As Filed Pursuant to Rule 424(b)(2)
Registration No. 333-72546
Prospectus Supplement to Prospectus dated November 28, 2001
(LOGO) $2,405,277,000
MERCK & CO., INC.
Medium-Term Notes, Series E
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TERMS OF SALE
The following terms may apply to the notes which we may sell at one or more
times. The final terms for each note will be included in a pricing supplement.
Unless otherwise agreed, if we sell notes having the full aggregate initial
public offering price set forth above, Merck & Co., Inc. will receive between
$2,387,237,422 and $2,402,270,404 of proceeds from the sale of the notes, after
paying the agents' commissions of between $18,039,578 and $3,006,596.
- mature 9 months or more from issue date
- we may have a right to extend the maturity or the maturity may extend
automatically unless you elect for earlier maturity
- fixed or floating interest rate or zero-coupon or other original issue
discount notes; floating interest rate may be based on one or more of:
- commercial paper rate
- prime rate
- LIBOR
- EURIBOR
- treasury rate
- CMT rate
- cd rate
- federal funds rate
- any other rate specified by us in the pricing supplement
- amount of principal or interest may be determined by reference to an index or
formula
- book-entry form only unless otherwise specified
- we may have a right to redeem early and/or you may have a right to elect early
repayment
- may be amortizing notes
- interest paid on fixed rate notes each May 1 and November 1 and at maturity,
or as specified
- interest paid on floating rate notes monthly, quarterly, semi-annually or
annually
- denominations of $1,000 and integral multiples, or as specified
- may be denominated in a currency other than U.S. dollars or in a composite
currency
- settlement in immediately available funds
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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We may sell the notes directly or through one or more agents or dealers,
including the agents listed below. The agents are not required to sell any
specific number or amount of the notes. The agents will use their reasonable
efforts to sell the notes offered.
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GOLDMAN, SACHS & CO. MERRILL LYNCH & CO. JPMORGAN
MORGAN STANLEY SALOMON SMITH BARNEY
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The date of this prospectus supplement is December 5, 2001.
DESCRIPTION OF NOTES WE MAY OFFER
INFORMATION ABOUT OUR MEDIUM-TERM NOTE PROGRAM
All of our Medium-Term Notes, Series E, referred to in this prospectus
supplement as the "NOTES" will be a single, distinct series of debt securities
issued under the indenture as described in the accompanying prospectus under
"Description of Debt Securities We May Offer" on page 2. We may, however, issue
notes in various amounts, at various times and on the terms we choose. The notes
may differ from one another, and from other series of our debt securities, in
their terms.
This section, together with the general description of debt securities contained
in the accompanying prospectus, summarizes the material terms that will apply
generally to the notes as a series. Each particular note will have financial and
other terms specific to it, and the specific terms of each note will be
described in a pricing supplement attached to the front of this prospectus
supplement. As you read this section, therefore, please remember that the
specific terms of your note as described in your pricing supplement will
supplement the general terms described in this section and in the accompanying
prospectus. Some of the statements we make in this section and in the
accompanying prospectus will not apply to your note.
When we refer to "YOUR PRICING SUPPLEMENT", we mean the pricing supplement
describing the specific terms of the note you purchase.
AMOUNTS THAT WE MAY ISSUE
The indenture does not limit the aggregate amount of debt securities that
we may issue, nor does it limit the number of series or the aggregate amount of
any particular series. We have initially authorized the issuance of notes having
an aggregate principal amount up to $2,405,277,000 or an equivalent amount in
any other currency or currency unit. We may, however, increase or decrease this
authorized amount at any time without your consent.
THIS SECTION IS ONLY A SUMMARY
The indenture and its associated documents, including your note, contain
the full legal text of the matters described in this section, the section of the
accompanying prospectus entitled "Description of Debt Securities We May Offer"
on page 2 and your pricing supplement. New York law governs the indenture and
the notes.
Because this section and your pricing supplement provide only a summary,
they do not describe every aspect of the indenture and your note. For example,
in this section and your pricing supplement, we use terms that have been given
special meaning in the indenture. In this section, however, we describe the
meaning of only the more important of those terms.
Terms used in the accompanying prospectus have the same meanings when used
in this prospectus supplement unless otherwise specified.
When we define a specialized term used in this section, it appears in BOLD,
ITALICIZED type surrounded by quotation marks, except as noted below in
"-- Interest Rates -- Floating Rate Notes" on page S-5.
FEATURES COMMON TO ALL NOTES
STATED MATURITY AND MATURITY
The day on which the principal amount of your note is scheduled to become
due is called the "STATED MATURITY" of the principal and is specified in your
pricing supplement. The principal may become due sooner, by reason of redemption
or acceleration after a default. The day on which the principal actually becomes
due, whether at the stated maturity or earlier, is called the "MATURITY" of the
principal.
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If so stated in the pricing supplement, we will have a right to extend the
stated maturity at our option. If so stated in the pricing supplement, the
stated maturity will automatically extend unless you elect that the principal
should mature. See "-- Extendable Notes" on page S-23 and "-- Renewable Notes"
on page S-24 for more information about these types of notes.
We also use the terms "stated maturity" and "maturity" to refer to the
dates when other payments become due. For example, we may refer to a regular
interest payment date when an installment of interest is scheduled to become due
as the "stated maturity" of that installment. When we refer to the "stated
maturity" or the "maturity" of a note without specifying a particular payment,
we mean the stated maturity or maturity, as the case may be, of the principal.
FORM OF NOTES
Unless the pricing supplement states otherwise, we will issue all notes in
the form of global securities and The Depository Trust Company, also known as
DTC, will be the depository. So long as notes are in the form of global notes,
all investors in those notes will be indirect holders and you will not be able
to become a direct holder of those notes except under the special circumstances
described on page 3 in the accompanying prospectus under "Description of Debt
Securities We May Offer -- Legal Ownership". If we do not issue your notes in
the form of global notes, you may choose to hold those notes as a direct holder
or to hold them in street name or through other indirect means.
CURRENCY OF NOTES
Amounts that become due and payable on your note will be payable in a
currency, composite currency, basket of currencies or currency unit or units
specified in your pricing supplement.
We call this currency, composite currency, basket of currencies or
currency unit or units, a "SPECIFIED CURRENCY". The specified currency for your
note will be U.S. dollars, unless your pricing supplement states otherwise. Some
notes may have different specified currencies for principal and interest.
You will have to pay for your notes by delivering the requisite amount of
the specified currency to a dealer that we name in your pricing supplement,
unless other arrangements have been made between you and us or you and that
dealer. Unless you take action to elect otherwise and except as described below
under "-- Payment Mechanics" on page S-18, we will make payments on your notes:
- in U.S. dollars on notes which are in the form of global notes or are
otherwise held indirectly through DTC.
- in the specified currency on notes which are not held through DTC.
TYPES OF NOTES
We may issue the following three types of notes:
- FIXED RATE NOTES. A note of this type will bear interest at a fixed rate
described in the applicable pricing supplement. This type includes "ZERO
COUPON NOTES", which bear no interest and are instead issued at a price lower
than the principal amount.
- FLOATING RATE NOTES. A note of this type will bear interest at rates that are
determined by reference to an interest rate formula. In some cases, we may
adjust the rates by adding or subtracting a spread or multiplying by a spread
multiplier. The rates may be subject to a minimum rate or a maximum rate. We
describe the various interest rate formulas and these other features below
under "-- Interest Rates -- Floating Rate Notes" on page S-5. If your note is
a floating rate note, we will specify the formula and any adjustments that
apply to the interest rate in your pricing supplement.
- INDEXED NOTES. A note of this type provides that the principal amount payable
at its maturity, and/or the amount of interest payable on an interest payment
date, will be determined by reference to a currency exchange rate, commodity
price, stock price, including baskets of stocks and
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stock indices, or to any other index described in the applicable pricing
supplement. This type includes "CURRENCY INDEXED NOTES", for which the index
is determined by the change, from one date to another, in the exchange rate
between the specified currency and another currency. If you are a holder of an
indexed note, you may receive a principal amount at maturity that is greater
than or less than the face amount of your note depending upon the value of the
applicable index at maturity. That value may fluctuate over time. If you
purchase an indexed note, your pricing supplement will include information
about the relevant index and about how amounts that are to become payable will
be determined by reference to that index. Before you purchase any indexed
note, you should read carefully the section entitled "Risks Relating to
Indexed Notes" on page S-35 and any other risk factors which are specified in
the applicable pricing supplement.
A fixed rate note, a floating rate note or an indexed note may be an
"ORIGINAL ISSUE DISCOUNT NOTE". We would issue a note of this type at a price
lower than its principal amount and it would provide that, upon early redemption
or acceleration of its maturity, an amount less than its principal amount will
be payable.
A note issued at a discount to its principal may be a "DISCOUNT NOTE"
subject to special tax rules under U.S. federal income tax law, regardless of
the amount payable upon redemption or acceleration of maturity -- that
is -- whether or not the particular note is an original issue discount note
under the indenture. See "United States Taxation -- United States
Holders -- Original Issue Discount" on page S-25 for a brief description of the
U.S. federal income tax consequences of owning a discount note.
INFORMATION IN THE PRICING SUPPLEMENT
Your pricing supplement will describe one or more of the following terms
of your note:
- the stated maturity and if the stated maturity will be extended automatically
or may be extended at our option;
- the specified currency or currencies for principal and any premium and
interest, if not U.S. dollars;
- the price at which we originally issue your note, expressed as a percentage of
the principal amount, and the original issue date;
- whether your note is a fixed rate note, a floating rate note or an indexed
note and also whether it is an original issue discount note;
- if your note is a fixed rate note, the yearly rate at which your note will
bear interest, if any, and the interest payment dates, if different from those
set forth below under "-- Interest Rates -- Fixed Rate Notes" on page S-5;
- if your note is a floating rate note, the interest rate basis, which may be
one of the base rates described in "-- Interest Rates -- Floating Rate Notes"
beginning on page S-5; any applicable index currency or maturity, spread or
spread multiplier or initial, maximum or minimum rate; the interest reset,
determination, calculation and payment dates; and the calculation agent, all
of which we describe under "-- Interest Rates -- Floating Rate Notes"
beginning on page S-5;
- if your note is a discount note, the yield to maturity and, if it is an
original issue discount note, the amount that would be payable if the note is
redeemed prior to its stated maturity or the maturity of its principal is
accelerated;
- if your note is an indexed note, the principal amount, if any, we will pay you
at maturity, the amount of interest, if any, we will pay you on an interest
payment date or the formula we will use to calculate these amounts, if any;
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- whether your note may be redeemed at our option or repaid at the holder's
option prior to the stated maturity and, if so, other relevant terms such as
the redemption commencement date, repayment date(s), redemption price(s) and
redemption period(s), all of which we describe under "-- Redemption and
Repayment" on page S-16;
- whether we will issue or make available your note in non-book-entry form; and
- any other terms of your note that are not inconsistent with the provisions of
the indenture.
INTEREST RATES
This subsection describes the different kinds of interest rates that may
apply to your note, if it bears interest.
FIXED RATE NOTES
Each fixed rate note, except any zero coupon note, will bear interest from
its original issue date or from the most recent date to which interest on the
note has been paid or made available for payment. Interest will accrue on the
principal of a fixed rate note at the fixed yearly rate stated in the applicable
pricing supplement, until the principal is paid or made available for payment.
Unless otherwise specified in the applicable pricing supplement, interest on a
fixed rate note will be payable semiannually each May 1 and November 1, which
will be the interest payment dates for a fixed rate note, and at maturity. Each
payment of interest due on an interest payment date or the date of maturity will
include interest accrued from and including the last date to which interest has
been paid, or made available for payment, or from the issue date if none has
been paid, or made available for payment, to but excluding the interest payment
date or the date of maturity. We will compute interest on fixed rate notes on
the basis of a 360-day year of twelve 30-day months. We will pay interest on
each interest payment date and at maturity as described below under "-- Payment
Mechanics" on page S-18.
FLOATING RATE NOTES
In this subsection, we use several specialized terms relating to the manner
in which floating interest rates are calculated without explaining the
meaning when we use the terms. These terms appear in BOLD, ITALICIZED type
without quotation marks the first time they appear and we define these
terms in "-- Special Rate Calculation Terms" at the end of this subsection
beginning on page S-14.
Also, please remember that the specific terms of your note as described in
your pricing supplement will supplement the general terms regarding the
floating rates of interest described in this subsection. Some of the
statements we make in this subsection will not apply to your note.
Each floating rate note will bear interest from its original issue date or
from the most recent date to which interest on the note has been paid or made
available for payment. Interest will accrue on the principal of a floating rate
note at the yearly rate determined pursuant to the interest rate formula stated
in the applicable pricing supplement, until the principal is paid or made
available for payment. We will pay interest on each interest payment date and at
maturity as described below under "-- Payment Mechanics" on page S-18.
BASE RATES. We currently expect to issue floating rate notes that bear
interest at rates based on one or more of the following "BASE RATES":
- commercial paper rate;
- prime rate;
- LIBOR;
- EURIBOR;
- treasury rate;
- CMT rate;
- CD rate; and/or
- federal funds rate.
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We describe each of these base rates in further detail below in this subsection.
If you purchase a floating rate note, your pricing supplement will specify the
type of base rate that applies to your note.
INITIAL INTEREST RATE
For any floating rate note, the interest rate in effect from the original
issue date to the first interest reset date will be the "INITIAL INTEREST RATE"
specified in the applicable pricing supplement.
RATE ADJUSTMENTS AND LIMITS. In some cases, we may adjust the base rate
for a floating rate note:
- by adding or subtracting a specified number of basis points called the
"SPREAD", with one basis point being 0.01%; or
- by multiplying by a specified percentage called the "SPREAD MULTIPLIER".
The actual interest rate, after any adjustment, may also be subject to either or
both of the following limits:
- a "MAXIMUM RATE" -- i.e., a specified upper limit that the actual rate in
effect at any time may not exceed; and/or
- a "MINIMUM RATE" -- i.e., a specified lower limit that the actual rate in
effect at any time may not fall below.
If you purchase a floating rate note, your pricing supplement will specify
whether any of these adjustments or limits apply to your note and, if so, what
they are.
Whether or not a maximum rate applies, the interest rate on a floating
rate note will in no event be higher than the maximum rate permitted by New York
law, as it may be modified by U.S. law of general application. Under current New
York law, the maximum rate of interest, with some exceptions, for any loan in an
amount less than $250,000 is 16% and for any loan in the amount of $250,000 or
more but less than $2,500,000 is 25% per year on a simple interest basis. These
limits do not apply to loans of $2,500,000 or more.
The rest of this subsection describes how we will determine the interest
rate and the interest payment dates, and how we will calculate interest, on a
floating rate note.
INTEREST RESET DATES. The rate of interest on a floating rate note will
be reset, by the calculation agent described below, daily, weekly, monthly,
quarterly, semi-annually or annually. The date on which the interest rate resets
and the reset rate becomes effective is called the "INTEREST RESET DATE". Except
as otherwise specified in the applicable pricing supplement, the interest reset
date will be as follows:
- for floating rate notes that reset daily, each MARKET DAY;
- for floating rate notes that reset weekly and are not treasury rate notes, the
Wednesday of each week;
- for treasury rate notes that reset weekly, the Tuesday of each week, except as
otherwise described in the last bullet under "-- Interest Determination Dates"
on page S-7;
- for floating rate notes that reset monthly, the third Wednesday of each month;
- for floating rate notes that reset quarterly, the third Wednesday of March,
June, September and December of each year;
- for floating rate notes that reset semiannually, the third Wednesday of each
of two months of each year as specified in the applicable pricing supplement;
and
- for floating rate notes that reset annually, the third Wednesday of one month
of each year as specified in the applicable pricing supplement.
For a floating rate note, the interest rate in effect on any particular day will
be the interest rate determined with respect to the latest interest reset date
that occurs on or before that day. There are several exceptions, however, to the
reset provisions described above.
For floating rate notes that reset daily or weekly, the base rate in
effect for each day following the second market day prior to an interest payment
date to, but excluding, the interest payment date, and for each day following
the second market day prior to the
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maturity to, but excluding, the maturity, will be the base rate in effect on
that second market day.
If any interest reset date for a floating rate note would otherwise be a
day that is not a market day, the interest reset date will be the next day that
is a market day. For a LIBOR note, however, if that market day is in the next
succeeding calendar month, the interest reset date will be the immediately
preceding market day.
INTEREST DETERMINATION DATES. The calculation agent will determine the
interest rate that takes effect on an interest reset date by reference to a
particular date called the "INTEREST DETERMINATION DATE". Except as otherwise
specified in the applicable pricing supplement:
- For all floating rate notes other than LIBOR notes, EURIBOR notes and treasury
rate notes, the interest determination date relating to a particular interest
reset date will be the second market day before the interest reset date.
- For LIBOR notes, the interest determination date relating to a particular
interest reset date will be the second LONDON MARKET DAY preceding the
interest reset date, unless the INDEX CURRENCY is pounds sterling, in which
case the interest determination date will be the interest reset date. We call
the interest determination date for a LIBOR note the "LIBOR INTEREST
DETERMINATION DATE".
- For EURIBOR notes, the interest determination date relating to a particular
interest reset date will be the second EURO BUSINESS DAY preceding the
interest reset date. We call the interest determination date for a EURIBOR
note the "EURIBOR INTEREST DETERMINATION DATE".
- For treasury rate notes, the interest determination date relating to a
particular interest reset date, which we call a "TREASURY INTEREST
DETERMINATION DATE", will be the day of the week in which the interest reset
date falls on which "TREASURY BILLS" -- i.e., direct obligations of the U.S.
government -- 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
the auction may be held on the preceding Friday. If as the result of a legal
holiday an auction is held on the preceding Friday, that Friday will be the
treasury interest determination date relating to the interest reset date
occurring in the next succeeding week. If the auction is held on a day that
would otherwise be an interest reset date, then the interest reset date will
instead be the first market day following the auction date.
INTEREST CALCULATION DATES. As described above, the calculation agent
will determine the interest rate that takes effect on a particular interest
reset date by reference to the corresponding interest determination date. Except
for LIBOR notes and EURIBOR notes, however, the calculation agent will actually
make the determination of the rate on the corresponding interest calculation
date. The "INTEREST CALCULATION DATE" will be the earlier of the following:
- the tenth calendar day after the interest determination date or, if that tenth
calendar day is not a market day, the next succeeding market day; and
- the market day immediately preceding the interest payment date or the
maturity, whichever is the day on which the next payment of interest will be
due.
