Filed Pursuant to Rule 424(b)(5)
Registration No. 333-82988
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 2, 2002)
$500,000,000
[LOGO] Baxter
Baxter International Inc.
5.25% Notes due 2007
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Baxter will pay interest on the notes on May 1 and November 1 of each year.
The first such payment will be made on November 1, 2002. The notes will mature
on May 1, 2007. We may redeem the notes at our option and at any time, either
as a whole or in part, at the redemption prices described in this prospectus
supplement.
The notes will be our unsecured and unsubordinated obligations and will rank
equally with all of our other unsecured and unsubordinated indebtedness.
-------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed upon the
accuracy or adequacy of this prospectus supplement or the prospectus. Any
representation to the contrary is a criminal offense.
-------------
Per Note Total
-------- ------------
Public offering price............... 99.508% $497,540,000
Underwriting discount............... 0.600% $ 3,000,000
Proceeds, before expenses, to Baxter 98.908% $494,540,000
The public offering price set forth above does not include accrued interest,
if any. Interest on the notes will accrue from April 26, 2002 to date of
delivery.
The notes are offered severally by the underwriters, subject to various
conditions. The underwriters expect to deliver the notes in book-entry form
only through The Depository Trust Company against payment on or about April 26,
2002.
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Joint Book-Running Managers
Deutsche Bank Securities Salomon Smith Barney
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Senior Co-Managers
Banc of America Securities LLC
Banc One Capital Markets, Inc.
UBS Warburg
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Co-Managers
ABN AMRO Incorporated
TD Securities
Wachovia Securities
April 23, 2002
TABLE OF CONTENTS
Prospectus Supplement
Page
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Recent Developments...................... S-3
Use of Proceeds.......................... S-3
Ratio of Earnings to Fixed Charges....... S-3
Description of Notes..................... S-3
Underwriting............................. S-6
Validity of Notes........................ S-7
Prospectus
Notice of Investors...................... 1
Where You Can Find More Information...... 1
Note Regarding Forward-Looking Statements 2
About the Company........................ 2
Use of Proceeds.......................... 3
Description of Debt Securities........... 3
Plan of Distribution..................... 17
Legal Matters............................ 18
Independent Accountants.................. 18
S-2
You should read this prospectus supplement and the accompanying prospectus
carefully before you invest. You should rely only on the information contained
in or incorporated by reference in this prospectus supplement and the
accompanying prospectus. We have not, and the underwriters have not, authorized
anyone to give you different information. If anyone gives you different or
inconsistent information, you should not rely on it. This prospectus supplement
may add to, update or change information in the accompanying prospectus. The
information contained in this prospectus supplement is current only as of the
date appearing at the bottom of the cover. Since that date, our business,
financial condition, results of operations and prospects may have changed.
In this prospectus supplement and the accompanying prospectus, unless we
otherwise specify or the context otherwise requires, references to "Baxter,"
"we," "us," and "our" refer to Baxter International Inc. and its subsidiaries.
We are not, and the underwriters are not, offering to sell or seeking offers
to buy securities in any jurisdiction where the offer or sale is not permitted.
This prospectus supplement and the accompanying prospectus do not contain
all of the information contained in the registration statement and its exhibits
which we filed with the Securities and Exchange Commission. You should read the
registration statement and its exhibits for information that may be of interest
to you. For information on obtaining a copy of the registration statement, see
"Where You Can Find More Information" in the accompanying prospectus.
RECENT DEVELOPMENTS
On April 18, 2002, Baxter issued a press release reporting first quarter
2002 sales and earnings. Sales increased 11 percent to $1.95 billion, up from
the $1.76 billion reported for the same period of 2001. Without the impact of
foreign exchange, Baxter's sales grew 14 percent compared to the same period of
2001. Baxter's net income in the quarter rose 18 percent to $253 million, from
the $214 million reported in the same period of 2001 (before the cumulative
effect of a 2001 change in accounting principle). Earnings per diluted share
grew 17 percent to $0.41, an increase from the $0.35 per share reported in the
same period of 2001.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the notes primarily to
repay existing indebtedness, and in particular, to reduce a portion of our
currently outstanding commercial paper. The commercial paper we will pay off
with the proceeds from the sale of these notes has been outstanding less than
60 days, matures within a few days of April 23, 2002, and bears a weighted
average interest rate of approximately 1.82% per annum.
RATIO OF EARNINGS TO FIXED CHARGES
The computations supporting our unaudited ratio of earnings to fixed charges
are disclosed in detail in our most recent Form 10-K, filed with the SEC on
March 13, 2002. Those ratios, for the full years ended December 31, 2001, 2000,
1999, 1998 and 1997, were 6.67, 6.54, 7.80, 3.75 and 3.94, respectively. Our
unaudited ratio of earnings to fixed charges for the three months ended March
31, 2002 was 11.90.
DESCRIPTION OF NOTES
The following summary of the terms of the notes supplements the general
description of debt securities contained in the accompanying prospectus. To the
extent the following terms are inconsistent with the general description
contained in the accompanying prospectus, the following terms replace such
inconsistent terms. You should read both the accompanying prospectus and this
prospectus supplement.
S-3
General
The notes will be limited to $500,000,000 aggregate principal amount and
will mature on May 1, 2007. The notes will bear interest at the rate per annum
of 5.25% from April 26, 2002 or from the most recent interest payment date to
which interest has been paid or provided. We will pay accrued interest
semi-annually on May 1 and November 1 of each year to the person in whose name
the note is registered at the close of business on April 15 and October 15, as
the case may be, that precedes such interest payment date. The first such
payment will be made on November 1, 2002. The notes will not be entitled to the
benefit of any mandatory redemption or sinking fund.
The notes will be issued under the indenture dated as of April 26, 2002,
between us and Bank One Trust Company, N.A., as trustee.
Optional Redemption
Meaning of Terms
We may redeem the notes at our option as described below. See "Optional
Redemption--Our Redemption Rights." The following terms are relevant to the
determination of the redemption price:
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed
as a percentage of its principal amount) equal to the Comparable Treasury Price
for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Reference Treasury Dealer as having a maturity comparable to
the remaining term of the notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the notes.
"Comparable Treasury Price" means, with respect to any redemption date, (A)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such quotations, or (C) if only
one Reference Treasury Dealer Quotation is received, such quotation.
"Reference Treasury Dealer" means (A) Deutsche Bank Securities Inc. or
Salomon Smith Barney Inc. (or their respective affiliates which are Primary
Treasury Dealers), and their respective successors; provided, however, that if
any of the foregoing shall cease to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), we will substitute
therefor another Primary Treasury Dealer, and (B) any other Primary Treasury
Dealer(s) selected by us.
"Reference Treasury Dealer Quotation" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer by 5:00 p.m. (New York
City time) on the third business day preceding such redemption date.
Our Redemption Rights
We may redeem the notes at our option and at any time or from time to time,
either as a whole or in part. If we elect to redeem the notes, we will pay a
redemption price equal to the greater of
. 100% of the principal amount of the notes to be redeemed, and
S-4
. the sum of the present values of the remaining scheduled payments of
principal and interest on the notes being redeemed on that redemption
date (not including the amount, if any, of accrued and unpaid interest
to the redemption date) discounted to the redemption date on a
semiannual basis at the Treasury Rate, as determined by the Reference
Treasury Dealer, plus 15 basis points
plus, in each case, accrued and unpaid interest on the notes to the redemption
date.
Notwithstanding the foregoing, installments of interest on notes that are
due and payable on interest payment dates falling on or prior to a redemption
date will be payable on the interest payment date to the registered holders as
of the close of business on the relevant record date according to the notes and
the indenture. The redemption price will be calculated on the basis of a
360-day year consisting of twelve 30-day months.
We will mail notice of any redemption at least 30 days but no more than 60
days before the redemption date to each registered holder of the notes to be
redeemed. Once notice of redemption is mailed, the notes called for redemption
will become due and payable on the redemption date at the applicable redemption
price, plus accrued and unpaid interest to the redemption date.
