1
                                                Filed Pursuant to Rule 424(b)(5)
                                                Registration No. 333-36383
 
           PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED OCTOBER 3, 1997
 
                                             $1,670,000,000
[MERCK                                      MERCK & CO., INC.
LOGO]                                  MEDIUM-TERM NOTES, SERIES C
                                 DUE 9 MONTHS OR MORE FROM DATE OF ISSUE
 
                            ------------------------
 
    Merck & Co., Inc. (the "Company") may offer from time to time its
Medium-Term Notes, Series C, due 9 months or more from the date of issue, as
selected by the purchaser and agreed to by the Company, at an aggregate initial
public offering price not to exceed $1,670,000,000 or its equivalent in one or
more other currencies or composite currencies, subject to reduction as the
result of the concurrent sale of other Debt Securities (as defined in the
Prospectus) by the Company.
    The Notes may be denominated in either U.S. dollars or in such foreign
currencies or composite currencies as set forth in the applicable Pricing
Supplement. The principal amount payable at maturity, or the amount of interest
payable on any interest payment date with respect to the Notes, or both, may be
determined by the relationship between a specified currency and another
currency, by the difference in price of a specified commodity on certain dates,
or by some other index. The specific currency or composite currency, interest
rate or rates (if any), index (if any), issue price and maturity date of any
Note will be set forth in a related Pricing Supplement to this Prospectus
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
Notes denominated in other than U.S. dollars or ECUs will not be sold in, or to
residents of, the country issuing such currency. See "Description of Notes".
    Unless otherwise specified in the applicable Pricing Supplement, interest on
the Fixed Rate Notes will be payable on each May 1 and November 1 and at
Maturity. Interest on the Floating Rate Notes will be payable on the dates
specified therein and in the applicable Pricing Supplement. Zero Coupon Notes
will not bear interest. Notes may be issued as Amortizing Notes, with payments
of principal and interest made in equal installments over the life of the Note.
    Unless a Redemption Commencement Date is specified in the applicable Pricing
Supplement, the Notes will not be redeemable prior to their Stated Maturity. If
a Redemption Commencement Date is so specified, the Notes will be redeemable at
the option of the Company at any time after such date as described herein. If so
indicated in the applicable Pricing Supplement, the Notes will obligate the
Company to repay such Notes at the option of the Holders thereof. If so
indicated in the applicable Pricing Supplement, the Maturity of the Notes may be
extended at the option of the Company or the Holders thereof.
    Unless otherwise specified in the applicable Pricing Supplement, the Notes
offered hereby will be issued only in the form of Book-Entry Securities
registered in the name of the nominee of The Depository Trust Company, which
will act as Depository. Interests in a Book-Entry Security will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depository and its participants. Except as described herein under "Description
of Notes -- Book-Entry Securities", owners of beneficial interests in a Book-
Entry Security will not be considered the Holders thereof and will not be
entitled to receive physical delivery of Notes in definitive form, and no
Book-Entry Security will be exchangeable except for another Book-Entry Security
of like denomination and terms to be registered in the name of the Depository or
its nominee. Unless otherwise specified in the applicable Pricing Supplement,
the Notes offered hereby will be issued only in denominations of $1,000 and
integral multiples thereof, or the approximate equivalent in another specified
currency.
                            ------------------------
 
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
   ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
   HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
                                    OFFENSE.
                            ------------------------
 


                                                 PRICE TO         AGENTS' DISCOUNTS OR                PROCEEDS TO
                                                 PUBLIC(1)           COMMISSIONS(2)                  COMPANY(2)(3)
                                              ---------------  --------------------------  ---------------------------------
                                                                                  
Per Note....................................       100%              .125% -- .750%               99.875% -- 99.250%
Total(4)....................................  $1,670,000,000   $2,087,000 -- $12,525,000   $1,667,912,500 -- $1,657,475,000

 
- ---------------
(1) Notes will be issued at 100% of their principal amount, unless otherwise
    specified in the applicable Pricing Supplement. Notes sold to an Agent as
    principal may be resold by such Agent, at market prices prevailing at the
    time of sale, at prices related to such prevailing market prices, at
    negotiated prices or at a fixed public offering price.
(2) The Company will pay a commission, or grant a discount to the Agents, of
    from .125% to .750%, depending on maturity, of the principal amount of any
    Notes sold through them as agents (or sold to such Agents as principal in
    circumstances in which no other discount is agreed), except that commissions
    (or discounts) on Notes with a maturity more than 30 years from date of
    issue will be negotiated at the time of sale and set forth in the applicable
    Pricing Supplement. The Company has agreed to indemnify the Agents against
    certain liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of U.S. $734,545 payable by the Company.
(4) Or the equivalent thereof in foreign currencies or composite currencies.
                            ------------------------
 
    Offers to purchase Notes are being solicited, on a reasonable efforts basis,
from time to time by the Agents on behalf of the Company. Notes also may be sold
to the Agents on their own behalf at negotiated discounts for resale to
investors. The Company reserves the right to sell Notes directly on its own
behalf and to appoint additional Agents. The Company also reserves the right to
withdraw, cancel or modify the offering contemplated hereby without notice. No
termination date for the offering of the Notes has been established. The Company
or the Agents may reject any order as a whole or in part. See "Supplemental Plan
of Distribution".
                            ------------------------
GOLDMAN, SACHS & CO.         J.P. MORGAN & CO.        MORGAN STANLEY DEAN WITTER
 
           The date of this Prospectus Supplement is October 9, 1997
   2
 
     CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES,
AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "SUPPLEMENTAL PLAN OF DISTRIBUTION".
 
                              DESCRIPTION OF NOTES
 
     The following description of the particular terms of the Medium-Term Notes,
Series C, offered hereby (the "Notes") supplements the description of the
general terms and provisions of Debt Securities set forth in the Prospectus, to
which description reference is hereby made. Capitalized terms not defined herein
or in the Glossary contained in this Prospectus Supplement have the meanings
assigned to them in the Prospectus or the Indenture. The following description
of Notes will apply unless otherwise specified in an applicable Pricing
Supplement.
 
GENERAL
 
     The Notes constitute a single series for purposes of the Indenture and are
limited in amount as set forth on the cover page hereof, less an amount equal to
the aggregate initial public offering price of any other Debt Securities (as
defined in the Prospectus) issued from time to time, including any other series
of medium-term notes. The foregoing limit, however, may be increased by the
Company if in the future it determines that it may wish to sell additional
Notes. For a description of the rights attaching to different series of Debt
Securities under the Indenture, see "Description of Debt Securities" in the
Prospectus.
 
     The Stated Maturity of each Note will be 9 months or more from its date of
issue and will be specified on the face thereof and in the applicable Pricing
Supplement. The applicable Pricing Supplement will indicate if a Note is subject
to an optional extension beyond its Stated Maturity as described under
"-- Extension of Maturity" and "-- Renewable Notes" below.
 
     Each Note will be denominated in either U.S. dollars or in such foreign
currencies or composite currencies ("Specified Currency") as specified on the
face thereof and in the applicable Pricing Supplement. Purchasers of the Notes
are required to pay for them by delivery of the requisite amount of the
Specified Currency to an Agent, unless other arrangements have been made. Unless
otherwise specified in the applicable Pricing Supplement, payments on the Notes
will be made in the applicable Specified Currency in the country issuing the
Specified Currency (or, in the case of ECUs, Brussels); provided that, at the
election of the Holder thereof and in certain circumstances at the option of the
Company, payments on Notes denominated in other than U.S. dollars may be made in
U.S. dollars. See "-- Payment of Principal and Interest" below and "Foreign
Currency Risks".
 
     Each Note will be represented by either a Book-Entry Security registered in
the name of a nominee of the Depository or a certificate issued in definitive
registered form, without coupons (a "Certificated Note"), as set forth in the
applicable Pricing Supplement. Except as set forth under "-- Book-Entry
Securities" below, Notes represented by a Book-Entry Security will not be
issuable as Certificated Notes. So long as the Depository or its nominee is the
registered owner of any Book-Entry Security, the Depository or its nominee, as
the case may be, will be considered the sole owner and Holder of the Notes
represented by such Book-Entry Security for all purposes under the Indenture and
the Notes. It is currently contemplated that only Notes that have a Specified
Currency of U.S. dollars will be issued as Book-Entry Securities. See
"-- Book-Entry Securities" below.
 
     Unless otherwise specified in the applicable Pricing Supplement, the
authorized denominations of any Note denominated in U.S. dollars will be $1,000
and integral multiples thereof. Unless otherwise specified in the applicable
Pricing Supplement, the authorized denominations of any Note denominated in a
Specified Currency other than U.S. dollars will be the amount of the Specified
Currency which is equivalent, at the noon buying rate in The City of New York
for cable transfers for such Specified Currency (the "Exchange Rate")
 
                                       S-2
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on the first Business Day in The City of New York and the country issuing such
currency (or, in the case of ECUs, Brussels) next preceding the date on which
the Company accepts the offer to purchase such Note, to $1,000 (rounded down to
an integral multiple of 1,000 units (but not less than 1,000 units) of such
Specified Currency) and any greater amount that is an integral multiple of 1,000
units of such Specified Currency.
 
     Notes will be sold in individual issues of Notes each having such interest
rate or interest rate formula, if any, Stated Maturity and date of original
issuance as shall be selected by the initial purchasers and agreed to by the
Company. Unless otherwise indicated in the applicable Pricing Supplement, each
Note, except any Zero Coupon Note or Indexed Note (each as defined below), will
bear interest at a fixed rate or at a rate determined by reference to the
Commercial Paper Rate, the Prime Rate, LIBOR, the Treasury Rate, the CD Rate,
the Federal Funds Rate or the CMT Rate, as adjusted by the Spread or Spread
Multiplier, if any, applicable to such Note. See "-- Interest Rate" below. "Zero
Coupon Notes" are Notes issued at a discount from the principal amount payable
at Maturity thereof which do not entitle their Holders to receive any payments
of interest prior to Maturity.
 
     The Notes may be issued as Original Issue Discount Notes. An Original Issue
Discount Note is a Note, including any Zero Coupon Note, which is issued at a
price lower than the principal amount thereof and which provides that upon
acceleration of the Maturity thereof, the amount payable to the Holder of such
Note will be determined in accordance with the terms of the Note, but will be an
amount less than the amount payable at the Stated Maturity of such Note. In
addition, United States federal income tax rules with respect to original issue
discount may apply to certain Notes, whether or not such Notes are Original
Issue Discount Notes. See "United States Taxation -- Original Issue Discount".
 
     The Notes may be issued as "Indexed Notes", the principal amount of which
payable at Maturity, or the interest on which, or both, will be determined by
reference to the relationship between the value of the Specified Currency and
another currency, changes in the price of a specified commodity between certain
specified dates or by some other index. See "-- Other Indexed Notes" below. The
Indexed Notes may include "Currency Indexed Notes", the principal amount of
which payable at Maturity, or the amount of interest payable on any Interest
Payment Date, or both, will be determined by reference to the exchange rate
between the Specified Currency and another currency or composite currency as set
forth in the applicable Pricing Supplement. See "-- Currency Indexed Notes"
below.
 
     The defeasance and covenant defeasance provisions of the Indenture
described under "Description of Debt Securities -- Defeasance and Covenant
Defeasance" in the Prospectus will apply to the Notes.
 
     The Notes will not be subject to any sinking fund and, unless a Redemption
Commencement Date is specified in the applicable Pricing Supplement, will not be
redeemable prior to their Stated Maturity. If a Redemption Commencement Date is
so specified with respect to any Note, the applicable Pricing Supplement will
also specify one or more redemption prices (expressed as a percentage of the
principal amount of such Note) ("Redemption Prices") and the redemption period
or periods ("Redemption Periods") during which such Redemption Prices shall
apply. On and after the Redemption Commencement Date with respect to any Note,
if any, such Note will be redeemable in whole or in part in increments of $1,000
or such other minimum denomination as is specified in the applicable Pricing
Supplement (provided that any remaining principal amount of such Note shall be
at least $1,000 or such other minimum denomination) at the option of the Company
at a Redemption Price, together with the interest thereon payable to the date
fixed for redemption (the "Redemption Date"), on notice given not more than 60
nor less than 30 days prior to the Redemption Date. If less than all the Notes
having the same tenor at any time outstanding are to be redeemed, the Notes to
be so redeemed shall be selected by the Trustee in any usual manner approved by
it.
 
     Certificated Notes may be presented for registration of transfer or
exchange at the Corporate Trust Office of First Trust of New York, National
Association, in the Borough of Manhattan, The City of New York.
 
INTEREST RATE
 
     Each Note, other than a Zero Coupon Note, will bear interest from and
including its date of issue or from the most recent Interest Payment Date (or,
if such Note is a Floating Rate Note and the Interest Reset Period
 
                                       S-3
   4
 
is daily or weekly, from and including the day following the most recent Regular
Record Date) to which interest on such Note has been paid or duly provided for
at the fixed rate per annum, or at the rate per annum determined pursuant to the
interest rate formula, stated therein and in the applicable Pricing Supplement
until the principal thereof is paid or made available for payment. Interest will
be payable on each Interest Payment Date and at Maturity as specified below
under "-- Payment of Principal and Interest".
 
     Each Note, other than a Zero Coupon Note, will bear interest at either (a)
a fixed rate (a "Fixed Rate Note") or (b) a variable rate determined by
reference to an interest rate formula (a "Floating Rate Note"), which may be
adjusted by adding or subtracting the Spread or multiplying by the Spread
Multiplier (each term as defined below). A Floating Rate Note may also have
either or both of the following: (a) a maximum numerical interest rate
limitation, or ceiling, on the rate of interest which may accrue during any
interest period (a "Maximum Rate"); and (b) a minimum numerical interest rate
limitation, or floor, on the rate of interest which may accrue during any
interest period (a "Minimum Rate"). The "Spread" is the number of basis points
specified in the applicable Pricing Supplement as being applicable to the
interest rate for such Note and the "Spread Multiplier" is the percentage
specified in the applicable Pricing Supplement as being applicable to the
interest rate for such Note. "Market Day" means (a) with respect to any Note
other than a LIBOR Note or a note denominated other than in U.S. dollars or a
Currency Indexed Note, any day that is a Business Day in The City of New York,
(b) with respect to LIBOR Notes only, any Business Day in The City of New York
on which dealings in deposits in the Index Currency are transacted in the London
interbank market, (c) with respect to Notes denominated in a currency other than
U.S. dollars, except for Notes denominated in European Currency Units ("ECUs")
and Currency Indexed Notes, any day that is a Business Day in The City of New
York and in the principal financial center of the country of the Specified
Currency and (d) with respect to Notes denominated in ECUs, any day that is a
Business Day in The City of New York and that is designated as an ECU settlement
day by the ECU Banking Association in Paris or otherwise generally regarded in
the ECU interbank market as a day on which payments in ECU are made and (e) with
respect to Currency Indexed Notes, a day described as a "Market Day" under the
heading "-- Currency Indexed Notes" below. "Index Maturity" means, with respect
to a Floating Rate Note, the period to maturity of the instrument or obligation
on which the interest rate formula is based, as specified in the applicable
Pricing Supplement. Unless otherwise provided in the applicable Pricing
Supplement, First Trust of New York, National Association, will be the
calculation agent (the "Calculation Agent") with respect to the Floating Rate
Notes. "London Market Day" means, with respect to LIBOR Notes, a day on which
dealings in the Index Currency are transacted in the London interbank market.
 
     The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Fixed Rate Note.
 
     The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis (the "Interest Rate Basis") for such Floating
Rate Note. The Interest Rate Basis for each Floating Rate Note will be: (a) the
Commercial Paper Rate, in which case such Note will be a Commercial Paper Rate
Note; (b) the Prime Rate, in which case such Note will be a Prime Rate Note; (c)
LIBOR, in which case such Note will be a LIBOR Note; (d) the Treasury Rate, in
which case such Note will be a Treasury Rate Note; (e) the CD Rate, in which
case such Note will be a CD Rate Note; (f) the Federal Funds Rate, in which case
such Note will be a Federal Funds Rate Note; the CMT Rate, in which case such
Note will be a CMT Rate Note; or (g) such other interest rate formula as is set
forth in such Pricing Supplement. The applicable Pricing Supplement for a
Floating Rate Note will specify the Interest Rate Basis and, if applicable, the
Calculation Agent, the Index Maturity, the Spread or Spread Multiplier, the
Maximum Rate, the Minimum Rate, the Initial Interest Rate, the Interest Payment
Dates, the Regular Record Dates, the Calculation Date, the Interest
Determination Date, the Interest Reset Dates and the Interest Reset Period with
respect to such Note.
 