INTEREST PAYMENT DATES. The "INTEREST PAYMENT DATES" for a floating rate
note will depend on when the interest rate is reset and, unless we specify
otherwise in the applicable pricing supplement, will be as follows:
- for floating rate notes that reset daily, weekly or monthly, the third
Wednesday of each month or the third Wednesday of March, June, September and
December of each year, as specified in the applicable pricing supplement;
- for floating rate notes that reset quarterly, the third Wednesday of March,
June, September and December of each year;
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- for floating rate notes that reset semiannually, the third Wednesday of the
two months of each year specified in the applicable pricing supplement; or
- for floating rate notes that reset annually, the third Wednesday of the month
specified in the applicable pricing supplement.
Regardless of these rules, if we originally issue a note after the regular
record date and before the date that would otherwise be the first interest
payment date, the first interest payment date will be the date that would
otherwise be the second interest payment date. We have defined the term "regular
record date" under "-- Payment Mechanics -- Who Receives Payment?" on page S-18.
In addition, the following special provision will apply to a floating rate
note with regard to any interest payment date other than one that falls on the
maturity. If the interest payment date would otherwise fall on a day that is not
a market day, then the interest payment date will be the next day that is a
market day. However, if the floating rate note is a LIBOR note or a EURIBOR note
and the next market day falls in the next calendar month, then the interest
payment date will be the next preceding day that is a market day. In all cases,
an interest payment date that falls on the maturity will not be changed.
CALCULATION OF INTEREST. Calculations relating to floating rate notes
will be made by the "CALCULATION AGENT", an institution that we appoint as our
agent for this purpose. Unless otherwise specified in your pricing supplement,
U.S. Bank Trust National Association initially will be the calculation agent for
all the notes. We may appoint a different institution to serve as calculation
agent from time to time without your consent and without notifying you of the
change.
For each floating rate note, the calculation agent will determine, on the
corresponding interest calculation or determination date, as applicable, the
interest rate that takes effect on each interest reset date. In addition, the
calculation agent will calculate the amount of interest that has accrued during
each "INTEREST PERIOD" -- i.e., the period from and including the original issue
date, or the last date to which interest has been paid or made available for
payment, to but excluding the payment date. For each interest period, the
calculation agent will calculate the amount of accrued interest by multiplying
the face amount of the floating rate note by an accrued interest factor for the
interest period. This factor will equal the sum of the interest factors
calculated for each day during the interest period. The interest factor for each
day will be a decimal and the calculation agent will calculate it by dividing
the interest rate (also expressed as a decimal) applicable to that day:
- by 360, in the case of commercial paper rate notes, prime rate notes, LIBOR
notes, EURIBOR notes, CD rate notes and federal funds rate notes; or
- by the actual number of days in the year, in the case of treasury rate notes
and CMT rate notes.
Upon the request of the holder of any floating rate note, the calculation
agent will provide for that note the interest rate then in effect -- and, if
determined, the interest rate that will become effective on the next interest
reset date. The calculation agent's determination of any interest rate, and its
calculation of the amount of interest for any interest period, will be final and
binding in the absence of manifest error.
The calculation agent will round all percentages resulting from any
calculation relating to a note upward or downward, as appropriate, to the next
higher or lower one hundred-thousandth of a percentage point (e.g., 9.876541%
(or .09876541) being rounded down to 9.87654% (or .0987654) and 9.876545% (or
.09876545) being rounded up to 9.87655% (or .0987655)). The calculation agent
will round all amounts used in or resulting from any calculation relating to a
floating rate note to the nearest cent, in the case of U.S. dollars, or to the
nearest corresponding unit, in the case of a currency other than U.S. dollars,
with one-half cent or one-half of a corresponding unit or more being rounded
upward.
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In determining the base rate that applies to a floating rate note during a
particular interest period, the calculation agent may obtain rate quotes from
various banks or dealers active in the relevant market, as described in the
following subsections. Those reference banks and dealers may include the
calculation agent itself and its affiliates, as well as any agent named on the
cover of this prospectus supplement and its affiliates.
COMMERCIAL PAPER RATE NOTES
If you purchase a commercial paper rate note, your note will bear interest
at a base rate equal to the commercial paper rate and adjusted by the spread or
spread multiplier, if any, specified in your pricing supplement.
"COMMERCIAL PAPER RATE" means the MONEY MARKET YIELD of the rate, for the
relevant interest determination date, for commercial paper having the INDEX
MATURITY specified in your pricing supplement, as published in H.15(519) under
the heading "Commercial Paper -- Nonfinancial". If the commercial paper rate
cannot be determined as described above, the following procedures will apply:
- If the rate described above is not published in H.15(519) by 9:00 A.M., New
York City time, on the relevant interest calculation date, then the commercial
paper rate will be the money market yield of the rate, for the relevant
interest determination date, for commercial paper having the index maturity
specified in your pricing supplement, as published in H.15 DAILY UPDATE or any
other recognized electronic source used for displaying that rate, under the
heading "Commercial Paper -- Nonfinancial".
- If the rate described above is not published in H.15(519), H.15 daily update
or another recognized electronic source by 3:00 P.M., New York City time, on
the relevant interest calculation date (unless the calculation is made earlier
and the rate is available from one of those sources at that time), the
commercial paper rate will be the money market yield of the arithmetic mean of
the following offered rates for U.S. dollar commercial paper that has the
relevant index maturity and is placed for an industrial issuer whose bond
rating is "AA", or the equivalent, from a nationally recognized rating agency:
the rates offered as of 11:00 A.M., New York City time, on the relevant
interest determination date, by three leading U.S. dollar commercial paper
dealers in New York City selected by the calculation agent.
- If fewer than three dealers selected by the calculation agent are quoting as
described above, the commercial paper rate for the new interest period will be
the commercial paper rate in effect for the prior interest period. If the
initial interest rate has been in effect for the prior interest period,
however, it will remain in effect for the new interest period.
PRIME RATE NOTES
If you purchase a prime rate note, your note will bear interest at a base
rate equal to the prime rate and adjusted by the spread or spread multiplier, if
any, specified in your pricing supplement.
"PRIME RATE" means the rate, for the relevant interest determination date,
published in H.15(519) under the heading "Bank Prime Loan". If the prime rate
cannot be determined as described above, the following procedures will apply:
- If the rate described above is not published in H.15(519) by 9:00 A.M., New
York City time, on the relevant interest calculation date, then the prime rate
will be the rate, for the relevant interest determination date, as published
in H.15 daily update or another recognized electronic source used for the
purpose of displaying that rate, under the heading "Bank Prime Loan".
- If the rate described above is not published in H.15(519), H.15 daily update
or another recognized electronic source by 9:00 A.M., New York City time, on
the relevant interest calculation date (unless the calculation is made earlier
and the rate is available from one of those sources at that time), then the
prime rate will be the arithmetic mean of the following rates as they appear
on the REUTERS SCREEN US PRIME 1 PAGE: the rate of interest publicly announced
by each
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bank appearing on that page as that bank's prime rate or base lending rate, as
of 11:00 A.M., New York City time, on the relevant interest determination
date.
- If fewer than four of these rates appear on the Reuters screen US PRIME 1
page, the prime rate will be the arithmetic mean of the prime rates or base
lending rates, as of the close of business on the relevant interest
determination date, of three major banks in New York City selected by the
calculation agent. For this purpose, the calculation agent will use rates
quoted on the basis of the actual number of days in the year divided by a
360-day year.
- If fewer than three banks selected by the calculation agent are quoting as
described above, the prime rate for the new interest period will be the prime
rate in effect for the prior interest period. If the initial interest rate has
been in effect for the prior interest period, however, it will remain in
effect for the new interest period.
LIBOR NOTES
If you purchase a LIBOR note, your note will bear interest at a base rate
equal to "LIBOR", which means the London interbank offered rate for deposits in
U.S. dollars or any other currency, as specified in your pricing supplement. In
addition, we will adjust the applicable LIBOR base rate by the spread or spread
multiplier, if any, specified in your pricing supplement. The calculation agent
will determine LIBOR in the following manner:
- LIBOR will be either:
-- the offered rate appearing on the LIBOR TELERATE PAGE; or
-- the arithmetic mean of the offered rates appearing on the LIBOR REUTERS
PAGE unless that page by its terms cites only one rate, in which case that
rate;
in either case, as of 11:00 A.M., London time, on the relevant LIBOR interest
determination date, for deposits of the relevant index currency having the
relevant index maturity beginning on the relevant interest reset date. Your
pricing supplement will indicate the index currency, the index maturity and the
reference page that apply to your LIBOR note. If no reference page is specified
in your pricing supplement, LIBOR Telerate page will apply to your LIBOR note.
- If LIBOR Telerate page applies and the rate described above does not appear on
that page, or if LIBOR Reuters page applies and fewer than two of the rates
described above appears on that page or no rate appears on any page on which
only one rate normally appears, then the calculation agent will determine
LIBOR upon the basis of the rates, at approximately 11:00 A.M., London time,
on the relevant LIBOR interest determination date, at which deposits of the
following kind are offered to prime banks in the London interbank market by
four major banks in that market selected by the calculation agent: deposits of
the index currency having the relevant index maturity, beginning on the
relevant interest reset date, and in a REPRESENTATIVE AMOUNT. The calculation
agent will request the principal London office of each of these banks to
provide a quotation of its rate. If at least two quotations are provided,
LIBOR for the relevant LIBOR interest determination date will be the
arithmetic mean of the quotations.
- If fewer than two quotations are provided as described above, LIBOR for the
relevant LIBOR interest determination date will be the arithmetic mean of the
rates for loans of the following kind to leading European banks quoted, at
approximately 11:00 A.M., in the principal financial center for the country of
the index currency, on that LIBOR interest determination date, by three major
banks in that financial center selected by the calculation agent: loans of the
index currency having the relevant index maturity, beginning on the relevant
interest reset date, and in a representative amount.
- If fewer than three banks selected by the calculation agent are quoting as
described above, LIBOR for the new interest period will be LIBOR in effect for
the prior interest period. If the initial interest rate has been in effect for
the prior interest period, however,
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it will remain in effect for the new interest period.
EURIBOR NOTES
If you purchase a "EURIBOR note", your note will bear interest at a base
rate equal to the interest rate for deposits in euros designated as "EURIBOR"
and sponsored jointly by the European Banking Federation and ACI -- the
Financial Market Association (or any company established by the joint sponsors
for purposes of compiling and publishing that rate). In addition, we will adjust
the EURIBOR base rate by the spread or spread multiplier, if any, specified in
your pricing supplement. The calculation agent will determine EURIBOR in the
following manner:
- EURIBOR will be the offered rate for deposits in euros having the index
maturity specified in your pricing supplement, beginning on the second EURO
BUSINESS DAY after the relevant EURIBOR interest determination date, as that
rate appears on Telerate page 248 as of 11:00 A.M., Brussels time, on the
relevant EURIBOR interest determination date.
- If the rate described above does not appear on Telerate page 248, EURIBOR will
be determined on the basis of the rates, at approximately 11:00 A.M., Brussels
time, on the relevant EURIBOR interest determination date, at which deposits
of the following kind are offered to prime banks in the EURO-ZONE interbank
market by the principal euro-zone office of each of four major banks in that
market selected by the calculation agent: euro deposits having the relevant
index maturity, beginning on the relevant interest reset date, and in a
representative amount. The calculation agent will request the principal
euro-zone office of each of these banks to provide a quotation of its rate. If
at least two quotations are provided, EURIBOR for the relevant EURIBOR
interest determination date will be the arithmetic mean of the quotations.
- If fewer than two quotations are provided as described above, EURIBOR for the
relevant EURIBOR interest determination date will be the arithmetic mean of
the rates for loans of the following kind to leading euro-zone banks quoted,
at approximately 11:00 A.M., Brussels time on that EURIBOR interest
determination date, by three major banks in the euro-zone selected by the
calculation agent: loans of euros having the relevant Index maturity,
beginning on the relevant interest reset date, and in a representative amount.
- If fewer than three banks selected by the calculation agent are quoting as
described above, EURIBOR for the new interest period will be EURIBOR in effect
for the prior interest period. If the initial interest rate has been in effect
for the prior interest period, however, it will remain in effect for the new
interest period.
TREASURY RATE NOTES
If you purchase a treasury rate note, your note will bear interest at a
base rate equal to the treasury rate, adjusted by the spread or spread
multiplier, if any, specified in your pricing supplement.
"TREASURY RATE" means the rate for the auction, on the relevant treasury
interest determination date, of treasury bills having the index maturity
specified in your pricing supplement, as published in H.15(519) under the
heading "U.S. Government Securities/ Treasury Bills -- Auction Average
(Investment)". If the treasury rate cannot be determined in this manner, the
following procedures will apply.
- If the rate described above does not appear on either page at 9:00 A.M., New
York City time, on the relevant interest calculation date (unless the
calculation is made earlier and the rate is available from that source at that
time), the treasury rate will be the rate, for the relevant interest
determination date, for the type of treasury bill described above, as
published in H.15 daily update, or another recognized electronic source used
for displaying that rate, under the heading "U.S. Government
Securities/Treasury Bills/Auction High".
- If the rate described in the prior paragraph is not published in H.15 daily
update or another recognized electronic source by
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9:00 A.M., New York City time, on the relevant interest calculation date
(unless the calculation is made earlier and the rate is available from one of
those sources at that time), the treasury rate will be the bond equivalent
yield of the auction rate, for the relevant treasury interest determination
date and the type of treasury bill described above, as announced by the U.S.
Department of the Treasury.
- If the auction rate described in the prior paragraph is not so announced by
3:00 P.M., New York City time, on the relevant interest calculation date, or
if no such auction is held for the relevant week, then the treasury rate will
be the rate, for the relevant treasury interest determination date, for
treasury bills of the kind described above, as published in H.15(519) under
the heading "U.S. Government Securities/ Treasury Bills/Secondary Market".
- If the rate described in the prior paragraph is not published in H.15(519) by
3:00 P.M., New York City time, on the relevant interest calculation date, then
the treasury rate will be the rate, for the relevant treasury interest
determination date and treasury bills of the kind described above, as
published in H.15 daily update, or another recognized electronic source used
for displaying that rate, under the heading "U.S. Government
Securities/Treasury Bills/Secondary Market".
- If the rate described in the prior paragraph is not published in H.15 daily
update or another recognized electronic source by 3:00 P.M., New York City
time, on the relevant interest calculation date (unless the calculation is
made earlier and the rate is available from one of those sources at that
time), the treasury rate will be the bond equivalent yield of the arithmetic
mean of the following secondary market bid rates for the issue of treasury
bills with a remaining maturity closest to the specified Index maturity: the
rates bid as of approximately 3:30 P.M., New York City time, on the relevant
treasury interest determination date, by three primary U.S. government
securities dealers in New York City selected by the calculation agent.
- If fewer than three dealers selected by the calculation agent are quoting as
described in the prior paragraph, the treasury rate in effect for the new
interest period will be the treasury rate in effect for the prior interest
period. If the initial interest rate has been in effect for the prior interest
period, however, it will remain in effect for the new interest period.
CMT RATE NOTES
If you purchase a CMT rate note, your note will bear interest at a base
rate equal to the CMT rate, adjusted by the spread or spread multiplier, if any,
specified in your pricing supplement.
"CMT RATE" means the following rate displayed on the DESIGNATED CMT
TELERATE PAGE under the heading ". . . Treasury Constant
Maturities . . . Federal Reserve Board Release H.15 . . . Mondays Approximately
3:45 P.M.", under the column for the DESIGNATED CMT INDEX MATURITY:
- if the designated CMT Telerate page is Telerate page 7051, the rate for the
relevant interest determination date; or
- if the designated CMT Telerate page is Telerate page 7052, the weekly or
monthly average, as specified in your pricing supplement, for the week that
ends immediately before the week in which the relevant interest determination
date falls, or for the month that ends immediately before the month in which
the relevant interest determination date falls, as applicable.
If the CMT rate cannot be determined in this manner, the following procedures
will apply.
- If the applicable rate described above is not displayed on the relevant
designated CMT Telerate page by 3:00 P.M., New York City time, on the relevant
interest calculation date (unless the calculation is made earlier and the rate
is available from that source at that time), then the CMT rate will be the
applicable treasury constant maturity rate described above -- i.e., for the
designated CMT index maturity and for either the relevant interest
determination date or the weekly or monthly average, as applicable -- as
published in H.15(519).
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- If the applicable rate described above is not published in H.15(519) by 3:00
P.M., New York City time, on the relevant interest calculation date, then the
CMT rate will be the treasury constant maturity rate, or other U.S. treasury
rate, for the Designated CMT index maturity and with reference to the relevant
interest determination date, that:
-- is published by the Board of Governors of the Federal Reserve System, or
the U.S. Department of the Treasury, and
-- is determined by the calculation agent to be comparable to the applicable
rate formerly displayed on the designated CMT Telerate page and published
in H.15(519).
- If the rate described in the prior paragraph is not published by 3:00 P.M.,
New York City time, on the relevant interest calculation date, then the CMT
rate will be the yield to maturity of the arithmetic mean of the following
secondary market offered rates for the most recently issued treasury notes
having an original maturity of approximately the designated CMT index maturity
and a remaining term to maturity of not less than the designated CMT index
maturity minus one year: the offered rates, as of approximately 3:30 P.M., New
York City time, on the relevant interest determination date, of three primary
U.S. government securities dealers in New York City selected by the
calculation agent. In selecting these offered rates, the calculation agent
will request quotations from five of these primary dealers and will disregard
the highest quotation -- or, if there is equality, one of the highest -- and
the lowest quotation -- or, if there is equality, one of the lowest. "TREASURY
NOTES" means direct, non-callable, fixed rate obligations of the U.S.
government.
- If the calculation agent is unable to obtain three quotations of the kind
described in the prior paragraph, the CMT rate will be the yield to maturity
of the arithmetic mean of the following secondary market offered rates for
treasury notes with an original maturity longer than the designated CMT index
maturity, with a remaining term to maturity closest to the designated CMT
index maturity and in an amount of at least $100 million: the offered rates,
as of approximately 3:30 P.M., New York City time, on the relevant interest
determination date, of three primary U.S. government securities dealers in New
York City selected by the calculation agent. In selecting these offered rates,
the calculation agent will request quotations from five of these primary
dealers and will disregard the highest quotation -- or, if there is equality,
one of the highest -- and the lowest quotation -- or, if there is equality,
one of the lowest. If two treasury notes with an original maturity longer than
the designated CMT index maturity have remaining terms to maturity that are
equally close to the designated CMT index maturity, the calculation agent will
obtain quotations for the treasury note with the shorter remaining term to
maturity.
