<PAGE>
RULE NO. 424(b)(2)
REGISTRATION NO. 333-13457
PROSPECTUS SUPPLEMENT (Subject to Completion, issued December 6, 1996)
(To Prospectus dated November 12, 1996)
$231,900,000
Mobil Corporation
1996-A Pass Through Trust
PASS THROUGH CERTIFICATES, SERIES 1996-A
---------------
Each Pass Through Certificate offered hereby will represent a fractional
undivided interest in the Mobil Corporation 1996-A Pass Through Trust (the
"Pass Through Trust") to be formed pursuant to a Pass Through Trust Agreement
and Pass Through Trust Supplement (together, the "Agreement"), among Mobil
Corporation ("Mobil"), Mobil Marine Finance Company I Inc. ("MMFC-I"), Mobil
Marine Finance Company II Inc. ("MMFC-II" and, together with MMFC-I, the
"Charterers") and State Street Bank and Trust Company (the "Pass Through
Trustee"), as trustee of the Pass Through Trust. The property of the Pass
Through Trust will consist of four secured notes (the "Secured Notes") issued
on a nonrecourse basis by four Owner Trusts pursuant to four separate
leveraged lease transactions to finance not more than 80% of the cost of four
double-hulled very large crude carriers (the "Vessels") each of which will be
acquired by one of the Owner Trusts from an affiliate of Mobil or the builder
thereof and chartered to one of the Charterers. Although neither the Pass
Through Certificates nor the Secured Notes are direct obligations of, or
guaranteed by, the Charterers or Mobil, the amounts unconditionally payable by
the Charterers and guaranteed by Mobil pursuant to four separate guaranties
each relating to one of the Vessels (each a "Parent Guaranty") for the charter
of the Vessels will be at least sufficient to pay in full when due all
scheduled payments of principal of, premium, if any, and interest on the
Secured Notes.
The Pass Through Trust will purchase the Secured Notes, which after the
accretion of discount, if any, as more particularly set forth below will have
an interest rate corresponding to the interest rate applicable to the Pass
Through Certificates. The maturity dates of the Secured Notes will occur on or
before the final distribution date applicable to the Pass Through
Certificates. The Secured Notes will be secured by, among other things, an
assignment of certain rights under the Charter relating to each Vessel,
including the right to receive charter hire payable in respect thereof. For
circumstances under which distributions to the Certificateholders may be made
prior to the final distribution date, see "Description of the Pass Through
Certificates--Payments and Distributions."
The Secured Notes will be purchased by the Pass Through Trust either at par
or at varying discounts from par and, during the period from the closing of
the public offering of the Pass Through Certificates to July 2, 1999, will
provide a return consisting of cash interest and accretion of discount such
that the yield to July 2, 1999 of each Secured Note will equal the semi-annual
bond equivalent rate corresponding to the interest rate per annum applicable
to such Pass Through Certificates. Any cash interest on the Secured Notes will
be passed through to Certificateholders. From and after July 2, 1999, all of
the Secured Notes will accrue interest, payable in cash, on January 2 and July
2 of each year. Principal and interest payments on the Secured Notes held in
the Pass Through Trust will be passed through to the Certificateholders in
scheduled amounts on January 2 and July 2 in each year, commencing July 2,
1997. The Proceeds to Pass Through Trustee shown below equals the sum of the
prices at which the Secured Notes will be sold to the Pass Through Trust upon
original issue, as described above.
---------------
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 OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
<TABLE>
<CAPTION>
PRINCIPAL INITIAL SCHEDULED PROCEEDS TO PASS
PASS THROUGH AMOUNT AT INTEREST PRINCIPAL FINAL PRICE TO THROUGH
CERTIFICATES MATURITY RATE (1) DISTRIBUTION DATE DISTRIBUTION DATE PUBLIC(2) TRUSTEE (2)(3)
- ------------ --------- --------- ----------------- ----------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
1996-A July 2, 1997 %
</TABLE>
- -------
(1) As more fully set forth herein, prior to January 2, 2000, interest is
only partially payable in cash.
(2) Plus accrued interest and accretion of discount, if any, from December
19, 1996.
(3) The underwriting commission of $1,507,350 constitutes .65% of the
aggregate accreted principal amount of the Pass Through Certificates.
The underwriting commission, and certain other expenses estimated at
$1,675,000, will be payable by the Owner Trusts in the leveraged lease
transactions. The proceeds from the sale of the Pass Through
Certificates will be used to purchase the Secured Notes from the Owner
Trusts.
---------------
The Pass Through Certificates are offered by the Underwriter, subject to
prior sale, when, as and if accepted by the Underwriter and subject to
approval of certain legal matters by Shearman & Sterling, counsel for the
Underwriter. It is expected that delivery of the Pass Through Certificates
will be made on or about December 19, 1996, in New York, New York, through the
facilities of The Depository Trust Company, against payment therefor in
immediately available funds.
---------------
MORGAN STANLEY & CO.
Incorporated
December 12, 1996
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY MOBIL,
MMFC-I, MMFC-II OR THE UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY SECURITIES OTHER THAN THE SECURITIES TO WHICH THEY RELATE
OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF MOBIL, MMFC-I OR MMFC-II SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.............................. S-3
Mobil Corporation.................... S-9
Mobil Marine Finance Company I
Mobil Marine Finance Company II...... S-9
Capitalization of Mobil Corporation.. S-9
Ratio of Earnings to Fixed Charges of
Mobil Corporation................... S-9
Selected Consolidated Financial
Information of Mobil Corporation.... S-10
Recent Developments of Mobil
Corporation......................... S-10
Outline of the Transaction........... S-11
Use of Proceeds...................... S-12
Diagram of Payments.................. S-12
Description of the Pass Through
Certificates........................ S-14
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of the Secured Notes.... S-17
Description of the Charters......... S-28
The Parent Guaranties............... S-34
The Participation Agreements........ S-34
The U.K. Financing.................. S-34
Federal Income Tax Consequences..... S-36
ERISA Considerations................ S-39
Underwriting........................ S-40
Legal Matters....................... S-41
Documents Incorporated by Reference. S-41
Appendix A: Glossary of Certain
Terms.............................. A-1
Appendix B: Schedules of Principal
Payments on the Secured Notes...... B-1
</TABLE>
Prospectus
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information............... 4
Documents Incorporated by Reference. 4
Formation of the Trusts............. 5
Outline of the Leveraged Lease
Structure.......................... 5
Use of Proceeds..................... 6
Mobil Corporation................... 6
The Lessees......................... 6
Ratio of Earnings to Fixed Charges
of Mobil Corporation............... 7
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of the Certificates... 7
Description of the Secured Notes.. 18
Federal Income Tax Consequences... 22
Certain Massachusetts Taxes....... 24
ERISA Considerations.............. 25
Plan of Distribution.............. 25
Legal Opinions.................... 27
Experts........................... 27
</TABLE>
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
SUMMARY
The following summary does not purport to be complete and is qualified in its
entirety by the detailed information appearing elsewhere or incorporated by
reference in this Prospectus Supplement and in the accompanying Prospectus.
MOBIL
Mobil was incorporated in March 1976 in the State of Delaware and operates
primarily as a holding company. Mobil's principal business, which is conducted
primarily through wholly owned subsidiaries, is in the United States and
international energy industries. Mobil is also a manufacturer and marketer of
petrochemicals, films and specialty chemical products. Mobil, through its
subsidiaries, has business interests in over 125 countries as of December 31,
1995. Mobil's principal executive offices are located at 3225 Gallows Road,
Fairfax, Virginia 22037-0001, and its telephone number is (703) 846-3000. MMFC-
I and MMFC-II are wholly owned subsidiaries of Mobil.
THE OFFERING
Glossary.................. Included at the end of this Prospectus Supplement
as Appendix A is a Glossary of certain significant
defined terms used herein.
Pass Through Trust........ The Mobil Corporation 1996-A Pass Through Trust
(the "Pass Through Trust") is to be formed
pursuant to a Pass Through Trust Supplement (the
"Trust Supplement") to be entered into pursuant to
the Pass Through Trust Agreement (the "Basic
Agreement" and, together with the Trust
Supplement, the "Agreement") among Mobil, MMFC-I,
MMFC-II and State Street Bank and Trust Company
(the "Pass Though Trustee"), as trustee. MMFC-I
and MMFC-II are herein collectively called the
"Charterers" and each individually called a
"Charterer."
Pass Through Trust The property of the Pass Through Trust will consist
Property.................. of four secured notes (each, a "Secured Note" and,
collectively, the "Secured Notes") issued on a
nonrecourse basis by four Owner Trusts in four
separate leveraged lease transactions to finance
not more than 80% of the cost to each Owner Trust
of a double-hulled very large crude carrier (a
"Vessel") which will be acquired by such Owner
Trust and chartered to one of the Charterers. Two
of the Vessels, the M/V Eagle (the "Eagle") and
the M/V Raven (the "Raven") (the "Delivered
Vessels"), have been sold to the applicable Owner
Trusts prior to the Offering. Mobil anticipates
delivery of the remaining two Vessels, currently
designated as Hull No. 1233 and Hull No. 1234 (the
"New Vessels"), from the Builder (as defined
below) to the applicable Owner Trust in the fourth
quarter of 1998 and the second quarter of 1999,
respectively. The Vessels are described under
"Outline of the Transaction" in this Prospectus
Supplement. The Charter with respect to each of
the Vessels, however, will become effective at the
time of the closing of the Offering.
The Pass Through Trust will acquire the four
Secured Notes, which will bear interest or
accretion of discount at the same rate as the Pass
Through Certificates, Series 1996-A (the "Pass
Through
S-3
<PAGE>
Certificates"), to be issued by the Pass Through
Trust. The maturity dates of the Secured Notes
acquired by the Pass Through Trust will occur on
or before the final distribution date of the Pass
Through Certificates. The aggregate principal
amount of the Secured Notes purchased and held in
the Pass Through Trust will be the same as the
aggregate principal amount of the Pass Through
Certificates issued by the Pass Through Trustee.
Book-Entry Registration... The Pass Through Certificates will be issued in
fully registered form and will be registered in
the name of Cede & Co. as the nominee of The
Depository Trust Company. No person acquiring an
interest in the Pass Through Certificates will be
entitled to receive a definitive certificate
representing such person's interest in the Pass
Through Trust, unless definitive certificates are
issued, which will only occur under limited
circumstances. See "Description of the
Certificates--Book Entry Registration--General"
and "--Definitive Certificates" in the
accompanying Prospectus.
Regular Distribution July 2, 1997, and thereafter each January 2 and
Dates..................... July 2.
Special Distribution Any Business Day.
Dates.....................
Record Dates.............. The fifteenth day preceding a Regular Distribution
Date or a Special Distribution Date.
Distributions............. All payments of principal, premium, if any, and
interest received by the Pass Through Trustee on
the Secured Notes will be distributed by the Pass
Through Trustee to holders of Pass Through
Certificates (the "Certificateholders") on the
date such receipt is confirmed by the Pass Through
Trustee, except in certain cases where such
Secured Notes are in default. Payments of
principal of and interest on the Secured Notes are
scheduled to be received in specified amounts by
the Pass Through Trustee on the Regular
Distribution Dates specified above and will be
distributed to the Certificateholders when
received on the corresponding Regular Distribution
Date. Payments of principal of, premium, if any,
and interest on the Secured Notes resulting from
prepayments thereof, if any, will be distributed
on a Special Distribution Date after not less than
20 days' notice from the Pass Through Trustee to
the Certificateholders. For a discussion of
distributions upon an Event of Default, see
"Description of the Certificates--Events of
Default and Certain Rights upon an Event of
Default" in the accompanying Prospectus.
Principal................. The Pass Through Trust will hold Secured Notes
whose principal is payable in scheduled amounts on
January 2 or July 2, or both, of certain years,
commencing July 2, 1997, in accordance with the
principal repayment schedules set forth in
Appendix B to this Prospectus Supplement. As used
in this Prospectus Supplement, the
S-4
<PAGE>
principal amount of a Secured Note refers to the
accreted value of such Secured Note during the
period, if any, that such Secured Note is
accreting discount and thereafter the face amount
thereof, in each case as reduced from time to time
by the payment of principal installments
thereunder.
Interest.................. Interest on the Pass Through Certificates will be
passed through at the rate per annum indicated on
the cover of this Prospectus Supplement, which is
the interest rate borne by the Secured Notes to be
held in the Pass Through Trust. The Secured Notes
issued in respect of the Delivered Vessels will
accrue interest from the closing of the Offering
payable in cash on each Regular Distribution Date.
The Secured Notes issued in respect of the New
Vessels will be purchased by the Pass Through
Trustee at varying discounts from par and, during
the period commencing on the closing of the
Offering until January 2, 1999, in the case of
Hull No. 1233, and July 2, 1999, in the case of
Hull No. 1234 (each such date being a "Full
Accrual Date"), will provide a return consisting
of accretion of discount such that the yield to
the applicable Full Accrual Date of such Secured
Note will equal the semi-annual bond equivalent
rate corresponding to the interest rate per annum
applicable to the Pass Through Certificates. From
and after the respective Full Accrual Dates, the
Secured Notes issued in respect of the New Vessels
will accrue interest payable in cash at the rate
per annum indicated on the cover of this
Prospectus Supplement, and such interest will be
passed through to Certificateholders on each
Regular Distribution Date. Interest will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months.
Initial Average Life The initial average life date for the Pass Through
Date...................... Certificates is December 26, 2008.
Prepayment of the Secured
Notes at a Premium........
(a) In the event that (i) an Owner Trust elects to
redeem in whole the related Secured Note then
outstanding at any time, (ii) a Charterer
terminates the related Charter upon the occurrence
of certain events with respect to the related
Vessel, (iii) a Head Lease (as defined below) is
terminated and the related Charter is terminated
or the related Vessel is sold pursuant to such
Head Lease and the new purchaser of such Vessel is
not substituted as obligor under the Secured Note
issued under the related Indenture (as defined
below) or (iv) the Construction Contract with
respect to a New Vessel is terminated by the
related Owner Trust prior to its delivery under
circumstances which would not make such Owner
Trust eligible for a refund under such
Construction Contract, the Secured Note issued in
respect of such Vessel will be prepaid in whole on
a Special Distribution Date at a price equal to
the unpaid principal amount thereof, together with
accrued interest thereon, plus a premium equal to
the Make-Whole Amount, if any. The Make-Whole
Amount will be computed at the comparable Treasury
Rate plus .10%. See
S-5
<PAGE>
"Description of the Secured Notes--Prepayments" in
this Prospectus Supplement for a description of
the events allowing the Charterer to terminate a
Charter, the circumstances entitling an Owner
Trust to a refund upon termination of a
Construction Contract and the manner of computing
the Make-Whole Amount, if any.
(b) If an Indenture Event of Default under any
Indenture resulting from one or more related
Charter Events of Default shall have occurred and
be continuing for less than 270 days, during which
time the related Secured Note shall not have been
accelerated, the related Owner Trust or Owner
Participant may elect to purchase such Secured
Note at a price equal to the aggregate unpaid
principal amount thereof, together with accrued
interest thereon plus a premium equal to the Make-
Whole Amount, if any. See "Description of the
Secured Notes--Prepayments" in this Prospectus
Supplement.
Prepayment of the Secured
Notes at Par..............
(a) In the event that (i) an Event of Loss with
respect to any Vessel shall occur, (ii) the
Construction Contract with respect to a New Vessel
is terminated by the related Owner Trust prior to
its delivery under circumstances which would make
such Owner Trust eligible for a refund under such
Construction Contract or (iii) Hull No. 1233 or
Hull No. 1234 is not delivered by the Builder by
January 2, 2000 or July 2, 2000, respectively
(each, a "Final Delivery Date"), the related Owner
Trust shall prepay the Secured Note issued in
respect of such Vessel at a price equal to the
unpaid principal amount thereof, together with
accrued interest thereon, but without payment of
any Make-Whole Amount or other premium. See
"Description of the Secured Notes--Prepayments" in
this Prospectus Supplement.
(b) If (i) an Indenture Event of Default under any
Indenture resulting from one or more related
Charter Events of Default shall have occurred and
be continuing for more than 270 days during which
time the related Secured Note shall not have been
accelerated, (ii) the Indenture Trustee has given
the related Owner Trust or Owner Participant
notice of its intent to accelerate such Secured
Note or (iii) such Secured Note has been
accelerated, the related Owner Trust or Owner
Participant may elect to purchase such Secured
Note at a price equal to the aggregate unpaid
principal amount thereof, together with accrued
interest thereon, but without any Make-Whole
Amount or other premium. See "Description of the
Secured Notes--Prepayments" in this Prospectus
Supplement.
Security for the Secured Each Secured Note will be issued under a separate
Notes..................... Indenture and will be secured by, among other
things, (i) an assignment of such Owner Trust's
rights under the related Charter, including the
right to receive hire under such Charter, (ii) an
assignment of such Owner Trust's
S-6
<PAGE>
rights under the related Parent Guaranty, (iii) an
assignment of such Owner Trust's rights under the
related Conditional Sale Agreement, Head Lease and
certain other U.K. Documents and (iv) in the case
of the New Vessels, an assignment, subject to
certain rights of the U.K. Lessor, of the related
Construction Contract. The Secured Note issued in
respect of each Vessel is also secured by certain
rights in such Vessel. The security for each
Secured Note is separate from the security for
each other Secured Note and the Secured Notes are
not cross-collateralized. See "Description of the
Pass Through Certificates," "Description of the
Secured Notes--Security" and "The U.K. Financing"
in this Prospectus Supplement and "Description of
the Certificates" and "Description of the Secured
Notes--Security" in the accompanying Prospectus.
Although the Secured Notes are not direct
obligations of, or guaranteed by, the Charterers
or Mobil, amounts unconditionally payable by each
Charterer for charter of the related Vessel
pursuant to the related Charter, which amounts are
unconditionally and irrevocably guaranteed by
Mobil pursuant to the related Parent Guaranty and
assigned to the related Indenture Trustee, will be
sufficient to pay in full when due all scheduled
payments of principal of, premium, if any, and
interest on the Secured Notes. See "Description of
the Secured Notes--General" in this Prospectus
Supplement and in the accompanying Prospectus.
U.K. Financing............ It is expected that immediately following the
closing of the Offering, a U.K. Financing of each
Vessel will be completed, pursuant to which such
Vessel is conditionally sold to the related U.K.
Lessor and leased back to the related Owner Trust.
See "The U.K. Financing."
Additional Notes.......... Under certain circumstances, additional secured
notes ("Additional Notes") under the Indenture
related to any Vessel may be issued to persons or
entities other than the Pass Through Trustee
(including, without limitation, affiliates of
Mobil) to finance a portion of the initial cost of
the Vessel, the cost of certain alterations,
modifications, additions or improvements to such
Vessel or, in the case of the New Vessels, certain
additional costs of construction. Any such
Additional Notes will be equally and ratably
secured with all outstanding Secured Notes issued
under such Indenture. No Certificateholder, as
such, will have any right to, or interest in, any
Additional Note. See "Description of the Secured
Notes--Additional Notes" and "Description of the
Charters-- Modifications and Alterations" in this
Prospectus Supplement.
The Guaranties............ Mobil will enter into each of the Parent Guaranties
pursuant to which it will irrevocably and
unconditionally guarantee all obligations of MMFC-
I or MMFC-II, as Charterers under the related
Charters and the other related Operative
Documents. See "Description of the Secured Notes--
The Parent Guaranties" in this Prospectus
Supplement.
S-7
<PAGE>
Use of Proceeds........... The proceeds from the sale of the Pass Through
Certificates will be used at the closing of the
Offering to purchase the Secured Note from the
respective Owner Trust in order to finance a
portion of the cost of each Vessel to such Owner
Trust. See "Use of Proceeds" in this Prospectus
Supplement.
Pass Through Trustee...... State Street Bank and Trust Company will act as
trustee, paying agent and registrar for the Pass
Through Certificates. State Street Bank and Trust
Company will also act as Indenture Trustee under
each Indenture.
Federal Income Tax The Pass Through Trust will be classified as a
Consequences.............. grantor trust for federal income tax purposes.
Thus, each Certificateholder will be treated as
the owner of a pro rata undivided interest in the
Secured Notes and any other property held in the
Pass Through Trust and will be required to report
on its federal income tax return its pro rata
share of income from the Secured Notes and any
other property held in the Pass Through Trust in
accordance with such Certificateholder's method of
accounting. The Secured Notes issued in respect of
the New Vessels will be issued with original issue
discount which Certificate Owners may be required
to include in income in advance of receipt of the
cash attributable to such income. See "Federal
Income Tax Consequences" in this Prospectus
Supplement.
ERISA Considerations...... The Pass Through Certificates, with certain
exceptions, are eligible for purchase by employee
benefit plans. See "ERISA Considerations" in this
Prospectus Supplement and in the accompanying
Prospectus.
S-8
<PAGE>
MOBIL CORPORATION
Mobil was incorporated in the State of Delaware in March 1976 and operates
primarily as a holding company. Mobil's principal business, which is conducted
primarily through wholly owned subsidiaries, is in the United States and
international energy industries. Mobil is also a manufacturer and marketer of
petrochemicals, packaging films and specialty chemical products. Mobil,
through its subsidiaries, has business interests in over 125 countries as of
December 31, 1995. The principal executive offices of Mobil are located at
3225 Gallows Road, Fairfax, Virginia 22037-0001, and its telephone number is
(703) 846-3000.
MOBIL MARINE FINANCE COMPANY I MOBIL MARINE FINANCE COMPANY II
MMFC-I and MMFC-II are each wholly owned special purpose finance
subsidiaries of Mobil incorporated in the State of Delaware. They have no
business activities other than chartering the Vessels and subchartering the
Vessels as permitted by their respective Charters. Their offices are located
at 3225 Gallows Road, Fairfax, Virginia 22037-0001, telephone number (703)
846-3000.
CAPITALIZATION OF MOBIL CORPORATION
The following table sets forth the unaudited capitalization of Mobil and its
consolidated subsidiaries as of September 30, 1996, prepared in accordance
with generally accepted accounting principles ("GAAP").
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1996
------------------------
(IN MILLIONS OF DOLLARS)
<S> <C>
Short term debt....................................... $ 3,706
Long term debt........................................ 4,925
Preferred stock (ESOP related), 89,192 shares issued
and outstanding...................................... 693
Unearned employee compensation (ESOP-related)......... (376)
Common stock, par value $2.00 per share, 600 million
shares authorized,
445,147,296 shares issued and outstanding............ 890
Capital surplus....................................... 1,449
Earnings retained in the business..................... 18,840
Cumulative foreign exchange transaction adjustment.... (131)
Common stock held in treasury, at cost--51,183,750
shares............................................... (2,569)
-------
Total capitalization............................... $27,427
</TABLE>
RATIO OF EARNINGS TO FIXED CHARGES OF MOBIL CORPORATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
-------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
---- ---- ------ ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges.......................... 4.6 3.9 5.7(a) 5.3 5.9 8.1
</TABLE>
- --------
(a) Excludes the favorable effect of $205 million of interest benefits from
the resolution of prior-period tax issues.
For the purpose of computing the consolidated ratio of earnings to fixed
charges, earnings represent income before change in accounting principle(s)
decreased or increased by the excess or short-fall of earnings over dividends
from equity affiliates plus income taxes and fixed charges, excluding
capitalized interest. Fixed charges represent interest and amortization of
debt discount expense (including capitalized interest) and the portion of
rents deemed representative of the interest factor.
S-9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF MOBIL CORPORATION
The following selected financial data of Mobil as of December 31, 1994 and
1995 and for the three years in the period ended December 31, 1995 are derived
from its audited consolidated financial statements. The data should be read in
conjunction with the consolidated financial statements, related notes, and
other financial information incorporated by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
------- ------- -------
(IN MILLIONS OF
DOLLARS)
<S> <C> <C> <C>
Revenues........................................... $63,975 $67,383 $75,370
Income before change in accounting principle....... $ 2,084 $ 1,759 $ 2,376
Cumulative effect of change in accounting
principle......................................... -- (680)(a) --
------- ------- -------
Net income......................................... $ 2,084 $ 1,079 $ 2,376
As of December 31:
Total assets..................................... $41,542 $42,138
Long-term debt................................... $ 4,714 $ 4,629
</TABLE>
- --------
(a) Effective January 1, 1994, Mobil changed the method of accounting it uses
to apply the lower of cost or market test for its crude oil and product
inventories.