On and after the redemption date, interest will cease to accrue on the notes
or any portion of the notes called for redemption (unless we default in the
payment of the redemption price and accrued interest). On or before the
redemption date, we will deposit with the paying agent (or the trustee) money
sufficient to pay the redemption price of and accrued interest on the notes to
be redeemed on that date. If fewer than all of the notes are to be redeemed,
the notes to be redeemed shall be selected by lot by the depositary, in the
case of notes represented by a global security, or by the trustee by a method
the trustee deems fair and appropriate, in the case of notes that are not
represented by a global security.
Book-Entry Notes
The notes will be issued in the form of one or more fully registered global
notes which will be deposited with, or on behalf of, the Depository Trust
Company (the "depositary"). You should review the information appearing under
the caption "Description of Debt Securities--Book-entry debt securities" in the
accompanying prospectus for information regarding the depositary arrangements
with respect to the notes.
Neither we nor the trustee, nor any registrar, paying agent or conversion
agent under the indenture, will have any responsibility for the performance by
the depositary or direct or indirect depositary participants of their
obligations under the rules and procedures governing their operations. The
depositary has advised us that it will take any action permitted to be taken by
a holder of notes only at the direction of one or more direct depositary
participants to whose account with the depositary interests in the notes are
credited and only for the principal amount of the notes for which directions
have been given.
Same-Day Settlement and Payment
Settlement by the purchasers of the notes will be made in immediately
available funds. All payments by us to the depositary of principal and interest
will be made in immediately available funds.
The notes will trade in the depositary's settlement system until maturity,
and therefore the depositary will require secondary trading activity in the
notes to be settled in immediately available funds.
Defeasance and Covenant Defeasance
The provisions of the of the indenture relating to defeasance as described
under "Description of Debt Securities--Discharge, defeasance and covenant
defeasance" in the accompanying prospectus will apply to the notes.
S-5
UNDERWRITING
Deutsche Bank Securities Inc. and Salomon Smith Barney Inc. are acting as
representatives of the underwriters named below.
Subject to the terms and conditions set forth in the underwriting agreement
dated April 23, 2002, each underwriter named below has severally agreed to
purchase, and we have agreed to sell to each underwriter, the principal amount
of notes set forth opposite its name below:
Principal
Amount of
Underwriter Notes
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Deutsche Bank Securities Inc.. $175,000,000
Salomon Smith Barney Inc...... 175,000,000
Banc of America Securities LLC 33,500,000
Banc One Capital Markets, Inc. 33,500,000
UBS Warburg LLC............... 33,500,000
ABN AMRO Incorporated......... 16,500,000
TD Securities (USA) Inc....... 16,500,000
First Union Securities, Inc... 16,500,000
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Total.................. $500,000,000
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The underwriting agreement provides that the obligations of the underwriters
to purchase the notes included in this offering are subject to approval of
legal matters by counsel and to other conditions. The underwriters are
obligated to purchase all of the notes if they purchase any of the notes.
The underwriters propose to offer some of the notes directly to the public
at the public offering price set forth on the cover page of this prospectus
supplement and some of the notes to dealers at the public offering price less a
concession not to exceed 0.35% of the principal amount of the notes. The
underwriters may allow, and dealers may reallow, a concession not to exceed
0.25% of the principal amount of the notes on sales to other dealers. After the
initial offering of the notes to the public, the representatives may change the
public offering price and concessions.
The following table shows the underwriting discount and commission we will
pay to the underwriters in connection with this offering (expressed as a
percentage of the principal amount of the notes):
Paid by
Baxter
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Per Note 0.600%
In connection with the offering, Deutsche Bank Securities Inc. and Salomon
Smith Barney Inc., on behalf of the underwriters, may purchase and sell notes
in the open market. These transactions may include over-allotment, syndicate
covering transactions and stabilizing transactions. Over-allotment involves
syndicate sales of notes in excess of the principal amount of notes to be
purchased by the underwriters in the offering, which creates a syndicate short
position. Syndicate covering transactions involve purchases of the notes in the
open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of notes made for the purpose of preventing or retarding a decline in
the market price of the notes while the offering is in progress.
The underwriters may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Deutsche Bank Securities Inc. or Salomon Smith Barney Inc., in covering
syndicate short positions or making stabilizing purchases, repurchases notes
originally sold by that syndicate member.
S-6
Any of these activities may have the effect of preventing or retarding a
decline in the market price of the notes. They may also cause the price of the
notes to be higher than the price that otherwise would exist in the open market
in the absence of these transactions. The underwriters may conduct these
transactions in the over-the-counter market or otherwise. If the underwriters
commence any of these transactions, they may discontinue them at any time.
The notes are a new issue of securities with no established trading market.
We have been advised by the underwriters that they intend to make a market in
the notes but are not obligated to do so and may discontinue market making at
any time without notice. No assurance can be given as to the liquidity of the
trading market for the notes.
We estimate that our total expenses of the offering, excluding the
underwriting discount, will be $30,000.
We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the underwriters may be required to make because of any
of those liabilities.
The underwriters and their affiliates have, directly and indirectly,
provided various investment and commercial banking services to us and our
affiliates for which they have received customary fees and commissions,
including participating as lenders in our existing syndicated revolving credit
facilities. The underwriters and their affiliates may, from time to time,
engage in transactions with and perform services for us in the ordinary course
of their business.
Bank One, N.A., an affiliate of the trustee and of Banc One Capital Markets,
Inc., in addition to being an agent bank and lender under our syndicated credit
facilities, maintains various commercial banking arrangements with us. First
Union Securities, Inc. is an indirect, wholly-owned subsidiary of Wachovia
Corporation. Wachovia Corporation conducts its investment banking,
institutional, and capital markets businesses through its various bank,
broker-dealer and nonbank subsidiaries (including First Union Securities, Inc.)
under the trade name of Wachovia Securities. Any references to Wachovia
Securities in this prospectus supplement, however, do not include Wachovia
Securities, Inc., member NASD/SIPC and a separate broker-dealer subsidiary of
Wachovia Corporation and sister affiliate of the First Union Securities, Inc.,
which may or may not be participating as a selling dealer in the distribution
of the notes.
VALIDITY OF NOTES
The validity of the notes offered hereby is being passed upon for us by our
Senior Vice President and General Counsel, Thomas J. Sabatino, Jr. Mr. Sabatino
owns shares of, and options on, our common stock, both directly and as a
participant in various stock and employee benefit plans. The validity of the
notes offered hereby is being passed upon for the underwriters by Sidley Austin
Brown & Wood LLP. Sidley Austin Brown & Wood LLP and its affiliated
partnerships also act as special counsel to Baxter and its affiliates from time
to time.
S-7
PROSPECTUS
[LOGO] Baxter
Baxter International Inc.
Up to $1,000,000,000 of
Debt Securities
-----------------
Baxter International Inc. ("we," "us," "our" or the "Company") intends to
offer from time to time up to $1,000,000,000 aggregate principal amount (or the
equivalent in foreign denominated currency or currency units) of our senior,
unsecured debt securities on terms to be determined when an agreement to sell
is made. The specific designation, aggregate principal amount, rate or method
of calculation of any interest, the time of payment of any interest, maturity,
authorized denominations, any initial public offering price, any redemption
terms or prepayment rights, repurchase rights, other specific terms, currency
of payment, and any listing on a securities exchange for each issue of debt
securities in respect of which this prospectus is being delivered, will be set
forth in the applicable prospectus supplement, together with the terms of the
offering of the debt securities, the net proceeds to us from their sale, and
the ratio of earnings to fixed charges for appropriate periods, if applicable.
The debt securities may be sold directly, through agents, or through
underwriters or dealers. If any of our agents or any underwriters are involved
in the sale of the debt securities in respect of which this prospectus is being
delivered, the names of the agents or underwriters and any applicable
commissions and discounts will be set forth in the applicable prospectus
supplement.
Neither the Securities and Exchange Commission ("SEC") nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
-----------------
The date of this Prospectus is April 2, 2002.
NOTICE TO INVESTORS
You should rely only on the information contained, or incorporated by
reference, in this prospectus. We have not authorized anyone to provide you
with different or additional information. You should not assume that the
information contained in this prospectus is accurate as of any date other than
the date on the front of this prospectus.
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process or continuous offering process.
Under this shelf registration process, we may issue and sell, from time to
time, the debt securities described in this prospectus in one or more offerings.