- If fewer than five but more than two of these primary dealers are quoting as
described in the prior paragraph, then the CMT rate for the relevant interest
determination date will be based on the arithmetic mean of the offered rates
so obtained, and neither the highest nor the lowest of those quotations will
be disregarded.
- If two or fewer primary dealers selected by the calculation agent are quoting
as described above, the CMT rate in effect for the new interest period will be
the CMT rate in effect for the prior interest period. If the initial interest
rate has been in effect for the prior interest period, however, it will remain
in effect for the new interest period.
CD RATE NOTES
If you purchase a CD rate note, your note will bear interest at a base
rate equal to the CD rate, adjusted by the spread or spread multiplier, if any,
specified in your pricing supplement.
"CD RATE" means the rate, on the relevant interest determination date, for
negotiable U.S. dollar certificates of deposit having the index maturity
specified in your pricing supplement, as published in H.15(519) under the
heading "CDs
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(Secondary Market)". If the CD rate cannot be determined in this manner, the
following procedures will apply.
- If the rate described above is not published in H.15(519) by 3:00 P.M., New
York City time, on the relevant interest calculation date, then the CD rate,
for the relevant interest determination date, will be the rate described above
as published in H.15 daily update, or another recognized electronic source
used for displaying that rate, under the heading "CDs (Secondary Market)".
- If the rate described above is not published in H.15(519), H.15 daily update
or another recognized electronic source by 3:00 P.M., New York City time, on
the relevant interest calculation date (unless the calculation is made earlier
and the rate is available from one of those sources at that time), the CD rate
will be the arithmetic mean of the following secondary market offered rates
for negotiable U.S. dollar certificates of deposit of major U.S. money center
banks with a remaining maturity closest to the specified index maturity, and
in a denomination of $5,000,000: the rates offered as of 10:00 A.M., New York
City time, on the relevant interest determination date, by three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in New York
City, as selected by the calculation agent.
- If fewer than three dealers selected by the calculation agent are quoting as
described above, the CD rate in effect for the new interest period will be the
CD rate in effect for the prior interest period. If the initial interest rate
has been in effect for the prior interest period, however, it will remain in
effect for the new interest period.
FEDERAL FUNDS RATE NOTES
If you purchase a federal funds rate note, your note will bear interest at
a base rate equal to the federal funds rate, adjusted by the spread or spread
multiplier, if any, specified in your pricing supplement.
"FEDERAL FUNDS RATE" means the rate for U.S. dollar federal funds on the
relevant interest determination date, as published in H.15(519) under the
heading "Federal Funds (Effective)". If the federal funds rate cannot be
determined in this manner, the following procedures will apply.
- If the rate described above is not displayed on Telerate page 120 at 3:00
P.M., New York City time, on the relevant interest calculation date (unless
the calculation is made earlier and the rate is available from that source at
that time), then the federal funds rate, for the relevant interest
determination date, will be the rate described above as published in H.15
daily update, or another recognized electronic source used for displaying that
rate, under the heading "Federal Funds (Effective)".
- If the rate described above is not displayed on Telerate page 120 and does not
appear in H.15(519), H.15 daily update or another recognized electronic source
by 3:00 P.M., New York City time, on the relevant interest calculation date
(unless the calculation is made earlier and the rate is available from one of
those sources at that time), the federal funds rate will be the arithmetic
mean of the rates of the last transaction in overnight, U.S. dollar federal
funds arranged, before 9:00 A.M., New York City time, on the relevant interest
determination date, by three leading brokers of U.S. dollar federal funds
transactions in New York City selected by the calculation agent.
- If fewer than three brokers selected by the calculation agent are quoting as
described above, the federal funds rate in effect for the new interest period
will be the federal funds rate in effect for the prior interest period. If the
initial interest rate has been in effect for the prior interest period,
however, it will remain in effect for the new interest period.
SPECIAL RATE CALCULATION TERMS
In this subsection entitled "-- Interest Rates", we used several
capitalized terms that have special meanings relevant to calculating floating
interest rates without
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explaining the meanings. We define these terms as follows:
"BOND EQUIVALENT YIELD" means a yield expressed as a percentage and
calculated in accordance with the following formula:
D X N
bond equivalent yield = ----------- X 100
N - (D X M)
where
- "D" means the annual rate for treasury bills quoted on a bank discount basis
and expressed as a decimal;
- "N" means 365 or 366, as the case may be; and
- "M" means the actual number of days in the applicable interest rate period.
"BUSINESS DAY" in any relevant place of payment means a Monday, Tuesday,
Wednesday, Thursday or Friday that is not a day on which banking institutions in
that place generally are authorized or obligated by law or executive order to
close.
"DESIGNATED CMT INDEX MATURITY" means the index maturity for a CMT rate
note and will be the original period to maturity of a U.S. treasury
security -- either 1, 2, 3, 5, 7, 10, 20 or 30 years -- specified in the
applicable pricing supplement. If no such original maturity period is so
specified, the designated CMT index maturity will be 2 years.
"DESIGNATED CMT TELERATE PAGE" means the Telerate page specified in the
applicable pricing supplement that displays treasury constant maturities as
reported in H.15(519). If no Telerate page is so specified, then the applicable
page will be Telerate page 7052. If Telerate page 7052 applies but the
applicable pricing supplement does not specify whether the weekly or monthly
average applies, the weekly average will apply.
"EURO BUSINESS DAY" means any day on which the Trans-European Automated
Real-Time Gross Settlement Express Transfer (TARGET) System, or any successor
system, is open for business.
"EURO-ZONE" means, at any time, the region comprised of the member states
of the European Economic and Monetary Union that, as of that time, have adopted
a single currency in accordance with the Treaty on European Union of February
1992.
"H.15(519)" means the weekly statistical release entitled "Statistical
Release H.15(519)", or any successor publication, published by the Board of
Governors of the Federal Reserve System.
"H.15 DAILY UPDATE" means the daily update of H.15(519) available through
the worldwide-web site of the Board of Governors of the Federal Reserve System,
at http://www.federalreserve.gov/releases/ H15/update, or any successor site or
publication.
"INDEX CURRENCY" means, with respect to a LIBOR note, the currency
specified as such in the applicable pricing supplement. The index currency may
be U.S. dollars or any other currency, and will be U.S. dollars unless another
currency is specified in the applicable pricing supplement.
"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.
"LIBOR REUTERS PAGE" means the display on the Reuters Monitor Money Rates
Service, or any successor service, on the page designated as "LIBOR" or any
replacement page or pages on which London interbank rates of major banks for the
relevant index currency are displayed.
"LIBOR TELERATE PAGE" means Telerate page 3750 or any replacement page or
pages on which London interbank rates of major banks for the relevant index
currency are displayed.
"LONDON MARKET DAY" means any day on which dealings in the relevant index
currency are transacted in the London interbank market.
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"MARKET DAY" means, for any note, a day that meets all the following
applicable requirements:
- for all notes, is a business day in New York City;
- if the note is a LIBOR note, is also a London market day;
- if the note has a specified currency other than U.S. dollars or euros, is also
a business day in the principal financial center of the country issuing the
specified currency; and
- if the note is a EURIBOR note or has a specified currency of euros, or is a
LIBOR note for which the index currency is euros, is also a EURO BUSINESS DAY;
except that, if the note is a currency indexed note, market day has the
different special meaning that is specified under "-- Currency Indexed Notes" on
page S-21.
"MONEY MARKET YIELD" means a yield expressed as a percentage and
calculated in accordance with the following formula:
D X 360
Money market yield = ------------- X 100
360 - (D X M)
where
- "D" means the annual rate for commercial paper quoted on a bank discount basis
and expressed as a decimal; and
- "M" means the actual number of days in the relevant interest period.
"PRINCIPAL FINANCIAL CENTER" has the following meanings when referring to
the following specified currencies:
- U.S. dollars -- New York City
- Australian dollars -- Sydney
- Deutsche marks -- Frankfurt
- Dutch guilders -- Amsterdam
- Italian lira -- Milan
- Swiss francs -- Zurich
"REPRESENTATIVE AMOUNT" means an amount that, in the calculation agent's
judgment, is representative of a single transaction in the relevant market at
the relevant time.
"REUTERS SCREEN US PRIME 1 PAGE" means the display on the "US PRIME 1"
page on the Reuters Monitor Money Rates Service, or any successor service, or
any replacement page or pages on that service, for the purpose of displaying
prime rates or base lending rates of major U.S. banks.
"TELERATE PAGE" means the display on the Bridge Telerate Service, or any
successor service, on the page or pages specified in this prospectus supplement
or the applicable pricing supplement, or any replacement page or pages on that
service.
If, when we use the terms designated CMT Telerate page, H.15 (519), H.15
daily update, Reuters screen LIBOR page, Reuters screen US PRIME 1 page,
Telerate LIBOR page or Telerate page, we refer to a particular heading or
headings on any of those pages, those references include any successor or
replacement heading or headings as determined by the calculation agent.
REDEMPTION AND REPAYMENT
Unless otherwise indicated in your pricing supplement, your note will not
be entitled to the benefit of any sinking fund -- that is, we will not deposit
money on a regular basis into any separate custodial account to repay your
notes. In addition, we will not be entitled to redeem your note before its
stated maturity unless your pricing supplement specifies a "REDEMPTION
COMMENCEMENT DATE". You will not be entitled to require us to buy your note from
you, before its stated maturity, unless your pricing supplement specifies one or
more "OPTIONAL REPAYMENT DATES".
If your pricing supplement specifies a redemption commencement date, it
will also specify one or more "REDEMPTION PRICES", which will be expressed as a
percentage of the principal amount of your note. It may also specify one or more
"REDEMPTION PERIODS" during which the redemption prices relating to a redemption
of notes during those periods will apply.
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If your pricing supplement specifies a redemption commencement date, your
note will be redeemable at our option at any time on or after that date. We may
redeem your entire note or any portion of the principal amount which would be an
authorized denomination for the note, except that any remaining unredeemed
portion must be at least the minimum denomination for the note. If we redeem
your note, we will do so at the specified redemption price, together with
interest accrued to the redemption date. If different prices are specified for
different redemption periods, the price we pay will be the price that applies to
the redemption period during which your note is redeemed.
If we exercise an option to redeem any note, we will give to the trustee
and the holder written notice of the principal amount of the note to be
redeemed, not less than 30 days nor more than 60 days before the applicable
redemption date.
If your pricing supplement specifies an optional repayment date, your note
will be repayable at your option on the specified optional repayment date at a
repayment price of 100% of the principal amount being redeemed, or, if your note
is an original issue discount note, at a price specified in the pricing
supplement, together with interest accrued to the repayment date. You may elect
repayment of your entire note or any portion of the principal amount which would
be an authorized denomination for the note, except that any remaining unpaid
portion must be at least the minimum denomination for your note. To obtain
repayment, the holder must complete the "Option to Elect Repayment" form on the
note and surrender the note at the corporate trust office of the trustee not
more than 60 days nor less than 30 days before the date of repayment. Exercise
of the repayment option is irrevocable.
If a note represented by a global note is subject to repayment at the
holder's option, the depository or its nominee, as the holder, will be the only
person that can exercise the right to repayment. Any indirect holders who own
beneficial interests in the global note and wish to exercise a repayment right
must give proper and timely instructions to their banks or brokers through which
they hold their interest, requesting that they notify the depository to exercise
the repayment right on their behalf. Different firms have different deadlines
for accepting instructions from their customers, and you should take care to act
promptly enough to ensure that your request is given effect by the depository
before the applicable deadline for exercise.
Street name and other indirect holders should contact their banks or brokers
for information about how to exercise a repayment right in a timely
manner.
If the option of the holder to elect repayment as described above is
deemed to be a "tender offer" within the meaning of Rule 14e-1 under the
Securities Exchange Act of 1934, we will comply with Rule 14e-1 as then in
effect to the extent applicable.
We or our affiliates may purchase notes from investors who are willing to
sell from time to time, either in the open market at prevailing prices or in
private transactions at negotiated prices. Notes that we or they purchase may,
at our discretion, be held, resold or canceled.
DENOMINATION OF NOTES
Unless we specify differently in the pricing supplement relating to your
note, the denomination of your note will be $1,000 or any integral multiple of
$1,000 above that. If your note is denominated in a specified currency other
than U.S. dollars, the denomination of the note will be an amount of the
specified currency for such note equivalent to $1,000, using an exchange rate
equal to the noon buying rate in The City of New York for cable transfers for
that specified currency on the first market day immediately before the date on
which we accept the offer to purchase the note, rounded down to the nearest
1,000 units of the specified currency, but not less than 1,000 units, and any
integral multiple of 1,000 units of the specified currency above that.
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WHETHER THE DEFEASANCE PROVISIONS APPLY
The full defeasance and covenant defeasance provisions of the indenture
described under "Description of Debt Securities We May Offer -- Defeasance" in
the accompanying prospectus will apply to the notes. However, we might be unable
to effect either full defeasance or covenant defeasance of the notes if we
choose to issue any floating rate notes, notes denominated other than in U.S.
dollars or indexed notes. In addition, as described in the prospectus under
"Description of Debt Securities We May Offer -- Defeasance" on page 10, we could
not effect full defeasance of the notes unless there is a change in U.S. federal
tax law.
PAYMENT MECHANICS
WHO RECEIVES PAYMENT?
If interest is due on a note on an interest payment date, we will pay the
interest to the person or entity in whose name the note is registered at the
close of business on the REGULAR RECORD DATE, as described below, relating to
the interest payment date. If interest is due at maturity but on a day that is
not an interest payment date, we will pay the interest to the person or entity
entitled to receive the principal of the note. If the principal or another
amount besides interest is due on a note at maturity, we will pay the amount to
the holder of the note against surrender of the note at a proper place of
payment or, in the case of a global note, in accordance with the applicable
policies of the depository.
Unless we specify otherwise in the applicable pricing supplement, the
"REGULAR RECORD DATE" relating to an interest payment date for any fixed rate
note will be the April 15 or October 15 next preceding that interest payment
date, and for any floating rate note will be the 15th calendar day before that
interest payment date, in each case whether or not the record date is a business
day in any location. For the purpose of determining the holder at the "close of
business" on a regular record date when business is not being conducted, the
close of business will mean 5:00 P.M., New York City time, on that day.
HOW WE WILL MAKE PAYMENTS DUE IN U.S. DOLLARS
We will follow the practice described in this subsection when paying
amounts due in U.S. dollars. We will make payments of amounts due in other
currencies as described in the next subsection.
PAYMENTS ON GLOBAL NOTES AND OTHER NOTES HELD THROUGH DTC. We will make
payments on a global note or other note held indirectly through the depository
in accordance with the applicable policies of the depository as in effect from
time to time. Under those policies, we will pay directly to the depository, or
its nominee, and not to any indirect holders who own beneficial interests in the
global note or other note. An indirect holder's right to receive those payments
will be governed by the rules and practices of the depository and its
participants, as described under "-- What is a Global Security?" on page 4 in
the prospectus.
PAYMENTS ON NOTES HELD DIRECTLY. We will make payments on directly held
notes as follows. We will pay interest that is due on an interest payment date
which is not the maturity for principal:
- by check mailed on the interest payment date to the holder at his or her
address for payments shown on the trustee's records as of the close of
business on the regular record date or
- by wire transfer of immediately available funds to an account at a bank in New
York City, if you have provided wire transfer instructions to the trustee not
later than the regular record date for that payment.
We will make payments of principal and any premium by wire transfer of
immediately available funds to an account at a bank in New York City, on the due
date, upon surrender of the note at the corporate trust office of U.S. Bank
Trust National Association in the Borough of Manhattan, The City of New York.
However, you will not receive payment by wire transfer on the due date unless
you have provided wire transfer instructions to the
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trustee and surrendered your note in time for the trustee to make the payment in
accordance with its normal procedures.
Book-entry and other indirect holders should consult their banks or brokers
for more information on how they will receive payments on their notes.
HOW WE WILL MAKE PAYMENTS DUE IN OTHER CURRENCIES
We will follow the practices described in this subsection when paying
amounts that are due in a specified currency other than U.S. dollars.
PAYMENTS ON GLOBAL NOTES AND OTHER NOTES HELD THROUGH DTC. We will make
payments on a global note or other note held indirectly through the depository
in accordance with the applicable policies of the depository as in effect from
time to time. We understand that these policies, as currently in effect at DTC,
are as follows:
Unless otherwise indicated in your pricing supplement, if you are an
indirect holder of global notes or other note held indirectly through DTC
denominated in a specified currency other than U.S. dollars and if you elect to
receive payments in a specified currency other than U.S. dollars, you must
notify the participant through which your interest in the global note or other
note is held of your election:
- on or before the applicable regular record date, in the case of a payment of
interest, or
- on or before the 16th day prior to stated maturity, or any redemption or
repayment date, in the case of payment of principal or any premium.
You may elect to receive all or only a portion of any interest, principal
or premium payment in a specified currency other than U.S. dollars.
Your participant must, in turn, notify DTC of your election on or before
the third DTC business day after that regular record date, in the case of a
payment of interest, and on or before the 12th DTC business day prior to stated
maturity, or on the redemption or repayment date if your note is redeemed or
repaid earlier, in the case of a payment of principal or any premium.
DTC, in turn, will notify the trustee of your election in accordance with
DTC's procedures.
If complete instructions are received by the participant and forwarded by
the participant to DTC, and by DTC to the trustee, on or before the dates noted
above, the trustee, in accordance with DTC's instructions, will make the
payments to you or your participant by wire transfer of immediately available
funds to an account maintained by the payee with a bank located in the country
issuing the specified currency or in another jurisdiction outside the United
States acceptable to us and the trustee.
If the foregoing steps are not properly completed, you will receive
payments in U.S. dollars.
PAYMENTS ON DIRECTLY HELD NOTES. Except as described in the last paragraph
under this heading, we will make payments on directly held notes in the
applicable specified currency. We will make these payments by wire transfer of
immediately available funds to any account requested by the holder, provided the
account is at a bank located in the country issuing the specified currency or is
in another jurisdiction outside the United States acceptable to us and the
trustee. To designate an account for wire payment, the holder must give the
trustee appropriate wire instructions not later than the regular record date for
the payment in question, if applicable, or the 15th day prior to maturity. In
the case of principal or any premium, due on an interest payment date which is
not the maturity for principal, the instructions must be given by the person or
entity who is the holder on the regular record date. In the case of principal or
any premium, the payment will be made only after the note is surrendered to the
trustee. Any instructions, once properly given, will remain in effect unless and
until new instructions are properly given in the manner described above.
