of March, June, September and December of each year; in the
case of Floating Rate Notes which reset semi-annually, on the third Wednesday
of the two months of each year specified in the applicable Pricing Supplement;
and in the case of Floating Rate Notes which reset annually, on the third
Wednesday of the month specified in the applicable Pricing Supplement (each an
"Interest Payment Date"), and in each case, at Maturity. If an Interest
Payment Date with respect to any Floating Rate Note would otherwise fall on a
day that is not a Market Day with respect to such Note, such Interest Payment
Date will be the next succeeding Market Day (or, in the case of a LIBOR Note,
if such day falls in the next calendar month, the next preceding Market Day).
 
  Payments of interest on any Fixed Rate Note or Floating Rate Note with
respect to any Interest Payment Date will include interest accrued to but
excluding such Interest Payment Date; provided, however, that if the Interest
Reset Period with respect to any Floating Rate Note is daily or weekly,
interest payable on such Note on any Interest Payment Date, other than
interest payable on the date on which principal on such Note is payable, will
include interest accrued through but excluding the day following the next
preceding Regular Record Date.
 
  With respect to a Floating Rate Note, accrued interest from (and including)
the date of issue or from (and including) the last date to which interest has
been paid is calculated by multiplying the face amount of such Floating Rate
Note by an accrued interest factor. Such accrued interest factor is computed
by adding the interest factor calculated for each day from (and including) the
date of issue, or from (and including) the last date to which interest has
been paid, to but excluding the date for which accrued interest is being
calculated. The interest factor (expressed as a decimal) for each such day is
computed by dividing the interest rate (expressed as a decimal) applicable to
such date by 360, in the case of Commercial Paper Rate Notes, Prime Rate
Notes, LIBOR Notes, CD Rate Notes or Federal Funds Rate Notes, or by the
actual number of days in the year, in the case of Treasury Rate Notes.
Interest on Fixed Rate Notes will be computed on the basis of a 360-day year
of twelve 30-day months.
 
                                     S-12

 
  Any payment on any Note due on any day which is not a Market Day, need not
be made on such day, but may be made on the next succeeding Market Day (or, in
the case of a LIBOR Note, if such day falls in the next calendar month, the
next preceding Market Day) with the same force and effect as if made on the
due date, and no interest shall accrue for the period from and after such
date.
 
  Payment of the principal of (and premium, if any) and any interest due with
respect to any Certificated Note at Maturity to be made in U.S. dollars will
be made in immediately available funds upon surrender of such Note at the
corporate trust office of the Trustee in the Borough of Manhattan, The City of
New York, provided that the Certificated Note is presented to the Paying Agent
(as defined in the Indenture) in time for the Paying Agent to make such
payments in such funds in accordance with its normal procedures. Payments of
interest with respect to Certificated Notes to be made in U.S. dollars other
than at Maturity will be made by check mailed by first class mail to the
address of the person entitled thereto as it appears in the Security Register
(as defined in the Indenture). A holder may elect to receive such payments of
interest by wire transfer of immediately available funds to a designated
account maintained in the United States upon receipt by the Trustee of written
instructions from such holder not later than the Regular Record Date for the
related Interest Payment Date. Such instructions shall remain in effect with
respect to payments of interest made to such holder on subsequent Interest
Payment Dates unless revoked or changed by written instructions received by
the Trustee from such holder, provided that any such written revocation or
change which is received by the Trustee after a Regular Record Date and before
the related Interest Payment Date shall not be effective with respect to the
interest payable on such Interest Payment Date.
 
  The total amount of any principal, premium, if any, and interest due on any
Global Security representing one or more Book-Entry Notes on any Interest
Payment Date or at Maturity will be made available to the Trustee on such
date. As soon as possible thereafter, the Trustee will make such payments to
the Depositary. The Depositary will allocate such payments to each Book-Entry
Note represented by such Global Security and make payments to the owners or
holders thereof in accordance with its existing operating procedures. Neither
the Company nor the Trustee shall have any responsibility or liability for
such payments by the Depositary. So long as the Depositary or its nominee is
the registered owner of any Global Security, the Depositary or its nominee, as
the case may be, will be considered the sole owner or holder of the Book-Entry
Note or Notes represented by such Global Security for all purposes under the
Indenture and the Book-Entry Notes except as otherwise noted therein. The
Company understands, however, that under existing industry practice, the
Depositary will authorize the persons on whose behalf it holds a Global
Security to exercise certain rights of holders of Notes, and the Indenture
provides that the Company, the Trustee and their respective agents will treat
as the holder of a Note the persons specified in a written statement of the
Depositary with respect to such Global Security for purposes of obtaining any
consents or directions required to be given by holders of the Notes pursuant
to the Indenture. See "Book-Entry System."
 
  Unless otherwise specified in the applicable Pricing Supplement, payments of
interest and principal (and premium, if any) with respect to any Note to be
made in a Specified Currency other than U.S. dollars will be made by wire
transfer of immediately available funds to such account with a bank located in
the country issuing the Specified Currency (or, with respect to Notes
denominated in ECUs, to an ECU account) or other jurisdiction acceptable to
the Company and the Trustee as shall have been designated at least five
Business Days prior to the Interest Payment Date or Maturity, as the case may
be, by the registered holder of such Note on the relevant Regular Record Date
or at Maturity, provided that, in the case of payment of principal (and
premium, if any) and any interest due at Maturity, the Note is presented to
the Paying Agent in time for the Paying Agent to make such payments in such
funds in accordance with its normal procedures. Such designation shall be made
by filing the appropriate information with the Trustee at its corporate trust
office in the Borough of Manhattan, The City of New York and, unless revoked
by written notice to the Trustee received by the Trustee on or prior to the
date five Business Days prior to the applicable Interest Payment Date or
 
                                     S-13

 
Maturity, as the case may be, any such designation made with respect to any
Note by a registered holder will remain in effect with respect to any further
payments with respect to such Note payable to such holder. If a payment with
respect to any such Note cannot be made by wire transfer because the required
designation has not been received by the Trustee on or before the requisite
date or for any other reason, a notice will be mailed to the holder at its
registered address requesting a designation pursuant to which such wire
transfer can be made and, upon the Trustee's receipt of such a designation,
such payment will be made within five Business Days of such receipt. The
Company will pay any administrative costs imposed by banks in connection with
making payments by wire transfer, but any tax, assessment or governmental
charge imposed upon payments will be borne by the holders of the Notes in
respect of which payments are made.
 
  If the principal of (and premium, if any) or interest on any Note is payable
in other than U.S. dollars and such Specified Currency is not available due to
the imposition of exchange controls or other circumstances beyond the control
of the Company, the Company will be entitled to satisfy its obligations to
holders of the Notes by making such payment in U.S. dollars on the basis of
the most recently available Exchange Rate. Any payment made under such
circumstances in U.S. dollars where the required payment is in other than U.S.
dollars will not constitute an Event of Default (as defined in the Prospectus)
under the Indenture.
 
BOOK-ENTRY SYSTEM
 
  Upon issuance, all Book-Entry Notes bearing interest at the same rate or
pursuant to the same formula, having the same date of issuance, redemption
provisions, if any, Specified Currency, Stated Maturity and other terms will
be represented by a single Global Security. Each Global Security representing
Book-Entry Notes will be deposited with, or on behalf of, the Depositary
located in the Borough of Manhattan, The City of New York, and will be
registered in the name of the Depositary or a nominee of the Depositary.
Currently, the Depositary accepts deposits of Global Securities denominated in
U.S. dollars only.
 
  With respect to any Book-Entry Note denominated in a Specified Currency
other than U.S. dollars, the Depositary currently has elected to have payments
of principal (and premium, if any) and interest on such Note made in U.S.
dollars unless notified by any of its Participants (as defined below) through
which an interest in such Note is held that it elects to receive such payment
of principal (or premium, if any) or interest in such Specified Currency.
Unless otherwise specified in the applicable Pricing Supplement, a Beneficial
Owner (as defined below) of Book-Entry Notes denominated in a Specified
Currency other than U.S. dollars electing to receive payments of principal (or
any premium) or interest in a currency other than U.S. dollars must notify the
Participant through which its interest is held on or prior to the applicable
Record Date, in the case of a payment of interest, and on or prior to the
sixteenth day prior to Maturity, in the case of principal or premium, of such
Beneficial Owner's election to receive all or a portion of such payment in
such Specified Currency. Such Participant must notify the Depositary of such
election on or prior to the third Business Day after such Record Date or after
such sixteenth day. The Depositary will notify the Trustee of such election on
or prior to the fifth Business Day after such Record Date or after such
sixteenth day. If complete instructions are received by the Participant and
forwarded by the Participant to the Depositary, and by the Depositary to the
Trustee, on or prior to such dates, the Beneficial Owner will receive payments
in the Specified Currency.
 
  The Depositary has advised the Company as follows: the Depositary is a
limited purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. The Depositary holds securities that its participants
("Participants") deposit with the Depositary. The Depositary also facilitates
the settlement among Participants of securities
 
                                     S-14

 
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. "Direct
Participants" include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations, some of whom (or their
representatives) own the Depositary. Access to the Depositary's system is also
available to others, such as securities brokers and dealers, banks and trust
companies, that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants").
The Rules applicable to the Depositary and its Participants are on file with
the Securities and Exchange Commission.
 