RECENT DEVELOPMENTS OF MOBIL CORPORATION
The following selected financial data for the nine-month period ended
September 30, 1996 is derived from unaudited condensed consolidated financial
statements prepared in accordance with GAAP. The unaudited condensed
consolidated financial statements include all adjustments, consisting of
normal recurring accruals, which Mobil considers necessary for a fair
presentation of its financial position and results of operations for this
period. Operating results for the nine months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1996. The data should be read in conjunction with the
consolidated financial statements, related notes, and other financial
information incorporated by reference herein.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
------------------------
(IN MILLIONS OF DOLLARS)
<S> <C>
Current assets......................................... $12,637
Non-current assets..................................... 33,590
Current liabilities.................................... 14,993
Long term debt......................................... 4,925
Deferred credits and other liabilities................. 7,407
Minority interest in subsidiary companies.............. 106
Shareholders' equity................................... 18,796
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1996
------------------------
(IN MILLIONS OF DOLLARS)
<S> <C>
Total revenues......................................... $58,546
Income before income taxes............................. 4,715
Net income............................................. 2,288
</TABLE>
S-10
<PAGE>
OUTLINE OF THE TRANSACTION
The Pass Through Certificates are being issued and sold in order to finance
a portion of the acquisition cost of four oil tankers, to facilitate
transactions whereby such tankers will be chartered on a long term basis to
the Charterers. In addition, a portion of the proceeds from the issuance and
sale of the Pass Through Certificates are expected to fund certain payments in
respect of the U.K. Financing. All four of the Vessels are or will be double-
hulled, double-bottomed very large crude carriers ("VLCC's"), of approximately
280,000 dead weight tons capacity. Each Vessel is or will be owned by a
separate trust (each, an "Owner Trust") created under the Delaware Business
Trust Act for the benefit of an Owner Participant under a Declaration and
Agreement of Trust dated November 22, 1996, among Deutsche Morgan Grenfell
(Cayman) Limited, as managing trustee (the "Managing Trustee"), Wilmington
Trust Company, as Delaware trustee (the "Delaware Trustee"), and such Owner
Participant.
The Owner Participants are limited life companies organized under the laws
of the Cayman Islands, each of which is owned 50% by a Mobil affiliate and 50%
by a third party investor. Each Owner Trust will finance not more than 80% of
the total cost of the related Vessel through the issuance of a Secured Note
pursuant to a related indenture (an "Indenture") between, in each case, such
Owner Trust and the Indenture Trustee. The remainder of the cost of each
Vessel to each Owner Trust will be provided by an equity investment by the
related Owner Participant and from the proceeds of the U.K. Financing or,
under the circumstances described in the last paragraph under this caption,
through the issuance of Additional Notes. The Secured Notes with respect to
all four of the Vessels will be acquired, in turn, by the Pass Through Trust,
which will finance its acquisition of such Secured Notes through the issuance
to the public of the Pass Through Certificates being offered hereby (the
"Offering").
The Delivered Vessels are currently in active use by Mobil shipping
affiliates for the international transportation of crude oil. The Eagle was
constructed for Mobil's affiliate, Mobil Shipping and Transportation Company,
a Liberian corporation ("MOSAT"), in the yard of Sumitomo Heavy Industries,
Ltd. (the "Builder") at Oppama, Japan, and delivered in August 1993. The Raven
likewise was constructed for MOSAT by the Builder and delivered in June 1996.
In connection with the Offering, the Eagle and the Raven were sold to the
applicable Owner Participants for prices of approximately $82.5 million and
$95.0 million, respectively. Title to the Eagle was transferred to the Owner
Trust named DUMOCO Eagle Trust, on December 2, 1996, and title to the Raven
was transferred to the Owner Trust named SAMOCO Raven Trust, on December 3,
1996.
The New Vessels will be constructed in Japan and are contracted for delivery
to MOSAT pursuant to two separate construction contracts with the Builder,
each dated June 28, 1996 (collectively, the "Construction Contracts"). Hull
No. 1233 will be constructed in the Builder's shipyard at Oppama, Japan and is
expected to be delivered in the fourth quarter of 1998; Hull No. 1234 will be
constructed under a subcontract with Ishikawajima- Harima Heavy Industries
Co., Ltd. at its yard in Kure, Japan and is expected to be delivered in the
second quarter of 1999. Under the Construction Contracts, the basic prices of
Hulls No. 1233 and 1234 payable to the Builder are fixed at $85.0 million and
$86.0 million, respectively. Certain incidental additional costs will be paid
under the Construction Contracts upon the delivery of the Vessels. The basic
price of Hull No. 1233 has been paid in full and the basic price of Hull No.
1234 will be paid in late December 1996.
Each Owner Trust is expected to conclude a lease financing arrangement with
the related U.K. Lessor whereby such Owner Trust's interest in the related
Vessel is subjected to a conditional sale agreement with such U.K. Lessor.
Such Owner Trust will be entitled to possession of such Vessel under a lease
(the "Head Lease") between such Owner Trust and such U.K. Lessor. The term of
each Head Lease will extend beyond the maturity of the Secured Note issued
under the Indenture with respect to the related Vessel.
Each Owner Trust will charter its interest in the related Vessel, including
its leasehold interest under the related Head Lease (a "Vessel Interest"), to
a Charterer pursuant to a Bareboat Charter Party (the "Charter"). Mobil will
enter into separate Parent Guaranties pursuant to which it will irrevocably
and unconditionally guarantee all obligations of each Charterer under the
related Charter and the related Operative Documents.
S-11
<PAGE>
The U.K. Financing is expected to close immediately following the closing of
the Offering. If for any reason the U.K. Financing fails to occur with respect
to one or more Vessels, an affiliate of Mobil will advance to the related
Owner Participant any funds necessary to complete the acquisition of the
related Vessel, and the related Owner Trust may thereafter issue Additional
Notes under the related Indenture to permit the repayment of such advance. In
no event will the aggregate of the principal amount of the Secured Note and
any such Additional Notes with respect to any Vessel exceed 80% of the related
Owner Trust's cost thereof.
USE OF PROCEEDS
Upon the closing of the Offering, the proceeds from the sale of the Pass
Through Certificates will be used by the Pass Through Trustee, on behalf of
the Pass Through Trust, to purchase the Secured Note issued under each
Indenture. The proceeds of the Secured Note issued under each Indenture will
be applied by the related Owner Trust to finance not more than 80% of the cost
of each Vessel to the related Owner Trust and, upon the closing of the U.K.
Financing, to provide security for the related Owner Trust's obligations under
the U.K. Financing. It is expected that a portion of the proceeds of the U.K.
Financing will be distributed to the Owner Trusts to effect the repayment of
indebtedness incurred to MOSAT in connection with the purchase of MOSAT's
interests in the Eagle, the Raven and the Construction Contract with respect
to Hull No. 1233. The existing indebtedness to MOSAT, in the form of three
separate short term loans, currently bears interest at a rate of 6.5% per
annum. Proceeds of $86.0 million from the U.K. Financing will be held by
SAMOCO 1234 Trust and applied to the payment in late December, 1996 of the
purchase price payable under the Construction Contract relating to Hull No.
1234. To the extent not required in connection with the U.K. Financing, the
proceeds of the Offering will be applied to the satisfaction of the MOSAT
indebtedness described above.
S-12
<PAGE>
DIAGRAM OF PAYMENTS
The following diagram illustrates certain aspects of the ongoing payment
flows in this transaction among Mobil, the Charterers, the Owner Trusts, the
Indenture Trustees, the Pass Through Trustee and the Certificateholders.
With respect to each Vessel, the Charterer will charter the related Vessel
Interest from the related Owner Trust under the related Charter, pursuant to
which such Charterer will pay Bareboat Hire and certain other amounts to such
Owner Trust. The Secured Note issued by such Owner Trust under the related
Indenture will be secured by certain rights in the related Vessel and by an
assignment to the related Indenture Trustee of the related Charter and the
related Parent Guaranty. As a result of the assignment of each Charter, the
related Charterer will pay a portion of the Bareboat Hire constituting debt
service on the related Secured Note directly to the related Indenture Trustee,
who, in turn, will apply such payments to pay the principal of, premium, if
any, and interest on the related Secured Note issued under the related
Indenture and held in the Pass Through Trust. The balance of payments under
such Charter will be paid to the related Owner Trust for the benefit of the
related Owner Participant. The Pass Through Trustee will distribute to
Certificateholders all payments received in respect of the Secured Notes held
in the Pass Through Trust, including payments, if any, made by Mobil under the
Parent Guaranties.
Graphic diagram indicating payment flows depicted as arrows between entities
depicted as squares. On the top row, there are 2 squares: one containing text
"MMFCI (with Mobil Guaranty), Charterer for Raven, Hull No 1233 and Hull No.
1234" ("Square 1") and another containing the text "MMFCII (with Mobil
Guaranty), Charterer for Eagle" ("Square 2") There is an arrow labeled "Excess
Payments" (i) from Square 1 to a square labeled "Owner Trust for Raven, Hull No.
1233 and Hull No. 1234*" ("Square 3") and (ii) from Square 2 to a square labeled
"Owner Trust for Eagle" ("Square 4"). In turn, there is an arrow labeled "Excess
Payments" (i) from Square 3 to a square labeled "Owner Participants for Raven,
Hull No. 1233 and Hull No. 1234*" and (ii) from Square 4 to a square labeled
"Owner Participant for Eagle".
In addition, there is an arrow labeled "Hire Payments Assigned by Owner Trust"
(i) from Square 1 to a Square labeled "Indenture Trustees for Raven, Hull No.
1233 and Hull No. 1234* ("Square 5") and (ii) from Square 2 to a square labeled
"Indenture Trustee for Eagle" ("Square 6"). In turn, there are arrows drawn from
each of Square 5 and Square 6 to a square labeled "Trustee for Pass Through
Trust 1996-A" ("Square 7"). Finally, an arrow labeled "l996-A Pass Through
Certificate Distributions" leads from Square 7 to a square labeled "Holders of
Pass through Certificates, Series 1996-A".
* Each of Raven, Hull No. 1233 and Hull No. 1234 is subject to a separate
Charter and Indenture, pursuant to which payments will be made in the manner
shown for Eagle.
S-13
<PAGE>
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
The Pass Through Certificates offered hereby will be issued by the Pass
Through Trustee pursuant to the terms of the Agreement. The following summary
of the particular terms of the Pass Through Certificates supplements and, to
the extent inconsistent therewith, replaces the description of the general
terms and provisions of the Pass Through Certificates set forth in the
accompanying Prospectus under the caption "Description of the Certificates."
The statements under this caption are a summary and do not purport to be
complete. This summary makes use of terms defined in, and is qualified in its
entirety by reference to all of, the provisions of the Basic Agreement, a form
of which has been filed as an exhibit to the Registration Statement of which
the accompanying Prospectus is a part, and to all of the provisions of the
Trust Supplement which, together with the forms of the related Note Purchase
Agreements (which are described herein as the Participation Agreements),
Indentures, Charters, Parent Guaranties and Trust Agreements, will be filed by
Mobil with the Commission as exhibits to a Current Report on Form 8-K.
PAYMENTS AND DISTRIBUTIONS
The Pass Through Certificates will be issued in fully registered form and
will be registered in the name of Cede & Co., as the nominee of The Depository
Trust Company. No person acquiring an interest in the Pass Through
Certificates will be entitled to receive a definitive certificate representing
such person's interest in the related Pass Through Trust unless definitive
certificates are issued under the limited circumstances described under the
caption "Description of the Certificates--Book-Entry Registration" in the
accompanying Prospectus.
Payments of principal, premium, if any, and interest on the Secured Notes
held in the Pass Through Trust will be distributed by the Pass Through Trustee
to Certificateholders on the date receipt of such payment is confirmed by the
Pass Through Trustee, except in certain cases when some or all of such Secured
Notes are in default. See "Description of the Certificates--Events of Default
and Certain Rights upon an Event of Default" in the accompanying Prospectus.
Interest paid on the Secured Notes will be passed through to the
Certificateholders on January 2 and July 2 of each year, commencing on July 2,
1997, until the final distribution date for the Pass Through Trust. Payments
of principal on the Secured Notes are scheduled to be received by the Pass
Through Trustee on January 2 or July 2, or both, in certain years depending
upon the terms of the Secured Notes, commencing July 2, 1997 (such scheduled
payments of principal and interest on the Secured Notes are herein referred to
as "Scheduled Payments"). Scheduled Payments of principal on the Secured Notes
held in the Pass Through Trust are set forth in Appendix B to this Prospectus
Supplement.
Each Certificateholder will be entitled to receive a pro rata share of any
distribution in respect of Scheduled Payments of principal and interest made
on the Secured Notes. Each such distribution in respect of Scheduled Payments
will be made by the Pass Through Trustee to the holders of record of the
Certificates on the fifteenth day preceding such Regular Distribution Date,
subject to certain exceptions. If a Scheduled Payment is not received by the
Pass Through Trustee on a Regular Distribution Date but is received within
five days thereafter, it will be distributed on the date received by the Pass
Through Trustee to such holders of record. If it is received after such five
day period, it will be treated as a Special Payment and distributed as
described below.
Payments of principal, premium, if any, and interest received by the Pass
Through Trustee on account of the early redemption, if any, of the Secured
Notes relating to one or more Vessels, and payments received by the Pass
Through Trustee following a default in respect of the Secured Notes relating
to one or more Vessels (including payments received by the Pass Through
Trustee on account of the purchase by an Owner Trust of the related Secured
Note, the sale by the Pass Through Trustee of such Secured Notes or the
exercise of remedies under the related Indenture by the Pass Through Trustee)
("Special Payments") will be distributed on, in the case of an early
redemption or a purchase, the date of such early redemption or purchase, which
shall be a Business Day, and otherwise, except as described in the next
paragraph, 20 days after the Pass Through Trustee has confirmed receipt of the
funds for such Special Payment (or the next Business Day after such 20th day
if such date is not a Business Day) (each, a "Special Distribution Date"). The
Pass Through Trustee will mail notice to the Certificateholders not less than
20 days prior to the Special Distribution Date on which any Special
S-14
<PAGE>
Payment is scheduled to be distributed by the Pass Through Trustee stating
such anticipated Special Distribution Date. Each distribution of a Special
Payment, other than the final distribution, on a Special Distribution Date
will be made by the Pass Through Trustee to the Certificateholders of record
on the 15th day next preceding such Special Distribution Date. See
"Description of the Secured Notes--Prepayments" in this Prospectus Supplement
and "Description of the Certificates--Events of Default and Certain Rights
upon an Event of Default" in the accompanying Prospectus.
In the event that, on the issuance date of the Pass Through Certificates,
all of the proceeds from the sale of the Pass Through Certificates are not
used to purchase the Secured Notes, such Secured Notes may be purchased by the
Pass Through Trustee at any time on or prior to January 31, 1997. In such
event, the Pass Through Trustee will hold such proceeds from the sale of the
Pass Through Certificates that are not used to purchase Secured Notes in an
escrow account pending the purchase of the Secured Notes not so purchased.
Such proceeds will be invested in certain specified investments having
maturity dates in no event later than January 31, 1997 at the discretion and
risk of, and for the account of, the applicable Charterer which will be
responsible for any losses on such investments. To the extent that any amount
of the proceeds from the sale of any Pass Through Certificates held in the
escrow account referred to above is not used to purchase Secured Notes on or
prior to January 31, 1997, such amount will be distributed by the Pass Through
Trustee to the holders of record of such Pass Through Certificates on a pro
rata basis upon not less than 20 days' prior notice to them as a Special
Payment on a Special Distribution Date not later than February 25, 1997,
together with interest thereon at a rate equal to the rate applicable to such
Pass Through Certificates, but without premium, and the applicable Charterer
will pay to the Pass Through Trustee on such date an amount equal to such
interest.
POOL FACTORS
Unless there has been an early redemption or a purchase of one or more of
the Secured Notes by the related Owner Trust or Owner Participant after an
Indenture Event of Default, or a default in the payment of principal in
respect of one or more of the Secured Notes held in a Pass Through Trust, the
Pool Factor for the Pass Through Trust (i) will decline in proportion to the
scheduled repayments of principal on the Secured Notes and (ii) will increase
in proportion to the accretion of discount on the Secured Notes. In the event
of such redemption, purchase or default, the Pool Factor and the Pool Balance
of the Pass Through Trust will be recomputed after giving effect thereto and
notice thereof will be mailed to the Certificateholders.
The "Pool Balance" indicates, as of any Regular Distribution Date or Special
Distribution Date, the aggregate unpaid principal amount (including accretion
of discount) of the Secured Notes held in the Pass Through Trust on such date
plus any amounts in respect of principal on such Secured Notes held by the
Pass Through Trustee and not yet distributed. The Pool Balance as of any
Regular Distribution Date or Special Distribution Date shall be computed after
giving effect to the payment of principal, if any, of the Secured Notes held
in the Pass Through Trust and the distribution thereof to be made on that date
and the accretion of discount to such date.
The "Pool Factor" for the Pass Through Trust as of any Regular Distribution
Date or Special Distribution Date is the quotient (rounded to the seventh
decimal place, with .00000005 being rounded upwards) computed by dividing (i)
the then outstanding Pool Balance by (ii) the original aggregate principal
amount (including the full accretion of discount) of the Pass Through
Certificates. The Pool Factor as of any Regular Distribution Date or Special
Distribution Date shall be computed after giving effect to the payment of
principal, if any, on the Secured Notes and distribution thereof to be made on
that date and the accretion of discount to such date. The Pool Factor will
initially be .9215400; thereafter, the Pool Factor will change as described
above to reflect changes in the Pool Balance. The amount of a
Certificateholder's pro rata share of the Pool Balance of the Pass Through
Trust can be determined by multiplying the original denomination of such
holder's Certificate by the Pool Factor as of the applicable Regular
Distribution Date or Special Distribution Date. A report setting forth the
Pool Factor and the Pool Balance will be mailed by the Pass Through Trustee to
Certificateholders on each Regular Distribution Date and Special Distribution
Date.
S-15
<PAGE>
As of the date of sale by the Pass Through Trustee of the Pass Through
Certificates and assuming that all proceeds are used to purchase Secured Notes
on or before January 31, 1997 and that no early redemption, default or purchase
of any Secured Notes shall occur, the aggregate scheduled repayment of
principal and accretion of discount on the Secured Notes to be held in the Pass
Through Trust and the resulting Pool Factor after taking into account each such
repayment and accretion of discount are set forth below:
<TABLE>
<CAPTION>
SCHEDULED SCHEDULED
ACCRETION PAYMENTS OUTSTANDING POOL
REGULAR DISTRIBUTION DATE OF DISCOUNT OF PRINCIPAL PRINCIPAL FACTOR
------------------------- ------------- ------------- --------------- ---------
<S> <C> <C> <C> <C>
December 19, 1996....... -- -- $213,705,126.00 0.9215400
July 2, 1997............ $4,019,818.96 $1,788,683.00 215,936,261.96 0.9311612
January 2, 1998......... 3,883,159.33 1,730,538.00 218,088,883.29 0.9404437
July 2, 1998............ 4,018,487.43 1,790,847.00 220,316,523.73 0.9500497
January 2, 1999......... 4,158,531.72 1,853,258.00 222,621,797.45 0.9599906
July 2, 1999............ 2,114,876.55 2,817,639.00 221,919,035.00 0.9569601
January 2, 2000......... 3,815,629.00 218,103,406.00 0.9405063
July 2, 2000............ 3,948,602.00 214,154,804.00 0.9234792
January 2, 2001......... 4,086,212.00 210,068,592.00 0.9058586
July 2, 2001............ 4,228,616.00 205,839,976.00 0.8876239
January 2, 2002......... 4,375,983.00 201,463,993.00 0.8687538
July 2, 2002............ 4,528,486.00 196,935,507.00 0.8492260
January 2, 2003......... 4,686,303.00 192,249,204.00 0.8290177
July 2, 2003............ 4,849,622.00 187,399,582.00 0.8081052
January 2, 2004......... 5,018,631.00 182,380,951.00 0.7864638
July 2, 2004............ 5,193,530.00 177,187,421.00 0.7640683
January 2, 2005......... 5,374,525.00 171,812,896.00 0.7408922
July 2, 2005............ 5,561,827.00 166,251,069.00 0.7169085
January 2, 2006......... 5,755,656.00 160,495,413.00 0.6920889
July 2, 2006............ 5,956,241.00 154,539,172.00 0.6664044
January 2, 2007......... 6,163,815.00 148,375,357.00 0.6398248
July 2, 2007............ 6,378,625.00 141,996,732.00 0.6123189
January 2, 2008......... 6,600,920.00 135,395,812.00 0.5838543
July 2, 2008............ 6,830,963.00 128,564,849.00 0.5543978
January 2, 2009......... 7,069,021.00 121,495,828.00 0.5239148
July 2, 2009............ 7,315,376.00 114,180,452.00 0.4923694
January 2, 2010......... 7,570,317.00 106,610,135.00 0.4597247
July 2, 2010............ 7,834,143.00 98,775,992.00 0.4259422
January 2, 2011......... 8,107,164.00 90,668,828.00 0.3909825
July 2, 2011............ 8,389,698.00 82,279,130.00 0.3548044
January 2, 2012......... 8,682,079.00 73,597,051.00 0.3173655
July 2, 2012............ 8,984,649.00 64,612,402.00 0.2786219
January 2, 2013......... 9,297,765.00 55,314,637.00 0.2385280
July 2, 2013............ 7,123,077.00 48,191,560.00 0.2078119
January 2, 2014......... 7,371,316.00 40,820,244.00 0.1760253
July 2, 2014............ 7,628,207.00 33,192,037.00 0.1431309
January 2, 2015......... 7,894,049.00 25,297,988.00 0.1090901
July 2, 2015............ 5,295,115.00 20,002,873.00 0.0862565
January 2, 2016......... 5,479,649.00 14,523,224.00 0.0626271
July 2, 2016............ 5,670,615.00 8,852,609.00 0.0381743
January 2, 2017......... 5,868,238.00 2,984,371.00 0.0128693
July 2, 2017............ 2,984,371.00 0.00 0.0000000
</TABLE>
S-16
<PAGE>
DESCRIPTION OF THE SECURED NOTES
The following summary of the particular terms and provisions of the Secured
Notes supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Secured Notes set forth
in the Prospectus under the heading "Description of the Secured Notes." The
statements under this caption are summaries and do not purport to be complete.
The summaries make use of terms defined in and are qualified in their entirety
by reference to all of the provisions of the Secured Notes, the Indentures,
the Charters and the Participation Agreements, forms of which will be filed by
Mobil with the Commission as exhibits to a Current Report on Form 8-K. The
summaries should be read in conjunction with the statements under the heading
"Description of the Secured Notes" in the Prospectus. The following summaries
relate to the Secured Note, the Indenture, the Charter, the Participation
Agreement and the Trust Agreement relating to each Vessel. Prior to the
issuance of the Pass Through Certificates, the related Charterer, Owner
Participant, Owner Trust, Managing Trustee and Indenture Trustee and the Pass
Through Trustee have entered into a Participation Agreement with respect to
each Vessel, and the related Owner Participant, Managing Trustee and Delaware
Trustee are parties to a Trust Agreement relating to such Vessel. Each
Participation Agreement contemplates that, on or after the date of issuance of
the Pass Through Certificates, a Charter and an Indenture will be executed and
delivered in a form prescribed therein and a Secured Note will be issued in
the form prescribed in such Indenture.
GENERAL
The Secured Note with respect to each Vessel will be issued under a separate
Indenture between the related Owner Trust and State Street Bank and Trust
Company, as Indenture Trustee.