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If a holder fails to give instructions as described above, we will notify
the holder at the address in the trustee's records and will make the payment
within five market days after the holder provides appropriate instructions. Any
late payment made in these circumstances will be treated under the indenture as
if made on the due date, and no interest will accrue on the late payment from
the due date to the date paid.
Although a payment on a directly held note may be due in a specified
currency other than U.S. dollars, we will make the payment in U.S. dollars if
the holder asks us to do so. To request U.S. dollar payment, the holder must
provide appropriate written notice to the trustee not later than the regular
record date of the payment in question, if applicable, or the 15th day prior to
maturity. In the case of any interest payment due on an interest payment date
which is not the maturity for principal, the request must be made by the person
or entity who is the holder on the regular record date. Any request, once
properly made, will remain in effect unless and until revoked by notice properly
given in the manner described above.
Book-entry and other indirect holders of a note with a specified currency
other than U.S. dollars should contact their banks or brokers for more
information about how to receive payments in the specified currency or in
U.S. dollars.
CONVERSION TO U.S. DOLLARS. When we are asked by a holder to make
payments in U.S. dollars of an amount due in another currency, either on a
global note or a non-global note as described above, we will determine the U.S.
dollar amount the holder receives as follows. The EXCHANGE RATE AGENT described
below on page S-21 will request currency bid quotations expressed in U.S.
dollars from three recognized foreign exchange dealers, any of which may be an
Agent or the exchange rate agent, as of 11:00 A.M., New York City time, on the
second market day before the payment date. The exchange rate agent will request
currency bid quotations on an aggregate basis for all holders of notes
requesting U.S. dollar payments of amounts due on the same date in the same
specified currency. The U.S. dollar amount the holder receives will be based on
the highest acceptable currency bid quotation received by the exchange rate
agent. If the exchange rate agent determines that three acceptable currency bid
quotations are not available on that second market day, the payment will be made
in the specified currency.
To be acceptable, a quotation must be given as of 11:00 A.M., New York
City time, on the second market day before the due date and the quoting dealer
must commit to execute a contract at the quotation. If some but not all of the
relevant notes are LIBOR notes or EURIBOR notes, the second preceding business
day will be determined for this purpose as if none of those notes were LIBOR
notes or EURIBOR notes.
A holder that requests payment in U.S. dollars will bear all associated
currency exchange costs, which will be deducted from the payment.
CURRENCY EXCHANGE CONTROLS. If we are obligated to make any payment in a
specified currency other than U.S. dollars, and the specified currency is not
available due to the imposition of exchange controls or other circumstances
beyond our control, we will be entitled to satisfy our obligation by making the
payment in U.S. dollars on the basis of the most recently available EXCHANGE
RATE.
For a specified currency other than U.S. Dollars, the "EXCHANGE RATE" will
be the noon buying rate for cable transfers in New York City for the specified
currency.
The foregoing will apply to any note, whether in global or non-global
form, and to any payment, including a payment at maturity. Any payment made
under the circumstances and in a manner described above will not result in a
default under any note or the indenture.
If any specified currency is converted into or replaced by another
currency pursuant to law having general and direct applicability in the
jurisdiction which issued that specified currency (which may include European
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Community law), we will make any payments on notes otherwise required to be made
in that specified currency in the currency into or by which that specified
currency has been converted or replaced, based on the conversion or equivalency
rate prescribed by law having general and direct applicability in that
jurisdiction (which may include European Community law), and that specified
currency will not be deemed to be unavailable to us solely by reason of that
conversion or replacement.
Similarly, if any currency is introduced in the jurisdiction issuing any
specified currency on the basis of legally enforceable equivalency to that
specified currency pursuant to law having general and direct applicability in
that jurisdiction (which may include European Community law) in preparation for
conversion of that specified currency into, or replacement of that specified
currency by, that other currency, we will be entitled, at our option, to make
any payments on notes otherwise required to be made in that specified currency
in that other currency based on the equivalency rate prescribed by law having
general and direct applicability in that jurisdiction (which may include
European Community law). Making payments in accordance with this paragraph or
the preceding paragraph will not, by itself, constitute a default in our
obligations to make those payments. No occurrence of a currency conversion,
replacement or introduction of a type described in this paragraph or the
preceding paragraph involving a specified currency will, by itself, entitle us
to avoid our obligations under any note or entitle us or you or any holder of a
note to rescission of the purchase and sale of that note or to reformation of
any of the terms of that note on the grounds of impossibility or
impracticability of performance, frustration of purpose or otherwise.
THE EURO. The euro, which may be a specified currency for some notes, is
the currency that was introduced as of January 1, 1999, at the start of the
third stage of European Economic and Monetary Union "EMU", pursuant to the
Treaty on European Union of February 1992, which is also known as the
"Maastricht Treaty". On January 1, 1999, the euro became the legal currency for
the 11 member states participating in EMU. The Maastricht Treaty provides that
the national currencies of these 11 member states will continue to be legal
tender in their respective states during a transition period from January 1,
1999 to December 31, 2001 and for a maximum of six months thereafter, but as
sub-units of the euro. The Maastricht Treaty provides that the conversion rates
for these national currencies and the euro were irrevocably fixed as of December
31, 1998.
EXCHANGE RATE AGENT. If we issue a note in a specified currency other
than U.S. dollars, we will appoint a financial institution to act as the
"EXCHANGE RATE AGENT". Unless otherwise specified in the applicable pricing
supplement, U.S. Bank Trust National Association initially will be the exchange
rate agent for the notes. We may change the exchange rate agent from time to
time without your consent and without notifying you of the change.
All determinations made by the exchange rate agent will be at its sole
discretion unless we state in the applicable pricing supplement that any
determination is subject to our approval. In the absence of manifest error,
those determinations will be conclusive for all purposes and binding on you and
us, without any liability on the part of the exchange rate agent.
PAYMENT WHEN OFFICES ARE CLOSED
If any payment is due on a note on a day that is not a market day, we will
make the payment on the next day that is a market day. Payments postponed to the
next market day in this situation will be treated under the indenture as if they
were made on the original due date. Postponement of this kind will not result in
a default under any note or the indenture, and no interest will accrue on the
postponed amount from the original due date to the next day that is a market
day.
CURRENCY INDEXED NOTES
We may offer currency indexed notes, the principal amount of which payable
at the stated maturity, or the amount of interest payable on any interest
payment date, or
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both, is determined by the rate of exchange between the specified currency and
the other currency or composite currency specified as the "INDEXED CURRENCY" in
the pricing supplement.
AMOUNT OF PRINCIPAL WE WILL PAY
Unless otherwise specified in the applicable pricing supplement, we will
pay the holder of a currency indexed note a principal amount which is:
- greater than the amount designated in the pricing supplement as the "FACE
AMOUNT" if, at the stated maturity, the rate at which the specified currency
can be exchanged for the indexed currency is greater than the exchange rate
designated in the pricing supplement as the "BASE EXCHANGE RATE"; or
- less than the face amount if, at the stated maturity, the rate at which the
specified currency can be exchanged for the indexed currency is less than the
base exchange rate.
However, unless otherwise specified in the pricing supplement, the maximum
principal amount that could be payable at the stated maturity is twice the face
amount and the minimum principal amount that could be payable is zero.
We will express the applicable exchange rates in units of the indexed
currency per one unit of the specified currency. Information on the relative
historical value of the specified currency against the indexed currency, any
exchange controls applicable to the specified currency or indexed currency and
any additional tax consequences to holders will be set forth in the pricing
supplement. For a discussion of risks generally applicable to currency indexed
notes, see "Risks Relating to Foreign Currency Notes" on page S-36 and "Risks
Relating to Indexed Notes" on page S-35.
MECHANICS FOR DETERMINATION AND PAYMENT OF PRINCIPAL AMOUNT
Unless otherwise specified in the applicable pricing supplement, we will
pay the holder of a currency indexed note on the stated maturity an amount of
specified currency equal to the face amount plus or minus an amount determined
by the "DETERMINATION AGENT" specified in the applicable pricing supplement. The
determination agent will determine the amount by reference to the difference
between the base exchange rate specified in the pricing supplement and the SPOT
RATE, as defined below.
Unless otherwise specified in the applicable pricing supplement, subject
to the limitations on the principal amount set forth above under "-- Amount of
Principal We Will Pay", the determination agent will use one of the following
formulas to determine the principal amount of a currency indexed note payable at
the stated maturity:
If the spot rate exceeds or equals the base exchange rate, the principal
amount of a currency indexed note payable at the stated maturity, which will in
no event be more than twice the face amount, will equal:
FA + [FA X (SR - BER) ].
----------
SR
In the above formula:
- "FA" means the face amount
- "BER" means the base exchange rate
- "SR" means the spot rate.
If the base exchange rate exceeds the spot rate, the principal amount of a
currency indexed note payable at the stated maturity, which will in no event be
less than zero, will equal:
FA - [FA X (BER - SR) ].
----------
SR
The "SPOT RATE" means the rate at which the specified currency can be
exchanged for the indexed currency as determined on the second EXCHANGE RATE
DAY, as defined below, prior to the stated maturity of the currency indexed note
by the determination agent, based upon the arithmetic mean of the open market
spot offer quotations for the indexed currency (spot bid quotation for the
specified currency) obtained by the determination agent from the REFERENCE
DEALERS in The City
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of New York at 11:00 A.M., New York City time, on the second exchange rate day
prior to the stated maturity, for an amount of indexed currency equal to the
face amount multiplied by the base exchange rate, with the specified currency
for settlement on the stated maturity.
"REFERENCE DEALERS" means the three banks or firms specified in the
applicable pricing supplement or, if any of them is unwilling or unable to
provide the requested quotations, other major money center banks in The City of
New York selected by us, in consultation with the determination agent, to act as
reference dealer or dealers.
If the quotations from the reference dealers are not available on the
second exchange rate day prior to stated maturity due to circumstances beyond
the control of us or the determination agent, the determination agent will
determine the spot rate on the basis of the most recently available quotations
from the reference dealers.
Unless otherwise specified in the applicable pricing supplement, "EXCHANGE
RATE DAY" means any day which is a business day in New York City and
- if the specified currency or indexed currency is the Canadian Dollar, in
Toronto, Canada,
- if the specified currency or indexed currency is the Australian Dollar, in
Melbourne, Australia,
- if the specified currency or indexed currency is the euro, is a day on which
the Trans-European Automated Real Time Gross Settlement Express Transfer
(TARGET) System, or any successor system, is open for business, and/or
- if the specified currency or indexed currency is any other currency or
composite currency other than the U.S. Dollar, in the principal financial
center of the country of that currency.
The principal amount of a currency indexed note determined by the
determination agent to be payable at the stated maturity will be payable to the
holders of the note in the manner set forth under "-- Payment Mechanics"
beginning on page S-18, unless otherwise specified in the applicable pricing
supplement. In the absence of manifest error, the determination by the
determination agent of the spot rate and the principal amount of currency
indexed notes payable at the stated maturity will be final and binding on us and
the holders of those currency indexed notes.
Unless otherwise specified in the applicable pricing supplement, in the
event of any redemption of a currency indexed note prior to its stated maturity,
the term "stated maturity," used above would refer to the redemption date of
such currency indexed note.
INTEREST PAYMENTS
Unless otherwise specified in the applicable pricing supplement, we will
pay the holder of a currency indexed note interest on the face amount at the
rate and times set forth in the applicable pricing supplement. Unless otherwise
specified in the pricing supplement, the provisions described under "-- Payment
Mechanics" on page S-18 will apply to payment of interest on currency indexed
notes.
AMORTIZING NOTES
We may offer notes for which payments of principal and interest are made
in equal installments over the life of the notes. These notes are called
amortizing notes. Unless otherwise specified in the pricing supplement, we will
compute interest on an amortizing note on the basis of a 360-day year of twelve
30-day months. Payments we make on an amortizing note will be applied first to
interest which is then due and payable and then to reduction of the unpaid
principal amount. Further information concerning additional terms and provisions
of an amortizing note will be specified in the pricing supplement, including a
table setting forth the repayment schedule.
EXTENDABLE NOTES
We may offer notes which give us the option to extend the stated maturity
of the notes for more periods. If a note gives us this
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option, the pricing supplement will say so and will specify a final date beyond
which we may not extend the stated maturity. The pricing supplement for notes of
this type will also specify the procedures applicable to our exercise of the
option to extend.
RENEWABLE NOTES
We may offer notes which for which the stated maturity will automatically
be extended for one or more periods, but not beyond a specified final date,
unless the holder elects that the note should mature. If a note has this
automatic renewal feature, the pricing supplement will say so and will specify
the dates and procedures that will apply.
UNITED STATES TAXATION
This section describes the material United States federal income tax
consequences of owning the notes we are offering. It applies to you only if you
acquire notes in the offering or offerings governed by this prospectus
supplement and you hold your notes as capital assets for tax purposes. This
section does not apply to you if you are a member of a class of holders subject
to special rules, such as:
- a dealer in securities or currencies,
- a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings,
- a bank,
- a life insurance company,
- a tax-exempt organization,
- a person that owns notes that are a hedge or that are hedged against interest
rate or currency risks,
- a person that owns notes as part of a straddle or conversion transaction for
tax purposes, or
- a person whose functional currency for tax purposes is not the U.S. dollar.
This section deals only with notes that are due to mature 30 years or less from
the date on which they are issued. The United States federal income tax
consequences of owning notes that are due to mature more than 30 years from
their date of issue will be discussed in an applicable pricing supplement. This
section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations under the Internal
Revenue Code, published rulings and court decisions, all as currently in effect.
These laws are subject to change, possibly on a retroactive basis.
Please consult your own tax advisor concerning the consequences of owning
these notes in your particular circumstances under the Code and the laws
of any other taxing jurisdiction.
UNITED STATES HOLDERS
This subsection describes the tax consequences to a United States holder.
You are a "UNITED STATES HOLDER" if you are a beneficial owner of a note and you
are:
- a citizen or resident of the United States,
- a domestic corporation,
- an estate whose income is subject to United States federal income tax
regardless of its source, or
- a trust if a United States court can exercise primary supervision over the
trust's administration and one or more United States persons are authorized to
control all substantial decisions of the trust.
If you are not a United States holder, this subsection does not apply to you and
you should refer to "-- United States Alien Holders" on page S-32.
PAYMENTS OF INTEREST
Except as described below in the case of interest on a "discount note"
that is not "qualified stated interest", each as defined below under
"-- Original Issue Discount -- General" on page S-25, you will be taxed on any
interest on your note, whether payable in U.S. dollars or a "FOREIGN CURRENCY",
including a composite currency or basket of currencies other than U.S. dollars,
as ordinary income at the time you receive the interest or when it
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accrues, depending on your method of accounting for tax purposes.
CASH BASIS TAXPAYERS. If you are a taxpayer that uses the cash receipts
and disbursements method of accounting for tax purposes and you receive an
interest payment that is denominated in, or determined by reference to, a
foreign currency, you must recognize income equal to the U.S. dollar value of
the interest payment, based on the exchange rate in effect on the date of
receipt, regardless of whether you actually convert the payment into U.S.
dollars.
ACCRUAL BASIS TAXPAYERS. If you are a taxpayer that uses an accrual
method of accounting for tax purposes, you may determine the amount of income
that you recognize with respect to an interest payment denominated in, or
determined by reference to, a foreign currency by using one of two methods.
Under the first method, you will determine the amount of income accrued based on
the average exchange rate in effect during the interest accrual period or, with
respect to an accrual period that spans two taxable years, that part of the
period within the taxable year.
If you elect the second method, you would determine the amount of income
accrued on the basis of the exchange rate in effect on the last day of the
accrual period or, in the case of an accrual period that spans two taxable
years, the exchange rate in effect on the last day of the part of the period
within the taxable year. Additionally, under this second method, if you receive
a payment of interest within five business days of the last day of your accrual
period or taxable year, you may instead translate the interest accrued into U.S.
dollars at the exchange rate in effect on the day that you actually receive the
interest payment. If you elect the second method, it will apply to all debt
instruments that you hold at the beginning of the first taxable year to which
the election applies and to all debt instruments that you subsequently acquire.
You may not revoke this election without the consent of the Internal Revenue
Service.
When you actually receive an interest payment, including a payment
attributable to accrued but unpaid interest upon the sale or retirement of your
note, denominated in, or determined by reference to, a foreign currency for
which you accrued an amount of income, you will recognize ordinary income or
loss measured by the difference, if any, between the exchange rate that you used
to accrue interest income and the exchange rate in effect on the date of
receipt, regardless of whether you actually convert the payment into U.S.
dollars.
ORIGINAL ISSUE DISCOUNT
GENERAL. If you own a note, other than a "SHORT-TERM NOTE" with a term of
one year or less, it will be treated as a "DISCOUNT NOTE" issued at an original
issue discount if the amount by which the note's stated redemption price at
maturity exceeds its issue price is more than a de minimis amount.
As explained under "Description of Notes We May Offer -- Features Common
to All Notes" on page S-2, a discount note, as defined here for U.S. federal
income tax law purposes, may or may not be considered an original issue discount
note under the indenture.
Generally, a note's "ISSUE PRICE" will be the first price at which a
substantial amount of notes included in the issue of which the note is a part is
sold to persons other than bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers. A note's "STATED REDEMPTION PRICE AT MATURITY" is the total of all
payments provided by the note that are not payments of qualified stated
interest. Generally, an interest payment on a note is "QUALIFIED STATED
INTEREST" if it is one of a series of stated interest payments on a note that
are unconditionally payable at least annually at a single fixed rate, with
certain exceptions for lower rates paid during some periods, applied to the
outstanding principal amount of the note. There are special rules for VARIABLE
RATE NOTES that are discussed under "-- Variable Rate Notes" on page S-28.
In general, your note is not a discount note if the amount by which its
stated redemption price at maturity exceeds its issue
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price is less than the "DE MINIMIS AMOUNT" of 1/4 of 1 percent of its stated
redemption price at maturity multiplied by the number of complete years to its
maturity. Your note will have "DE MINIMIS ORIGINAL ISSUE DISCOUNT" if the amount
of the excess is less than the de minimis amount. If your note has de minimis
original issue discount, you must include the de minimis amount in income as
stated principal payments are made on the note, unless you make the election
described below under "-- Election to Treat All Interest as Original Issue
Discount" on page S-28. You can determine the includible amount with respect to
each such payment by multiplying the total amount of your note's de minimis
original issue discount by a fraction equal to:
- the amount of the principal payment made
divided by
- the total stated principal amount of the note.