This prospectus provides you with a general description of the debt
securities which may be offered by us. Each time we sell debt securities, we
are required to provide you with a prospectus and a prospectus supplement
containing specific information about us and the terms of the offering. That
prospectus supplement may include additional risk factors or other special
considerations applicable to those debt securities. Any prospectus supplement
may also add, update or change information in this prospectus. If there is any
inconsistency between the information in this prospectus and the applicable
prospectus supplement, you should rely on the information in that prospectus
supplement. You should read both this prospectus and the applicable prospectus
supplement together with additional information described under "Where You Can
Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain further information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also
available to the public over the Internet at the SEC's Web site at
http://www.sec.gov. Our SEC filings are also available at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005.
We incorporate by reference in this prospectus the following document filed
by us with the SEC:
. our Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
Any statement made in a document incorporated by reference or deemed
incorporated herein by reference is deemed to be modified or superseded for
purposes of this prospectus if a statement contained in this prospectus or in
any other subsequently filed document which also is incorporated or deemed
incorporated by reference herein modifies or supersedes that statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus. We also
incorporate by reference all documents filed pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act after the date of this prospectus
until we or the underwriters sell all of the debt securities.
Statements made in this prospectus or in any document incorporated by
reference in this prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the documents incorporated by reference, each such
statement being qualified in all material respects by such reference.
You may request a copy of these filings at no cost, by writing or calling us
at the following address: Corporate Secretary, Baxter International Inc., One
Baxter Parkway, Deerfield, Illinois 60015 (847) 948-2000.
1
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements throughout this prospectus that are not historical facts,
(including material incorporated herein by reference) are forward-looking
statements. These statements are based on our current expectations and involve
numerous risks and uncertainties. Some of these risks and uncertainties are
factors that affect all international businesses, while some are specific to us
and the health care areas in which we operate.
The factors below in some cases have affected and could affect our actual
results, causing results to differ, and possibly differ materially, from those
expressed in any such forward looking statements. These factors include
technological advances in the medical field, economic conditions, demand and
market acceptance risks for new and existing products, technologies and health
care services, the impact of competitive products and pricing, manufacturing
capacity, new plant start-ups, global regulatory, trade and tax policies,
ongoing product testing, regulatory, legal or other developments relating to
our series A, AF and AX dialyzers, continued price competition, product
development risks, including technological difficulties, ability to enforce
patents and unforeseen commercialization and regulatory factors. Additionally,
as discussed in Item 3.--"Legal Proceedings," in our Form 10-K for the year
ended December 31, 2001 which is incorporated herein by reference, upon the
resolution of certain legal matters, we may incur charges in excess of
presently established reserves. Any such charge could have a material adverse
effect on our results of operations or cash flows in the period in which it is
recorded.
International operations are subject to certain additional risks inherent in
conducting business outside the United States, such as changes in currency
exchange rates, price and currency exchange controls, import restrictions,
nationalization, expropriation and other governmental action.
Currency fluctuations are also a significant variable for global companies,
especially fluctuations in local currencies where hedging opportunities are
unreasonably expensive or unavailable. If the United States dollar strengthens
significantly against most foreign currencies, our ability to realize projected
growth rates in our sales and net earnings outside the United States could be
negatively impacted.
We believe that our expectations with respect to forward-looking statements
are based upon reasonable assumptions within the bounds of our knowledge of our
business and operations, but there can be no assurance that our actual results
or performance will conform to any future results or performance expressed or
implied by such forward-looking statements.
ABOUT THE COMPANY
Baxter International Inc. and our Subsidiaries
We were incorporated under Delaware law in 1931. We engage in the worldwide
development, manufacture and distribution of a diversified line of products,
systems and services used primarily in the health care field. Throughout the
rest of this business description, "we," "us," or "our" refers to Baxter
International Inc., our parent company, together with its subsidiary companies,
taken as a consolidated enterprise. We manufacture products in 28 countries and
sell them in over 100 countries. Health care is concerned with the preservation
of health and with the diagnosis, cure, mitigation and treatment of disease and
body defects and deficiencies. Our products are used by hospitals, clinical and
medical research laboratories, blood and blood dialysis centers, rehabilitation
centers, nursing homes, doctors' offices and by patients, at home, under
physician supervision.
We operate as a global leader in critical therapies for life-threatening
conditions. Our continuing operations are comprised of three segments:
Medication Delivery, which provides a range of intravenous solutions and
specialty products that are used in combination for fluid replenishment,
nutrition therapy, pain management, antibiotic therapy and chemotherapy;
BioScience, which develops biopharmaceuticals, biosurgery products,
2
vaccines and blood collection, processing and storage products and
technologies; and Renal, which develops products and provides services to treat
end-stage kidney disease. Our three businesses enjoy leading positions in the
medical products and services fields.
USE OF PROCEEDS
Except as otherwise set forth in any prospectus supplement relating to the
debt securities to be offered thereby, we will use the net proceeds from the
sale of the debt securities for working capital, to repay our existing debt,
for our capital expenditures and for general corporate purposes.
DESCRIPTION OF DEBT SECURITIES
The debt securities will be our unsecured and unsubordinated obligations
issued in one or more series and will rank equally with each other and with all
of our other unsecured and unsubordinated indebtedness. The debt securities
will be issued under an indenture to be entered into between us and Bank One
Trust Company, N.A., as trustee. The terms of any series of debt securities
will be those specified in the indenture, as amended or supplemented from time
to time, and in the certificates evidencing that series of debt securities.
The following summary of selected provisions of the indenture and the debt
securities is not complete, and the summary of selected terms of a particular
series of debt securities included in the applicable prospectus supplement also
will not be complete. You should review the indenture and the form of
certificate evidencing the applicable debt securities, each of which has been
or will be filed as an exhibit to the registration statement of which this
prospectus is a part or as an exhibit to documents which have been or will be
incorporated by reference in this prospectus. To obtain a copy of the indenture
or the form of certificate for the debt securities, see "Where You Can Find
More Information" in this prospectus. The following summary and the summary in
the applicable prospectus supplement are qualified in their entirety by
reference to all of the provisions of the indenture and the certificates
evidencing the debt securities. The provisions of the indenture and the debt
certificates, including defined terms, are incorporated by reference in this
prospectus. Terms used in this section have the meanings assigned to those
terms in the indenture. When we refer to "we," "us" or "our" in this section or
when we otherwise refer to ourselves in this section, we mean Baxter
International Inc., excluding, unless otherwise expressly stated or the context
otherwise requires, our subsidiaries.
The following description of debt securities describes general terms and
provisions of the series of debt securities to which any prospectus supplement
may relate. When we offer to sell a series of debt securities, we will describe
the specific terms of the series in the applicable prospectus supplement. If
any particular terms of the debt securities described in a prospectus
supplement differ from any of the terms described in this prospectus, the terms
described in the applicable prospectus supplement will supersede the terms
described in this prospectus.
General
The debt securities may be issued from time to time in one or more series.
