This filing is made pursuant to Rule 424(b)(2)
under the Securities Act of 1933 in connection
with Registration No. 33-69746
Supplement No. 1 dated April 12, 2002
to Pricing Supplement No. 13 dated April 13, 2000
(To Prospectus dated March 4, 1994 and
Prospectus Supplement dated March 4, 1994)
ALLERGAN, INC.
Medium-Term Notes
Due Nine Months or More from Date of Issue
CUSIP - 01849QAN5
Capitalized terms used but not defined herein shall have the meanings given such
terms in the Pricing Supplement, Prospectus and Prospectus Supplement attached
hereto.
Pursuant to the Remarketing Agreement described herein, the Remarketing Dealer
elected to remarket the Drs. on the Remarketing Date and on and after the
Remarketing Date, the Drs. shall bear interest at the rate of 7.47% per annum.
Pricing Supplement No. 13 dated April 13, 2000
(To Prospectus dated March 4, 1994 and
Prospectus Supplement dated March 4, 1994)
ALLERGAN, INC.
Medium-Term Notes
Due Nine Months or More from Date of Issue
--------------------------------------------------------------------------------
TRADE DATE: April 13, 2000
ORIGINAL ISSUE DATE: April 17, 2000
REMARKETING DATE: April 17, 2002
PRINCIPAL AMOUNT: $25,000,000
ISSUE PRICE: 100.00%
AGENT'S COMMISSION: .25%
NET PROCEEDS TO ISSUER: 99.75%(1)
MATURITY DATE: April 17, 2012, subject to mandatory tender to the Remarketing
Dealer or mandatory repurchase by the Company, in each case on April 17, 2002
and in each case as described in the Additional Terms Attachment to this Pricing
Supplement (the "Attachment")
INTEREST RATE: Prior to April 17, 2002, Three-month LIBOR plus .675% as
described in the Attachment. On and after April 17, 2002, at a fixed rate
determined as described in the Attachment under "Mandatory Tender of Drs.;
Remarketing".
FLOATING RATE PROVISIONS:
Index Currency: U.S. Dollars
Index Maturity: 3 months
Interest Reset Period: Quarterly
Interest Reset Dates: January 17, April 17, July 17 and October 17
Interest Determination Dates: Two London Business Days preceding the relevant
Interest Reset Date
Interest Payment Dates: January 17, April 17, July 17 and October 17 of each
year, commencing July 17, 2000
Day Count Convention: Actual/360
FIXED RATE PROVISIONS:
Interest Payment Dates: April 17 and October 17
Day Count Convention: 30/360
FORM: /X/ Book-Entry / / Certificated
CUSIP NO.: 01849QAM7
----------
(1) Includes the consideration for the Drs. and a payment of 2.536% of the
principal amount of the Drs. by the Remarketing Dealer to the Issuer in
connection with the Remarketing Dealer's option to require the
mandatory tender of the Drs. on the Remarketing Date at 100% of the
principal amount thereof. See "Underwriting" in the Attachment.
MANDATORY TENDER/REPURCHASE:
If J.P. Morgan Securities Inc., as Remarketing Dealer (the "Remarketing
Dealer"), has elected to remarket the Drs. as described in the
Attachment, the Drs. will be subject to mandatory tender to the
Remarketing Dealer at 100% of the principal amount thereof for
remarketing on the Remarketing Date. See "Description of the Drs.--
Mandatory Tender of Drs.; Remarketing" in the Attachment. If the
Remarketing Dealer elects not to remarket the Drs., or for any reason
does not purchase all of the outstanding Drs. on the Remarketing Date,
holders will be required to tender, and the Company will be required to
purchase, on the Remarketing Date any outstanding Drs. that have not
been purchased by the Remarketing Dealer at 100% of the principal
amount thereof plus accrued interest, if any. See "Description of the
Drs.-- Repurchase" in the Attachment.
REDEMPTION:
The Drs. will be redeemable on the Remarketing Date on the terms
described in "Description of the Drs.--Redemption" in the Attachment
ORIGINAL ISSUE DISCOUNT NOTE: / / Yes /X/ No
AGENT: J.P. Morgan Securities Inc.
AGENT ACTING IN THE CAPACITY AS INDICATED BELOW:
/ / Agent /X/ Principal
IF AS PRINCIPAL:
/X/ The Notes are being offered at varying prices related to
prevailing market prices at the time of resale.
/ / The Notes are being offered at a fixed initial public
offering price of % of principal amount. See "Underwriting" on
the Attachment.
OTHER PROVISIONS: See the Attachment
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE Drs. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF Drs. TO COVER SYNDICATE SHORT POSITIONS
AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING" IN THIS PRICING SUPPLEMENT AND "PLAN OF DISTRIBUTION" IN THE
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
2
ADDITIONAL TERMS ATTACHMENT
This Additional Terms Attachment constitutes a part of the Pricing
Supplement, dated April 13, 2000, of Allergan, Inc. (the "Company") and contains
a description of additional terms and provisions applicable to the Dealer
remarketable securities(sm) ("Drs.(sm)") due April 17, 2012 of the Company,
which represent a series of Medium-Term Notes Due Nine Months or More from Date
of Issue of the Company. The Drs. are Floating Rate/Fixed Rate Notes as
described in the Prospectus Supplement, subject to such further terms as are
described below. The following description of the terms of the Drs. supplements
and, to the extent inconsistent therewith, replaces, the description of the
general terms of the Securities set forth in the Prospectus Supplement and the
accompanying Prospectus, to which description reference is made. Capitalized
terms used but not defined herein shall have the meanings given such terms in
such Prospectus and Prospectus Supplement.