     The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually or annually (each an "Interest Reset
Period"), as specified in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, the interest reset date (the
"Interest Reset Date") will be, in the case of Floating Rate Notes which reset
daily, each Market Day; in the case of Floating Rate Notes (other than Treasury
Rate Notes) which reset weekly, the Wednesday of each week; in the case of
 
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Treasury Rate Notes which reset weekly, except as provided in the following
paragraph, the Tuesday of each week; in the case of Floating Rate Notes which
reset monthly, the third Wednesday of each month; in the case of Floating Rate
Notes which reset quarterly, the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes which reset semi-annually, the
third Wednesday of two months of each year as specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes which reset annually,
the third Wednesday of one month of each year as specified in the applicable
Pricing Supplement; provided, however, that the interest rate in effect from the
date of issue to the first Interest Reset Date with respect to a Floating Rate
Note will be the Initial Interest Rate (as set forth in the applicable Pricing
Supplement). If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Market Day with respect to such Floating Rate
Note, the Interest Reset Date for such Floating Rate Note shall be postponed to
the next day that is a Market Day with respect to such Floating Rate Note,
except that in the case of a LIBOR Note, if such Market Day is in the next
succeeding calendar month, such Interest Reset Date shall be the immediately
preceding Market Day.
 
     Unless otherwise specified in the applicable Pricing Supplement, the
Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination Date"),
for a Prime Rate Note (the "Prime Rate Interest Determination Date"), for a CD
Rate Note (the "CD Rate Interest Determination Date"), for a Federal Funds Rate
Note (the "Federal Funds Interest Determination Date"), and for a CMT Rate Note
(the "CMT Rate Interest Determination Date") will be the second Market Day
preceding such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for a LIBOR Note (the "LIBOR Interest
Determination Date") will be the second London Market Day preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a Treasury Rate Note (the "Treasury Interest Determination Date")
will be the day of the week on which Treasury bills are auctioned for the week
in which such Interest Reset Date falls, or if no auction is held for such week,
the Monday of such week (or if Monday is a legal holiday, the next succeeding
Market Day) and the Interest Reset Date will be the Market Day immediately
following such Treasury Interest Determination Date. Treasury bills are usually
sold at auction on the Monday of each week, unless that day is a legal holiday,
in which case the auction is usually held on the following Tuesday, except that
such auction may be held on the preceding Friday. If, as the result of a legal
holiday, an auction is so held on the preceding Friday, such Friday will be the
Treasury Interest Determination Date pertaining to the Interest Reset Date
occurring in the next succeeding week.
 
     All percentages used in or resulting from any calculation of the rate of
interest on Floating Rate Notes will be rounded, if necessary, to the nearest
one hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward (e.g., 9.876545% (or .09876545) will be rounded
upward to 9.87655% (or .0987655)), and all amounts used in or resulting from
such calculation on Floating Rate Notes will be rounded to the nearest cent or,
in the case of Notes denominated other than in U.S. dollars, the nearest unit of
such other currency or composite currency (with one-half cent or unit being
rounded upward).
 
     In addition to any maximum interest rate which may be applicable to any
Floating Rate Note pursuant to the above provisions, the interest rate on the
Floating Rate Notes will in no event be higher than the maximum rate permitted
by New York law, as the same may be modified by United States law of general
application. Under present New York law the maximum rate of interest is 25% per
annum on a simple interest basis, with certain exceptions. The limit may not
apply to Floating Rate Notes in which U.S. $2,500,000 or more has been invested.
 
     The interest rate for a Floating Rate Note with respect to any Interest
Reset Date will be determined by the Calculation Agent as of the related
Interest Determination Date and will be calculated no later than the Calculation
Date. "Calculation Date" means, unless otherwise specified in the applicable
Pricing Supplement, the earlier of (i) the tenth calendar day after such
Interest Determination Date or, if such day is not a Market Day, the next
succeeding Market Day or (ii) the Market Day immediately preceding the
applicable Interest Payment Date or date any payment of principal is due, as the
case may be. Upon the request of the Holder of any Floating Rate Note, the
Calculation Agent will provide the interest rate then in effect, and, if
determined, the interest rate which will become effective on the next Interest
Reset Date with respect to such Floating
 
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Rate Note. The Calculation Agent's determination of any interest rate will be
final and binding in the absence of manifest error.
 
  COMMERCIAL PAPER RATE NOTES
 
     Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any), and will be payable on the dates, specified on the face of
the Commercial Paper Rate Note and in the applicable Pricing Supplement.
 
     Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Reset Date, the
Money Market Yield (calculated as described below) of the per annum rate (quoted
on a bank discount basis) for the relevant Commercial Paper Interest
Determination Date for commercial paper having the specified Index Maturity as
published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates" or any successor
publication of the Board of Governors of the Federal Reserve System
("H.15(519)") under the heading "Commercial Paper -- Nonfinancial". In the event
that such rate is not published prior to 9:00 A.M., New York City time, on the
relevant Calculation Date, then the Commercial Paper Rate with respect to such
Interest Reset Date shall be the Money Market Yield of the rate on such
Commercial Paper Interest Determination Date for commercial paper having the
specified Index Maturity as published by the Federal Reserve Bank of New York in
its daily statistical release, "Composite 3:30 P.M. Quotations for U.S.
Government Securities", or any successor publication published by the Federal
Reserve Bank of New York ("Composite Quotations") under the heading "Commercial
Paper -- Nonfinancial". If by 3:00 P.M., New York City time, on such Calculation
Date such rate is not yet published in either H.15(519) or Composite Quotations,
the Commercial Paper Rate with respect to such Interest Reset Date shall be
calculated by the Calculation Agent and shall be the Money Market Yield of the
arithmetic mean of the offered per annum rates (quoted on a bank discount
basis), as of 11:00 A.M., New York City time, on such Commercial Paper Interest
Determination Date, of three leading dealers of commercial paper in The City of
New York selected by the Calculation Agent for commercial paper of the specified
Index Maturity placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized rating agency; provided, however, that
if fewer than three dealers selected as aforesaid by the Calculation Agent are
quoting as mentioned in this sentence, the Commercial Paper Rate with respect to
such Interest Reset Date will be the Commercial Paper Rate in effect on such
Commercial Paper Interest Determination Date.
 
     "Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
 
                          
Money Market Yield = 100 X      360 X D
                             --------------
                             360 - (D X M)


 
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period corresponding to the specified Index Maturity.
 
  PRIME RATE NOTES
 
     Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any), and
will be payable on the dates, specified on the face of the Prime Rate Note and
in the applicable Pricing Supplement.
 
     Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Reset Date, the rate set forth for the
relevant Prime Rate Interest Determination Date in H.15(519) under the heading
"Bank Prime Loan". In the event that such rate is not published prior to 9:00
A.M., New York City time, on the relevant Calculation Date, then the Prime Rate
with respect to such Interest Reset Date will be the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the Reuters
Screen USPRIME1 Page as such bank's prime rate or base lending rate as in effect
for such Prime Rate Interest Determination Date as quoted on the Reuters Screen
USPRIME1 Page on such
 
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Prime Rate Interest Determination Date. If fewer than four such rates appear on
the Reuters Screen USPRIME1 Page on such Prime Rate Interest Determination Date,
the Prime Rate with respect to such Interest Reset Date will be the arithmetic
mean of the prime rates or base lending rates (quoted on the basis of the actual
number of days in the year divided by a 360-day year) as of the close of
business on such Prime Rate Interest Determination Date by three major banks in
The City of New York selected by the Calculation Agent; provided, however, that
if fewer than three banks selected as aforesaid by the Calculation Agent are
quoting as mentioned in this sentence, the Prime Rate with respect to such
Interest Reset Date will be the Prime Rate in effect on such Prime Rate Interest
Determination Date. "Reuters Screen USPRIME1 Page" means the display designated
as page "USPRIME1" on the Reuters Monitor Money Rates Service (or such other
page as may replace the USPRIME1 page on that service or any successor service
for the purpose of displaying prime rates or base lending rates of major United
States banks).
 
  LIBOR NOTES
 
     LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any), and will be
payable on the dates, specified on the face of the LIBOR Note and in the
applicable Pricing Supplement.
 
          (i) With respect to any LIBOR Interest Determination Date, LIBOR will
     be either (a) if "LIBOR Reuters" is specified in the applicable Pricing
     Supplement, the arithmetic mean of the offered rates (unless the Designated
     LIBOR Page by its terms provides only for a single rate in which case such
     single rate shall be used) for deposits in the Index Currency having the
     Index Maturity specified in such Pricing Supplement, commencing on the
     applicable Interest Reset Date, that appear (or, if only a single rate is
     required as aforesaid, appears) on the Designated LIBOR Page as of 11:00
     A.M., London time, on such LIBOR Interest Determination Date, or (b) if
     "LIBOR Telerate" is specified in the applicable Pricing Supplement or if
     neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable
     Pricing Supplement as the method for calculating LIBOR, the rate for
     deposits in the Index Currency having the Index Maturity specified in such
     Pricing Supplement, commencing on such Interest Reset Date, that appears on
     the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR
     Interest Determination Date. If fewer than two such offered rates so
     appear, or if no such rate so appears, as applicable, LIBOR on such LIBOR
     Interest Determination Date will be determined in accordance with the
     provisions described in clause (ii) below. "Designated LIBOR Page" means
     (a) if "LIBOR Reuters" is specified in the applicable Pricing Supplement,
     the display on the Reuter Monitor Money Rates Service (or any successor
     service) on the page specified in such Pricing Supplement (or any other
     page as may replace such page on such service) for the purpose of
     displaying the London interbank rates of major banks for the applicable
     Index Currency, or (b) if "LIBOR Telerate" is specified in the applicable
     Pricing Supplement as the method for calculating LIBOR, the display on the
     Dow Jones Telerate Service (or any successor service) on the page specified
     in such Pricing Supplement (or any other page as may replace such page on
     such service) for the purpose of displaying the London interbank rates of
     major banks for the applicable Index Currency.
 
          (ii) With respect to a LIBOR Interest Determination Date on which
     fewer than two offered rates appear, or no rate appears, as the case may
     be, on the Designated LIBOR Page as specified in clause (i) above, the
     Calculation Agent will request the principal London office of each of four
     major reference banks in the London interbank market, as selected by the
     Calculation Agent, to provide the Calculation Agent with its offered
     quotation for deposits in the Index Currency for the period of the Index
     Maturity specified in the applicable Pricing Supplement, commencing on the
     applicable Interest Reset Date, to prime banks in the London interbank
     market at approximately 11:00 A.M., London time, on such LIBOR Interest
     Determination Date and in a principal amount that is representative for a
     single transaction in such Index Currency in such market at such time. If
     at least two such quotations are so provided, then LIBOR on such LIBOR
     Interest Determination Date will be the arithmetic mean of such quotations.
     If fewer than two such quotations are so provided, then LIBOR on such LIBOR
     Interest Determination Date will be the arithmetic mean of the rates quoted
     at approximately 11:00 A.M., in the applicable Principal Financial Center,
     on such LIBOR Interest Determination Date by three major banks
 
                                       S-7
   8
 
     in such Principal Financial Center selected by the Calculation Agent for
     loans in the Index Currency to leading European banks, having the Index
     Maturity specified in the applicable Pricing Supplement and in a principal
     amount that is representative for a single transaction in such Index
     Currency in such market at such time; provided, however, that if the banks
     so selected by the Calculation Agent are not quoting as mentioned in this
     sentence, LIBOR determined as of such LIBOR Interest Determination Date
     will be LIBOR in effect on such LIBOR Interest Determination Date.
     "Principal Financial Center" means the capital city of the country issuing
     the Index Currency, except that with respect to United States dollars,
     Australian dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss
     francs and ECUs, the Principal Financial Center shall be The City of New
     York, Sydney, Frankfurt, Amsterdam, Milan, Zurich and Luxembourg,
     respectively.
 
  TREASURY RATE NOTES
 
     Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if any)
and will be payable on the dates specified on the face of the Treasury Rate Note
and in the applicable Pricing Supplement.
 
     Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Reset Date, the rate from the auction
on the relevant Treasury Interest Determination Date of direct obligations of
the United States ("Treasury bills") having the specified Index Maturity as
published in H.15(519) under the heading "U.S. Government Securities/Treasury
Bills -- Auction Average (Investment)" or, if not so published by 9:00 A.M., New
York City time, on the relevant Calculation Date, the auction average rate
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) for such auction as otherwise
announced by the United States Department of the Treasury. In the event that the
results of such auction of Treasury bills having the specified Index Maturity
are not published or reported as provided above by 3:00 P.M., New York City
time, on such Calculation Date, or if no such auction is held during such week,
then the Treasury Rate shall be the rate set forth in H.15(519) for the relevant
Treasury Rate Interest Determination Date for the specified Index Maturity under
the heading "U.S. Government Securities/Treasury Bills/Secondary Market". In the
event such rate is not so published by 3:00 P.M., New York City time, on the
relevant Calculation Date, the Treasury Rate with respect to such Interest Reset
Date shall be calculated by the Calculation Agent and shall be a yield to
maturity (expressed as a bond equivalent, on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates as of approximately 3:30 P.M.. New York City time, on
such Treasury Interest Determination Date, of three primary United States
government securities dealers in The City of New York selected by the
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if fewer than
three dealers selected as aforesaid by the Calculation Agent are quoting as
mentioned in this sentence, the Treasury Rate with respect to such Interest
Reset Date will be the Treasury Rate in effect on such Treasury Interest
Determination Date.
 
  CD RATE NOTES
 
     CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any), and will
be payable on the dates, specified on the face of the CD Rate Note and in the
applicable Pricing Supplement.
 
     Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Reset Date, the rate for the relevant CD
Interest Determination Date for negotiable certificates of deposit having the
specified Index Maturity as published in H.15(519) under the heading "CDs
(Secondary Market)". In the event that such rate is not published prior to 9:00
A.M., New York City time, on the relevant Calculation Date, then the CD Rate
with respect to such Interest Reset Date shall be the rate on such CD Rate
Interest Determination Date for negotiable certificates of deposit having the
specified Index Maturity as published in Composite Quotations under the heading
"Certificates of Deposit". If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not published in either H.15(519) or Composite
Quotations, the CD Rate with respect to such Interest Reset Date shall be
calculated by the Calculation Agent and shall be the arithmetic mean of the
secondary market offered rates, as of 10:00 A.M., New York City time, on such
 
                                       S-8
   9
 
CD Rate Interest Determination Date, of three leading nonbank dealers of
negotiable U.S. dollar certificates of deposit in The City of New York selected
by the Calculation Agent for negotiable certificates of deposit of major United
States money market banks with a remaining maturity closest to the specified
Index Maturity in a denomination of $5,000,000; provided, however, that if fewer
than three dealers selected as aforesaid by the Calculation Agent are quoting as
mentioned in this sentence, the CD Rate with respect to such Interest Reset Date
will be the CD Rate in effect on such CD Rate Interest Determination Date.
 
  FEDERAL FUNDS RATE NOTES
 
     Federal Funds Rate Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any), and will be payable on the dates, specified on the face of
the Federal Funds Rate Note and in the applicable Pricing Supplement.
 
     Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Reset Date, the rate on the
relevant Federal Funds Interest Determination Date for Federal Funds as
published in H.15(519) under the heading "Federal Funds (Effective)". In the
event that such rate is not published prior to 9:00 A.M., New York City time, on
the relevant Calculation Date, then the Federal Funds Rate with respect to such
Interest Reset Date will be the rate on such Federal Funds Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate". If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not published in either H.15(519) or Composite
Quotations, the Federal Funds Rate with respect to such Interest Reset Date
shall be calculated by the Calculation Agent and shall be the arithmetic mean of
the rates, on such Federal Funds Interest Determination Date, for the last
transaction in overnight Federal Funds arranged by three leading brokers of
Federal Funds transactions in The City of New York selected by the Calculation
Agent prior to 9:00 A.M., New York City time, on such Federal Funds Interest
Determination Date; provided, however, that if fewer than three brokers selected
as aforesaid by the Calculation Agent are quoting as mentioned in this sentence,
the Federal Funds Rate with respect to such Interest Reset Date will be the
Federal Funds Rate in effect on such Federal Funds Interest Determination Date.
 
  CMT RATE NOTES
 
     CMT Rate Notes will bear interest at the rates (calculated with reference
to the CMT Rate and the Spread and/or Spread Multiplier, if any), and will be
payable on the dates, specified on the face of such CMT Rate Notes and in the
applicable Pricing Supplement.
 