We can issue an unlimited amount of debt securities under the indenture. The
indenture provides that we may issue debt securities of any series in an amount
up to the aggregate principal amount which is authorized from time to time by
us. Please read the applicable prospectus supplement relating to the series of
debt securities being offered for specific terms including, where applicable:
. the title of the series of debt securities;
. any limit on the aggregate principal amount of debt securities of the
series;
3
. the price or prices at which we will issue debt securities of the series;
. the date or dates on which we will pay the principal of and premium, if
any, on debt securities of the series, or the method or methods, if any,
that will be used to determine those dates;
. the rate or rates, which may be fixed or variable, at which debt
securities of the series will bear interest, if any, or the method or
methods, if any, that will be used to determine those rates;
. the basis used to calculate interest, if any, on the debt securities of
the series if other than a 360-day year of twelve 30-day months;
. the date or dates, if any, from which interest on the debt securities of
the series will accrue, or the method or methods, if any, that will be
used to determine those dates;
. the dates on which the interest, if any, on the debt securities of the
series will commence accruing and will be payable and the record dates for
the payment of interest;
. the place or places where amounts due on the debt securities of the series
will be payable and where the debt securities of the series may be
surrendered for registration of transfer and exchange;
. the terms and conditions, if any, upon which we may, at our option, redeem
debt securities of the series;
. the terms and conditions, if any, upon which we will repurchase debt
securities of the series at the option of the holders of debt securities
of the series;
. the terms of any sinking fund or analogous provision;
. if other than United States dollars, the currency to be used to purchase
the debt securities of the series and the currency to be used for payments
on debt securities of the series, and our ability or the ability of the
holders of debt securities of the series, if any, to have payments made in
any other currency;
. any addition to, or modification or deletion of, any covenant or event of
default with respect to debt securities of the series;
. whether the debt securities of the series are to be issuable in registered
or bearer form or both and, if in bearer form, whether we will issue any
debt securities of the series in temporary or permanent global form and,
if so, the identity of the depositary for the global debt security;
. whether and under what circumstances we will pay any additional amounts in
respect of certain taxes, assessments or other governmental charges
imposed on holders of the series of debt securities who are United States
Aliens ("additional amounts") and, if so, whether we will have the option
to redeem the series of debt securities rather than pay any additional
amounts;
. the person to whom any interest on any registered securities of the series
of debt securities will be payable, if different than the person in whose
name a registered security is registered at the close of business on the
regular record date for that payment;
. the manner in which, or the person to whom, any interest on any bearer
security of the series of debt securities will be payable, if different
than upon presentation and surrender of the coupons relating to the bearer
security;
. the extent to which, or the manner in which, any interest payable on a
temporary global debt security will be paid, if other than in the manner
provided in the indenture;
. the portion of the principal amount of the series of debt securities which
will be payable upon acceleration if other than the full principal amount;
. the authorized denominations in which the series of debt securities will
be issued, if other than denominations of $1,000 and any integral multiple
of $1,000, in the case of registered securities, or $5,000, in the case of
bearer securities;
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. if the amount of payments on the series of debt securities may be
determined with reference to an index, formula or other method or methods
("indexed securities") and the manner used to determine those amounts; and
. any other terms of debt securities of the series.
As used in this prospectus and any prospectus supplement relating to the
offering of debt securities, references to the principal of and premium, if
any, and interest, if any, on the series of debt securities include the payment
of additional amounts, if any, required by the series of debt securities in
that context.
Debt securities may be issued as original issue discount securities to be
sold at a substantial discount below their principal amount. In the event of an
acceleration of the maturity of any original issue discount security, the
amount payable to the holder upon acceleration will be determined in the manner
described in the applicable prospectus supplement. Material federal income tax
and other considerations applicable to original issue discount securities will
be described in the applicable prospectus supplement.
If the purchase price of any debt securities is payable in a foreign
currency or currency unit or if the principal of, or premium, if any, or
interest, if any, on any of the debt securities is payable in a foreign
currency or currency unit, the specific terms of those debt securities and the
applicable foreign currency or currency unit will be specified in the
prospectus supplement relating to those debt securities.
The terms of the debt securities of any series may differ from the terms of
the debt securities of any other series, and the terms of particular debt
securities within any series may differ from each other. If expressly provided
in the applicable prospectus supplement, we may, without the consent of the
holders of the debt securities of any series, reopen an existing series of debt
securities and issue additional debt securities of that series or establish
additional or different terms of that series.
Registration, transfer, payment and paying agent
Unless otherwise indicated in the applicable prospectus supplement, each
series of debt securities will be issued in registered form only, without
coupons. The indenture, however, provides that we may also issue debt
securities in bearer form only, or in both registered and bearer form. Bearer
securities may not be offered, sold, resold or delivered in connection with
their original issuance in the United States or to any United States person, as
defined below, other than offices located outside the United States of
specified United States financial institutions. "United States person" means
any citizen or resident of the United States, any corporation, partnership or
other entity created or organized in or under the laws of the United States,
any estate the income of which is subject to United States federal income
taxation regardless of its source, or any trust whose administration is subject
to the primary supervision of a United States court and which has one or more
United States fiduciaries who have the authority to control all substantial
decisions of the trust. "United States" means the United States of America,
including the states thereof and the District of Columbia, its territories, its
possessions and other areas subject to its jurisdiction. Purchasers of bearer
securities will be subject to certification procedures and may be affected by
limitations under United States tax laws. The applicable procedures and
limitations will be described in the prospectus supplement relating to the
offering of the bearer securities.
Unless otherwise indicated in the applicable prospectus supplement, the debt
securities will be payable and may be surrendered for registration of transfer
or exchange and, if applicable, for conversion into or exchange for other types
of securities, at an office or agency maintained by the trustee in the Borough
of Manhattan, The City of New York. However, we, at our option, may make
payments of interest on any registered security by check mailed to the address
of the person entitled to receive that payment or by wire transfer to an
account maintained by the payee with a bank located in the United States. No
service charge will be made for any registration of transfer or exchange,
redemption or repayment of debt securities, or for any conversion or exchange
of debt
5
securities for other types of securities, but we may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with that transaction.
Unless otherwise indicated in the applicable prospectus supplement, payment
of principal, premium, if any, and interest, if any, on bearer securities will
be made, subject to any applicable laws and regulations, at an office or agency
outside the United States. Unless otherwise indicated in the applicable
prospectus supplement, payment of interest due on bearer securities on any
interest payment date will be made only against surrender of the coupon
relating to that interest payment date. Unless otherwise indicated in the
applicable prospectus supplement, no payment of principal, premium, if any, or
interest, if any, with respect to any bearer security will be made at any
office or agency in the United States or by check mailed to any address in the
United States or by wire transfer to an account maintained with a bank located
in the United States. However, if any bearer securities are payable in United
States dollars, payments on those bearer securities may be made at the
corporate trust office of the trustee or at any office or agency designated by
us in the Borough of Manhattan, The City of New York, if, but only if, payment
of the full amount due on the bearer securities for principal, premium, if any,
or interest, if any, at all offices outside of the United States maintained for
that purpose by us is illegal or effectively precluded by exchange controls or
similar restrictions.
Unless otherwise indicated in the applicable prospectus supplement, we will
not be required to:
. issue, register the transfer of or exchange debt securities of any series
during a period beginning at the opening of business 15 days before any
selection of debt securities of that series having the same terms to be
redeemed and ending at the close of business on the day of that selection;
. register the transfer of or exchange any registered security, or portion
of any registered security, selected for redemption, except the unredeemed
portion of any registered security being redeemed in part;
. exchange any bearer security selected for redemption, except to exchange a
bearer security for a registered security of that series having the same
terms that is simultaneously surrendered for redemption; or
. issue, register the transfer of or exchange a debt security which has been
surrendered for repayment at the option of the holder, except the portion,
if any, of the debt security not to be repaid.
Book-entry debt securities
The debt securities of a series may be issued in whole or in part in the
form of one or more global debt securities. Global debt securities will be
deposited with, or on behalf of, a depositary identified in the applicable
prospectus supplement relating to the series. Global debt securities may be
issued in either registered or bearer form and in either temporary or permanent
form. Unless and until it is exchanged in whole or in part for individual
certificates evidencing debt securities, a global debt security may not be
transferred except as a whole by the depositary to its nominee or by the
nominee to the depositary, or by the depositary or its nominee to a successor
depositary or to a nominee of the successor depositary.
We anticipate that global debt securities will be deposited with, or on
behalf of, The Depository Trust Company ("DTC"), New York, New York, and that
global debt securities will be registered in the name of DTC's nominee, Cede &
Co. We also anticipate that the following provisions will apply to the
depository arrangements with respect to global debt securities. Additional or
differing terms of the depository arrangements will be described in the
applicable prospectus supplement.
DTC has advised us that it 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;
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. 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.
DTC holds securities that its participants deposit with DTC. DTC also
facilitates the settlement among its participants of securities transactions,
including transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, which eliminates the
need for physical movement of securities certificates. Direct participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and other organizations. DTC is owned by a number of its direct
participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, LLC. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others, sometimes referred to in this
prospectus as indirect participants, that clear transactions through or
maintain a custodial relationship with a direct participant either directly or
indirectly. Indirect participants include securities brokers and dealers, banks
and trust companies. The rules applicable to DTC and its participants are on
file with the SEC.