  Purchases of Book-Entry Notes under the Depositary's system must be made by
or through Direct Participants. Upon the issuance by the Company of Book-Entry
Notes represented by any Global Security, the Depositary will credit, on its
book-entry system, the respective principal amounts of the Book-Entry Notes
represented by such Global Security to the accounts of Participants. The
accounts to be credited shall be designated by the agents of the Company with
respect to such Book-Entry Notes, by certain other agents of the Company or by
the Company if such Book-Entry Notes are offered and sold directly by the
Company. The ownership interest of each actual purchaser of each Book-Entry
Note (a "Beneficial Owner") will be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from the Depositary of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in Book-Entry Notes are expected to be effected by entries
made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Book-Entry Notes, except as set forth below. To facilitate
subsequent transfers, all Book-Entry Notes deposited by Participants with the
Depositary will be registered in the name of the Depositary's partnership
nominee, Cede & Co. The deposit of Book-Entry Notes with the Depositary and
their registration in the name of Cede & Co. will not effect any change in
beneficial ownership. The laws of some states require that certain purchasers
of securities take physical delivery of such securities in definitive form.
Such laws may impair the ability to transfer beneficial interests in Book-
Entry Notes represented by any Global Security.
 
  So long as the Depositary for any Global Security, or its nominee, is the
registered owner of such Global Security, the Depositary or its nominee, as
the case may be, will be considered the sole owner or holder of the Book-Entry
Notes represented by such Global Security for all purposes of such Notes and
for all purposes under the Indenture.
 
  With respect to any Book-Entry Note, unless the Depositary has notified the
Company that it is unwilling or unable to continue as depositary therefor, the
Depositary has ceased to be a clearing agency registered under the Securities
Exchange Act of 1934, the Company has delivered to the Trustee a written
notice that all Book-Entry Notes shall be exchangeable, an Event of Default
(as defined below under "Description of Debt Securities--Events of Default" in
the accompanying Prospectus) has occurred and is continuing with respect to
the Notes represented thereby or as otherwise set forth in the applicable
Pricing Supplement, owners of beneficial interests in such Book-Entry Note
will not be entitled to have the Notes represented thereby registered in their
names, will not receive or be entitled to receive physical delivery of
Certificated Notes in exchange therefor and will not be considered to be the
owners or holders of any Notes represented thereby under the Indenture or such
Book-Entry Note. Unless and until it is exchanged in whole or in part for
individual certificates evidencing the Book-Entry Notes represented thereby,
any Global Security may not be transferred except as a whole by the depositary
for such Global Security to a nominee of such depositary or by a nominee of
such depositary to such depositary or another nominee of such depositary or by
the depositary or any nominee to a successor depositary or any nominee of such
successor.
 
                                     S-15

 
  The Company expects that conveyance of notices and other communications by
the Depositary to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time. In
addition, neither the Depositary nor Cede & Co. will consent or vote with
respect to Notes; the Company has been advised that the Depositary's usual
procedure is to mail an omnibus proxy to the Company as soon as possible after
the record date with respect to such consent or vote. The omnibus proxy would
assign Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts the Notes are credited on such record date (identified in a
listing attached to the omnibus proxy).
 
  Settlement for Book-Entry Notes will be made by the purchasers thereof in
immediately available funds. As long as the Depositary continues to make its
same day funds settlement system available to the Company, all payments of
principal of (and premium, if any) and interest on a Book-Entry Note held by
the Depositary or its nominee will be made by the Company in immediately
available funds.
 
  Secondary trading in notes and debentures of corporate issuers is generally
settled in clearinghouse or next-day funds. In contrast, Book-Entry Notes will
trade in the Depositary's same-day funds settlement system, and secondary
market trading activity in those securities will therefore be required by the
Depositary to settle in immediately available funds. No assurance can be given
as to the effect, if any, of settlement in immediately available funds on
trading activity in Book-Entry Notes.
 
  Payments of principal of (and premium, if any) and interest on the Book-
Entry Notes represented by a Global Security registered in the name of the
Depositary or its nominee will be made by the Company through the Trustee to
the Depositary or its nominee, as the case may be, as the registered owner of
such Global Security. Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in any Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
 
  The Company has been advised that the Depositary will credit the accounts of
Direct Participants with payment in amounts proportionate to their respective
holdings in any Global Security as shown on the records of the Depositary. The
Company has been advised that the Depositary's practice is to credit Direct
Participants' accounts on the applicable payment date unless the Depositary
has reason to believe that it will not receive payment on such date. The
Company expects that payments by Participants to Beneficial Owners will be
governed by standing customer instructions and customary practices, as is now
the case with securities held for the accounts of customers. Such payments
will be the responsibility of such Participants.
 
            CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
 
  The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates). It deals only with
Notes held as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the "Code"), does not discuss all
of the tax consequences that may be relevant to a holder in light of his
particular circumstances and does not purport to deal with persons in special
tax situations, such as financial institutions, insurance companies, tax-
exempt organizations, regulated investment companies, dealers in securities or
currencies, persons holding Notes as a hedge against currency risks or as a
position in a "straddle" for tax purposes, or persons whose functional
currency (as defined in Section 985 of the Code) is not the United States
dollar. It also does not deal with holders other than original purchasers
(except where otherwise specifically noted). BECAUSE THE EXACT PRICING AND
OTHER TERMS OF THE NOTES WILL VARY, NO
 
                                     S-16

 
ASSURANCE CAN BE GIVEN THAT THE CONSIDERATIONS DESCRIBED BELOW WILL APPLY TO A
PARTICULAR ISSUANCE OF NOTES. CERTAIN MATERIAL UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF PARTICULAR NOTES (WHERE
APPLICABLE) WILL BE SUMMARIZED IN THE PRICING SUPPLEMENT RELATING TO SUCH
NOTES. PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX LAWS
TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE NOTES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION.
 
  As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate or trust the income of which is
subject to United States Federal income taxation regardless of its source or
(iv) any other person whose income or gain in respect of a Note is effectively
connected with the conduct of a United States trade or business. The term also
includes certain former citizens of the United States. As used herein, the
term "non-U.S. Holder" means a beneficial owner of a Note that is not a U.S.
Holder.
 
U.S. HOLDERS
 
  PAYMENTS OF INTEREST. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular
method of accounting for federal income tax purposes).
 
  ORIGINAL ISSUE DISCOUNT. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Notes issued with original issue
discount ("Discount Notes").
 
  For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a
Note providing for the payment of any amount other than qualified stated
interest (as hereinafter defined) prior to maturity, multiplied by the
weighted average maturity of such Note). The issue price of each Note in an
issue of Notes equals the first price at which a substantial amount of such
Notes has been sold for money (ignoring sales to bond houses, brokers, or
similar persons or organizations acting in the capacity of underwriters,
placement agents, or wholesalers). The stated redemption price at maturity of
a Note is the sum of all payments provided by the Note other than "qualified
stated interest" payments. The term "qualified stated interest" generally
means stated interest that is unconditionally payable as a series of payments
in cash or property (other than debt instruments of the issuer) at least
annually during the entire term of the Note and equal to the outstanding
principal balance of the Note multiplied by a single fixed rate of interest.
In addition, under final Treasury Regulations (the "OID Regulations")
promulgated by the Internal Revenue Service (the "IRS") under the original
issue discount provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), if a Note bears interest for one or more accrual periods at a
rate below the rate applicable for the remaining term of such Note (e.g.,
Notes with teaser rates or interest holidays), and if the greater of either
the resulting foregone interest on such Note or any "true" discount on such
Note (i.e., the excess of the Note's stated principal amount over its issue
price) equals or exceeds a specified de minimis amount, then the stated
interest on the Note would be treated as original issue discount rather than
qualified stated interest.
 
  Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's
 
                                     S-17

 
regular method of tax accounting for federal income tax purposes). Holders of
Notes with a de minimis amount of original issue discount, as described above,
will generally include such original issue discount in income as capital gain
on a pro rata basis as principal payments are made on the Note. A U.S. Holder
of a Discount Note that matures more than one year from the date of issuance
must include original issue discount in income as ordinary interest for United
States Federal income tax purposes as it accrues under a constant yield method
based on a compounding of interest in advance of receipt of the cash payments
attributable to such income, regardless of such U.S. Holder's regular method
of tax accounting. In general, the amount of original issue discount included
in income by the initial U.S. Holder of a Discount Note is the sum of the
daily portions of original issue discount with respect to such Discount Note
for each day during the taxable year (or portion of the taxable year) on which
such U.S. Holder held such Discount Note. The "daily portion" of original
issue discount on any Discount Note is determined by allocating to each day in
any accrual period a ratable portion of the original issue discount allocable
to that accrual period. An "accrual period" may be of any length and the
accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs either on the final day of
an accrual period or on the first day of an accrual period. The amount of
original issue discount allocable to each accrual period is generally equal to
the difference between (i) the product of the Discount Note's adjusted issue
price at the beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the close of each accrual period
and appropriately adjusted to take into account the length of the particular
accrual period) and (ii) the amount of any qualified stated interest payments
allocable to such accrual period. The "adjusted issue price" of a Discount
Note at the beginning of any accrual period is the sum of the issue price of
the Discount Note plus the amount of original issue discount allocable to all
prior accrual periods minus the amount of any prior payments on the Discount
Note that were not qualified stated interest payments. Under these rules, U.S.
Holders generally will have to include in income increasingly greater amounts
of original issue discount in successive accrual periods.
 
