<PAGE> 1
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED OCTOBER 11, 1996
$300,000,000
ROHM AND HAAS COMPANY
MEDIUM-TERM NOTES
DUE FROM 9 MONTHS TO 30 YEARS FROM DATE OF ISSUE
------------------------
Rohm and Haas Company (the "Company") may offer from time to time up to
$300,000,000 aggregate principal amount of its Medium-Term Notes (the "Notes")
due from 9 months to 30 years from the date of issue, as selected by the
purchaser and agreed to by the Company. The Company will sell the Notes through
Goldman, Sachs & Co., Citicorp Securities, Inc. and J.P. Morgan Securities Inc.
as agents (the "Agents"). The specific interest rates, interest rate bases,
maturities and other terms of the Notes will be set forth in the related Pricing
Supplement to this Prospectus Supplement. The Notes offered hereby will be
issued as either Book Entry Notes or Certificated Registered Notes (each, as
defined below) in a minimum denomination of $1,000 and integral multiples
thereof, unless otherwise specified in the applicable Pricing Supplement. See
"Description of Notes."
Interest on the Fixed Rate Notes (as defined below) will be payable on each
April 1 and October 1 and at maturity, unless otherwise specified in the
applicable Pricing Supplement. Interest on the Floating Rate Notes (as defined
below) will be payable on the dates specified in the applicable Pricing
Supplement.
Unless a Redemption Commencement Date (as defined below) is specified in
the applicable Pricing Supplement, the Notes will not be redeemable prior to
their Stated Maturity (as defined below). If a Redemption Commencement Date is
so specified, the Notes will be redeemable at the option of the Company at any
time on or after such date as described herein. If so indicated in the
applicable Pricing Supplement, the Notes may also be subject to repayment in
whole or in part at the option of the Holders (as defined below) thereof. See
"Description of Notes."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT, ANY SUPPLEMENT HERETO, OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSION(2) COMPANY(2)(3)
------------ ------------------- -------------------------
<S> <C> <C> <C>
Per Note............................ 100% 0.125%-0.750% 99.250%-99.875%
Total............................... $300,000,000 $375,000-$2,250,000 $297,750,000-$299,625,000
</TABLE>
(1) Notes will be issued at 100% of their principal amount, unless otherwise
specified in the applicable Pricing Supplement.
(2) The Company will pay the Agents a commission of from 0.125% to 0.750% of the
principal amount of any Note, depending upon its Stated Maturity, sold
through any such Agents (or sold to any Agent as principal in circumstances
in which no other discount is payable). The Company has agreed to indemnify
each of the Agents against certain liabilities, including liabilities under
the Securities Act of 1933.
(3) Before deducting estimated expenses of $150,000 payable by the Company,
including $50,000 of estimated expenses of the Agents to be reimbursed by
the Company.
------------------------
Offers to purchase the Notes are being solicited, on a reasonable efforts
basis, from time to time by each of the Agents on behalf of the Company. The
Notes may be sold to any Agent on its own behalf at negotiated discounts. The
Company reserves the right to sell the Notes directly on its own behalf. The
Company reserves the right to withdraw, cancel or modify the offer contemplated
hereby without notice. The Company or any Agent may reject any order as a whole
or in part. See "Supplemental Plan of Distribution."
GOLDMAN, SACHS & CO.
CITICORP SECURITIES, INC.
J.P. MORGAN & CO.
------------------------
The date of this Prospectus Supplement is June 4, 1997.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES,
AND THE IMPOSITION OF A PENALTY BID, DURING AND AFTER THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "SUPPLEMENTAL PLAN OF DISTRIBUTION."
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<PAGE> 3
DESCRIPTION OF NOTES
GENERAL
The following description of the particular terms of the Notes offered
hereby (referred to in the Prospectus as "Offered Debt Securities") supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and provisions of Debt Securities set forth in the Prospectus, to
which description reference is hereby made. Unless otherwise specified in the
applicable Pricing Supplement, the Notes will have the terms described below.
Capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the Prospectus.
The Notes offered hereby will be senior, unsecured obligations of the
Company and constitute a single series for purposes of the Indenture, dated as
of April 1, 1986, supplemented by the First Supplemental Indenture, dated as of
December 15, 1988, and the Second Supplemental Indenture, dated as of May 1,
1992, (together, the "Senior Debt Indenture") between the Company and Mellon
Bank, N.A., as successor trustee to Corestates Bank, N.A., formerly the
Philadelphia National Bank (the "Trustee"). The Notes are limited in amount as
set forth on the cover page hereof; however, such limit may be increased by the
Company if in the future it determines that it may wish to sell additional
Notes. For a description of the rights of the holders of securities under the
Senior Debt Indenture, including the Notes, see "Description of Debt Securities"
in the Prospectus.
The Notes will be offered on a continuous basis. Unless previously
redeemed, a Note will mature on the date ("Stated Maturity") from 9 months to 30
years from its date of issue that is specified on the face thereof and in the
applicable Pricing Supplement or, if such Note is a Floating Rate Note and such
specified date is not a Market Day with respect to such Note, the next
succeeding Market Day (or, in the case of a LIBOR Note, if such next succeeding
Market Day falls in the next calendar month, the next preceding Market Day).
The Notes will be issuable as either Book-Entry Notes or Certificated
Registered Notes (see below). The Notes will be issued in denominations of
$1,000 and integral multiples of $1,000 in excess thereof, unless otherwise
specified in the Notes.
The Notes will be sold in individual issues of Notes having such interest
rate or interest rate basis, if any, Stated Maturity and date of original
issuance as shall be selected by the initial purchasers and agreed to by the
Company. Unless otherwise indicated in the applicable Pricing Supplement, each
Note will bear interest at a fixed rate or at a rate determined by reference to
the Commercial Paper Rate, the Prime Rate, LIBOR, the Treasury Rate, the CD Rate
or the Federal Funds Rate, as adjusted by the Spread and/or Spread Multiplier,
if any, (each such term, as defined below) applicable to such Note. See
"Description of Notes -- Interest Rate."
Unless so indicated in the applicable Pricing Supplement, the Senior Debt
Indenture and Notes do not contain any covenants other than those set forth
herein and in the Prospectus. Accordingly, the Company may, subject to such
covenants and its other obligations and restrictions, incur additional
indebtedness, pay dividends, engage in transactions with stockholders and
affiliates, make investments it deems appropriate, create liens, transfer assets
among subsidiaries and engage in sales of assets and subsidiary stock.
REDEMPTION
If a Note is to be redeemable prior to maturity, the Pricing Supplement
relating to each Note will indicate that such Note will be redeemable at the
option of the Company on a date or dates specified prior to maturity at a price
or prices set forth in the applicable Pricing Supplement, together with accrued
interest to the date of redemption. The Notes will not be subject to any sinking
fund, unless otherwise provided in the applicable Pricing Supplement. The
Company may redeem any of the Notes which are redeemable and remain outstanding
either in whole or from time to time in part, upon not less than 30 nor more
than 60 days' notice. If less than all of the Notes with like tenor and terms
are to be redeemed, the Notes to be redeemed shall be selected by the Trustee by
such method as the Trustee shall deem fair and appropriate.
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<PAGE> 4
REPAYMENT AND REPURCHASE
If a Note is to be repayable prior to maturity at the option of the holder
thereof (the "Holder"), the Pricing Supplement relating to the Note will
indicate that the Note will be repayable at the option of the Holder on a date
or dates specified prior to maturity at a price or prices set forth in the
applicable Pricing Supplement, together with accrued interest to the date of
repayment.