Purchases of debt securities within the DTC system must be made by or
through direct participants, which will receive a credit for the debt
securities on DTC's records. The ownership interest of the actual purchaser or
beneficial owner of a debt security is, in turn, recorded on the direct and
indirect participants' records. Beneficial owners will not receive written
confirmation from DTC of their purchases, but beneficial owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the direct or indirect participants
through which they purchased the debt securities. Transfers of ownership
interests in debt securities are to be accomplished by entries made on the
books of participants acting on behalf of beneficial owners. Beneficial owners
will not receive certificates representing their ownership interests in the
debt securities, except under the limited circumstances described below.
To facilitate subsequent transfers, all debt securities deposited by direct
participants with DTC will be registered in the name of DTC's nominee, Cede &
Co. The deposit of debt securities with DTC and their registration in the name
of Cede & Co. will not change the beneficial ownership of the debt securities.
DTC has no knowledge of the actual beneficial owners of the debt securities.
DTC's records reflect only the identity of the direct participants to whose
accounts the debt securities are credited. Those participants may or may not be
the beneficial owners. The direct and indirect participants are responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants and by direct and
indirect participants to beneficial owners will be governed by arrangements
among them, subject to any legal requirements in effect from time to time.
Redemption notices will be sent to DTC or its nominee. If less than all of
the debt securities of a series are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each direct participant in the
debt securities to be redeemed.
In any case where a vote may be required with respect to the debt securities
of any series, neither DTC nor Cede & Co. will give consents for or vote the
global debt securities. Under its usual procedures, DTC will mail an omnibus
proxy to us as soon as possible after the record date. The omnibus proxy
assigns the consenting or voting rights of Cede & Co. to those direct
participants to whose accounts the debt securities are credited on the record
date identified in a listing attached to the omnibus proxy.
Principal and premium, if any, and interest, if any, on the global debt
securities will be paid to Cede & Co., as nominee of DTC. DTC's practice is to
credit direct participants' accounts on the relevant payment date unless DTC
has reason to believe that it will not receive payments on the payment date.
Payments by direct and indirect participants to beneficial owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
"street name." Those payments
7
will be the responsibility of participants and not of DTC or us, subject to any
legal requirements in effect from time to time. Payment of principal, premium,
if any, and interest, if any, to Cede & Co. is our responsibility, disbursement
of payments to direct participants is the responsibility of DTC, and
disbursement of payments to the beneficial owners is the responsibility of
direct and indirect participants.
Except under the limited circumstances described in this prospectus,
beneficial owners of interests in a global debt security will not be entitled
to have debt securities registered in their names and will not receive physical
delivery of debt securities. Accordingly, each beneficial owner must rely on
the procedures of DTC to exercise any rights under the debt securities and the
indenture.
The laws of some jurisdictions may require that some purchasers of
securities take physical delivery of securities in definitive form. These laws
may impair the ability to transfer or pledge beneficial interests in global
debt securities.
DTC is under no obligation to provide its services as depositary for the
debt securities of any series and may discontinue providing its services at any
time by giving reasonable notice to use or the trustee. Neither we nor the
trustee will have any responsibility for the performance by DTC or its
participants or indirect participants under the rules and procedures governing
DTC. As noted above, beneficial owners of debt securities generally will not
receive certificates representing their ownership interests in the debt
securities. However, if
. DTC notifies us that it is unwilling or unable to continue as a depositary
for the global debt securities of any series or if DTC ceases to be a
clearing agency registered under the Securities Exchange Act and a
successor depositary for the debt securities of the series is not
appointed within 90 days of the notification or of our becoming aware of
DTC's ceasing to be so registered, as the case may be,
. we determine, in our sole discretion, not to have the debt securities of
any series represented by one or more global debt securities, or
. an event of default under the indenture has occurred and is continuing
with respect to the debt securities of any series,
we will prepare and deliver to the trustee certificates for the debt securities
of that series, which will deliver the certificates in exchange for beneficial
interests in the global debt securities. Any beneficial interest in a global
debt security that is exchangeable under the circumstances described in the
preceding sentence will be exchangeable for debt securities in definitive
certificated form registered in the names that DTC will direct. It is expected
that these directions will be based upon directions received by DTC from its
participants with respect to ownership of beneficial interests in the global
debt securities.
We obtained the information in this section and elsewhere in this prospectus
concerning DTC and DTC's book-entry system from sources that we believe to be
reliable, but we take no responsibility for the accuracy of this information.
Outstanding debt securities
In determining whether the holders of the requisite principal amount of
outstanding debt securities have given any request, demand, authorization,
direction, notice, consent or waiver under the indenture:
. the principal amount of an original issue discount security that will be
deemed to be outstanding for these purposes will be that portion of the
principal amount of the original issue discount security that could be
declared to be due and payable upon a declaration of acceleration of the
original issue discount security as of the date of the determination;
. the principal amount of any indexed security that will be deemed to be
outstanding for these purposes will be the principal face amount of the
indexed security determined on the date of its original issuance;
8
. the principal amount of a debt security denominated in a foreign currency
that will be deemed to be outstanding for these purposes will be the
United States dollar equivalent, determined on the date of original issue
of the debt security, of the principal amount of the debt security; and
. a debt security owned by us or any obligor on the debt security or any
affiliate of ours or the other obligor will not be deemed to be
outstanding.
Redemption and repurchase
The debt securities of any series may be redeemable at our option or may be
subject to mandatory redemption by us as required by a sinking fund or
otherwise. In addition, the debt securities of any series may be subject to
repurchase by us at the option of the holders. The applicable prospectus
supplement will describe the terms, the times and the prices regarding any
optional or mandatory redemption or option to repurchase any series of debt
securities.
Restrictive Covenants
Restrictions on the creation of secured debt. The indenture provides that we
will not, and will not cause or permit a restricted subsidiary to, create,
incur, assume or guarantee any indebtedness borrowed by us or our restricted
subsidiaries that is secured by a security interest in any of our principal
facilities or shares of stock owned directly or indirectly by us or a
restricted subsidiary or by indebtedness borrowed by one of our restricted
subsidiaries from us or another of our restricted subsidiaries ("secured debt")
unless the debt securities will be secured equally and ratably with or prior to
the secured debt, with exceptions as listed in the indenture. These
restrictions do not apply to indebtedness secured by:
. security interests on any property, which is a parcel of real property at
a manufacturing plant, a warehouse or an office building and which is
acquired, constructed, developed or improved by us or a restricted
subsidiary, which secures or provides for the payment of all or any part
of the acquisition cost of the property or the cost of the construction,
development or improvement of the property and which is created prior to,
at the same time or within 120 days after the completion of the
acquisition of the property or the later to occur of the completion,
development or improvement or the commencement or operation, use or
commercial production of the property;
. security interests on property at the time of its acquisition by us or a
restricted subsidiary which secure obligations assumed by us or a
restricted subsidiary;
. security interests arising from conditional sales agreements or title
retention agreements with respect to property acquired by us or any of our
restricted subsidiaries;
. security interests existing on the property or on the outstanding shares
or indebtedness of a corporation or firm at the time the corporation or
firm becomes a restricted subsidiary or is merged or consolidated with us
or a restricted subsidiary or sells, leases or otherwise disposes of
substantially all of its property to us or one of our restricted
subsidiaries;
. security interests securing indebtedness of a restricted subsidiary owed
to us or to another restricted subsidiary;
. mechanics' and other statutory liens in respect of obligations not due or
being contested;
. security interests for taxes, assessments or governmental charges or
levies not yet delinquent or security interests for taxes, assessments or
governmental changes or levies already delinquent but which are being
contested;
. security interests arising in connection with legal proceedings, including
judgment liens, so long as the proceedings are being contested and, in the
case of judgment liens, the execution has been stayed;
. landlords' liens on fixtures;
9
. security interests arising in connection with contracts and subcontracts
with or made at the request of the United States, any state, or any
department, agency or instrumentality of the Unites States or any state;
. security interests that secure an obligation issued by the United States
of America or any state, territory or possession of the United States or
any of their political subdivisions or the District of Columbia, in
connection with the financing of the cost of construction or acquisition
of a principal facility or a part of a principal facility;
. security interests by reason of deposits to qualify us or a restricted
subsidiary to conduct business, to maintain self-insurance, or to comply
with law;
. the extension of any security interest existing on the date of the
indenture on a principal facility to additions, extensions or improvements
to the principal facility and not as a result of borrowing money or the
securing of indebtedness incurred after the date of the indenture; and
. any extension, renewal or refunding, or successive extensions, renewals or
refundings, in whole or in part of by secured debt secured by any security
interest listed to above, provided that the principal amount of the
secured debt does not exceed the principal amount outstanding immediately
prior to the extension, renewal or refunding and that the security
interest securing the secured debt is limited to the property which,
immediately prior to the extension, renewal or reducing, secured the
secured debt and additions to the property.