Generally, if your discount note matures more than one year from its date
of issue, you must include original issue discount in income before you receive
cash attributable to that income. The amount of original issue discount, or
"OID" that you must include in income is calculated using a constant-yield
method, and generally you will include increasingly greater amounts of OID in
income over the life of your note. More specifically, you can calculate the
amount of "ACCRUED OID" that you must include in income by adding the daily
portions of OID with respect to your discount note for each day during the
taxable year or portion of the taxable year that you hold your discount note.
You can determine the daily portion by allocating to each day in any "ACCRUAL
PERIOD" a pro rata portion of the OID allocable to that accrual period. You may
select an accrual period of any length with respect to your discount note and
you may vary the length of each accrual period over the term of your discount
note. However, no accrual period may be longer than one year and each scheduled
payment of interest or principal on the discount note must occur on either the
first or final day of an accrual period.
You can determine the amount of OID allocable to an accrual period by:
- multiplying your discount note's adjusted issue price at the beginning of the
accrual period by your note's yield to maturity, and then
- subtracting from this figure the sum of the payments of qualified stated
interest on your note allocable to the accrual period.
You must determine the discount note's yield to maturity on the basis of
compounding at the close of each accrual period and adjusting for the length of
each accrual period. Further, you determine your discount note's "ADJUSTED ISSUE
PRICE"at the beginning of any accrual period by:
- adding your discount note's issue price and any accrued OID for each prior
accrual period, and then
- subtracting any payments previously made on your discount note that were not
qualified stated interest payments.
If an interval between payments of qualified stated interest on your
discount note contains more than one accrual period, then, when you determine
the amount of OID allocable to an accrual period, you must allocate the amount
of qualified stated interest payable at the end of the interval, including any
qualified stated interest that is payable on the first day of the accrual period
immediately following the interval, pro rata to each accrual period in the
interval based on their relative lengths. In addition, you must increase the
adjusted issue price at the beginning of each accrual period in the interval by
the amount of any qualified stated interest that has accrued prior to the first
day of the accrual period but that is not payable until the end of the interval.
You may compute the amount of OID allocable to an initial short accrual period
by using any reasonable method if all other accrual periods, other than a final
short accrual period, are of equal length.
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The amount of OID allocable to the final accrual period is equal to the
difference between:
- the amount payable at the maturity of your note, other than any payment of
qualified stated interest, and
- your note's adjusted issue price as of the beginning of the final accrual
period.
ACQUISITION PREMIUM. If you purchase your note for an amount that is less
than or equal to the sum of all amounts, other than qualified stated interest,
payable on your note after the purchase date but is greater than the amount of
your note's adjusted issue price, as determined above under "-- General" on page
S-25, the excess is "ACQUISITION PREMIUM". If you do not make the election
described below under "-- Election to Treat All Interest as Original Issue
Discount" on page S-28, then you must reduce the daily portions of OID by a
fraction equal to:
- the excess of your adjusted basis in the note immediately after purchase over
the adjusted issue price of the note
divided by:
- the excess of the sum of all amounts payable, other than qualified stated
interest, on the note after the purchase date over the note's adjusted issue
price.
PRE-ISSUANCE ACCRUED INTEREST. An election may be made to decrease the
issue price of your note by the amount of pre-issuance accrued interest if:
- a portion of the initial purchase price of your note is attributable to
pre-issuance accrued interest,
- the first stated interest payment on your note is to be made within one year
of your note's issue date, and
- the payment will equal or exceed the amount of pre-issuance accrued interest.
If this election is made, a portion of the first stated interest payment
will be treated as a return of the excluded pre-issuance accrued interest and
not as an amount payable on your note.
NOTES SUBJECT TO CONTINGENCIES INCLUDING OPTIONAL REDEMPTION. Your note
is subject to a contingency if it provides for an alternative payment schedule
or schedules applicable upon the occurrence of a contingency or contingencies,
other than a remote or incidental contingency, whether such contingency relates
to payments of interest or of principal. In such a case, you must determine the
yield and maturity of your note by assuming that the payments will be made
according to the payment schedule most likely to occur if:
- the timing and amounts of the payments that comprise each payment schedule are
known as of the issue date, and
- one of such schedules is significantly more likely than not to occur.
If there is no single payment schedule that is significantly more likely than
not to occur, other than because of a mandatory sinking fund, you must include
income on your note in accordance with the general rules that govern contingent
payment obligations. These rules will be discussed in the applicable pricing
supplement.
Notwithstanding the general rules for determining yield and maturity, if
your note is subject to contingencies, and either you or we have an
unconditional option or options that, if exercised, would require payments to be
made on the note under an alternative payment schedule or schedules, then:
- in the case of an option or options that we may exercise, we will be deemed to
exercise or not exercise an option or combination of options in the manner
that minimizes the yield on your note, and
- in the case of an option or options that you may exercise, you will be deemed
to exercise or not exercise an option or combination of options in the manner
that maximizes the yield on your note. If both you and we hold options
described in the preceding sentence, those rules will apply to each option in
the order in which they may be exercised. You may determine the
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yield on your note for the purposes of those calculations by using any date on
which your note may be redeemed or repurchased as the maturity date and the
amount payable on the date that you chose in accordance with the terms of your
note as the principal amount payable at maturity.
If a contingency, including the exercise of an option, actually occurs or
does not occur contrary to an assumption made according to the above rules then,
except to the extent that a portion of your note is repaid as a result of this
"CHANGE IN CIRCUMSTANCES" and solely to determine the amount and accrual of OID,
you must redetermine the yield and maturity of your note by treating your note
as having been retired and reissued on the date of the change in circumstances
for an amount equal to your note's adjusted issue price on that date.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. You may elect
to include in gross income all interest that accrues on your note using the
constant-yield method described above under "-- General" on page S-25, with the
modifications described below. For purposes of this election, interest will
include stated interest, OID, de minimis original issue discount, market
discount, de minimis market discount and unstated interest, as adjusted by any
amortizable bond premium, described below under "-- Notes Purchased at a
Premium" on page S-31, or acquisition premium.
If you make this election for your note, then, when you apply the
constant-yield method:
- the issue price of your note will equal your cost,
- the issue date of your note will be the date you acquired it, and
- no payments on your note will be treated as payments of qualified stated
interest.
Generally, this election will apply only to the note for which you make it;
however, if the note has amortizable bond premium, you will be deemed to have
made an election to apply amortizable bond premium against interest for all debt
instruments with amortizable bond premium, other than debt instruments the
interest on which is excludible from gross income, that you hold as of the
beginning of the taxable year to which the election applies or any taxable year
thereafter. Additionally, if you make this election for a market discount note,
you will be treated as having made the election discussed below under "-- Market
Discount" on page S-30, to include market discount in income currently over the
life of all debt instruments that you currently own or later acquire. You may
not revoke any election to apply the constant-yield method to all interest on a
note or the deemed elections with respect to amortizable bond premium or market
discount notes without the consent of the Internal Revenue Service.
VARIABLE RATE NOTES. Your note will be a "VARIABLE RATE NOTE" if:
- your note's issue price does not exceed the total noncontingent principal
payments by more than the lesser of:
1. .015 multiplied by the product of the total noncontingent principal
payments and the number of complete years to maturity from the issue date,
or
2. 15 percent of the total noncontingent principal payments; and
- your note provides for stated interest, compounded or paid at least annually,
only at:
1. one or more qualified floating rates,
2. a single fixed rate and one or more qualified floating rates,
3. a single objective rate, or
4. a single fixed rate and a single objective rate that is a qualified inverse
floating rate.
Your note will have a variable rate that is a "QUALIFIED FLOATING RATE" if:
- variations in the value of the rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in the currency
in which your note is denominated; or
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- the rate is equal to such a rate multiplied by either:
1. a fixed multiple that is greater than 0.65 but not more than 1.35, or
2. a fixed multiple that is greater than 0.65 but not more than 1.35,
increased or decreased by a fixed rate; and
- the value of the rate on any date during the term of your note is set no
earlier than three months prior to the first day on which that value is in
effect and no later than one year following that first day.
If your note provides for two or more qualified floating rates that are
within 0.25 percentage points of each other on the issue date or can reasonably
be expected to have approximately the same values throughout the term of the
note, the qualified floating rates together constitute a single qualified
floating rate.
Your note will not have a qualified floating rate, however, if the rate is
subject to certain restrictions (including caps, floors, governors, or other
similar restrictions) unless such restrictions are fixed throughout the term of
the note or are not reasonably expected to significantly affect the yield on the
note.
Your note will have a variable rate that is a single "OBJECTIVE RATE" if:
- the rate is not a qualified floating rate,
- the rate is determined using a single, fixed formula that is based on
objective financial or economic information that is not within the control of
or unique to the circumstances of the issuer or a related party, and
- the value of the rate on any date during the term of your note is set no
earlier than three months prior to the first day on which that value is in
effect and no later than one year following that first day.
Your note will not have a variable rate that is an objective rate,
however, if it is reasonably expected that the average value of the rate during
the first half of your note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of your note's term.
An objective rate as described above is a "QUALIFIED INVERSE FLOATING
RATE" if:
- the rate is equal to a fixed rate minus a qualified floating rate; and
- the variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the cost of newly borrowed funds.
Your note will also have a single qualified floating rate or an objective
rate if interest on your note is stated at a fixed rate for an initial period of
one year or less followed by either a qualified floating rate or an objective
rate for a subsequent period, and either:
- the fixed rate and the qualified floating rate or objective rate have values
on the issue date of the note that do not differ by more than 0.25 percentage
points; or
- the value of the qualified floating rate or objective rate is intended to
approximate the fixed rate.
Commercial paper rate notes, prime rate notes, LIBOR notes, EURIBOR notes,
treasury rate notes, CMT rate notes, CD rate notes and federal funds rate notes
generally will be treated as variable rate notes under these rules.
In general, if your variable rate note provides for stated interest at a
single qualified floating rate or objective rate, (or one of those rates after a
single fixed rate for an initial period), all stated interest on your note is
qualified stated interest. In this case, the amount of OID, if any, is
determined by using, 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, for any other objective rate, a
fixed rate that reflects the yield reasonably expected for your note.
If your variable rate note does not provide for stated interest at a
single qualified floating rate or a single objective rate, and also does not
provide for interest payable at a fixed rate other than a single fixed rate for
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an initial period, you generally must determine the interest and OID accruals on
your note by:
- determining a fixed rate substitute for each variable rate provided under your
variable rate note;
- constructing the equivalent fixed rate debt instrument (using the fixed rate
substitute described above);
- determining the amount of qualified stated interest and OID with respect to
the equivalent fixed rate debt instrument; and
- adjusting for actual variable rates during the applicable accrual period.
When you determine the fixed rate substitute for each variable rate provided
under the variable rate note, you generally will use the value of each variable
rate as of the issue date or, for an objective rate that is not a qualified
inverse floating rate, a rate that reflects the reasonably expected yield on
your note.
If your variable rate note provides for stated interest either at one or
more qualified floating rates or at a qualified inverse floating rate, and also
provides for stated interest at a single fixed rate other than at a single fixed
rate for an initial period, you generally must determine interest and OID
accruals by using the method described in the previous paragraph. However, your
variable rate note will be treated, for purposes of the first three steps of the
determination, as if your note had provided for a qualified floating rate, or a
qualified inverse floating rate, rather than the fixed rate. The qualified
floating rate, or qualified inverse floating rate, that replaces the fixed rate
must be such that the fair market value of your variable rate note as of the
issue date approximates the fair market value of an otherwise identical debt
instrument that provides for the qualified floating rate, or qualified inverse
floating rate, rather than the fixed rate.
SHORT-TERM NOTES. In general, if you are an individual or other
cash-basis United States holder of a short-term note, you are not required to
accrue OID, as specially defined below for the purposes of this paragraph, for
United States federal income tax purposes unless you elect to do so (although it
is possible that you may be required to include any stated interest in income as
you receive it). If you are an accrual basis taxpayer, a taxpayer in a special
class, including, but not limited to, a regulated investment company, common
trust fund, or a certain type of pass-through entity, or a cash basis taxpayer
who so elects, you will be required to accrue OID on short-term notes on either
a straight-line basis or under the constant-yield method, based on daily
compounding. If you are not required and do not elect to include OID in income
currently, any gain you realize on the sale or retirement of your short-term
note will be ordinary income to the extent of the accrued OID, which will be
determined on a straight-line basis unless you make an election to accrue the
OID under the constant-yield method, through the date of sale or retirement.
However, if you are not required and do not elect to accrue OID on your
short-term notes, you will be required to defer deductions for interest on
borrowings allocable to your short-term notes in an amount not exceeding the
deferred income until the deferred income is realized.
When you determine the amount of OID subject to these rules, you must
include all interest payments on your short-term note, including stated
interest, in your short-term note's stated redemption price at maturity.
FOREIGN CURRENCY DISCOUNT NOTES. If your discount note is denominated in,
or determined by reference to, a foreign currency, you must determine OID for
any accrual period on your discount note in the foreign currency and then
translate the amount of OID into U.S. dollars in the same manner as stated
interest accrued by an accrual-basis United States holder, as described under
"-- United States Holders -- Payments of Interest" on page S-[24]. You may
recognize ordinary income or loss when you receive an amount attributable to OID
in connection with a payment of interest or the sale or retirement of your note.
MARKET DISCOUNT. You will be treated as if you purchased your note, other
than a
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short-term note, at a market discount, and your note will be a "MARKET DISCOUNT
NOTE" if:
- you purchase your note for less than its issue price as determined above under
"Original Issue Discount -- General" on page S-25; and
- the difference between the note's stated redemption price at maturity or, in
the case of a discount note, the note's revised issue price, and the price you
paid for your note is equal to or greater than 1/4 of 1 percent of your note's
stated redemption price at maturity or revised issue price, respectively,
multiplied by the number of complete years to the note's maturity. To
determine the "REVISED ISSUE PRICE" of your note for these purposes, you
generally add any OID that has accrued on your note to its issue price.
If your note's stated redemption price at maturity or, in the case of a
discount note, its revised issue price, exceeds the price you paid for the note
by less than 1/4 of 1 percent multiplied by the number of complete years to the
note's maturity, the excess constitutes "DE MINIMIS MARKET DISCOUNT", and the
rules discussed below are not applicable to you.
You must treat any gain you recognize on the maturity or disposition of
your market discount note as ordinary income to the extent of the accrued market
discount on your note. Alternatively, you may elect to include market discount
in income currently over the life of your note. If you make this election, it
will apply to all debt instruments with market discount that you acquire on or
after the first day of the first taxable year to which the election applies. You
may not revoke this election without the consent of the Internal Revenue
Service. If you own a market discount note and do not make this election, you
will generally be required to defer deductions for interest on borrowings
allocable to your note in an amount not exceeding the accrued market discount on
your note until the maturity or disposition of your note.
You will accrue market discount on your market discount note on a
straight-line basis unless you elect to accrue market discount using a
constant-yield method. If you make this election, it will apply only to the note
with respect to which it is made and you may not revoke it.
NOTES PURCHASED AT A PREMIUM
If you purchase your note for an amount in excess of its principal amount,
you may elect to treat the excess as "AMORTIZABLE BOND PREMIUM". If you make
this election, you will reduce the amount required to be included in your income
each year with respect to interest on your note by the amount of amortizable
bond premium allocable to that year, based on your note's yield to maturity. If
your note is denominated in, or determined by reference to, a foreign currency,
you will compute your amortizable bond premium in units of the foreign currency
and your amortizable bond premium will reduce your interest income in units of
the foreign currency. Gain or loss recognized that is attributable to changes in
exchange rates between the time your amortized bond premium offsets interest
income and the time of the acquisition of your note is generally taxable as
ordinary income or loss. If you make an election to amortize bond premium, it
will apply to all debt instruments, other than debt instruments the interest on
which is excludible from gross income, that you hold at the beginning of the
first taxable year to which the election applies or that you thereafter acquire,
and you may not revoke it without the consent of the Internal Revenue Service.
See also "-- Original Issue Discount -- Election to Treat All Interest as
Original Issue Discount" on page S-[28].
PURCHASE, SALE AND RETIREMENT OF THE NOTES
Your "TAX BASIS" in your note will generally be the U.S. dollar cost, as
defined below, of your note, adjusted by:
- adding any OID or market discount, de minimis original issue discount and de
minimis market discount previously included in income with respect to your
note, and then
- subtracting any payments on your note that are not qualified stated interest
payments
S-31
and any amortizable bond premium applied to reduce the interest on your note.
If you purchase your note with foreign currency, the U.S. dollar cost of your
note will generally be the U.S. dollar value of the purchase price on the date
of purchase. However, if you are a cash-basis taxpayer, or an accrual-basis
taxpayer if you so elect, and your note is traded on an established securities
market, as defined in the applicable Treasury regulations, the U.S. dollar cost
of your note will be the U.S. dollar value of the purchase price on the
settlement date of your purchase.
You will generally recognize gain or loss on the sale or retirement of
your note equal to the difference between the amount you realize on the sale or
retirement and your tax basis in your note. If your note is sold or retired for
an amount in foreign currency, the amount you realize will be the U.S. dollar
value of such amount on:
- the date payment is received, if you are a cash-basis taxpayer and the notes
are not traded on an established securities market, as defined in the
applicable Treasury regulations,
- the date of disposition, if you are an accrual-basis taxpayer, or
- the settlement date for the sale, if you are a cash-basis taxpayer, or an
accrual basis taxpayer that so elects, and the notes are traded on an
established securities market, as defined in the applicable Treasury
regulations.
You will recognize capital gain or loss when you sell or retire your note,
except to the extent:
- described above under "-- Original Issue Discount -- Short-Term Notes" on page
S-30 or "-- Market Discount" on page S-30,
- attributable to accrued but unpaid interest,
- the rules governing contingent payment obligations apply, or
- attributable to changes in exchange rates as described below.
Capital gain of a noncorporate United States holder is generally taxed at
a maximum rate of 20% where the property is held for more than one year, and 18%
where the property is held for more than five years.
You must treat any portion of the gain or loss that you recognize on the
sale or retirement of a note as ordinary income or loss to the extent
attributable to changes in exchange rates. However, you take exchange gain or
loss into account only to the extent of the total gain or loss you realize on
the transaction.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
If you receive foreign currency as interest on your note or on the sale or
retirement of your note, your tax basis in the foreign currency will equal its
U.S. dollar value when the interest is received or at the time of the sale or
retirement. If you purchase foreign currency, you generally will have a tax
basis equal to the U.S. dollar value of the foreign currency on the date of your
purchase. If you sell or dispose of a foreign currency, including if you use it
to purchase notes or exchange it for U.S. dollars, any gain or loss recognized
generally will be ordinary income or loss.