Each Owner Trust will charter its related Vessel Interest to the related
Charterer pursuant to the related Charter. Under each Charter, the related
Charterer is obligated to make payments of hire and other amounts payable
under the related Operative Documents to the related Owner Trust. Each Owner
Trust's right to receive payments under the related Charter and other amounts
payable under the related Operative Documents (other than Excepted Payments)
has been assigned under the related Indenture to the related Indenture
Trustee. Pursuant to the terms of each Indenture, at any time until an
Indenture Event of Default has occurred and is continuing, the related
Charterer will pay only Base Hire, Termination Value and certain other amounts
of Supplemental Hire described below ("Assigned Hire") directly to the related
Indenture Trustee. Assigned Hire under each Charter will be sufficient to pay
in full scheduled payments of principal of, premium, if any, and interest on
the Secured Note issued under the related Indenture. Assigned Hire payments
received by the related Indenture Trustee will be distributed to the Pass
Through Trustee to pay the principal of, premium, if any, and interest on the
related Secured Note held in the Pass Through Trust, which payments in turn
will be distributed by the Pass Through Trustee to the Certificateholders on
the date receipt thereof is confirmed by the Pass Through Trustee. Each
Charterer will pay all other amounts payable under the related Charter
directly to the related Owner Trust for distribution to the related Owner
Participant and any such amounts will not be available for distribution to the
Certificateholders except in certain cases upon the occurrence of an Indenture
Event of Default. If an Indenture Event of Default has occurred and is
continuing with respect to an Indenture, all payments under the related
Charter and the other related Operative Documents (other than Excepted
Payments) will be payable by the related Charterer directly to the related
Indenture Trustee and then distributed in accordance with the terms of such
Indenture. The Secured Note issued under each Indenture is not, however, a
direct obligation of, or guaranteed by, the related Charterer or Mobil. Each
Charterer's obligations under the related Charter and the other related
Operative Documents to which it is a party are general obligations of such
Charterer and are irrevocably and unconditionally guaranteed by Mobil under
the related Parent Guaranty.
Under each Charter, Base Hire is an amount that is at least sufficient to
pay the scheduled semi-annual installments of principal and interest due and
payable on the Secured Note issued under the related Indenture. Following an
Event of Loss to the related Vessel or an early termination of the related
Charter, the related Charterer will pay directly to the related Indenture
Trustee an amount which is at least sufficient, together with other amounts
then due under such Charter, to pay in full as of the date of such payment the
aggregate unpaid
S-17
<PAGE>
principal of the outstanding Secured Note issued under the related Indenture,
together with all unpaid interest thereon accrued to such date of payment
("Termination Value"). In addition to Base Hire and Termination Value, each
Charterer is also obligated under the related Indenture and the related
Charter to pay directly to the related Indenture Trustee that portion of
Supplemental Hire consisting of premium, if any (except premium, if any,
payable by the related Owner Participant or the related Owner Trust in
connection with an election by such Owner Participant or Owner Trust to
purchase or redeem the related Secured Note upon the occurrence of a related
Charter Event of Default), and interest on overdue payments due to the related
Indenture Trustee or any amounts payable to such Indenture Trustee for its
services, expenses or indemnification.
PRINCIPAL PAYMENTS
The Maturity Date and aggregate principal amounts (including the full
accretion of discount) of the Secured Notes to be held in the Pass Through
Trust are as follows:
<TABLE>
<CAPTION>
OUTSTANDING PRINCIPAL
AMOUNT AFTER FULL
VESSEL (OWNER TRUST) CHARTERER ACCRETION FINAL MATURITY DATE
- ------------------------------------ --------- --------------------- -------------------
<S> <C> <C> <C>
Eagle (DUMOCO Eagle Trust) MMFC-II 47,800,000 January 2, 2013
Raven (SAMOCO Raven Trust) MMFC-I 58,500,000 January 2, 2015
Hull No. 1233 (SAMOCO 1233 Trust) MMFC-I 62,800,000 January 2, 2017
Hull No. 1234 (SAMOCO 1234 Trust) MMFC-I 62,800,000 July 2, 2017
</TABLE>
Interest on each Secured Note will be payable on the unpaid principal amount
of such Secured Note at the rate per annum indicated on the face of such
Secured Note on each Regular Distribution Date for which interest is payable
thereon. Such interest will be computed on the basis of a 360-day year of
twelve 30-day months. Secured Notes issued in respect of the Delivered Vessels
will accrue interest from the Closing Date payable in cash on each Regular
Distribution Date, commencing July 2, 1997. The Secured Notes issued in
respect of the New Vessels will be issued at varying discounts from par and,
during the period from the Closing Date until the applicable Full Accrual Date
(January 2, 1999, in the case of Hull No. 1233, and July 2, 1999, in the case
of Hull No. 1234), will provide a return consisting of accretion of discount
such that the yield to the applicable Full Accrual Date of such Secured Note
will equal the semi-annual bond equivalent rate corresponding to the interest
rate applicable to the Pass Through Certificates. From and after the
respective Full Accrual Dates, the Secured Notes issued in respect of the New
Vessels will accrue interest payable in cash on each Regular Distribution Date
(commencing July 2, 1999 in the case of Hull No. 1233 and January 2, 2000 in
the case of Hull No. 1234) at the rate per annum indicated on the cover of
this Prospectus Supplement.
As used in this Prospectus Supplement, the principal amount of a Secured
Note issued in respect of a Delivered Vessel refers to the face amount of such
Secured Note, as such amount may be reduced from time to time by the payment
of principal installments thereunder. Each Secured Note issued in respect of a
New Vessel will accrete original issue discount from the Closing Date to the
applicable Full Accrual Date, and, as used in this Prospectus Supplement, the
principal amount of each such Secured Note refers to the accreted value of
such Secured Note during the period that such Secured Note is accreting
discount, and after the applicable Full Accrual Date, the face amount thereof,
as such amount may be reduced from time to time by the payment of principal
installments thereunder. The principal of, accreted discount, if any, and
interest on the Secured Notes held in the Pass Through Trust will be payable
as set forth on Appendix B hereto.
If any date scheduled for any payment of principal of, premium, if any, or
interest on any Secured Note is not a Business Day, such payment may be made
on the next succeeding Business Day without any additional interest.
(Indentures, Section 2.03(b))
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PREPAYMENTS
Mandatory Prepayments
In the event that (i) an Event of Loss shall occur with respect to any
Vessel, (ii) the Construction Contract for any New Vessel is terminated by the
related Owner Trust prior to delivery under circumstances which would make
such Owner Trust eligible for a refund under such Construction Contract or
(iii) a New Vessel shall not have been delivered by the Builder on or prior to
the applicable Final Delivery Date, then the related Owner Trust shall redeem,
on the date on which Termination Value is paid pursuant to the related
Charter, the entire unpaid principal amount of the outstanding Secured Note
issued under the related Indenture at a redemption price equal to 100% of such
unpaid principal amount plus, in each case, accrued and unpaid interest
thereon to the applicable payment date, but without the payment of any Make-
Whole Amount or other premium. An Owner Trust with respect to a New Vessel is
eligible to receive a refund of such New Vessel's purchase price under the
related Construction Contract in the event that such New Vessel is rejected by
such Owner Trust, such Construction Contract is cancelled by such Owner Trust
in accordance with certain agreed terms or the Builder defaults in delivery or
otherwise breaches such Construction Contract in a manner justifying recision
thereof. (Indentures, Section 3.02; Construction Contracts, Section 6(f))
In the event that a Charterer exercises its voluntary termination right
under the related Charter or if the Construction Contract for any New Vessel
is terminated by the related Owner Trust prior to its delivery under
circumstances which would not make the related Owner Trust eligible for a
refund under such Construction Contract or if a special termination occurs as
a result of the termination of a Head Lease under circumstances where the
related Charter is terminated or the related Vessel is sold pursuant to such
Head Lease and the new purchaser of such Vessel is not substituted as obligor
of the Secured Note issued under the related Indenture, the related Owner
Trust shall redeem in whole on the date the Termination Value is paid pursuant
to the related Charter the entire unpaid principal amount of such Secured Note
outstanding on such date, at a redemption price equal to 100% of the unpaid
principal amount thereof, together with any accrued and unpaid interest
thereon, plus a premium equal to the applicable Make-Whole Amount, if any,
with respect to such Secured Note, and otherwise without premium. (Indentures,
Section 3.03; Charters, Article 18)
Voluntary Prepayment
At any time each Owner Trust may, with the prior written consent of the
related Charterer, redeem in whole the Secured Note issued under the related
Indenture at a redemption price equal to 100% of the unpaid principal amount
thereof, together with any accrued and unpaid interest thereon to the date of
redemption plus a premium equal to the Make-Whole Amount, if any, with respect
to such Secured Note, and otherwise without premium. (Indentures, Section
3.05)
In addition, each Secured Note is subject to purchase or prepayment in whole
by the related Owner Trust or Owner Participant, on any Special Distribution
Date if (i) an Indenture Event of Default under the related Indenture
resulting from one or more related Charter Events of Default shall have
occurred and be continuing for less than 270 days, during which time such
Secured Note shall not have been accelerated, at a price equal to the
aggregate unpaid principal amount thereof, together with accrued interest
thereon, plus a premium equal to the applicable Make-Whole Amount, if any, or
(ii) (A) an Indenture Event of Default under the related Indenture resulting
from one or more related Charter Events of Default shall have occurred and be
continuing for more than 270 days, during which time such Secured Note shall
not have been accelerated, (B) the related Indenture Trustee shall have given
such Owner Trust or Owner Participant notice of its intent to accelerate such
Secured Note or (C) such Secured Note shall have been accelerated, at a price
equal to the aggregate unpaid principal amount thereof, together with accrued
interest thereon, but without any Make-Whole Amount or other premium.
(Indentures, Section 3.06)
The "Make-Whole Amount," if any, with respect to any Secured Note to be
redeemed shall be determined as of the fourth Business Day prior to the
applicable Redemption Date, and shall equal the excess, if any, of (a) the sum
of the present values of all remaining scheduled payments of principal and
interest from the applicable
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Redemption Date to the maturity of such Secured Note, discounted semi-annually
on each January 2 and July 2 at a rate equal to the Treasury Rate (as defined
below) plus .10%, based on a 360-day year of twelve 30-day months, over (b)
the aggregate unpaid principal amount of such Secured Note, plus accrued but
unpaid interest on such Secured Note (but not any accrued interest in default)
to the Redemption Date. The Make-Whole Amount, if any, payable with respect to
any Secured Note will be determined by an independent investment banking
institution of national standing (the "Investment Banker") selected by the
related Charterer.
The "Treasury Rate" means, with respect to each Secured Note to be redeemed
or purchased, a per annum rate (expressed as a semi-annual equivalent and as a
decimal and, in the case of U.S. Treasury bills, converted to a bond
equivalent yield) determined to be the per annum rate equal to the semi-annual
yield to maturity of U.S. Treasury securities maturing on the Average Life
Date (as defined below) of such Secured Note, as determined by interpolation
between the most recent weekly average yields to maturity for two series of
U.S. Treasury securities (A) one maturing as close as possible to, but earlier
than, the Average Life Date of such Secured Note and (B) the other maturing as
close as possible to, but later than, the Average Life Date of such Secured
Note, in each case as published in the most recent H.15(519) (or, if a weekly
average yield to maturity for United States Treasury securities maturing on
the Average Life Date of such Secured Note is reported in the most recent
H.15(519), as published in H.15(519)). H.15(519) means "Statistical Release
H.15(519), Selected Interest Rates," or any successor publication, published
by the Board of Governors of the Federal Reserve System. The most recent
H.15(519) means the latest H.15(519) which is published prior to the close of
business on the fourth Business Day prior to the Redemption Date.
The "Average Life Date" for any Secured Note to be redeemed shall be the
date which follows the Redemption Date by a period equal to the Remaining
Weighted Average Life at the Redemption Date of such Secured Note. The
"Remaining Weighted Average Life" of such Secured Note at the Redemption Date
of such Secured Note is the number of days determined by dividing (A) the sum
of the products obtained by multiplying (1) the amount of each remaining
principal payment on such Secured Note by (2) the number of days from and
including the Redemption Date to but excluding the scheduled payment date of
such principal payment by (B) the then unpaid principal amount of such Secured
Note.
SECURITY
The Secured Note issued under each Indenture is secured by, among other
things, (i) an assignment of the related Owner Trust's rights under the
related Charter, including the right to receive all payments under the related
Charter (other than Excepted Payments), (ii) an assignment of such Owner
Trust's rights under the related Parent Guaranty (other than rights in respect
of Excepted Payments), (iii) an assignment of such Owner Trust's rights under
the related Conditional Sale Agreement, Head Lease and certain other U.K.
Financing Documents and (iv) in the case of the New Vessels, an assignment,
subject to certain rights of the U.K. Lessor, of the related Construction
Contract. (Indentures, Granting Clause)
So long as no Indenture Event of Default has occurred and is continuing
under an Indenture, the related Owner Trust will be entitled to exercise all
of its rights under the related Charter and under the other related Operative
Documents, subject to certain specific exceptions (including with respect to
amendments, waivers, modifications and consents under specified provisions of
certain of the Operative Documents). Each Owner Trust's rights, however, do
not include the right to receive payments of Assigned Hire, which payments
will be made directly to the related Indenture Trustee. The assignment by each
Owner Trust to the related Indenture Trustee of its rights under the related
Charter and the other related Operative Documents also excludes certain rights
of such Owner Trust thereunder, including rights relating to indemnification
by the related Charterer for certain matters and insurance proceeds payable to
such Owner Trust under liability insurance maintained by the Charterer under
the related Charter. (Indentures, Granting Clause) For a description of
certain other rights of each Owner Trust, as owner under the related Charter,
see "The Charters--Charter Events of Default."
So long as no Indenture Event of Default has occurred and is continuing,
funds, if any, held from time to time by the related Indenture Trustee
pursuant to any related Operative Document will be invested and reinvested
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in Permitted Investments by such Indenture Trustee at the direction of the
related Charterer acting as agent of the related Owner Trust. The Charterer,
on behalf and as agent of each Owner Trust, is required to pay on demand to
the applicable Indenture Trustee the amount of any loss resulting from any
such investment. So long as no Charter Event of Default has occurred and is
continuing under the related Charter, the related Charterer is entitled to
receive any profits made from such investments. (Charters, Article 29(h);
Indentures, Section 7.04)
The Ship Mortgage
Each Owner Trust of a Delivered Vessel will grant, and each Owner Trust of a
New Vessel has agreed that on the delivery date of such Vessel it will grant,
to the related Indenture Trustee a mortgage (the "Ship Mortgage") in the
related Vessel Interest to secure the payment of the Secured Note issued under
the related Indenture. So long as the U.K. Financing is in effect, the Ship
Mortgage on each Vessel will provide that it is subordinate to the rights of
the U.K. Lessor. Each Ship Mortgage will further provide that upon foreclosure
the Indenture Trustee would only have the right to sell the Owner Trust's
interest in the Vessel subject to the rights of the U.K. Lessor rather than
the Vessel itself. In addition under these circumstances the Ship Mortgage
will not qualify as a "preferred" mortgage and would rank behind holders of
maritime liens on the Vessel.
ADDITIONAL NOTES
Additional Notes may be issued under and secured by each Indenture, at any
time and from time to time, for the purpose of providing funds to finance the
initial cost of the related Vessel if the related U.K. Financing is not
concluded, the cost of certain modifications, alterations, additions and
improvements to the related Vessel ("Modifications") or, in the case of the
New Vessels, certain additional costs of construction ("Alterations");
provided that certain conditions set forth in such Indenture are satisfied,
including, among other things, that (i) the aggregate principal amount of the
related Secured Note and any such Additional Note issued under such Indenture
to finance the related Owner Trust's initial cost of the related Vessel shall
not exceed 80% of such cost, (ii) the aggregate principal amount of the
related Secured Note, any Additional Note issued under such Indenture to
finance the initial cost of such Vessel and any other Additional Notes issued
under such Indenture to finance any Additions or Modifications after the
issuance of such Additional Notes will not exceed 85% of the Fair Market Sales
Value of such Vessel (taking into account the value of such Modifications or
Alterations), (iii) the date of maturity of the Additional Notes will not
extend beyond the end of the applicable Charter Period, (iv) no Charter Event
of Default under the related Charter or Indenture Event of Default under such
Indenture will have occurred and be continuing on the date of issuance of the
Additional Notes, (v) the related Indenture Trustee will have received such
opinions as are customary in transactions of this type, (vi) the related
Indenture Trustee will have received confirmation from each of Moody's
Investors Service, Inc. and Standard & Poor's Rating Group (together, the
"Rating Agencies") to the effect that the issuance of Additional Notes will
not result in the downgrade or withdrawal of such Rating Agency's then current
credit rating of the Pass Through Certificates and (vii) the terms of the
Additional Notes, except for the terms of payment, will be substantially the
same as the related Secured Notes. Any such Additional Notes may be issued to
persons or entities (including, without limitation, Mobil affiliates) other
than the Pass Through Trustee. (Indentures, Section 2.08)
The terms, conditions and designations of any such Additional Notes will be
set forth in a supplement to the related Indenture. (Indentures, Section 2.08)
In addition, Assigned Hire and other amounts payable by the Charterer under
the related Charter will be adjusted to the extent necessary to provide
Assigned Hire sufficient to provide for the payment, when due, of all
scheduled payments of principal of, premium, if any, and interest on the
related Secured Notes, including any related Additional Notes. (Indentures,
Section 2.08) All Secured Notes issued and outstanding under an Indenture,
including any related Additional Notes, will be equally and ratably secured
thereunder, without preference, priority or distinction. (Indentures, Section
2.10)
LIMITATION OF LIABILITY
The Secured Note issued under each Indenture is not a direct obligation of,
or guaranteed by, the related Charterer, Owner Trust, Owner Participant,
Managing Trustee or Delaware Trustee. None of the Owner Trust, Managing
Trustee, Delaware Trustee, Owner Participant or Indenture Trustee with respect
to any Vessel, or any
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affiliates thereof, shall be personally liable to any holder of a related
Secured Note or, in the case of such Owner Trust, Managing Trustee, Delaware
Trustee and Owner Participant, to the related Indenture Trustee for any
amounts payable under such Secured Note or, except as provided in such
Indenture, for any liability under such Indenture. All payments of principal
of, premium, if any, and interest on each Secured Note (other than payments
made in connection with an optional redemption or purchase by the related
Owner Trust or Owner Participant) will be made only from the assets subject to
the Lien of the related Indenture or the income and proceeds received by the
related Indenture Trustee therefrom (including payments made by the related
Charterer under the related Charter and payments made, if any, by Mobil under
the related Parent Guaranty). (Indentures, Section 2.02)
Except as otherwise provided in each Indenture, none of the related
Indenture Trustee, Managing Trustee or Delaware Trustee, in its individual
capacity, shall be answerable or accountable under such Indenture or under the
related Secured Notes under any circumstances except, with respect to such
Indenture Trustee, Managing Trustee or Delaware Trustee, for (a) its own
willful misconduct or gross negligence, (b) failure to exercise reasonable
care in safeguarding securities held by it under such Indenture, (c) in case
of any inaccuracy of representation or warranty made by such Indenture
Trustee, Managing Trustee or Delaware Trustee under the related Operative
Documents, (d) any tax based on or measured by any fees, commissions or
compensation received by it for acting as trustee, (e) subject to certain
exceptions, failure to use reasonable care in disbursing funds in accordance
with such Indenture and (f) failure to remove certain liens in accordance with
the related Participation Agreement. (Indentures, Sections 7.01 and 7.03;
Participation Agreements, Sections 8, 9, 10 and 11) No Owner Participant will
have any duty or responsibility under the related Indenture or the Secured
Note issued thereunder to the related Indenture Trustee or to any holder of
such Secured Note. (Indentures, Section 2.02)
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
Each Charterer will be prohibited from consolidating with or merging into
any other corporation or transferring substantially all of its assets to
another corporation unless such Charterer is the continuing corporation or,
among other things, (a) the successor corporation shall be a corporation
organized and existing under the laws of the United States or any State or the
District of Columbia, (b) the successor corporation shall assume the due and
punctual performance and observance of all of the covenants and conditions of
each related Operative Document to which such Charterer is a party and which
are to be performed by such Charterer, (c) immediately after giving effect to
such transaction, no Charter Event of Default will have occurred and be
continuing under the related Charter and (d) after giving effect to such
transaction, the related Parent Guaranty remains in full force and effect and
constitutes a full and unconditional guaranty by Mobil of the successor
corporation's obligations under the related Charter and each related Operative
Document to which it is a party. (Participation Agreements, Section 12.3)
Pursuant to each Parent Guaranty, Mobil will be prohibited from
consolidating with or merging into any other corporation, dissolving or
transferring all or substantially all of its assets to another corporation,
unless Mobil is the continuing corporation or such successor or transferee (a)
expressly and unconditionally assumes the punctual performance and observance
of all covenants, conditions and obligations of Mobil under such Parent
Guaranty and (b) shall not, immediately after such merger, consolidation, sale
or other disposition, be in default in the performance of any covenant,
condition or obligation of Mobil under such Parent Guaranty.
INDENTURE EVENTS OF DEFAULT, CURE, NOTICE AND WAIVER
Events of Default under each Indenture include: (a) a related Charter Event
of Default (other than nonpayment of any Excess Hire or Additional Excess Hire
payment or Excepted Payment) that shall have occurred and be continuing, (b)
default by the applicable Owner Trust in making payments when due of principal
of, premium, if any, or interest on the related Secured Note and continuance
of that default for ten Business Days, (c) failure by the applicable Owner
Trust, Managing Trustee or Owner Participant to perform or observe in any
material respect any covenant or agreement contained in such Indenture or any
other related Operative Document which shall have continued for a period of 30
days after receipt of notice by such Owner Trust,
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Managing Trustee or Owner Participant from the applicable Indenture Trustee or
the Pass Through Trustee specifying such failure and requiring it to be
remedied (or if such failure is remediable and the related Owner Trust,
Managing Trustee or Owner Participant is diligently attempting to remedy such
failure, such failure shall continue for a period of 180 days after receipt of
notice thereof), (d) any representation or warranty made by the applicable
Owner Trust, Managing Trustee or Owner Participant in the related
Participation Agreement being inaccurate in any material respect as of the
date made unless such inaccurate representation or warranty shall not be
material to the recipient thereof at the time the notice referred to below is
received by such Owner Trust, Managing Trustee or Owner Participant or any
material adverse effect is cured or corrected within 30 days after receipt of
written notice to the related Owner Trust, Managing Trustee or Owner
Participant from the applicable Indenture Trustee; provided that, if such
material adverse effect is capable of being remedied and such Owner Trust,
Managing Trustee or Owner Participant is diligently attempting to remedy such
effect, such person shall have 90 days after receipt of written notice thereof
to remedy such material adverse effect, and (e) the occurrence of certain
events of bankruptcy, reorganization or insolvency of the related Owner
Participant or Owner Trust. (Indentures, Section 5.02)
If a Charterer fails to make any Base Hire payment under the related Charter
within ten Business Days after the same has become due, the related Indenture
Trustee may not exercise remedies under such Charter or declare the related
Secured Note to be due and payable or exercise any other remedies under the
related Indenture until eleven days after the tenth Business Day of such
failure. If the related Owner Trust furnishes to the related Indenture Trustee
the amount of such Base Hire payment, together with interest thereon on
account of the delayed payment thereof, within such eleven day period, such
Indenture Trustee and holders of the related outstanding Secured Note may not
exercise any remedies otherwise available under such Indenture or such Charter
as the result of such failure. Each Owner Trust's rights to cure an Indenture
Event of Default resulting from the failure of a Charterer to pay Base Hire
under the related Charter will be limited to the right to cure an aggregate of
six defaults, or three consecutive defaults, under such Charter and may only
be exercised as long as no other Indenture Event of Default has occurred and
is continuing under the related Indenture. Each Owner Trust or Owner
Participant may also cure any other default by the related Charterer in the
performance of its obligations under the related Charter and the other related
Operative Documents and any other Charter Event of Default if (but only if)
the performance or observance of such obligations or the cure of such Charter
Event of Default can be effected by the payment of money alone. Such cure
rights may be exercised as long as no other Indenture Event of Default has
occurred and is continuing under the related Indenture at any time prior to
the day which is the later of (x) the eleventh day subsequent to the date
notice of such default or Charter Event of Default is delivered by the related
Indenture Trustee to such Owner Trust or Owner Participant and (y) the
eleventh day subsequent to the expiration of the grace period, if any. During
such eleven day period, the applicable Indenture Trustee may not exercise
remedies under the related Charter or declare the related Secured Note to be
payable or otherwise exercise remedies under the related Indenture.