SUPPLEMENTAL DESCRIPTION OF THE DRS.
GENERAL
The Drs., which are a series of Notes as described in the Prospectus Supplement,
are to be issued as a series of debt securities under the Indenture, dated as of
March 1, 1994, as supplemented (the "Indenture"), between the Company and First
Trust of New York, National Association (formerly BankAmerica National Trust
Company), as trustee (the "Trustee"), which is more fully described in the
accompanying Prospectus Supplement and Prospectus.
The Drs. will be limited to $25,000,000 aggregate principal amount.
The Drs. will mature on April 17, 2012 (the "Stated Maturity Date"). If the
Remarketing Dealer elects to remarket the Drs., then the Drs. will be subject to
mandatory tender to the Remarketing Dealer, for purchase at 100% of the
principal amount thereof on April 17, 2002 (the "Remarketing Date") on the terms
and subject to the conditions described herein. See "--Mandatory Tender of Drs.;
Remarketing", below. If the Remarketing Dealer does not elect to exercise its
right to a mandatory tender of the Drs., or for any reason does not purchase all
of the Drs. on the Remarketing Date, then holders are required to tender, and
the Company is required to repurchase, any Drs. that have not been purchased by
the Remarketing Date from the holders thereof at 100% of the principal amount
thereof plus accrued interest, if any. See "--Repurchase" below. The Drs. will
be redeemable on the terms described under "--Redemption".
The Drs. will be issued in the form of one or more registered global securities
and will be deposited with, or on behalf of, DTC and registered in the name of
DTC or its nominee. See "--Book-Entry System".
3
Although the United States federal income tax treatment of the Drs. is not
certain, the terms of the Drs. provide that the Company and all holders of the
Drs. agree to treat the Drs. as debt instruments that mature on the Remarketing
Date for United States federal income tax purposes. See "Certain United States
Federal Income Tax Considerations". In addition, the holders of the Drs. may
under applicable accounting rules, be required to recognize changes in the fair
value of the interest rate option represented by the remarketing right of the
Remarketing Dealer from time to time, depending upon prevailing interest rates.
INTEREST
Prior to the Remarketing Date, the Drs. will bear interest at a floating rate.
If the Remarketing Dealer elects to remarket the Drs., then after the
Remarketing Date, the interest rate on the Drs. will be reset at a fixed rate
until the Stated Maturity Date, as determined by the Remarketing Dealer based on
bids requested from dealers in the Company's publicly-traded debt securities.
See "--Mandatory Tender of Drs.; Remarketing."
Interest on the Drs. will be paid to the persons in whose names the Drs. are
registered at the close of business on the Business Day immediately preceding
any Interest Payment Date; provided, however, that interest payable at maturity
will be payable to the persons to whom the principal of such Drs. shall be
payable. Interest payments for the Drs. shall be the amount of interest accrued
from the date of issue or from the last date to which interest has been paid to,
but excluding, the Interest Payment Date or maturity, as the case may be.
Floating Rate Provisions
The rate of interest for each Interest Period (as defined below) prior to the
Remarketing Date is the Three-Month LIBOR Rate plus .675%. Such rate of interest
shall be determined for each Interest Period on the second London Banking Day
(as defined in the ISDA Definitions, which is defined below) preceding the
relevant Reset Date (as defined below). The "Three-Month LIBOR Rate" for an
Interest Period means a rate equal to the Floating Rate (as defined in the ISDA
Definitions) that would be determined by the LIBOR Calculation Agent (as defined
below) under an interest rate swap transaction if the LIBOR Calculation Agent
were acting as Calculation Agent (as defined in the ISDA Definitions) for that
swap transaction under the terms of an agreement incorporating the ISDA
Definitions and under which:
(i) the Floating Rate Option (as defined in the ISDA Definitions) is
USD-LIBOR-BBA;
(ii) the Designated Maturity (as defined in the ISDA Definitions) is
three months; and
(iii) the Reset Date (as defined in the ISDA Definitions) is the first
day of that Interest Period.
4
Prior to the Remarketing Date, interest will be payable on each January 17,
April 17, July 17 and October 17 and will be computed by dividing the actual
number of days in the Interest Period by 360.
"Business Day" means any day that is not a Saturday or Sunday, and that, in The
City of New York, is not a day on which banking institutions are generally
authorized or obligated by law to close.
"Interest Period" means (i) the period from and including April 17, 2000, to but
excluding the first Interest Payment Date, and (ii) each successive period from
and including an Interest Payment Date, to but excluding the next Interest
Payment Date or at maturity, as the case may be.