     Unless otherwise indicated in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Rate Interest Determination Date, the rate
displayed on the Designated CMT Telerate Page under the caption ". . . Treasury
Constant Maturities . . . Federal Reserve Board Release H.15 . . . Mondays
Approximately 3:45 P.M.", or any successor caption, under the column for the
Designated CMT Maturity Index for (i) if the Designated CMT Telerate Page is
7055, the rate on such CMT Rate Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week or the month, as applicable,
ended immediately preceding the week in which the related CMT Rate Interest
Determination Date occurs. In the event such rate is no longer displayed on the
relevant page, or is not displayed prior to 3:00 P.M., New York City time, on
the related Calculation Date, then the CMT Rate for such CMT Rate Interest
Determination Date will be such Treasury Constant Maturity rate for the
Designated CMT Maturity Index, as published in the relevant H.15(519) or any
successor publication. If such rate is no longer published, or is not published
by 3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate for such CMT Rate Interest Determination Date will be such Treasury
Constant Maturity rate for the Designated CMT Maturity Index (or other United
States Treasury rate for the Designated CMT Maturity Index) for the CMT Rate
Interest Determination Date with respect to such Interest Reset Date as may then
be published by either the Board of Governors of the Federal Reserve System or
the United States Department of the Treasury that the Calculation Agent
determines to be comparable to the rate formerly displayed on the Designated CMT
Telerate Page and published in the relevant H.15(519) or any successor
publication. If such information is not provided by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate for the CMT Rate
Interest Determination Date will be calculated by the
 
                                       S-9
   10
 
Calculation Agent and will be a yield to maturity, based on the arithmetic mean
of the secondary market closing offer side prices as of approximately 3:30 P.M.,
New York City time, on the CMT Rate Interest Determination Date reported,
according to their written records, by three leading primary United States
government securities dealers (each, a "Reference Dealer") in The City of New
York (which may include one or more of the Agents or their affiliates) selected
by the Calculation Agent (from five such Reference Dealers selected by the
Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for the most recently issued direct noncallable
fixed rate obligations of the United States ("Treasury Notes") with an original
maturity of approximately the Designated CMT Maturity Index and a remaining term
to maturity of not less than such Designated CMT Maturity Index minus one year.
If the Calculation Agent is unable to obtain three such Treasury Note
quotations, the CMT Rate for such CMT Rate Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on the
arithmetic mean of the secondary market offer side prices as of approximately
3:30 P.M., New York City time, on the CMT Rate Interest Determination Date of
three Reference Dealers in The City of New York (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest quotation (or,
in the event of equality, one of the lowest)), for Treasury Notes with an
original maturity of the number of years that is the next highest to the
Designated CMT Maturity Index and a remaining term to maturity closest to the
Designated CMT Maturity Index and in an amount of at least $100 million. If
three or four (and not five) of such Reference Dealers are quoting as described
above, then the CMT Rate will be based on the arithmetic mean of the offer
prices obtained and neither the highest nor the lowest of such quotes will be
eliminated; provided, however, that if fewer than three Reference Dealers
selected by the Calculation Agent are quoting as described herein, the CMT Rate
will be the CMT Rate in effect on such CMT Rate Interest Determination Date. If
two Treasury Notes with an original maturity as described in the third preceding
sentence have remaining terms to maturity equally close to the Designated CMT
Maturity Index, the quotes for the Treasury Note with the shorter remaining term
to maturity will be used.
 
     "Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service, or any successor service, on the page designated in the applicable
Pricing Supplement (or any other page as may replace such page on that service
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519)), for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519). If no such page is specified in the applicable Pricing
Supplement, the Designated CMT Telerate Page shall be 7052 for the most recent
week.
 
     "Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
 
PAYMENT OF PRINCIPAL AND INTEREST
 
     Unless otherwise specified in the applicable Pricing Supplement, payments
of principal of (and premium, if any) and interest on all Notes will be made in
the applicable Specified Currency (or, if such Specified Currency is not at the
time of such payment legal tender for the payment of public and private debts,
in such other coin or currency of the country which issued such Specified
Currency as at the time of such payment is legal tender for the payment of such
debts); provided, however, that payments of principal (and premium, if any) and
interest on Notes denominated in other than U.S. dollars will nevertheless be
made in U.S. dollars (i) at the option of the Holders thereof under the
procedures described in the two following paragraphs and (ii) at the option of
the Company in the case of imposition of exchange controls or other
circumstances beyond the control of the Company as described in the next to last
paragraph under this heading.
 
     Unless otherwise specified in the applicable Pricing Supplement, and except
as provided in the next paragraph, payments of interest and principal (and
premium, if any) with respect to any Note denominated in other than U.S. dollars
will be made in U.S. dollars if the registered Holder of such Note on the
relevant Regular Record Date or at Maturity, as the case may be, has transmitted
a written request for such payment in
 
                                      S-10
   11
 
U.S. dollars to the Trustee at its Corporate Trust Office in The City of New
York on or prior to such Regular Record Date or the date 15 days prior to
Maturity, as the case may be. Such request may be in writing (mailed or hand
delivered) or by cable, telex or other form of facsimile transmission. Any such
request made with respect to any Note by a registered Holder will remain in
effect with respect to any further payments of interest and principal (and
premium, if any) with respect to such Note payable to such Holder, unless such
request is revoked on or prior to the relevant Regular Record Date or the date
15 days prior to Maturity, as the case may be. Holders of Notes denominated in
other than U.S. dollars whose Notes are registered in the name of a broker or
nominee should contact such broker or nominee to determine whether and how an
election to receive payments in U.S. dollars may be made.
 
     The U.S. dollar amount to be received by a Holder of a Note denominated in
other than U.S. dollars who elects to receive payment in U.S. dollars will be
based on the highest bid quotation in The City of New York received by the
Exchange Rate Agent (as defined below) as of 11:00 A.M., New York City time, on
the second Market Day next preceding the applicable payment date from three
recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) for the purchase by the quoting dealer of the Specified Currency for U.S.
dollars for settlement on such payment date in the aggregate amount of the
Specified Currency payable to all Holders of Notes electing to receive U.S.
dollar payments and at which the applicable dealer commits to execute a
contract. If three such bid quotations are not available on the second Market
Day preceding the date of payment of principal (and premium, if any) or interest
with respect to any Note, such payment will be made in the Specified Currency.
All currency exchange costs associated with any payment in U.S. dollars on any
such Note will be borne by the Holder thereof by deductions from such payment.
Unless otherwise provided in the applicable Pricing Supplement, First Trust of
New York, National Association, will be the Exchange Rate Agent (the "Exchange
Rate Agent") with respect to the Notes.
 
     Interest will be payable to the person in whose name a Note is registered
(which in the case of Book-Entry Securities will be the Depository or a nominee
of the Depository) at the close of business on the Regular Record Date next
preceding each Interest Payment Date; provided, however, that interest payable
at Maturity will be payable to the person to whom principal shall be payable
(which in the case of Book-Entry Securities will be the Depository or a nominee
of the Depository). The first payment of interest on any Note originally issued
between a Regular Record Date and an Interest Payment Date will be made on the
Interest Payment Date following the next succeeding Regular Record Date to the
registered owner on such next succeeding Regular Record Date. Unless otherwise
indicated in the applicable Pricing Supplement, the "Regular Record Date" with
respect to any Floating Rate Note shall be the date 15 calendar days prior to
each Interest Payment Date, whether or not such date shall be a Business Day in
the City of New York and the "Regular Record Date" with respect to any Fixed
Rate Note shall be the April 15 and October 15 next preceding the May 1 and
November 1 Interest Payment Dates.
 
     Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable, in the case of Floating Rate Notes
which reset daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year (as
indicated in the applicable Pricing Supplement); in the case of Floating Rate
Notes which reset quarterly, on the third Wednesday of March, June, September
and December of each year; in the case of Floating Rate Notes which reset
semi-annually, on the third Wednesday of the two months of each year specified
in the applicable Pricing Supplement; and in the case of Floating Rate Notes
which reset annually, on the third Wednesday of the month specified in the
applicable Pricing Supplement (each an "Interest Payment Date"), and, in each
case, at Maturity. If an Interest Payment Date (other than at Maturity) with
respect to any Floating Rate Note would otherwise fall on a day that is not a
Market Day with respect to such Note, such Interest Payment Date will be the
next succeeding Market Day (or, in the case of a LIBOR Note, if such day falls
in the next calendar month, the next preceding Market Day).
 
     Payments of interest on any Fixed Rate Note or Floating Rate Note with
respect to any Interest Payment Date will include interest accrued to but
excluding such Interest Payment Date.
 
     With respect to a Floating Rate Note, accrued interest from the date of
issue or from the last date to which interest has been paid is calculated by
multiplying the face amount of such Floating Rate Note by an
 
                                      S-11
   12
 
accrued interest factor. Such accrued interest factor is computed by adding the
interest factor calculated for each day from the date of issue, or from the last
date to which interest has been paid, to but excluding the date for which
accrued interest is being calculated. The interest factor (expressed as a
decimal) for each such day is computed by dividing the interest rate (expressed
as a decimal) applicable to such date by 360, in the case of Commercial Paper
Rate Notes, Prime Rate Notes, LIBOR Notes, CD Rate Notes or Federal Funds Rate
Notes, or by the actual number of days in the year, in the case of Treasury Rate
Notes or CMT Rate Notes. Interest on Fixed Rate Notes will be computed on the
basis of a 360-day year of twelve 30-day months.
 
     If the date for payment of the principal of or any premium or interest on
any Floating Rate Note at Maturity is not a Market Day, then such payment of
principal, premium or interest need not be made on such day, but may be made on
the next succeeding Market Day with the same force and effect as if made on the
due date, and no interest shall accrue for the period from and after such date.
 
     A payment on any Fixed Rate Note due on any day that is not a Market Day
with respect to such Note need not be made on such a day, but may be made on the
next succeeding Market Day with the same force and effect as if made on the due
date, and no interest shall accrue for the period from and after such date.
 
     Payment of the principal of (and premium, if any) and any interest due with
respect to any Certificated Note at maturity to be made in U.S. dollars will be
made in immediately available funds upon surrender of such Note at the Corporate
Trust Office of First Trust of New York, National Association, in the Borough of
Manhattan, The City of New York, provided that the Certificated Note is
presented to the Paying Agent in time for the Paying Agent to make such payments
in such funds in accordance with its normal procedures. Payments of interest
with respect to Certificated Notes to be made in U.S. dollars other than at
Maturity will be made by check mailed to the address of the Person entitled
thereto as it appears in the Security Register or by wire transfer to such
account as may have been appropriately designated in writing no later than the
relevant Regular Record Date to the Paying Agent by such Person. For information
on the manner of payment in respect of Book-Entry Securities, see "-- Book-Entry
Securities", below.
 
     Unless otherwise specified in the applicable Pricing Supplement, payments
of interest and principal (and premium, if any) with respect to any Note to be
paid in a Specified Currency other than U.S. dollars will be made by wire
transfer to such account maintained by the Holder with a bank located in the
country issuing the Specified Currency (or, with respect to Notes denominated in
ECUs, Brussels) or other jurisdiction acceptable to the Company and the Trustee
as shall have been designated in writing on or prior to the relevant Regular
Record Date preceding the Interest Payment Date or 15 days preceding Maturity,
as the case may be, by the registered Holder of such Note on the relevant
Regular Record Date or Maturity, provided that, in the case of payment of
principal of (and premium, if any) and any interest due at Maturity, the Note is
presented to the Paying Agent in time for the Paying Agent to make such payments
in such funds in accordance with its normal procedures. Such designation shall
be made by filing the appropriate information with the Trustee at its Corporate
Trust Office in The City of New York, and, unless revoked in writing, any such
designation made with respect to any Note by a registered Holder will remain in
effect with respect to any further payments with respect to such Note payable to
such Holder. If a payment with respect to any such Note cannot be made by wire
transfer because the required designation has not been received by the Trustee
on or before the requisite date or for any other reason, a notice will be mailed
to the Holder at its registered address requesting a designation pursuant to
which such wire transfer can be made and, upon the Trustee's receipt of such a
designation. such payment will be made within five Market Days with respect to
such Note of such receipt. The Company will pay any administrative costs imposed
by banks in connection with making payments by wire transfer, but any tax,
assessment or governmental charge imposed upon payments will be borne by the
Holders of the Notes in respect of which payments are made.
 
     If the principal of (and premium, if any) or interest on any Note is
payable in other than U.S. dollars and such Specified Currency is not available
due to the imposition of exchange controls or other circumstances beyond the
control of the Company, the Company will be entitled to satisfy its obligations
to Holders of the Notes by making such payment in U.S. dollars on the basis of
the most recently available Exchange Rate. Any payment made under such
circumstances in U.S. dollars where the required payment is in other than U.S.
dollars will not constitute an Event of Default under the Indenture.
 
                                      S-12
   13
 
     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 such Specified Currency (which may include European Community law),
any payments in respect of any Notes otherwise required to be made in such
Specified Currency shall be made in the currency into or by which such Specified
Currency has been so converted or replaced, based on the conversion or
equivalency rate prescribed by law having general and direct applicability in
such jurisdiction (which may include European Community law), and such Specified
Currency shall not be deemed to be unavailable to the Company solely by reason
of any such conversion or replacement. If any currency is introduced in the
jurisdiction issuing any Specified Currency on the basis of legally enforceable
equivalency to such Specified Currency pursuant to law having general and direct
applicability in such state (which may include European Community law) in
preparation for conversion of such Specified Currency into, or replacement of
such Specified Currency by, such other currency, the Company shall be entitled,
at its option, to make any payments in respect of any Notes otherwise required
to be made in such Specified Currency in such other currency based on the
equivalency rate prescribed by law having general and direct applicability in
such jurisdiction (which may include European Community law). Making payments in
accordance with this paragraph shall not, by itself, constitute a default in the
Company's obligations to make such payments. No occurrence of a currency
conversion, replacement or introduction of a type described in this paragraph
involving a Specified Currency shall, by itself, entitle the Company to avoid
its obligations under any Note or entitle the Company or any Holder of a Note to
rescission of the purchase and sale of such Note or to reformation of any of the
terms thereof on the grounds of impossibility or impracticability of
performance, frustration of purpose or otherwise.
 
BOOK-ENTRY SECURITIES
 
     Upon issuance all Notes to be sold in book-entry form bearing interest (if
any) at the same rate or pursuant to the same formula, having the same date of
issuance, redemption provisions, if any, Specified Currency, Stated Maturity and
other terms will be represented by one or more Book-Entry Securities. Each
Book-Entry Security will be deposited with, or on behalf of, the Depository, and
will be registered in the name of the Depository or a nominee of the Depository.
 
     It is currently contemplated that only Notes that have a Specified Currency
of U.S. dollars will be issued as Book-Entry Securities.
 
     Ownership of beneficial interests in a Book-Entry Security will be limited
to institutions that have accounts with the Depository or its nominee
("participants") or persons that may hold interests through participants. The
Company has been advised by the Depository that upon receipt of any payment of
principal of or any premium or interest in respect of a Book-Entry Security, the
Depository will credit, on its book-entry registration and transfer system,
accounts of participants with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Book-Entry
Security as shown on the records of the Depository. Ownership of beneficial
interests by participants in such a Book-Entry Security will be evidenced only
by, and the transfer of that ownership interest will be effected only through,
records maintained by the Depository or its nominee for such Book-Entry
Security. Ownership of beneficial interests in such Book-Entry Security by
persons that hold through participants will be evidenced only by, and the
transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such laws may impair the ability
to transfer beneficial interests in such Book-Entry Security.
 
     Payment of principal of and any premium and interest on Notes represented
by any Book-Entry Security registered in the name of or held by the Depository
or its nominee will be made to the Depository or its nominee, as the case may
be, as the Holder of the Book-Entry Security. Payments by participants to owners
of beneficial interests in a Book-Entry Security held through such participants
will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers registered in "street
name", and will be the sole responsibility of such participants. Neither the
Company, the Trustee, nor any agent of the Company or the Trustee will have any
responsibility or liability for any aspect of the Depository's records or any
participant's records relating to or payments made on account of beneficial
 
                                      S-13
   14
 
ownership interests in a Book-Entry Security or for maintaining, supervising or
reviewing any of the Depository's records or any participant's records relating
to such beneficial ownership interests.
 
     No Book-Entry Security described above may be transferred except as a whole
by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository.
 
     No Book-Entry Security may be exchanged in whole or in part for Notes
registered, and no transfer of a Book- Entry Security in whole or in part may be
registered, in the name of any Person other than the Depository for such Book-
Entry Security or any nominee of such Depository unless (i) the Depository has
notified the Company that it is unwilling or unable to continue as Depository
for such Book-Entry Security or has ceased to be qualified to act as such as
required by the Indenture, (ii) there shall have occurred and be continuing an
Event of Default with respect to such Book-Entry Security or (iii) there shall
exist such circumstances, if any, in addition to or in lieu of those described
above as may be described in the applicable Pricing Supplement.
 
     Any Book-Entry Security that is exchangeable pursuant to the preceding
sentence shall be exchangeable in whole for Certificated Notes in registered
form of any authorized denomination and of like tenor and aggregate principal
amount. Such Notes shall be registered in the name or names of such person or
persons as the Depository shall instruct the Trustee. It is expected that such
instructions may be based upon directions received by the Depository from its
participants with respect to ownership of beneficial interests in such Book-
Entry Security.
 