In order for such Note to be repaid, the Company must receive at the
corporate trust office of the Trustee in the City of Pittsburgh, Pennsylvania at
least 30 days, but not more than 60 days, prior to the specified repayment date,
(i) if the Note is a Certificated Registered Note, the Note with the form
entitled "Option to Elect Repayment" on the reverse of the Note duly completed
or (ii) if the Note is a Book-Entry Note, a telegram, telex, facsimile
transmission or letter from a member of a national securities exchange, the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company in the United States of America setting forth the name of the Holder of
the Note, the principal amount of the Note, the amount of the Note to be repaid
(which shall not be less than the minimum authorized denomination of such Note),
the certificate number or a description of the tenor and terms of the Note and a
statement that the option to elect repayment is being exercised thereby.
Exercise of the repayment option by the Holder of a Note shall be irrevocable.
The repayment option may be exercised by the Holder of a Note for less than the
entire principal amount of the Note provided that the principal amount of the
Note remaining outstanding after repayment, if any, is an authorized
denomination. The Trustee will refer all questions as to the validity,
eligibility (including time of receipt) and acceptance of any Note for repayment
to the Company whose determination of such question will be final and binding.
Unless otherwise specified in the applicable Pricing Supplement, if a
Discount Note (as defined below) is to be repaid prior to its Stated Maturity,
the amount of principal due and payable with respect to such Note shall be
limited to the sum of the principal amount of such Note multiplied by the Issue
Price (expressed as a percentage of the aggregate principal amount), plus the
original issue discount accrued from the date of issue to the specified
repayment date, which accrual shall be calculated using the "interest method"
(computed in accordance with generally accepted accounting principles in effect
on the specified repayment date).
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may be held, resold or
surrendered to the Trustee for cancellation.
INTEREST RATE
Each Note will bear interest from its date of issue or from the most recent
Interest Payment Date (or, if such Note is a Floating Rate Note and the Interest
Reset Dates are daily or weekly, from the day following the most recent Regular
Record Date) to which interest on such Note has been paid or duly provided for
at the fixed rate per annum, or at the rate per annum determined pursuant to the
interest rate basis, as stated therein and in the applicable Pricing Supplement
until the principal thereof is paid or made available for payment. Interest will
be payable on each Interest Payment Date and at Maturity as specified below
under "Payment of Principal and Interest."
Each Note will bear interest at either a fixed rate (a "Fixed Rate Note")
or a variable rate determined by reference to the interest rate basis (the
"Interest Rate Basis") as specified on the face thereof and in the applicable
Pricing Supplement (a "Floating Rate Note"), which may be adjusted by adding or
subtracting the Spread or multiplying by the Spread Multiplier. A Floating Rate
Note may also have either or both of the following: (a) a maximum numerical
interest rate limitation, or ceiling, on the rate of interest which may accrue
during any interest period (a "Maximum Rate"); and (b) a minimum numerical
interest rate limitation, or floor, on the rate of interest which may accrue
during any interest period (a "Minimum Rate"). The "Spread" is the number of
basis points specified in the applicable Pricing Supplement as being applicable
to the interest rate for such Note, and the "Spread Multiplier" is the
percentage specified in the applicable Pricing Supplement as being applicable to
the interest rate for such Note. "Market Day" means (a) with respect to any Note
(other than any LIBOR Note), any Business Day, and (b) with respect to any LIBOR
Note, any such Business Day on which
S-4
<PAGE> 5
dealings in deposits in U.S. dollars are transacted in the London interbank
market. "Index Maturity" means, with respect to a Floating Rate Note, the period
to maturity of the instrument or obligation from which the Interest Rate Basis
is derived, as specified in the applicable Pricing Supplement. Unless otherwise
provided in the applicable Pricing Supplement, the Trustee will be the
calculation agent (the "Calculation Agent") with respect to the Floating Rate
Notes.
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Fixed Rate Note.
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an Interest Rate Basis for such Floating Rate Note. The Interest Rate
Basis for each Floating Rate Note will be: (a) the Commercial Paper Rate, in
which case such Note will be a Commercial Paper Rate Note; (b) the Prime Rate,
in which case such Note will be a Prime Rate Note; (c) LIBOR, in which case such
Note will be a LIBOR Note; (d) the Treasury Rate, in which case such Note will
be a Treasury Rate Note; (e) the CD Rate, in which case such Note will be a CD
Rate Note; (f) the Federal Funds Rate, in which case such Note will be a Federal
Funds Rate Note; or (g) such other Interest Rate Basis as is set forth in such
Pricing Supplement. The applicable Pricing Supplement for a Floating Rate Note
will specify, among other things, the Interest Rate Basis and, if applicable,
the Calculation Agent, the Index Maturity, the Spread or Spread Multiplier, the
Maximum Rate, the Minimum Rate, the Initial Interest Rate, the Interest Payment
Dates, the Regular Record Dates, the Calculation Date, the Interest
Determination Date and the Interest Reset Date with respect to such Note.
The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually or annually (each an "Interest Reset
Date"), as specified in the applicable Pricing Supplement. The Interest Reset
Date will be, in the case of Floating Rate Notes which reset daily, each Market
Day; in the case of Floating Rate Notes which reset weekly, the Wednesday of
each week; in the case of Treasury Rate Notes which reset weekly, the Tuesday of
each week; in the case of Floating Rate Notes which reset monthly, the third
Wednesday of each month; in the case of Floating Rate Notes which reset
quarterly, the third Wednesday of March, June, September and December; in the
case of Floating Rate Notes which reset semi-annually, the third Wednesday of
the two months of each year specified in the applicable Pricing Supplement; and
in the case of Floating Rate Notes which reset annually, the third Wednesday of
the month of each year specified in the applicable Pricing Supplement; provided,
however, that (a) the interest rate in effect from the date of issue to the
first Interest Reset Date with respect to a Floating Rate Note will be the
Initial Interest Rate (as set forth in the applicable Pricing Supplement) and
(b) the interest rate in effect for the ten days immediately prior to the Stated
Maturity of a Note will be that in effect on the tenth day preceding such Stated
Maturity. If any Interest Reset Date for any Floating Rate Note would otherwise
be a day that is not a Market Day with respect to such Floating Rate Note, the
Interest Reset Date for such Floating Rate Note will be postponed to the next
day that is a Market Day with respect to such Floating Rate Note, except that in
the case of a LIBOR Note, if such Market Day is in the next succeeding calendar
month, such Interest Reset Date will be the immediately preceding Market Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination Date"),
for a Prime Rate Note (the "Prime Rate Interest Determination Date"), for a
LIBOR Note (the "LIBOR Interest Determination Date"), for a CD Rate Note (the
"CD Rate Interest Determination Date") and for a Federal Funds Rate Note (the
"Federal Funds Rate Interest Determination Date") will be the second Market Day
preceding such Interest Reset Date. The Interest Determination Date pertaining
to an Interest Reset Date for a Treasury Rate Note (the "Treasury Interest
Determination Date") will be the day of the week in which such Interest Reset
Date falls on which Treasury bills would normally be auctioned. Treasury bills
are usually sold at auction on the Monday of each week, unless that day is a
legal holiday, in which case the auction is usually held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Treasury Interest Determination Date pertaining to the
Interest Reset Date occurring in the next succeeding week. If an auction date
shall fall on any Interest Reset Date for a Treasury Rate Note, then such
Interest Reset Date will instead be the first Market Day immediately following
such auction date.
S-5
<PAGE> 6
All percentages resulting from any calculations referred to in this
Prospectus Supplement will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point (e.g., 9.876545% (or .09876545) being
rounded to 9.87655% (or .0987655)), and all amounts used in or resulting from
such calculations will be rounded to the nearest cent (with one-half cent being
rounded upwards).
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if determined, the
interest rate which will become effective on the next Interest Reset Date. The
Calculation Agent's determination of any interest rate will be final and binding
in the absence of manifest error.
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any), and will be payable on the dates, specified on the
face of the Commercial Paper Rate Note and in the applicable Pricing Supplement.
The "Calculation Date" pertaining to a Commercial Paper Interest Determination
Date will be the tenth day after such Commercial Paper Interest Determination
Date or, if any such day is not a Market Day, the next succeeding Market Day.