  A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal
to the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder
must include in its gross income with respect to such Discount Note for any
taxable year (or portion thereof in which the U.S. Holder holds the Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
 
  Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the
total noncontingent principal payments due under the Variable Note by more
than a specified de minimis amount and (b) it provides for stated interest,
paid or compounded at least annually, at current values of (i) one or more
qualified floating rates, (ii) a single fixed rate and one or more qualified
floating rates, (iii) a single objective rate, or (iv) a single fixed rate and
a single objective rate that is a qualified inverse floating rate.
 
  A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable
rate is a qualified floating rate if it is equal to either (1) the product of
a qualified floating rate and a fixed multiple that is greater than 0.65 but
not more than 1.35 or (2) the product of a qualified floating rate and a fixed
multiple that is greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate. In addition, under the OID Regulations, two or more
qualified floating rates that can reasonably be expected to have
 
                                     S-18

 
approximately the same values throughout the term of the Variable Note (e.g.,
two or more qualified floating rates with values within 25 basis points of
each other as determined on the Variable Note's issue date) will be treated as
a single qualified floating rate. Notwithstanding the foregoing, a variable
rate that would otherwise constitute a qualified floating rate but which is
subject to one or more restrictions such as a maximum numerical limitation
(i.e., a cap) or a minimum numerical limitation (i.e., a floor) may, under
certain circumstances, fail to be treated as a qualified floating rate under
the OID Regulations unless such cap or floor is fixed throughout the term of
the Note. An "objective rate" is a rate (other than a qualified floating rate)
that is obtained using a single fixed formula and that is based on objective
financial or economic information outside of the issuer's control. The OID
Regulations also provide that other variable interest rates may be treated as
objective rates if so designated by the IRS in the future. Despite the
foregoing, a variable rate of interest on a Variable Note will not constitute
an objective rate if it is reasonably expected that the average value of such
rate during the first half of the Variable Note's term will be either
significantly less than or significantly greater than the average value of the
rate during the final half of the Variable Note's term. A "qualified inverse
floating rate" is any objective rate where such rate is equal to a fixed rate
minus a qualified floating rate, as long as variations in the rate can
reasonably be expected to inversely reflect contemporaneous variations in the
qualified floating rate. The OID Regulations also provide that if a Variable
Note provides for stated interest at a fixed rate for an initial period of
less than one year followed by a variable rate that is either a qualified
floating rate or an objective rate for a subsequent period and if the variable
rate on the Variable Note's issue date is intended to approximate the fixed
rate (e.g., the value of the variable rate on the issue date does not differ
from the value of the fixed rate by more than 25 basis points), then the fixed
rate and the variable rate together will constitute either a single qualified
floating rate or objective rate, as the case may be.
 
  If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually during
the term of the Note will constitute qualified stated interest and will be
taxed accordingly. Thus, a Variable Note that provides for stated interest at
either a single qualified floating rate or a single objective rate throughout
the term thereof and that qualifies as a "variable rate debt instrument" under
the OID Regulations will generally not be treated as having been issued with
original issue discount unless the Variable Note is issued at a "true"
discount (i.e., at a price below the Note's stated principal amount) in excess
of a specified de minimis amount. Original issue discount on such a Variable
Note arising from "true" discount is allocated to an accrual period using the
constant yield method described above by assuming that the variable rate is a
fixed rate equal to (i) in the case of a qualified floating rate or qualified
inverse floating rate, the value as of the issue date, of the qualified
floating rate or qualified inverse floating rate, or (ii) in the case of an
objective rate (other than a qualified inverse floating rate), a fixed rate
that reflects the yield that is reasonably expected for the Variable Note.
 
  In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed
rate that reflects the yield that is reasonably expected for the Variable
Note. In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or
a qualified inverse
 
                                     S-19

 
floating rate, if the Variable Note provides for a qualified inverse floating
rate). Under such circumstances, the qualified floating rate or qualified
inverse floating rate that replaces the fixed rate must be such that the fair
market value of the Variable Note as of the Variable Note's issue date is
approximately the same as the fair market value of an otherwise identical debt
instrument that provides for either the qualified floating rate or qualified
inverse floating rate rather than the fixed rate. Subsequent to converting the
fixed rate into either a qualified floating rate or a qualified inverse
floating rate, the Variable Note is then converted into an "equivalent" fixed
rate debt instrument in the manner described above.
 
  Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S.
Holder of the Variable Note will account for such original issue discount and
qualified stated interest as if the U.S. Holder held the "equivalent" fixed
rate debt instrument. In each accrual period, appropriate adjustments will be
made to the amount of qualified stated interest or original issue discount
assumed to have been accrued or paid with respect to the "equivalent" fixed
rate debt instrument in the event that such amounts differ from the actual
amount of interest accrued or paid on the Variable Note during the accrual
period.
 
  If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. Generally, if a Variable Note is treated
as a contingent payment obligation, interest payments thereon will be treated
as "contingent interest" payments. Under recently issued Treasury Regulations,
any contingent interest payments on a Variable Note would be includible in
income in a taxable year whether or not the amount of any payment is fixed or
determinable in that year. The amount of interest included in income in any
particular accrual period would be determined by constructing a projected
payment schedule (as determined under the Regulations) for the Variable Note
and applying daily accrual rules similar to those for accruing original issue
discount on Notes issued with original issue discount (as discussed above). If
the actual amount of contingent interest payments is not equal to the
projected amount, an adjustment to income at the time of the payment must be
made to reflect the difference.
 
  Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable
at the option of the holder prior to their stated maturity (a "put option").
Notes containing such features may be subject to rules that differ from the
general rules discussed above. Investors intending to purchase Notes with such
features should consult their own tax advisors, since the original issue
discount consequences will depend, in part, on the particular terms and
features of the purchased Notes.
 
  U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
 
  SHORT-TERM NOTES. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects
to do so. If such an election is not made, any gain recognized by the U.S.
Holder on the sale, exchange or maturity of the Short-Term Note will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis, or upon election under the constant yield method (based
on daily compounding), through the date of sale, exchange or maturity, and a
portion of the deductions otherwise allowable to the U.S. Holder for interest
on borrowings allocable to the Short-Term Note will be deferred until a
corresponding amount of income is realized. U.S. Holders who report income for
 
                                     S-20

 
United States Federal income tax purposes under the accrual method, and
certain other holders including banks and dealers in securities, are required
to accrue original issue discount on a Short-Term Note on a straight-line
basis unless an election is made to accrue the original issue discount under a
constant yield method (based on daily compounding).
 
  MARKET DISCOUNT. If a U.S. Holder purchases a Note, other than a Discount
Note, for an amount that is less than its stated redemption price at maturity
or, in the case of a Discount Note, for an amount that is less than its
adjusted issue price as of the purchase date, such U.S. Holder will be treated
as having purchased such Note at a "market discount," unless such market
discount is less than a specified de minimis amount.
 
  Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized
on the sale, exchange, retirement or other disposition of, a Note as ordinary
income to the extent of the lesser of (i) the amount of such payment or
realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such Note at the time
of such payment or disposition. Market discount will be considered to accrue
ratably during the period from the date of acquisition to the maturity date of
the Note, unless the U.S. Holder elects to accrue market discount on an
economic accrual basis. If such Note is disposed of in a nontaxable
transaction (other than as provided in Sections 1276(c) and (d) of the Code),
accrued market discount will be includible as ordinary income to the U.S.
Holder as if such U.S. Holder had sold the Note at its then fair market value.
 
  A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note
or certain earlier dispositions (including a nontaxable transaction other than
as provided by Sections 1276(c) and (d) of the Code), because a current
deduction is only allowed to the extent the interest expense exceeds an
allocable portion of market discount. A U.S. Holder may elect to include
market discount in income currently as it accrues (on either a ratable or
semiannual compounding basis), in which case the rules described above
regarding the treatment as ordinary income of gain upon the disposition of the
Note and upon the receipt of certain cash payments and regarding the deferral
of interest deductions will not apply. Generally, such currently included
market discount is treated as ordinary interest for United States Federal
income tax purposes. Such an election will apply to all debt instruments
acquired by the U.S. Holder on or after the first day of the taxable year to
which such election applies and may be revoked only with the consent of the
IRS.
 
  PREMIUM. If a U.S. Holder purchases a Note for an amount that is greater
than the sum of all amounts payable on the Note after the purchase date other
than payments of qualified stated interest, such U.S. Holder will be
considered to have purchased the Note with "amortizable bond premium" equal in
amount to such excess. A U.S. Holder may elect to amortize such premium using
a constant yield method over the remaining term of the Note and may offset
interest otherwise required to be included in respect of the Note during any
taxable year by the amortized amount of such excess for the taxable year.
However, if the Note may be optionally redeemed after the U.S. Holder acquires
it at a price in excess of its stated redemption price at maturity, special
rules would apply which could result in a deferral of the amortization of some
bond premium until later in the term of the Note. A U.S. Holder who elects to
amortize bond premium must reduce his tax basis in the Note by the amount of
the premium amortized in any year. Any election to amortize bond premium
applies to all taxable debt obligations then owned and thereafter acquired by
the U.S. Holder and may be revoked only with the consent of the IRS.
 