"ISDA Definitions" means the 1991 ISDA Definitions, as amended and updated as of
the date hereof, published by the International Swaps and Derivatives
Association, Inc.
"USD-LIBOR-BBA" means that the rate for a Reset Date will be the rate for
deposits in U.S. Dollars for a period of the Designated Maturity which appears
on the Telerate Page 3750 as of 11:00 a.m., London time, on the day that is two
London Banking Days preceding that Reset Date. If such rate does not appear on
the Telerate Page 3750, the rate for that Reset Date will be determined as if
the parties had specified "USD-LIBOR-Reference Banks" as the applicable Floating
Rate Option. "USD-LIBOR-Reference Banks" means that the rate for a Reset Date
will be determined on the basis of the rates at which deposits in U.S. Dollars
are offered by the Reference Banks (as defined in the ISDA Definitions) at
approximately 11:00 a.m., London time, on the day that is two London Banking
Days preceding that Reset Date to prime banks in the London interbank market for
a period of the Designated Maturity commencing on that Reset Date and in a
Representative Amount (as defined in the ISDA Definitions). The LIBOR
Calculation Agent will request the principal London office of each of the
Reference Banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate for that Reset Date will be the arithmetic
mean of the quotations. If fewer than two quotations are provided as requested,
the rate for that Reset Date will be the arithmetic mean of the rates quoted by
major banks in New York City, selected by the LIBOR Calculation Agent, at
approximately 11:00 a.m., New York City time, on that Reset Date for loans in
U.S. Dollars to leading European banks for a period of the Designated Maturity
commencing on that Reset Date and in a Representative Amount.
Pursuant to the Drs., J.P. Morgan Securities Inc. shall be the initial "LIBOR
Calculation Agent" with respect to the Drs. The LIBOR Calculation Agent will
notify the Company and the Trustee of each determination of the interest rate
applicable to the Drs. promptly after such determination is made. The Trustee
will, upon the request of the holder of any Dr., provide the interest rate then
in effect and, if different, the interest rate which will become effective as a
result of the determination made with respect to the most recent Reset Date with
respect to such Dr. The Trustee will not be responsible for determining the
interest rate applicable to any Dr.
5
Fixed Rate Provisions
From and after April 17, 2002, unless previously redeemed, the Drs. will bear
interest at the rate determined by the Remarketing Dealer until the Stated
Maturity Date, payable semi-annually on April 17 and October 17 of each year.
Interest will be calculated on the basis of a 360-day year of twelve 30-day
months.
MANDATORY TENDER OF DRS.; REMARKETING
The following description sets forth the terms and conditions of the remarketing
of the Drs., if the Remarketing Dealer elects to purchase the Drs. on the
Remarketing Date for remarketing.
Mandatory Tender
If the Remarketing Dealer gives notice to the Company and the Trustee on a
Business Day not later than five Business Days prior to the Remarketing Date
(the "Notification Date") of its intention to purchase all of the Drs. for
remarketing, all outstanding Drs. will be automatically tendered to the
Remarketing Dealer for purchase on the Remarketing Date, except in the
circumstances described under "--Repurchase" or "--Redemption" below. The
purchase price of the Drs. will be equal to 100% of the principal amount
thereof. When the Drs. are tendered for remarketing, the Remarketing Dealer may
remarket the Drs. for its own account at varying prices to be determined by the
Remarketing Dealer at the time of each sale or may sell such Drs. to the
Reference Corporate Dealer (defined below) submitting the lowest firm, committed
bid on the Determination Date, as described below.
If the Remarketing Dealer elects to remarket the Drs., then from and including
the Remarketing Date to but excluding the Stated Maturity Date, the Drs. will
bear interest at the Interest Rate to Maturity (defined below). The obligation
of the Remarketing Dealer to purchase the Drs. on the Remarketing Date is
subject to several conditions set forth in a Remarketing Agreement between the
Company and the Remarketing Dealer (the "Remarketing Agreement"). In addition,
the Remarketing Dealer may terminate the Remarketing Agreement upon the
occurrence of certain events set forth therein. See "--The Remarketing Dealer".
If for any reason the Remarketing Dealer does not purchase all outstanding Drs.
on the Remarketing Date, the Company will be required on the Remarketing Date to
repurchase any Drs. that have not been purchased by the Remarketing Dealer from
the holders thereof at a price equal to the principal amount thereof plus all
accrued interest, if any. See "--Repurchase" below.
The Remarketing Dealer shall determine the interest rate the Drs. will bear from
the Remarketing Date to the Stated Maturity Date (the "Interest Rate to
Maturity") on the third Business Day immediately preceding the Remarketing Date
(the "Determination Date") by soliciting by 3:30 p.m., New York City time, the
Reference Corporate Dealers (defined below) for firm, committed bids to purchase
all outstanding Drs. at the Dollar Price (defined below), and by selecting the
lowest such firm, committed bid (regardless of whether each of the Reference
Corporate Dealers actually submits a bid). Each bid shall be expressed in terms
of the Interest Rate to Maturity that
6
the Drs. would bear (quoted as a spread over 5.95% per annum (the "Base Rate"))
based on the following assumptions:
(i) the Drs. would be issued on the Remarketing Date for
settlement on the same day;
(ii) the Drs. would mature on the Stated Maturity Date; and
(iii) the Drs. would bear interest from the Remarketing Date
at the Interest Rate to Maturity bid by such Reference Corporate
Dealer, payable semi-annually on the Interest Payment Dates for the
Drs. subsequent to the Remarketing Date.