(Indentures, Section 5.03)
To the extent of any payment made by the related Owner Participant or Owner
Trust described in the preceding paragraph, such Owner Participant or Owner
Trust shall be subrogated to the rights of the holders of the Secured Note
issued under the related Indenture to receive from the related Indenture
Trustee the payment of Assigned Hire or other amount for which such payment
was made by such Owner Participant or Owner Trust, as the case may be, and
such Owner Participant or Owner Trust, as the case may be, shall be entitled
to receive payment from such Indenture Trustee upon receipt thereof by the
Indenture Trustee; provided, however, that no such amount shall be paid over
to such Owner Participant or Owner Trustee, as the case may be, unless all
principal and interest on the related Secured Note then due and payable and
any other amounts then due and payable under such Secured Note and the related
Indenture shall have been paid in full and no Indenture Event of Default has
occurred and is continuing. Upon exercising any such cure rights, neither such
Owner Participant nor such Owner Trust shall obtain any lien on the applicable
Indenture Estate or Trust Estate on account of such payment, nor shall any
claim of such Owner Trust or Owner Participant against the related Charterer
for the repayment thereof impair the prior right and security interest of the
related Indenture Trustee in and to the applicable Indenture Estate.
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Pursuant to each Indenture, during the occurrence and continuance of an
Indenture Event of Default all payments under the related Charter (other than
Excepted Payments) or any other related Operative Documents will upon notice
to the related Charterer become immediately payable by the related Charterer
to the related Indenture Trustee, and such Indenture Trustee shall withhold
any amounts otherwise payable to the related Owner Trust until the earliest to
occur of (i) the first Business Day following the date that is 180 days after
such Indenture Trustee received such amount and (ii) the date that such
Indenture Event of Default is no longer continuing (in each of which cases
described in clauses (i) and (ii) such amounts shall be distributed to such
Owner Trust, unless, prior thereto, the related Secured Note shall have been
accelerated or such Indenture Trustee shall have given notice to the Owner
Trust of its intention to accelerate the related Secured Note or the Indenture
Trustee shall have served notice of its intent to declare the related Charter
to be in default (in which case such amounts shall be applied as provided in
the related Indenture)). (Indentures, Section 4.01(c))
The holders of a majority in aggregate principal amount of the outstanding
Secured Notes issued under each Indenture, by written directive to the
applicable Indenture Trustee, may on behalf of all holders of such Secured
Notes direct such Indenture Trustee to waive any past default under such
Indenture, except a default in the payment of the principal of, premium, if
any, or interest on, or other amounts due under any such Secured Notes or a
default in respect of any covenant or provision of such Indenture that cannot
be modified or amended without the consent of each holder of such Secured
Notes. (Indentures, Section 5.08)
REMEDIES
If an Indenture Event of Default has occurred and is continuing and so long
as the same has not been remedied, then the related Indenture Trustee may
exercise all of the rights and powers provided under the related Indenture or
available under applicable law; provided, however, such Indenture Trustee must
give the related Owner Trust at least ten Business Days' (or five Business
Days in the case of acceleration of the related Secured Note other than an
automatic acceleration of the related Secured Note) prior written notice of
its intention to exercise remedies under such Indenture. Subject to the
provisions of the related Indenture, upon the occurrence and during the
continuance of an Indenture Event of Default, the related Indenture Trustee
may exercise all rights and remedies of the related Owner Trust to the
exclusion of such Owner Trust under the related Charter (other than those
rights and remedies relating to Excepted Payments), including, without
limitation, the right to take possession of all or any part of the related
Indenture Estate and exclude such Owner Trust and all persons (including the
related Charterer but excluding the related U.K. Lessor to the extent of such
U.K. Lessor's rights under the related Conditional Sale Agreement) claiming
under such Owner Trust. Upon at least 25 days' prior written notice to the
related Owner Participant and the related Owner Trust, the related Indenture
Trustee may invoke and exercise the power of sale and sell any or all of the
related Indenture Estate in the manner required by law at public auction, or
in any other manner which shall be in accordance with applicable law, or, such
Indenture Estate may be foreclosed, and such Indenture Trustee may exercise
all rights and remedies of a secured party under the Uniform Commercial Code
as in effect in any applicable jurisdiction; provided that (i) such Indenture
Trustee shall not sell, assign, transfer or deliver any of such Indenture
Estate or take possession of such Indenture Estate unless the related Secured
Note has been accelerated and (ii) no exercise of any remedies by such
Indenture Trustee may affect the rights of the related Charterer under the
related Charter unless a Charter Event of Default thereunder has occurred and
is continuing and such Charter has been declared to be in default in
accordance therewith. In addition, each Indenture Trustee's right to exercise
foreclosure remedies under the related Indenture is subject in certain
circumstances to its having proceeded to exercise one or more material
remedies under the related Charter seeking to terminate such Charter, unless
at the time, such Indenture Trustee is stayed or otherwise prevented from
doing so by operation of law, in which case such Indenture Trustee has agreed
to refrain from exercising remedies under such Indenture for a period of up to
180 days from the date of the commencement of such prohibition. If such
Charterer were a debtor in a proceeding under Title 11, United States Code
(the "Bankruptcy Code"), during a Charter Event of Default under the related
Charter, the condition described in the immediately preceding sentence could
not be met by the related Indenture Trustee during the period when certain
actions against such bankrupt Charterer, including actions to dispossess such
Charterer, would be barred by the automatic stay provisions of the Bankruptcy
Code. See "Description of the Charters--Charter Events of Default."
(Indentures, Section 5.04)
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If an Indenture Event of Default (other than certain bankruptcy Charter
Events of Default or an Indenture Event of Default relating to the bankruptcy,
reorganization or insolvency of the related Owner Participant or Owner Trust
or the related Charterer or Guarantor) occurs and is continuing, then the
related Indenture Trustee may at any time, by five days' written notice to the
related Owner Trust, declare the unpaid principal of the related Secured Note
then outstanding, together with accrued but unpaid interest thereon and any
other amounts due thereunder, immediately due and payable. In the case of
certain bankruptcy-related Indenture Events of Default under each Indenture,
the related Secured Note shall automatically become due and payable. The
holders of a majority in aggregate principal amount of the Secured Note
outstanding under each Indenture may rescind and annul any such acceleration
at any time before the entry of any judgment or decree for the payment of the
money so due, provided all overdue installments of principal of and interest
on such Secured Note, if any, and all other amounts payable under such Secured
Note (except the principal of such Secured Note which by such acceleration
shall have become payable) have been duly paid and every other Indenture Event
of Default under such Indenture has been cured. (Indentures, Section 5.04)
Each Indenture provides that if the related Indenture Trustee has actual
knowledge of any Indenture Event of Default under such Indenture (or an event
which, after the giving of notice or the lapse of time, or both, would become
an Indenture Event of Default), any failure on the part of the related
Charterer to make any payment of Assigned Hire when due or any Event of Loss,
the Indenture Trustee will give prompt notice of such event to the related
Owner Trust, Owner Participant and Charterer and, within 90 days after
obtaining such actual knowledge, mail to the holders of the related Secured
Note notice of any such Indenture Event of Default unless, in each case, such
Indenture Event of Default has been remedied before the giving of such notice.
The holders of a majority in aggregate principal amount of the Secured Note
then outstanding under each Indenture may instruct the related Indenture
Trustee to give such notice, consent or direction or exercise such right,
remedy or power under the related Indenture or Charter or in respect of the
related Indenture Estate or take such other action as shall be specified in
such instruction, provided that such action is authorized to be taken under
the related Indenture. If the related Indenture Trustee has not received such
instruction from the holders of such Secure Note within 20 days after mailing
of the notice described in the first sentence of this paragraph, such
Indenture Trustee may take such action, or refrain from taking such action,
but will be under no duty to take or refrain from taking any action, with
respect to such Indenture Event of Default, Event of Loss or fact as it
determines to be advisable and in the best interest of the holders of such
Secured Note. In any such event, however, each Indenture provides that the
related Indenture Trustee will not be required to take any action or refrain
from taking any action instructed to be taken or refrained from being taken
unless such Indenture Trustee has been indemnified to its reasonable
satisfaction against any liability in the performance of any of its duties
under such Indenture. (Indentures, Sections 6.01, 6.02, 6.04)
If an Indenture Event of Default occurs and is continuing under any
Indenture and the applicable Indenture Trustee (as security assignee) has
declared the related Charter to be in default or the related Secured Note has
been accelerated, any sums held or received by such Indenture Trustee will be
applied, first, to reimburse such Indenture Trustee for any tax, expense or
other loss incurred by it and to pay any other amounts then due such Indenture
Trustee, second, to reimburse the holders of the related Secured Note for any
amounts paid to indemnify such Indenture Trustee as provided in the related
Indenture and, third, to pay in full the aggregate unpaid principal amount of
such Secured Note then outstanding and all accrued but unpaid interest thereon
to the date of distribution. (Indentures, Section 4.03)
BANKRUPTCY OF OWNER TRUST OR OWNER PARTICIPANT
Although each Owner Trust has been structured as a special-purpose entity
the activities of which are expressly limited to the sale-leaseback
transaction contemplated by the Operative Documents related thereto, it is
possible that such Owner Trust could become the subject of a proceeding under
the Bankruptcy Code. In such event, receipt of payments by the related
Indenture Trustee under the related Charter, Parent Guaranty and Secured Note
may be interrupted, and the exercise of remedies by such Indenture Trustee,
including foreclosure of the related Indenture, would be stayed during the
pendency of bankruptcy proceedings. Subject to certain procedural and
substantive safeguards provided by the Bankruptcy Code (such as the
requirement that the debtor-
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in-possession or trustee provide adequate protection of the interests of the
holders of the related Secured Note), a bankruptcy court could permit the use
or disposition of Bareboat Hire, including Assigned Hire, and other payments
under the related Charter and the related Indenture Estate for purposes other
than making payments on such Secured Note, or could modify the interest rate,
maturity and payment terms of such Secured Note.
In the event of the bankruptcy of an Owner Participant, it is possible that,
notwithstanding that the related Vessel is owned by the related Owner Trust in
trust, such Vessel, the related Charter, Parent Guaranty and Secured Note
could become part of the bankruptcy proceeding. In such event, payments under
the related Charter, Parent Guaranty or Secured Note could be interrupted and
the ability of the related Indenture Trustee to exercise its remedies under
the related Indenture might be restricted, although such Indenture Trustee
would retain its status as a secured creditor in respect of such Charter,
Parent Guaranty and Vessel.
MODIFICATION OF AGREEMENTS
Without the consent of holders of a majority in aggregate principal amount
of the Secured Notes outstanding under any Indenture, the provisions of such
Indenture and the related Charter, Participation Agreement, Trust Agreement,
Head Lease, Conditional Sale Agreement, Construction Contract and any other
related Operative Documents may not be amended or modified, except to the
extent indicated below.
Certain provisions of each Indenture, the related Charter, Participation
Agreement, Trust Agreement, Head Lease, Conditional Sale Agreement and any
other related Operative Document may be modified, amended or supplemented by
the parties thereto without the consent of holders of the Secured Notes
outstanding under such Indenture so long as no Indenture Event of Default
shall have occurred and be continuing thereunder. In the case of each Charter,
such provisions include, among others, provisions relating to (i) payments
under the Charter and other payments, except to the extent indicated in clause
(f) of the following paragraph, (ii) the maintenance of the related Vessel,
modifications to such Vessel and the return to the related Owner Trust of such
Vessel at the end of the applicable Charter Period and (iii) the renewal of
such Charter. In addition, prior to an Indenture Event of Default the
Construction Contract with respect to a New Vessel may be amended or modified
without the consent of any holder of the related Secured Notes; provided that
such amendment or modification does not decrease (except to a de minimis
extent) the Fair Market Sales Value of such Vessel or decrease the useful life
or utility of such Vessel. (Indentures, Section 9.02)
Without the consent of each holder of a Secured Note outstanding under the
related Indenture, no amendment or modification of such Indenture or any
related Operative Document may (a) change the stated maturity or reduce the
principal amount of, or premium, if any, or interest payable on any Secured
Note issued under such Indenture or impair the right to institute suit for the
enforcement of any such payment or change mandatory or optional prepayment
provisions or change the date or place on which, or the coin or currency in
which, any principal or premium, if any, or interest is due and payable, (b)
create any lien with respect to the property subject to the Lien of such
Indenture, except as permitted in such Indenture, or deprive any holder of a
Secured Note issued thereunder of the benefit of the Lien of such Indenture,
(c) change the percentage in principal amount of any outstanding Secured Notes
issued under such Indenture necessary to modify or amend any provision of such
Indenture or any other related Operative Document or to waive compliance
therewith, (d) modify the definitions of "Indenture Default," "Indenture Event
of Default," "Majority in Interest of Holders of Notes," "Charter Default," or
"Charter Event of Default," (e) modify the order of priority of payments under
such Indenture, (f) reduce the amount or change the time of any payment of
Assigned Hire under the related Charter, (g) modify the requirements for
supplementing or amending such Indenture, (h) amend the related Charter or the
related Parent Guaranty releasing the related Charterer or Mobil from its
respective payment obligations thereunder or changing the absolute and
unconditional character of such obligations or (i) modify the indemnity
provisions of any related Operative Documents in any manner materially adverse
to the interests of the holders of the related Secured Notes. (Indentures,
Section 9.02(a))
SUBSTITUTION OF OBLIGOR UNDER CERTAIN CIRCUMSTANCES
If, in connection with the termination of a Head Lease, the related Vessel
is sold to another owner trust (a "Substitute Obligor"), then such Substitute
Obligor may assume all of the rights and obligations of the related
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Owner Trust under the related Indenture and other related Operative Documents.
Such assumption shall be subject to certain terms and conditions, including,
among other things, that (i) the Substitute Obligor shall execute and deliver
to the applicable Indenture Trustee a supplement to such Indenture whereby,
among other things, such Substitute Obligor shall assume all of the
obligations of such Owner Trust with respect to such Secured Note and will
agree that it is purchasing the related Vessel Interest subject to the
mortgage and security interest (or a mortgage or security interest in the same
or substantially identical terms) on the related Vessel Interest in favor of
the related Indenture Trustee; (ii) such Substitute Obligor shall cause to be
delivered to such Indenture Trustee an opinion of counsel to the effect that,
among other things, all filings and recordings and other actions necessary or
appropriate to protect the interests of such Indenture Trustee have been
accomplished; and (iii) Mobil shall have confirmed that the related Parent
Guaranty remains in full force and effect. Upon such assumption, the related
Owner Trust will be released from all obligations with respect to such Secured
Note. The Substitute Obligor may not effect such assumption (a) if any event
which constitutes an Indenture Event of Default under the related Indenture
shall be continuing after giving effect to such assumption or (b) unless both
of the Rating Agencies shall have delivered to the related Indenture Trustee
confirmation that such assumption will not result in a downgrade or withdrawal
of such Rating Agency's then current credit rating of the Pass Through
Certificates. (Indentures, Section 3.04)
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DESCRIPTION OF THE CHARTERS
OPERATION OF THE VESSELS
Each Charterer intends to subcharter the related Vessel Interest to Mobil
Shipping Co. Ltd. ("MSCL") pursuant to a Bareboat Subcharter Party (the
"Initial Subcharter").
THE CHARTERS
Term and Hire
Each Owner Trust will bareboat charter the relevant Vessel to the related
Charterer pursuant to its respective Charter. Each Charter commences on the
Closing Date and runs through the dates shown in the table below, unless
earlier terminated as described or extended as described herein. (Charters,
Article 2) The Charterer has the sole responsibility and obligation to make
all payments due under each Charter, including any and all payments of
Assigned Hire. (Charters, Article 3) Each Charterer's obligation to make
payments under the related Charter is guaranteed by Mobil under the related
Parent Guaranty. (Parent Guaranties, Article 2)
<TABLE>
<CAPTION>
VESSEL CHARTERER EXPIRATION DATE OF CHARTER
- ------------- --------- --------------------------
<S> <C> <C>
Eagle MMFC-II January 2, 2013
Raven MMFC-I January 2, 2015
Hull No. 1233 MMFC-I January 2, 2017
Hull No. 1234 MMFC-I July 2, 2017
</TABLE>
Each Owner Trust's right to receive payments under the related Charter and
other amounts payable under the related Operative Documents (other than
Excepted Payments) has been assigned under the related Indenture to the
related Indenture Trustee. Pursuant to the terms of each Indenture, until an
Indenture Event of Default has occurred and is continuing, the related
Charterer will pay only Assigned Hire directly to the related Indenture
Trustee. Such payments will be used to make scheduled payments of principal
and accrued and unpaid interest then due on the related Secured Note issued
under such Indenture, which will furnish the funds to be distributed to the
Pass Through Trustee and thereafter to the Certificateholders. Each Charterer
will pay all other amounts payable under the related Charter directly to the
related Owner Trust for distribution to the related Owner Participant and any
such amounts will not be available for distribution to the Certificateholders
except in certain cases upon the occurrence of an Indenture Event of Default
under the related Indenture. If an Indenture Event of Default has occurred and
is continuing with respect to an Indenture, upon written notice from the
related Indenture Trustee to the related Charterer, all payments under the
related Charter and the other Operative Documents (other than Excepted
Payments) will be payable by such Charterer directly to such Indenture Trustee
and then distributed in accordance with the terms of such Indenture. Each
Charterer's obligation to make payments of Assigned Hire under the applicable
Charter is an absolute, irrevocable and unconditional obligation of such
Charterer and shall not be affected by any circumstance, including, without
limitation: any claim, setoff, deduction, defense or counterclaim; any defect
in the condition, design, quality or fitness for use of the related Vessel or
any part thereof; the failure of the Builder to construct or deliver such
Vessel; any damage to or destruction of or any requisition or taking of such
Vessel; any interruption or interference with any use, operation or possession
of such Vessel, including, without limitation, as a result of a termination of
or default under the related Head Lease or Conditional Sale Agreement (except
as expressly provided in such Charter). (Charters, Article 9) Each Charterer's
obligations under the related Charter are irrevocably and unconditionally
guaranteed by Mobil under the related Parent Guaranty. (Parent Guaranties,
Article 2)
Payments of Assigned Hire due to an Owner Trust under the related Charter
will be payable directly to the related Indenture Trustee on January 2 and
July 2 in each year (or, if such day is not a Business Day, on the next
succeeding Business Day without interest) commencing, in the case of Delivered
Vessels, on July 2, 1997 and, in the case of Hull No. 1233 and Hull No. 1234,
on July 2, 1999 and January 2, 2000, respectively. (Charters, Article 3(e))
Assigned Hire payable under each Charter will be sufficient to pay in full all
scheduled payments of principal of, premium, if any, and interest on, the
Secured Note issued under the related Indenture. In certain cases, payments
under each Charter may be adjusted; however, Assigned Hire payments may never
be less than the scheduled payments of principal of and interest on the
Secured Note issued under the related Indenture. (Charters, Article 3)
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Net Charter; Head Lease Obligations; Use and Maintenance
The obligations of each Charterer are those of a charterer under a "net
charter," and, as such, it is obligated, at its expense, to pay all costs and
expenses of maintaining and preserving the related Vessel thereunder.
(Charters, Article 9) To the extent there are any obligations imposed on the
related Owner Trust under such Head Lease, such Charterer shall take such
action as may be required to permit such Owner Trust to perform, or shall
itself perform, such obligations to the extent necessary to keep such Head
Lease in full force and effect. During the Charter Period each Charterer must
maintain and preserve each Vessel in such condition as will entitle it to
maintain the same classification and rating of the American Bureau of Shipping
as when delivered to it under each related Charter (except from changes in
class resulting solely from the age of such Vessel). At all times during the
applicable Charter Period, each Charterer, at its own expense, shall operate
and maintain (or cause any Permitted Subcharterer to operate and maintain) the
related Vessel in accordance with the established maintenance, rebuild and
repair programs in effect for affiliates of Mobil and as may be required to
(a) comply with all Government Rules and Government Actions and requirements
of the American Bureau of Shipping (except to the extent (i) such Charterer is
permitted to contest such Government Rules and Government Actions or
requirements, (ii) an exemption from compliance therewith is obtained, (iii)
good faith efforts and appropriate steps to comply are being taken and such
compliance is effected prior to the date such Vessel Interest is returned to
the related Owner Trust or (iv) noncompliance does not result in any material
adverse consequence to such Charterer; so long as, in the case of clauses (i)-
(iv), such contest or failure of compliance does not result in any material
risk of (x) the sale, forfeiture or loss of any material part of or interest
in such Vessel or the related Vessel Interest, Trust Estate or Indenture
Estate, (y) interference of the payment of any amount payable under the
related Charter when due or (z) any criminal liability on the part of or other
material adverse effect on the related Owner Trust, Owner Participant, Trust
Estate, Indenture Estate or Vessel Interest) and (b) keep such Vessel in good
working order and condition (ordinary wear and tear excepted). (Charters,
Article 11(a)) With respect to any Charter, unless a Charter Event of Default
is continuing under such Charter and such Charter has been declared to be in
default, the related Indenture Trustee has agreed not to take or cause any
action to be taken which would be contrary to the related Charterer's rights
under such Charter. (Indentures, Section 5.09)
Modifications and Alterations
At all times during the Charter Period, each Charterer shall make (or cause
to be made) all Modifications to its Vessel as may be required from time to
time to meet its maintenance requirements under the related Charter or to
maintain any insurance coverage required under such Charter unless such
Charterer shall have elected to terminate such Charter. Each Charterer shall
complete (or cause to be completed) all such Modifications in a good and
workmanlike manner, with reasonable dispatch and in a manner which does not
decrease (except to a de minimis extent) the Fair Market Sales Value of such
Vessel or decrease the remaining useful life or utility of such Vessel or
cause such Vessel to become "limited use property." Each Charterer may make
(or allow to be made) other Modifications to the related Vessel, at its own
cost and expense and without the consent of the related Owner Trust or
Indenture Trustee; provided that (i) such other Modifications do not reduce
(except to a de minimis extent) the Fair Market Sales Value of such Vessel
below such value immediately prior to the other Modifications being made and
(ii) such Modifications do not cause such Vessel to become "limited use
property" or reduce its useful life. Title to all Modifications to a Vessel
that are not severable or that are required by any Governmental Rule or
Governmental Action or that are financed by the related Owner Trust shall vest
in such Owner Trust free and clear of all Liens, except Permitted Liens.
(Charters, Article 13)
Subcharter and Assignment
Each Charterer may, without the consent of the related Owner Trust, the
Indenture Trustee or the Pass Through Trustee, at any time and from time to
time, assign the related Charter and its interests and rights thereunder to
any person, so long as, among other conditions, (i) after giving effect to
such assignment, the related Parent Guaranty remains in full force and effect
and constitutes a full and unconditional guaranty of the
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obligations of the assignee under such Charter to the same extent as the
guaranty of such Charterer's obligations under such Charter prior to giving
effect to any such assignment, (ii) certain material related Charter Events of
Default and bankruptcy Charter Defaults are not continuing on the date any
such assignment to any affiliate of such Charterer is effected and no such
Charter Event of Default or bankruptcy Charter Default is continuing on the
date such assignment to any other person is effected, (iii) such assignment
shall not result in the violation of any Government Rule and (iv) such
assignee shall have validly assumed the obligations of such Charterer under
each of the related Operative Documents to which such Charterer is a party.
Each Charterer may, without the consent of the related Owner Trust, the
Indenture Trustee or the Pass Through Trustee, at any time and from time to
time, subcharter the related Vessel Interest to another person; provided that,
among other conditions, (i) such subcharter is expressly subject and
subordinate to the related Charter (and such subcharter contains a provision
providing that any subcharter permitted thereunder shall be so subject and
subordinate) and in no event continues beyond the related Charter Period, (ii)
such Charterer remains primarily liable under the related Charter and under
the other related Operative Documents to which it is a party as though no such
subcharter was in existence, (iii) the related Parent Guaranty remains in full
force and effect, (iv) certain Charter Events of Default and bankruptcy
Charter Defaults under the related Charter are not continuing at the
commencement of such subcharter and (v) any such subcharter with a term in
excess of six months shall be approved by the related Owner Trust prior to its
execution. Any subcharterer under a subcharter permitted under any Charter may
sub-subcharter the related Vessel Interest to another person under a sub-
subcharter that otherwise complies with the provisions of such Charter
applicable to a subcharter thereunder. Each Charterer intends to subcharter
its related Vessel Interest to MSCL pursuant to an Initial Subcharter.