     As long as the Depository, or its nominee, is the registered Holder of a
Book-Entry Security, the Depository or such nominee, as the case may be, will be
considered the sole owner and Holder of such Book-Entry Security for all
purposes under the Notes and the Indenture. Except in the limited circumstances
referred to above, owners of beneficial interests in a Book-Entry Security will
not be entitled to have such Book-Entry Security registered in their names, will
not receive or be entitled to receive physical delivery of Certificated Notes in
exchange therefor and will not be considered to be the owners or Holders of such
Book-Entry Security for any purpose under the Notes or the Indenture.
Accordingly, each person owning a beneficial interest in such Book-Entry
Security must rely on the procedures of the Depository and, if such person is
not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a Holder under the
Indenture.
 
     The Indenture provides that the Depository, as a Holder, may appoint agents
and otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver, or other action which a
Holder is entitled to give or take under the Indenture. The Company understands
that, under existing industry practices, in the event that the Company requests
any action of Holders or an owner of a beneficial interest in such Book-Entry
Security desires to give or take any action that a Holder is entitled to give or
take under the Indenture, the Depository would authorize the participants
holding the relevant beneficial interests to give or take such action, and such
participants would authorize beneficial owners owning through such participants
to give or take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
 
     The Depository has advised the Company as follows: the Depository 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 Depository was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions, such as transfers and pledges, among its participants in such
securities through electronic computerized book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depository's participants include securities brokers and
dealers (including the Agents), banks, trust companies, clearing corporations,
and certain other organizations, some of whom (and/or their representatives) own
the Depository. Access to Depository's book-entry system is also available to
others, such
 
                                      S-14
   15
 
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
 
REPAYMENT AT THE OPTION OF THE HOLDER
 
     The Notes will be repayable by the Company at the option of the Holders
thereof prior to Stated Maturity only if one or more optional repayment dates
are specified in the applicable Pricing Supplement ("Optional Repayment Dates").
If so specified, the Notes will be subject to repayment at the option of the
Holders thereof on any Optional Repayment Date in whole or from time to time in
part in increments of $1,000 or such other minimum denomination specified in the
applicable Pricing Supplement (provided that any remaining principal amount
thereof shall be at least $1,000 or such other minimum denomination), at a
repayment price equal to 100% of the unpaid principal amount to be repaid (or,
if the Note is an Original Issue Discount Note, such lesser amount as provided
therein), together with unpaid interest accrued to the date of repayment. For
any Note to be repaid, such Note must be received, together with the form
thereon entitled "Option to Elect Repayment" duly completed, by the Trustee at
its Corporate Trust Office (or such other address of which the Company shall
from time to time notify the Holders) not more than 60 nor less than 30 calendar
days prior to the date of repayment. Exercise of such repayment option by the
Holder will be irrevocable.
 
     Only the Depository may exercise the repayment option in respect of Notes
represented by a Book-Entry Security. Accordingly, owners of beneficial
interests ("Beneficial Owners") in a Book Entry Security that desire to have all
or any portion of such interests repaid must instruct the participant through
which they own their interest to direct the Depositary to exercise the repayment
option on their behalf by delivering the Book Entry Security and duly completed
election form to the Trustee as aforesaid. In order to ensure that such
Book-Entry Security and election form are received by the Trustee on a
particular day, the applicable Beneficial Owner must so instruct the participant
through which it owns its interest before such participant's deadline for
accepting instructions for that day. Different firms may have different
deadlines for accepting instructions from their customers. Accordingly,
Beneficial Owners should consult the participants through which they own their
interest for the respective deadlines for such participants. All instructions
given to participants from Beneficial Owners relating to the option to elect
repayment shall be irrevocable. In addition, at the time such instructions are
given, each such Beneficial Owner shall cause the participant through which it
owns its interest to transfer such Beneficial Owner's interest in the Book-Entry
Security, on the Depository's records, to the Trustee. See "-- Book-Entry
Securities" above.
 
     If applicable, the Company will comply with the requirements of Rule 14c-1
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
any other securities laws or regulations in connection with any such repayment.
 
CURRENCY INDEXED NOTES
 
     The Company may from time to time 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 both, is determined by the
rate of exchange between the Specified Currency and the other currency or
composite currency specified as the Indexed Currency (the "Indexed Currency") in
the applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, Holders of Currency Indexed Notes will be entitled to
receive a principal amount of such Currency Indexed Notes exceeding the amount
designated as the face amount of such Currency Indexed Notes in the applicable
Pricing Supplement (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 rate of such exchange designated as the Base Exchange Rate,
expressed in units of the Indexed Currency per one unit of the Specified
Currency, in the applicable Pricing Supplement (the "Base Exchange Rate") and
will be entitled to receive a principal amount of such Currency Indexed Notes
less than the Face Amount of such Currency Indexed Notes, if, at the Stated
Maturity, the rate at which the Specified Currency can be exchanged for the
Indexed Currency is less than such Base Exchange Rate. Information as to the
relative historical value of the applicable Specified Currency against the
applicable Indexed Currency, any exchange controls applicable to such Specified
Currency or Indexed Currency and any
 
                                      S-15
   16
 
additional tax consequences to Holders will be set forth in the applicable
Pricing Supplement. See "Foreign Currency Risks".
 
     Unless otherwise specified in the applicable Pricing Supplement, the term
"Exchange Rate Day" shall mean any day which is a Business Day in The City of
New York and (a) if the Specified Currency or Indexed Currency is the Canadian
Dollar, in Toronto, Canada, (b) if the Specified Currency or Indexed Currency is
the Australian Dollar, in Melbourne, Australia, (c) if the Specified Currency or
Indexed Currency is the ECU, in Brussels, Belgium, and/or (d) 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 such
Specified Currency or Indexed Currency.
 
     Unless otherwise specified in the applicable Pricing Supplement, interest
will be payable by the Company in the Specified Currency based on the Face
Amount of the Currency Indexed Notes and at the rate and times and in the manner
set forth herein and in the applicable Pricing Supplement. If the formulas set
forth below are applicable to Currency Indexed Notes, the maximum principal
amount payable at the Stated Maturity in respect of such Currency Indexed Notes
would be equal to twice the Face Amount and the minimum principal amount payable
would be zero.
 
     Unless otherwise specified in the applicable Pricing Supplement, principal
of a Currency Indexed Note will be payable by the Company in the Specified
Currency at the Stated Maturity in an amount equal to the Face Amount of the
Currency Indexed Note, plus or minus an amount determined by the determination
agent specified in the applicable Pricing Supplement (the "Determination Agent")
by reference to the difference between the Base Exchange Rate and the Spot Rate
(as defined below). The "Spot Rate" shall mean the rate at which the Specified
Currency can be exchanged for the Indexed Currency as determined on the second
Exchange Rate Day (the "Determination Date") prior to the Stated Maturity of
such 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 (as defined below) in The City of New York at 11:00 A.M.,
New York City time, on the Determination Date, for an amount of Indexed Currency
equal to the Face Amount of such Currency Indexed Note multiplied by the Base
Exchange Rate, with the Specified Currency for settlement on the Stated Maturity
expressed in units of the Indexed Currency per one unit of the Specified
Currency. If such quotations from the Reference Dealers are not available on the
Determination Date due to circumstances beyond the control of the Company or the
Determination Agent, the Spot Rate will be determined on the basis of the most
recently available quotations from the Reference Dealers. The principal amount
of the Currency Indexed Notes determined by the Determination Agent to be
payable at the Stated Maturity will be payable to the Holders thereof in the
manner set forth herein and in the applicable Pricing Supplement. As used
herein, the term "Reference Dealers" shall mean the three banks or firms
specified as such in the applicable Pricing Supplement or, if any of them shall
be unwilling or unable to provide the requested quotations, such other major
money center bank or banks in The City of New York selected by the Company, in
consultation with the Determination Agent, to act as Reference Dealer or Dealers
in replacement therefor. 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 thereof shall be final and binding
on the Company and the Holders of such Currency Indexed Notes.
 
     Unless otherwise specified in the applicable Pricing Supplement, on the
basis of the aforesaid determination by the Determination Agent and the formulas
and limitations set forth below, (i) if the Base Exchange Rate equals the Spot
Rate for any Currency Indexed Note, then the principal amount of such Currency
Indexed Note payable at the Stated Maturity would be equal to the Face Amount of
such Currency Indexed Note; (ii) if the Spot Rate exceeds the Base Exchange Rate
(i.e., the Specified Currency has appreciated against the Indexed Currency
during the term of the Currency Indexed Note, then the principal amount so
payable would be greater than the Face Amount of such Currency Indexed Note up
to an amount equal to twice the Face Amount of such Currency Indexed Note; (iii)
if the Spot Rate is less than the Base Exchange Rate (i.e., the Specified
Currency has depreciated against the Indexed Currency during the term of the
Currency Indexed Note) but is greater than one-half of the Base Exchange Rate,
the principal amount so payable would be less than the Face Amount of such
Currency Indexed Note; and (iv) if the Spot Rate is less
 
                                      S-16
   17
 
than or equal to one-half of the Base Exchange Rate, then the Spot Rate will be
deemed to be one-half of the Base Exchange Rate and no principal amount of the
Currency Indexed Note would be payable at the Stated Maturity.
 
     Unless otherwise specified in the applicable Pricing Supplement, the
formula to be used by the Determination Agent to determine the principal amount
of a Currency Indexed Note payable at the Stated Maturity will be as follows:
 
     If the Spot Rate exceeds or equals the Base Exchange Rate, the principal
amount of a Currency Indexed Note payable at the Stated Maturity shall equal:
 
                                            
                  Face Amount + (Face Amount X Spot Rate - Base Exchange Rate).
                                               ----------------------------------------
                                               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 shall, in no event,
be less than zero) shall equal:
 
                                            
                  Face Amount - (Face Amount X Base Exchange Rate - Spot Rate).
                                               ----------------------------------------
                                               Spot Rate


 
     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.
 
OTHER INDEXED NOTES
 
     The Company may issue Indexed Notes other than Currency Indexed Notes for
which the amount of interest payable or the amount of principal payable at
Maturity, or both, will be determined with reference to such other index or
indices as will be set forth in the applicable Pricing Supplement. The
applicable Pricing Supplement will contain a description of such index or
indices, a formula for calculating interest and principal, any additional tax
consequences to the Holder of such Notes and certain risks associated with such
Notes.
 
AMORTIZING NOTES
 
     The Company may from time to time offer Notes for which payments of
principal and interest are made in equal installments over the life of such
Notes ("Amortizing Notes"). Unless otherwise specified in the applicable Pricing
Supplement, interest on each Amortizing Note will be computed on the basis of a
360-day year of twelve 30-day months. Payments with respect to Amortizing Notes
will be applied first to interest due and payable thereon and then to the
reduction of the unpaid principal amount thereof. Further information concerning
additional terms and provisions of Amortizing Notes will be specified in the
applicable Pricing Supplement, including a table setting forth repayment
information for such Amortizing Notes.
 
EXTENSION OF MATURITY
 
     An applicable Pricing Supplement will indicate whether the Company has the
option to extend the Stated Maturity of a Note (other than an Amortizing Note)
for one or more periods up to but not beyond a date set forth in such Pricing
Supplement. If the Company has such option with respect to any Note, the
procedures relating thereto will be as set forth in the applicable Pricing
Supplement.
 
RENEWABLE NOTES
 
     An applicable Pricing Supplement will indicate whether the Stated Maturity
of a Note (other than an Amortizing Note) will automatically be extended for one
or more periods but not beyond a date set forth in such Pricing Supplement
unless the Holder elects at its option that such Note shall mature, as will be
set forth in such Pricing Supplement.
 
                                      S-17
   18
 
                             UNITED STATES TAXATION
 
     The following is a summary of the principal United States federal income
tax consequences of ownership of Notes. It deals only with Notes held as capital
assets by initial purchasers, and not with special classes of holders, such as
dealers in securities or currencies, traders in securities that elect to mark to
market, banks, tax-exempt organizations, life insurance companies, persons that
hold Notes that are a hedge or that are hedged against currency risks or that
are part of a straddle or conversion transaction or persons whose functional
currency is not the U.S. dollar. Moreover, the summary 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 ownership of Notes that are
due to mature more than 30 years from their date of issue will be discussed in
an applicable Pricing Supplement. This summary is based on the Internal Revenue
Code of 1986, as amended (the "Code"), its legislative history, existing and
proposed regulations thereunder, published rulings and court decisions, all as
currently in effect and all subject to change at any time, perhaps with
retroactive effect.
 
     Prospective purchasers of Notes should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any other taxing jurisdiction, of the ownership of Notes.
 
UNITED STATES HOLDERS
 
  PAYMENTS OF INTEREST
 
     Interest on a Note, whether payable in U.S. dollars or a Specified Currency
other than U.S. dollars (a "foreign currency"), other than interest on a
"Discount Note" that is not "qualified stated interest" (each as defined below
under "Original Issue Discount -- General"), will be taxable to a United States
Holder as ordinary income at the time it is received or accrued, depending on
the holder's method of accounting for tax purposes. A United States Holder is a
beneficial owner that is (i) a citizen or resident of the United States, (ii) a
domestic corporation, (iii) an estate the income of which is subject to United
States federal income tax without regard to 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.
 
     If an interest payment is denominated in, or determined by reference to, a
foreign currency, the amount of income recognized by a cash basis United States
Holder will be the U.S. dollar value of the interest payment, based on the
exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars.
 
     An accrual basis United States Holder may determine the amount of income
recognized with respect to an interest payment denominated in, or determined by
reference to, a foreign currency in accordance with either of two methods. Under
the first method, the amount of income accrued will be 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, the part of the period within
the taxable year).
 
     Under the second method, the United States Holder may elect to 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, if a payment of interest is
actually received within five business days of the last day of the accrual
period or taxable year, an electing accrual basis United States Holder may
instead translate such accrued interest into U.S. dollars at the exchange rate
in effect on the day of actual receipt. Any such election will apply to all debt
instruments held by the United States Holder at the beginning of the first
taxable year to which the election applies or thereafter acquired by the United
States Holder, and will be irrevocable without the consent of the Internal
Revenue Service (the "Service").
 
     Upon receipt of the interest payment (including a payment attributable to
accrued but unpaid interest upon the sale or retirement of a Note) denominated
in, or determined by reference to, a foreign currency, the United States Holder
will recognize ordinary income or loss measured by the difference between (x)
the
 
                                      S-18
   19
 
average exchange rate used to accrue interest income, or the exchange rate as
determined under the second method described above if the United States Holder
elects that method, and (y) the exchange rate in effect on the date of receipt,
regardless of whether the payment is in fact converted into U.S. dollars.
 
  ORIGINAL ISSUE DISCOUNT
 
     GENERAL.  A Note, other than a Note with a term of one year or less (a
"short-term Note"), will be treated as issued at an original issue discount (a
"Discount Note") if the excess of the Note's "stated redemption price at
maturity" over its issue price is more than a "de minimis amount" (as defined
below). Generally, the issue price of a Note 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 other than bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers. The
stated redemption price at maturity of a Note is the total of all payments
provided by the Note that are not payments of "qualified stated interest". A
qualified stated interest payment is generally any 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. Special rules
for "Variable Rate Notes" (as defined below under "Original Issue
Discount -- Variable Rate Notes") are described below under "Original Issue
Discount -- Variable Rate Notes".
 
     In general, if the excess of a Note's stated redemption price at maturity
over its issue price is less than 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to its
maturity (the "de minimis amount"), then such excess, if any, constitutes "de
minimis original issue discount" and the Note is not a Discount Note. Unless the
election described below under "Election to Treat All Interest as Original Issue
Discount" is made, a United States Holder of a Note with de minimis original
issue discount must include such de minimis original issue discount in income as
stated principal payments on the Note are made. The includible amount with
respect to each such payment will equal the product of the total amount of the
Note's de minimis original issue discount and a fraction, the numerator of which
is the amount of the principal payment made and the denominator of which is the
stated principal amount of the Note.
 
     United States Holders of Discount Notes having a maturity of more than one
year from their date of issue must, generally, include original issue discount
("OID") in income calculated on a constant-yield method before the receipt of
cash attributable to such income, and generally will have to include in income
increasingly greater amounts of OID over the life of the Note. The amount of OID
includible in income by a United States Holder of a Discount Note is the sum of
the daily portions of OID with respect to the Discount Note for each day during
the taxable year or portion of the taxable year on which the United States
Holder holds such Discount Note ("accrued OID"). The daily portion is determined
by allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to that accrual period. Accrual periods with respect to a Note may be
of any length selected by the United States Holder and may vary in length over
the term of the Note as long as (i) no accrual period is longer than one year
and (ii) each scheduled payment of interest or principal on the Note occurs on
either the final or first day of an accrual period. The amount of OID allocable
to an accrual period equals the excess of (a) the product of the Discount Note's
adjusted issue price at the beginning of the accrual period and such Note's
yield to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period) over
(b) the sum of the payments of qualified stated interest on the Note allocable
to the accrual period. The "adjusted issue price" of a Discount Note at the
beginning of any accrual period is the issue price of the Note increased by (x)
the amount of accrued OID for each prior accrual period and decreased by (y) the
amount of any payments previously made on the Note that were not qualified
stated interest payments. For purposes of determining the amount of OID
allocable to an accrual period, if an interval between payments of qualified
stated interest on the Note contains more than one accrual period, 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) is allocated pro rata on the basis of
relative lengths to each accrual period in the interval, and the adjusted issue
price at the beginning of each accrual period in the interval must be increased
by the amount of any qualified stated interest that has accrued prior to the
first day
 
                                      S-19
   20
 
of the accrual period but that is not payable until the end of the interval. The
amount of OID allocable to an initial short accrual period may be computed using
any reasonable method if all other accrual periods other than a final short
accrual period are of equal length. The amount of OID allocable to the final
accrual period is the difference between (x) the amount payable at the maturity
of the Note (other than any payment of qualified stated interest) and (y) the
Note's adjusted issue price as of the beginning of the final accrual period.
 