The Interest Rate to Maturity announced by the Remarketing Dealer as a result of
such process will be quoted to the nearest one hundred-thousandth (0.00001) of
one percent per annum and, absent manifest error, will be binding and conclusive
upon the holders of the Drs., the Company and the Trustee. The Remarketing
Dealer shall have the discretion to select the time at which the Interest Rate
to maturity is determined on the Determination Date.
"Dollar Price" means the discounted present value to the Remarketing Date of the
cash flows on a bond (x) with a principal amount equal to the aggregate
principal amount of the Drs., (y) maturing on the Stated Maturity Date and (z)
bearing interest from the Remarketing Date, payable semi-annually (assuming a
360-day year consisting of twelve 30-day months) on the interest payment dates
of the Drs. at a rate equal to the Base Rate, using a discount rate equal to the
Treasury Rate (defined below).
"Reference Corporate Dealer" means J.P. Morgan Securities Inc. and four other
leading dealers of publicly-traded debt securities of the Company to be chosen
by the Remarketing Dealer.
"Treasury Rate" means the annual rate equal to the semi-annual equivalent yield
to maturity or interpolated (on a 30/360 day count basis) yield to maturity on
the Determination Date of the Comparable Treasury Issue (defined below) for
value on the Remarketing Date, assuming a price for the Comparable Treasury
Issues (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price (defined below).
"Comparable Treasury Issue" means the United States Treasury security selected
by the Remarketing Dealer as having an actual maturity on the Determination Date
(or the United States Treasury securities selected by the Remarketing Dealer to
derive an interpolated maturity on such Determination Date) comparable to the
remaining term of the Drs.
"Comparable Treasury Price" means (a) the offer price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) on the
Determination Date, as set forth on Telerate Page 500 (defined below), adjusted
to reflect settlement on the Remarketing Date if
7
prices quoted on Telerate Page 500 are for settlement on any date other than the
Remarketing Date, or (b) if such page (or any successor page) is not displayed
or does not contain such offer prices on such Business Day, (i) if the
Remarketing Dealer obtains four or five Reference Treasury Dealer Quotations,
the average of such Reference Treasury Dealer Quotations for such Remarketing
Date, after excluding the highest and lowest of such Reference Treasury Dealer
Quotations (unless there is more than one highest or lowest quotation, in which
case only one such highest and/or lowest quotation shall be excluded), or (ii)
if the Remarketing Dealer obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Reference Treasury Dealer Quotations. The
Remarketing Dealer shall have the discretion to select the time at which the
Comparable Treasury Price is determined on the Determination Date.
"Telerate Page 500" means the display designated as "Telerate Page 500" on Dow
Jones Markets Limited (or such other page as may replace Telerate Page 500 on
such service) or such other service displaying the offer price specified in
clause (a) of the definition of Comparable Treasury Price as may replace Dow
Jones Markets Limited.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer, the offer price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) for settlement on the Remarketing Date
quoted in writing to the Remarketing Dealer by such Reference Treasury Dealer by
3:30 p.m., New York City time, on the Determination Date.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in
The City of New York (which may include the Remarketing Dealer) selected by the
Remarketing Dealer.
Notification of Results; Settlement
If the Remarketing Dealer has elected to remarket the Drs. as provided herein,
then the Remarketing Dealer will notify the Company, the Trustee and DTC by
telephone, confirmed in writing, by 5:00 p.m., New York City time, on the
Determination Date, of the Interest Rate to Maturity.
All of the Drs. will be automatically delivered to the account of the Trustee by
book-entry through DTC, pending payment of the purchase price therefor, on the
Remarketing Date.
The Remarketing Dealer will make, or cause the Trustee to make, payment to DTC
by the close of business on the Remarketing Date against delivery through DTC of
the Drs., of the purchase price for all of the Drs. tendered. The purchase price
of the Drs. will be equal to 100% of the principal amount thereof. If the
Remarketing Dealer does not purchase all of the Drs. on the Remarketing Date,
then the Company is obliged to make or cause to be made such payment for all of
the Drs. not purchased by the Remarketing Dealer, as described below under
"--Repurchase." In any case, the Company will make, or cause the Trustee to
make, payment of interest due on the Remarketing Date to holders of Drs. by book
entry through DTC by the close of business on the Remarketing Date.
8
The tender and settlement procedures described above may be modified without the
consent of the holders of the Drs. to the extent required by DTC or, if the
book-entry system is no longer available for the Drs. at the time of the
remarketing, to the extent required to facilitate the tendering and remarketing
of Drs. in certificated form. In addition, the Remarketing Dealer may modify
without the consent of the holders of the Drs. the settlement procedures set
forth above in order to facilitate the settlement process.