(Charters, Article 20(c))
Liens
Each Vessel Interest will be maintained free of Liens other than (a) the
respective rights and interests of the related Charterer, Owner Participant,
Owner Trust, Indenture Trustee and the holders of the Secured Notes issued
under the related Indenture, as provided in the related Operative Documents
(and, in the case of the New Vessels, the interests of the Builder pursuant to
the related Construction Contract), (b) related Owner Trust's Liens, Owner
Participant's Liens and Indenture Trustee's Liens, (c) Liens for Taxes either
not delinquent or being contested in good faith and by appropriate
proceedings, so long as such proceedings do not involve any material danger of
the sale, forfeiture or loss of any part of the related Vessel, Trust Estate
or Indenture Estate, or title thereto or any interest therein or any material
danger of the interference with any payments of Assigned Hire under the
Charter, (d) materialmen's, mechanics', workers', repairmen's, employees' or
other like Liens, arising in the ordinary course of business, or arising in
the course of constructing, repairing, equipping or installing, modifying or
expanding the related Vessel or any part thereof, for amounts either not more
than 60 days past due or being contested in good faith and by appropriate
proceedings, so long as such proceedings do not involve any material danger of
the sale, forfeiture or loss of any part of the related Vessel, Trust Estate
or Indenture Estate, or title thereto or any interest therein and any material
danger of interference with any payments of Assigned Hire under the Charter,
(e) Liens arising out of judgments or awards against the Charterer or any
subcharterer with respect to which at the time an appeal or proceeding for
review is being prosecuted in good faith, so long as such judgment, award or
appeal does not involve any material danger of the sale, forfeiture or loss of
any part of the related Vessel, Trust Estate or Indenture Estate, or title
thereto or any interest therein or any material danger of interference with
any payments of Assigned Hire under the Charter, (f) the rights and interests
of the U.K. Lessor to the related Vessel, including its rights provided under
the U.K. Documents, (g) Liens for current crew's wages, for general average or
salvage (including contract salvage) or for wages of stevedores employed
directly by the related Charterer, MSCL or the operator, agent or master of
the related Vessel which in each case (A) are unclaimed or covered by
insurance or (B) are for amounts either not more than 60 days past due or
being contested in good faith and by appropriate proceedings, so long as such
proceedings do not involve any material danger of the sale, forfeiture or loss
of any part of the related Vessel, Trust Estate or Indenture Estate, or title
thereto or any interest therein or any material danger of interference with
any payments of Assigned Hire under the Charter and Liens which, under the
laws of the Marshall Islands, take priority over the related Ship Mortgage and
which are for amounts either not more than 60 days
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past due or being contested in good faith and by appropriate proceedings so
long as such proceedings do not involve any material danger of the sale,
forfeiture or loss of any part of the related Vessel, Vessel Interest, Trust
Estate or Indenture Estate, or title thereto or any interest therein and any
material danger of interference with any payments of Assigned Hire under the
Charter, and (h) Liens, assignments and subcharters permitted by the related
Charter and the rights of MSCL under the Initial Subcharter and the rights of
any other subcharterer or any sub-subcharterer under any other subcharter (or
sub-subcharter) permitted by the related Charter.
Insurance
At all times during the applicable Charter Period, each Charterer will, at
its own cost and expense, maintain insurance with respect to the related
Vessel in such amounts and in such forms as are consistent with the practice
of affiliates of Mobil engaged in maritime transportation for other properties
similar to such Vessel owned or leased to such affiliate including marine and
hull risks insurance, war risk insurance, public liability insurance,
including personal injury and property damage coverage, and comprehensive
general liability insurance, including environmental clean-up cost coverage.
Any such insurance coverage may be subject to such deductible amounts and
self-insured retentions as are consistent with the practice of affiliates of
Mobil engaged in maritime transportation for other properties similar to such
Vessel owned or leased by such affiliates. If consistent with the requirements
of the related Charter, such insurance may be carried under blanket policies
maintained by or on behalf of such Charterer and may be carried by insurers
that are affiliates of Mobil.
Any insurance policy maintained by or on behalf of such Charterer shall name
the related Owner Trust, the related Indenture Trustee and the Pass Through
Trustee as additional insureds. In addition, unless such endorsement will
result in material incremental cost to such Charterer or any permitted
subcharterer, any such insurance policy will provide an endorsement that the
respective interests of the related Owner Trust, the related Indenture Trustee
and the Pass Through Trustee shall not be invalidated by any action or
inaction of such Charterer or any other person, regardless of any breach or
violation of any warranty, declaration or condition contained in such policies
by such Charterer or any other person. Except when a Charter Event of Default
shall have occurred and be continuing under the related Charter or in
connection with an Event of Loss to the related Vessel, all amounts payable
under such insurance coverage in respect of property damage will be payable
to, or at the direction of, the related Charterer. If a Charter Event of
Default occurs and is continuing under a Charter, such amounts will be paid to
the related Indenture Trustee as security for the obligations of the related
Charterer and, subject to the related Indenture, applied against such
Charterer's payment obligations under the related Charter as they become due.
In addition, each of the related Owner Trust and the Charterer is entitled to
maintain additional insurance coverage with respect to the related Vessel
Interest for its own benefit and at its own expense. (Charters, Article 16)
Voluntary Termination
Economic Termination. Each Charterer has the right, upon 90 days' prior
written notice to the related Owner Trust, to terminate any Charter with
respect to the related Vessel Interest on any Termination Value Determination
Date (a "Termination Date") if the Charterer determines in good faith that the
continuation of such Charter is uneconomic by reason of the cost of compliance
with Governmental Rules or Governmental Actions or by reason of indemnity
payments required to be made to any person under such Charter or the related
Participation Agreement. If a Charterer elects so to terminate a related
Charter, such Charterer shall, as agent for the related Owner Trust, use
reasonable efforts to solicit bids for the cash purchase of the related Vessel
Interest on the Termination Date. On the Termination Date, the related Owner
Trust will be obligated to transfer its interest in the related Vessel
Interest to the highest bona fide cash bidder, unless the related Owner Trust
has duly elected to retain its interest in such Vessel Interest. If the
related Vessel Interest is sold, the related Owner Trust shall retain the
total net sales price thereof and the related Charterer will be obligated to
pay to such Owner Trust an amount equal to the excess of the Termination Value
of such Vessel Interest over the net proceeds realized from the sale thereof.
Each Charterer also will be obligated to pay to the related Owner Trust (or,
in the case of certain amounts of Supplemental Hire, to the person entitled
thereto) on the Termination Date all accrued, due and unpaid Bareboat Hire and
all Supplemental Hire then due and owing (including the Make-Whole Amount, if
any). If the related Owner Trust elects to retain the Vessel Interest, the
related Charterer will be
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obligated to pay all accrued, due and unpaid Bareboat Hire and all
Supplemental Hire then due and owing (including the Make-Whole Amount, if any)
on such Vessel Interest, and the related Owner Trust will be obligated to pay
to the Indenture Trustee an amount equal to the unpaid principal amount of,
premium, if any, and accrued and unpaid interest on, the Secured Notes issued
under the related Indenture. If an Owner Trust fails to make such payment, the
related Charterer's termination election will be deemed to have been revoked.
All funds to be paid or deposited with an Owner Trust as described in this
paragraph shall, so long as the related Indenture shall not have been
discharged, be deposited directly with the related Indenture Trustee and shall
be applied to redeem in full the Secured Note issued under the related
Indenture as provided in such Indenture. Amounts in excess of amounts applied
to redeem the Secured Note in accordance with the related Indenture will be
distributed by the related Indenture Trustee in accordance with the terms of
the related Indenture. The Lien of the related Indenture will terminate with
respect to the related Vessel Interest after the Termination Value thereof has
been paid in full and all other amounts then due and payable have been paid
and, if all amounts due the related Owner Participant have also been paid, the
related Charter shall also terminate with respect to such Vessel Interest.
Each Charterer will be entitled, subject to certain limitations, to revoke its
termination election not less than 30 days prior to the Termination Date. In
the event that the related Head Lease shall have terminated in circumstances
where the related U.K. Lessor is obliged to conclude the sale of the related
Vessel Interest or its rights under the related Conditional Sale Agreement,
the related Charterer shall have no obligation to solicit bids for the cash
purchase of the related Vessel Interest on the Termination Date as agent for
the related Owner Trust, and any proceeds from such sale to which such Owner
Trust is entitled shall be applied against the obligations of such Charterer
under the related Charter in respect of the payment of Termination Value.
If no sale or retention of the applicable Vessel Interest shall have
occurred by the Termination Date, the related Charter will continue in full
force and effect.
Special Termination
If the Builder has not delivered a New Vessel by the applicable Final
Delivery Date (January 2, 2000 or July 2, 2000, respectively), or the
Construction Contract with respect to such Vessel shall have been terminated,
cancelled or rescinded for any reason prior to the Delivery Date or if, in
connection with the termination of a Head Lease, the related Charter is
terminated or the related Vessel is sold and the purchaser for any reason
shall not have become a Substitute Obligor in compliance with the provisions
of the Operative Documents, the related Charterer will be required to pay to
the related Indenture Trustee the applicable Termination Value of such Vessel.
Such amount shall be applied to redeem in full the Secured Note issued under
the related Indenture. See "Description of Secured Notes--Substitution of
Obligor in Certain Circumstances" and "--Prepayments."
Event of Loss
In the event any Vessel suffers an Event of Loss, the related Charterer will
be obligated to pay the Termination Value thereof. So long as the related
Indenture shall not have been discharged, the related Charterer will deposit
Termination Value directly with the related Indenture Trustee and such amount
shall be applied to redeem in full the Secured Note issued under the related
Indenture. Amounts, if any, in excess of amounts applied to redeem such
Secured Note in accordance with the related Indenture will be distributed by
the related Indenture Trustee in accordance with the terms of the related
Indenture. The Lien of the related Indenture will terminate with respect to
such Vessel Interest after full payment of the Termination Value thereof and
all other amounts then due and payable have been paid and, if all amounts due
to the related Owner Participant have also been paid, the related Charter
shall also terminate with respect to such Vessel Interest.
An Event of Loss with respect to each Vessel is defined to include (a) the
loss, theft, destruction or disappearance of, or the occurrence of damage
(which, in the related Charterer's reasonable, good faith opinion, renders
repair or replacement uneconomic) to, such Vessel (or substantially the
entirety of such Vessel); (b) the permanent condemnation, confiscation or
seizure of, or requisition of title to, such Vessel by any Governmental
Authority; (c) the requisition of use of such Vessel by any Governmental
Authority for a period which exceeds the remaining portion of the applicable
Charter Period; or (d) the receipt of insurance proceeds based upon an actual
or constructive total loss of such Vessel.
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Charter Events of Default
Charter Events of Default with respect to each Charter include, among other
things: (a) the failure to make any payment of Assigned Hire and such failure
shall continue for ten Business Days after the date such payment was due, (b)
the failure to make payments of Supplemental Hire or any other payment under
the related Charter (other than Assigned Hire or any Excess Hire or Additional
Excess Hire or Excepted Payments (unless the related Owner Trust elects to
make the failure to make such payment of Excess Hire, Additional Excess Hire
or Excepted Payment constitute a Charter Event of Default)) or any other
amount payable under any other related Operative Document and such failure
continues for a period of fifteen Business Days after notice of such failure
to the related Charterer from the related Owner Trust or Indenture Trustee,
(c) failure by the related Charterer to perform or observe in any material
respect any material covenant or agreement (not included in clause (a) or (b)
above) to be performed or observed by it under such Charter or any other
related Operative Document (other than any covenant or agreement to pay Excess
Hire or Additional Excess Hire or to make an Excepted Payment) and such
failure shall continue for a period of 30 days after receipt by such Charterer
of written notice thereof specifying such failure and requiring it to be
remedied from the related Owner Trust or the related Indenture Trustee (or 365
days after such notice, if such default is susceptible of cure and such
Charterer is diligently attempting to cure such default), (d) failure by Mobil
to perform or observe any covenant or agreement to be performed or observed by
it under the related Parent Guaranty in any material respect (other than any
covenant or agreement in respect of the related Charterer's obligations under
the related Operative Documents) and such failure shall continue for a period
of 30 days after receipt by such Charterer of written notice thereof from the
related Owner Trust or Indenture Trustee (or 365 days after such notice, if
such default is susceptible of cure and Mobil is diligently attempting to cure
such default), (e) any material representation or warranty made by the related
Charterer or Mobil in certain sections of the related Participation Agreement
or in the related Parent Guaranty or in certain certificates delivered
pursuant to such Participation Agreement shall have been materially false when
made and any material adverse impact thereof shall remain uncured or
uncorrected for 30 days after written notice thereof from the related Owner
Trust or Indenture Trustee (or 365 days after such notice, if such material
adverse impact is susceptible of cure, so long as such Charterer or Mobil, as
applicable, is diligently attempting to cure such misrepresentation) unless
such inaccuracy shall not be material to the recipient of the representation
or warranty at the time such written notice was received, (f) the occurrence
of certain events of bankruptcy, reorganization or insolvency of the related
Charterer or Mobil, (g) the related Parent Guaranty shall cease to be in full
force and effect or to be the valid, binding and enforceable agreement of
Mobil or (h) the related Charterer shall fail to maintain the insurance
policies required by such Charter and such failure shall continue for a period
of 30 days following receipt of notice thereof from the related Owner Trust or
Indenture Trustee. (Charters, Article 21)
Upon the occurrence and continuance of a Charter Event of Default under any
Charter, the related Indenture Trustee, as assignee of the related Owner
Trust, may declare such Charter to be in default. Except as provided below,
the related Indenture Trustee may at any time thereafter exercise one or more
of the remedies set forth in the related Charter, including the right to
terminate such Charter, to repossess the related Vessel Interest, to sell such
Vessel Interest or any part thereof free and clear of the related Charterer's
rights, and, under certain circumstances, retain the proceeds, and, so long as
such Vessel Interest has not been sold, to require such Charterer to pay as
liquidated damages unpaid Bareboat Hire and accrued interest plus any one of
the following: (a) an amount equal to the excess of the Termination Value over
the Fair Market Sales Value of such Vessel Interest, as of the payment date
specified by such Owner Trust by written notice to such Charterer (or the last
day of the applicable Charter Period, if earlier) or (b) an amount equal to
Termination Value as of such date in which event such Vessel Interest shall be
transferred to such Charterer. If any Vessel Interest has been sold, the
related Owner Trust may require the related Charterer to pay as liquidated
damages an amount equal to the sum of (x) all accrued and unpaid Bareboat Hire
and Supplemental Hire plus (y) the amount of any deficiency between
Termination Value and the proceeds of such sale plus (z) interest at the
Overdue Rate plus 3% on all of the foregoing amounts from the date of such
sale until the date of payment. (Charters, Article 22)
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THE PARENT GUARANTIES
Pursuant to the Parent Guaranty with respect to each Vessel, Mobil has
irrevocably and unconditionally guaranteed the full and prompt payment of all
amounts payable by the related Charterer under the related Charter,
Participation Agreement and each of the other related Operative Documents when
and as the same shall become due and payable. Each Parent Guaranty is an
unsecured obligation of Mobil and is enforceable without any need first to
enforce the related Charter against the related Charterer.
THE PARTICIPATION AGREEMENTS
Each Charterer is required to indemnify the related Owner Participant, Owner
Trust, Managing Trustee, Delaware Trustee, Indenture Trustee and the Pass
Through Trustee for certain losses, fees and expenses and for certain other
matters. (Participation Agreements, Section 13.1) In addition, each Charterer
is required to indemnify the related Owner Participant for certain taxes in
connection with the ownership, charter, sale or use of the related Vessel.
(Participation Agreements, Section 13.2)
If, on the applicable delivery date with respect to a New Vessel, such
Vessel meets the requirements for delivery under the Construction Contract
with respect to such Vessel, the related Charterer shall accept delivery of
such Vessel, shall cause title to be registered in the name of the related
Owner Trust in the Marshall Islands (or other jurisdiction designated by such
Charterer acceptable to the related Owner Participant and not materially less
favorable to the holders of the related Secured Note) and will cause the
related Ship Mortgage to be filed and recorded in all appropriate places
necessary to perfect the mortgage lien to be created thereby as part of the
related Indenture Estate.
THE U.K. FINANCING
Each Owner Trust expects to conclude, immediately after the closing of the
Offering, a financing arrangement with the U.K. Lessor pursuant to which,
among other things, such Owner Trust has entered into a conditional sale
agreement (a "Conditional Sale Agreement") and a long term lease (a "Head
Lease") and certain related security documents with respect to its Vessel.
Conditional Sale Agreement
Pursuant to the terms of each Conditional Sale Agreement, the applicable
Owner Trust has contracted to sell its rights in the related Vessel to the
U.K. Lessor in consideration of two or three installment payments totalling in
the aggregate the sales price of such Vessel. Upon delivery of each Vessel to
the U.K. Lessor under the related Conditional Sale Agreement, such Vessel will
be subjected to a Head Lease from the U.K. Lessor to the related Owner Trust.
The final installment of a Vessel's sales price under the related Conditional
Sale Agreement will be payable by the U.K. Lessor to the related Owner Trust
at the termination date of, or upon the expiry of, the corresponding Head
Lease, whereupon legal title to such Vessel will pass from such Owner Trust to
the U.K. Lessor or its designee. Upon any early termination of the related
Head Lease (other than as a result of certain insolvency events with respect
to the U.K. Lessor or a total loss of the related Vessel), the related
Conditional Sale Agreement will allow the U.K Lessor to pay the final
installment payment and require the related Owner Trust to transfer legal
title to the related Vessel to the U.K. Lessor or its designee. In certain
circumstances relating to the total loss of a New Vessel prior to its delivery
by the Builder and certain other events relating to the insolvency of the U.K.
Lessor, the obligations of both parties to such Conditional Sale Agreement
will terminate and the related Owner Trust will refund a certain amount to the
related U.K. Lessor as compensation. If any Head Lease terminates as a result
of certain insolvency events with respect to the related U.K. Lessor, the
related Owner Trust will no longer be obligated to transfer title to the
related Vessel to the U.K. Lessor.
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Head Lease
Pursuant to the terms of each Head Lease, the U.K. Lessor will lease to the
applicable Owner Trust all of its rights in the related Vessel which were
conveyed to the U.K. Lessor under the Conditional Sale Agreement. The
obligations of the lessee for which the related Owner Trust is liable under
the Head Lease will be unconditionally guaranteed by Mobil pursuant to the
U.K. Deed of Parent Guaranty. The term of each Head Lease will expire on a
date following the maturity of the Secured Notes issued under the related
Indenture. At all times during the term of each Head Lease (the "Head Lease
Period") and for as long thereafter as certain sums remain due and payable
thereunder, the U.K. Lessor will have the benefit of certain security,
including a letter of credit issued by a bank securing significant portions of
the rent and other sums payable under such Head Lease. Under the terms of each
Head Lease, the related Owner Trust will be prohibited from disposing of, or
imposing liens (other than certain permitted liens) on, the related Vessel and
will be required to maintain certain operating standards pertaining to, among
other things, obtaining appropriate licenses and records, performing
appropriate maintenance and maintaining adequate insurance with respect to
such Vessel. In addition, pursuant to the terms of each Head Lease, the
related Owner Trust will agree to indemnify the U.K. Lessor and certain
affiliated persons for all losses, including certain tax losses, which may be
suffered by them subject to certain exceptions. All obligations of the related
Owner Trust under each Head Lease will be undertaken by the related Charterer
and unconditionally guaranteed by Mobil under the U.K. Deed of Parent
Guaranty.
If an event of default under any Head Lease or certain other events,
including adverse changes in law or termination of the related Charter, occurs
and is continuing and has not been waived, the U.K. Lessor will have the right
to terminate such Head Lease. As set forth under "--Conditional Sale
Agreement," the related Owner Trust may thereupon be required to transfer
title to the related Vessel to the U.K. Lessor, and the U.K. Lessor will be
obliged under such circumstances to cause the sale of such Vessel at a price
not less than its fair market value. Subject to payment of a certain amount
upon termination of such Head Lease, such sale will be arranged by such Owner
Trust or its designee as exclusive sales agent. In any event, the proceeds of
such sale, if any, will be required to be paid to such Owner Trust or the
Indenture Trustee, as the case may be, up to the sum of (a) an agreed amount,
which shall not be less than the principal amount of the related Secured Notes
scheduled to be outstanding at the date of such sale, (b) interest accrued on
such principal amount since the last interest payment date and (c) the Make-
Whole Amount, if any, payable with respect to the prepayment of such principal
amount.
Security Arrangements
In order to secure the U.K. Lessor's obligation to permit the sale of the
related Vessel and rebate the proceeds thereof to the applicable Owner Trust,
as described in the preceding paragraph, the U.K. Lessor will grant a security
interest in its rights under the Conditional Sale Agreement and any rights
that it will have or may thereafter acquire in the related Vessel. The
Indenture Trustee under the related Indenture will have the benefit of these
security interests either directly or by assignment from the related Owner
Trust. Because of the novelty of these security arrangements and the many
jurisdictions potentially involved, there can be no assurance that the
assortment of rights in the related Vessel which will vest in each Indenture
Trustee and, indirectly, in the holder of the related Secured Note, would
provide rights similar to those held by a mortgagee under a conventional ship
mortgage in the event of an arrest of the related Vessel, a foreclosure under
the related Indenture or a proceeding in bankruptcy. However, Mobil's
obligation under each Parent Guaranty to make payments under the related
Charter and the other related Operative Documents, as well as its obligation
under each U.K. Deed of Parent Guaranty to make payments under certain U.K.
Documents, should not be affected by any early termination of the U.K.
Financing.
If a Head Lease were to terminate by reason of certain insolvency events
with respect to the U.K. Lessor, the right of the U.K. Lessor to acquire title
to the related Vessel under the related Conditional Sale Agreement would
lapse, such Head Lease would terminate and, upon payment of certain
compensation payments to the related U.K. Lessor by the related Owner Trust
under such Conditional Sale Agreement (which liability has been
unconditionally guaranteed by Mobil), the U.K. Lessor's rights under the
related U.K. Documents would terminate.
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Under the terms of each Charter, the sale of the related Vessel upon the
termination of the related Head Lease would constitute a Special Termination
Event under such Charter unless the purchaser of such Vessel agreed to assume
the Secured Note issued under the related Indenture. If a purchaser were to
agree to assume the obligations of the transferring Owner Trust under such
Indenture and other related Operative Documents and the other conditions set
forth therein were satisfied, including obtaining a confirmation of the
related Parent Guaranty, there would be no early repayment of the Secured Note
under such Indenture. See "Description of the Secured Notes--Substitution of
Obligor under Certain Circumstances."
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of the Pass
Through Certificates by a Certificateholder. This summary is based on laws,
regulations, rulings and decisions now in effect, all of which are subject to
change by legislative, administrative or judicial action. The discussion below
does not purport to address federal income tax consequences applicable to
particular categories of investors, some of which (for example, insurance
companies or foreign investors) may be subject to special rules. The Pass
Through Trust is not indemnified for any federal income taxes that may be
imposed upon it, and the imposition of any such taxes could result in a
reduction in the amounts available for distribution to the Certificateholders
from the Pass Through Trust. In connection with the Offering, Mobil and the
Charterers will receive an opinion from Dewey Ballantine, special counsel to
the Charterers and Mobil, that, based upon currently applicable law, the
following discussion properly describes in general the anticipated principal
United States federal income tax consequences of acquiring, holding and
disposing of the Pass Through Certificates.
INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE,
LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE PASS THROUGH CERTIFICATES, INCLUDING THE
ADVISABILITY OF MAKING ANY ELECTION DISCUSSED BELOW, IN LIGHT OF THEIR OWN
PARTICULAR CIRCUMSTANCES.
General
Based upon an interpretation of analogous authorities under currently
applicable law, the Pass Through Trust will be classified as a grantor trust
(and not as an association taxable as a corporation) and each
Certificateholder will be treated as the owner of a pro rata undivided
interest in the Secured Notes and any other property held in the Pass Through
Trust. Each Certificateholder will be required to report on its federal income
tax return its pro rata share of the entire income (including interest
payments and original issue or market discount) from the Secured Notes and any
other property in the Pass Through Trust, in accordance with such
Certificateholder's method of accounting.