     ACQUISITION PREMIUM.  A United States Holder that purchases a Note for an
amount less than or equal to the sum of all amounts payable on the Note after
the purchase date other than payments of qualified stated interest but in excess
of its adjusted issue price (as determined above under "Original Issue
Discount -- General")(any such excess being "acquisition premium") and that does
not make the election described below under "Election to Treat All Interest as
Original Issue Discount" shall reduce the daily portions of OID by a fraction,
the numerator of which is the excess of the United States Holder's adjusted
basis in the Note immediately after its purchase over the adjusted issue price
of the Note, and the denominator of which is the excess of the sum of all
amounts payable on the Note after the purchase date, other than payments of
qualified stated interest, over the Note's adjusted issue price.
 
     MARKET DISCOUNT.  A Note, other than a short-term Note, will be treated as
purchased at a market discount (a "Market Discount Note") if (i) the amount for
which a United States Holder purchased the Note is less than the Note's issue
price (as determined above under "Original Issue Discount -- General") and (ii)
the Note's stated redemption price at maturity or, in the case of a Discount
Note, the Note's "revised issue price", exceeds the amount for which the United
States Holder purchased the Note by at least 1/4 of 1 percent of such Note's
stated redemption price at maturity or revised issue price, respectively,
multiplied by the number of complete years to the Note's maturity. If such
excess is not sufficient to cause the Note to be a Market Discount Note, then
such excess constitutes "de minimis market discount" and such Note is not
subject to the rules discussed in the following paragraphs. The Code provides
that, for these purposes, the "revised issue price" of a Note generally equals
its issue price, increased by the amount of any OID that has accrued on the
Note.
 
     Any gain recognized on the maturity or disposition of a Market Discount
Note will be treated as ordinary income to the extent that such gain does not
exceed the accrued market discount on such Note. Alternatively, a United States
Holder of a Market Discount Note may elect to include market discount in income
currently over the life of the Note. Such an election shall apply to all debt
instruments with market discount acquired by the electing United States Holder
on or after the first day of the first taxable year to which the election
applies. This election may not be revoked without the consent of the Service.
 
     Market discount on a Market Discount Note will accrue on a straight-line
basis unless the United States Holder elects to accrue such market discount on a
constant-yield method. Such an election shall apply only to the Note with
respect to which it is made and may not be revoked. A United States Holder of a
Market Discount Note that does not elect to include market discount in income
currently generally will be required to defer deductions for interest on
borrowings allocable to such Note in an amount not exceeding the accrued market
discount on such Note until the maturity or disposition of such Note.
 
     PRE-ISSUANCE ACCRUED INTEREST.  If (i) a portion of the initial purchase
price of a Note is attributable to pre-issuance accrued interest, (ii) the first
stated interest payment on the Note is to be made within one year of the Note's
issue date and (iii) the payment will equal or exceed the amount of pre-issuance
accrued interest, then the United States Holder may elect to decrease the issue
price of the Note by the amount of pre-issuance accrued interest. In that event,
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 the
Note.
 
     NOTES SUBJECT TO CONTINGENCIES INCLUDING OPTIONAL REDEMPTION.  If a Note
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, if the timing and amount of the payments that comprise each payment
schedule are known as of the issue date and if one of such schedules is
significantly more likely than not to occur, the yield and maturity of the Note
are determined by assuming that the payments will be made according to that
payment schedule. If there is no single payment schedule that is significantly
more likely than not to occur (other than because of a mandatory
 
                                      S-20
   21
 
sinking fund), the Note will be subject to the general rules that govern
contingent payment obligations. These rules will be discussed in an applicable
Pricing Supplement.
 
     Notwithstanding the general rules for determining yield and maturity in the
case of Notes subject to contingencies, if the Company or the holder has 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 (i) in
the case of an option or options of the Company, the Company will be deemed to
exercise or not exercise an option or combination of options in the manner that
minimizes the yield on the Note and (ii) in the case of an option or options of
the holder, the holder will be deemed to exercise or not exercise an option or
combination of options in the manner that maximizes the yield on the Note. If
both the Company and the holder have options described in the preceding
sentence, those rules apply to such options in the order in which they may be
exercised. For purposes of those calculations, the yield on the Note is
determined by using any date on which the Note may be redeemed or repurchased as
the maturity date and the amount payable on such date in accordance with the
terms of the 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 (a
"change in circumstances") then, except to the extent that a portion of the Note
is repaid as a result of the change in circumstances and solely for purposes of
determining the amount and accrual of OID, the yield and maturity of the Note
are redetermined by treating the Note as having been retired and reissued on the
date of the change in circumstances for an amount equal to the Note's adjusted
issue price on that date.
 
     ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT.  A United States
Holder may elect to include in gross income all interest that accrues on a Note
using the constant-yield method described above under the heading "Original
Issue Discount -- General", with the modifications described below. For purposes
of this election, interest includes 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") or acquisition premium.
 
     In applying the constant-yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal its cost to the
electing United States Holder, the issue date of the Note will be the date of
its acquisition by the electing United States Holder, and no payments on the
Note will be treated as payments of qualified stated interest. This election
will generally apply only to the Note with respect to which it is made and may
not be revoked without the consent of the Service. If this election is made with
respect to a Note with amortizable bond premium, then the electing United States
Holder will be deemed to have elected to apply amortizable bond premium against
interest with respect to all debt instruments with amortizable bond premium
(other than debt instruments the interest on which is excludible from gross
income) held by the electing United States Holder as of the beginning of the
taxable year in which the Note with respect to which the election is made is
acquired or thereafter acquired. The deemed election with respect to amortizable
bond premium may not be revoked without the consent of the Service.
 
     If the election to apply the constant-yield method to all interest on a
Note is made with respect to a Market Discount Note, the electing United States
Holder will be treated as having made the election discussed above under
"Original Issue Discount -- Market Discount" to include market discount in
income currently over the life of all debt instruments held or thereafter
acquired by such United States Holder.
 
     VARIABLE RATE NOTES.  A "Variable Rate Note" is a Note that: (i) has an
issue price that does not exceed the total noncontingent principal payments by
more than the lesser of (1) the product of (x) the total noncontingent principal
payments, (y) the number of complete years to maturity from the issue date and
(z) .015, or (2) 15 percent of the total noncontingent principal payments, and
(ii) does not provide for stated interest other than stated interest compounded
or paid at least annually 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".
 
     A qualified floating rate or objective rate in effect at any time during
the term of the instrument must be set at a "current value" of that rate. A
"current value" of a rate is the value of the rate on any day that is no
 
                                      S-21
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earlier than 3 months prior to the first day on which that value is in effect
and no later than 1 year following that first day.
 
     A variable rate is a "qualified floating rate" if (i) 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 the Note
is denominated or (ii) it is equal to the product of such a rate and either (a)
a fixed multiple that is greater than 0.65 but not more than 1.35, or (b) a
fixed multiple greater than 0.65 but not more than 1.35, increased or decreased
by a fixed rate. If a Note provides for two or more qualified floating rates
that (i) are within 0.25 percentage points of each other on the issue date or
(ii) 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. A rate is not 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.
 
     An "objective rate" is a rate, other than a qualified floating rate, that
is determined using a single, fixed formula and 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. A variable rate is not an
objective rate, however, if it is reasonably expected that the average value of
the rate during the first half of the Note's term will be either significantly
less than or significantly greater than the average value of the rate during the
final half of the Note's term. An objective rate is a "qualified inverse
floating rate" if (i) the rate is equal to a fixed rate minus a qualified
floating rate, and (ii) the variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the cost of newly borrowed
funds.
 
     If interest on a 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 (i) 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 (ii) the value of the qualified
floating rate or objective rate is intended to approximate the fixed rate, the
fixed rate and the qualified floating rate or the objective rate constitute a
single qualified floating rate or objective rate. Under these rules, Commercial
Paper Rate Notes, Prime Rate Notes, LIBOR Notes, Treasury Rate Notes, CD Rate
Notes, Federal Funds Rate Notes and CMT Rate Notes will generally be treated as
Variable Rate Notes.
 
     In general, if a Variable Rate Note provides for stated interest at a
single qualified floating rate or objective rate, all stated interest on the
Note is qualified stated interest and 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, in the case of any other objective rate, a fixed rate
that reflects the yield reasonably expected for the Note.
 
     If a 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 at a single fixed rate for an
initial period), the amount of interest and OID accruals on the Note are
generally determined by (i) determining a fixed rate substitute for each
variable rate provided under the Variable Rate Note (generally, the value of
each variable rate as of the issue date or, in the case of an objective rate
that is not a qualified inverse floating rate, a rate that reflects the
reasonably expected yield on the Note), (ii) constructing the equivalent fixed
rate debt instrument (using the fixed rate substitutes described above), (iii)
determining the amount of qualified stated interest and OID with respect to the
equivalent fixed rate debt instrument, and (iv) making the appropriate
adjustments for actual variable rates during the applicable accrual period.
 
     If a Variable Rate Note provides for stated interest either at one or more
qualified floating rates or at a qualified inverse floating rate, and in
addition provides for stated interest at a single fixed rate (other than at a
single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Note is treated, for purposes of the first
three steps of the determination, as if it provided for a qualified floating
rate (or a qualified inverse floating rate, as the case may be) rather than the
fixed rate. The qualified floating rate (or qualified inverse floating rate)
replacing the fixed rate must be such that the fair market value of the Variable
Rate Note as of the issue date would be approximately the same as the fair
market value of an otherwise identical debt
 
                                      S-22
   23
 
instrument that provides for the qualified floating rate (or qualified inverse
floating rate) rather than the fixed rate.
 
     SHORT-TERM NOTES.  In general, an individual or other cash basis United
States Holder of a short-term Note is not required to accrue OID (as specially
defined below for the purposes of this paragraph) for United States federal
income tax purposes unless it elects to do so (but may be required to include
any stated interest in income as the interest is received). Accrual basis United
States Holders and certain other United States Holders, including banks,
regulated investment companies, dealers in securities, common trust funds,
United States Holders who hold Notes as part of certain identified hedging
transactions, certain pass-through entities and cash basis United States Holders
who so elect, are required to accrue OID on short-term Notes on either a
straight-line basis or under the constant-yield method (based on daily
compounding), at the election of the United States Holder. In the case of a
United States Holder not required and not electing to include OID in income
currently, any gain realized on the sale or retirement of the short-term Note
will be ordinary income to the extent of the OID accrued on a straight-line
basis (unless an election is made to accrue the OID under the constant-yield
method) through the date of sale or retirement. United States Holders who are
not required and do not elect to accrue OID on short-term Notes will be required
to defer deductions for interest on borrowings allocable to short-term Notes in
an amount not exceeding the deferred income until the deferred income is
realized.
 
     For purposes of determining the amount of OID subject to these rules, all
interest payments on a short-term Note, including stated interest, are included
in the short-term Note's stated redemption price at maturity.
 
     FOREIGN CURRENCY SPECIFIED CURRENCY DISCOUNT NOTES.  OID for any accrual
period on a Discount Note that is denominated in, or determined by reference to,
a foreign currency will be determined in the foreign currency and then
translated into U.S. dollars in the same manner as stated interest accrued by an
accrual basis United States Holder, as described under "Payments of Interest".
Upon receipt of an amount attributable to OID (whether in connection with a
payment of interest or the sale or retirement of a Note), a United States Holder
may recognize ordinary income or loss.
 
  NOTES PURCHASED AT A PREMIUM
 
     A United States Holder that purchases a Note for an amount in excess of its
principal amount may elect to treat such excess as "amortizable bond premium",
in which case the amount required to be included in the United States Holder's
income each year with respect to interest on the Note will be reduced by the
amount of amortizable bond premium allocable (based on the Note's yield to
maturity) to such year. In the case of a Note that is denominated in, or
determined by reference to, a foreign currency, amortizable bond premium will be
computed in units of foreign currency, and amortizable bond premium will reduce
interest income in units of the foreign currency. At the time amortized bond
premium offsets interest income, exchange gain or loss (taxable as ordinary
income or loss) is realized measured by the difference between exchange rates at
that time and at the time of the acquisition of the Notes. Any election to
amortize bond premium shall apply to all bonds (other than bonds the interest on
which is excludible from gross income) held by the United States Holder at the
beginning of the first taxable year to which the election applies or thereafter
acquired by the United States Holder, and is irrevocable without the consent of
the Service. See also "Original Issue Discount -- Election to Treat All Interest
as Original Issue Discount".
 
  PURCHASE, SALE AND RETIREMENT OF THE NOTES
 
     A United States Holder's tax basis in a Note will generally be its U.S.
dollar cost (as defined below), increased by the amount of any OID or market
discount included in the United States Holder's income with respect to the Note
and the amount, if any, of income attributable to de minimis original issue
discount and de minimis market discount included in the United States Holder's
income with respect to the Note, and reduced by (i) the amount of any payments
that are not qualified stated interest payments, and (ii) the amount of any
amortizable bond premium applied to reduce interest on the Note. The U.S. dollar
cost of a Note purchased with a foreign currency will generally be the U.S.
dollar value of the purchase price on the date of purchase or,
 
                                      S-23
   24
 
in the case of Notes traded on an established securities market, as defined in
the applicable Treasury Regulations, that are purchased by a cash basis United
States Holder (or an accrual basis United States Holder that so elects), on the
settlement date for the purchase.
 
     A United States Holder will generally recognize gain or loss on the sale or
retirement of a Note equal to the difference between the amount realized on the
sale or retirement and the tax basis of the Note. The amount realized on a sale
or retirement for an amount in foreign currency will be the U.S. dollar value of
such amount on (i) the date payment is received in the case of a cash basis
United States Holder, (ii) the date of disposition in the case of an accrual
basis United States Holder or (iii) in the case of Notes traded on an
established securities market, as defined in the applicable Treasury
Regulations, sold by a cash basis United States Holder (or an accrual basis
United States Holder that so elects), on the settlement date for the sale.
Except to the extent described above under "Original Issue
Discount -- Short-Term Notes" or "Original Issue Discount -- Market Discount",
described in the next succeeding paragraph, attributable to accrued but unpaid
interest or subject to the general rules governing contingent payment
obligations, gain or loss recognized on the sale or retirement of a Note will be
capital gain or loss. Long-term capital gain of an individual United States
Holder is generally subject to a maximum tax rate of 28% in respect of property
held for more than one year and to a maximum rate of 20% in respect of property
held in excess of 18 months.
 
     Gain or loss recognized by a United States Holder on the sale or retirement
of a Note that is attributable to changes in exchange rates will be treated as
ordinary income or loss. However, exchange gain or loss is taken into account
only to the extent of total gain or loss realized on the transaction.
 
  EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
 
     Foreign currency received as interest on a Note or on the sale or
retirement of a Note will have a tax basis equal to its U.S. dollar value at the
time such interest is received or at the time of such sale or retirement.
Foreign currency that is purchased will generally have a tax basis equal to the
U.S. dollar value of the foreign currency on the date of purchase. Gain or loss
recognized on a sale or other disposition of a foreign currency (including its
use to purchase Notes or upon exchange for U.S. dollars) will generally be
ordinary income or loss.
 
  INDEXED NOTES
 
     The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules with respect to Notes that are not
subject to the rules governing Variable Rate Notes payments on which are
determined by reference to any index and other Notes that are subject to the
general rules governing contingent payment obligations.
 