As long as DTC's nominee holds the certificates representing any Drs. in the
book entry system of DTC, no certificates for such Drs. will be delivered by any
selling beneficial owner to reflect any transfer of such Drs. effected in the
remarketing. In addition, under the terms of the Drs. and the Remarketing
Agreement (as defined below), the Company has agreed that (i) it will use its
best efforts to maintain the Drs. in book-entry form with DTC or any successor
thereto and to appoint a successor depository to the extent necessary to
maintain the Drs. in book-entry form and (ii) it will waive any discretionary
right it otherwise has under the Indenture to cause the Drs. to be issued in
certificated form.
For further information with respect to transfers and settlement through DTC,
see "--Book-Entry System" below, and "Description of Notes--Book-Entry Notes" in
the accompanying Prospectus Supplement and "Description of the Debt
Securities--Global Securities" in the accompanying Prospectus.
The Remarketing Dealer
On or prior to the date of issuance of the Drs., the Company and the Remarketing
Dealer will enter into the Remarketing Agreement which will provide for the Drs.
to be remarketed substantially on the terms described below and in "--Mandatory
Tender of Drs.; Remarketing." The Remarketing Dealer will not receive any fees
or reimbursement of expenses from the Company in connection with the
remarketing, except that it will receive reimbursement of reasonable
out-of-pocket expenses under certain circumstances.
The Company will agree to indemnify the Remarketing Dealer against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"), arising out of or in connection with its duties under
the Remarketing Agreement.
If the Remarketing Dealer elects to remarket the Drs. as described herein, the
obligation of the Remarketing Dealer to purchase Drs. from holders thereof will
be subject to several conditions set forth in the Remarketing Agreement. In
addition, the Remarketing Agreement will provide for its termination by the
Remarketing Dealer on or before the Remarketing Date, upon the occurrence of
certain events that would customarily give underwriters the right to terminate
an underwriting agreement or would give rise to a failure to satisfy a closing
condition to an underwriting agreement in the Company's public debt offerings.
The Remarketing Agreement will also provide that the Remarketing Dealer may
resign as Remarketing Dealer at any time prior to the Notification Date, such
resignation to be effective ten Business Days after the
9
delivery to the Company and the Trustee of notice of such resignation. In such
case, the Company shall have the right, but not the obligation, to appoint a
successor Remarketing Dealer.
As a result of these conditions and termination rights and the Remarketing
Dealer's right to resign, holders of Drs. cannot be assured that their Drs. will
be purchased by the Remarketing Dealer in connection with a mandatory tender. No
holder of any Drs. shall have any rights or claims under the Remarketing
Agreement or against the Company or the Remarketing Dealer as a result of the
Remarketing Dealer not purchasing such Drs. If the Remarketing Dealer does not
purchase all of the Drs. on the Remarketing Date, the Company will be required
to purchase on the Remarketing Date any Drs. that have not been purchased by the
Remarketing Dealer at a price equal to 100% of the principal amount thereof plus
accrued interest, if any. See "Description of the Drs. -- Repurchase."
The Remarketing Dealer, in its individual or any other capacity, may buy, sell,
hold and deal in any of the Drs. The Remarketing Dealer may exercise any vote or
join in any action which any holder of Drs. may be entitled to exercise or take
with like effect as if it did not act in any capacity under the Remarketing
Agreement. The Remarketing Dealer, in its individual capacity, either as
principal or agent, may also engage in or have an interest in any financial or
other transaction with the Company as freely as if it did not act in any
capacity under the Remarketing Agreement.
REPURCHASE
If the Remarketing Dealer for any reason does not purchase all of the Drs. on
the Remarketing Date, the holders shall be required to tender and the Company
shall repurchase on the Remarketing Date any Drs. that have not been purchased
by the Remarketing Dealer, at a price equal to 100% of the principal amount of
the Drs. plus all accrued and unpaid interest, if any, on such Drs. to (but
excluding) the Remarketing Date.
REDEMPTION
If the Remarketing Dealer has elected to remarket the Drs. on the Remarketing
Date, the Company shall have the right to redeem the Drs., in whole but not in
part, from the Remarketing Dealer on the Remarketing Date at a redemption price
equal to the greater of (i) 100% of the aggregate principal amount of the Drs.
and (ii) the Dollar Price, by giving notice of such redemption to the
Remarketing Dealer
(x) no later than the Business Day immediately prior to the
Determination Date or
(y) if fewer than three Reference Corporate Dealers timely submit firm,
committed bids for all outstanding Drs. to the Remarketing Dealer on
the Determination Date,
10
immediately after the deadline set by the Remarketing Dealer for
receiving such bids has passed.
In either such case, it shall pay such redemption price for the Drs. in same-day
funds by wire transfer on the Remarketing Date to an account designated by the
Remarketing Dealer.
The Drs. are not otherwise subject to redemption.
BOOK-ENTRY SYSTEM
The Drs. will be issued in the form of one or more fully registered global
securities that will be deposited with, or on behalf of, DTC and registered in
the name of DTC's nominee.