"Commercial Paper Rate" means, with respect to any Interest Reset Date, the
Money Market Yield (calculated as described below) of the per annum rate (quoted
on a bank discount basis) for the relevant Commercial Paper Interest
Determination Date for commercial paper having the specified Index Maturity as
published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates" or any successor
publication of the Board of Governors of the Federal Reserve System
("H.15(519)") under the heading "Commercial Paper." In the event that such rate
is not published prior to 3:00 P.M., New York City time, on the relevant
Calculation Date, then the Commercial Paper Rate shall be the Money Market Yield
of the rate on such Commercial Paper Interest Determination Date for commercial
paper of the specified Index Maturity as published by the Federal Reserve Bank
of New York in its daily statistical release, "Composite 3:30 p.m. Quotations
for U.S. Government Securities" or any Successor Publication published by the
Federal Reserve Bank of New York ("Composite Quotations") under the heading
"Commercial Paper". If by 3:00 P.M., New York City time, on such Calculation
Date, such rate is not yet available in either H.15(519) or Composite
Quotations, then the Commercial Paper Rate with respect to such Interest Reset
Date shall be calculated by the Calculation Agent and shall be the Money Market
Yield of the arithmetic mean of the offered per annum rates (quoted on a bank
discount basis), as of 11:00 A.M., New York City time, on such Commercial Paper
Interest Determination Date, of three leading dealers of commercial paper in The
City of New York selected by the Calculation Agent for commercial paper of the
specified Index Maturity placed for an industrial issuer whose bond rating is
"AA," or the equivalent, from a nationally recognized rating agency; provided,
however, that if fewer than three dealers selected as aforesaid by the
Calculation Agent are quoting as mentioned in this sentence, the Commercial
Paper Rate with respect to such Interest Reset Date will be the Commercial Paper
Rate in effect on such Commercial Paper Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
Money Market Yield = 100 X 360 X D
-------------
360 - (D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period from the Interest Reset Date to but excluding the day that
numerically corresponds to such Interest Reset Date (or, if there is not any
such numerically corresponding day, the last day) in the calendar month that is
the number of months corresponding to the specified Index Maturity after the
month in which such Interest Reset Date falls.
S-6
<PAGE> 7
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any),
and will be payable on the dates, specified on the face of the Prime Rate Note
and in the applicable Pricing Supplement. The "Calculation Date" pertaining to a
Prime Rate Interest Determination Date will be the tenth day after such Prime
Rate Interest Determination Date or, if any such day is not a Market Day, the
next succeeding Market Day.
"Prime Rate" means, with respect to any Interest Reset Date, the rate set
forth in H.15(519) for the relevant Prime Rate Interest Determination Date
opposite the caption "Bank Prime Loan". If such rate is not yet published by
9:00 A.M., New York City time, on the Calculation Date, the Prime Rate for such
Prime Rate Interest Determination Date will be the arithmetic mean of the rates
of interest publicly announced by each bank that appears on the display
designated as page "USPRIME1" on the Reuters Monitor Money Rate Service (or such
other page as may replace the USPRIME1 page on such service for the purpose of
displaying prime rates of major United States banks) (the "Reuters Screen
USPRIME1 Page") as such bank's prime rate or base lending rate as in effect for
such Prime Rate Interest Determination Date as quoted on the Reuters Screen
USPRIME1 Page on such Prime Rate Interest Determination Date, or, if fewer than
four such rates appear on the Reuters Screen USPRIME1 Page for such Interest
Determination Date, the Prime Rate shall be the arithmetic mean of the rate
announced as a prime or base rate for commercial loans quoted on the basis of
the actual number of days in the year divided by a 360-day year as of the close
of business on each Prime Rate Interest Determination Date by three major money
center banks in The City of New York selected by the Calculation Agent from
which quotations are requested. If fewer than three quotations are provided, the
Prime Rate will be determined as the arithmetic mean of the announced prime
rates quoted in The City of New York on the relevant Prime Rate Interest
Determination Date by three substitute banks or trust companies organized and
doing business under the laws of the United States, or any state thereof, having
total equity capital of at least U.S. $500,000,000 and being subject to
supervision or examination by federal or state authority, selected by the
Calculation Agent to quote such rate or rates; provided, however, that if the
banks or trust companies selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, the Prime Rate with respect to such Prime
Rate Interest Reset Date will be the Prime Rate in effect on such Prime Rate
Interest Determination Date.
LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any), and will be
payable on the dates, specified on the face of the LIBOR Note and in the
applicable Pricing Supplement.
LIBOR with respect to any Interest Reset Date will be determined by the
Calculation Agent in accordance with the following provisions:
(i) LIBOR will be, as specified in the applicable LIBOR Note, either
(a) the arithmetic mean of the offered rates for deposits in U.S. dollars
having the specified Index Maturity designated in such LIBOR Note, that
appear on the Reuters Screen LIBO Page as of 11:00 A.M., London time, on
such LIBOR Interest Determination Date, if at least two such offered rates
appear on the Reuters Screen LIBO Page ("LIBOR Reuters"), or (b) the rate
for deposits in U.S. dollars having the Index Maturity designated in such
LIBOR Note, that appears on the Telerate Page 3750, as of 11:00 A.M.,
London time, on that LIBOR Interest Determination Date ("Libor Telerate").
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on
the Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks). "Telerate Page 3750" means the
display designated as page "3750" on the Telerate Service (or such other
page as may replace the 3750 page on that service or such other service or
services as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar
deposits). If neither LIBOR Reuters nor LIBOR Telerate is specified in such
LIBOR Note, LIBOR will be determined as if LIBOR
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<PAGE> 8
Telerate had been specified. If fewer than two offered rates appear on the
Reuters Screen LIBO Page, or if no rate appears on the Telerate Page 3750,
as applicable, LIBOR in respect of that LIBOR Interest Reset Date will be
determined as if the parties had specified the rate described in (ii)
below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates for the applicable Index Maturity appear on
the Reuters Screen LIBO Page as described in (i)(a) above, or on which no
rate appears on Telerate Page 3750, as specified in (i)(b) above, as
applicable, LIBOR will be determined on the basis of the rates at
approximately 11:00 A.M., London time, on such LIBOR Interest Determination
Date at which deposits in U.S. dollars having the specified Index Maturity
are offered to prime banks in the London interbank market by four major
banks in the London interbank market selected by the Calculation Agent
commencing on the second Market Day immediately following such LIBOR
Interest Determination Date and in a principal amount equal to an amount of
not less than U.S. $1,000,000 that in the Calculation Agent's judgment is
representative for a single transaction in such market at such time (a
"Representative Amount"). The Calculation Agent will request the principal
London office of each of such banks to provide a quotation of its rate. If
at least two such quotations are provided, LIBOR with respect to such
Interest Reset Date will be the arithmetic mean of such quotations. If
fewer than two quotations are provided, LIBOR with respect to such Interest
Reset Date will be the arithmetic mean of the rates quoted at approximately
11:00 A.M., New York City time, on such LIBOR Interest Determination Date
by three major banks in The City of New York, selected by the Calculation
Agent, for loans in U.S. dollars to leading European banks having the
specified Index Maturity commencing on the Interest Reset Date and in a
Representative Amount; provided, however, that if fewer than three banks
selected as aforesaid by the Calculation Agent are quoting as mentioned in
this sentence, LIBOR with respect to such Interest Reset Date will be the
LIBOR in effect on such LIBOR Interest Determination Date.
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any), and will be payable on the dates, specified on the face of the Treasury
Rate Note and in the applicable Pricing Supplement. The "Calculation Date" with
respect to a Treasury Interest Determination Date will be the tenth day after
such Treasury Interest Determination Date or, if any such day is not a Market
Day, the next succeeding Market Day.
