Pricing Supplement No. 2
Pricing Supplement No. 2
Dated August 20, 2002
(to Prospectus dated November 28,
2001 and Prospectus Supplement
dated December 5, 2001)
Merck & Co., Inc.
Medium-Term Notes, Series E
Floating Rate Notes
Underwriters and
Principal Amounts:
|
UBS Warburg LLC
Salomon Smith Barney Inc.
Merrill Lynch, Pierce,
Fenner & Smith Incorporated
|
$38,934,000
$15,125,000
$12,000,000
|
| |
|
|
| |
Total |
$66,059,000 |
| Trade Date: |
August 20, 2002 |
Settlement Date
(Original Issue Date): |
August 23, 2002 |
| Stated Maturity: |
August 22, 2042 |
| Interest Rate Basis: |
3-month LIBOR |
| Spread: |
Minus 45 basis points |
| Initial Interest Rate: |
3-month LIBOR, determined as if the original issue date were an
interest reset date, minus the spread |
| Interest Reset Dates: |
Quarterly, on the 22nd day of each February, May, August and November,
commencing November 22, 2002 |
| Interest Payment Dates: |
February 22, May 22, August 22 and November 22 of each year, commencing
November 22, 2002 |
| Issue Price: |
100.00% of the principal amount |
| Underwriter’s Discount: |
1.00% of the principal amount |
| Net Proceeds to Merck: |
99.00% of the principal amount |
| Calculation Agent: |
U.S. Bank Trust National Association |
Optional
Repayment Dates: |
The notes will be repayable at the option of the holder on at least 30
days notice on the following optional repayment dates and at the
following repayment prices: |
| |
Optional Repayment Date |
Repayment Price |
| |
August 22, 2013 and on each third
anniversary thereafter to maturity |
100.00% |
| Optional Redemption: |
The notes may be redeemed at any time, at the option of Merck, in whole
or in part, in amounts of $1,000 or any multiple of $1,000, at the
following redemption prices, if redeemed during the following 12-month
periods: |
| |
Redemption Period |
Redemption Price
|
| |
August 22, 2032 through August 21, 2033 |
105.00% |
| |
August 22, 2033 through August 21, 2034 |
104.50% |
| |
August 22, 2034 through August 21, 2035 |
104.00% |
| |
August 22, 2035 through August 21, 2036 |
103.50% |
| |
August 22, 2036 through August 21, 2037 |
103.00% |
| |
August 22, 2037 through August 21, 2038 |
102.50% |
| |
August 22, 2038 through August 21, 2039 |
102.00% |
| |
August 22, 2039 through August 21, 2040 |
101.50% |
| |
August 22, 2040 through August 21, 2041 |
101.00% |
| |
August 22, 2041 through August 21, 2042 |
100.50% |
Notes Used as Qualified Replacement Property:
Prospective investors seeking to treat the notes as “qualified replacement
property” for purposes of Section 1042 of the Internal Revenue Code of 1986, as
amended (the “Code”), should be aware that Section 1042 requires the issuer to
meet certain requirements in order for the notes to constitute qualified
replacement property. In general, qualified replacement property is a security
issued by a domestic “operating corporation” that did not, for the taxable year
preceding the taxable year in which such security was purchased, have “passive
investment income” in excess of 25 percent of the gross receipts of such
corporation for such preceding taxable year (the “Passive Income Test”). A
corporation will be considered an “operating corporation” if at the time the
securities are purchased or before the end of the replacement period, as defined
in Section 1042 of the Code, more than 50 percent of its assets are used in the
active conduct of a trade or business. For these purposes, where the issuing
corporation is in control of one or more corporations or such issuing
corporation is controlled by one or more other corporations, all such
corporations are treated as one corporation (the “Affiliated Group”) for the
purposes of computing the amount of passive investment income for purposes of
Section 1042. Merck believes that it is an “operating corporation” and that less
than 25 percent of its Affiliated Group’s gross receipts is passive investment
income for the taxable year ending December 31, 2001. In making this
determination, Merck has made certain assumptions and used procedures which it
believes are reasonable. However, the calculation and characterization of
certain types of income (as active or passive investment income) in certain of
the Affiliated Group’s finance and insurance companies is not entirely clear as
there are no Treasury regulations or rulings promulgated by the Internal Revenue
Service (the “IRS”) that explain the calculation and characterization of such
income in circumstances similar to those of Merck’s Affiliated Group. Even if
such categories of income were treated as passive investment income, Merck
believes that the Affiliated Group’s passive investment income did not exceed
more than 25 percent of the Affiliated Group’s gross receipts for the taxable
year ending December 31, 2001. No assurance can be given as to whether Merck
will continue to meet the Passive Income Test. It is, in addition, possible that
the IRS may disagree with the manner in which Merck has calculated the
Affiliated Group’s gross receipts (including the characterization thereof) and
passive investment income and the conclusions reached herein. Investors that
treat the notes as “qualified replacement property” are subject to special rules
regarding their basis and holding period in the notes. Investors should consult
their own tax advisors about the operation of the rules relating to qualified
replacement property in their particular circumstances.
UBS WARBURG
SALOMON SMITH BARNEY
MERRILL LYNCH & CO.