INDEXED NOTES AND RENEWABLE, EXTENDIBLE AND AMORTIZING NOTES
The applicable pricing supplement will discuss any special United States
federal income tax rules with respect to notes the payments on which are
determined by reference to any index and other notes that are subject to the
rules governing contingent payment obligations which are not subject to the
rules governing variable rate notes and with respect to any renewable and
extendible notes and with respect to any notes providing for the periodic
payment of principal over the life of the note.
UNITED STATES ALIEN HOLDERS
This subsection describes the tax consequences to a United States alien
holder. You are a "UNITED STATES ALIEN HOLDER" if you
S-32
are the beneficial owner of a note and are, for United States federal income tax
purposes:
- a nonresident alien individual,
- a foreign corporation,
- a foreign partnership, or
- an estate or trust that in either case is not subject to United States federal
income tax on a net income basis on income or gain from a note.
If you are a United States holder, this subsection does not apply to you.
This discussion assumes that the note is not subject to the rules of
Section 871(h)(4)(A) of the Internal Revenue Code, relating to interest payments
that are determined by reference to the income, profits, changes in the value of
property or other attributes of the debtor or a related party.
Under United States federal income and estate tax law, and subject to the
discussion of backup withholding below, if you are a United States alien holder
of a note:
- we and other U.S. payors generally will not be required to deduct United
States withholding tax from payments of principal, premium, if any, and
interest, including OID, to you if, in the case of payments of interest:
1. you do not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of Merck & Co., Inc. entitled to vote,
2. you are not a controlled foreign corporation that is related to us through
stock ownership, and
3. the U.S. payor does not have actual knowledge or reason to know that you
are a United States person and:
a. you have furnished to the U.S. payor an Internal Revenue Service Form
W-8BEN or an acceptable substitute form upon which you certify, under
penalties of perjury, that you are a non-United States person,
b. in the case of payments made outside the United States to you at an
offshore account (generally, an account maintained by you at a bank or
other financial institution at any location outside the United States),
you have furnished to the U.S. payor documentation that establishes your
identity and your status as a non-United States person,
c. the U.S. payor has received a withholding certificate (furnished on an
appropriate Internal Revenue Service Form W-8 or an acceptable
substitute form) from a person claiming to be:
i. a withholding foreign partnership (generally a foreign partnership
that has entered into an agreement with the Internal Revenue Service
to assume primary withholding responsibility with respect to
distributions and guaranteed payments it makes to its partners),
ii. a qualified intermediary (generally a non-United States financial
institution or clearing organization or a non-United States branch
or office of a United States financial institution or clearing
organization that is a party to a withholding agreement with the
Internal Revenue Service), or
iii. a U.S. branch of a non-United States bank or of a non-United States
insurance company,
and the withholding foreign partnership, qualified intermediary or U.S.
branch has received documentation upon which it may rely to treat the
payment as made to a non-United States person in accordance with U.S.
Treasury regulations (or, in the case of a qualified intermediary, in
accordance with its agreement with the Internal Revenue Service),
d. the U.S. payor receives a statement from a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business,
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i. certifying to the U.S. payor under penalties of perjury that an
Internal Revenue Service Form W-8BEN or an acceptable substitute
form has been received from you by it or by a similar financial
institution between it and you, and
ii. to which is attached a copy of the Internal Revenue Service Form
W-8BEN or acceptable substitute form, or
e. the U.S. payor otherwise possesses documentation upon which it may rely
to treat the payment as made to a non-United States person in accordance
with U.S. treasury regulations; and
- no deduction for any United States federal withholding tax will be made from
any gain that you realize on the sale or exchange of your note or coupon.
Further, a note held by an individual, who at death is not a citizen or resident
of the United States, will not be includible in the individual's gross estate
for United States federal estate tax purposes if:
- the decedent did not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Merck & Co., Inc., entitled
to vote at the time of death; and
- the income on the note would not have been effectively connected with a United
States trade or business of the decedent at the same time.
BACKUP WITHHOLDING AND
INFORMATION REPORTING
UNITED STATES HOLDERS
In general, if you are a noncorporate United States holder, we and other
payors are required to report to the Internal Revenue Service all payments of
principal, any premium and interest on your note, and the accrual of OID on a
discount note. In addition, we and other payors are required to report to the
Internal Revenue Service any payment of proceeds of the sale of your note before
maturity within the United States. Additionally, backup withholding will apply
to any payments, including payments of OID, if you fail to provide an accurate
taxpayer identification number, or you are notified by the Internal Revenue
Service that you have failed to report all interest and dividends required to be
shown on your federal income tax returns.
In general, if you are a United States alien holder, payments of
principal, premium or interest, including OID, made by us and other payors to
you will not be subject to backup withholding and information reporting,
provided that the certification requirements described above under "-- United
States Alien Holders" on page S-32 are satisfied or you otherwise establish an
exemption. However, we and other payors are required to report payments of
interest on your notes on Internal Revenue Service Form 1042-S even if the
payments are not otherwise subject to information reporting requirements. In
addition, payment of the proceeds from the sale of notes effected at a United
States office of a broker will not be subject to backup withholding and
information reporting provided that:
- the broker does not have actual knowledge or reason to know that you are a
United States person and you have furnished to the broker:
- an appropriate Internal Revenue Service Form W-8 or an acceptable substitute
form upon which you certify, under penalties of perjury, that you are not a
United States person, or
- other documentation upon which it may rely to treat the payment as made to a
non-United States person in accordance with U.S. Treasury regulations, or
- you otherwise establish an exemption.
If you fail to establish an exemption and the broker does not possess adequate
documentation of your status as a non-United States person, the payments may be
subject to information reporting and backup withholding. However, backup
withholding will not apply with respect to payments made to an offshore account
maintained by you unless
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the broker has actual knowledge that you are a United States person.
In general, payment of the proceeds from the sale of notes effected at a
foreign office of a broker will not be subject to information reporting or
backup withholding. However, a sale effected at a foreign office of a broker
will be subject to information reporting and backup withholding if:
- the proceeds are transferred to an account maintained by you in the United
States,
- the payment of proceeds or the confirmation of the sale is mailed to you at a
United States address, or
- the sale has some other specified connection with the United States as
provided in U.S. Treasury regulations,
unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above
(relating to a sale of notes effected at a United States office of a broker) are
met or you otherwise establish an exemption.
In addition, payment of the proceeds from the sale of notes effected at a
foreign office of a broker will be subject to information reporting if the
broker is:
- a United States person,
- a controlled foreign corporation for United States tax purposes,
- a foreign person 50% or more of whose gross income is effectively connected
with the conduct of a United States trade or business for a specified
three-year period, or
- a foreign partnership, if at any time during its tax year:
- one or more of its partners are "U.S. persons", as defined in U.S. Treasury
regulations, who in the aggregate hold more than 50% of the income or
capital interest in the partnership, or
- such foreign partnership is engaged in the conduct of a United States trade
or business,
unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above
(relating to a sale of notes effected at a United States office of a broker) are
met or you otherwise establish an exemption. Backup withholding will apply if
the sale is subject to information reporting and the broker has actual knowledge
that you are a United States person.
RISKS RELATING TO INDEXED NOTES
Indexed notes may present a high level of risk, and investors in some
indexed notes may lose their entire investment. In addition, the treatment of
indexed notes for U.S. federal income tax purposes is often unclear due to the
absence of any authority specifically addressing the issues presented by any
particular indexed note. Thus, if you are an investor in indexed notes, you
should be capable of independently evaluating the federal income tax
consequences of purchasing an indexed note that apply in your particular
circumstances. You should also read "United States Taxation" on pages S-24 to
S-35 for a discussion of U.S. tax matters.
LOSS OF PRINCIPAL OR INTEREST
The principal amount of an indexed note payable at maturity, and/or the
amount of interest payable on an interest payment date, will be determined by
reference to a currency exchange rate, commodity price, stock price or price of
a basket of stocks, a stock index or any other index described in your pricing
supplement. We refer to each of these as an "index". The direction and magnitude
of the change in the value of the relevant index will determine the principal
amount of an indexed note payable at maturity and/or the amount of interest
payable on an interest payment date. The terms of a particular indexed note may
or may not include a guaranteed return of a percentage of the face amount at
maturity or a minimum interest rate. Thus, if you purchase an indexed note, you
may lose all or a portion of the principal you invest and may receive no
interest on your investment.
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VOLATILITY
Some indices are highly volatile, which means that their value may change
significantly, up or down, over a short period of time. The amount of principal
or interest that can be expected to become payable on an indexed note may vary
substantially from time to time. Because the amount of principal or interest
payable on an indexed note is generally calculated based on the value of the
relevant index on a specified date or over a limited period of time, volatility
in the index increases the risk that the return on the indexed notes may be
adversely affected by a fluctuation in the level of the relevant index.
The volatility of an index may be affected by political or economic
events, including governmental actions, or by the activities of participants in
the relevant markets. Any of these events or activities could adversely affect
the value of an indexed note.
COMPOSITION AND AVAILABILITY OF INDICES
Some indices may consist of or refer to several different currencies,
commodities, securities or other financial instruments. The compiler of such an
index typically reserves the right to alter the composition of the index and the
manner in which the value of the index is calculated. An alteration may result
in a decrease in the value of or return on an indexed note that is linked to the
index.
An index of this kind may become unavailable due to events such as war,
natural disasters, cessation of publication of the index or a suspension or
disruption of trading in any currency, commodity, security or other financial
instrument on which the index is based. If an index becomes unavailable, we may
delay determining the amount payable as principal or interest on an indexed note
or we may use an alternative method to determine the value of the unavailable
index. Alternative methods of valuation are generally intended to produce a
value similar to the value resulting from reference to the relevant index.
However, it is unlikely that any alternative method of valuation we use will
produce a value identical to the value that the actual index would produce. If
we use an alternative method of valuation for a note linked to an index of this
kind, the value of the note, or the rate of return on it, may be lower than it
otherwise would be.
Indexed notes may be linked to indices that are not commonly used or have
been developed only recently. The lack of a trading history may make it
difficult to anticipate the volatility or other risks associated with an indexed
note of this kind. In addition, trading in these indices or their underlying
currencies, commodities, securities or other financial instruments may be
limited, which could increase their volatility and decrease the value of the
related indexed notes or the rates of returns on them.
INFORMATION ABOUT INDICES
If we issue an indexed note, we may include historical information about
the relevant index in the applicable pricing supplement. Any information about
indices that we may provide will be furnished as a matter of information only
and you should not regard the information as indicative of the range of, or
trends in fluctuations in, the relevant index that may occur in the future.
RISKS RELATING TO
FOREIGN CURRENCY NOTES
If you intend to invest in a note the principal of which or interest on which is
payable in a currency other than U.S. dollars, you should consult your own
financial and legal advisors about the currency risks entailed by your
investment. Notes of this kind are not an appropriate investment for investors
who are unsophisticated with respect to foreign currency transactions.
The information in this section is directed to investors who are U.S. residents,
and does not address risks for investors who are not U.S. residents. If you are
not a U.S. resident, you should consult your own financial and legal advisors.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in a note with a specified currency other than U.S. dollars
entails significant risks that are not associated with a similar investment in a
note payable solely in U.S. dollars. These risks include the
S-36
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 or other
conditions by either the U.S. or foreign governments. These risks generally
depend on factors over which we have 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 several foreign currencies
have been highly volatile, and this volatility may be expected to continue and
perhaps spread to other currencies 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 in
which a note is denominated against the U.S. dollar could result in a decrease
in the effective yield of the note and, in certain circumstances, could result
in a loss to the investor on a U.S. dollar basis.
Foreign exchange rates can either float or be fixed by sovereign
governments. From time to time, governments use a variety of techniques, such as
intervention by a country's central bank or imposition of regulatory controls or
taxes, to affect the exchange rate of their currencies. Governments may also
issue a new currency to replace an existing currency or alter the exchange rate
or exchange characteristics by devaluation or revaluation of a currency. Thus, a
special risk in purchasing non-U.S. dollar denominated notes is that their U.S.
dollar-equivalent yields or payouts could be affected by governmental actions.
In addition, the ability of a holder to move currency freely out of the country
in which it is paid or to convert the currency at a freely determined market
rate could be limited by governmental actions. There will be no adjustment or
change in the terms of these notes in the event that exchange rates should
become fixed or be allowed to float, in the event of any devaluation,
revaluation or imposition of exchange or other regulatory controls or taxes, or
in the event of other developments affecting the U.S. dollar or any other
applicable specified currency.
Governments have imposed from time to time and may in the future impose
exchange controls or other conditions with respect to the exchange or transfer
of a specified currency that could affect exchange rates as well as the
availability of a specified currency for a note at its maturity or on any other
payment date. Even if there are no actual exchange controls or other conditions
in place for a specified currency, it is possible that the currency would not be
available on a day when payment in that currency is due. In that event, we will
be entitled to make all payments due, including payments due at maturity or on
the redemption or repayment date if the notes are redeemed or repaid earlier, in
U.S. dollars, using the most recently available exchange rate, as we describe
above under "Description of Notes We May Offer -- Payment Mechanics" on page
S-18.
GOVERNING LAW AND JUDGMENTS
New York law will govern the notes. A judgment for money in an action
based on a note denominated in a foreign currency in a federal or state court in
the United States ordinarily would be enforced in the United States only in U.S.
dollars. The date used to determine the rate of conversion of the currency in
which any particular note is denominated into U.S. dollars will depend upon
various factors, including which court renders the judgment. Under Section 27 of
the New York Judiciary Law, for example, a state court in the State of New York
rendering a judgment on a note denominated in a foreign currency would be
required to render the judgment in the specified currency, and the judgment
would be converted into U.S. dollars at the exchange rate prevailing on the date
of entry of the judgment. That rate will likely differ from the exchange rate
used under the terms that apply to the notes.
INFORMATION ABOUT EXCHANGE RATES
If we issue a note denominated in other than U.S. dollars, we may include
in the applicable pricing supplement a currency supplement that provides
information about historical exchange rates for the specified
S-37
currency. Any information about exchange rates that we may provide will be
furnished as a matter of information only and you should not regard the
information as indicative of the range of or trends in fluctuations in currency
exchange rates that may occur in the future.
SUPPLEMENTAL PLAN OF DISTRIBUTION
We and the agents named on the cover of this prospectus supplement have
entered into a distribution agreement with respect to the notes. Subject to some
conditions, the agents have agreed to use their reasonable efforts to solicit
purchases of the notes. We have the right to accept offers to purchase notes and
may reject any proposed purchase of the notes. The agents may also reject any
offer to purchase notes. We will pay the agents a commission on any notes sold
through the agents. Unless otherwise agreed, the commission will range from
0.125% to 0.750% of the principal amount of the notes, depending on the maturity
of the notes.
We may also sell notes to the agents who will purchase the notes as
principal for their own accounts. Sales of this type will be made at a discount
equal to the discount set forth on the cover page of this prospectus supplement
if no other discount is agreed. Any notes the agents purchase as principal may
be resold at the market price or at other prices determined by the agents at the
time of resale. We may also sell notes directly on our own behalf. We will not
pay a commission on notes we sell directly.
The agents may resell any notes they purchase to other brokers or dealers
at a discount which may include all or part of the discount the agents received
from us. The agents will purchase the notes at a price equal to 100% of the
principal amount less a discount. Unless otherwise stated, the discount will
equal the applicable commission on an agency sale of notes of the same maturity.
If all the notes are not sold at the initial offering price, the agents may
change the offering price and the other selling terms.
Unless otherwise specified in the pricing supplement, notes denominated in
a specified currency other than U.S. dollars or euro will not be sold in the
country issuing that specified currency or to residents of that country.
The agents, whether acting as agents or principals, may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933. We have agreed
to indemnify the several agents against liabilities, including liabilities under
the 1933 Act.
The agents may sell to dealers who may resell to investors, and the agents
may pay all or part of the discount or commission they receive from us to the
dealers. Those dealers may be deemed to be "underwriters" within the meaning of
the 1933 Act.
The notes are a new issue of securities with no established trading market
and will not be listed on a securities exchange. We cannot give you any
assurance about how liquid or illiquid the trading market for the notes will be.
We estimate that our share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$1,000,000.
In connection with the offering of the notes, the agents may purchase and
sell notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the agents of a greater number of notes
than they are required to purchase in the offering. Stabilizing transactions
consist of certain bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the notes while the offering is in
progress.
The agents also may impose a penalty bid. This occurs when a particular
agent or a broker or dealer repays to the other agents a portion of the
underwriting discount received by it because the other agents have repurchased
notes sold by or for the account of that agent or broker or dealer in
stabilizing or short covering transactions.
These activities by the agents may stabilize, maintain or otherwise affect
the market price of the notes. As a result, the price of the notes may be higher
than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the agents at any time.
These transactions may be effected in the over-the-counter market or otherwise.
S-38
Each of the agents and their affiliates may engage in various transactions
with us and perform various services for us in the ordinary course of business.
VALIDITY OF NOTES
Kenneth C. Frazier, our Senior Vice President and General Counsel, will
pass on the validity of the notes for us. Sullivan & Cromwell, 125 Broad Street,
New York, New York 10004, will pass on the validity of the notes for the agents.
As of November 30, 2001, Mr. Frazier owned, directly and indirectly, 3,364
shares of our common stock and exercisable options to purchase 152,250
additional shares of our common stock. Sullivan & Cromwell has from time to time
provided legal services to us. The opinions of Mr. Frazier and Sullivan &
Cromwell will be based upon assumptions about future actions required to be
taken in connection with the issuance and sale of each note and about other
events which may affect the validity of notes but which cannot be ascertained on
the date of the opinions.
S-39
$2,405,277,000
(LOGO)
MERCK & CO., INC.
DEBT SECURITIES
---------------------
Merck & Co., Inc. may from time to time issue up to a total of
$2,405,277,000 of debt securities. The accompanying prospectus supplement will
specify the terms of the securities.
Merck & Co., Inc. may sell these securities to or through underwriters, and
also to other purchasers or through agents. We will set forth the names of any
underwriters or agents in the accompanying prospectus supplement.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------
Prospectus dated November 28, 2001.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC utilizing a shelf registration process. Under this shelf process, we may
sell any combination of the debt securities described in this prospectus in one
or more offerings up to a total amount of $2,405,277,000. This prospectus
provides you with a general description of the debt securities we may offer.