"Treasury Rate" means, with respect to any Interest Reset Date, the rate
for the auction on the relevant Treasury Interest Determination Date of direct
obligations of the United States ("Treasury bills") having the specified Index
Maturity as published in H.15(519) under the heading "U.S. Government
Securities/Treasury Bills/Auction Average (Investment)" or, if not so published
by 3:00 P.M., New York City time, on the relevant Calculation Date, the auction
average rate (expressed as a bond equivalent, on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) for such auction as
otherwise announced by the United States Department of the Treasury. In the
event that the results of such auction of Treasury bills having the specified
Index Maturity are not published or reported as provided above by 3:00 P.M., New
York City time, on such Calculation Date, or, if no such auction is held during
such week, then the Treasury Rate shall be the rate set forth in H.15(519) for
the relevant Treasury Interest Determination Date for the specified Index
Maturity under the heading "U.S. Government Securities/Treasury Bills/Secondary
Market." If such rate is not so published by 3:00 P.M., New York City time, on
the relevant Calculation Date, the Treasury Rate for such Interest Reset Date
shall be calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates as of approximately 3:30 P.M., New York City time, on
such Treasury Interest Determination Date of three leading primary United States
government securities dealers in The City of New York selected by the
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if fewer than
three dealers selected as aforesaid by the Calculation Agent are quoting as
mentioned in this sentence, the Treasury
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<PAGE> 9
Rate with respect to such Interest Reset Date will be the Treasury Rate in
effect on such Treasury Interest Determination Date.
CD RATE NOTES
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any), and
will be payable on the dates, specified on the face of the CD Rate Note and in
the applicable Pricing Supplement. The "Calculation Date" pertaining to a CD
Interest Determination Date will be the tenth day after such CD Interest
Determination Date or, if such day is not a Market Day, the next succeeding
Market Day.
"CD Rate" means, with respect to any Interest Reset Date, the rate for the
relevant CD Rate Interest Determination Date for negotiable certificates of
deposit having the specified Index Maturity as published in H.15(519) under the
heading "CDs (Secondary Market)." In the event that such rate is not published
prior to 3:00 P.M., New York City time, on the relevant Calculation Date, then
the CD Rate with respect to such Interest Reset Date shall be the rate on such
CD Rate Interest Determination Date for negotiable certificates of deposit
having the specified Index Maturity as published in the Composite Quotations
under the heading "Certificates of Deposit." If by 3:00 P.M., New York City
time, on such Calculation Date such rate is not published in either H.15(519) or
Composite Quotations, the CD Rate with respect to such Interest Reset Date shall
be calculated by the Calculation Agent and shall be the arithmetic mean of the
secondary market offered rates, as of 10:00 A.M., New York City time, on such CD
Rate Interest Determination Date, of three leading nonbank dealers of negotiable
U.S. dollar certificates of deposit in The City of New York selected by the
Calculation Agent for negotiable certificates of deposit of major United States
money market banks with a remaining maturity closest to the specified Index
Maturity in a denomination of $5,000,000; provided, however, that if fewer than
three dealers selected as aforesaid by the Calculation Agent are quoting as
mentioned in this sentence, the CD Rate with respect to such Interest Reset Date
will be the CD Rate in effect on such CD Rate Interest Determination Date.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any), and will be payable on the dates, specified on the
face of the Federal Funds Rate Note and in the applicable Pricing Supplement.
The "Calculation Date" pertaining to a Federal Funds Interest Determination Date
will be the tenth day after such Federal Funds Interest Determination Date or,
if such day is not a Market Day, the next succeeding Market Day.
"Federal Funds Rate" means, with respect to any Interest Reset Date, the
rate on the relevant Federal Funds Interest Determination Date for Federal Funds
as published in H.15(519) under the heading "Federal Funds (Effective)." In the
event that such rate is not published prior to 3:00 P.M., New York City time, on
the relevant Calculation Date, then the Federal Funds Rate with respect to such
Interest Reset Date will be the rate on such Federal Funds Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not published in either H.15(519) or Composite
Quotations, the Federal Funds Rate with respect to such Interest Reset Date
shall be calculated by the Calculation Agent and shall be the arithmetic mean of
the rates, as of 11:00 A.M., New York City time, on such Federal Funds Interest
Determination Date, for the last transaction of not less than $1,000,000 in
overnight Federal Funds arranged by three leading brokers of Federal Funds
transactions in The City of New York selected by the Calculation Agent;
provided, however, that if fewer than three brokers selected as aforesaid by the
Calculation Agent are quoting as mentioned in this sentence, the Federal Funds
Rate with respect to such Interest Reset Date will be the Federal Funds Rate in
effect on such Federal Funds Interest Determination Date.
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PAYMENT OF PRINCIPAL AND INTEREST
Interest will be payable to the person in whose name a Note is registered
at the close of business on the Regular Record Date next preceding each Interest
Payment Date; provided, however, that interest payable at maturity will be
payable to the person to whom principal shall be payable. The first payment of
interest on any Note originally issued between a Regular Record Date and an
Interest Payment Date will be made on the Interest Payment Date following the
next succeeding Regular Record Date to the registered owner on such next
succeeding Regular Record Date. Unless otherwise indicated in the applicable
Pricing Supplement, the "Regular Record Date" with respect to any Floating Rate
Note shall be the date 15 calendar days prior to each Interest Payment Date,
whether or not such date shall be a Business Day, and the "Regular Record Date"
with respect to any Fixed Rate Note shall be the March 15 or September 15
immediately preceding the Interest Payment Date.
Interest will be payable, in the case of Fixed Rate Notes, on April 1 and
October 1 of each year. Interest will be payable, in the case of Floating Rate
Notes which reset daily or weekly, on the third Wednesday of March, June,
September and December of each year; in the case of Floating Rate Notes which
reset monthly, on the third Wednesday of each month or on the third Wednesday of
March, June, September and December of each year (as indicated in the applicable
Pricing Supplement); in the case of Floating Rate Notes which reset quarterly,
on the third Wednesday of March, June, September and December of each year; in
the case of Floating Rate Notes which reset semi-annually, on the third
Wednesday of the two months of each year specified in the applicable Pricing
Supplement; and in the case of Floating Rate Notes which reset annually, on the
third Wednesday of the month specified in the applicable Pricing Supplement
(each an "Interest Payment Date"), and in each case, at the Stated Maturity. If
an Interest Payment Date with respect to any Floating Rate Note would otherwise
fall on a day that is not a Market Day with respect to such Note, such Interest
Payment Date will be the next succeeding Market Day (or, in the case of a LIBOR
Note, if such day falls in the next calendar month, the next preceding Market
Day).
Payments of interest on any Fixed Rate Note or Floating Rate Note with
respect to any Interest Payment Date will include interest accrued to but
excluding such Interest Payment Date; provided, however, that if the Interest
Reset Dates with respect to any Floating Rate Note are daily or weekly, interest
payable on such Note on any Interest Payment Date, other than interest payable
on the date on which principal on any such Note is payable, will include
interest accrued to but excluding the day following the immediately preceding
Regular Record Date.
With respect to a Floating Rate Note, accrued interest from the date of
issue or from the last date to which interest has been paid is calculated by
multiplying the face amount of such Floating Rate Note by an accrued interest
factor. Such accrued interest factor is computed by adding the interest factor
calculated for each day from the date of issue, or from the last date to which
interest has been paid, to but excluding the date for which accrued interest is
being calculated. The interest factor (expressed as a decimal) for each such day
is computed by dividing the interest rate (expressed as a decimal) applicable to
such date by 360, in the case of Commercial Paper Rate Notes, Prime Rate Notes,
LIBOR Notes, CD Rate Notes or Federal Funds Rate Notes, or by the actual number
of days in the year, in the case of Treasury Rate Notes. Interest on Fixed Rate
Notes will be computed on the basis of a 360-day year of twelve 30-day months.