Because the Pass Through Trust holds more than one Secured Note, a purchaser
of a Pass Through Certificate will be treated as purchasing an interest in
each Secured Note at a price determined by allocating the purchase price paid
for the Pass Through Certificate among such Secured Notes in proportion to
their fair market values at the time of purchase of the Pass Through
Certificate.
Original Issue Discount
The Secured Notes relating to the two New Vessels (the "OID Secured Notes")
issued by two of the Owner Trusts (SAMOCO 1233 Trust and SAMOCO 1234 Trust),
will be issued with original issue discount ("OID")
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in excess of the de minimis amounts provided for by the Code. Although there
is little guidance on the issue, it appears likely that the Secured Note
issued by the third Owner Trust, SAMOCO Raven Trust, established for the
benefit of the same investor, will be aggregated with the OID Secured Notes
for purposes of applying the OID provisions (the "Aggregated Secured Notes").
Accordingly, each Certificateholder generally will be required to include OID
in income on the Aggregated Secured Notes as it accrues under a constant yield
method in advance of cash payments attributable to such income (regardless of
whether the Certificateholder is a cash or accrual basis taxpayer).
The amount of OID with respect to the Aggregated Secured Notes will be the
excess of the "stated redemption price at maturity" of the Aggregated Secured
Notes over their issue price. The "stated redemption price at maturity" of the
Aggregated Secured Notes will include all cash payments required to be made on
the Aggregated Secured Notes (other than qualified stated interest, which is
generally defined as stated interest that is payable at least annually at a
single fixed rate or at certain qualifying variable rates), whether
denominated as principal or interest. The issue price of the Aggregated
Secured Notes is the allocable portion of the first price at which a
substantial amount of Pass Through Certificates is sold to the public for
money and is expected to be that portion of the offering price set forth in
this Prospectus Supplement that the fair market value of the Aggregated
Secured Notes at the time of their purchase bears to the offering price.
Each Certificateholder will be required to include in gross income an amount
equal to the sum of the daily portions of OID for each day during the taxable
year in which the Aggregated Secured Notes are held. The daily portion of OID
is determined by allocating to each day in an accrual period the pro rata
portion of the OID that is allocable to the accrual period. The amount of OID
that is allocable to an accrual period will be determined by multiplying the
adjusted issue price of the Aggregated Secured Notes allocable to the
Certificateholder at the beginning of the accrual period by the yield to
maturity of such Aggregated Secured Notes. The adjusted issue price of the
Aggregated Secured Notes allocable to the Certificateholder at the beginning
of an accrual period will be equal to their issue price increased by all
previously accrued OID and reduced by the amount of all previous payments
(other than payments of qualified stated interest). The yield to maturity is
the discount rate that, when used to compute the present value of payments to
be made under the Aggregated Secured Notes, produces an amount equal to the
issue price of the Aggregated Secured Notes. Actual interest payments (other
than payments of qualified stated interest) will not be taxable upon receipt
as such but will be treated as payments of previously accrued OID.
The Pass Through Trustee will report annually to the Internal Revenue
Service (the "IRS") and Certificateholders of record the amount of OID accrued
with respect to the Aggregated Secured Notes.
It is possible that the IRS will take the position that the Aggregated
Secured Notes should not be aggregated as described above or that the Secured
Note issued by the fourth Owner Trust, DUMOCO Eagle Trust, should be
aggregated with the Aggregated Secured Notes. In either such case, the amount
and timing of income relating to OID may be different than described in this
discussion.
Sales of Pass Through Certificates
A Certificateholder that sells a Pass Through Certificate will generally
recognize gain or loss (in the aggregate) equal to the difference between the
amount realized on the sale (except to the extent attributable to accrued
interest, which will be taxable as interest income) and the
Certificateholder's adjusted tax basis in the Pass Through Certificate. A
Certificateholder's adjusted tax basis in a Pass Through Certificate generally
will be equal to the price paid by such Certificateholder for such Pass
Through Certificate increased by the portion of OID previously included in
gross income to the date of disposition (and accrued market discount, if any)
and decreased by any cash payments (other than payments of qualified stated
interest) regardless of whether such payments are denominated as interest or
principal. Subject to the market discount provisions of the Code (described
below), any such gain or loss will be capital gain or loss if the Pass Through
Certificate was held as a capital asset and, if the Pass Through Certificate
was held for more than one year, will be long-term capital gain or loss. Any
long-term capital gains realized will be taxable to corporate taxpayers at the
rates applicable to ordinary income and to individual taxpayers at a maximum
marginal rate of 28%. Any capital losses realized will be deductible by a
corporate taxpayer only to the extent of capital gains and by an individual
taxpayer only to the extent of capital gains plus $3,000 of other income.
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Market Discount
In general, a purchaser of a Pass Through Certificate (other than an
original purchaser of a Pass Through Certificate at the offering price set
forth in this Prospectus Supplement) will be considered to have acquired an
interest in a Pass Through Certificate at a "market discount" to the extent
the issue price of the Pass Through Certificate plus the amount of OID
includible in income by all prior Certificateholders of the Pass Through
Certificate exceeds the purchaser's tax basis allocable to such Pass Through
Certificate, unless the excess does not exceed a prescribed de minimis amount.
In the event such excess exceeds the de minimis amount, the Certificateholder
will be subject to the market discount rules with regard to its interest in
the Pass Through Certificate.
In the case of a sale or other disposition of a Pass Through Certificate
subject to the market discount rules, gain, if any, from such sale or
disposition must be treated as ordinary income to the extent such gain
represents market discount that has accrued during the period in which the
Pass Through Certificate was held. If such Pass Through Certificate is
disposed of in a nontaxable transaction, the accrued market discount (subject
to certain exceptions) will be includible in ordinary income as if the
Certificateholder had sold the Pass Through Certificate at its then market
value.
In the case of a partial principal payment on a Pass Through Certificate
subject to the market discount rules, such payment must be included in gross
income as ordinary income to the extent such payment does not exceed the
market discount that has accrued during the period such Pass Through
Certificate was held. The amount of any accrued market discount later required
to be included in income upon a disposition or subsequent partial principal
payment will be reduced by the amount of accrued market discount previously
included in income.
Pursuant to the Conference Committee Report to the Tax Reform Act of 1986
(the "Conference Report") and until Treasury regulations are issued, because
the Secured Notes are amortizing obligations and the Aggregated Secured Notes
have OID, Certificateholders that acquire Pass Through Certificates with
market discount may elect to accrue market discount either on the basis of a
constant interest rate or in proportion to the accrual of OID for the
applicable accrual period (i.e., the amount of market discount that accrues
during a period is equal to the product of (a) the total remaining market
discount and (b) a fraction, the numerator of which is the OID for the period
and the denominator of which is the total remaining OID at the beginning of
the period).
If, in any taxable year, interest paid or accrued on a loan incurred or
continued to purchase or carry a Pass Through Certificate subject to the
market discount rules exceeds the interest currently includible in income with
respect to such Pass Through Certificate, deduction of the excess interest
must be deferred to the extent of the market discount allocable to the taxable
year. The deferred portion of any interest expense generally will be
deductible when such market discount is included in income upon the sale or
other disposition (including repayment) of the Pass Through Certificate.
A taxpayer may elect to include market discount in its gross income
currently. If such election is made, it shall apply to all market discount
bonds acquired by the taxpayer on or after the first day of the first taxable
year for which such election applies and for all subsequent periods. The rules
described above regarding the treatment of certain gain as ordinary income and
the deferral of interest expense will not apply to the taxpayer if such an
election is made.
Premium
In general, a subsequent purchaser of a Pass Through Certificate who
purchases the Pass Through Certificate for an amount less than the sum of all
amounts (other than qualified stated interest) payable on the Secured Notes
after the purchase date but greater than their adjusted issue price
immediately before such purchase (i.e., a purchase at a "premium") also will
be required to include in gross income the sum of the daily portions of OID on
the Aggregated Secured Notes. In computing the daily portions of OID for such
a purchaser, however, the daily portion of OID is reduced by a portion of the
premium equal to the product of (A) the daily portion of OID for such day
(computed in accordance with the rules set forth above) and (B) a fraction,
the numerator of which is the amount, if any, by which the Certificateholder's
basis in the Secured Notes on the date of acquisition exceeds the Secured
Notes' adjusted issue price at that time, and the denominator of which is the
sum of all amounts (other than qualified stated interest) payable on the
Secured Notes after the date of acquisition reduced by the Secured Notes'
adjusted issue price.
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Backup Withholding
Payments made on the Pass Through Certificates, and proceeds from the sale
of the Pass Through Certificates to or through certain brokers, may be subject
to a "backup" withholding tax of 31% unless the Certificateholder complies
with certain reporting procedures or is exempt from such requirements. Any
such withheld amounts are allowed as a credit against the Certificateholder's
federal income tax and may entitle such Certificateholder to a refund,
provided the required information is furnished to the IRS. Furthermore,
certain penalties may be imposed by the IRS on a Certificateholder who is
required to supply information but who does not do so in the proper manner.
ERISA CONSIDERATIONS
Pass Through Certificates may be purchased by an employee benefit plan (a
"Plan") subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). A fiduciary of a Plan must determine that the purchase of a
Pass Through Certificate is consistent with its fiduciary duties under ERISA
and does not result in a non-exempt prohibited transaction as defined in
Section 406 of ERISA or Section 4975 of the Code. Employee benefit plans which
are governmental plans (as defined in Section 3(32) of ERISA) and certain
church plans (as defined in Section 3(32) of ERISA) are not subject to the
fiduciary responsibility provisions of ERISA. Any Plan that purchases a Pass
Through Certificate must be an "accredited investor" as defined in Rule
501(a)(1) of Regulation D of the Securities Act of 1933, as amended (the
"Securities Act").
The United States Department of Labor (the "DOL") has granted to Morgan
Stanley & Co. Incorporated an administrative exemption (Prohibited Transaction
Exemption 90-24 et al., Exemption Application No. D-8019 et al., 55 Fed. Reg.
20,548 (1990)) (the "Exemption") from certain of the prohibited transaction
rules of ERISA and the Code with respect to the initial purchase, the holding,
and the subsequent resale by a Plan (including an individual retirement
account or other plan subject to Section 4975 of the Code) of certificates in
certain pass through trusts, the assets of which pass through trust consist of
secured credit instruments that bear interest or are purchased at a discount
in transactions by or between business entities (including, but not limited
to, qualified equipment notes secured by leases). The limited relief provided
by the DOL in the Exemption from certain provisions of ERISA and the Code is
subject to several other conditions, including a requirement that certificates
acquired by a Plan under the Exemption have received a rating at the time of
acquisition by the Plan that is in one of the three highest rating categories
from either Standard & Poor's Rating Group, Moody's Investors Service, Inc.,
Fitch Investors Service, Inc. or Duff & Phelps Inc. The Exemption also
requires that the acquisition of certificates by a Plan be on terms (including
the price for the Pass Through Certificates) that are at least as favorable to
a Plan as they would be in an arm's length transaction with an unrelated
party.
Each fiduciary of a Plan should independently determine if its purchase or
holding of a Pass Through Certificate will require an exemption, and if so,
whether the Exemption applies to such purchase or holding, or whether any
other prohibited transaction exemption is available.
A fiduciary should also consider that, under regulations promulgated by the
DOL, 29 C.F.R. Section 2510.3-101 (the "Regulation"), if a Plan acquires a
Pass Through Certificate, then the Plan's assets may include both the Pass
Through Certificate it acquires and an undivided interest in the underlying
assets of the related Pass Through Trust (because such Pass Through Trust is
deemed to hold assets of the Plan), unless the actual level of investment by
employee benefit plans (and certain entities in which employee benefit plans
invest) in the Pass Through Certificates is not "significant" within the
meaning of the Regulation.
Under the terms of the Regulation, if a Pass Through Trust were deemed to
hold assets of an employee benefit plan by reason of a Plan's investment in a
Pass Through Certificate, such Plan assets would include an undivided interest
in such Pass Through Trust, the Secured Notes and other assets held by such
Pass Through Trust. In such an event, the persons providing services with
respect to the assets of such Pass Through Trust, including the Secured Notes,
may be subject to the fiduciary responsibility provisions of Title I of ERISA
and be
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subject to the prohibited transaction provisions of ERISA and the Code with
respect to transactions involving such assets, unless such transactions are
subject to a statutory or administrative exemption. The Exemption may provide
prohibited transaction relief under these circumstances.
Insurance companies considering the purchase of Pass Through Certificates
should also consult their own counsel as to the application of the decision by
the United States Supreme Court in John Hancock Mutual Life Insurance Co. v.
Harris Trust and Savings Bank, 114 S.Ct. 517 (1993) to such a purchase. Under
that decision, assets held in an insurance company's general account may be
deemed plan assets under certain circumstances.
The foregoing discussion is general in nature and is not intended to be all
inclusive. Any fiduciary of a Plan considering the purchase of Pass Through
Certificates should consult its legal advisors regarding the consequences of
such purchase under ERISA and the Code (and, particularly in the case of non-
ERISA plans, concerning any state law consideration).
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
with Mobil, MMFC-I and MMFC-II (the "Underwriting Agreement"), Morgan Stanley
& Co. Incorporated (the "Underwriter") has agreed to purchase from the Pass
Through Trustee $231,900,000 aggregate accreted principal amount of Pass
Through Certificates.
The Underwriting Agreement provides that the obligation of the Underwriter
to pay for and accept delivery of the Pass Through Certificates is subject to
the approval of certain legal matters by its counsel and to certain other
conditions. The Underwriter is obligated to take and pay for all of the Pass
Through Certificates if any are taken.
The Underwriter initially proposes to offer all or part of the Pass Through
Certificates directly to the public at the public offering price set forth on
the cover page of this Prospectus Supplement and may offer a portion of the
Pass Through Certificates to dealers at a price which represents a concession
not in excess of .40%. The Underwriter may allow, and such dealers may
reallow, a concession not in excess of the .25% for certain dealers. After the
initial public offering, the public offering prices and such concessions may
from time to time be varied by the Underwriter.
Mobil, MMFC-I and MMFC-II have each agreed to indemnify the Underwriter
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
Mobil does not intend to apply for listing of the Pass Through Certificates
on a national securities exchange, but has been advised by the Underwriter
that it presently intends to make a market in the Pass Through Certificates,
as permitted by applicable laws and regulations. The Underwriter is not
obligated, however, to make a market in the Pass Through Certificates and any
such market-making may be discontinued at any time at the sole discretion of
the Underwriter. Accordingly, no assurance can be given as to the liquidity
of, or trading markets for, the Pass Through Certificates.
The Underwriter and certain of its affiliates perform investment banking and
other financial services for Mobil and its subsidiaries in the ordinary course
of business.
It is expected that delivery of the Pass Through Certificates will be made
against payment therefor on or about the date specified in the last paragraph
of the cover page of this Prospectus Supplement, which will be the fifth
business day following the date of pricing of the Pass Through Certificates
(such settlement cycle being herein referred to as "T+5"). Under Rule 15c6-1
under the Exchange Act, trades in the secondary market generally are required
to settle in three business days, unless the parties to any such trade
expressly agree otherwise. Accordingly, purchasers who wish to trade Pass
Through Certificates on any date prior to two business days prior to the date
of settlement will be required, by virtue of the fact that the Pass Through
Certificates initially will settle in T+5, to specify an alternate settlement
cycle at the time of any such trade to prevent a failed settlement. Purchasers
of Pass Through Certificates who wish to trade Pass Through Certificates on
any date prior to two business days prior to the date of settlement should
consult their own advisor.
S-40
<PAGE>
LEGAL MATTERS
The validity of the Pass Through Certificates offered hereby will be passed
upon for Mobil, MMFC-I and MMFC-II by Ralph N. Johanson, Jr., Managing
Counsel, Corporate Finance and Securities of Mobil, and by Dewey Ballantine,
New York, New York, and for the underwriters by Shearman & Sterling, New York,
New York. Mr. Johanson, Dewey Ballantine and Shearman & Sterling will rely on
the opinion of Bingham, Dana & Gould LLP, counsel for the Pass Through Trustee
as to certain matters relating to the authorization, execution and delivery of
such Pass Through Certificates by, and the valid and binding effect thereof
on, the Pass Through Trustee.
DOCUMENTS INCORPORATED BY REFERENCE
Mobil's Annual Report on Form 10-K for the year ended December 31, 1995, its
Reports on Form 10-Q for the three months ended March 31, 1996, June 30, 1996
and September 30, 1996 and its Current Reports on Form 8-K filed on January
22, 1996, February 14, 1996, February 29, 1996, April 23, 1996, May 13, 1996,
May 17, 1996, July 22, 1996, August 7, 1996, September 3, 1996 and October 21,
1996 heretofore filed with the Commission pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), are hereby incorporated by
reference.
All documents filed by Mobil pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus Supplement and
prior to the termination of the Offering of the Pass Through Certificates
offered hereby shall be deemed to be incorporated by reference in this
Prospectus Supplement and to be a part hereof from the date of filing of such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus Supplement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such 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 Supplement and the accompanying Prospectus.
Mobil will provide without charge to each person to whom this Prospectus
Supplement and the accompanying Prospectus is delivered, upon the request of
such person, a copy of any or all of the foregoing documents incorporated
herein by reference (other than exhibits unless specifically incorporated
therein). Requests for such documents should be directed to Mobil Corporation,
3225 Gallows Road, Fairfax, Virginia 22037-0001, Attention: Secretary
(telephone (703) 846-3000).
S-41
<PAGE>
APPENDIX A
GLOSSARY OF CERTAIN TERMS
The following is a glossary of certain terms used in this Prospectus. The
definitions of terms used in this glossary that are also used in the
Agreement, an Indenture, Charter or Participation Agreement are qualified in
their entirety by reference to the definitions of such terms contained
therein.
"Agreement" means the Basic Agreement as supplemented by the Trust
Supplement.
"Assigned Hire" means, with respect to each Charter, all Base Hire,
Termination Value and certain amounts of Supplemental Hire payable thereunder.
"Basic Agreement" means the Pass Through Trust Agreement, among the Pass
Through Trustee, Mobil, MMFC-I and MMFC-II and certain other Mobil
subsidiaries party thereto.
"Builder" means Sumitomo Heavy Industries, Ltd., a Japanese company.
"Business Day" means any day other than a Saturday or Sunday or any other
day on which banks located in London, England, New York, New York, Fairfax,
Virginia, the city in which the corporate trust department of the Indenture
Trustee is located, the city in which the corporate trust department of the
Managing Trustee is located or the city in which the corporate trust
department of the Pass Through Trustee is located, are required or authorized
to remain closed. Unless otherwise expressly stated, all references to "day"
or "days" shall refer to calendar days.
"Certificateholder" means the person in whose name a Certificate is
registered.
"Charter" means each of the Bareboat Charter Party Agreements with respect
to a Vessel between the applicable Owner Trust, as owner, and the applicable
Charterer, as charterer, as such Bareboat Charter Party Agreement may be
amended from time to time.
"Charter Event of Default" means each event designated as an event of
default under each Charter. See "Description of the Charters--The Charter--
Charter Events of Default."
"Charterer" means, with respect to the Charter of the Raven and Hulls No.
1233 and 1234, MMFC-I; and, with respect to the Charter of Eagle, MMFC-II,
together with any successors under any such Charter.
"Closing Date" means December 19, 1996.
"Code" means the U.S. Internal Revenue Code of 1986, as amended.
"Commission" means the U.S. Securities and Exchange Commission.
"Conditional Sale Agreement" means each of the conditional sale agreements,
dated November 25, 1996, between the related Owner Trust and the U.K. Lessor.
"Construction Contract" means each of the shipbuilding contracts, dated June
28, 1996, between the Builder and MOSAT, as buyer, relating to the
construction and sale by the Builder and the purchase by MOSAT of one New
Vessel.
"Delaware Trustee" means, with respect to each Trust Agreement and the Owner
Trust related thereto, Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity except as expressly provided in
such Trust Agreement, but solely as Delaware Trustee; and each person which
may be acting from time to time as Delaware Trustee in accordance with the
provisions of such Trust Agreement.
A-1
<PAGE>
"Delivered Vessel" means either of the Eagle, constructed by the Builder and
delivered to MOSAT in August, 1993 or the Raven, constructed by the Builder
and delivered to MOSAT in June, 1996 (together, the "Delivered Vessels").
"DUMOCO" means a limited life company incorporated under the laws of the
Cayman Islands as a joint venture between MOSAT and a third party investor.
"Event of Default" means, with respect to the Agreement, the occurrence and
continuance of an Indenture Event of Default under any Indenture.
"Event of Loss" means each of the events defined as such in any Charter. See
"Description of the Charters--The Charter--Events of Loss."
"Full Accrual Date" means, with respect to the Secured Note issued under the
Indenture related to Hull No. 1233, January 2, 1999 and, with respect to the
Secured Note issued under the Indenture related to Hull No. 1234, July 2,
1999.
"Head Lease" means each of the long term leases to be entered into between
an Owner Trust and the related U.K. Lessor.
"Indenture" means each separate Trust Indenture, Assignment of Charter and
Head Lease and Security Agreement to be entered into between the related Owner
Trust and the related Indenture Trustee with respect to the issuance of
Secured Notes related to one of the Vessels, as such agreement may hereafter
be amended or supplemented in accordance with its terms.
"Initial Average Life Date" means December 26, 2008.
"Indenture Estate" means, with respect to each Indenture, an assignment of,
security interest in, and mortgage on, all of the right, title and interest of
each Owner Trust in its property, rights, interests and privileges, including,
without limitation, the related Vessel, Vessel Interest, Charter and Parent
Guaranty (other than the right to receive Excepted Payments).
"Indenture Event of Default" means, with respect to each Indenture, each of
the events designated as an Event of Default therein. See "Description of the
Secured Notes--Events of Default."
"Indenture Trustee" means, with respect to each Indenture, State Street Bank
and Trust Company, a Massachusetts trust company, not in its individual
capacity except as expressly provided therein, but solely as trustee; and each
person which may be acting from time to time as Indenture Trustee in
accordance with the provisions thereof.
"Initial Subcharter" means, with respect to each Charter, each Bareboat
Subcharter Party between MMFC-I or MMFC-II, as the case may be, as charterer,
and MSCL, as subcharterer.
"Managing Trustee" means, with respect to each Trust Agreement and the Owner
Trust related thereto, Deutsche Morgan Grenfell (Cayman) Ltd., a Cayman
Islands banking corporation, not in its individual capacity except as
expressly provided in such Trust Agreement, but solely as Managing Trustee;
and each person which may be acting from time to time as Managing Trustee in
accordance with the provisions of such Trust Agreement.
"MMFC-I" means Mobil Marine Finance Company I Inc., a Delaware corporation,
and one of the Charterers.
"MMFC-II" means Mobil Marine Finance Company II Inc., a Delaware
corporation, and one of the Charterers.
A-2
<PAGE>
"Mobil" means Mobil Corporation, a Delaware corporation.
"MOSAT" means Mobil Shipping and Transportation Company, a Liberian
corporation.
"MSCL" means Mobil Shipping Co. Ltd., an English corporation, and the
initial subcharterer of each Vessel.
"New Vessel" means either of the vessels designated as Hull No. 1233 and
Hull No. 1234 being constructed pursuant to the related Construction Contract
and, collectively, the "New Vessels."
"Offering" means the offering of the Pass Through Certificates described in
this Prospectus Supplement.
"Operative Documents" means, with respect to each Vessel, the related
Indenture and the Secured Note issued thereunder, and the related Parent
Guaranty, Charter, Participation Agreement, Ship Mortgage and Trust Agreement.
"Owner Participant" means, with respect to the Raven, Hull No. 1233 and Hull
No. 1234, SAMOCO, and with respect to the Eagle, DUMOCO.
"Owner Trust" means, with respect to Raven, SAMOCO Raven Trust, with respect
to Eagle, DUMOCO Eagle Trust, with respect to Hull No. 1233, SAMOCO 1233
Trust, and with respect to Hull No. 1234, SAMOCO 1234 Trust, each organized
under the Delaware Business Trust Act for the benefit of the related Owner
Participant under the related Trust Agreement.
"Owner Trustees" mean, with respect to each Owner Trust, the related
Managing Trustee and the related Delaware Trustee.