  DISPOSITION OF A NOTE. Except as discussed above, upon the sale, exchange or
retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and
 
                                     S-21

 
unpaid interest) and such U.S. Holder's adjusted tax basis in the Note. A U.S.
Holder's adjusted tax basis in a Note generally will equal such U.S. Holder's
initial investment in the Note increased by any original issue discount
included in income (and accrued market discount, if any, if the U.S. Holder
has included such market discount in income) and decreased by the amount of
any payments, other than qualified stated interest payments, received and
amortizable bond premium taken with respect to such Note. Such gain or loss
generally will be long-term capital gain or loss if the Note were held for
more than one year. The excess of the net long-term capital gains over the net
short term capital losses is taxed at a lower rate than ordinary income for
certain corporate taxpayers. The distinction between capital gain or loss and
ordinary income or loss is also relevant for purposes of, among other things,
limitations on the deductibility of capital losses.
 
  EXTENSION OF MATURITY. As described above under the heading "Description of
Notes--Extension of Maturity," the issuer may have the option to extend the
maturity of a Note and, if the issuer exercises such option, the Holder will
have the option to require the issuer to repay the Note on the Maturity Date.
The election by the Company to extend the maturity of a Note will, under
certain circumstances, be treated for federal income tax purposes as a taxable
exchange of such Note for a modified note. See "Disposition of a Note."
Purchase of such Notes should carefully examine the applicable Pricing
Supplement and should consult with their tax advisors with respect to such a
feature since the tax consequences will depend, in part, on the particular
terms and features of the Note.
 
NON-U.S. HOLDERS
 
  A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Note, unless such non-U.S. Holder owns actually
or constructively 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, is a controlled foreign
corporation related directly or indirectly to the Company through stock
ownership, or is a bank receiving interest described in Section 881(c)(3)(A)
of the Code. To qualify for the exemption from taxation, the last United
States payor in the chain of payment prior to payment to a non-U.S. Holder
(the "Withholding Agent") must have received in the year in which a payment of
interest or principal occurs, or in either of the two preceding calendar
years, a statement that (i) is signed by the beneficial owner of the Note
under penalties of perjury, (ii) certifies that such owner is not a U.S.
Holder and (iii) provides the name and address of the beneficial owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement
to the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the beneficial owner to the organization or institution. In addition, the
Treasury Department has recently issued proposed regulations regarding the
withholding and information reporting rules discussed above. In general, the
proposed regulations do not alter the substantive withholding and information
reporting requirements but unify current certification procedures and forms
and clarify reliance standards. If finalized in their current form, the
proposed regulations would generally be effective for payments made after
December 31, 1997, subject to certain transition rules.
 
  Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, unless (i) such Holder is an individual who is present in the United
States for 183 days or more in the taxable year of disposition, and either (a)
such individual has a "tax home" (as defined in Section 911(d)(3) of the Code)
in the United States (unless such gain is attributable to a fixed place of
business in a foreign country maintained by such individual and has been
subject to foreign tax of at least 10%) or (b) the gain is attributable to an
office or other fixed place of business maintained by such individual in the
United States or (ii) the gain is effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder.
 
                                     S-22

 
  If a non-U.S. Holder of a Note is engaged in a trade or business in the
United States, and if interest (including original issue discount) on the Note
is effectively connected with the conduct of such trade or business, the non-
U.S. Holder, although exempt from the withholding tax discussed in the
preceding paragraph, will generally be subject to regular United States income
tax on interest (including any original issue discount) and on any gain
realized on the sale, exchange or other disposition of a Note in the same
manner as if it were a U.S. Holder. See the discussion above regarding U.S
Holders. In lieu of the certificate described above, such a Holder will be
required to provide to the Company a properly executed Internal Revenue
Service Form 4224 in order to claim an exemption from withholding tax. In
addition, if such non-U.S. Holder is a foreign corporation, it may be subject
to a branch profits tax equal to 30% (or such lower rate provided by an
applicable treaty) of its effectively connected earnings and profits for the
taxable year, subject to certain adjustments. For purposes of the branch
profits tax, interest (including original issue discount) on and any gain
recognized on the sale, exchange or other disposition of a Note will be
included in the effectively connected earnings and profits of such non-U.S.
Holder if such interest or gain, as the case may be, is effectively connected
with the conduct by the non-U.S. Holder of a trade or business in the United
States.
 
  The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual owns, actually or constructively, 10% or more of the total
combined voting power of all classes of stock of the Company entitled to vote
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
 
BACKUP WITHHOLDING AND INFORMATION REPORTING
 
  Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments (including original issue discount) made in respect of the
Notes to registered owners who are not "exempt recipients" and who fail to
provide certain identifying information (such as the registered owner's
taxpayer identification number) in the required manner. Generally, individuals
are not exempt recipients, whereas corporations and certain other entities
generally are exempt recipients. Payments made in respect of the Notes to a
U.S. Holder must be reported to the IRS, unless the U.S. Holder is an exempt
recipient or establishes an exemption. Compliance with the identification
procedures described in the preceding section would establish an exemption
from backup withholding for those non-U.S. Holders who are not exempt
recipients.
 
  Under current Treasury Regulations, payment on the sale, exchange or other
disposition of a Note made to or through a foreign office of a broker
generally will not be subject to backup withholding. However, if such broker
is a United States person, a controlled foreign corporation for United States
tax purposes or a foreign person 50% or more of whose gross income is
effectively connected with a United States trade or business for a specified
three-year period, information reporting will be required unless the broker
has in its records documentary evidence that the beneficial owner is not a
United States person and certain other conditions are met or the beneficial
owner otherwise establishes an exemption. Under proposed Treasury Regulations,
backup withholding may apply to any payment which such broker is required to
report if such broker has actual knowledge that the payee is a United States
person. Payments to or through the United States office of a broker will be
subject to backup withholding and information reporting unless the Holder
certifies, under penalties of perjury, that it is not a United States person
or otherwise establishes an exemption.
 
  Holders should consult their tax advisors regarding their qualification for
an exemption from backup withholding and information reporting and the
procedures for obtaining such an exemption, if applicable. Any amounts
withheld under the backup withholding rules from a payment to a beneficial
owner would be allowed as a refund or a credit against such beneficial owner's
United States Federal income tax provided the required information is
furnished to the IRS.
 
                                     S-23

 
                            FOREIGN CURRENCY RISKS
 
  THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS AND PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN THE NOTES
DENOMINATED IN OTHER THAN U.S. DOLLARS. PROSPECTIVE INVESTORS SHOULD CONSULT
THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN
INVESTMENT IN THE NOTES DENOMINATED IN A CURRENCY (INCLUDING ANY COMPOSITE
CURRENCY) OTHER THAN U.S. DOLLARS. SUCH NOTES ARE NOT AN APPROPRIATE
INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN
CURRENCY TRANSACTIONS
 
  THE INFORMATION SET FORTH IN THIS PROSPECTUS SUPPLEMENT IS DIRECTED TO
PROSPECTIVE PURCHASERS WHO ARE UNITED STATES RESIDENTS, AND THE COMPANY
DISCLAIMS ANY RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS WHO ARE
RESIDENTS OF COUNTRIES OTHER THAN THE UNITED STATES WITH RESPECT TO ANY
MATTERS THAT MAY AFFECT THE PURCHASE, HOLDING OR RECEIPT OF PAYMENTS OF
PRINCIPAL OF (AND PREMIUM, IF ANY) AND INTEREST ON THE NOTES. SUCH PERSONS
SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS WITH REGARD TO SUCH
MATTERS.
 
GENERAL
 
  EXCHANGE RATES AND EXCHANGE CONTROLS. An investment in Notes that are
denominated in other than U.S. dollars entails significant risks that are not
associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of
significant changes in rates of exchange between the U.S. dollar and the
various foreign currencies or composite currencies and the possibility of the
imposition or modification of foreign exchange controls by either the U.S. or
foreign governments. Such risks generally depend on factors over which the
Company has no control, such as economic and political events and the supply
of and demand for the relevant currencies. In recent years, rates of exchange
between the U.S. dollar and certain foreign currencies have been highly
volatile and such volatility may be expected in the future. Fluctuations in
any particular exchange rate that have occurred in the past are not
necessarily indicative, however, of fluctuations in the rate that may occur
during the term of any Note. Depreciation of a Specified Currency other than
U.S. dollars against the U.S. dollar would result in a decrease in the
effective yield of such Note below its coupon rate, and in certain
circumstances could result in a loss to the investor on a U.S. dollar basis.
 
  Governments have imposed from time to time and may in the future impose
exchange controls which could affect exchange rates as well as the
availability of the Specified Currency at a Note's Maturity or on any other
payment date in respect thereof. Even if there are no actual exchange
controls, it is possible that the Specified Currency for any particular Note
would not be available at such Note's Maturity. In that event, the Company
will repay in U.S. dollars on the basis of the most recently available
Exchange Rate. See "Description of Notes--Payment of Principal and Interest".
 
  Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. Accordingly, payments
on Notes made in a Specified Currency other than U.S. dollars will be made
from an account with a bank located in the country issuing the Specified
Currency (or, with respect to Notes denominated in ECUs, from an ECU account).
See "Description of Notes--Payment of Principal and Interest".
 
  Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in other than U.S. dollars or ECUs will not be sold in, or to
residents of, the country issuing the Specified Currency in which particular
Notes are denominated.
 
  With respect to any Note denominated in other than U.S. dollars, a Pricing
Supplement including a currency supplement with respect to the applicable
Specified Currency (which supplement shall include information with respect to
applicable current foreign exchange controls, if any), certain federal
 
                                     S-24

 
income tax considerations and the relevant historical exchange rates for the
Specified Currency shall constitute a part of this Prospectus Supplement. The
information therein concerning exchange rates is furnished as a matter of
information only and should not be regarded as indicative of the range of or
trends in fluctuations in currency exchange rates that may occur in the
future.
 
GOVERNING LAW AND JUDGMENTS
 
  The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of California. A judgment for money in an action
based on a Note denominated in a foreign currency or currency unit in a
federal or state court in the United States ordinarily would be enforced in
the United States only in United States dollars. Under California law, a
judgment on a foreign-money claim is stated in an amount of the foreign
currency or currency unit and is payable in that foreign currency or, at the
option of the debtor, in United States dollars. The date used to determine the
rate of conversion of the currency or currency unit in which any particular
Note is denominated into United States dollars will depend upon various
factors.
 
NOTES DENOMINATED IN ECUS
 
  If payment on a Note is required to be made in ECUs and on a payment date
with respect to such Note, ECUs are unavailable due to the imposition of
exchange controls or other circumstances beyond the Company's control or are
no longer used in the European Monetary System, then all payments due on such
payment date shall be made in U.S. dollars. The amount so payable on any
payment date in ECUs shall be converted into U.S. dollars at a rate determined
by the Exchange Rate Agent as of the second Business Day prior to the date on
which such payment is due on the following basis: The component currencies of
the ECUs for this purpose (the "Components") shall be the currency amounts
that were components of the ECUs as of the last date on which ECUs were used
in the European Monetary System. The equivalent of ECUs in U.S. dollars shall
be calculated by aggregating the U.S. dollar equivalents of the Components.
The U.S. dollar equivalent of each of the Components shall be determined by
the Exchange Rate Agent on the basis of the most recently available Exchange
Rate for the Components, or as otherwise indicated in the applicable Pricing
Supplement.
 
  If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a
Component shall be divided or multiplied in the same proportion. If two or
more component currencies are consolidated into a single currency, the amounts
of those currencies as Components shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of that currency as a
Component shall be replaced by amounts of such two or more currencies, each of
which shall have a value on the date of division equal to the amount of the
former component currency divided by the number of currencies into which that
currency was divided.
 
  All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion (except to the extent expressly provided herein or
in the applicable Pricing Supplement that any determination is subject to
approval by the Company) and, in the absence of manifest error, shall be
conclusive for all purposes and binding on holders of the Notes and the
Company, and the Exchange Rate Agent shall have no liability therefor.
 
                                     S-25

 
                       SUPPLEMENTAL PLAN OF DISTRIBUTION
 
  Subject to the terms and conditions set forth in the Distribution Agreement,
dated December 16, 1996 (the "Distribution Agreement"), the Notes are being
offered on a continuing basis by the Company through Goldman, Sachs & Co. and
J.P. Morgan Securities Inc. (the "Agents"), who have agreed to use their
reasonable efforts to solicit purchases of the Notes. The Company will have
the sole right to accept offers to purchase Notes and may reject any proposed
purchase of Notes as a whole or in part. The Agents shall have the right, in
their discretion reasonably exercised, to reject any offer to purchase Notes,
as a whole or in part. The Company will pay the Agents a commission of from
 .125% to .750% of the principal amount of Notes, depending upon maturity, for
sales made through them as Agents.
 
  The Company may also sell Notes to the Agents as principals for their own
accounts. Unless otherwise specified in the applicable Pricing Supplement, any
Note sold to an Agent as principal will be purchased by such Agent at a price
equal to 100% of the principal amount thereof less a percentage equal to the
commission applicable to an agency sale of a Note of identical maturity. Such
Notes may be resold at prevailing market prices, or at prices related thereto,
at the time of such resale, as determined by the Agents. The Company reserves
the right to sell Notes directly on its own behalf. No commission will be
payable on any Notes sold directly by the Company.
 
  In addition, the Agents may offer the Notes they have purchased as principal
to other dealers. The Agents may sell Notes to any dealer at a discount and,
unless otherwise specified in the applicable Pricing Supplement, such discount
allowed to any dealer may include all or part of the discount to be received
from the Company. After the initial public offering of Notes to be resold to
investors and other purchasers on a fixed public offering price basis, the
public offering price, concession and discount may be changed.
 
  The Agents may sell to or through dealers who may resell to investors, and
the Agents may pay all or part of their discount or commission to such
dealers. Such dealers may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933, as amended (the "Act").
 
  Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes will be required to be made in immediately
available funds in The City of New York.
 
  The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Act. The Company has agreed to indemnify the Agents
against certain liabilities, including liabilities under the Act. The Company
has agreed to reimburse the Agents for certain expenses.
 
  Goldman, Sachs & Co. and J.P. Morgan Securities Inc. have performed various
investment banking services for the Company and its subsidiaries and may
perform such services in the future. Affiliates of J.P. Morgan Securities Inc.
have performed commercial banking services for the Company and its
subsidiaries and may perform such services in the future.
 
  The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given
as to the existence or liquidity of any secondary market for the Notes.
 
                                     S-26

 
                           [LOGO OF AVERY DENNISON]
 
                                DEBT SECURITIES
 
                               ----------------
 
  Avery Dennison Corporation (the "Company") may offer, from time to time,
debt securities consisting of debentures, notes and/or other unsecured
evidences of indebtedness (the "Debt Securities") at an aggregate initial
offering price not to exceed $150,000,000, or, if the principal of the Debt
Securities is payable in a foreign or composite currency, the equivalent
thereof at the time of the offering. The Debt Securities may be offered as
separate series and may be offered in amounts, at prices and on terms to be
determined at the time of sale. When a particular series of Debt Securities
(the "Offered Debt Securities") is offered, a supplement to this Prospectus
(the "Prospectus Supplement") will be delivered with this Prospectus setting
forth the terms of such Offered Debt Securities, including, if applicable, the
specific designation, aggregate principal amount, denominations, currency,
purchase price, maturity, interest rate (which may be fixed or variable) and
time of payment of interest, redemption terms and any listing on a securities
exchange of the Offered Debt Securities. All or a portion of the Debt
Securities of a series may be issued in temporary or permanent global form.
 
                               ----------------
 
   THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES 
    AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
    SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
        PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.   ANY
             REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
                               ----------------
 
  The Offered Debt Securities may be sold directly, through agents designated
from time to time or through underwriters or dealers, which may be a group of
underwriters represented by one or more firms, or through a combination of
such methods. See "Plan of Distribution." If any agents of the Company or any
underwriters or dealers are involved in the sale of the Offered Debt
Securities, the names of such agents, underwriters or dealers and any
applicable commissions or discounts will be set forth in the Prospectus
Supplement.
 
                               ----------------
 
  This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
 
                               ----------------
 
               The date of this Prospectus is December 13, 1996

 
                             AVAILABLE INFORMATION
 
  The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: New York Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048; and Chicago Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can be obtained from the Public Reference Branch of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates, or may be examined without charge
at the offices of the Commission or accessed through the Commission's Internet
address at http://www.sec.gov. Such material can also be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005 and the Pacific Stock Exchange Incorporated, 301 Pine Street, San
Francisco, California 94104, on which exchanges the Company's common stock is
listed.
 
  This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits, referred to as the "Registration
Statement") filed by the Company with the Commission under the Securities Act
of 1933, as amended (the "1933 Act"). This Prospectus omits certain of the
information contained in the Registration Statement in accordance with the
rules and regulations of the Commission, and reference is hereby made to the
Registration Statement for further information with respect to the Company and
the Debt Securities offered hereby. Any statements contained herein concerning
the provisions of any documents are not necessarily complete, and, in each
instance, reference is made to such copy filed as a part of the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference. The Registration Statement may be
inspected without charge at the office of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies
thereof may be obtained from the Commission at prescribed rates, or may be
examined without charge at the offices of the Commission or accessed through
the Commission's Internet address at http://www.sec.gov.
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
  The Company's (i) Annual Report on Form 10-K for the fiscal year ended
December 30, 1995; (ii) Quarterly Report on Form 10-Q for the quarter ended
March 30, 1996; (iii) Quarterly Report on Form 10-Q for the quarter ended June
29, 1996; (iv) Quarterly Report on Form 10-Q for the quarter ended September
28, 1996; and (v) Current Report on Form 8-K dated October 24, 1996 are
incorporated in and made a part of this Prospectus.
 
  All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering of the Debt
Securities shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the date of filing of such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in
any subsequently filed document deemed to be incorporated herein or contained
in the accompanying Prospectus Supplement modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement or this Prospectus.
 