UNITED STATES ALIEN HOLDERS
 
     For purposes of this discussion, a "United States Alien Holder" is any
holder of a Note who is (i) a nonresident alien individual or (ii) a foreign
corporation, partnership or estate or trust, in either case not subject to
United States federal income tax on a net income basis in respect of income or
gain from a Note. This discussion assumes that the Note is not subject to the
rules of Section 871(h)(4)(A) of the 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 present United States federal income and estate tax law, and subject
to the discussion of backup withholding below:
 
          (i) payments of principal, premium (if any) and interest, including
     OID, by the Company or any of its paying agents to any holder of a Note
     that is a United States Alien Holder will not be subject to United States
     federal withholding tax if, in the case of interest or OID, (a) the
     beneficial owner of the Note does not actually or constructively own 10% or
     more of the total combined voting power of all classes of stock of the
     Company entitled to vote, (b) the beneficial owner of the Note is not a
     controlled foreign corporation that is related to the Company through stock
     ownership, and (c) either (A) the
 
                                      S-24
   25
 
     beneficial owner of the Note certifies to the Company or its agent, under
     penalties of perjury, that it is not a United States Holder and provides
     its name and address or (B) 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
     holds the Note certifies to the Company or its agent under penalties of
     perjury that such statement has been received from the beneficial owner by
     it or by a financial institution between it and the beneficial owner and
     furnishes the payor with a copy thereof;
 
          (ii) a United States Alien Holder of a Note will not be subject to
     United States federal withholding tax on any gain realized on the sale or
     exchange of a Note; and
 
          (iii) 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 purposes of the United States federal estate tax as a
     result of the individual's death if (a) the individual did not actually or
     constructively own 10% or more of the total combined voting power of all
     classes of stock of the Company entitled to vote and (b) the income on the
     Note would not have been effectively connected with a United States trade
     or business of the individual at the individual's death.
 
     Recently issued Treasury regulations (the "Withholding Regulations") that
will be effective with respect to payments after December 31, 1998 will provide
alternative methods for satisfying the certification requirement described in
clause (i)(c) above. The Withholding Regulations also will require, in the case
of Notes held by a foreign partnership, that (x) the certification described in
clause (i)(c) above be provided by the partners rather than by the foreign
partnership and (y) the partnership provide certain information, including a
United States taxpayer identification number. A look-through rule will apply in
the case of tiered partnerships.
 
BACKUP WITHHOLDING AND INFORMATION REPORTING
 
  UNITED STATES HOLDERS
 
     In general, information reporting requirements will apply to payments of
principal, any premium and interest on a Note and the proceeds of the sale of a
Note before maturity within the United States to, and to the accrual of OID on a
Discount Note with respect to, non-corporate United States Holders, and "backup
withholding" at a rate of 31% will apply to such payments and to payments of OID
if the United States Holder fails to provide an accurate taxpayer identification
number or is notified by the Internal Revenue Service that it has failed to
report all interest and dividends required to be shown on its federal income tax
returns.
 
  UNITED STATES ALIEN HOLDERS
 
     Under current law, information reporting on Internal Revenue Service Form
1099 and backup withholding will not apply to payments of principal, premium (if
any) and interest (including OID) made by the Company or a paying agent to a
United States Alien Holder on a Note; provided the certification described in
clause (i)(c) under "United States Alien Holders" above is received and provided
further that the payor does not have actual knowledge that the holder is a
United States person. The Company or a paying agent, however, may report (on
Internal Revenue Service Form 1042S) payments of interest (including OID) on
Notes. See the discussion above with respect to the rules under the Proposed
Regulations.
 
     Payments of the proceeds from the sale by a United States Alien Holder of a
Note made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for United States tax
purposes or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting may apply to such payments. Payments of the
proceeds from the sale of a Note to or through the United States office of a
broker is subject to information reporting and backup withholding unless the
holder or beneficial owner certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
 
                                      S-25
   26
 
                             FOREIGN CURRENCY RISKS
 
GENERAL
 
     THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT
IN NOTES THAT RESULT FROM SUCH NOTES BEING DENOMINATED OR PAYABLE IN OR WITH
RESPECT TO WHICH PAYMENTS ARE DETERMINED BY REFERENCE TO A CURRENCY OR CURRENCY
UNIT OTHER THAN U.S. DOLLARS, EITHER AS SUCH RISKS EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE
INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS
ENTAILED BY AN INVESTMENT IN SUCH NOTES. SUCH NOTES ARE NOT AN APPROPRIATE
INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN
CURRENCY TRANSACTIONS. Unless otherwise specified in the applicable Pricing
Supplement, Notes denominated in other than U. S. dollars or ECUs will not be
sold in, or to residents of, the country issuing the Specified Currency in which
particular Notes are denominated. The information set forth in this Prospectus
Supplement is directed to prospective purchasers who are United States
residents, and the Company disclaims any responsibility to advise prospective
purchasers who are residents of countries other than the United States with
respect to any matters that may affect the purchase, holding or receipt of
payments of principal of and interest on the Notes. Such persons should consult
their own financial and legal advisors with regard to such matters. With respect
to any Note denominated in other than U.S. dollars or any Currency Indexed Note,
a Currency Supplement with respect to the applicable Specified Currency and/or
Indexed Currency (which supplement shall include information with respect to
applicable current foreign exchange controls, if any) shall be attached to this
Prospectus Supplement. The information therein concerning exchange rates is
furnished as a matter of information only and should not be regarded as
indicative of the range of or trends in fluctuations in currency exchange rates
that may occur in the future.
 
EXCHANGE RATES AND EXCHANGE CONTROLS
 
     An investment in Notes that are denominated in or the payment of which is
related to the value of, a currency other than U.S. dollars entails significant
risks that are not associated with a similar investment in a security
denominated in U.S. dollars. Similarly, an investment in a Currency Indexed Note
entails significant risks that are not associated with a similar investment in
Notes that are not Currency Indexed Notes. Such risks include, without
limitation, the possibility of significant changes in rates of exchange between
the U.S. dollar and the various foreign currencies or composite currencies (and
in the case of Currency Indexed Notes, the rate of exchange between the
Specified Currency and the Indexed Currency) and the possibility of the
imposition or modification of foreign exchange controls by either the U.S. or
foreign governments. Such risks depend on factors over which the Company has no
control, such as economic and political events and the supply of and demand for
the relevant currencies. In recent years, rates of exchange between the U.S.
dollar and certain foreign currencies have been highly volatile and such
volatility may be expected in the future. Fluctuations in any particular
exchange rate that have occurred in the past are not necessarily indicative,
however, of fluctuations in the rate that may occur during the term of any Note.
Depreciation of a Specified Currency other than U.S. dollars against the U.S.
dollar would result in a decrease in the U.S. dollar equivalent yield of a Note
denominated in such Specified Currency below its stated interest rate, in the
U.S. dollar equivalent value of the principal payable at maturity of such Note
and, generally, in the U.S. dollar equivalent market value of such Note.
Similarly, depreciation of the Specified Currency with respect to a Currency
Indexed Note against the Applicable Indexed Currency would result in the
principal amount payable with respect to such Currency Indexed Note at the
Stated Maturity being less than the Face Amount of such Currency Indexed Note
which, in turn, would decrease the effective yield of such Currency Indexed Note
below its stated interest rate and could also result in a loss to the investor.
See "Description of Notes -- Currency Indexed Notes".
 
     Governments have imposed from time to time and may in the future impose
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at a Note's Maturity. Even if there are no
actual exchange controls, it is possible that the Specified Currency for any
particular Note would not be available at such Note's Maturity. In that event,
the Company will repay in U.S. dollars on the
 
                                      S-26
   27
 
basis of the most recently available Exchange Rate. See "Description of
Notes -- Payment of Principal and Interest".
 
     Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. In addition, banks
generally do not offer non-U.S. dollar denominated checking or savings account
facilities in the United States. Accordingly, payments on Notes made in a
Specified Currency other than U.S. dollars will be made from an account with a
bank located in the country issuing the Specified Currency (or, with respect to
Notes denominated in ECUs, Brussels). See "Description of Notes -- Payment of
Principal and Interest".
 
JUDGMENTS
 
     The Notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on the Notes were commenced in a court
in the United States, it is likely that such court would grant judgment relating
to the Notes only in U.S. dollars. It is not clear, however, whether, in
granting such judgment, the rate of conversion into U.S. dollars would be
determined with reference to the date of default, the date judgment is rendered
or some other date. New York statutory law provides, however, that a court shall
render a judgment in the foreign currency of the underlying obligation and that
the judgment shall be converted into U.S. dollars at the rate of exchange
prevailing on the date of the entry of the judgment.
 
                                      S-27
   28
 
                       SUPPLEMENTAL PLAN OF DISTRIBUTION
 
     Subject to the terms and conditions set forth in the Distribution
Agreement, dated October 9, 1997 (the "Distribution Agreement"), the Notes are
being offered on a continuing basis by the Company through Goldman, Sachs & Co.,
J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated (the
"Agents"), who have agreed to use reasonable efforts to solicit purchases of the
Notes. The Company will have the sole right to accept offers to purchase Notes
and may reject any proposed purchase of Notes as a whole or in part. The Agents
shall have the right, in their discretion reasonably exercised, to reject any
offer to purchase Notes, as a whole or in part. The Company will pay the Agents
a commission or grant a discount to the Agents of between .125% and .750%,
depending on maturity of the principal amount of any Notes sold through them as
Agents (or sold to such Agents as principal in circumstances in which no other
discount is agreed), except that commissions on Notes with a maturity more than
30 years from date of issue will be negotiated at the time of sale and set forth
in the applicable Pricing Supplement.
 
     The Company may also sell Notes to the Agents as principals for their own
accounts at a discount to be agreed upon at the time of sale, or the purchasing
Agents may receive from the Company a commission or discount equivalent to that
set forth on the cover page hereof in the case of any such principal transaction
in which no other discount is agreed, except that commissions on Notes due more
than 30 years from date of issue will be negotiated at the time of sale and set
forth in the applicable Pricing Supplement. Such Notes may be resold at
prevailing market prices, or at prices related thereto, at the time of such
resale or at negotiated prices, as determined by the Agents, or at a fixed
public offering price. The Company reserves the right to sell Notes directly on
its own behalf. No commission will be payable on any Notes sold directly by the
Company.
 
     Subject to the terms and conditions set forth in the Distribution
Agreement, the Notes are being offered on a continuing basis by the Company
through Goldman, Sachs & Co. and CS First Boston Corporation (the "Agents"),
which have agreed to use reasonable efforts to solicit purchases of the Notes.
The Company will have the sole right to accept offers to purchase Notes and may
reject any proposed purchase of Notes in whole or in part. The Agents shall have
the right, in their discretion reasonably exercised, to reject any offer to
purchase Notes, in whole or in part. The Company will pay the Agents a
commission of from 0.125% to 0.750% of the principal amount of Notes, depending
upon maturity, for sales made through them as Agents.
 
     The Company may also sell Notes to the Agents as principals for their own
accounts at a discount to be agreed upon at the time of sale, or the purchasing
Agents may receive from the Company a commission or discount equivalent to that
set forth on the cover page hereof in the case of any such principal transaction
in which no other discount is agreed. Such Notes may be resold at prevailing
market prices, or at prices related thereto, at the time of such resale, as
determined by the Agents. The Company reserves the right to sell Notes directly
on its own behalf. No commission will be payable on any Notes sold directly by
the Company.
 
     In addition, the Agents may offer the Notes they have purchased as
principal to other dealers. The Agents may sell Notes to any dealer at a
discount and, unless otherwise specified in the applicable Pricing Supplement,
such discount allowed to any dealer may include all or part of the discount to
be received from the Company. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased by
such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to any agency sale of a Note of
identical maturity. After the initial public offering of Notes to be resold to
investors and other purchasers on a fixed public offering price basis, the
public offering price, concession and discount may be changed.
 
     The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 (the "Act"). The Company has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Act, or contribute to payments which the Agents may be
required to make in respect thereof. The Company has agreed to reimburse the
Agents for certain expenses.
 
     Each of the Agents and their respective affiliates may engage in various
transactions with and perform various services for the Company in the ordinary
course of business. Dennis Weatherstone, a member of the Board of Directors of
J.P. Morgan & Co. Incorporated, of which J.P. Morgan Securities Inc. is a
subsidiary, is also a member of the Board of Directors of the Company.
 
                                      S-28
   29
 
     The Agents may sell to or through dealers who may resell to investors, and
the Agents may pay all or part of their discount or commission to such dealers.
Such dealers may be deemed to be "underwriters" within the meaning of the Act.
 
     Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes will be required to be made in immediately available
funds in The City of New York.
 
     The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of the secondary market for the Notes.
 
     In connection with the offering, the Agents may purchase and sell the Notes
in the open market. These transactions may include overallotment and stabilizing
transactions and purchases to cover short positions credited by the Agents in
connection with the offering. The Agents also may impose a penalty bid, whereby
selling concessions allowed to broker-dealers in respect of the securities sold
in the offering may be reclaimed by the Agents if such Notes are repurchased by
the Agents in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Notes, which may
be higher than the price that might otherwise prevail in the open market; and
these activities, if commenced, may be discontinued at any time.
 
                               VALIDITY OF NOTES
 
     The validity of the Notes will be passed upon for the Company by Mary M.
McDonald, Esq., Senior Vice President and General Counsel for the Company, and
for the Agents by Sullivan & Cromwell, New York, New York. The opinions of Ms.
McDonald and Sullivan & Cromwell will be conditioned upon, and subject to
certain assumptions regarding, future action required to be taken by the Company
and the Trustee in connection with the issuance and sale of any particular Note,
the specific terms of Notes and other matters which may affect the validity of
Notes but which cannot be ascertained on the date of such opinions. Ms. McDonald
and her husband beneficially own an aggregate of 35,622 shares of Common Stock
and hold options to acquire 600 shares which are exercisable within 60 days.
 
                                      S-29
   30
 
                                    GLOSSARY
 
     Set forth below are definitions, or the locations elsewhere of definitions,
of some of the terms used in this Prospectus Supplement.
 
     "Calculation Agent" means the agent appointed by the Company to calculate
interest rates for Floating Rate Notes. Unless otherwise provided in a Pricing
Supplement, the Calculation Agent will be First Trust of New York, National
Association.
 
     "Calculation Date" pertaining to any Interest Determination Date means,
unless otherwise specified in the applicable pricing supplement, the earlier of
(i) the tenth calendar day after such Interest Determination Date or, if such
day is not a Market Day, the next succeeding Market Day or (ii) the Market Day
immediately preceding the applicable Interest Payment Date or the date any
payment of principal is due, as the case may be.
 
     "CD Rate" means the rate calculated as set forth under the heading
"Description of the Notes -- Interest Rate -- CD Rate Notes", unless otherwise
indicated in the applicable Pricing Supplement.
 
     "CMT Rate" means the rate calculated as set forth under the heading
"Description of the Notes -- Interest Rate -- CMT Rate Notes", unless otherwise
indicated in an applicable Pricing Supplement.
 
     "Commercial Paper Rate" means the rate calculated as set forth under the
heading "Description of the Notes -- Interest Rate -- Commercial Paper Rate
Notes", unless otherwise indicated in the applicable Pricing Supplement.
 
     "Composite Quotations" means the daily statistical release entitled
"Composite 3:30 P.M. Quotations for U.S. Government Securities", or any
successor publication, published by the Federal Reserve Bank of New York.
 
     "Currency Indexed Notes" means Notes the principal amount of which payable
at Maturity will be determined by reference to the exchange rate between the
Specified Currency and another currency or composite currency as set forth in
the applicable Pricing Supplement.
 
     "Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service, or any successor service, on the page designated in the applicable
Pricing Supplement (or any other page as may replace such page on that service
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519)), for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519). If no such page is specified in the applicable Pricing
Supplement, the Designated CMT Telerate Page shall be 7052 for the most recent
week.
 
     "Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
 
     "Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page as may replace such page on such service) for the
purpose of displaying the London interbank rates of major banks for the
applicable Index Currency, or (b) if "LIBOR Telerate" is specified in the
applicable Pricing Supplement as the method for calculating LIBOR, the display
on the Dow Jones Telerate Service (or any successor service) on the page
specified in such Pricing Supplement (or any other page as may replace such page
on such service) for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency.
 
     "Exchange Rate" for any Specified Currency means the noon buying rate in
The City of New York for cable transfers for such Specified Currency as
certified for customs purposes by (or if not so certified as otherwise
determined by) the Federal Reserve Bank of New York.
 
                                      S-30
   31
 
     "Exchange Rate Agent" means the agent appointed by the Company to convert
principal and any premium and interest payments in respect of Foreign Currency
Notes into U.S. dollars. Unless otherwise provided in a Pricing Supplement, the
Exchange Rate Agent will be First Trust of New York, National Association.
 
     "Federal Funds Rate" means the rate calculated as set forth under the
heading "Description of the Notes -- Interest Rate -- Federal Funds Rate Notes",
unless otherwise indicated in the applicable Pricing Supplement.
 
     "Fixed Rate Note" shall mean Notes bearing interest at a fixed rate as
described under the heading "Description of the Notes -- Interest Rate".
 
     "Floating Rate Notes" shall mean Notes bearing interest at a variable rate
as described under the heading "Description of the Notes -- Interest Rate".
 
     "H.15(519)" means the weekly statistical release entitled "Statistical
Release H.15(519), Selected Interest Rates", or any successor publication,
published by the Board of Governors of the Federal Reserve System.
 