DTC is a limited-purpose trust company organized under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. DTC Participants include securities brokers
and dealers, banks, trust companies, clearing corporations, and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission (the "Commission").
Payments of principal of, premium, if any, and interest on the Drs. will be made
to Cede & Co., as nominee of DTC. DTC's practice is to credit Direct
Participants' accounts on the related payment date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to
beneficial owners of the Drs. will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Trustee or any Paying
Agent under the Indenture, or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal and interest to Cede & Co. is the responsibility of the Company or the
Trustee or any Paying Agent; disbursement of such payments to Direct
Participants shall be the responsibility of DTC;
11
and disbursement of such payments to the beneficial owners of the Drs. shall be
the responsibility of Direct and Indirect Participants.
DTC may decide to discontinue providing its services as securities depository
with respect to the Drs. at any time by giving notice to the Company or the
Trustee. Under such circumstances, in the event that a successor securities
depository is not obtained, Drs. certificates are required to be printed and
delivered.
Neither the Company, the Trustee, any Paying Agent nor any Registrar for the
Drs. will have any responsibility or liability for any aspect of the records
maintained by DTC relating to, or payments made on account of beneficial
ownership interests in, Drs. represented in global form, or for maintaining,
supervising or receiving any records relating to such beneficial ownership
interests maintained by DTC.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The following is a general discussion of the principal U.S. federal income tax
consequences of the purchase, ownership and disposition of the Drs. to initial
holders purchasing Drs. at the "issue price." The "issue price" of a Drs. will
equal the first price to the public (not including bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers) at which a substantial amount of the Drs. is
sold for money. This summary is based upon laws, regulations, rulings and
decisions currently in effect, all of which are subject to change, which change
may be retroactive. Moreover, it deals only with purchasers who hold Drs. as
"capital assets" within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code"), and does not purport to deal with persons in
special tax situations, such as financial institutions, insurance companies,
regulated investment companies, dealers or traders in securities or currencies,
persons holding Drs. as a hedge against currency risk or as a position in a
"straddle," "conversion" or another integrated transaction for tax purposes, or
U.S. Holders (as defined below) whose functional currency is not the U.S.
dollar. In addition, this discussion only addresses the U.S. federal income tax
consequences of the Drs. until the Remarketing Date.
As used herein, the term "U.S. Holder" means a beneficial owner of Drs. that is,
for U.S. federal income tax purposes, (i) a citizen or resident of the United
States, (ii) a corporation or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, (iii) an
estate whose income is subject to U.S. federal income tax regardless of its
source, or (iv) a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust. As used herein, the term "non-U.S. Holder" means a beneficial owner of a
Drs. that is, for U.S. federal income tax purposes, (i) a nonresident alien
individual, (ii) a foreign corporation, (iii) a nonresident alien fiduciary of a
foreign estate or trust or (iv) a foreign partnership one or more of the members
of which is, for U.S. federal income tax purposes, a nonresident alien
individual, a foreign corporation or a nonresident alien fiduciary of a foreign
estate or trust.
Because the Drs. are subject to mandatory tender for purchase by the Remarketing
Dealer or repurchase by the Company if not purchased by the Remarketing Dealer
on the Remarketing Date, the Company intends to treat the Drs. as maturing on
the Remarketing Date for U.S. federal income tax purposes and as being reissued
on the Remarketing Date should the Remarketing Dealer remarket the Drs. By
purchasing the Drs., a holder agrees to follow such treatment for U.S. federal
income tax purposes. Because no debt instrument closely comparable to the Drs.
has been the subject of any Treasury regulation, revenue ruling or judicial
decision, the U.S. federal income tax treatment of the Drs. is not certain. NO
RULINGS HAVE BEEN OR ARE EXPECTED TO BE SOUGHT FROM THE INTERNAL REVENUE SERVICE
("IRS") WITH RESPECT TO
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ANY OF THE ISSUES DISCUSS HEREIN, AND NO ASSURANCE CAN BE GIVEN THAT THE IRS
WILL NOT TAKE A CONTRARY POSITION. ACCORDINGLY, SIGNIFICANT ASPECTS OF THE U.S.
FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE DRS. ARE UNCERTAIN, AND
NO ASSURANCE CAN BE GIVEN THAT THE IRS OR THE COURTS WILL AGREE THAT THE DRS.
SHOULD BE TREATED AS MATURING ON THE REMARKETING DATE. FURTHERMORE, NO ADVICE
HAS BEEN RECEIVED OR IS EXPECTED TO BE SOUGHT FROM ANY STATE, LOCAL OR FOREIGN
TAXING AUTHORITY AS TO THE INCOME, FRANCHISE, PERSONAL PROPERTY OR OTHER
TAXATION OF THE DRS. PROSPECTIVE PURCHASERS ARE STRONGLY URGED TO CONSULT THEIR
TAX ADVISERS REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT
IN THE DRS. (INCLUDING ALTERNATIVE CHARACTERIZATIONS OF THE DRS.). EXCEPT WHERE
INDICATED TO THE CONTRARY, THE FOLLOWING DISCUSSION ASSUMES THAT THE COMPANY'S
TREATMENT OF THE DRS. WILL BE RESPECTED FOR U.S. FEDERAL INCOME TAX PURPOSES.