Any payment on any Fixed Rate Note due on any day which is not a Business
Day need not be made on such day, but may be made on the next succeeding
Business Day with the same force and effect as if made on the due date, and no
interest shall accrue for the period from and after such date. The term
"Business Day", as used herein, means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in Philadelphia,
Pennsylvania or New York, New York are authorized or obligated by law or
executive order to close.
Payment of the principal (and premium, if any) and any interest due with
respect to any Note will be paid at the corporate trust office of the Trustee in
the City of Pittsburgh, Pennsylvania; provided, however, that payment of
interest on a Certificated Registered Note shall be paid by draft payable to the
holder of
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record on the Regular Record Date and payment of principal (and premium, if any)
and any interest due with respect to such a Note at the Stated Maturity shall be
payable only upon surrender of such Note; provided, further, that all payments
of principal, premium, if any, and interest on Book-Entry Notes shall be payable
as described below under "Book-Entry Notes".
BOOK ENTRY NOTES
At the option of the Company, the Company may designate in the Pricing
Supplement that the Notes will be issued only in book entry form ("Book-Entry
Notes"). Upon issuance, all Book Entry Notes of like tenor and having the same
Issue Date may be represented by one or more Global Securities. Each Global
Security representing Book Entry Notes will be deposited with, or on behalf of,
The Depository Trust Company, as depositary (the "Depository"), located in the
Borough of Manhattan, The City of New York, and will be registered in the name
of the Depository or a nominee of the Depository. No Global Security or Global
Securities described above may be transferred except as a whole by the
Depository for such Global Security or Global Securities to a nominee of the
Depository or by a nominee of the Depository to the Depository or to another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
The Depository has advised the Company and its paying agents as follows:
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, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934. The Depository holds securities
that its participants ("Participants") deposit with the Depository. The
Depository also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry charges in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other
organizations. The Depository is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the Depository system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules
applicable to the Depository and its Participants are on file with the
Securities and Exchange Commission.
Purchases of the Book Entry Notes under the Depository's system must
be made by or through Direct Participants, which will receive a credit for
the Book Entry Notes on the Depository's records. The ownership interest of
each actual purchaser of each Security ("Beneficial Owner") is in turn to
be recorded on the Direct and Indirect Participants' record. Beneficial
Owners will not receive written confirmation from the Depository of their
purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers
of ownership interests in the Book Entry Notes 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 Book Entry Notes except as described below.
To facilitate subsequent transfers, all Book Entry Notes deposited by
Participants with the Depository are registered in the name of the
Depository's partnership nominee, Cede & Co. The deposit of Book Entry
Notes with the Depository and their registration in the name of Cede & Co.
effect no change to beneficial ownership. The Depository has no knowledge
of the actual Beneficial Owners of the Book Entry Notes. The Depository's
records reflect only the identity of the Direct Participants to whose
accounts such Book Entry Notes are credited, which may or may not be the
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Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depository to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial Owners will
be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Book Entry Notes within an issue are being redeemed, the Depository's
practice is to determine by lot the amount of the interest of each Direct
Participant in such Book Entry Note to be redeemed.
Neither the Depository nor Cede & Co. will consent or vote with
respect to Book Entry Notes. Under its usual procedures, the Depository
mails an Omnibus Proxy to the issuer as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts the Book Entry Notes are
credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Principal and interest payments on the Book Entry Notes will be made
to the Depository. The Depository's practice is to credit Direct
Participants' accounts on the payment date in accordance with their
respective holdings shown on the Depository's records unless the Depository
has reason to believe that it will not receive payment on the payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held
for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such Participant and not of the
Depository, the Trustee, or the Company or any paying agent or the
Securities Registrar, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of principal and interest to
the Depository is the responsibility of the Company or its paying agent,
disbursement of such payments to Direct Participants shall be the
responsibility of the Depository, and disbursements of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
The Depository may discontinue providing its services as securities
depository with respect to the Book Entry Notes at any time by giving
reasonable notice to the Company or its paying agent. The Company may
decide to discontinue the use of the system of book-entry transfers through
the Depository (or a successor depository).
Book-Entry Notes represented by a Global Security are exchangeable for
Certificated Registered Notes, of like tenor and of an equal aggregate principal
amount, only if (i) the Depository notifies the Company that it is unwilling or
unable to continue as Depository for such Global Security or if at any time the
Depository ceases to be a clearing agency registered under the Securities
Exchange Act of 1934 (the "Exchange Act"), and a successor Depository is not
appointed by the Company within 90 days, (ii) the Company in its sole discretion
determines that such Book-Entry Notes issued in the form of a Global Security
shall be exchangeable for Certificated Registered Notes, or (iii) the Depository
for such Global Security surrenders such Global Security in exchange in whole or
in part for individual Certificated Registered Notes of like tenor and terms in
definitive form on such terms as are acceptable to the Company and such
Depository. In any such exchange, the Company will execute and the Trustee will
authenticate and deliver individual Certificated Registered Notes in definitive
registered form in authorized denominations. Upon the exchange of a Global
Security for individual Certificated Registered Notes, such Global Security will
be canceled by the Trustee. Certificated Registered Notes issued in exchange for
a Global Security will be registered in such names and in such authorized
denominations as the Depository for such Global Security, pursuant to
instructions from its Direct Participants or Indirect Participants or otherwise,
shall instruct the Trustee. The Trustee will deliver such Certificated
Registered Notes to the persons in whose names such Certificated Registered
Notes are so registered.
Except as provided above, if a Note is designated a Book-Entry Note in the
applicable Pricing Supplement, owners of beneficial interests in such Book-Entry
Note will not be entitled to receive physical
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delivery of Certificated Registered Notes in definitive form and no Global
Security representing the Notes shall be exchangeable, except for another Global
Security of like denomination and tenor to be registered in the name of the
Depository or its nominee. Accordingly, each person owning a beneficial interest
must rely on the procedures of the Depository and, if such person is not a
Participant, on the procedures of the Participant through which such person owns
its beneficial interest, to exercise any rights of a holder under the Notes.
CERTIFICATED REGISTERED NOTES
At the option of the Company, the Company may designate in the Pricing
Supplement that the Notes will be issued in certificated registered form,
without coupons ("Certificated Registered Notes"). Without charge (i)
Certificated Registered Notes may be exchanged, upon presentation and surrender
at a designated office or agency of the Trustee in the City of Pittsburgh,
Pennsylvania, for Certificated Registered Notes of other authorized
denominations; and (ii) any Certificated Registered Note may be transferred by
the registered holder, or by its attorney-in-fact duly authorized in writing, at
such office or agency upon presentation and surrender of such Note for
cancellation, and upon any such transfer a new Certificated Registered Note or
Notes, of authorized denominations, in the same aggregate principal amount,
subject to the same terms and conditions will be issued to the transferee.
Transfers or exchanges of Certificated Registered Notes may not be effected
during the 15-day period preceding any date of redemption.
TAX CONSIDERATIONS
The following is a summary of the principal United States federal income
tax consequences of ownership of Notes. It deals only with Notes held as capital
assets by initial purchasers and does not consider all aspects of United States
federal income taxation that may be relevant to prospective purchasers of Notes.
This summary does not address the federal income tax consequences to special
classes of holders, such as dealers in securities or currencies, banks,
tax-exempt organizations, life insurance companies, persons holding Notes as a
hedge against currency risks or as part of a straddle or conversion transaction,
persons that are not "United States Holders", as defined below, or persons whose
functional currency is not the U.S. dollar. The summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), its legislative history, existing
and proposed regulations thereunder, published rulings and court decisions, all
as currently in effect and all subject to change at any time, perhaps with
retroactive effect.
Prospective purchasers of Notes should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any other taxing jurisdiction, of the ownership of Notes.