     "Index Currency" means the currency or composite currency specified in the
applicable Pricing Supplement as to which LIBOR shall be calculated. If no such
currency or composite currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
 
     "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 indicated in the applicable Pricing Supplement.
 
     "Initial Interest Rate" means the rate at which Floating Rate Note will
bear interest from and including its Issue Date (or that of a predecessor Note)
to but excluding the first Interest Reset Date, as indicated in the applicable
Pricing Supplement.
 
     "Interest Determination Date" means the date as of which the interest rate
for a Floating Rate Note is to be calculated, to be effective as of the
following Interest Reset Date and calculated on the related Calculation Date
(except in the case of LIBOR, which is calculated on the related LIBOR Interest
Determination Date).
 
     "Interest Reset Date" means the date on which a Floating Rate Note will
begin to bear interest at the variable interest rate determined as of any
Interest Determination Date. The Interest Reset Dates with respect to any
Floating Rate Note will be set forth in the applicable Pricing Supplement and in
such Note.
 
     "LIBOR" means the rate calculated as set forth under the heading
"Description of the Notes -- Interest Rate -- LIBOR Notes", unless otherwise
indicated in the applicable Pricing Supplement.
 
     "London Market Day" means any day on which dealings in deposits in the
Index Currency are transacted in the London interbank market.
 
     "Market Day" means (a) with respect to any Note other than a LIBOR Note or
a note denominated other than in U.S. dollars or a Currency Indexed Note, any
day that is a Business Day in The City of New York, (b) with respect to LIBOR
Notes only, any Business Day in The City of New York on which dealings in
deposits in the Index Currency are transacted in the London interbank market,
(c) with respect to Notes denominated in a currency other than U.S. dollars,
except for Notes denominated in European Currency Units ("ECUs") and Currency
Indexed Notes, any day that is a Business Day in The City of New York and in the
principal financial center of the country of the Specified Currency, (d) with
respect to Notes denominated in ECUs, any day that is a Business Day in The City
of New York and that is designated as an ECU settlement day by the ECU Banking
Association in Paris or otherwise generally regarded in the ECU interbank market
as a day on which payments in ECU are made and (e) with respect to Currency
Indexed Notes, a day described as a "Market Day" under the heading "Description
of Notes -- Currency Indexed Notes".
 
     "Maturity", when used with respect to any Note, means the date on which the
principal of such Note or an installment of principal becomes due and payable as
therein or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
 
                                      S-31
   32
 
     "Original Issue Discount Note" means a Note issued at a discount from the
principal amount payable at Maturity and which provides that upon acceleration
of the Maturity thereof, the amount payable to the Holder thereof will be
determined in accordance with the terms of the Note but will be an amount less
than the amount payable at the Stated Maturity.
 
     "Prime Rate" means the rate calculated as set forth under the heading
"Description of the Notes -- Interest Rate -- Prime Rate Notes", unless
otherwise indicated in the applicable Pricing Supplement.
 
     "Principal Financial Center" means the capital city of the country issuing
the Index Currency, except that with respect to United States dollars,
Australian dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs
and ECUs, the Principal Financial Center shall be The City of New York, Sydney,
Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively.
 
     "Reuters Screen USPRIME1 Page" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "USPRIME1" page (or such
other page as may replace the USPRIME1 page on such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
 
     "Specified Currency" means the currency or composite currency in which a
Note is denominated, except as described under "Description of Notes -- Payment
of Principal and Interest".
 
     "Spread" means the number of basis points specified in the Note and the
applicable Pricing Supplement as being applicable to the interest rate for a
particular Floating Rate Note.
 
     "Spread Multiplier" means the percentage specified in the Note and the
applicable Pricing Supplement as being applicable to the interest rate for a
particular Floating Rate Note.
 
     "Stated Maturity", when used with respect to any Note or any installment of
principal thereof or interest thereon, means the date specified in such Note as
the fixed date on which the principal of such Note or such installment of
principal or interest is due and payable.
 
     "Treasury Rate" means the interest rate calculated as set forth under the
heading "Description of the Notes -- Interest Rate -- Treasury Rate Notes",
unless otherwise indicated in the applicable Pricing Supplement.
 
     "Zero Coupon Note" means a note issued at a discount from the principal
amount payable at Maturity which does not entitle the Holder to receive any
payments of interest prior to Maturity.
 
                                      S-32
   33
 
PROSPECTUS
 
                                 $1,670,000,000
 
[MERCK LOGO]                   MERCK & CO., INC.
                                DEBT SECURITIES
                            ------------------------
 
     Merck & Co., Inc. (the "Company") may offer from time to time in one or
more series its debt securities (the "Debt Securities") at an aggregate initial
offering price not to exceed $1,670,000,000 (or its equivalent in foreign
currencies or currency units). The Company will offer Debt Securities to the
public on terms determined by market conditions.
 
                            ------------------------
 
     The accompanying Prospectus Supplement sets forth the specific designation,
aggregate principal amount, purchase price, maturity, interest rate (or manner
of calculation thereof), time of payment of interest (if any), listing (if any)
on a securities exchange, the form of the Debt Securities (which may be in
registered form or book-entry form) and any other specific terms of the Debt
Securities and the name of and compensation to each dealer, underwriter, or
agent (if any) involved in the sale of the Debt Securities covered by the
Prospectus Supplement.
 
                            ------------------------
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
     AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
         THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
              SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
                  ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
                      TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
                            ------------------------
 
     Debt Securities may be offered through dealers, through underwriters, or
through agents designated from time to time, as set forth in the Prospectus
Supplement, and Debt Securities may be offered to other purchasers directly or
through agents. Net proceeds to the Company will be the purchase price in the
case of a purchaser or dealer, the public offering price less discount in the
case of an underwriter, or the purchase price less commission in the case of an
agent -- in each case, less other expenses attributable to issuance and
distribution. See "Plan of Distribution" for possible indemnification
arrangements for dealers, underwriters, and agents.
 
                            ------------------------
 
     This Prospectus may not be used to consummate the sale of any Securities
unless accompanied by a Prospectus Supplement.
 
                            ------------------------
 
                 THE DATE OF THIS PROSPECTUS IS OCTOBER 3, 1997
   34
 
     NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFERING DESCRIBED
HEREIN AND THEREIN, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY ANY UNDERWRITER, DEALER OR AGENT. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT SHALL CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OFFERED HEREUNDER IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OR SALE IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER IMPLIES THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY AT ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
 
                             AVAILABLE INFORMATION
 
     The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission").
 
     All such reports, proxy statements and other information, including the
documents incorporated by reference herein, can be inspected and copied at
prescribed rates at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices at 7 World Trade Center, 13th floor, New York, New York 10048,
and 1400 Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Certain of such reports, proxy statements and other information are also
available over the Internet at http://www.sec.gov. Such material can also be
inspected at the office of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005, and at the office of the Philadelphia Stock Exchange, 1900
Market Street, Philadelphia, Pennsylvania 19130.
 
     The Company has filed a registration statement on Form S-3 (herein,
together with all amendments and exhibits, referred to as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement and the exhibits filed as a part thereof. Statements contained herein
concerning any document filed as an exhibit are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference.
 
               INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
 
     The following documents filed by the Company (Exchange Act File No. 1-3305)
with the Commission are hereby incorporated by reference into this Prospectus:
 
          (a) Annual Report on Form 10-K, filed March 19, 1997, for the fiscal
     year ended December 31, 1996.
 
          (b) Quarterly Report on Form 10-Q, filed on May 13, 1997, for the
     quarter ended March 31, 1997.
 
          (c) Current Report on Form 8-K, filed May 15, 1997.
 
          (d) Quarterly Report on Form 10-Q, filed August 13, 1997, for the
     quarter ended June 30, 1997.
 
     All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debt Securities hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such document.
 
     Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus and the Registration Statement
 
                                        2
   35
 
of which it is a part to the extent that a statement contained herein or in any
other subsequently filed document which is also incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus or such Registration
Statement.
 
     The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon written or oral request of such person,
a copy of any or all of the documents which have been or may be incorporated
herein by reference, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference into the information that the
Registration Statement incorporates). Requests for such copies should be
directed to the Office of the Secretary, Merck & Co., Inc., P.O. Box 100, One
Merck Drive, Whitehouse Station, New Jersey 08889-0100, telephone number (800)
613-2104.
 
                                        3
   36
 
                                  THE COMPANY
 
     The Company is a leading research-driven pharmaceutical company that
discovers, develops, manufactures and markets a broad range of human and animal
health products and services.
 
     Human health products include therapeutic and preventive agents, generally
sold by prescription, for the treatment of human disorders. Among these are
elevated cholesterol products, hypertension/heart failure products,
anti-ulcerants, antibiotics, ophthalmologicals, vaccines/biologicals, benign
prostatic hyperplasia products, osteoporosis products, an HIV protease
inhibitor, anti-inflammatories/analgesics, psychotherapeutics and a muscle
relaxant. The Company also provides human health services, principally managed
prescription drug programs.
 
     A portion of the Company's human health products business is conducted
through joint ventures, including joint ventures with Astra AB, Johnson &
Johnson, E.I. DuPont de Nemours and Company, Pasteur-Merieux Connaught and
American Home Products Corporation.
 
     Through a joint venture with Rhone-Poulenc, the Company also conducts an
animal health and poultry genetics business. The joint venture, which is equally
owned by the Company and Rhone-Poulenc, conducts the Company's and Rhone
Poulenc's former animal health and poultry genetics businesses. Animal health
products include medicinals used to control and alleviate disease in livestock,
small animals and poultry. These products are primarily antiparasitics and also
include coccidiostats for the treatment of poultry diseases. The poultry
genetics business products include poultry breeding stock selected for increased
or improved meat or egg production.
 
     The Company was incorporated in the State of New Jersey in 1927 and
maintains its principal offices at Whitehouse Station, New Jersey. The Company's
address is P.O. Box 100, One Merck Drive, Whitehouse Station, New Jersey
08889-0100 and its telephone number is (908) 423-1000.
 
                                USE OF PROCEEDS
 
     Except as otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Debt Securities for
general corporate purposes, including the reduction of short-term debt. Funds
not required immediately for such purposes may be invested temporarily in
short-term marketable securities.
 
                      RATIOS OF EARNINGS TO FIXED CHARGES
 
     The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the indicated periods:
 


                                                SIX
                                               MONTHS
                                               ENDED               YEAR ENDED DECEMBER 31,
                                              JUNE 30,     ----------------------------------------
                                                1997       1996     1995     1994     1993     1992
                                              --------     ----     ----     ----     ----     ----
                                                                             
    Ratio of earnings to fixed charges......     29         23       38       28       27       34

 
     For purposes of computing these ratios, "earnings" consist of income before
income taxes, cumulative effect of accounting changes, one-third of rents
(deemed by the Company 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 the Company's consolidated financial statements
and dividends on preferred stock of subsidiary companies.
 
                         DESCRIPTION OF DEBT SECURITIES
 
     The Debt Securities are to be issued under the Indenture dated as of April
1, 1991, as amended and supplemented (the "Indenture"), between the Company and
First Trust of New York, National Association,
 
                                        4
   37
 
as Trustee (the "Trustee"), a copy of which is filed (or incorporated by
reference) as an exhibit to the Registration Statement. The following summaries
of certain provisions of the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the Indenture, including the definitions therein of certain terms.
Wherever particular Sections or defined terms of the Indenture are referred to,
such Sections or defined terms are incorporated herein by reference.
 
     The following sets forth certain general terms and provisions of the Debt
Securities offered hereby. The particular terms of the Debt Securities offered
by any Prospectus Supplement (the "Offered Debt Securities") will be described
in the Prospectus Supplement relating to such Offered Debt Securities (the
"Applicable Prospectus Supplement").
 
GENERAL
 
     The Indenture does not limit the amount of Debt Securities that may be
issued thereunder and Debt Securities may be issued thereunder from time to time
in one or more series. The Debt Securities will be unsecured and unsubordinated
obligations of the Company and will rank equally and ratably with other
unsecured and unsubordinated obligations of the Company.
 
     Unless otherwise indicated in the Applicable Prospectus Supplement,
principal of, premium, if any, and interest on the Debt Securities will be
payable, and the transfer of Debt Securities will be registrable, at the office
or agency to be maintained by the Company in The City of New York and at any
other office or agency maintained by the Company for such purpose. (Sections
301, 305 and 1002) The Debt Securities will be issued only in fully registered
form without coupons and, unless otherwise indicated in the Applicable
Prospectus Supplement, in denominations of $1,000 or integral multiples thereof.
(Section 302) No service charge will be made for any registration of transfer or
exchange of the Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith. (Section 305)
 
     The Applicable Prospectus Supplement will describe the following terms of
the Offered Debt Securities: (1) the title of the Offered Debt Securities; (2)
any limit on the aggregate principal amount of the Offered Debt Securities; (3)
the Person to whom any interest on the Offered Debt Securities shall be payable,
if other than the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest; (4) the date or dates on which the principal of the Offered
Debt Securities is payable; (5) the rate or rates at which the Offered Debt
Securities shall bear interest, if any, the date or dates from which any such
interest shall accrue, the Interest Payment Dates on which any such interest
shall be payable and the Regular Record Date for the interest payable on any
Interest Payment Date; (6) the place or places where the principal of and any
premium and interest on the Offered Debt Securities shall be payable; (7) the
period or periods within which, the price or prices at which and the terms and
conditions upon which the Offered Debt Securities may be redeemed, in whole or
in part, at the option of the Company; (8) the obligation, if any, of the
Company to redeem or purchase the Offered Debt Securities pursuant to any
sinking fund or analogous provisions or at the option of a Holder thereof and
the period or periods within which, the price or prices at which and the terms
and conditions upon which the Offered Debt Securities shall be redeemed or
purchased, in whole or in part, pursuant to such obligation; (9) if other than
denominations of $1,000 and any integral multiple thereof, the denominations in
which the Offered Debt Securities shall be issuable; (10) the currency,
currencies or currency units in which payment of the principal of and any
premium and interest on any Offered Debt Securities shall be payable if other
than the currency of the United States of America; (11) if the amount of
payments of principal of or any premium or interest on any Offered Debt
Securities may be determined with reference to an index or formula, the manner
in which such amounts shall be determined; (12) if the principal of or any
premium or interest on any Offered Debt Securities is to be payable, at the
election of the Company or a Holder thereof, in one or more currencies or
currency units other than that or those in which the Securities are stated to be
payable, the currency, currencies or currency units in which payment of the
principal of and any premium and interest on the Offered Debt Securities as to
which such election is made shall be payable, and the periods within which and
the terms and conditions upon which such election is to be made; (13) if other
than the principal amount thereof, the portion of the principal amount of the
Offered Debt Securities which shall be payable upon
 
                                        5
   38
 
declaration of acceleration of the Maturity thereof; (14) the applicability of
the provisions described under "Defeasance and Covenant Defeasance"; (15) if the
Offered Debt Securities will be issuable only in the form of a Book-Entry
Security as described under "Book-Entry Debt Securities," the Depository or its
nominee with respect to the Offered Debt Securities and the circumstances under
which the Book-Entry Security may be registered for transfer or exchange or
authenticated and delivered in the name of a Person other than the Depository or
its nominee; and (16) any other terms of the Offered Debt Securities. (Section
301)
 
     The Debt Securities may be issued as Original Issue Discount Debt
Securities to be offered and sold at a substantial discount below their stated
principal amount. Federal income tax consequences and other special
considerations applicable to Original Issue Discount Debt Securities and any
Debt Securities treated as having been issued with original issue discount for
Federal income tax purposes will be described in the Applicable Prospectus
Supplement. "Original Issue Discount Debt Securities" means any Debt Security
which provides for an amount less than the principal amount thereof to be due
and payable upon the declaration of acceleration of the Maturity thereof upon
the occurrence of an Event of Default and the continuation thereof. (Section
101)
 
BOOK-ENTRY DEBT SECURITIES
 
     The Debt Securities of a series may be issued in the form of one or more
Book-Entry Securities that will be deposited with a Depository or its nominee
identified in the Applicable Prospectus Supplement. In such a case, one or more
Book-Entry Securities will be issued in a denomination or aggregate
denominations equal to the portion of the aggregate principal amount of
Outstanding Debt Securities of the series to be represented by such Book-Entry
Security or Securities. Unless and until it is exchanged in whole or in part for
Debt Securities in definitive registered form, a Book-Entry Security may not be
registered for transfer or exchange except as a whole by the Depository for such
Book-Entry Security to a nominee or such Depository and except in the
circumstances described in the Applicable Prospectus Supplement. (Sections 204
and 305)
 
     The specific terms of the depository arrangement with respect to any
portion of a series of Debt Securities to be represented by a Book-Entry
Security will be described in the Applicable Prospectus Supplement.
 