For purposes of the indenture, our "principal facilities" are our manufacturing
plants, warehouses, office buildings or parcels of real property owned by us or
any of our restricted subsidiaries, provided each plant, warehouse, office
building or parcel of real property has a gross book value, without deduction
for any depreciation reserves, in excess of 2% of consolidated net tangible
assets other than any facility which is determined by our board of directors to
not be of material importance. For purposes of the indenture, our consolidated
net tangible assets are the total amount of assets which would be included on
our consolidated balance sheet under generally accepted accounting principles
after deducting all short-term liabilities and liability items, except for
indebtedness payable more than one year from the date of incurrence and all
goodwill, trade names, trademarks, patents, unamortized debt discount,
unamortized expense incurred in the issuance of debt and other like intangibles
except for prepaid royalties.
In addition to the foregoing, we and our restricted subsidiaries may create,
incur, assume or guarantee secured debt, without equally and ratably securing
the debt securities, if and only to the extent that, the sum of
. the amount of secured debt entered into after the date of the indenture,
other than secured debt permitted as listed in the preceding paragraph,
plus
. the aggregate value of sale and leaseback transactions entered into after
the date of the indenture, other than sale and leaseback transactions
permitted under the second bullet point under "Restrictions on sale and
leaseback transactions,"
does not exceed 5% of our consolidated net tangible assets.
For purposes of the indenture, our "restricted subsidiaries" are those
corporations in which we own voting securities entitling us to elect a majority
of the directors and which are either designated as restricted subsidiaries in
accordance with the indenture or:
. existed as such on the date of the indenture or is the successor to, or
owns, any equity interest in, a corporation which so existed;
. has its principal business and assets in the United States;
. the business is other than the obtaining of financing in capital markets
outside the United States or the financing of the acquisition or
disposition of real or personal property or dealing in real property for
residential or office building purposes; and
10
. does not have assets substantially all of which consist of securities of
one or more corporations which are not restricted subsidiaries.
Restrictions on sale and leaseback transactions. The indenture provides that
we will not, and will not permit any restricted subsidiary to, enter into any
sale or transfer of any principal facility which has been in operation, use or
commercial production for more than 120 days prior to the sale or transfer, or
which, in the case of a principal facility which is a parcel of real property
other than a manufacturing plant, warehouse or office building, has been owned
by us or one of our restricted subsidiaries for more than 120 days prior to the
sale or transfer, if the sale or transfer is made with the intention of
leasing, or as part of an arrangement involving the lease, of the principal
facility to us or one of our restricted subsidiaries, except a lease for a
period not exceeding 36 months or that secures or relates to obligations issued
by the United States, or any state, in connection with the financing of the
cost of construction or acquisition of the principal facility ("sale and
leaseback transaction"), unless:
. we or our restricted subsidiary would be entitled to incur secured debt
permitted by the indenture only by reason of the provision described in
the second paragraph under the sub-heading "Restrictions on the creation
of secured debt" equal in amount to the value of the sale and leaseback
transaction without equally and ratably securing the debt securities; or
. we or our restricted subsidiary apply within one year, or commit to apply
within one year, an amount equal to the net proceeds of the property sold
pursuant to the sale and leaseback transaction to:
--the acquisition, construction or improvement of properties which are or will
be a principal facility, or
--the optional redemption of debt securities or to the repayment of other
superior indebtedness of us or of any restricted subsidiary.
For purposes of the indenture, "superior indebtedness" means any of our
obligations, or the obligations of any of our restricted subsidiaries, which:
. when created, are payable at least one year later;
. should be shown on our consolidated balance sheet in accordance with
generally accepted accounting principles; and
. are not subordinate and junior in right of payment to the prior payment of
our debt securities.
Instead of applying all or any part of the proceeds of a sale and leaseback
transaction to the redemption of debt securities, we may deliver to the
trustee, within one year of the transfer, debt securities for cancellation and
thereby reduce the amount to be applied to the redemption of debt securities by
an amount equivalent to the aggregate principal amount of the debt securities
delivered. Debt securities so redeemed or delivered will not be used as credits
against any mandatory sinking fund payments.
Restrictions on transfers of principal facilities. The indenture provides
that we will not, nor will we permit any restricted subsidiary to, transfer any
principal facility to any of our subsidiaries which is not a restricted
subsidiary unless we or it apply within one year, or commit to apply within one
year, an amount equal to the fair value of the principal facility at the time
of the transfer:
. to the acquisition, construction, development or improvement of a
principal facility or part of a principal facility; or
. to the optional redemption of debt securities or to the repayment of our
superior indebtedness or the superior indebtedness of any of our
restricted subsidiaries.
In lieu of applying all or any part of the amount to the redemption of
securities, we may deliver to the trustee securities for cancellation and
thereby reduce the amount to be applied to the redemption of securities by the
principal amount of the securities so delivered. Securities so redeemed or
delivered will not be used as credits against any mandatory sinking fund
payments.
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Restrictions on mergers, consolidations and transfers of assets. The
indenture provides that we will not consolidate or merge into or transfer or
lease all or substantially all of our assets to another person unless;
. in the case of a merger, we are the surviving corporation in the merger; or
. the person into which we are merged or which acquires all or substantially
all of our assets is a corporation organized under the laws of the United
States, any state or the District of Columbia, and assumes all of our
obligations relating to the securities and the indenture, and immediately
after the transaction no default exists.
Upon any the consolidation, merger or transfer, the successor corporation
will be substituted for us under the indenture. The successor corporation may
then exercise all of our powers and rights under the indenture, and we will be
released from all of our liabilities and obligations in respect of the
securities and the indenture. In the event we lease all or substantially all of
our assets, the lessee corporation will be our successor and may exercise all
of our powers and rights under the indenture but we will not be released from
our obligations to pay the principal of and interest on the securities.
Events of default
Unless otherwise specified in the applicable prospectus supplement, an
"event of default" with respect to the debt securities of any series is defined
in the indenture as being:
. default in payment of any interest on, or any additional amounts payable
with respect to any interest on, any of the debt securities of that series
or any coupon relating to the debt securities when due, and continuance of
the default for a period of 30 days;
. default in payment of any principal of or premium, if any, on, or any
additional amounts payable with respect to any principal of or premium, if
any, on, any of the debt securities of that series when due, whether at
maturity, upon redemption, upon repayment or repurchase at the option of
the holder or otherwise;
. default in the deposit of any sinking fund payment or payment under any
analogous provision when due with respect to any of the debt securities of
that series;
. default by us in the performance, or breach, of any other covenant or
warranty in the indenture or in any debt security of that series, other
than a covenant or warranty included in the indenture solely for the
benefit of a series of debt securities other than that series, and
continuance of that default or breach, without that default or breach
having been cured or waived, for a period of 60 days after the trustee or
the holders of not less than 25% in aggregate principal amount of the debt
securities of that series then outstanding give notice to us, or in the
case of notice by the holders, to us and the trustee, specifying the
default or breach;
. our failure to make any payment when due, including any applicable grace
period, relating to our indebtedness which is in an amount in excess of
$50,000,000, or our default with respect to any of our indebtedness that
results in acceleration of indebtedness which is in an amount in excess of
$50,000,000;
. specified events of bankruptcy, insolvency or reorganization with respect
to us or any of our restricted subsidiaries; or
. any other event of default established for the debt securities of that
series.
No event of default with respect to any particular series of debt securities
necessarily constitutes an event of default with respect to any other series of
debt securities. The indenture provides that, within 90 days after the
occurrence of any default with respect to the debt securities of any series,
the trustee will mail to all holders of the debt securities of that series
notice of that default, unless that default has been cured or waived. However,
the
12
indenture provides that the trustee may withhold notice of a default with
respect to the debt securities of that series, except a default in payment of
principal, premium, if any, interest, if any, additional amounts, if any, or
sinking fund payments, if any, if the trustee considers it in the best interest
of the holders to do so. In the case of a default in the performance or the
breach of any covenant or warranty in the indenture with respect to debt
securities or that series, no notice will be given until at least 30 days after
the occurrence of the default or breach. As used in this paragraph, the term
"default" means any event which is, or after notice or lapse of time or both
would become, an event of default with respect to the debt securities of any
series.