Each time we sell debt securities, we will provide a prospectus supplement that
will contain specific information about the terms of that offering. The
prospectus supplement may also add to or update other information contained in
this prospectus. You should read both this prospectus and the accompanying
prospectus supplement together with additional information described under the
heading "Where You Can Find More Information" on page 13.
i
MERCK
We are a global research-driven pharmaceutical company that discovers,
develops, manufactures and markets a broad range of human and animal health
products and provides pharmaceutical benefit services. We have two reportable
business segments: Merck Pharmaceutical and Merck-Medco. Merck Pharmaceutical
products consist of therapeutic agents, sold by prescription, for the treatment
of human disorders. Merck-Medco revenues are derived from the filling and
management of prescriptions and health management programs.
Our human health products include therapeutic agents, sold by prescription,
for the treatment of human disorders, as well as preventive agents. Among these
are atherosclerosis products, hypertension/heart failure products,
anti-inflammatory/analgesics, osteoporosis products, vaccines/biologicals, a
respiratory product, anti-ulcerants, antibiotics, ophthalmologicals, and HIV
products.
We conduct a portion of our human health products business through joint
ventures with other companies, including joint ventures with Johnson & Johnson
and Aventis Pasteur S.A. We are also a limited partner in a partnership with
AstraZeneca PLC.
Through a joint venture with Aventis S.A., we also conduct an animal health
and poultry genetics business.
Our Merck-Medco segment includes our sales of non-Merck products and our
pharmaceutical benefits services, principally managed prescription drug programs
and programs to help manage patient health and drug utilization.
We were incorporated in the State of New Jersey in 1927 and maintain our
principal offices at Whitehouse Station, New Jersey. Our address is P.O. Box
100, One Merck Drive, Whitehouse Station, New Jersey 08889-0100 and our
telephone number is (908) 423-1000. The terms "Merck", "we", "us" or "our"
generally refer to Merck & Co., Inc. and its consolidated subsidiaries, except
that only Merck & Co., Inc. legally will be the issuer of the debt securities
offered under this prospectus.
RATIOS OF EARNINGS TO
FIXED CHARGES
Our consolidated ratios of earnings to fixed charges for the nine months
ended September 30, 2001 and each of the fiscal years ended December 31, 1996
through 2000 are as follows:
YEARS ENDED DECEMBER 31,
NINE MONTHS ENDED --------------------------------
SEPTEMBER 30, 2001 2000 1999 1998 1997 1996
------------------ ---- ---- ---- ---- ----
14 14 18 26 29 23
For purposes of computing these ratios, earnings consist of income before
income taxes, cumulative effect of accounting changes, one-third of rents, which
is the amount we consider to be representative of the interest factor inherent
in rents, interest expense, net of amounts capitalized, and dividends on
preferred stock of subsidiary companies. Fixed charges consist of one-third of
rents, interest expense as reported in our consolidated financial statements and
dividends on preferred stock of subsidiary companies.
USE OF PROCEEDS
Unless otherwise indicated in the accompanying prospectus supplement, we
will use the net proceeds from the sale of the debt securities for general
corporate purposes, including the reduction of short-term debt. We may
temporarily invest funds that we do not immediately need for these purposes in
short-term marketable securities.
1
DESCRIPTION OF DEBT SECURITIES
WE MAY OFFER
As required by Federal law for all bonds and notes that are publicly
offered, a document called the indenture governs the debt securities. The
indenture is a contract, dated as of April 1, 1991, which we amended once and
may amend further in the future, between us and U.S. Bank Trust National
Association, which acts as trustee. The trustee has two main roles. First, the
trustee can enforce your rights against us if we default. There are some
limitations on the extent to which the trustee acts on your behalf, described on
page 11 under "-- Remedies if an Event of Default Occurs". Second, the trustee
performs administrative duties for us, such as sending you interest payments,
registering transfers of your debt securities to a new buyer if you sell and
sending you notices.
The indenture and its associated documents contain the full legal text of
the matters described in this section. New York law governs the indenture and
the debt securities. The indenture is an exhibit to our registration statement.
See "Where You Can Find More Information" on page 13 for information on how to
obtain a copy.
We may issue as many distinct series of debt securities under the indenture
as we wish. This section summarizes all the material terms of the debt
securities that are common to all series unless otherwise indicated in the
prospectus supplement relating to a particular series.
Because this section is a summary, it does not describe every aspect of the
debt securities, and is subject to and qualified in its entirety by reference to
all the provisions of the indenture, including definitions of some of the terms
used in the indenture. We describe the meaning for only the more important
terms. We also include references in parentheses to some sections of the
indenture. Whenever we refer to particular sections or defined terms of the
indenture in this prospectus or in the prospectus supplement, we incorporate by
reference those sections or defined terms here or in the prospectus supplement.
We may issue the debt securities as original issue discount securities,
which we would offer and sell at a substantial discount below their stated
principal amount. (section 101) A prospectus supplement relating to original
issue discount securities will describe federal income tax consequences and
other special considerations applicable to them. We may also issue the debt
securities as indexed securities or securities denominated in foreign currencies
or currency units, as described in more detail in a prospectus supplement
relating to any of these types of debt securities. A prospectus supplement
relating to indexed debt securities or foreign currency debt securities will
also describe any additional tax consequences or other special considerations
applicable to these types of debt securities.
In addition, we will describe the material specific financial, legal and
other terms particular to debt securities of each series in the prospectus
supplement relating to the debt securities of that series. The prospectus
supplement relating to debt securities of the series will describe the following
terms of the debt securities:
- the title of the debt securities of the series;
- any limit on the total principal amount of the debt securities of the
series;
- the date or dates on which the debt securities of the series will mature;
- any rate or rates, which may be fixed or variable, per annum at which the
debt securities of the series will bear interest, if any, and the date or
dates from which any interest will accrue;
- the date or dates on which any interest on the debt securities of the
series will be payable and the regular record date or dates we will use
to determine who is entitled to receive each interest payment;
- the place or places where the principal and any premium and interest will
be payable;
- any period or periods within which and the price or prices at which we
will have the option to redeem the debt securities of the series, and the
other detailed terms and provisions of any optional redemption right;
2
- any obligation we will have to redeem the debt securities of the series
under a sinking fund or analogous provision or to redeem your debt
securities at your option and the period or periods during which, the
price or prices at which and the other specific terms under which we
would be obligated to redeem the debt securities of the series under any
obligation of this kind;
- if other than integral multiples of $1,000, the denominations in which we
will issue the debt securities of the series;
- if other than United States dollars, the currency of payment of the
principal and any premium and interest on the debt securities of the
series;
- any index or other special method we will use to determine the amount of
principal or any premium or interest we will pay on the debt securities
of the series;
- if we or you have a right to choose the currency or currency units in
which payments on any of the debt securities of the series will be made,
the currencies or currency units that we or you may elect, when we or you
may make the election and the other specific terms of the right to make
an election of this kind;
- if other than the principal amount, the portion of the principal amount
of the debt securities of the series which will be payable upon the
declaration of acceleration of the maturity of the debt securities of the
series;
- the applicability of the provisions described on page 10 under
"-- Defeasance";
- if we will issue the debt securities of the series only in the form of
global securities as described below under "-- Global Securities", the
name of the depository for the debt securities of the series and the
circumstances under which the trustee may terminate the global securities
and register separate debt securities in the names of persons other than
the depository or its nominee if other than those circumstances described
on page 5 under "-- Special Situations When a Global Security will be
Terminated"; and
- any other special terms of the debt securities of the series that are not
inconsistent with the provisions of the indenture.
We will attach the prospectus supplement relating to the debt securities of
the series to the front of this prospectus.
We may issue debt securities other than the debt securities described in
this prospectus. There is no requirement that we issue any other debt securities
under the indenture. Thus, we may issue any other debt securities under other
indentures or documentation, containing provisions different from those included
in the indenture or applicable to one or more issues of the debt securities
described in this prospectus.
LEGAL OWNERSHIP
STREET NAME AND OTHER INDIRECT HOLDERS
We generally will not recognize investors who hold debt securities in
accounts at banks or brokers as legal holders of debt securities. Holding in
that way is called holding in street name. Instead, we would recognize only the
bank or broker, or the financial institution the bank or broker uses to hold its
debt securities. These intermediary banks, brokers and other financial
institutions pass along principal, interest and other payments on the debt
securities, either because they agree to do so in their customer agreements or
because they are legally required to. If you hold debt securities in street
name, you should check with your own institution to find out:
- how it handles securities payments and notices;
- whether it imposes fees or charges;
- how it would handle voting if ever required;
3
- whether and how you can instruct it to send you debt securities
registered in your own name so you can be a direct holder as described
below; and
- how it would pursue rights under the debt securities if there were a
default or other event triggering the need for holders to act to protect
their interests.
DIRECT HOLDERS
Our obligations, as well as the obligations of the trustee and those of any
third parties employed by us or the trustee, run only to persons or entities who
are the direct holders of debt securities, i.e., those who are registered as
holders of debt securities. As noted above, we do not have obligations to you if
you hold in street name or through other indirect means, either because you
choose to hold debt securities in that manner or because we issued the debt
securities in the form of global securities as described below. For example,
once we make payment to the registered holder, we have no further responsibility
for the payment even if that registered holder is legally required to pass the
payment along to you as a street name customer but does not do so.
GLOBAL SECURITIES
What is a Global Security? A global security is a special type of
indirectly held security, as described above under "-- Street Name and Other
Indirect Holders". If we choose to issue debt securities in the form of global
securities, the ultimate beneficial owners can only be indirect holders. We do
this by requiring that the global security be registered in the name of a
financial institution we select and by requiring that the debt securities
included in the global security not be transferred to the name of any other
direct holder unless the special circumstances described below occur. The
financial institution that acts as the sole direct holder of the global security
is called the depository.
Any person wishing to own a debt security included in a global security
must do so indirectly by virtue of an account with a broker, bank or other
financial institution that in turn has an account with the depository. The
prospectus supplement indicates whether we will issue your debt securities only
in the form of global securities.
Special Investor Considerations for Global Securities. The account rules
of your financial institution and the rules of the depository, as well as
general laws relating to securities transfers, will govern your rights as an
indirect holder of a global security. We will not recognize you as a registered
holder of debt securities and instead will deal only with the depository that
holds the global security.
You should be aware that if debt securities are issued only in the form of
global securities:
- You cannot have debt securities registered in your own name.
- You cannot receive physical certificates for your interest in the debt
securities.
- You will be a street name holder and must look to your own bank or broker
for payments on the debt securities and protection of your legal rights
relating to the debt securities. See "-- Street Name and Other Indirect
Holders" on page 3.
- You may not be able to sell interests in the debt securities to some
insurance companies and other institutions that are required by law to
own their securities as direct holders.
- The depository's policies will govern payments, transfers, exchange and
other matters relating to your interest in the global security. We and
the trustee have no responsibility for any aspect of the depository's
actions or for its records of ownership interests in the global security.
We and the trustee also do not supervise the depository in any way.
- The depository will require that you purchase or sell interests in a
global security within its system using same-day funds for settlement.
4
Special Situations When a Global Security will be Terminated. In a few
special situations described later, the trustee will terminate the global
security and will exchange interests in it for separate certificates
representing debt securities. After that exchange, the choice of whether to hold
debt securities directly or in street name will be up to you. You must consult
your own bank or broker to find out how to have your interests in the debt
securities transferred to your own name, so that you will be a direct holder. We
previously described the rights of street name investors and direct holders in
the debt securities in the subsections entitled, "-- Street Name and Other
Indirect Holders" on page 3 and "-- Direct Holders" on page 4.
The special situations for termination of a global security are:
- When the depository notifies us that it is unwilling, unable or no longer
qualified to continue as depository,
- When we notify the trustee that we wish to terminate the global security,
or
- When an event of default on the debt securities has occurred and has not
been cured. Defaults are discussed on pages 11 and 12 under "-- Events of
Default".
The prospectus supplement may also list additional situations for
terminating a global security that would apply only to the particular debt
securities of the series covered by the prospectus supplement. When a global
security terminates, the depository, and not we or the trustee, is responsible
for deciding the names of the institutions that will be the initial direct
holders. (sections 204 and 305)
In the remainder of this description "you" means direct holders and not
street name or other indirect holders of debt securities. Indirect holders
should read the previous subsection on page 3 entitled "-- Street Name and Other
Indirect Holders".
OVERVIEW OF REMAINDER OF THIS DESCRIPTION
The remainder of this description summarizes:
- ADDITIONAL MECHANICS relevant to the debt securities under normal
circumstances, such as how you transfer ownership and where we make
payments.
- Your rights under several SPECIAL SITUATIONS, such as if we merge with
another company or if we want to change a term of the debt securities.
- RESTRICTIVE COVENANTS contained in the indenture which specify particular
business actions that we promise not to take. Particular securities of a
series may have additional restrictive covenants.
- Your rights if we DEFAULT or experience other financial difficulties.
- OUR RELATIONSHIP WITH THE TRUSTEE.
ADDITIONAL MECHANICS
FORM, EXCHANGE AND REGISTRATION OF TRANSFER
We will issue the debt securities:
- only in fully registered form;
- without interest coupons; and
- unless otherwise indicated in the prospectus supplement, in denominations
that are integral multiples of $1,000. (section 302)
You may have your debt securities broken into more debt securities of
smaller denominations or combined into fewer debt securities of larger
denominations, as long as the total principal amount is not changed. (section
305) This is called an exchange.
5
You may exchange or register a transfer of debt securities at the office of
the trustee. The trustee acts as our agent for registering debt securities in
the names of holders and registering transfers of debt securities. We may change
this appointment to another entity or perform it ourselves. The entity
performing the role of maintaining the list of registered direct holders is
called the security registrar. It will also register transfers. (section 305)
You will not be required to pay a service charge to register a transfer of
debt securities or to exchange debt securities, but you may be required to pay
for any tax or other governmental charge associated with the transfer or
exchange. The security registrar will make the registration of transfer or
exchange only if it is satisfied with your proof of ownership. (section 305)
If we have designated additional transfer agents, they are named in the
prospectus supplement. We may cancel the designation of any particular transfer
agent. We may also approve a change in the office through which any transfer
agent acts. (section 1002)
If the debt securities are redeemable and we redeem less than all of the
debt securities of a particular series, we may block the registration of
transfer or exchange of debt securities during the period beginning 15 days
before the day we mail the notice of redemption and ending on the day of that
mailing, in order to freeze the list of holders to prepare the mailing. We may
also refuse to register transfers or exchanges of debt securities selected for
redemption, except that we will continue to permit transfers and exchanges of
the unredeemed portion of any debt security being partially redeemed. (section
305)
PAYMENT AND PAYING AGENTS
We will pay interest to you on each date interest is due if you are a
direct holder listed in the trustee's records at the close of business on a
particular day in advance of each due date for interest, even if you no longer
own the debt security on the interest due date. That particular day, usually
about two weeks in advance of the interest due date, is called the regular
record date and is stated in the prospectus supplement. (section 307) Holders
buying and selling debt securities must work out between them how to compensate
for the fact that we will pay all the interest for an interest period to the one
who is the registered holder on the regular record date. The most common manner
is to adjust the sales price of the debt securities to pro-rate interest fairly
between buyer and seller. This pro-rated interest amount is called accrued
interest.
Unless otherwise stated in the prospectus supplement, we will pay interest,
principal and any other money due on the debt securities at the corporate trust
office of the trustee in New York City. (section 1002) That office is currently
located at 100 Wall Street, 16th floor, New York, New York 10005. You must make
arrangements to have your payments picked up at or wired from that office. We
may also choose to pay interest by mailing checks.
Street name and other indirect holders should consult their banks or
brokers for information on how they will receive payments.
We may also arrange for additional payment offices, and may cancel or
change these offices, including our use of the trustee's corporate trust office.
These offices are called paying agents. We may also choose to act as our own
paying agent. We must notify you of changes in the paying agents for any
particular debt securities of the series. (section 1002)
NOTICES
We and the trustee will send notices regarding the debt securities only to
direct holders, using their addresses as listed in the trustee's records.
(sections 101 and 106)
All paying agents must return to us all money paid by us that remains
unclaimed two years after the amount is due to direct holders. After that
two-year period, you may look only to us for payment and not to the trustee, any
other paying agent or anyone else. (section 1003)
6
SPECIAL SITUATIONS
MERGERS AND SIMILAR EVENTS
We may consolidate or merge with another company or firm. We may also sell
or lease substantially all of our assets to another firm, or to buy or lease
substantially all of the assets of another firm. However, we may not take any of
these actions unless the following conditions, among others, are met:
- Where we merge out of existence or sell or lease substantially all our
assets, the other firm must be a corporation, partnership or trust
organized under the laws of a U.S. state or the District of Columbia or
under Federal law and it must agree to be legally responsible for the
debt securities.
- The merger, sale of assets or other transaction must not cause a default
on the debt securities, and we must not already be in default unless the
merger or other transaction would cure the default. For purposes of this
no-default test, a default would include an event of default, as
described on page 11, that has occurred and not been cured. A default for
this purpose would also include the occurrence of any event that would be
an event of default if we received the required notice of our default or
if under the indenture the default would become an event of default after
existing for a specific period of time. (section 801)
- It is possible that the merger, sale of assets or other transaction would
cause some of our property to become subject to a mortgage or other legal
mechanism giving lenders preferential rights in that property over other
lenders or over our general creditors if we fail to pay them back. We
have promised to limit these preferential rights, as discussed under
"-- Restrictive Covenants" on pages 8 through 10. If a merger or other
transaction would create any liens on any of our property we must comply
with those restrictive covenants. We would do this either by deciding
that the liens were permitted, or by following the requirements of the
restrictive covenants to grant an equivalent or higher-ranking lien to
you and the other direct holders of the debt securities on the same
property that we own.
MODIFICATION AND WAIVER
There are three types of changes we can make to the indenture and the debt
securities.