"Parent Guaranties" means the irrevocable and unconditional guaranties by
Mobil of payments by, and certain obligations of, the Charterer under each
Charter and the other related Operative Documents.
"Participation Agreement" means, with respect to each Vessel, the agreement,
among the related Owner Trust, Managing Trustee, Charterer, Owner Participant,
Indenture Trustee and the Pass Through Trustee, in each case relating to the
leveraged lease financing of such Vessel and the other transactions described
therein.
"Pass Through Certificates" means the Series 1996-A Pass Through
Certificates issued pursuant to the Agreement, each representing a fractional
undivided interest in the Pass Through Trust.
"Pass Through Trust" means the Mobil Corporation 1996-A Pass Through Trust
to be formed pursuant to the Agreement.
"Pass Through Trustee" means State Street Bank and Trust Company, a
Massachusetts trust company, in its capacity as Pass Through Trustee under the
Pass Through Trust, and each other person which may from time to time act as
successor Pass Through Trustee under the Pass Through Trust.
"Pool Balance" means, with respect to the Pass Through Trust, as of any
date, the aggregate unpaid principal amount (including accretion of discount)
of the Secured Notes held in such Pass Through Trust on such date, plus any
amounts in respect of principal on such Secured Notes held by the Pass Through
Trustee and not yet distributed. The Pool Balance as of any Regular
Distribution Date or Special Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Secured Notes held in such
Pass Through Trust and the distribution thereof to be made on that date and
any accretion of discount to such date.
"Pool Factor" means, with respect to the Pass Through Trust, as of any date,
the quotient (rounded to the seventh decimal place, with .00000005 being
rounded upwards) computed by dividing (i) the Pool Balance by
A-3
<PAGE>
(ii) the original aggregate principal amount of the Pass Through Certificates
(including all accretion of discount). The Pool Factor as of any Regular
Distribution Date or Special Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Secured Notes held in the
Pass Through Trust and distribution thereof to be made on that date and any
accretion of discount to such date.
"Rating Agencies" means Standard & Poor's Rating Group and Moody's Investors
Service, Inc.
"Regular Distribution Date" means July 2, 1997 and, thereafter, January 2
and July 2 of each year, until the final distribution date for the Pass
Through Trust.
"SAMOCO" means a limited life company incorporated under the laws of the
Cayman Islands as a joint venture between MOSAT and a third party investor.
"Scheduled Payment" means each payment of principal of or interest on a
Secured Note scheduled to be received by the Pass Through Trustee on a Regular
Distribution Date.
"Secured Note" means a secured note issued on a nonrecourse basis by an
Owner Trust pursuant to the related Indenture.
"Special Distribution Date" means any date on which a Special Payment will
be distributed by the Pass Through Trustee to the Certificateholders, which
date shall be a Business Day.
"Special Payment" means (i) any payment of principal, premium, if any, and
interest received by the Pass Through Trustee on account of the prepayment, if
any, of the Secured Notes held in the Pass Through Trust, (ii) any payment
received by the Pass Through Trustee following an Indenture Event of Default
in respect of the Secured Notes held in the Pass Through Trust, including
payments, if any, received by the Pass Through Trustee on account of the
purchase by the related Owner Trust or the Owner Participant of such Secured
Notes, (iii) payments received by the Pass Through Trustee on account of the
sale by it of such Secured Notes and (iv) any Scheduled Payment which is not
in fact paid within five days of the Regular Distribution Date applicable
thereto.
"Termination Value" means the amount required to be received by each Owner
Trust under the related Charter following certain early terminations of such
Charter, which amount shall in all circumstances be at least sufficient
together with other amounts then due under such Charter to pay in full as of
the date of payment thereof the aggregate unpaid principal of the outstanding
Secured Notes issued under the related Indenture, together with all unpaid
interest thereon accrued and to accrue to such date of payment.
"Trust Agreement" means, with respect to each Vessel, each Trust Agreement
dated November 22, 1996, among the Managing Trustee, the Delaware Trustee and
the related Owner Participant, pursuant to which the Owner Trust related to
such Vessel was created and established for the benefit of the related Owner
Participant.
"Trust Estate" means, with respect to each Owner Trust, the estate created
under the related Trust Agreement, including all estate, right, title and
interest of such Owner Trust in and to the related Vessel Interest and all
right, title and interest of such Owner Trust under the related Operative
Documents and the related U.K. Documents and all money held by the Managing
Trustee from time to time thereunder, including, without limitation, all
amounts received under the related Charter, insurance proceeds, sales
proceeds, rental proceeds, and requisition, indemnity or other payments of any
kind, but specifically excluding Excepted Payments (collectively, the "Trust
Estate").
"Trust Supplement" means the supplement to the Basic Agreement, among Mobil,
MMFC-I, MMFC-II and the Pass Through Trustee, creating the Pass Through Trust.
A-4
<PAGE>
"U.K. Documents" means, with respect to each Vessel, collectively, the
Conditional Sale Agreement, the Head Lease, the U.K. Security Agreement and
the U.K. Deed of Parent Guaranty by Mobil in favor of the related U.K. Lessor.
"U.K. Lessor" means, with respect to each Vessel, a U.K. financial
institution not an affiliate of Mobil.
"Vessel" means any of Eagle, Raven, Hull No. 1233 or Hull No. 1234, each a
very large crude carrier having a capacity of approximately 280,000 deadweight
tons, that is the subject of the financing described in this Prospectus
Supplement. In the case of each New Vessel, unless the context otherwise
requires, the term "Vessel" includes the rights of the purchaser under the
related Construction Contract for such Vessel until the delivery date of such
New Vessel.
"Vessel Interest" means all of the right, title and interest of each Owner
Trust in the related Vessel, comprising, in the case of each Delivered Vessel,
title (subject to the related Conditional Sale Agreement) registered in the
Marshall Islands and the Owner Trust's rights under the related Head Lease,
together with certain ancillary rights thereto, and, in the case of each New
Vessel, prior to delivery and passage of title, such Owner Trust's rights
under the related Construction Contract (subject to the related Conditional
Sale Agreement), together with the rights described above upon completion and
delivery of the New Vessel under such Construction Contract, and in each case
including the rights in the Vessel of the applicable Owner Trust under the
related Charter, Trust Agreement, Participation Agreement and the related
Operative Documents (other than the right to receive Excepted Payments) and
related U.K. Documents.
A-5
<PAGE>
APPENDIX B
SCHEDULE OF PRINCIPAL PAYMENTS ON THE SECURED NOTES
SCHEDULE 1
DUMOCO EAGLE TRUST
<TABLE>
<CAPTION>
SCHEDULED SCHEDULED
PAYMENTS PAYMENTS OUTSTANDING
REGULAR DISTRIBUTION DATE OF INTEREST OF PRINCIPAL PRINCIPAL
------------------------- ------------- ------------ --------------
<S> <C> <C> <C>
July 2, 1997........................ $1,786,139.94 $ 893,037.00 $46,906,963.00
January 2, 1998..................... 1,634,707.66 864,007.00 46,042,956.00
July 2, 1998........................ 1,604,597.02 894,117.00 45,148,839.00
January 2, 1999..................... 1,573,437.04 925,277.00 44,223,562.00
July 2, 1999........................ 1,541,191.14 957,523.00 43,266,039.00
January 2, 2000..................... 1,507,821.46 990,893.00 42,275,146.00
July 2, 2000........................ 1,473,288.84 1,025,425.00 41,249,721.00
January 2, 2001..................... 1,437,552.78 1,061,162.00 40,188,559.00
July 2, 2001........................ 1,400,571.28 1,098,143.00 39,090,416.00
January 2, 2002..................... 1,362,301.00 1,136,413.00 37,954,003.00
July 2, 2002........................ 1,322,697.00 1,176,017.00 36,777,986.00
January 2, 2003..................... 1,281,712.81 1,217,001.00 35,560,985.00
July 2, 2003........................ 1,239,300.33 1,259,414.00 34,301,571.00
January 2, 2004..................... 1,195,409.75 1,303,305.00 32,998,266.00
July 2, 2004........................ 1,149,989.57 1,348,725.00 31,649,541.00
January 2, 2005..................... 1,102,986.50 1,395,728.00 30,253,813.00
July 2, 2005........................ 1,054,345.38 1,444,369.00 28,809,444.00
January 2, 2006..................... 1,004,009.12 1,494,705.00 27,314,739.00
July 2, 2006........................ 951,918.65 1,546,796.00 25,767,943.00
January 2, 2007..................... 898,012.81 1,600,701.00 24,167,242.00
July 2, 2007........................ 842,228.38 1,656,486.00 22,510,756.00
January 2, 2008..................... 784,499.85 1,714,214.00 20,796,542.00
July 2, 2008........................ 724,759.49 1,773,955.00 19,022,587.00
January 2, 2009..................... 662,937.16 1,835,777.00 17,186,810.00
July 2, 2009........................ 598,960.33 1,899,754.00 15,287,056.00
January 2, 2010..................... 532,753.90 1,965,960.00 13,321,096.00
July 2, 2010........................ 464,240.20 2,034,474.00 11,286,622.00
January 2, 2011..................... 393,338.78 2,105,376.00 9,181,246.00
July 2, 2011........................ 319,966.42 2,178,748.00 7,002,498.00
January 2, 2012..................... 244,037.06 2,254,677.00 4,747,821.00
July 2, 2012........................ 165,461.56 2,333,253.00 2,414,568.00
January 2, 2013..................... 84,147.69 2,414,568.00 0.00
</TABLE>
B-1
<PAGE>
APPENDIX B
SCHEDULE OF PRINCIPAL PAYMENTS ON THE SECURED NOTES
SCHEDULE 2
SAMOCO RAVEN TRUST
<TABLE>
<CAPTION>
SCHEDULED SCHEDULED
PAYMENTS PAYMENTS OUTSTANDING
REGULAR DISTRIBUTION DATE OF INTEREST OF PRINCIPAL PRINCIPAL
------------------------- ------------- ------------- --------------
<S> <C> <C> <C>
July 2, 1997....................... $2,185,966.25 $ 895,646.00 $57,604,354.00
January 2, 1998.................... 2,007,511.74 866,531.00 56,737,823.00
July 2, 1998....................... 1,977,313.13 896,730.00 55,841,093.00
January 2, 1999.................... 1,946,062.09 927,981.00 54,913,112.00
July 2, 1999....................... 1,913,721.95 960,321.00 53,952,791.00
January 2, 2000.................... 1,880,254.77 993,788.00 52,959,003.00
July 2, 2000....................... 1,845,621.25 1,028,421.00 51,930,582.00
January 2, 2001.................... 1,809,780.78 1,064,262.00 50,866,320.00
July 2, 2001....................... 1,772,691.25 1,101,351.00 49,764,969.00
January 2, 2002.................... 1,734,309.17 1,139,733.00 48,625,236.00
July 2, 2002....................... 1,694,589.47 1,179,453.00 47,445,783.00
January 2, 2003.................... 1,653,485.54 1,220,557.00 46,225,226.00
July 2, 2003....................... 1,610,949.13 1,263,094.00 44,962,132.00
January 2, 2004.................... 1,566,930.30 1,307,112.00 43,655,020.00
July 2, 2004....................... 1,521,377.45 1,352,665.00 42,302,355.00
January 2, 2005.................... 1,474,237.07 1,399,806.00 40,902,549.00
July 2, 2005....................... 1,425,453.83 1,448,589.00 39,453,960.00
January 2, 2006.................... 1,374,970.51 1,499,072.00 37,954,888.00
July 2, 2006....................... 1,322,727.85 1,551,315.00 36,403,573.00
January 2, 2007.................... 1,268,664.52 1,605,378.00 34,798,195.00
July 2, 2007....................... 1,212,717.10 1,661,326.00 33,136,869.00
January 2, 2008.................... 1,154,819.88 1,719,223.00 31,417,646.00
July 2, 2008....................... 1,094,904.96 1,779,138.00 29,638,508.00
January 2, 2009.................... 1,032,902.00 1,841,141.00 27,797,367.00
July 2, 2009....................... 968,738.24 1,905,304.00 25,892,063.00
January 2, 2010.................... 902,338.40 1,971,704.00 23,920,359.00
July 2, 2010....................... 833,624.51 2,040,418.00 21,879,941.00
January 2, 2011.................... 762,515.94 2,111,527.00 19,768,414.00
July 2, 2011....................... 688,929.23 2,185,113.00 17,583,301.00
January 2, 2012.................... 612,778.04 2,261,265.00 15,322,036.00
July 2, 2012....................... 533,972.95 2,340,070.00 12,981,966.00
January 2, 2013.................... 452,421.52 2,421,621.00 10,560,345.00
July 2, 2013....................... 368,028.02 2,506,015.00 8,054,330.00
January 2, 2014.................... 280,693.40 2,593,349.00 5,460,981.00
July 2, 2014....................... 190,315.19 2,683,727.00 2,777,254.00
January 2, 2015.................... 96,787.30 2,777,254.00 .00
</TABLE>
B-2
<PAGE>
APPENDIX B
SCHEDULE OF PRINCIPAL PAYMENTS ON THE SECURED NOTES
SCHEDULE 3
SAMOCO 1233 TRUST
<TABLE>
<CAPTION>
SCHEDULED SCHEDULED SCHEDULED
ACCRETION PAYMENTS PAYMENTS OUTSTANDING
REGULAR DISTRIBUTION DATE OF DISCOUNT OF INTEREST OF PRINCIPAL PRINCIPAL
- ------------------------- ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
July 2, 1997............ $2,044,320.61 $ 0.00 $ 0.00 $56,666,636.01
January 2, 1998......... 1,974,832.27 0.00 0.00 58,641,468.28
July 2, 1998............ 2,043,655.17 0.00 0.00 60,685,123.45
January 2, 1999......... 2,114,876.55 0.00 0.00 62,800,000.00
July 2, 1999............ 2,188,580.00 899,795.00 61,900,205.00
January 2, 2000......... 2,157,222.14 931,153.00 60,969,052.00
July 2, 2000............ 2,124,771.46 963,603.00 60,005,449.00
January 2, 2001......... 2,091,189.90 997,185.00 59,008,264.00
July 2, 2001............ 2,056,438.00 1,031,937.00 57,976,327.00
January 2, 2002......... 2,020,475.00 1,067,900.00 56,908,427.00
July 2, 2002............ 1,983,258.68 1,105,116.00 55,803,311.00
January 2, 2003......... 1,944,745.39 1,143,629.00 54,659,682.00
July 2, 2003............ 1,904,889.92 1,183,485.00 53,476,197.00
January 2, 2004......... 1,863,645.47 1,224,729.00 52,251,468.00
July 2, 2004............ 1,820,963.66 1,267,411.00 50,984,057.00
January 2, 2005......... 1,776,794.39 1,311,580.00 49,672,477.00
July 2, 2005............ 1,731,085.82 1,357,289.00 48,315,188.00
January 2, 2006......... 1,683,784.30 1,404,590.00 46,910,598.00
July 2, 2006............ 1,634,834.34 1,453,540.00 45,457,058.00
January 2, 2007......... 1,584,178.47 1,504,196.00 43,952,862.00
July 2, 2007............ 1,531,757.24 1,556,617.00 42,396,245.00
January 2, 2008......... 1,477,509.14 1,610,866.00 40,785,379.00
July 2, 2008............ 1,421,370.46 1,667,004.00 39,118,375.00
January 2, 2009......... 1,363,275.37 1,725,099.00 37,393,276.00
July 2, 2009............ 1,303,155.67 1,785,219.00 35,608,057.00
January 2, 2010......... 1,240,940.79 1,847,434.00 33,760,623.00
July 2, 2010............ 1,176,557.71 1,911,817.00 31,848,806.00
January 2, 2011......... 1,109,930.89 1,978,444.00 29,870,362.00
July 2, 2011............ 1,040,982.12 2,047,393.00 27,822,969.00
January 2, 2012......... 969,630.47 2,118,744.00 25,704,225.00
July 2, 2012............ 895,792.24 2,192,582.00 23,511,643.00
January 2, 2013......... 819,380.76 2,268,994.00 21,242,649.00
July 2, 2013............ 740,306.32 2,348,068.00 18,894,581.00
January 2, 2014......... 658,476.15 2,429,899.00 16,464,682.00
July 2, 2014............ 573,794.17 2,514,581.00 13,950,101.00
January 2, 2015......... 486,161.02 2,602,214.00 11,347,887.00
July 2, 2015............ 395,473.86 2,692,901.00 8,654,986.00
January 2, 2016......... 301,626.26 2,786,748.00 5,868,238.00
July 2, 2016............ 204,508.09 2,883,867.00 2,984,371.00
January 2, 2017......... 104,005.33 2,984,371.00 0.00
</TABLE>
B-3
<PAGE>
APPENDIX B
SCHEDULE OF PRINCIPAL PAYMENTS ON THE SECURED NOTES
SCHEDULE 4
SAMOCO 1234 TRUST
<TABLE>
<CAPTION>
SCHEDULED SCHEDULED SCHEDULED
ACCRETION PAYMENTS PAYMENTS OUTSTANDING
REGULAR DISTRIBUTION DATE OF DISCOUNT OF INTEREST OF PRINCIPAL PRINCIPAL
- ------------------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
July 2, 1997............ $1,975,498.35 $ 0.00 $ 0.00 $54,758,308.95
January 2, 1998......... 1,908,327.07 0.00 0.00 56,666,636.01
July 2, 1998............ 1,974,832.27 0.00 0.00 58,641,468.28
January 2, 1999......... 2,043,655.17 0.00 0.00 60,685,123.45
July 2, 1999............ 2,114,876.55 0.00 0.00 62,800,000.00
January 2, 2000......... 2,188,580.00 899,795.00 61,900,205.00
July 2, 2000............ 2,157,222.14 931,153.00 60,969,052.00
January 2, 2001......... 2,124,771.46 963,603.00 60,005,449.00
July 2, 2001............ 2,091,189.90 997,185.00 59,008,264.00
January 2, 2002......... 2,056,438.00 1,031,937.00 57,976,327.00
July 2, 2002............ 2,020,475.00 1,067,900.00 56,908,427.00
January 2, 2003......... 1,983,258.68 1,105,116.00 55,803,311.00
July 2, 2003............ 1,944,745.39 1,143,629.00 54,659,682.00
January 2, 2004......... 1,904,889.92 1,183,485.00 53,476,197.00
July 2, 2004............ 1,863,645.47 1,224,729.00 52,251,468.00
January 2, 2005......... 1,820,963.66 1,267,411.00 50,984,057.00
July 2, 2005............ 1,776,794.39 1,311,580.00 49,672,477.00
January 2, 2006......... 1,731,085.82 1,357,289.00 48,315,188.00
July 2, 2006............ 1,683,784.30 1,404,590.00 46,910,598.00
January 2, 2007......... 1,634,834.34 1,453,540.00 45,457,058.00
July 2, 2007............ 1,584,178.47 1,504,196.00 43,952,862.00
January 2, 2008......... 1,531,757.24 1,556,617.00 42,396,245.00
July 2, 2008............ 1,477,509.14 1,610,866.00 40,785,379.00
January 2, 2009......... 1,421,370.46 1,667,004.00 39,118,375.00
July 2, 2009............ 1,363,275.37 1,725,099.00 37,393,276.00
January 2, 2010......... 1,303,155.67 1,785,219.00 35,608,057.00
July 2, 2010............ 1,240,940.79 1,847,434.00 33,760,623.00
January 2, 2011......... 1,176,557.71 1,911,817.00 31,848,806.00
July 2, 2011............ 1,109,930.89 1,978,444.00 29,870,362.00
January 2, 2012......... 1,040,982.12 2,047,393.00 27,822,969.00
July 2, 2012............ 969,630.47 2,118,744.00 25,704,225.00
January 2, 2013......... 895,792.24 2,192,582.00 23,511,643.00
July 2, 2013............ 819,380.76 2,268,994.00 21,242,649.00
January 2, 2014......... 740,306.32 2,348,068.00 18,894,581.00
July 2, 2014............ 658,476.15 2,429,899.00 16,464,682.00
January 2, 2015......... 573,794.17 2,514,581.00 13,950,101.00
July 2, 2015............ 486,161.02 2,602,214.00 11,347,887.00
January 2, 2016......... 395,473.86 2,692,901.00 8,654,986.00
July 2, 2016............ 301,626.26 2,786,748.00 5,868,238.00
January 2, 2017......... 204,508.09 2,883,867.00 2,984,371.00
July 2, 2017............ 104,005.33 2,984,371.00 0.00
</TABLE>
B-4
<PAGE>
PROSPECTUS
$650,000,000
PASS THROUGH CERTIFICATES
MOBIL MARINE FINANCE COMPANY I INC.
MOBIL MARINE FINANCE COMPANY II INC.
MOBIL LEASE FINANCE COMPANY INC.
MOBIL CHEMICAL FINANCE (TEXAS) INC.
MOBIL CHEMICAL FINANCE (LOUISIANA) INC.
MOBIL PETRORAIL FINANCE INC.
MOBIL TRANSPORT FINANCE COMPANY INC.
MOBIL EQUIPMENT FINANCE COMPANY INC.
----------------
Applicable Underlying Payments Fully and Unconditionally
Guaranteed by
Mobil Corporation
Up to $650,000,000 aggregate public offering price of Pass Through
Certificates (the "Certificates") (or its equivalent (based on the applicable
exchange rate at the time of sale) in one or more foreign currencies or units
based on or related to currencies, including European Currency Units) may be
offered for sale from time to time pursuant to this Prospectus and related
Prospectus Supplements (as defined below). Certificates may be issued in one
or more series in amounts, at prices and on terms to be determined at the time
of the offering. In respect of each offering of Certificates, a separate Mobil
Pass Through Trust for each series of Certificates being offered (each, a
"Pass Through Trust") will be formed pursuant to a Pass Through Trust
Agreement (the "Basic Agreement"), among Mobil Marine Finance Company I Inc.,
Mobil Marine Finance Company II Inc., Mobil Lease Finance Company Inc., Mobil
Chemical Finance (Texas) Inc., Mobil Chemical Finance (Louisiana) Inc., Mobil
Petrorail Finance Inc., Mobil Transport Finance Company Inc., Mobil Equipment
Finance Company Inc. (each, a "Lessee"), Mobil Corporation ("Mobil") and State
Street Bank and Trust Company (the "Trustee"), as trustee under each Pass
Through Trust, and a supplement thereto (each, a "Trust Supplement") relating
to such Pass Through Trust to be entered into among one or more of the
Lessees, Mobil and the Trustee. Each Certificate in a series will represent a
fractional undivided interest in the related Pass Through Trust and will have
no rights, benefits or interests in respect of any other Pass Through Trust.
The property of each Pass Through Trust will consist of notes (the "Secured
Notes") issued on a nonrecourse basis by one or more owner trustees (each, an
"Owner Trustee") of one or more separate owner trusts (each, an "Owner Trust")
in connection with one or more separate leveraged lease transactions to
finance or refinance all or a portion of the cost of certain real or personal
property to be specified in a Prospectus Supplement, which property may
consist of title to, an estate for years or a leasehold or similar interest in
equipment, manufacturing, drilling or production facilities, marine tankers,
rail cars, corporate aircraft (including engines), drilling platforms,
refineries, pipelines, chemical plants, and other real or personal property or
undivided interests therein (each such specified property, "Leased Property").
Each Leased Property has been or will be leased or chartered to a Lessee
pursuant to separate lease agreements, sublease agreements, charters or
similar agreements (each, a "Lease"). Although neither the Certificates nor
the Secured Notes will be obligations of, or guaranteed by, any Lessee or
Mobil, the amounts unconditionally payable under the Lease or Leases related
to a Pass Through Trust will be at least sufficient to pay in full when due
all payments of principal and interest and, except in the limited
circumstances set forth in the applicable Prospectus Supplement, premium, if
any, due in respect of the Secured Notes held in that Pass Through Trust.
Mobil will fully and unconditionally guarantee (in each case pursuant to a
"Parent Guaranty") to the holders of Certificates from time to time the full
and prompt payment of amounts payable by the Lessee under a related Lease when
and as the same shall become due and payable.