  The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the request of any such person, a copy of any
or all of the documents incorporated herein by reference (other than exhibits
to such documents, unless such exhibits are specifically incorporated by
reference into the documents that this Prospectus incorporates). Requests for
such copies should be directed to the Secretary, Avery Dennison Corporation,
150 North Orange Grove Boulevard, Pasadena, California 91103; telephone (818)
304-2000.
 
                                       2

 
                                  THE COMPANY
 
  The principal business of the Company is the production of self-adhesive
materials. Some of these materials are "converted" into labels and other
products through embossing, printing, stamping and die-cutting, and some are
sold in unconverted form as base materials, tapes and reflective sheeting. The
Company also manufactures and sells a variety of office products and other
items not involving pressure-sensitive components, such as notebooks, three-
ring binders, organizing systems, markers, glue sticks, fasteners, business
forms, tickets, tags and imprinting equipment.
 
  The Company manufactures and sells these products from 200 manufacturing
facilities and sales offices located in 33 countries, and employs
approximately 15,500 persons worldwide. Its principal corporate offices are
located at 150 North Orange Grove Boulevard, Pasadena, California 91103
(telephone: (818) 304-2000).
 
  The Company was founded in 1935 by R. Stanton Avery, the Founder and
Chairman Emeritus, incorporated in California in 1946 and reincorporated in
Delaware in 1977. On October 16, 1990, a wholly owned subsidiary of the
Company merged into Dennison Manufacturing Company ("Dennison"), Dennison
became a wholly owned subsidiary of the Company, and the Company changed its
name from Avery International Corporation to Avery Dennison Corporation.
References herein to the "Company" are to Avery Dennison Corporation and its
subsidiaries, unless the context otherwise requires.
 
                                USE OF PROCEEDS
 
  Except as may be set forth in the Prospectus Supplement, the Company intends
to use the net proceeds from the sale of the Debt Securities to reduce
domestic variable-rate short-term borrowings, to reduce or retire from time to
time other indebtedness and for other general corporate purposes.
 
                      RATIO OF EARNINGS TO FIXED CHARGES
 
  The following table sets forth the Company's consolidated ratio of earnings
to fixed charges for the periods shown.
 


                                                          NINE MONTHS ENDED
                                                     ---------------------------
                                                     SEPTEMBER 30, SEPTEMBER 28,
                            1991 1992 1993 1994 1995     1995          1996
                            ---- ---- ---- ---- ---- ------------- -------------
                                              
   Ratio of earnings to
    fixed charges.......... 2.7  3.1  3.2  3.9  4.6       4.5           5.7

 
  The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, "earnings" consist of income before income
taxes plus fixed charges (excluding capitalized interest), and "fixed charges"
consist of interest expense, capitalized interest, amortization of debt
issuance costs and the portion of rent expense (estimated to be 40% for 1991
and 35% for 1992, 1993, 1994, 1995, and for the nine months ended September
30, 1995 and September 28, 1996, respectively) on operating leases deemed
representative of interest.
 
                                       3

 
                        DESCRIPTION OF DEBT SECURITIES
 
  The Debt Securities are to be issued under an Indenture, dated as of March
15, 1991, between the Company and Security Pacific National Bank, as Trustee,
as amended by a First Supplemental Indenture, dated as of March 16, 1993,
between the Company and First Trust of New York, National Association, as
successor Trustee (the "Trustee"), each of which is incorporated by reference
as an exhibit to the Registration Statement (collectively, the "Indenture").
The following summary of certain general provisions of the Indenture and the
Debt Securities does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the provisions of the Indenture,
including the definitions therein of certain terms. The particular terms of
the Offered Debt Securities and the extent, if any, to which such general
provisions may apply to the Offered Debt Securities will be described in the
Prospectus Supplement relating to such Offered Debt Securities.
 
GENERAL
 
  The Indenture does not limit the amount of Debt Securities which may be
issued thereunder and provides that Debt Securities may be issued thereunder
up to the aggregate principal amount which may be authorized from time to
time. The Debt Securities may be issued from time to time in one or more
series. The Debt Securities will be unsecured and will rank on a parity with
all other unsecured and unsubordinated indebtedness of the Company.
 
  Debt Securities will be issued in fully registered form without coupons and
may be issued in whole or in part in the form of one or more global securities
("Global Securities").
 
  Reference is made to the Prospectus Supplement relating to the particular
series of Offered Debt Securities offered thereby for the following terms of
the Offered Debt Securities: (i) the title and aggregate principal amount of
the Offered Debt Securities; (ii) the price (expressed as a percentage of the
aggregate principal amount thereof) at which the Offered Debt Securities will
be issued; (iii) the date or dates on which the Offered Debt Securities will
mature; (iv) the rate or rates per annum, or the method for determining such
rate or rates, if any, at which the Offered Debt Securities will bear
interest; (v) the date from which such interest, if any, on the Offered Debt
Securities will accrue, the dates on which such interest, if any, will be
payable, the date on which payment of such interest, if any, will commence and
the regular record dates for such interest payment dates; (vi) the place or
places where the principal of (and premium, if any) and interest, if any, on
the Offered Debt Securities shall be payable; (vii) any optional or mandatory
sinking fund provisions; (viii) the date, if any, after which, or the period
or periods, if any, within which, and the price or prices at which the Offered
Debt Securities may, pursuant to any optional or mandatory redemption
provisions, be redeemed at the option of the Company or the holder thereof and
any other terms and provisions of such optional or mandatory redemptions; (ix)
the denominations in which any Offered Debt Securities will be issuable if
other than denominations of $1,000 and any integral multiple thereof; (x) if
other than the principal amount thereof, the portion of the principal amount
of Offered Debt Securities which will be payable upon declaration of
acceleration of maturity thereof; (xi) any Events of Default with respect to
the Offered Debt Securities, if not set forth in the Indenture; (xii) the
currency or currencies, including composite currencies, in which payment of
the principal of (and premium, if any) and interest, if any, on the Offered
Debt Securities will be payable (if other than the currency of the United
States of America) which may be different for principal, premium, if any, and
interest, if any; (xiii) if the principal of (and premium, if any), or
interest, if any, on the Offered Debt Securities are to be payable, at the
election of the Company or any holder thereof, in a currency or currencies
other than that in which the Offered Debt Securities are stated to be payable,
the period or periods within which, and the terms and conditions upon which,
such election may be made; (xiv) if the amount of payments of principal of
(and premium, if any), or interest, if any, on the Offered Debt Securities may
be determined with reference to an index, the manner in which such amounts
will be determined; (xv) whether such Offered Debt Securities are to be issued
in whole or in part in the form of one or more Global
 
                                       4

 
Securities; (xvi) the application, if any, of certain provisions of the
Indenture relating to defeasance and discharge, and certain conditions
thereto; (xvii) any additional covenants or other material terms relating to
the Offered Debt Securities (which may not be inconsistent with the
Indenture); and (xviii) any Federal income tax consequences applicable to the
Offered Debt Securities.
 
  Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal (and premium, if any) will be payable and the Debt Securities will
be transferable at the corporate trust office of the Trustee in the City of
New York, New York. Unless other arrangements are made, interest, if any, will
be paid by checks mailed by first class mail to the holders of Debt Securities
at their registered addresses. No service charge will be made for any transfer
or exchange of the Debt Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
 
  One or more series of the Debt Securities may be issued as discounted Debt
Securities (bearing no interest or interest at a rate which at the time of
issuance is below market rates) to be sold at a substantial discount below
their stated principal amount. Federal income tax consequences and other
special considerations applicable to any such discounted Debt Securities will
be described in the Prospectus Supplement relating thereto.
 
  Indexed Debt Securities may be issued with the principal amount payable at
maturity, or the amount of interest payable on an interest payment date, to be
determined by reference to a currency exchange rate, composite currency,
commodity price or other financial or non-financial index as set forth in the
Pricing Supplement applicable thereto. Holders of indexed Debt Securities may
receive a principal amount at maturity that is greater than or less than the
face amount of such Debt Securities depending upon the value at maturity of
the applicable index. Information as to the methods for determining the
principal amount payable at maturity or the amount of interest payable on an
interest payment date, as the case may be, any currency or commodity market to
which principal or interest is indexed, foreign exchange and other risks and
certain additional tax and other considerations with respect to indexed Debt
Securities will be set forth in the Pricing Supplement applicable thereto.
 
  The covenants of the Company under the Indenture, as described below, will
not necessarily afford holders of the Debt Securities protection in the event
of a highly leveraged transaction involving the Company, such as a leveraged
buyout.
 
CERTAIN DEFINITIONS
 
  "Attributable Debt" means, as to any particular lease under which any Person
is at the time liable and at any date as of which the amount thereof is to be
determined, the total net amount of rent required to be paid by such Person
under such lease during the remaining primary term thereof, discounted from
the respective due dates thereof to such date at the actual percentage rate
inherent in such arrangement as determined in good faith by the Company. The
net amount of rent required to be paid under any such lease for any such
period shall be the aggregate amount of the rent payable by the lessee with
respect to such period after excluding amounts required to be paid on account
of maintenance and repairs, insurance, taxes, assessments, water rates and
similar charges. In the case of any lease which is terminable by the lessee
upon the payment of a penalty, such net amount shall also include the amount
of such penalty, but no rent shall be considered as required to be paid under
such lease subsequent to the first date upon which it may be so terminated.
 