CERTAIN COVENANTS OF THE COMPANY
 
     Subsidiaries.  The term "Subsidiary" is defined in the Indenture as a
corporation more than 50% of the outstanding stock of which is owned directly or
indirectly by the Company and/or one or more Subsidiaries. The term "Domestic
Subsidiary" is defined in the Indenture as a Subsidiary substantially all the
fixed assets of which are located, or substantially all the business of which is
carried on, within the United States (including Puerto Rico), or which owns or
leases any Principal Domestic Manufacturing Property, but such term excludes any
Subsidiary the principal business of which is the financing of the operations of
the Company or its Subsidiaries outside the United States (including Puerto
Rico) (but such Subsidiary is excluded only so long as it neither owns nor
leases any Principal Domestic Manufacturing Property). (Section 101)
 
     Restrictions on Secured Debt.  The Indenture provides that if the Company
or any Domestic Subsidiary shall incur, issue, assume or guarantee any Debt
secured by a Mortgage on any Principal Domestic Manufacturing Property of the
Company or any Domestic Subsidiary or on any shares of stock or Debt of any
Domestic Subsidiary, the Company will secure, or cause such Domestic Subsidiary
to secure, the Outstanding Debt Securities equally and ratably with (or prior
to) such secured Debt, unless after giving effect thereto the aggregate amount
of all such secured Debt together with all Attributable Debt of the Company and
of any Domestic Subsidiary in respect of sale and leaseback transactions
involving Principal Domestic Manufacturing Properties would not exceed 10% of
the Consolidated Net Tangible Assets of the Company and its consolidated
Subsidiaries. For the purpose of providing such equal and ratable security, the
principal amount of Outstanding Debt Securities of any series of Original Issue
Discount Securities shall be such portion of the principal amount as specified
in the terms of that series that would be payable upon acceleration of the
Maturity thereof at the time of such determination. This restriction will not
apply to, and there shall be excluded in computing secured Debt for the purpose
of such restriction, Debt secured by (a) Mortgages on property of, or on any
shares of stock or Debt of, any corporation existing at the time such
corporation
 
                                        6
   39
 
becomes a Domestic Subsidiary, (b) Mortgages in favor of the Company or a
Domestic Subsidiary, (c) Mortgages in favor of governmental bodies of the United
States or any State or Puerto Rico or any other country or any political
subdivision thereof to secure partial, progress or advance payments, (d)
Mortgages on property, shares of stock or Debt, purchase money Mortgages and
construction Mortgages existing at or incurred within 120 days of the time of
acquisition thereof (including acquisition through merger or consolidation), and
(e) certain extensions, renewals or replacements of Mortgages referred to in the
foregoing clauses (a) through (d) inclusive. (Section 1008) The Indenture does
not restrict the incurrence of unsecured Debt by the Company or its
Subsidiaries.
 
     "Principal Domestic Manufacturing Property" is defined in the Indenture to
include any facility (together with the land on which it is erected and fixtures
comprising a part thereof) used primarily for manufacturing, processing or
warehousing of the Company's products and located in the United States
(including Puerto Rico), owned or leased by the Company or a Subsidiary and
having a gross book value in excess of 1% of Consolidated Net Tangible Assets,
other than any such facility or portion thereof (i) which is financed by certain
governmental obligations the interest on which is excludable from gross income
of the holder thereof pursuant to the provisions of Section 103 (a) of the
Internal Revenue Code or Section 745 of Title 48 of the United States Code or
(ii) which in the opinion of the Board of Directors of the Company is not of
material importance to the total business conducted by the Company and its
Subsidiaries as an entirety. "Consolidated Net Tangible Assets" is defined as
the aggregate amount of all assets (after deducting intangible assets and the
amount of all current liabilities) of the Company and its consolidated
Subsidiaries. "Mortgage" is defined as any mortgage, pledge, lien, security
interest, conditional sale or other title retention agreement or similar
encumbrance. "Attributable Debt" is defined to mean the total net amount of rent
(discounted at the rate of 1% per annum over the weighted average Yield to
Maturity of the Outstanding Debt Securities compounded semi-annually) required
to be paid during the remaining term of any lease. (Section 101)
 
     Restrictions on Sales and Leaseback Transactions.  The Indenture provides
that neither the Company nor any Domestic Subsidiary may, after the effective
date of the Indenture, enter into any sale and leaseback transaction involving
any Principal Domestic Manufacturing Property which has been or is to be sold or
transferred, more than 120 days after the acquisition thereof or the completion
of construction and commencement of full operations thereof, unless (a) the
Company or such Domestic Subsidiary could create Debt secured by a Mortgage on
such property as described under "Restrictions on Secured Debt" in an amount
equal to the Attributable Debt with respect to the sale and leaseback
transaction without equally and ratably securing the Outstanding Debt Securities
or (b) the Company, within 120 days, applies to the retirement of its Funded
Debt which is pari passu (as defined in the Indenture) with the Outstanding
Securities an amount equal to the greater of (i) the net proceeds of the sale of
the Principal Domestic Manufacturing Property leased pursuant to such
arrangement or (ii) the fair market value of the Principal Domestic
Manufacturing Property so leased (subject to credits for certain voluntary
retirements of Funded Debt). (Section 1009) "Funded Debt" is defined as
indebtedness for money borrowed having a maturity at or being renewable or
extendible to a date more than 12 months from the date of determination.
(Section 101) This restriction does not apply to any sale and leaseback
transaction (a) between the Company and a Subsidiary or between Subsidiaries, or
(b) involving the taking back of a lease for a period of three years or less.
(Section 1009)
 
     Unless otherwise indicated in the Applicable Prospectus Supplement, the
Indenture does not contain covenants specifically designed to protect Holders in
the event of a highly leveraged transaction involving the Company.
 
EVENTS OF DEFAULT
 
     Any one of the following events constitutes an Event of Default under the
Indenture with respect to Securities of any series: (a) failure to pay any
interest on any Debt Security of that series when due, continued for 30 days;
(b) failure to pay principal of or any premium on any Debt Security of that
series when due; (c) failure to deposit any sinking fund payment, when due, in
respect of any Debt Security of that series; (d) failure to perform, or breach
of, any covenant or warranty of the Company in the Indenture (other than a
 
                                        7
   40
 
covenant included in the Indenture solely for the benefit of a series of Debt
Securities thereunder other than that series) continued for 90 days after
written notice as provided in the Indenture; (e) certain events in bankruptcy,
insolvency or reorganization of the Company; or (f) any other Event of Default
provided with respect to Debt Securities of that series. (Section 501)
 
     If any Event of Default with respect to the Debt Securities of any series
at the time Outstanding occurs and is continuing, either the Trustee or the
Holders of at least 25 percent in aggregate principal amount of the Outstanding
Debt Securities of that series may declare the principal amount (or, if the Debt
Securities of that series are Original Issue Discount Debt Securities, such
portion of the principal amount as may be specified in the terms thereof) of all
the Debt Securities of that series to be due and payable immediately. At any
time after a declaration of acceleration with respect to Debt Securities of any
series has been made, but before a judgment or decree based on acceleration has
been obtained, the Holders of a majority in aggregate principal amount of
Outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration. (Section 502)
 
     Reference is made to the Applicable Prospectus Supplement relating to any
series of Offered Debt Securities that are Original Issue Discount Debt
Securities for the particular provisions relating to acceleration of the Stated
Maturity of a portion of the principal amount of such series of Original Issue
Discount Debt Securities upon the occurrence of an Event of Default and the
continuation thereof.
 
     The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. (Section 603) Subject to such
provisions for the indemnification of the Trustee and to certain other
conditions, the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of any series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series. (Section 512)
 
     No Holder of any series of Debt Securities will have any right to institute
any proceeding with respect to the Indenture or for any remedy thereunder,
unless such Holder shall have previously given to the Trustee written notice of
a continuing Event of Default and unless the Holders of at least 25 percent in
principal amount of the Outstanding Debt Securities of that series shall have
made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee, and the Trustee shall not have received
from the Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of that series a direction inconsistent with such request and
shall have failed to institute such proceeding within 60 days. (Section 507)
However, such limitations do not apply to a suit instituted by a Holder of a
Debt Security for enforcement of payment of the principal of and premium, if
any, or interest on such Debt Security on or after the respective due dates
expressed in such Debt Security. (Section 508)
 
     The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Section 1004)
 
MODIFICATION AND WAIVER
 
     Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Debt Securities of each series
issued under the Indenture and affected by the modification or amendments;
provided, however, that no such modification or amendment may, without the
consent of the Holders of all Debt Securities affected thereby, (i) change the
Stated Maturity of the principal of, or any installment of principal of or
interest on, any Debt Security, (ii) reduce the principal amount of, or the
premium, if any, or (except as otherwise provided in the Applicable Prospectus
Supplement) interest on, any Debt Security (including in the case of an Original
Issue Discount Debt Security the amount payable upon acceleration of the
Maturity thereof); (iii) change the place or currency of payment of principal
of, premium, if any, or interest on any Debt Security; (iv) impair the right to
institute suit for the enforcement of any payment on any
 
                                        8
   41
 
Debt Security on or after the Stated Maturity thereof (or in the case of
redemption, on or after the Redemption Date); or (v) reduce the percentage in
principal amount of Outstanding Debt Securities of any series, the consent of
whose Holders is required for modification or amendment of the Indenture or for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults. (Section 902)
 
     The Holders of at least a majority in aggregate principal amount of the
Outstanding Debt Securities of any series may, on behalf of all Holders of that
series, waive compliance by the Company with certain restrictive provisions of
the Indenture. (Section 1010) The Holders of not less than a majority in
aggregate principal amount of the Outstanding Debt Securities of any series may,
on behalf of all Holders of that series, waive any past default under the
Indenture, except a default in the payment of principal, premium or interest or
in respect of a covenant or provision of the Indenture that cannot be modified
or amended without the consent of the Holder of each Outstanding Debt Security
of such series affected thereby. (Section 513)
 
CONSOLIDATION, MERGER AND SALE OF ASSETS
 
     The Company may not consolidate with or merge into any other Person or
transfer or lease its assets substantially as an entirety to any Person and may
not permit any Person to merge into or consolidate with the Company or transfer
or lease its assets substantially as an entirety to the Company, unless (i) any
successor or purchaser is a corporation, partnership, or trust organized under
the laws of the United States of America, any State or the District of Columbia,
and any such successor or purchaser expressly assumes the Company's obligations
on the Debt Securities under a supplemental Indenture, (ii) immediately after
giving effect to the transaction no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of Default, shall have
occurred and be continuing, (iii) if properties or assets of the Company become
subject to a Mortgage not permitted by the Indenture, the Company or such
successor Person, as the case may be, takes such steps as shall be necessary
effectively to secure the Securities equally and ratably with (or prior to) all
indebtedness secured thereby, and (iv) the Company has delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel stating compliance with these
provisions. (Section 801)
 
DEFEASANCE AND COVENANT DEFEASANCE
 
     The Indenture provides, unless otherwise indicated in the Applicable
Prospectus Supplement with respect to the Offered Debt Securities, that the
Company, at the Company's option, (a) will be discharged from any and all
obligations in respect of the Debt Securities of any series (except for certain
obligations to register the transfer of or exchange of Debt Securities of such
series, replace stolen, lost or mutilated Debt Securities of such series,
maintain paying agencies and hold moneys for payment in trust) or (b) need not
comply with certain restrictive covenants of the Indenture, including those
described under "Certain Covenants", and the occurrence of an event described in
clause (e) under "Events of Default" shall no longer be an Event of Default, in
each case, if the Company deposits, in trust, with the Trustee money or U.S.
Government Obligations, which through the payment of interest thereon and
principal thereof in accordance with their terms will provide money, in an
amount sufficient to pay all the principal of and interest on the Debt
Securities of such series on the dates such payments are due (which may include
one or more redemption dates designated by the Company) in accordance with the
terms of the Debt Securities of such series. Such a trust may only be
established if, among other things, (i) no Event of Default or event which with
the giving of notice or lapse of time, or both, would become an Event of Default
under the Indenture shall have occurred and be continuing on the date of such
deposit, (ii) such deposit will not cause the Trustee to have any conflicting
interest with respect to other securities of the Company and (iii) the Company
shall have delivered an Opinion of Counsel to the effect that the Holders will
not recognize income, gain or loss for Federal income tax purposes as a result
of such deposit or defeasance and will be subject to Federal income tax in the
same manner as if such defeasance had not occurred, which Opinion of Counsel, in
the case of clause (a) above, must refer to and be based upon a published ruling
of the Internal Revenue Service, a private ruling of the Internal Revenue
Service addressed to the Company, or otherwise a change in applicable Federal
income tax law occurring after the date of the Indenture. In the event the
Company omits to comply with its remaining obligations under the Indenture after
a defeasance of the Indenture with respect to the Debt Securities of any series
as described under clause (b) above and the Debt Securities of such series are
declared due and payable
 
                                        9
   42
 
because of the occurrence of any Event of Default, the amount of money and U.S.
Government Obligations on deposit with the Trustee may be insufficient to pay
amounts due on the Debt Securities of such series at the time of the
acceleration resulting from such Event of Default. However, the Company will
remain liable in respect of such payments. (Article Thirteen)
 
CONCERNING THE TRUSTEE
 
     First Trust of New York, National Association, is Trustee under the
Indenture. The Trustee performs services for the Company in the ordinary course
of business.
 
                              PLAN OF DISTRIBUTION
 
     The Company may sell the Debt Securities being offered hereby through
agents, through underwriters and through dealers, and Debt Securities may be
sold to other purchasers directly or through agents.
 
     The distribution of the Debt Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
 
     In connection with the sale of Debt Securities, underwriters may receive
compensation from the Company or from purchasers of Debt Securities for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company, and any profit on
the resale of Debt Securities by them, may be deemed to be underwriting
discounts and commissions, under the Securities Act. Any such underwriter or
agent will be identified, and any such compensation received from the Company
will be described, in the Applicable Prospectus Supplement.
 
     Underwriters, dealers and agents that participate in the distribution of
the Debt Securities or their affiliates may be customers of, extend credit to or
engage in transactions with or perform services for the Company in the ordinary
course of business.
 
     The Debt Securities are not proposed to be listed on a securities exchange,
and any underwriters or dealers will not be obligated to make a market in Debt
Securities. The Company cannot predict the activity or liquidity of any trading
in the Debt Securities.
 
     Underwriters participating in the offering of the Debt Securities may
purchase and sell Debt Securities in the open market. These transactions may
include overallotment and stabilizing transactions and purchasees to cover short
positions created by such underwriters in connection with the offering. Such
underwriters may also impose a penalty bid, whereby selling concessions allowed
to broker-dealers in respect of the Debt Securities sold in the offering may be
reclaimed by such underwriters if such Debt Securities are repurchased by the
underwriters in stabilizing transactions. These activities may stabilize,
maintain or otherwise affect the market price of the Debt Securities, which may
be higher than the price that might otherwise prevail in the open market; and
these activities, if commenced, may be discontinued at any time.
 
                          VALIDITY OF DEBT SECURITIES
 
     The validity of Debt Securities offered hereby will be passed upon for the
Company by Mary M. McDonald, Esq., Senior Vice President and General Counsel of
the Company, and for any underwriters or agents by Sullivan & Cromwell, New
York, New York. Ms. McDonald and her husband beneficially own an aggregate of
35,622 shares of Common Stock and hold options to acquire 600 shares which are
exercisable within 60 days.
 
                                       10
   43
 
                                    EXPERTS
 
     The consolidated financial statements of the Company at December 31, 1996
and 1995 and for each of the three years in the period ended December 31, 1996,
appearing in its Annual Report on Form 10-K, for the fiscal year ended December
31, 1996 and incorporated in this Prospectus by reference, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto and incorporated by reference herein. The financial
statements referred to above are included in reliance upon the reports of said
firm and upon the authority of said firm as experts in auditing and accounting.
 
                                       11
   44
 
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  NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT, ANY
PRICING SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND
THE PROSPECTUS OR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
 
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                               TABLE OF CONTENTS
 


                                        PAGE
                                        ----
                                     
PROSPECTUS SUPPLEMENT
Description of Notes..................   S-2
United States Taxation................  S-18
Foreign Currency Risks................  S-26
Supplemental Plan of Distribution.....  S-28
Validity of Notes.....................  S-29
Glossary..............................  S-30
PROSPECTUS
Available Information.................     2
Incorporation of Certain Information
  by Reference........................     2
The Company...........................     4
Use of Proceeds.......................     4
Ratios of Earnings to Fixed Charges...     4
Description of Debt Securities........     4
Plan of Distribution..................    10
Validity of Debt Securities...........    10
Experts...............................    11

 
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                                 $1,670,000,000
 
                               MERCK & CO., INC.
 
                          MEDIUM-TERM NOTES, SERIES C
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                                  [MERCK LOGO]
 
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                              GOLDMAN, SACHS & CO.
 
                               J.P. MORGAN & CO.
 
                           MORGAN STANLEY DEAN WITTER
                                OCTOBER 9, 1997
 
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