Changes Requiring Your Approval. First, there are changes that cannot be
made to your debt securities without your specific approval. Following is a list
of those types of changes:
- change the payment due date of any installment of the principal or any
interest on a debt security stated in the debt security;
- reduce any amounts due on a debt security;
- reduce the amount of principal payable upon acceleration of the maturity
of a debt security following a default;
- change the place or currency of payment on a debt security;
- impair your right to sue for payment;
- reduce the percentage of debt securities the holders of which must
consent to modify or amend the indenture;
- reduce the percentage of debt securities the holders of which must
consent to waive compliance with certain provisions of the indenture or
to waive certain defaults; and
- modify any other aspect of the provisions dealing with modification and
waiver of the indenture. (section 902)
Changes Requiring a Majority Vote. The second type of change to the
indenture and the debt securities is the kind that requires a vote in favor by
direct holders owning a majority of the principal amount of the debt securities
of the particular series affected. (section 902) Most changes fall into this
category, such as if we
7
wish to obtain a waiver of all or part of the restrictive covenants described
below, or a waiver of a past default. However, we cannot obtain a waiver of a
payment default or any other aspect of the indenture or the securities listed in
the first category on page 7 under "-- Changes Requiring Your Approval" unless
we obtain your individual consent to the waiver. (section 513)
Changes Not Requiring Approval. The third type of change does not require
any vote by holders of debt securities. This type is limited to corrections and
clarifications and other changes that would not adversely affect holders of the
debt securities. (section 901)
Further Details Concerning Voting. When taking a vote, we will use the
following rules to decide how much principal amount to attribute to a debt
security:
- For original issue discount securities, we will use the principal amount
that would be due and payable on the voting date if the maturity of the
debt securities were accelerated to that date because of a default.
- For debt securities for which the principal amount is undetermined
because, for example, it is based on an index, we will use a special rule
for that series of debt security that we will describe in the prospectus
supplement.
- For debt securities denominated in one or more foreign currencies or
currency units, we will use the U.S. dollar equivalent.
Debt securities will not be considered outstanding and therefore will not
carry voting rights if we have deposited or set aside in trust for you money for
their payment or redemption. (section 107) Debt securities will also not be
eligible to vote if they have been fully defeased as described on page 10 under
"-- Full Defeasance". (section 101)
We may set any day as a record date for the purpose of determining the
direct holders of outstanding debt securities that are entitled to vote or take
other action under the indenture. (section 301) In some circumstances, the
trustee may set a record date for action by direct holders.
Street name and other indirect holders should consult their banks or
brokers for information on how approval may be granted or denied if we seek to
change the indenture or the debt securities or request a waiver.
RESTRICTIVE COVENANTS
In the following description of restrictive covenants, we use several
specialized terms without explaining the meaning when we use the terms. We
define these terms, which appear in BOLD, ITALICIZED type without quotation
marks the first time they appear, in "-- Definitions Relating to our Restrictive
Covenants" at the end of this subsection on pages 9 and 10.
Restrictions on Secured Debt. Some of our property may be subject to a
mortgage or other legal mechanism that gives our lenders preferential rights in
that property over other lenders, including you and the other direct holders of
the debt securities, or over our general creditors if we fail to pay them back.
These preferential rights are called liens. Debt which is protected by these
preferential rights is called secured debt. In the indenture, we promise that we
will not incur any new secured debt that is secured by a lien on any of our
PRINCIPAL DOMESTIC MANUFACTURING PROPERTIES, or on any shares of stock or debt
of any of our DOMESTIC SUBSIDIARIES, unless we grant an equivalent or
higher-ranking lien on the same property to you and the other direct holders of
the debt securities.
We do not need to comply with this restriction if the amount of all debt
that would be secured by liens on principal domestic manufacturing properties,
including the new debt, the debt securities which we would so secure as
described in the previous sentence, and all ATTRIBUTABLE DEBT, that results from
a sale and leaseback transaction involving principal domestic manufacturing
properties, is less than 10% of our CONSOLIDATED NET TANGIBLE ASSETS.
8
This restriction on secured debt does not apply to debt secured by certain
types of liens, and we can disregard this secured debt when we calculate the
limits imposed by this restriction. These types of liens are:
- liens on the property of any of our domestic subsidiaries, or on their
shares of stock or debt, if those liens existed at the time the
corporation became our domestic subsidiary;
- liens in favor of us or our domestic subsidiaries;
- liens in favor of U.S. governmental bodies that we granted in order to
assure our payments to such bodies that we owe by law or because of a
contract we entered into;
- liens on property that existed at the time we acquired the property,
including property we may acquire through a merger or similar
transaction, or that we granted in order to purchase the property, which
are sometimes called purchase money mortgages; and
- debt secured by liens that extend, renew or replace any of these types of
liens.
We and our subsidiaries may have as much unsecured debt as we may choose.
(section 1008)
Restrictions on Sales and Leasebacks. We promise that neither we nor any
of our domestic subsidiaries will enter into any sale and leaseback transaction
involving a principal domestic manufacturing property, unless we comply with
this restrictive covenant. A sale and leaseback transaction generally is an
arrangement between us or a domestic subsidiary and a bank, insurance company or
other lender or investor where we or the domestic subsidiary sell a property to
a lender or investor more than 120 days after the completion of construction of
the property and the beginning of its full operation and we lease the property
back from the lender.
We can comply with this restrictive covenant in either of two ways:
- First, we will be in compliance if we or our domestic subsidiary could
grant a lien on the principal domestic manufacturing property in an
amount equal to the attributable debt for the sale and leaseback
transaction without being required to grant an equivalent or
higher-ranking lien to you and the other direct holders of the debt
securities under the restriction on secured debt described on page 8.
- Second, we can comply if we retire an amount of FUNDED DEBT, within 120
days of the transaction, equal to at least the net proceeds of the sale
of the principal domestic manufacturing property that we lease in the
transaction or the fair value of that property, subject to credits for
voluntary retirements of debt securities and funded debt we may make,
whichever is greater.
This restriction on sales and leasebacks does not apply to any sale and
leaseback transaction that is between us and one of our domestic subsidiaries or
between domestic subsidiaries, or that involves a lease for a period of three
years or less. (section 1009)
Definitions Relating to our Restrictive Covenants. Following are the
meanings of the terms that are important in understanding the restrictive
covenants previously described:
- "Attributable debt" means the total net amount of rent, discounted at 1%
per annum compounded semi-annually, that is required to be paid during
the remaining term of any lease.
- "Consolidated net tangible assets" is the total amount of assets, less
reserves and certain other permitted deductible items, after subtracting
all current liabilities and all goodwill, trade names, trademarks,
patents, unamortized debt discounts and expenses and similar intangible
assets, as such amounts appear on our most recent consolidated balance
sheet and computed in accordance with generally accepted accounting
principles.
- A "domestic subsidiary" means any of our subsidiaries which transacts
substantially all of its business in the United States, has substantially
all of its fixed assets located in the United States, or owns or leases
principal domestic manufacturing property. However, a subsidiary whose
principal business is financing our operations outside of the United
States is not a domestic subsidiary. A subsidiary is a
9
corporation in which we and/or one or more of our other subsidiaries owns
at least 50% of the voting stock, which is a kind of stock that
ordinarily permits its owners to vote for the election of directors.
- "Funded debt" means all debt for borrowed money that either has a
maturity of 12 months or more from the date on which the calculation of
funded debt is made or has a maturity of less than 12 months from that
date but is by its terms renewable or extendible beyond 12 months from
that date at the option of the borrower.
- A "principal domestic manufacturing property" is any building or other
structure or facility, and the land on which it sits and its associated
fixtures, that we use primarily for manufacturing or processing and that
is located in the United States, other than a building, structure or
other facility that our board of directors has determined is not of
material importance to the total business that we and our subsidiaries
conduct or a building or structure which is financed by obligations
issued by a U.S. governmental entity, the interest of which is excludable
from gross income of the holders under provisions of the tax code.
DEFEASANCE
The following discussion of full defeasance and covenant defeasance will be
applicable to your debt securities of the series only if we choose to have those
provisions apply to those securities. If we do so choose, we will state that in
the prospectus supplement. (section 1301)
Full Defeasance. If there is a change in federal tax law, as described
below, we can legally release ourselves from any payment or other obligations on
the debt securities if we put in place other arrangements for you to be repaid.
This is called full defeasance. In order to achieve full defeasance, we must do
the following:
- We must deposit in trust for your benefit and the benefit of all other
direct holders of the debt securities any combination of money and U.S.
government or U.S. government agency notes or bonds that will generate
enough cash to make interest, principal and any other payments on the
debt securities on their various due dates.
- There must be a change in current federal tax law or an IRS ruling that
lets us make the above deposit without causing you to be taxed on the
debt securities any differently than if we did not make the deposit and
just repaid the debt securities ourselves. Under current federal tax law,
the deposit and our legal release from the debt securities would be
treated as though we took back your debt securities and gave you your
share of the cash and notes or bonds deposited in trust. In that event,
you could recognize gain or loss on the debt securities you give back to
us.
- We must deliver to the trustee a legal opinion of our counsel confirming
the tax law change described above.
If we ever did accomplish full defeasance, as described above, you would
have to rely solely on the trust deposit for repayment on the debt securities.
You could not look to us for repayment in the unlikely event of any shortfall.
Conversely, the trust deposit would most likely be protected from claims of our
lenders and other creditors if we ever become bankrupt or insolvent. (sections
1302 and 1304)
Covenant Defeasance. Under current federal tax law, we can make the same
type of deposit described above and be released from some of the restrictive
covenants in the debt securities. This is called covenant defeasance. In that
event, you would lose the protection of those restrictive covenants but would
gain the protection of having money and securities set aside in trust to repay
the debt securities. In order to achieve covenant defeasance, we must do the
following:
- We must deposit in trust for your benefit and the benefit of all other
direct holders of the debt securities any combination of money and U.S.
government or U.S. government agency notes or bonds that will generate
enough cash to make interest, principal and any other payments on the
debt securities on their various due dates.
10
- We must deliver to the trustee a legal opinion of our counsel confirming
that under current federal income tax law we may make the above deposit
without causing you to be taxed on the debt securities any differently
than if we did not make the deposit and just repaid the debt securities
ourselves.
If we accomplish covenant defeasance, the following provisions of the
indenture and the debt securities would no longer apply:
- Our promises regarding conduct of our business previously described on
pages 8 through 10 under "-- Restrictive Covenants", and any other
similar covenants applicable to the debt securities of the series and
described in the prospectus supplement.
- The condition regarding the treatment of liens when we merge or engage in
similar transactions, as described on page 7 under "-- Mergers and
Similar Events".
- The events of default relating to breach of covenants and acceleration of
the maturity of other debt, described below under "-- What Is an Event of
Default?"
If we accomplish covenant defeasance, you can still look to us for
repayment of the debt securities if there were a shortfall in the trust deposit.
In fact, if one of the remaining events of default occurred, such as our
bankruptcy, and the debt securities become immediately due and payable, there
may be such a shortfall in the trust deposit. Depending on the event causing the
default, you may not be able to obtain payment of the shortfall. (sections 1303
and 1304)
DEFAULT AND RELATED MATTERS
EQUAL RANKING WITH OUR OTHER UNSECURED CREDITORS
The debt securities are not secured by any of our property or assets.
Accordingly, your ownership of debt securities means you are one of our
unsecured creditors. The debt securities are not subordinated to any of our
other debt obligations and therefore they rank equally with all our other
unsecured and unsubordinated indebtedness.
EVENTS OF DEFAULT
You will have special rights if an event of default occurs and is not
cured, as described later in this subsection.
What Is an Event of Default? The term event of default means any of the
following:
- We do not pay the principal or any premium on a debt security of your
series on its due date.
- We do not pay interest on a debt security of your series within 30 days
of its due date.
- We do not deposit money into a separate custodial account known as
sinking fund when such deposit is due, if we agreed to maintain a sinking
fund for your debt securities and the other debt securities of the same
series.
- We remain in breach of either of the restrictive covenants described on
pages 8 through 10 under "-- Restrictive Covenants" or any other covenant
or warranty in the indenture for 90 days after we receive a notice of
default stating we are in breach. The notice must be sent by either the
trustee or direct holders of at least 25% of the principal amount of debt
securities of the affected series.
- We file for bankruptcy or other specific events of bankruptcy, insolvency
or reorganization occur.
- Any other event of default described in the prospectus supplement occurs.
(section 501)
Remedies if an Event of Default Occurs. If an event of default has
occurred and has not been cured, the trustee or the direct holders of at least
25% in principal amount of the outstanding debt securities of the affected
series may declare the entire principal amount of all the debt securities of
that series to be due and immediately payable. This is called a declaration of
acceleration of maturity. The direct holders of at least a
11
majority in principal amount of the debt securities of the affected series may
cancel a declaration of acceleration of maturity. (section 502)
Except in cases of default, where the trustee has some special duties, the
trustee is not required to take any action under the indenture at the request of
any holders unless the direct holders offer the trustee reasonable protection,
called an indemnity, against expenses and liability. (section 603) If reasonable
indemnity is provided, the direct holders of a majority in principal amount of
the outstanding debt securities of the relevant series may direct the time,
method and place of conducting any lawsuit or other formal legal action seeking
any remedy available to the trustee. These majority direct holders may also
direct the trustee in performing any other action under the indenture. (section
512)
Before you bypass the trustee and bring your own lawsuit or other formal
legal action or take other steps to enforce your rights or protect your
interests relating to the debt securities, the following must occur:
- You must give the trustee written notice that an event of default has
occurred and remains uncured.
- The direct holders of at least 25% in principal amount of all outstanding
debt securities of the relevant series must make a written request that
the trustee take action because of the default, and must offer reasonable
indemnity to the trustee against the cost and other liabilities of taking
that action.
- The trustee must have not received from direct holders of a majority in
principal amount of the outstanding debt securities of that series a
direction inconsistent with the written notice.
- The trustee must have not taken action for 60 days after receipt of the
above notice and offer of indemnity. (section 507)
However, you are entitled at any time to bring a lawsuit for the payment of
money due on your debt security on or after its due date. (section 508)
Street name and other indirect holders should consult their banks or
brokers for information on how to give notice or direction to or make a request
of the trustee and to make or cancel a declaration of acceleration.
We will furnish to the trustee every year a written statement of our
officers certifying that to their knowledge we are in compliance with the
indenture and the debt securities, or else specifying any default. (section
1004)
OUR RELATIONSHIP WITH THE TRUSTEE
U.S. Bank Trust National Association is the trustee under the indenture.
The trustee performs services for us in the ordinary course of business.
PLAN OF DISTRIBUTION
We may sell the debt securities through agents, underwriters or dealers, or
directly to one or more purchasers.
AGENTS
We may designate agents who agree to use their reasonable efforts to
solicit purchases for the period of their appointment to sell debt securities on
a continuing basis.
UNDERWRITERS
If we use underwriters for a sale of debt securities, the underwriters will
acquire those debt securities for their own account. The underwriters may resell
the debt securities in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The
12
underwriters or agents may have a right to change any initial public offering
price and any discounts or concessions that they allow or re-allow or pay to
dealers from time to time.
DIRECT SALES
We may also sell debt securities directly to one or more purchasers without
using underwriters or agents.
Underwriters, dealers, and agents that participate in the distribution of
the debt securities may be underwriters as defined in the Securities Act of
1933, and any discounts or commissions they receive from us and any profit on
their resale of the debt securities may be treated as underwriting discounts and
commissions under the Securities Act. Any underwriters or agents will be
identified and their compensation described in the applicable prospectus
supplement. We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act. Underwriters, dealers and agents may engage in transactions
with or perform services for us in the ordinary course of their businesses.
We do not intend to list the debt securities on a securities exchange. Any
underwriters or dealers will not be obligated to make a market in the debt
securities. We cannot give you any assurance about how liquid or illiquid the
trading market for the debt securities will be.
VALIDITY OF DEBT SECURITIES
Kenneth C. Frazier, our Senior Vice President and General Counsel, will
pass upon the validity of the debt securities for us. Sullivan & Cromwell, New
York, New York will pass upon the validity of the debt securities for any
underwriters or agents. As of October 31, 2001, Mr. Frazier owned, directly and
indirectly, 3,359 shares of our common stock and exercisable options to purchase
152,250 additional shares of our common stock. Sullivan & Cromwell has from time
to time provided legal services to us.
EXPERTS
Arthur Andersen LLP, our independent public accountants, audited our
consolidated financial statements as of December 31, 2000 and 1999 and for each
of the three years in the period ended December 31, 2000, which appear in our
annual report on Form 10-K, for the fiscal year ended December 31, 2000, as
indicated in their reports. We incorporate those consolidated financial
statements in this prospectus, and we do so in reliance upon the reports of
Arthur Andersen LLP and upon the authority of them as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. The address of the SEC's
Internet site is provided solely for the information of investors and is not
intended to be an active link. You may also read and copy any document we file
at the SEC's public reference room in Washington, D.C. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room.
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
SEC, including
13
filings after the date of this registration statement and prior to the
effectiveness of this registration statement, will automatically update and
supersede this information. Information furnished under Item 9 of our current
reports on Form 8-K is not incorporated by reference in this prospectus and
registration statement. We furnished information under Item 9 of our current
reports on Form 8-K filed January 23, 2001, February 15, 2001, April 20, 2001,
June 22, 2001, July 20, 2001, August 9, 2001, October 18, 2001 and October 24,
2001. We incorporate by reference:
- our annual report on Form 10-K for the year ended December 31, 2000, file
number 1-3305;
- our amended annual report on Form 10-K/A for the year ended December 31,
2000, file number 1-3305;
- our quarterly reports on Form 10-Q for the quarters ended March 31, 2001,
June 30, 2001 and September 30, 2001, file number 1-3305; and
- our current reports on Form 8-K filed May 11, 2001 and July 19, 2001.
- any future filings we make with the SEC under Sections 13(a), 13(c), 14,
or 15(d) of the Securities Exchange Act of 1934 until we sell all of the
debt securities.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Corporate Secretary
Merck & Co., Inc.
One Merck Drive
Whitehouse Station, NJ 08889-0100
(908) 423-1000
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these debt securities in any state where the offer is not permitted.
You should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front cover of
those documents.
14
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No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell the debt securities it describes, but only under circumstances and in
jurisdictions where it is lawful to do so. The information in this prospectus is
current only as of its date.
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TABLE OF CONTENTS
Page
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Prospectus Supplement
Description of Notes We May Offer......... S-2
United States Taxation.................... S-24
Risks Relating to Indexed Notes........... S-35
Risks Relating to Foreign Currency
Notes................................... S-36
Supplemental Plan of Distribution......... S-38
Validity of Notes......................... S-39
Prospectus
About this Prospectus..................... i
Merck..................................... 1
Ratios of Earnings to Fixed Charges....... 1
Use of Proceeds........................... 1
Description of Debt Securities We May
Offer................................... 2
Plan of Distribution...................... 12
Validity of Debt Securities............... 13
Experts................................... 13
Where You Can Find More Information....... 13
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$2,405,277,000
MERCK & CO, INC.
Medium-Term Notes, Series E
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(LOGO)
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GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
JPMORGAN
MORGAN STANLEY
SALOMON SMITH BARNEY
December 5, 2001
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