  "Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) less (i) all
liabilities, other than deferred income taxes and Funded Debt and (ii) all
goodwill, trade names, trademarks, patents, organizational expenses and other
like intangibles, of the Company and its consolidated Subsidiaries and
computed in accordance with generally accepted accounting principles.
 
                                       5

 
  "Funded Debt" means (i) all indebtedness for money borrowed having a
maturity of more than 12 months from the date as of which the determination is
made or having a maturity of 12 months or less but by its terms being
renewable or extendible beyond 12 months from such date at the option of the
borrower and (ii) rental obligations payable more than 12 months from such
date under leases which are capitalized in accordance with generally accepted
accounting principles (such rental obligations to be included as Funded Debt
at the amount so capitalized and to be included for the purposes of the
definition of Consolidated Net Tangible Assets both as an asset and as Funded
Debt at the amount so capitalized).
 
  "Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
 
  "Principal Property" means any real property owned at March 15, 1991 or
thereafter acquired by the Company or any Subsidiary of the Company the gross
book value (including related land and improvements thereon and all machinery
and equipment included therein without deduction of any depreciation reserves)
of which on the date as of which the determination is being made exceeds 2% of
Consolidated Net Tangible Assets other than (i) any property which in the
opinion of the Board of Directors is not of material importance to the total
business conducted by the Company and its Subsidiaries as an entirety or (ii)
any portion of a particular property which is similarly found not to be of
material importance to the use or operation of such property.
 
  "Subsidiary" means a corporation, partnership or trust more than 50% of the
outstanding voting stock of which, or similar ownership interest in which, is
owned, directly or indirectly, by the Company or by one or more other
Subsidiaries, or by the Company and one or more other Subsidiaries.
 
RESTRICTIONS ON SECURED DEBT
 
  If the Company or any Subsidiary shall incur, issue, assume or guarantee any
evidence of indebtedness for borrowed money ("Debt") secured, after March 15,
1991, by a mortgage, pledge or lien ("Mortgage") on any Principal Property of
the Company or any Subsidiary, or on any share of capital stock or Debt of any
Subsidiary, the Company will secure or cause such Subsidiary to secure the
Debt Securities equally and ratably with (or, at the Company's option, prior
to) such secured Debt, so long as such secured Debt is so secured, unless,
after giving effect thereto, the aggregate amount of all such secured Debt,
together with all Attributable Debt of the Company and its Subsidiaries with
respect to sale and leaseback transactions involving Principal Properties
(with the exception of such transactions which are excluded as described in
"Restrictions on Sales and Leasebacks" below), would not exceed 10% of
Consolidated Net Tangible Assets.
 
  The above restriction will not apply to, and there will be excluded from
secured Debt in any computation under such restriction, Debt secured by (a)
Mortgages on property of the Company or any Subsidiary, or on any shares of
capital stock of or Debt of any Subsidiary, existing on March 15, 1991, (b)
Mortgages on property of, or on any shares of capital stock of or Debt of, any
corporation existing at the time such corporation becomes a Subsidiary, (c)
Mortgages in favor of the Company or any Subsidiary, (d) Mortgages in favor of
governmental bodies to secure progress, advance or other payments pursuant to
any contract or provision of any statute, (e) Mortgages on property, shares of
capital stock or Debt existing at the time of acquisition thereof (including
acquisition through merger or consolidation) and purchase money and
construction Mortgages which are entered into within specified time limits,
(f) Mortgages securing industrial revenue bonds, pollution control bonds or
other similar types of bonds, (g) mechanics and similar liens arising in the
ordinary course of business in respect of obligations not due or being
contested in good faith, (h) Mortgages arising from deposits with, or the
giving of any form of security to, any governmental agency required as a
condition to the transaction of business or exercise of any privilege,
franchise or license, (i) Mortgages for taxes, assessments or
 
                                       6

 
governmental charges or levies which are not then delinquent or, if
delinquent, are being contested in good faith, (j) Mortgages (including
judgment liens) arising from legal proceedings being contested in good faith
(and, in the case of judgment liens, execution thereof is stayed) and (k) any
extension, renewal or replacement of any Mortgage referred to in the foregoing
clauses (a) through (j) inclusive or any Debt secured thereby, provided that
such extension, renewal or replacement will be limited to all or part of the
same property, shares of capital stock or Debt that secured the Mortgage
extended, renewed or replaced.
 
RESTRICTIONS ON SALES AND LEASEBACKS
 
  Neither the Company nor any Subsidiary may, after March 15, 1991, enter into
any sale and leaseback transaction involving any Principal Property, unless,
after giving effect thereto, the aggregate amount of all Attributable Debt
with respect to such transactions plus all Debt secured by Mortgages on
Principal Properties, or on shares of capital stock or Debt of Subsidiaries
(with the exception of secured Debt which is excluded as described in
"Restrictions on Secured Debt" above), would not exceed 10% of Consolidated
Net Tangible Assets.
 
  This restriction will not apply to, and there shall be excluded from
Attributable Debt in any computation under such restriction, any sale and
leaseback transaction if (a) the lease is for a period, including renewal
rights, of not in excess of three years, (b) the sale or transfer of the
Principal Property is made within a specified period after its acquisition or
construction, (c) the lease secures or relates to industrial revenue bonds,
pollution control bonds or other similar types of bonds, (d) the transaction
is between the Company and a Subsidiary or between Subsidiaries, or (e) the
Company or a Subsidiary, within 120 days after the sale or transfer shall have
been made by the Company or by a Subsidiary, applies an amount equal to the
greater of the net proceeds of the sale of the Principal Property leased
pursuant to such arrangement or the fair market value of the Principal
Property so leased at the time of entering into such arrangement (as
determined in any manner approved by the Board of Directors) to (i) the
retirement of the Debt Securities or other Funded Debt of the Company ranking
on a parity with or senior to the Debt Securities, or the retirement of the
securities or other Funded Debt of a Subsidiary; provided, however, that the
amount to be applied to the retirement of such Funded Debt of the Company or a
Subsidiary shall be reduced by (x) the principal amount of any Debt Securities
(or other notes or debentures constituting such Funded Debt) delivered within
such 120-day period to the Trustee or other applicable trustee for retirement
and cancellation and (y) the principal amount of such Funded Debt, other than
items referred to in the preceding clause (x), voluntarily retired by the
Company or a Subsidiary within 120 days after such sale; and provided further,
that notwithstanding the foregoing, no retirement referred to in this clause
(i) may be effected by payment at maturity or pursuant to any mandatory
sinking fund payment or any mandatory prepayment provision, or (ii) the
purchase of other property which will constitute a Principal Property having a
fair market value, in the opinion of the Board of Directors, at least equal to
the fair market value of the Principal Property leased in such sale and
leaseback transaction.
 
RESTRICTIONS ON THE PAYMENT OF DIVIDENDS AND OTHER PAYMENTS
 
  The Company may not declare or pay any dividends or make any distributions
on its capital stock (except in shares of, or warrants or rights to subscribe
for or purchase shares of, capital stock of the Company), nor may the Company
or any Subsidiary make any payment to retire or acquire shares of such stock,
at a time when a payment default described in clause (i), (ii) or (iii) of
"Events of Default" below has occurred and is continuing.
 
MERGER AND CONSOLIDATION
 
  The Company covenants that it will not merge, consolidate or sell, convey,
transfer or lease its properties or assets substantially as an entirety and
the Company will not permit any Person to consolidate with or merge into the
Company unless, among other things, (a) the successor Person is
 
                                       7

 
the Company or another corporation, partnership or trust which assumes the
Company's obligations on the Debt Securities and under the Indenture, (b)
after giving effect to such transaction, the Company or the successor Person
would not be in default under the Indenture and (c) if, as a result of any
such consolidation or merger or such conveyance, transfer or lease, properties
or assets of the Company would become subject to an encumbrance which would
not be permitted by the Indenture, the Company or such successor Person takes
such steps as are necessary effectively to secure the Debt Securities equally
and ratably with (or, at the option of the Company, prior to) all indebtedness
secured thereby.
 
EVENTS OF DEFAULT
 
  The Indenture defines "Events of Default" with respect to the Debt
Securities of any series as being one of the following events: (i) default in
the payment of any installment of interest on that series for 30 days after
becoming due; (ii) default in the payment of principal of (or premium, if any,
on) that series when due; (iii) default in the deposit of any sinking fund
payment on that series when due; (iv) default in the performance or breach of
any other covenant or warranty of the Company in the Debt Securities of that
series or the Indenture (other than a covenant or warranty included in the
Indenture solely for the benefit of any series of Debt Securities other than
that series) for 60 days after notice to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in principal amount of
the outstanding Debt Securities of such series; (v) default under any
mortgage, indenture (including the Indenture) or instrument under which there
is issued, or which secures or evidences, any indebtedness for borrowed money
of the Company or any Subsidiary existing as of March 15, 1991 or thereafter
created, which default shall constitute a failure to pay principal of such
indebtedness in an amount exceeding $10,000,000 when due and payable (other
than as a result of acceleration), after expiration of any applicable grace
period with respect thereto, or shall have resulted in an aggregate principal
amount of such indebtedness exceeding $10,000,000 becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable, without such indebtedness having been discharged or such
acceleration having been rescinded or annulled within a period of 10 days
after notice to the Company by the Trustee or to the Company and the Trustee
by the holders of at least 25% in principal amount of the outstanding Debt
Securities of such series; (vi) certain events of bankruptcy, insolvency or
reorganization; and (vii) any other Event of Default provided with respect to
Debt Securities of that series. If an Event of Default shall occur and be
continuing with respect to the Debt Securities of any series, either the
Trustee or the holders of at least 25% in principal amount of the Debt
Securities then outstanding of that series may declare the principal (or such
portion thereof as may be specified in the Prospectus Supplement relating to
such series) of the Debt Securities of such series to be immediately due and
payable.
 