The indenture provides that if an event of default, other than an event of
default relating to events of bankruptcy, insolvency or reorganization with
respect to any series of debt securities occurs and is continuing, either the
trustee or the holders of at least 25% in principal amount of the debt
securities of that series then outstanding may declare the principal of, or if
debt securities of that series are original issue discount securities, the
lesser amount as may be specified in the terms of that series of debt
securities, and accrued and unpaid interest, if any, on all the debt securities
of that series to be due and payable immediately. The indenture also provides
that if an event of default relating to events of bankruptcy, insolvency or
reorganization with respect to any series of debt securities occurs, the
principal of, or if debt securities of that series are original issue discount
securities, the lesser amount as may be specified in the terms of that series
of debt securities, and accrued and unpaid interest, if any, on all the debt
securities of that series will automatically become and be immediately due and
payable without any declaration or other action on the part of the trustee or
any holder of the debt securities of that series. However, upon specified
conditions, the holders of a majority in principal amount of the debt
securities of a series then outstanding may rescind and annul an acceleration
of the debt securities of that series and its consequences.
Subject to the provisions of the Trust Indenture Act requiring the trustee,
during the continuance of an event of default under the indenture, to act with
the requisite standard of care, the trustee is under no obligation to exercise
any of its rights or powers under the indenture at the request or direction of
any of the holders of debt securities of any series unless those holders have
offered the trustee reasonable indemnity.
Subject to this requirement, holders of a majority in principal amount of
the outstanding debt securities of any series issued under the indenture have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the trustee under the indenture with respect to that
series. The indenture requires the annual filing by us with the trustee of a
certificate which states whether we are in default under the terms of the
indenture.
Notwithstanding any other provision of the indenture, the holder of a debt
security will have the right, which is absolute and unconditional, to receive
payment of the principal of and premium, if any, and interest, if any, on that
debt security on the respective due dates for those payments and to institute
suit for the enforcement of those payments, and this right will not be impaired
without the consent of the holder.
Modification and waivers
The indenture permits us and the trustee, with the consent of the holders of
a majority in principal amount of the outstanding debt securities of each
series issued under the indenture and affected by a modification or amendment,
to modify or amend any of the provisions of the indenture or of the debt
securities of the applicable series or the rights of the holders of the debt
securities of that series under the indenture. However, no modification or
amendment may, without the consent of the holder of each outstanding debt
security issued under the indenture affected by the modification or amendment,
among other things:
. change the stated maturity of the principal of, or premium, if any, or any
installment of interest, if any, on or any additional amounts, if any,
with respect to any debt securities issued under the indenture;
13
. reduce the principal of or any premium on any debt securities or reduce
the rate of interest on or the redemption or repurchase price of any debt
security, or any additional amounts with respect to any debt securities,
or change our obligation to pay additional amounts;
. reduce the amount of principal of any original issue discount securities
that would be due and payable upon an acceleration of the maturity of the
debt security;
. adversely affect any right of repayment or repurchase at the option of any
holder;
. change any place where or the currency in which the principal of, any
premium or interest on, or any additional amounts with respect to, any
debt securities are payable;
. impair the holder's right to institute suit to enforce the payment of any
debt securities on or after their stated maturity or, in the case of
redemption, on or after the redemption date; or
. reduce the percentage of debt securities of any series issued under the
indenture whose holders must consent to any modification or amendment or
any waiver of compliance with specific provisions of the indenture or
specified defaults under the indenture and their consequences.
The indenture also contains provisions permitting us and the trustee,
without the consent of the holders of any debt securities issued under the
indenture, to modify or amend the indenture, among other things:
. to evidence the succession of another person to us under the indenture and
the assumption of our obligations contained in the indenture and the debt
securities;
. to add to our covenants for the benefit of the holders of all or any
series of debt securities issued under the indenture or to surrender any
right or power conferred upon us in the indenture with respect to all or
any series of debt securities issued under the indenture;
. to add to or change any provisions of the indenture to facilitate the
issuance of bearer securities;
. to establish the form or terms of debt securities of any series and any
related coupons, including, deletions from or additions or changes to the
indenture in connection with the modification or amendment, so long as
those deletions, additions and changes are not applicable to any other
series of debt securities then outstanding;
. to cure any ambiguity or correct or supplement any provision in the
indenture which may be defective or inconsistent with other provisions in
the indenture, or to make any other provisions with respect to matters or
questions arising under the indenture which will not adversely affect the
interests of the holders of the debt securities of any series then
outstanding;
. to add any additional events of default with respect to all or any series
of debt securities; or
. to amend or supplement any provision contained in the indenture, provided
that the amendment or supplement does not apply to any outstanding debt
securities issued before the date of the amendment or supplement that is
entitled to the benefits of that provision.
The holders of a majority in aggregate principal amount of the outstanding
debt securities of any series may waive our compliance with some of the
restrictive provisions of the indenture, which may include covenants, if any,
which are specified in the applicable prospectus supplement. The holders of a
majority in aggregate principal amount of the outstanding debt securities of
any series may, on behalf of all holders of debt securities of that series,
waive any past default under the indenture with respect to debt securities of
that series and its consequences, except a default in the payment of the
principal of, or premium, if any, or interest, if any, on debt securities of
that series or a default in respect of a covenant or provision which cannot be
modified or amended without the consent of the holder of each outstanding debt
security of the affected series.
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Discharge, defeasance and covenant defeasance
Unless otherwise provided in the applicable prospectus supplement, upon our
direction, the indenture will cease to be of further effect with respect to any
series of debt securities issued under the indenture specified by us, subject
to the survival of specified provisions of the indenture, when:
. either
--all outstanding debt securities of that series and, in the case of bearer
securities, all related coupons, have been delivered to the trustee for
cancellation, subject to exceptions, or
--all debt securities of that series and, if applicable, any related coupons
have become due and payable or will become due and payable at their
stated maturity within one year or are to be called for redemption
within one year and we have deposited with the trustee, in trust, funds
in United States dollars, in the foreign currency in which the debt
securities of that series are payable, or direct or indirect obligations
of the United States or the government which issued the applicable
foreign currency ("government obligations") in an amount sufficient to
pay the entire indebtedness on the debt securities of that series in
respect of principal, premium, if any, and interest, if any, and, to the
extent that the debt securities of that series provide for the payment
of additional amounts and the amount of any additional amounts which are
or will be payable is at the time of deposit reasonably determinable by
us, in the exercise of our sole discretion, those additional amounts, to
the date of the deposit, if the debt securities of that series have
become due and payable, or to the maturity or redemption date of the
debt securities of that series, as the case may be;
. we have paid all other sums payable under the indenture with respect to
the debt securities of that series; and
. the trustee has received an officers' certificate and an opinion of
counsel called for by the indenture.
If the debt securities of any series provide for the payment of additional
amounts, we will remain obligated, following the deposit described above, to
pay additional amounts on those debt securities to the extent that they exceed
the amount deposited in respect of those additional amounts as described above.
Unless otherwise provided in the applicable prospectus supplement, we may
elect with respect to any series of debt securities either
. to defease and be discharged from all of our obligations with respect to
that series of debt securities ("defeasance"), except for, among other
things,
--the obligation to pay additional amounts with respect to payments on that
series of debt securities to the extent that those additional amounts
exceed the amount deposited in respect of those amounts as provided
below,
--the obligation to register the transfer or exchange of those debt securities,
--the obligation to replace temporary or mutilated, destroyed, lost or stolen
debt securities,
--the obligation to maintain an office or agency in respect of that series of
debt securities,
--the obligation to hold moneys for payment in trust, and
--the obligation, if applicable, to repurchase or repay debt securities of
that series at the option of the holders in accordance with their terms,
or
. to be released from our obligations with respect to the debt securities of
the series under specified covenants in the indenture including those
described under the heading "Restrictive covenants" and, if applicable,
other covenants as may be specified in the applicable prospectus
supplement, and any omission to comply with those obligations will not
constitute a default or an event of default with respect to that series of
debt securities ("covenant defeasance"),
15
in either case upon the irrevocable deposit with the trustee, or other
qualifying trustee, in trust for that purpose, of an amount in United States
dollars or in the foreign currency in which those debt securities are payable
at stated maturity or, if applicable, upon redemption, and/or government
obligations which, through the payment of principal and interest in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of and any premium and any interest on, and, to the extent that the
debt securities of that series provide for the payment of additional amounts
and the amount of the additional amounts which are or will be payable is at the
time of deposit reasonably determinable by us, in the exercise of our sole
discretion, the additional amounts with respect to, that series of debt
securities, and any mandatory sinking fund or analogous payments on that series
of debt securities, on the due dates for those payments.