PAYMENTS OF INTEREST
Interest on a Note, other than interest on a "Discount Note" that is not
"qualified stated interest" (each as defined below under "Original Issue
Discount -- General"), will be taxable to a United States Holder as ordinary
income at the time it is received or accrued, depending on the holder's method
of accounting for tax purposes. A United States Holder is a beneficial owner who
or that is (i) a citizen or resident of the United States, (ii) a domestic
corporation or (iii) otherwise subject to United States federal income taxation
on a net income basis in respect of a Note.
ORIGINAL ISSUE DISCOUNT
GENERAL
A Note, other than a Note with a term of one year or less (a "Short-Term
Note"), will be treated as issued at an original issue discount (a "Discount
Note") if the excess of the Note's "stated redemption price at maturity" over
its issue price is more than a "de minimis amount" (as defined below).
Generally,
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the issue price of a Note will be the first price at which a substantial amount
of Notes included in the issue of which the Note is a part is sold to other than
bond houses, brokers, or similar persons or organizations acting in the capacity
of underwriters, placement agents, or wholesalers. The stated redemption price
at maturity of a Note is the total of all payments provided by the Note that are
not payments of "qualified stated interest". A qualified stated interest payment
is generally any one of a series of stated interest payments on a Note that are
unconditionally payable at least annually at a single fixed rate (with certain
exceptions for lower rates paid during some periods) applied to the outstanding
principal amount of the Note. Special rules for "Variable Rate Notes" (as
defined below under "Original Issue Discount -- Variable Rate Notes") are
described below under "Original Issue Discount -- Variable Rate Notes".
In general, if the excess of a Note's stated redemption price at maturity
over its issue price is less than 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to its
maturity (the "de minimis amount"), then such excess, if any, constitutes "de
minimis original issue discount" and the Note is not a Discount Note. Unless the
election described below under "Election to Treat All Interest as Original Issue
Discount" is made, a United States Holder of a Note with de minimis original
issue discount must include such de minimis original issue discount in income as
stated principal payments on the Note are made. The includible amount with
respect to each such payment will equal the product of the total amount of the
Note's de minimis original issue discount and a fraction, the numerator of which
is the amount of the principal payment made and the denominator of which is the
stated principal amount of the Note.
United States Holders of Discount Notes having a maturity of more than one
year from their date of issue must generally include original issue discount
("OID") in income calculated on a constant-yield method before the receipt of
cash attributable to such income, and generally will have to include in income
increasingly greater amounts of OID over the life of the Note. The amount of OID
includible in income by a United States Holder of a Discount Note is the sum of
the daily portions of OID with respect to the Discount Note for each day during
the taxable year or portion of the taxable year on which the United States
Holder holds such Discount Note ("accrued OID"). The daily portion is determined
by allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to that accrual period. Accrual periods with respect to a Note may be
of any length selected by the United States Holder and may vary in length over
the term of the Note as long as (i) no accrual period is longer than one year
and (ii) each scheduled payment of interest or principal on the Note occurs on
either the final or first day of an accrual period. The amount of OID allocable
to an accrual period equals the excess of (a) the product of the Discount Note's
adjusted issue price at the beginning of the accrual period and such Note's
yield to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period) over
(b) the sum of the payments of qualified stated interest on the Note allocable
to the accrual period. The "adjusted issue price" of a Discount Note at the
beginning of any accrual period is the issue price of the Note increased by (x)
the amount of accrued OID for each prior accrual period and decreased by (y) the
amount of any payments previously made on the Note that were not qualified
stated interest payments. For purposes of determining the amount of OID
allocable to an accrual period, if an interval between payments of qualified
stated interest on the Note contains more than one accrual period, the amount of
qualified stated interest payable at the end of the interval (including any
qualified stated interest that is payable on the first day of the accrual period
immediately following the interval) is allocated pro rata on the basis of
relative lengths of each accrual period in the interval, and the adjusted issue
price at the beginning of each accrual period in the interval must be increased
by the amount of any qualified stated interest that has accrued prior to the
first day of the accrual period but that is not payable until the end of the
interval. The amount of OID allocable to an initial short accrual period may be
computed using any reasonable method if all other accrual periods other than a
final short accrual period are of equal length. The amount of OID allocable to
the final accrual period is the difference between (x) the amount payable at the
maturity of the Note (other than any payment of qualified stated interest) and
(y) the Note's adjusted issue price as of the beginning of the final accrual
period.
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ACQUISITION PREMIUM
A United States Holder that purchases a Discount Note for an amount less
than or equal to the Note's remaining stated redemption price at maturity, but
in excess of its adjusted issue price (as determined above under "Original Issue
Discount -- General")(any such excess being "acquisition premium"), and that
does not make the election described below under "Election to Treat All Interest
as Original Issue Discount", shall reduce the daily portions of OID by a
fraction, the numerator of which is the excess of the United States Holder's
adjusted basis in the Note immediately after its purchase over the adjusted
issue price of the Note, and the denominator of which is the excess of the sum
of all amounts payable on the Note after the purchase date, other than payments
of qualified stated interest, over the Note's adjusted issue price.
MARKET DISCOUNT
A Note, other than a short-term Note, will be treated as purchased at a
market discount (a "Market Discount Note") if the Note's stated redemption price
at maturity or, in the case of a Discount Note, the Note's "revised issue
price", exceeds the amount for which the United States Holder purchased the Note
by at least 1/4 of 1 percent of such Note's stated redemption price at maturity
or revised issue price, respectively, multiplied by the number of complete years
to the Note's maturity. If such excess is not sufficient to cause the Note to be
a Market Discount Note, then such excess constitutes "de minimis market
discount" and such Note is not subject to the rules discussed in the following
paragraphs. The Code provides that, for these purposes, the "revised issue
price" of a Note generally equals its issue price, increased by the amount of
any OID that has accrued on the Note.
Any gain recognized on the maturity or disposition of a Market Discount
Note will be treated as ordinary income to the extent that such gain does not
exceed the accrued market discount on such Note. Alternatively, a United States
Holder of a Market Discount Note may elect to include market discount in income
currently over the life of the Note. Such an election shall apply to all debt
instruments with market discount acquired by the electing United States Holder
on or after the first day of the first taxable year to which the election
applies. This election may not be revoked without the consent of the Internal
Revenue Service (the "Service").
Market discount on a Market Discount Note will accrue on a straight-line
basis unless the United States Holder elects to accrue such market discount on a
constant-yield method. Such an election shall apply only to the Note with
respect to which it is made and may not be revoked. A United States Holder of a
Market Discount Note that does not elect to include market discount in income
currently generally will be required to defer deductions for interest on
borrowings allocable to such Note in an amount not exceeding the accrued market
discount on such Note until the maturity or disposition of such Note.
PRE-ISSUANCE ACCRUED INTEREST
If (i) a portion of the initial purchase price of a Note is attributable to
pre-issuance accrued interest, (ii) the first stated interest payment on the
Note is to be made within one year of the Note's issue date and (iii) such
payment will equal or exceed the amount of pre-issuance accrued interest, then
the United States Holder may elect to decrease the issue price of the Note by
the amount of pre-issuance accrued interest. In that event, a portion of the
first stated interest payment will be treated as a return of the excluded
pre-issuance accrued interest and not as an amount payable on the Note.
NOTES SUBJECT TO CONTINGENCIES INCLUDING OPTIONAL REDEMPTION
If a Note provides for an alternative payment schedule or schedules
applicable upon the occurrence of a contingency or contingencies (other than a
remote or incidental contingency), whether such contingency relates to payments
of interest or of principal, if the timing and amount of the payments that
comprise each payment schedule are known as of the issue date and if one of such
schedules is significantly more likely than not to occur, the yield and maturity
of the Note are determined by assuming that the payments will be made according
to that payment schedule. If there is no single payment
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schedule that is significantly more likely than not to occur (other than because
of a mandatory sinking fund), the Note will be subject to the general rules that
govern contingent payment obligations. These rules will be discussed in an
applicable Pricing Supplement.