  The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default with respect to Debt Securities of a series, give the
holders of such Debt Securities of such series notice of all uncured defaults
known to it (the term default to mean the events specified above without grace
periods); provided that, except in the case of default in the payment of
principal of (or premium, if any) or interest, if any, on any Debt Security of
such series or in the payment of any sinking fund installment with respect to
Debt Securities of such series, the Trustee shall be protected in withholding
such notice if it in good faith determines that the withholding of such notice
is in the interest of the holders of Debt Securities of such series.
 
  The Company will be required to furnish to the Trustee annually a statement
by certain officers of the Company stating whether or not, to the best of
their knowledge, the Company is in default in the performance and observance
of any of the terms, provisions and conditions of certain covenants contained
in the Indenture and, if the Company is in default, specifying all such
defaults and the nature and status thereof of which they may have knowledge.
 
                                       8

 
  The holders of a majority in principal amount of the outstanding Debt
Securities of any series will have the right, subject to certain limitations,
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee with respect to the Debt Securities of such series, and to waive
certain defaults with respect thereto. The Indenture provides that in case an
Event of Default shall occur and be continuing, the Trustee shall exercise
such of its rights and powers under the Indenture, and use the same degree of
care and skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the holders of
Debt Securities unless they shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might
be incurred by it in compliance with such request.
 
MODIFICATION OF THE INDENTURE
 
  With certain exceptions, the Indenture may be modified or amended with the
consent of the holders of not less than a majority in principal amount of the
outstanding Debt Securities of each series affected by the modification;
provided, however, that no such modification or amendment may be made, without
the consent of the holder of each Debt Security affected, which would (i)
reduce the principal amount of or the interest on any Debt Security, change
the stated maturity of the principal of, or any installment of interest on,
any Debt Security, or the other terms of payment thereof, or (ii) reduce the
above-stated percentage of Debt Securities, the consent of the holders of
which is required to modify or amend the Indenture, or the percentage of Debt
Securities of any series, the consent of the holders of which is required to
waive certain past defaults.
 
DEFEASANCE AND COVENANT DEFEASANCE
 
  Under the Indenture, the Company may elect to discharge (a "defeasance") its
obligations with respect to the outstanding Debt Securities of a series (other
than certain obligations to the Trustee and the Company's obligations with
respect to the registration, transfer and exchange of Debt Securities,
mutilated, destroyed, lost and stolen Debt Securities, the maintenance of an
office or agency in the place of payment for such series and the treatment of
funds held by Paying Agents), or may elect to be released from the
restrictions described under "Restrictions on Secured Debt", "Restrictions on
Sales and Leasebacks" and "Restrictions on the Payment of Dividends and Other
Payments" above and any other provisions identified in the accompanying
Prospectus Supplement ("covenant defeasance") if, among other things, (i) the
Company has irrevocably deposited or caused to be deposited with the Trustee
(or other satisfactory trustee), as trust funds for the payment of such Debt
Securities, money or U.S. Government Obligations (as defined in the
Indenture), or a combination thereof, which through the scheduled payment of
principal and interest will provide money in an amount sufficient, without
reinvestment, to pay and discharge at maturity or redemption the entire amount
of principal of (and premium, if any) and interest, if any, on such Debt
Securities and any mandatory sinking fund payments or analogous payments
applicable to the outstanding Debt Securities of such series; (ii) no Event of
Default or event which with notice or lapse of time or both would become an
Event of Default with respect to such Debt Securities shall have occurred and
be continuing on the date of such deposit and, for certain purposes, at any
time during the period ending on the 123rd day after the date of deposit, or
any longer preference period; (iii) such defeasance or covenant defeasance
shall not cause the Trustee to have a conflicting interest as referred to in
the Indenture; (iv) such defeasance or covenant defeasance will not result in
a breach or violation of, or constitute a default under, the Indenture or
other material agreements or instruments of the Company or cause the Debt
Securities, if listed on a national securities exchange, to be delisted; and
(v) the Company provides the Trustee with an opinion of counsel to the effect
that the holders of the Debt Securities of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of such
covenant defeasance or defeasance, as the case may be, and will be subject to
Federal
 
                                       9

 
income tax on the same amounts and at the same times as would have been the
case if such covenant defeasance or defeasance, as the case may be, had not
occurred and, in the case of a defeasance, such opinion is based upon a ruling
issued by the Internal Revenue Service or a change in the applicable Federal
income tax law since the date of the Indenture to that effect.
 
CONCERNING THE TRUSTEE
 
  First Trust of New York, National Association is the Trustee under the
Indenture and has been appointed by the Company as initial Security Registrar
(as defined in the Indenture) with regard to the Debt Securities.
 
                             PLAN OF DISTRIBUTION
 
GENERAL
 
  The Company may sell Offered Debt Securities (i) to or through underwriters
or dealers; (ii) through agents; (iii) directly to purchasers; or (iv) through
a combination of any such methods of sale. Any such underwriter, dealer or
agent may be deemed to be an underwriter within the meaning of the 1933 Act.
The Prospectus Supplement relating to the Offered Debt Securities sets forth
their offering terms, including the name or names of any underwriters, dealers
or agents, the purchase price of the Offered Debt Securities and the proceeds
to the Company from such sale, any discounts, commissions and other items
constituting compensation, any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers and any securities
exchanges on which the Offered Debt Securities may be listed.
 
  If underwriters are used in the sale, the Offered Debt Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, or at prices
related to such prevailing market prices, or at negotiated prices. The Offered
Debt Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more of such firms. Unless otherwise set forth in the Prospectus
Supplement, the obligations of the underwriters to purchase the Offered Debt
Securities will be subject to certain conditions precedent and the
underwriters will be obligated to purchase all the Offered Debt Securities if
any are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time
to time.
 
  Under agreements which may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of Offered Debt
Securities may be entitled to indemnification or contribution by the Company
against certain liabilities, including liabilities under the 1933 Act.
 
  The specific terms and manner of sale of Offered Debt Securities will be set
forth or summarized in the Prospectus Supplement.
 
  If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Offered Debt Securities from the Company
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases will be
subject to acceptance by the Company. The obligations of any purchaser under
any such contracts will be subject to the condition that the purchase of
Offered Debt Securities shall not at the time of delivery be prohibited under
the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such other persons will not have any responsibility in
respect of the validity or performance of such contracts.
 
                                      10

 
                                LEGAL OPINIONS
 
  The validity of the Debt Securities will be passed upon for the Company by
Latham & Watkins, and for the underwriters, dealers or agents, if any, by
O'Melveny & Myers LLP, unless otherwise specified in the Prospectus
Supplement.
 
                                    EXPERTS
 
  The consolidated balance sheet of the Company as of December 30, 1995 and
December 31, 1994, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended December 30, 1995, incorporated by reference in this Prospectus, have
been incorporated herein in reliance on the report, which includes an
explanatory paragraph regarding the Company's adoption of the provisions of
the Financial Accounting Standards Board's Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions", SFAS No. 109, "Accounting for Income Taxes" and SFAS No.
112, "Employers' Accounting for Postemployment Benefits" during 1993, of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
 
                                      11

 
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  NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE PROSPECTUS IN CONNECTION
WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND
THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT, ANY
PRICING SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITA-
TION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHO-
RIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALI-
FIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLIC-
ITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUP-
PLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF.
 
 
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                               TABLE OF CONTENTS
 
                             PROSPECTUS SUPPLEMENT


                                                                            PAGE
                                                                            ----
                                                                         
Use of Proceeds............................................................  S-2
Description of Notes.......................................................  S-2
Certain United States Federal Income Tax Considerations.................... S-16
Foreign Currency Risks..................................................... S-24
Supplemental Plan of Distribution.......................................... S-26
 
                                  PROSPECTUS
 
Available Information......................................................    2
Incorporation of Certain Documents by Reference............................    2
The Company................................................................    3
Use of Proceeds............................................................    3
Ratio of Earnings to Fixed Charges.........................................    3
Description of Debt Securities.............................................    4
Plan of Distribution.......................................................   10
Legal Opinions.............................................................   11
Experts....................................................................   11

 
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                                 $150,000,000

                           [LOGO OF AVERY DENNISON]
 
                          MEDIUM-TERM NOTES, SERIES D
 
                                  -----------
                             PROSPECTUS SUPPLEMENT
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                             GOLDMAN, SACHS & CO.
 
                               J.P. MORGAN & CO.
 
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