The defeasance or covenant defeasance described above will only be effective
if, among other things:
. it will not result in a breach or violation of, or constitute a default
under, the indenture or any other material agreement or instrument to
which we are a party or are bound;
. in the case of defeasance, we will have delivered to the trustee an
opinion of independent counsel confirming that
--we have received from or there has been published by the Internal Revenue
Service a ruling, or
--since the date of the indenture there has been a change in applicable federal
income tax law,
in either case to the effect that, and based on this ruling or change the
opinion of counsel will confirm that, the holders of the debt securities
of the applicable series will not recognize income, gain or loss for
federal income tax purposes as a result of the defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if the defeasance had not
occurred;
. in the case of covenant defeasance, we will have delivered to the trustee
an opinion of independent counsel to the effect that the holders of the
debt securities of that series will not recognize income, gain or loss for
federal income tax purposes as a result of the covenant defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if the covenant
defeasance had not occurred;
. if the cash and/or government obligations deposited are sufficient to pay
the principal of, and premium, if any, and interest and additional
amounts, if any, with respect to the debt securities of that series
provided those debt securities are redeemed on a particular redemption
date, we will have given the trustee irrevocable instructions to redeem
those debt securities on that date; and
. no event of default or event which with notice or lapse of time or both
would become an event of default with respect to debt securities of that
series will have occurred and be continuing on the date of the deposit
into trust; and, solely in the case of defeasance, no event of default
arising from specified events of bankruptcy, insolvency or reorganization
with respect to us or any restricted subsidiary or event which with notice
or lapse of time or both would become an event of default will have
occurred and be continuing during the period through and including the
91st day after the date of the deposit into trust.
Unless otherwise provided in the applicable prospectus supplement, if after
we have deposited funds and/or government obligations to effect defeasance or
covenant defeasance with respect to debt securities of any series,
. the holder of a debt security of that series is entitled to, and does,
elect under the indenture or the terms of that debt security to receive
payment in a currency other than the currency in which the deposit has
been made, or
. a conversion event, as defined below, occurs in respect of the foreign
currency in which the deposit has been made,
the indebtedness represented by that debt security will be deemed to have been,
and will be, fully discharged and satisfied through the payment of the
principal of and premium, if any, and interest, if any, on that debt security as
16
it becomes due out of the proceeds yielded by converting the amount deposited
in respect of that debt security into the currency in which that debt security
becomes payable as a result of the election or conversion event based on, in
the case of payments made under the first bullet above, the applicable market
exchange rate for the foreign currency in effect on the second business day
before the payment date, or, with respect to a conversion event, the applicable
market exchange rate for the foreign currency in effect, as nearly as feasible,
at the time of the conversion event.
For purposes of the indenture, a "conversion event" is the cessation of the
use of a foreign currency both by the government of the country or the
confederation which issued the foreign currency and for the settlement of
transactions by a central bank or other public institutions of or within the
international banking community, or any currency unit or composite currency for
the purposes for which it was established.
In the event we effect covenant defeasance with respect to debt securities
of any series and those debt securities are declared due and payable because of
the occurrence of any event of default other than an event of default with
respect to the covenants as to which covenant defeasance has been effected,
which would no longer be applicable to the debt securities of that series after
covenant defeasance, the amount of monies and/or government obligations
deposited with the trustee to effect covenant defeasance may not be sufficient
to pay amounts due on the debt securities of that series at the time of any
acceleration resulting from that event of default. However, we would remain
liable to make payment of those amounts due at the time of acceleration.
The applicable prospectus supplement may further describe the provisions, if
any, permitting or restricting defeasance or covenant defeasance with respect
to the debt securities of a particular series.
Regarding the trustee
We and our subsidiaries may maintain deposit accounts and conduct other
banking transactions with the trustee or its affiliates in the ordinary course
of business, and the trustee and its affiliates may from time to time in the
future provide us with banking and financial services in the ordinary course of
their business.
PLAN OF DISTRIBUTION
The company may sell securities through underwriters or agents or directly
to other purchasers, including broker-dealers as principals. The prospectus
supplement with respect to the securities sets forth the terms of the offering
of the securities, including the name or names of any underwriters and the
respective amount of the securities underwritten, the names of any agents
involved in the offer or sale of the securities, the purchase price of the
securities and the proceeds to the company from such sale, any underwriting
discounts and other items constituting underwriters' compensation, any
commissions payable to agents, any initial public offering price, and any
discounts or concessions allowed or reallowed or paid to dealers. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
If the securities are sold through underwriters, they will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
securities may be offered to the public either (i) through underwriting
syndicates or (ii) directly by one or more firms acting as underwriters. The
underwriter or underwriters with respect to a particular underwritten offering
of securities are named in the prospectus supplement relating to such offering,
and if an underwriting syndicate is used, the managing underwriter or
underwriters are set forth on the cover of such prospectus supplement. Unless
otherwise set forth in the prospectus supplement, the obligations of the
underwriters to purchase the securities will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all the securities
if any are purchased.
17
If broker-dealers are used in the sale, the company will sell the securities
to the dealers as principals. The dealers may then resell the securities to the
public at varying prices to be determined by such dealers at the time of resale.
The securities may be sold directly by the company or through agents
designated by the company from time to time. Unless otherwise indicated in the
prospectus supplement, any such agent is acting on a best efforts basis for the
period of its appointment. As one of the means of direct issuance of the
securities, the company may, through an agent, conduct an electronic "dutch
auction" of the securities among potential purchasers who are eligible to
participate in such auction, as more fully described in the prospectus
supplement.
In the event that the securities are not listed on a national securities
exchange, certain broker-dealers may make a market in the securities, but will
not be obligated to do so and may discontinue any market making at any time
without notice. No assurance can be given that any broker-dealer will make a
market in the securities or as to the liquidity of the trading market for the
securities, whether or not the securities are listed on a national securities
exchange. The prospectus supplement with respect to the securities will state,
if known, whether or not any broker-dealer intends to make a market in such
securities. If no such determination has been made, the prospectus supplement
will so state.
If so indicated in the prospectus supplement, the company will authorize
agents, underwriters or broker-dealers to solicit offers from certain types of
institutions to purchase securities from the company at the public offering
price set forth in the prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
Agents, underwriters and broker-dealers may be entitled under agreements
entered into with the company to indemnification by the company against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribution with respect to payments which the agents,
underwriters or broker-dealers may be required to make in respect thereof.
Agents, underwriters and broker-dealers may be customers of, engage in
transactions with, or perform services for the company in the ordinary course
of business.
LEGAL MATTERS
The validity of the debt securities issued hereunder will be passed upon for
us by our Senior Vice President and General Counsel, Thomas J. Sabatino, Jr.
Mr. Sabatino owns shares of, and options on, our common stock, both directly
and as a participant in various stock and employee benefit plans. See our proxy
statement for details.
INDEPENDENT ACCOUNTANTS
The financial statements of Baxter International Inc. incorporated in this
prospectus by reference to Baxter's Annual Report on Form 10-K for the year
ended December 31, 2001, have been audited by PricewaterhouseCoopers LLP,
independent accountants, as stated in their report appearing therein.
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$500,000,000
[LOGO] Baxter
Baxter International Inc.
5.25% Notes due 2007
-------------
PROSPECTUS SUPPLEMENT
April 23, 2002
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Deutsche Bank Securities
Salomon Smith Barney
Banc of America Securities LLC
Banc One Capital Markets, Inc.
UBS Warburg
ABN AMRO Incorporated
TD Securities
Wachovia Securities
================================================================================