PROSPECTIVE PURCHASERS SHOULD ALSO CONSULT THEIR TAX ADVISERS WITH RESPECT TO
ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN
TAXING JURISDICTION.
TAX TREATMENT OF THE DRS.
Assuming the characterization of the Drs. set forth above, the following tax
consequences will result with respect to U.S. Holders.
Interest Income
Interest on the Drs. will be taxable as ordinary income for U.S. federal income
tax purposes when received or accrued by a U.S. Holder in accordance with its
method of accounting. The Company does not anticipate that the initial issuance
of the Drs. will result in original issue discount ("OID"), generally defined as
the excess of the stated redemption price at the maturity of the Drs. over its
issue price. However, if a Drs. is issued with OID and such OID is greater than
the statutory de minimis amount (generally, 1/4 of one percent of the Drs.'
stated redemption price at the Remarketing Date multiplied by the number of
complete years to the Remarketing Date from the issue date), the holder of such
debt instrument issued with OID generally will be required to recognize as
ordinary income the amount of OID on the debt instrument as such discount
accrues, in accordance with a constant yield method.
Gain or Loss on Sale or Redemption
When a Drs. is sold or redeemed, the U.S. Holder will recognize gain or loss
equal to the difference between the amount realized on the sale or redemption
(excluding any amount attributable to accrued interest not previously included
in income) and the adjusted basis in its Drs. The adjusted basis of the Drs.
generally will equal the U.S. Holder's cost, increased by any OID previously
includable in the U.S. Holder's income with respect to the Drs., and reduced by
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the principal payments previously received with respect to the Drs. Gain or loss
on sale or redemption of a Drs. will generally be capital gain or loss.
Capital gains of individuals derived with respect to capital assets held for
more than one year are eligible for reduced rates of taxation depending upon the
holding period of such capital assets. The deductibility of capital losses is
subject to certain limitations.
ALTERNATIVE U.S. FEDERAL INCOME TAX TREATMENT
It is possible that the IRS will disagree with or that a court will not uphold
the Company's treatment of the Drs. In particular, the IRS could seek to treat
the Drs. as maturing on the Stated Maturity Date, and might also: (i)
characterize the issue price of the Drs. as including the consideration paid by
the Remarketing Dealer to the Company in connection with the Company's
appointment of such Remarketing Dealer (the "Option Premium"), and (ii) treat
the holder as having sold a call option to the Remarketing Dealer (the "Call
Option") for an amount equal to the Option Premium. Under such a
recharacterization, the amount deemed received as consideration for sale of the
Call Option would be treated as an option premium paid to such holder (and
consequently would not be recognized as income on the writing of the Call
Option). Because of the Remarketing, if the Drs. were treated as maturing on the
Stated Maturity Date, holders would be subject to certain Treasury regulations
dealing with contingent payment debt instruments (the "Contingent Debt
Regulations"). Under the Contingent Debt Regulations, each holder would be
required (regardless of such holder's usual method of accounting) to include in
income original issue discount for each interest accrual period in an amount
equal to the product of the adjusted issue price of the Drs. at the beginning of
each interest accrual period and a projected yield to maturity of the Drs. The
projected yield to maturity would be based on the "comparable yield" (i.e. the
yield at which the Company would issue a fixed rate debt instrument maturing on
the Stated Maturity Date, with terms and conditions otherwise similar to those
of the Drs.), which could be higher that the interest rate on the Drs. In
addition, any gain recognized on the sale of the Drs. would generally be treated
as ordinary income, while any losses would generally be ordinary to the extent
of previously accrued original issue discount and thereafter be capital loss.
Moreover, upon the sale of Drs. (other than through the mandatory tender), the
IRS could take the position that gain and loss with respect to the Call Option
and the debt obligation be separately determined, which could result in a deemed
capital loss on the Call Option and a corresponding additional amount of
ordinary gain on the debt obligation. The ability to use capital losses to
offset ordinary income in determining taxable income is generally limited.
Prospective purchasers are strongly urged to consult their tax advisers
regarding the U.S. federal income tax consequences of an investment in the Drs.
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TREATMENT OF NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to U.S. federal withholding tax on
payments of principal, premium (if any) or interest (including original issue
discount and accruals under the Contingent Debt Regulations, if any) on Drs.,
unless such non-U.S. Holder owns actually or constructively 10% or more of the
total combined voting power of the Company or is a controlled foreign
corporation related to the Company through stock ownership. Sections 871(h) and
881(c) of the Code, and applicable Treasury regulations, require that, in order
to obtain the exemption from withholding tax described above, either the
beneficial owner of the Drs., or a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "Financial Institution") and that is holding
the Drs. on behalf of such beneficial owner, file a statement with the
withholding agent to the effect that the beneficial owner of the Drs. is not a
U.S. person. In general, this requirement will be fulfilled if the beneficial
owner of a Drs. certifies on IRS Form W-8, under penalties of perjury, that it
is not a U.S. person and provides its name and address, and any Financial
Institution holding the Drs. on behalf of the beneficial owner files a statement
with the withholding agent to the effect that it has received such statement
from the Holder (and furnishes the withholding agent with a copy thereof).