Notwithstanding the general rules for determining yield and maturity in the
case of Notes subject to contingencies, if the Company or the holder has an
unconditional option or options that, if exercised, would require payments to be
made on the Note under an alternative payment schedule or schedules, then (i) in
the case of an option or options of the Company, the Company will be deemed to
exercise or not exercise an option or combination of options in the manner that
minimizes the yield on the Note and (ii) in the case of an option or options of
the holder, the holder will be deemed to exercise or not exercise an option or
combination of options in the manner that maximizes the yield on the Note. If
both the Company and the holder have options described in the preceding
sentence, those rules apply to such options in the order in which they may be
exercised. For purposes of those calculations, the yield on the Note is
determined by using any date on which the Note may be redeemed or repurchased as
the maturity date and the amount payable on such date in accordance with the
terms of the Note as the principal amount payable at maturity.
If a remote contingency actually occurs or does not occur contrary to an
assumption made according to the above rules or if an incidental contingency
becomes sufficiently fixed in amount or timing (a "change in circumstances")
then, except to the extent that a portion of the Note is repaid as a result of
the change in circumstances and solely for purposes of determining the amount
and accrual of OID, the yield and maturity of the Note are redetermined by
treating the Note as having been retired and reissued on the date of the change
in circumstances for an amount equal to the Note's adjusted issue price on that
date.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT
A United States Holder may elect to include in gross income all interest
that accrues on a Note using the constant-yield method described above under the
heading "Original Issue Discount -- General", with the modifications described
below. For purposes of this election, interest includes stated interest, OID, de
minimis original issue discount, market discount, de minimis market discount and
unstated interest, as adjusted by any amortizable bond premium (described below
under "Notes Purchased at a Premium") or acquisition premium.
In applying the constant-yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal its cost to the
electing United States Holder, the issue date of the Note will be the date of
its acquisition by the electing United States Holder, and no payments on the
Note will be treated as payments of qualified stated interest. This election
will generally apply only to the Note with respect to which it is made and may
not be revoked without the consent of the Service. If this election is made with
respect to a Note with amortizable bond premium, then the electing United States
Holder will be deemed to have elected to apply amortizable bond premium against
interest with respect to all debt instruments with amortizable bond premium
(other than debt instruments the interest on which is excludable from gross
income) held by the electing United States Holder as of the beginning of the
taxable year in which the Note with respect to which the election is made is
acquired or thereafter acquired. The deemed election with respect to amortizable
bond premium may not be revoked without the consent of the Service.
If the election to apply the constant-yield method to all interest on a
Note is made with respect to a Market Discount Note, the electing United States
Holder will be treated as having made the election discussed above under
"Original Issue Discount -- Market Discount" to include market discount in
income currently over the life of all debt instruments held or thereafter
acquired by such United States Holder.
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VARIABLE RATE NOTES
A "Variable Rate Note" is a Note that: (i) has an issue price that does not
exceed the total noncontingent principal payments by more than the lesser of (1)
the product of (x) the total noncontingent principal payments, (y) the number of
complete years to maturity from the issue date and (z) .015, or (2) 15 percent
of the total noncontingent principal payments, and (ii) does not provide for
stated interest other than stated interest compounded or paid at least annually
at (1) one or more "qualified floating rates", (2) a single fixed rate and one
or more qualified floating rates, (3) a single "objective rate" or (4) a single
fixed rate and a single objective rate that is a "qualified inverse floating
rate".
A qualified floating rate or objective rate in effect at any time during
the term of the instrument must be set at a "current value" of that rate. A
"current value" of a rate is the value of the rate on any day that is no earlier
than 3 months prior to the first day on which that value is in effect and no
later than 1 year following that first day.
A variable rate is a "qualified floating rate" if (i) variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the Note
is denominated or (ii) it is equal to the product of such a rate and either (a)
a fixed multiple that is greater than 0.65 but not more than 1.35, or (b) a
fixed multiple greater than 0.65 but not more than 1.35, increased or decreased
by a fixed rate. If a Note provides for two or more qualified floating rates
that (i) are within 0.25 percentage points of each other on the issue date or
(ii) can reasonably be expected to have approximately the same values throughout
the term of the Note, the qualified floating rates together constitute a single
qualified floating rate. A rate is not a qualified floating rate, however, if
the rate is subject to certain restrictions (including caps, floors, governors,
or other similar restrictions) unless such restrictions are fixed throughout the
term of the Note or are not reasonably expected to significantly affect the
yield on the Note.
An "objective rate" is a rate, other than a qualified floating rate, that
is determined using a single, fixed formula and that is based on objective
financial or economic information that is not within the control of or unique to
the circumstances of the issuer or a related party. A variable rate is not an
objective rate, however, if it is reasonably expected that the average value of
the rate during the first half of the Note's term will be either significantly
less than or significantly greater than the average value of the rate during the
final half of the Note's term. An objective rate is a "qualified inverse
floating rate" if (i) the rate is equal to a fixed rate minus a qualified
floating rate, and (ii) the variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the cost of newly borrowed
funds.
If interest on a Note is stated at a fixed rate for an initial period of
one year or less followed by either a qualified floating rate or an objective
rate for a subsequent period and (i) the fixed rate and the qualified floating
rate or objective rate have values on the issue date of the Note that do not
differ by more than 0.25 percentage points or (ii) the value of the qualified
floating rate or objective rate is intended to approximate the fixed rate, the
fixed rate and the qualified floating rate or the objective rate constitute a
single qualified floating rate or objective rate. Under these rules, Commercial
Paper Rate Notes, Prime Rate Notes, LIBOR Notes, Treasury Rate Notes, CD Rate
Notes, and Federal Funds Rate Notes will generally be treated as Variable Rate
Notes.
In general, if a Variable Rate Note provides for stated interest at a
single qualified floating rate or objective rate, all stated interest on the
Note is qualified stated interest and the amount of OID, if any, is determined
by using, in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date of the qualified floating rate or qualified
inverse floating rate, or, in the case of any other objective rate, a fixed rate
that reflects the yield reasonably expected for the Note.
If a Variable Rate Note does not provide for stated interest at a single
qualified floating rate or a single objective rate and also does not provide for
interest payable at a fixed rate (other than at a single fixed rate for an
initial period), the amount of interest and OID accruals on the Note are
generally determined by (i) determining a fixed rate substitute for each
variable rate provided under the Variable Rate Note (generally, the value of
each variable rate as of the issue date or, in the case of an objective
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rate that is not a qualified inverse floating rate, a rate that reflects the
reasonably expected yield on the Note), (ii) constructing the equivalent fixed
rate debt instrument (using the fixed rate substitutes described above), (iii)
determining the amount of qualified stated interest and OID with respect to the
equivalent fixed rate debt instrument, and (iv) making the appropriate
adjustments for actual variable rates during the applicable accrual period.
If a Variable Rate Note provides for stated interest either at one or more
qualified floating rates or at a qualified inverse floating rate, and in
addition provides for stated interest at a single fixed rate (other than at a
single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Note is treated, for purposes of the first
three steps of the determination, as if it provided for a qualified floating
rate (or a qualified inverse floating rate, as the case may be) rather than the
fixed rate. The qualified floating rate (or qualified inverse floating rate)
replacing the fixed rate must be such that the fair market value of the Variable
Rate Note as of the issue date would be approximately the same as the fair
market value of an otherwise identical debt instrument that provides for the
qualified floating rate (or qualified inverse floating rate) rather than the
fixed rate.