Generally, a non-U.S. Holder will not be subject to U.S. federal income tax on
any amount which constitutes gain upon retirement or disposition of Drs.,
provided the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. Holder. Certain other exceptions
may be applicable, and a non-U.S. Holder should consult its tax adviser in this
regard.
If a non-U.S. Holder of Drs. is engaged in a trade or business in the United
States, and if interest (including OID, if any) or gain on the Drs. is
effectively connected with the conduct of this trade or business, the non-U.S.
Holder, although exempt from the withholding tax discussed above, will generally
be subject to regular U.S. income tax on interest and on any gain realized on
the sale, exchange or other disposition of Drs. in the same manner as if it were
a U.S. Holder. In lieu of the statement described above, such Holder will be
required to provide to the Company a properly executed Form 4224 (or successor
form) in order to claim an exemption from withholding tax. In addition, if such
non-U.S. Holder is a foreign corporation, it may be subject to a branch profits
tax equal to 30% (or such lower rate provided by an applicable treaty) of its
effectively connected earnings and profits for the taxable year, subject to
certain adjustments. For purposes of the branch profits tax, interest on and any
gain recognized on the sale, exchange or other disposition of Drs. will be
included in the effectively connected earnings and profits of such non-U.S.
Holder if such interest or gain, as the case may be, is effectively connected
with the conduct by the non-U.S. Holder of a trade or business in the United
States.
The Drs. will not be includable in the estate of a non-U.S. Holder unless the
individual is a direct or indirect 10% or greater shareholder of the Company or,
at the time of such individual's death,
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payments in respect of the Drs. would have been effectively connected with the
conduct by such individual of a trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
A holder may be subject to backup withholding at the rate of 31% of the interest
and other "reportable payments" (including, under certain circumstances,
principal payments and sales proceeds) paid with respect to the Drs. if, in
general, the holder fails to comply with certain certification procedures and is
not an exempt recipient under applicable provisions of the Code.
SUMMARY
This discussion is intended to be a general summary. Due to the complexity of
the rules described above, the current uncertainty as to the manner of their
application to holders and possible changes in law, it is particularly important
that each holder consult with its own tax adviser regarding the tax treatment of
its acquisition, ownership and disposition of its Drs. under the laws of the
United States and those of any state, local or foreign taxing jurisdiction.
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UNDERWRITING
Under the terms and subject to the conditions contained in a Terms Agreement
(such agreement, including the Distribution Agreement to which it corresponds,
the "Terms Agreement") relating to the Drs. offered hereby, the Company has
agreed to sell all of the Drs. offered hereby to J.P. Morgan Securities Inc.
("JPMSI"). Under the terms and conditions of the Terms Agreement, JPMSI is
committed to purchase all of the Drs. offered hereby if any are purchased.
JPMSI initially proposes to offer the Drs. in part directly to the public at
varying prices based on prevailing market rates at the time of resale. JPMSI
will purchase the Drs. at 99.75% of the principal amount thereof. In addition,
in consideration for the right to require the mandatory tender of all
outstanding Drs. as described above, it will pay to the Company, on the same
date it pays the purchase price for the Drs., an amount equal to 2.536% of the
principal amount of the Drs. Consequently, the net proceeds to the Company will
be $25,571,500, or 102.286% of the principal amount of the Drs.
In connection with the offering, JPMSI may engage in transactions that maintain
or otherwise affect the price of the Drs. Specifically, JPMSI may overallot in
connection with the offering, creating a syndicate short position. In addition,
JPMSI may bid for, and purchase, shares of Drs. in the open market to cover
syndicate short positions. Finally, the underwriting syndicate may reclaim
selling concessions allowed for distributing the Drs. in the offering if the
syndicate repurchases previously distributed Drs. in syndicate covering
transactions or otherwise. Any of these activities may maintain the market price
of the Drs. above independent market levels. JPMSI is not required to engage in
these activities, and may end any of these activities at any time.
The Company has agreed to indemnify JPMSI against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments JPSMI may be
required to make in respect thereof. See also "Plan of Distribution" in the
accompanying Prospectus Supplement.
From time to time in the ordinary course of their respective businesses, JPMSI
and certain of its affiliates have engaged in and may in the future engage in
commercial and/or investment banking transactions with the Company and its
affiliates.
The Drs. are a new issue of securities with no established trading market. The
Company has been advised by JPMSI that JPSMI intends to make a market in the
Drs. but is not obligated to do so and may discontinue market making at any time
without notice. No assurance can be given as to the liquidity of the trading
market for the Drs.
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LEGAL MATTERS
The legality of the Drs. and certain other matters will be passed upon
by Francis R. Tunney, Jr., General Counsel of the Company, and the legality of
the Drs. will be passed upon by Davis Polk & Wardwell, New York, New York, on
behalf of JPSMI.
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