SHORT-TERM NOTES
In general, an individual or other cash basis United States Holder of a
short-term Note is not required to accrue OID (as specially defined below for
the purposes of this paragraph) for United States federal income tax purposes
unless it elects to do so (but may be required to include any stated interest in
income as the interest is received). Accrual basis United States Holders and
certain other United States Holders, including banks, regulated investment
companies, dealers in securities, common trust funds, United States Holders who
hold Notes as part of certain identified hedging transactions, certain pass-
through entities and cash basis United States Holders who so elect, are required
to accrue OID on short-term Notes on either a straight-line basis or under the
constant-yield method (based on daily compounding), at the election of the
United States Holder. In the case of a United States Holder not required and not
electing to include OID in income currently, any gain realized on the sale or
retirement of the short-term Note will be ordinary income to the extent of the
OID accrued on a straight-line basis (unless an election is made to accrue the
OID under the constant-yield method) through the date of sale or retirement.
United States Holders who are not required and do not elect to accrue OID on
short-term Notes will be required to defer deductions for interest on borrowings
allocable to short-term Notes in an amount not exceeding the deferred income
until the deferred income is realized.
For purposes of determining the amount of OID subject to these rules, all
interest payments on a short-term Note, including stated interest, are included
in the short-term Note's stated redemption price at maturity.
NOTES PURCHASED AT A PREMIUM
A United States Holder that purchases a Note for an amount in excess of its
principal amount may elect to treat such excess as "amortizable bond premium",
in which case the amount required to be included in the United States Holder's
income each year with respect to interest on the Note will be reduced by the
amount of amortizable bond premium allocable (based on the Note's yield to
maturity) to such year. Any election to amortize bond premium shall apply to all
bonds (other than bonds the interest on which is excludable from gross income)
held by the United States Holder at the beginning of the first taxable year to
which the election applies or thereafter acquired by the United States Holder,
and is irrevocable without the consent of the Service. See also "Original Issue
Discount -- Election to Treat All Interest as Original Issue Discount".
PURCHASE, SALE AND RETIREMENT OF THE NOTES
A United States Holder's tax basis in a Note will generally be its cost,
increased by the amount of any OID or market discount included in the United
States Holder's income with respect to the Note and the amount, if any, of
income attributable to de minimis original issue discount and de minimis market
discount included in the United States Holder's income with respect to the Note,
and reduced by (i) the
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amount of any payments that are not qualified stated interest payments, and (ii)
the amount of any amortizable bond premium applied to reduce interest on the
Note.
A United States Holder will generally recognize gain or loss on the sale or
retirement of a Note equal to the difference between the amount realized on the
sale or retirement and the tax basis of the Note. Except to the extent described
above under "Original Issue Discount -- Short-Term Notes" or "Original Issue
Discount -- Market Discount", gain or loss recognized on the sale or retirement
of a Note will be capital gain or loss and will be long-term capital gain or
loss if the Note was held for more than one year.
INDEXED NOTES
The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules with respect to Notes that are not
subject to the rules governing Variable Rate Notes, payments on which are
determined by reference to any index, and other Notes that are subject to the
general rules governing contingent payment obligations.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments of
principal, any premium and interest on a Note and the proceeds of the sale of a
Note before maturity within the United States to, and to the accrual of OID on a
Discount Note with respect to, non-corporate United States Holders. "Backup
withholding" at a rate of 31% will apply to such payments and to payments of OID
if the United States Holder fails to provide an accurate taxpayer identification
number or is notified by the Internal Revenue Service that it has failed to
report all interest and dividends required to be shown on its federal income tax
returns.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution
Agreement, dated June 4, 1997 (the "Distribution Agreement"), the Notes will be
offered from time to time by the Company through Goldman, Sachs & Co. ("Goldman
Sachs"), Citicorp Securities, Inc. ("Citicorp") and J.P. Morgan Securities Inc.
("J.P. Morgan") (collectively, the "Agents"), who have each agreed to use
reasonable efforts to solicit purchases of the Notes. The Company will have the
sole right to accept offers to purchase Notes and may reject any proposed
purchase of Notes as a whole or in part. The Agents will have the right, in
their discretion reasonably exercised, to reject any offer to purchase Notes, as
a whole or in part. The Company will pay each Agent a commission of from 0.125%
to 0.750% of the principal amount of Notes, depending upon maturity, for sales
made through such Agent.
The Company may also sell Notes to any Agent as principal for its own
account at a discount to be agreed upon at the time of sale, or the purchasing
Agent may receive from the Company a commission or discount equivalent to that
set forth on the cover page hereof in the case of any such principal transaction
in which no other discount is agreed. Such Notes may be resold at prevailing
market prices, or at prices related thereto, at the time of such resale, as
determined by the Agent. The Company reserves the right to sell Notes directly
on its own behalf. No commission will be payable on any Notes sold directly by
the Company.
In addition, the Agents may offer the Notes they have purchased as
principal to other dealers. The Agents may sell Notes to any dealer at a
discount and, unless otherwise specified in the applicable Pricing Supplement,
such discount allowed to any dealer may include all or part of the discount to
be received from the Company. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased by
such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to any agency sale of a Note of
identical maturity. After the initial public offering of Notes to be resold to
investors and other purchasers on a fixed public offering price basis, the
public offering price, concession and discount may be changed.
During and after the offering, the Agents may purchase and sell the Notes
in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover short positions created by the
Agents in connection with the offering. The Agents also may impose a penalty
bid, whereby selling concessions allowed to broker-dealers in respect of the
Notes sold in the offering
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may be reclaimed by the Agents if such Notes are repurchased by the Agents in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Notes, which may be higher than the
price that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
in the over-the-counter market or otherwise.
The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 (the "Act"). The Company has
agreed to indemnify each of the Agents against certain liabilities, including
liabilities under the Act. The Company has agreed to reimburse each of the
Agents for certain expenses.
The Agents may sell to or through dealers who may resell to Investors, and
the Agents may pay all or part of their discount or commission to such dealers.
Such dealers may be deemed to be "underwriters" within the meaning of the Act.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes will be required to be made in immediately available
funds in The City of New York.
Goldman Sachs performs various investment banking services for the Company.
Citicorp and its affiliates, and J.P. Morgan and its affiliates, engage in
commercial banking and investment banking transactions with and perform services
for the Company and its affiliates in the ordinary course of business.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of the secondary market for the Notes.
VALIDITY OF SECURITIES
The validity of the Notes offered hereby will be passed upon for the
Company by Robert P. Vogel, General Counsel, Rohm and Haas Company, 100
Independence Mall West, Philadelphia, Pennsylvania 19106-2399. As of December
31, 1996, Mr. Vogel owned beneficially 2,467 shares of Common Stock of the
Company, including shares allocated to his account under the Company's savings
and employee stock ownership plans as of December 31, 1996, and 15,357 shares
subject to options exercisable currently or within sixty days.
The validity of the Notes will be passed upon for the Agents by Sullivan &
Cromwell, New York, New York. Sullivan & Cromwell will rely as to all matters of
Pennsylvania law upon the opinion of Mr. Vogel. The opinion of Sullivan &
Cromwell will be conditioned upon, and subject to certain assumptions regarding,
future action required to be taken by the Company and the Trustee in connection
with the issuance and sale of any particular Note, the specific terms of Notes
and other matters which may affect the validity of Notes but which cannot be
ascertained on the date of such opinions.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Description of Notes.................. S-3
Tax Considerations.................... S-13
Supplemental Plan of Distribution..... S-19
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Rohm and Haas Company................. 2
Use of Proceeds....................... 3
Description of Debt Securities........ 3
Description of Capital Stock.......... 11
Plan of Distribution.................. 12
Experts............................... 13
Validity of Securities................ 13
============================================
</TABLE>
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$300,000,000
ROHM AND HAAS COMPANY
MEDIUM-TERM NOTES
DUE FROM 9 MONTHS TO 30 YEARS FROM DATE OF ISSUE
---------------------
PROSPECTUS SUPPLEMENT
---------------------
GOLDMAN, SACHS & CO.
CITICORP SECURITIES, INC.
J. P. MORGAN & CO.
======================================================