The specific terms of the particular Certificates in respect of which this
Prospectus is being delivered will be set forth in a supplement to this
Prospectus (each, a "Prospectus Supplement") which will be delivered together
with this Prospectus, and which will include, where applicable, the specific
designation, form, aggregate principal amount, initial public offering price
and distribution dates relating to such Certificates, the currency in which
such Certificates will be payable, and the use of the net proceeds from the
offering of such Certificates. The Prospectus Supplement will also
<PAGE>
describe the Pass Through Trust or Pass Through Trusts relating to such
Certificates, the Secured Notes to be purchased by such Pass Through Trust or
Pass Through Trusts, each Leased Property relating to such Secured Notes, the
leveraged lease transactions relating to such Secured Notes and other special
terms relating to such Certificates.
If so specified in a Prospectus Supplement related to an offering of
Certificates, the Trust Property (as defined below) of a Pass Through Trust
will consist of Secured Notes related to Leased Property which are
subordinated in right of payment to other Secured Notes related to the same
Leased Property. In respect of such offering, only Secured Notes having the
same priority of payment may be held in the same Pass Through Trust. In
addition, the related Prospectus Supplement may provide that the Trustees on
behalf of the applicable Pass Through Trusts may enter into an intercreditor
or subordination agreement establishing priorities among series of
Certificates or that one or more payments of interest on the related Secured
Notes of one or more series or distributions made by the Trustee of the
related Pass Through Trust will be supported by a liquidity facility issued by
an institution identified in the related Prospectus Supplement.
Secured Notes may be issued in respect of one or more items of Leased
Property. Secured Notes in respect of a particular item of Leased Property may
be issued in one or more series, each of which may have a different interest
rate and different final maturity dates. For each series of Certificates, the
Trustee will purchase one or more Secured Notes issued with respect to one or
more items of Leased Property such that all of the Secured Notes held in the
related Pass Through Trust will have identical interest rates (in each case
equal to the rate applicable to the Certificates issued by such Pass Through
Trust), and such that the latest maturity date for such Secured Notes will
occur on or before the final distribution date for such Certificates. Interest
paid on the Secured Notes held in each Pass Through Trust will be passed
through to the holders of the Certificates relating to such Pass Through Trust
on the dates and at the rate per annum set forth in the Prospectus Supplement
relating to such Certificates until the final distribution date for such Pass
Through Trust. Principal paid on the Secured Notes held in each Pass Through
Trust will be passed through to the holders of the Certificates relating to
such Pass Through Trust in scheduled amounts on the dates set forth in the
Prospectus Supplement relating to such Certificates until the final
distribution date for such Pass Through Trust. The Secured Notes to be held in
a Pass Through Trust will be secured by (i) an assignment of certain of the
issuing Owner Trustee's rights as lessor or charterer under the Lease relating
to the Leased Property to which such Secured Notes relate, including the right
to receive rentals and certain other payments from the Lessee, (ii) an
assignment of certain of such Owner Trustee's rights under the Parent Guaranty
relating to such Leased Property and (iii) to the extent specified in the
applicable Prospectus Supplement, a mortgage or other security interest in
such Leased Property or in construction contracts or other agreements,
collateral accounts or other security, in each case subject to the rights of
the Lessee under the related Lease and other rights, if any, described in the
applicable Prospectus Supplement.
The Certificates may be sold to or through underwriters, through dealers or
agents or directly to purchasers. See "Plan of Distribution." Each Prospectus
Supplement will set forth the names of any underwriters, dealers or agents
involved in the sale of the Certificates in respect of which that Prospectus
Supplement is being delivered, the proposed amounts, if any, to be purchased
by underwriters and the compensation, if any, of such underwriters or agents.
See "Plan of Distribution" for information concerning secondary trading of the
Certificates.
----------------
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT. THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The Date of this Prospectus is November 12, 1996.
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THESE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY RELATED PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND SUCH
PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY MOBIL,
ANY LESSEE OR ANY UNDERWRITERS, AGENTS OR DEALERS. THIS PROSPECTUS AND ANY
RELATED PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS AND ANY RELATED PROSPECTUS SUPPLEMENT NOR ANY SALE
MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF MOBIL OR ANY
LESSEE SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED
HEREIN OR THEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available
Information................................. 4
Documents
Incorporated by
Reference................................... 4
Formation of
the Trusts.................................. 5
Outline of the
Leveraged Lease
Structure................................... 5
Use of
Proceeds.................................... 6
Mobil
Corporation................................. 6
The Lessees................................. 6
Ratio of
Earnings to
Fixed Charges
of Mobil
Corporation................................. 7
Description of
the
Certificates................................ 7
Description of
the Secured
Notes....................................... 18
Federal Income
Tax
Consequences................................ 22
Certain
Massachusetts
Taxes....................................... 24
Erisa
Considerations.............................. 25
Plan of
Distribution................................ 25
Legal Opinions.............................. 27
Experts..................................... 27
</TABLE>
3
<PAGE>
AVAILABLE INFORMATION
Mobil and the Lessees have filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (together with any
amendments thereto, the "Registration Statement") under the Securities and
Exchange Act of 1933, as amended (the "Securities Act"), with respect to
Certificates offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, omits certain information contained in the
Registration Statement as permitted by the rules and regulations of the
Commission. For further information with respect to Mobil, the Lessees or the
Certificates offered hereby, reference is made to the Registration Statement,
exhibits, financial statements, notes and schedules filed as part thereof,
which may be inspected at the public reference facilities of the Commission at
the addresses set forth below. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made
to the exhibit for a more complete description of the document or matter
involved, and each such statement made herein with respect to such contract,
agreement or document shall be deemed qualified in its entirety by such
reference.
Mobil is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith
files reports and other information with the Commission. The Registration
Statement, as well as such reports and other information filed by Mobil
pursuant to the Exchange Act, may be inspected and copied (at prescribed
rates) at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional
Offices of the Commission at 7 World Trade Center, Suite 1300, New York, New
York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. The Commission also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information filed electronically by Mobil. In addition, such reports,
proxy statements and other information may be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005, upon which
the common stock of Mobil is traded.
No separate financial statements of any of the Lessees have been included or
incorporated by reference herein. Mobil and the Lessees do not consider that
such financial statements would be material to holders of the Certificates
because (i) all of the voting securities of each Lessee will be owned,
directly or indirectly, by Mobil, a reporting company under the Exchange Act,
(ii) each of the Lessees is a newly-formed special purpose entity, has no
independent operations and will not engage in any activity other than leasing
Leased Property and (iii) the obligations of each of the Lessees are fully and
unconditionally guaranteed by Mobil as and to the extent described herein. See
"The Lessees," "Description of the Certificates," and "Parent Guaranties."
DOCUMENTS INCORPORATED BY REFERENCE
Mobil's Annual Report on Form 10-K for the year ended December 31, 1995, its
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996, June 30,
1996 and September 30, 1996, and its Current Reports on Form 8-K filed on
January 22, 1996, February 14, 1996, February 29, 1996, April 23, 1996, May
13, 1996, May 17, 1996, July 22, 1996, August 7, 1996, September 3, 1996 and
October 21, 1996 heretofore filed with the Commission pursuant to the Exchange
Act are hereby incorporated by reference.
All documents filed by Mobil pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Certificates offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such 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.
4
<PAGE>
Mobil will provide without charge to each person to whom this Prospectus is
delivered, upon the request of such person, a copy of any or all of the
foregoing documents incorporated herein by reference (other than exhibits
unless specifically incorporated therein). Requests for such documents should
be directed to Mobil Corporation, 3225 Gallows Road, Fairfax, Virginia 22037-
0001, Attention: Secretary (telephone (703) 846-3000).
FORMATION OF THE TRUSTS
In respect of each offering of Certificates, a separate Pass Through Trust
for each series of Certificates being offered will be formed pursuant to the
Basic Agreement and a Trust Supplement to be entered into among Mobil, the
Trustee and one or more Lessees (each Lessee that is liable under one or more
related Leases, an "Applicable Lessee"). Following the execution and delivery
of a Trust Supplement, the Trustee, on behalf of the related Pass Through
Trust, will purchase the Secured Notes to be held in such Pass Through Trust
having an interest rate (or, in the case of Secured Notes with a zero coupon,
accrual rate) equal to the interest rate (or accrual rate) applicable to the
Certificates evidencing interests in such Pass Through Trust. The maturity
date of the Secured Notes acquired by a Pass Through Trust will occur not
later than the final scheduled distribution date applicable to the
Certificates evidencing an interest in such Pass Through Trust. The Trustee
will distribute all payments of principal, premium, if any, and interest
received by it as holder of such Secured Notes to the holders of Certificates
evidencing an interest in the Pass Through Trust in which such Secured Notes
are held. See "Description of the Certificates."
OUTLINE OF THE LEVERAGED LEASE STRUCTURE
Unless otherwise specified in the applicable Prospectus Supplement, the
Certificates offered pursuant to any Prospectus Supplement will be issued to
facilitate the acquisition by one or more Owner Trustees, each acting not in
its individual capacity (except as expressly set forth in such Prospectus
Supplement) but solely as trustee under a separate trust agreement (each, an
"Owner Trust Agreement") for one or more equity investors (each, an "Owner
Participant"), of certain items of Leased Property. Owner Participants may
include affiliates of Mobil. Not later than the delivery date of the
applicable Leased Property to an Owner Trustee, such Owner Trustee will lease
or charter such Leased Property to a Lessee pursuant to a separate Lease. Such
Lessee may initially sublease or subcharter such Leased Property to an
affiliate of Mobil.
The Owner Trustees will obtain a portion of the funding for the Leased
Property from the equity investments of the related Owner Participants, which
will be the beneficiaries of the related Owner Trusts, and will obtain the
remainder of the funding from the issuance on a non-recourse basis of the
Secured Notes to be held in the related Pass Through Trusts and, to the extent
set forth in the applicable Prospectus Supplement, additional debt secured by
such Leased Property or other sources. The Secured Notes to be held in the
Pass Through Trusts will be acquired by the Trustee with the proceeds from the
sale of Certificates.
Secured Notes relating to a particular Leased Property will be issued under
a separate indenture and security agreement or a similar agreement (each, an
"Indenture") with respect to such Leased Property. Each Indenture will be
entered into by and among a financial institution (the "Corporate Indenture
Trustee") and, where required by applicable law, an individual who may be an
officer or employee of the Corporate Indenture Trustee (the "Individual
Indenture Trustee"), as trustees thereunder (the Corporate Indenture Trustee
and the Individual Indenture Trustee, in such capacities, the "Indenture
Trustees"), and the issuing Owner Trustee. No Owner Trustee or Owner
Participant will be personally liable for any amount payable under the related
Indenture or the Secured Notes issued thereunder.
The Secured Notes issued under each Indenture and held in each Pass Through
Trust will be secured by (i) an assignment of certain of the related Owner
Trustee's rights as lessor or charterer under the Lease with respect to the
applicable Leased Property, including the right to receive certain rentals and
other payments from the Applicable Lessee, (ii) an assignment of certain of
such Owner Trustee's rights under the Parent Guaranty
5
<PAGE>
relating to such Leased Property, and (iii) to the extent specified in the
applicable Prospectus Supplement, a mortgage or other security interest in
such Leased Property, or in construction contracts or other agreements,
collateral accounts or other security, in each case subject to the rights of
the Applicable Lessee under the related Lease and other rights, if any,
described in the applicable Prospectus Supplement. (Such security with respect
to each Indenture shall be referred to as the "Indenture Estate.") Unless
otherwise set forth in the applicable Prospectus Supplement, the Secured Notes
issued under an Indenture will not be secured by any of the Leased Properties
securing the Secured Notes issued under any other Indenture (including any
other Leased Properties acquired by the related Owner Trustee) and will not be
cross-defaulted with Secured Notes issued under any other Indenture (including
any other Indenture entered into by such Owner Trustee).
The rents and other amounts payable by the Applicable Lessee under the
related Lease will be sufficient to pay in full when due all payments of
principal and interest and, except in the limited circumstances set forth in
the applicable Prospectus Supplement, premium, if any, due in respect of the
Secured Notes issued under the Indenture. The Secured Notes will not be
recourse obligations of any Owner Participant or issuing Owner Trustee, but
will be payable solely from the rents or charter hire and other amounts
payable under the Lease of the Leased Property securing such Secured Notes and
amounts realized from the exercise of the Indenture Trustee's remedies under
the Indenture against the related Indenture Estate. Pursuant to a Parent
Guaranty, Mobil will fully and unconditionally guarantee the full and prompt
payments payable by the Applicable Lessee under the related Lease when and as
the same shall become due and payable. See "Description of the Secured Notes."
USE OF PROCEEDS
The Certificates offered pursuant to this Prospectus and a related
Prospectus Supplement will be issued in order to facilitate the financing or
refinancing of all or a portion of the cost of certain Leased Property
specified in such Prospectus Supplement. The proceeds from the sale of
Certificates in respect of such Leased Property is not expected to exceed 90%
of the value of such Leased Property at the time of financing or refinancing,
which may be established by appraisal or by reference to its original cost.
Except as set forth in a Prospectus Supplement for a specific offering of
Certificates, the proceeds from the sale of the Certificates will be used by
the Trustee or Trustees on behalf of the applicable Pass Through Trust or Pass
Through Trusts to purchase Secured Notes. See "Description of the
Certificates" and "Description of the Secured Notes." In the event that, at
the time Certificates are issued, the Secured Notes to be purchased by the
applicable Pass Through Trust or Pass Through Trusts are not available for
purchase, the proceeds of the sale of such Certificates may be used by the
Trustee to purchase certain limited investments on an interim basis, as
described in the applicable Prospectus Supplement. In such event, any portion
of the proceeds of the sale of such Certificates not used for the purchase of
Secured Notes on or prior to the date set forth in such Prospectus Supplement
will be distributed on a Special Distribution Date (as defined below) to the
applicable Certificateholders, together with interest, but without premium.
See "Description of the Certificates--Delayed Purchase."
MOBIL CORPORATION
Mobil was incorporated in the State of Delaware in March 1976 and operates
primarily as a holding company. Mobil's principal business, which is conducted
primarily through wholly-owned subsidiaries, is in the United States and
international energy industries. Mobil is also a manufacturer and marketer of
petrochemicals, packaging films and specialty chemical products. Mobil,
through its subsidiaries, had business interests in over 125 countries as at
December 31, 1995. The principal executive offices of Mobil are located at
3225 Gallows Road, Fairfax, Virginia 22037-0001, and its telephone number is
(703) 846-3000.
THE LESSEES
Each Lessee is a wholly-owned special purpose finance subsidiary of Mobil.
Each Lessee has no business activities other than leasing and subleasing
Leased Property as permitted by the Applicable Lease. Each Lessee's offices
are located at 3225 Gallows Road, Fairfax, Virginia 22037-0001, and its
telephone number is (703) 846-3000.
6
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES OF MOBIL CORPORATION
The following table sets forth the consolidated ratio of earnings to fixed
charges for Mobil for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -------------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges... 4.6 3.9 5.7(a) 5.3 5.9 8.1
</TABLE>
- --------
(a) Excludes the favorable effect of $205 million of interest benefits from
the resolution of prior-period tax issues.
For the purpose of computing the consolidated ratio of earnings to fixed
charges, earnings represent income before change in accounting principle(s)
decreased or increased by the excess or short-fall of earnings over dividends
from equity affiliates plus income taxes and fixed charges, excluding
capitalized interest. Fixed charges represent interest and amortization of
debt discount expense (including capitalized interest) and the portion of
rents deemed representative of the interest factor.
DESCRIPTION OF THE CERTIFICATES
In connection with each offering of Certificates, one or more separate Pass
Through Trusts will be formed and one or more series of Certificates will be
issued pursuant to the Basic Agreement and one or more separate Trust
Supplements to be entered into among Mobil, the Applicable Lessee or
Applicable Lessees and the Trustee on behalf of the related Pass Through
Trust. The statements made under this caption are summaries and do not purport
to be complete. Reference is made to, and the summaries are qualified in their
entirety by reference to, the detailed provisions of the Basic Agreement, the
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part and which will be qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The summaries
relate to the Basic Agreement to be entered into and each of the Trust
Supplements, the Pass Through Trusts to be formed thereby and the Certificates
to be issued by each Pass Through Trust except to the extent, if any,
described in the applicable Prospectus Supplement. Reference is also made to,
and the summaries are qualified in their entirety by reference to, the
detailed provisions of the form of Parent Guaranty, which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
Trust Supplement relating to each series of Certificates and the forms of the
related Indenture, Lease, Participation Agreement or similar agreements will
be filed as exhibits to a post-effective amendment to the Registration
Statement of which this Prospectus is a part, a Current Report on Form 8-K, a
Quarterly Report on Form 10-Q or an Annual Report on Form 10-K, as applicable,
to be filed by Mobil with the Commission.
The Certificates offered pursuant to this Prospectus will be limited to
$650,000,000 aggregate public offering price (or its equivalent (based on the
applicable exchange rate at the time of sale) in one or more foreign
currencies or units based on or related to currencies, including European
Currency Units).
Certain provisions of the description of the Certificates in this Prospectus
do not necessarily apply to one Certificate of each Pass Through Trust which
may be issued in a denomination of less than $1,000.
To the extent that any provision in any Prospectus Supplement is
inconsistent with any provision in this summary, the provision of such
Prospectus Supplement will control.
GENERAL
Each Certificate will represent a fractional undivided interest in the Pass
Through Trust created by the Trust Supplement pursuant to which such
Certificate was issued and all payments and distributions shall be made only
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from the related Trust Property (as defined below). The property of each Pass
Through Trust (the "Trust Property") will include the Secured Notes held in
such Pass Through Trust, all monies at any time paid thereon and all monies
due and to become due thereunder and funds from time to time deposited with
the Trustee in accounts relating to such Pass Through Trust. Each Certificate
will represent a pro rata share of the outstanding principal amount of the
Secured Notes held in the related Pass Through Trust and, unless otherwise
specified in the applicable Prospectus Supplement, will be issued in minimum
denominations of $1,000 or any integral multiple thereof. The Certificates do
not represent an interest in or obligation of Mobil, any Lessee, the Trustee,
any of the Indenture Trustees or Owner Trustees in their individual
capacities, any Owner Participant, or any of their respective affiliates. Each
Certificateholder by its acceptance of a Certificate agrees to look solely to
the income and proceeds from the Trust Property as provided in the Basic
Agreement and the applicable Trust Supplement.
No holder of a Certificate issued with respect to a Pass Through Trust will
have any rights, benefits or interests in respect of any other Pass Through
Trust or in the property held by any other Pass Through Trust. All payments
and distributions on the Certificates will be made only from the related Trust
Property, or pursuant to intercreditor, subordination or similar agreements to
which the related Trustee may be a party.
Secured Notes issued under an Indenture may be held in more than one Pass
Through Trust and one Pass Through Trust may hold Secured Notes issued under
more than one Indenture.
Interest will be passed through to Certificateholders of each Pass Through
Trust at the rate per annum payable on the Secured Notes held in such Pass
Through Trust, as set forth for such Pass Through Trust on the cover page of
the applicable Prospectus Supplement.
None of the Basic Agreement, the Indentures nor the Leases will include
financial covenants or "event risk" provisions that would afford
Certificateholders protection in the event of a highly leveraged or other
transaction involving Mobil or the Lessees. The Certificateholders will have
the benefit of a lien on the Leased Property and the other property in each
Indenture Estate securing the Secured Notes held in the related Pass Through
Trust, as discussed under "Description of the Secured Notes--Security."
Reference is made to the Prospectus Supplement that accompanies this
Prospectus for a description of the specific series of Certificates being
offered thereby, including: (1) the specific designation and title of such
Certificates; (2) the Regular Distribution Dates (as defined below) and
Special Distribution Dates (as defined below) applicable to such Certificates;
(3) the currency or currencies (including currency units) in which such
Certificates may be denominated; (4) the specific form of such Certificates,
including whether or not such Certificates are to be issued in accordance with
a book-entry system; (5) a description of the Secured Notes to be purchased by
the related Pass Through Trust, including the period or periods within which,
the price or prices at which, and the terms and conditions upon which such
Secured Notes may or must be redeemed, purchased or defeased in whole or in
part, by the Applicable Lessee or the related Owner Trustee or Owner
Participant, (6) a description of the related Leased Property and the rights
and interests of the related Owner Trustee, the Applicable Lessee and others
therein; (7) a description of the related Indenture, including a description
of the events of default under the related Indenture, the remedies exercisable
upon the occurrence of such events of default and any limitations on the
exercise of such remedies with respect to such Secured Notes; (8) a
description of the related Lease, Owner Trust Agreement and Participation
Agreement, including (a) the names of the related Owner Trustees, (b) a
description of the events of default under the related Leases, the remedies
exercisable upon the occurrence of such events of default and any limitations
on the exercise of such remedies with respect thereto, and (c) the rights of
the related Owner Trustee, if any, and/or Owner Participant, if any, to cure
failures of the Applicable Lessee to pay rent under the related Lease; (9) the
extent, if any, to which the provisions of the operative documents applicable
to such Secured Notes may be amended by the parties thereto without the
consent of the holders of, or only upon the consent of the holders of a
specified percentage of aggregate principal amount of, such Secured Notes;
(10) the terms of the related Parent Guaranty; (11) the terms of any
intercreditor, subordination or similar agreement relating to the Certificates
or Secured Notes or of any liquidity or credit
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facility and (12) any other special terms pertaining to such Certificates or
Secured Notes, including any modification of the terms set forth herein.
If any Certificates are denominated in one or more foreign currencies or
currency units, the restrictions, certain United States federal income tax
considerations, specific terms and other information with respect to such
Certificates and such foreign currency or currency units will be set forth in
the applicable Prospectus Supplement.
If any Certificates relate to Secured Notes that were sold at a substantial
discount below the stated principal amount of such Secured Notes, certain
United States federal income tax considerations, specific terms and other
information with respect to such Certificates will be set forth in the
applicable Prospectus Supplement.
BOOK-ENTRY REGISTRATION
General
If specified in the applicable Prospectus Supplement, the Certificates
issued thereunder will be subject to the provisions described below and under
the caption "--Definitive Certificates." Upon issuance, each series of
Certificates will be represented by one fully registered global certificate.
Each global certificate will be deposited with, or on behalf of, The
Depository Trust Company ("DTC") and registered in the name of Cede & Co.
("Cede"), or its nominee. No person acquiring an interest in such Certificates
("Certificate Owner") will be entitled to receive a certificate representing
such person's interest in such Certificates, except as set forth below under
"--Definitive Certificates." Unless and until Definitive Certificates (as
defined below) are issued under the limited circumstances described herein and
in the applicable Prospectus Supplement, all references to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
DTC Participants (as defined below), and all references herein to
distributions, notices, reports and statements to Certificateholders shall
refer, as the case may be, to distributions, notices, reports and statements
to DTC or Cede, as the registered holder of such Certificates, or to DTC
Participants for distribution to Certificate Owners in accordance with DTC
procedures.
DTC is a limited purpose trust company organized under the laws of the State
of New York, 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 section 17A of the Exchange Act. DTC holds
securities for its participants ("DTC Participants") and facilitates the
clearance and settlement of securities transactions between DTC Participants
through electronic computerized book-entries in DTC Participants' accounts,
thereby eliminating the need for physical movement of certificates. DTC
Participants include securities brokers and dealers, banks, trust companies
and clearing corporations. Indirect access to the DTC system also is available
to others such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a DTC Participant either
directly or indirectly ("Indirect Participants").
Certificate Owners that are not DTC Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, the Certificates may do so only through DTC Participants and
Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal and interest from the Trustee through DTC
Participants or Indirect Participants, as the case may be. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments, because such payments will be forwarded by the Trustee to Cede, as
nominee for DTC. DTC will forward such payments in same-day funds to DTC
Participants who are credited with ownership of the Certificates in amounts
proportionate to the principal amount of each such DTC Participant's
respective holdings of beneficial interests in the Certificates. DTC
Participants will thereafter forward payments to Indirect Participants or
Certificate Owners, as the case may be, in accordance with customary industry
practices. The forwarding of such distributions to the Certificate Owners will
be the responsibility of such DTC Participants. Unless and until the
Definitive Certificates are issued under the limited circumstances described
herein, the only "Certificateholder" will be Cede, as nominee of DTC.
Certificate Owners will not be recognized by the Trustee as
Certificateholders, as
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such term is used in the Basic Agreement, and Certificate Owners will be
permitted to exercise the rights of Certificateholders only indirectly through
DTC and DTC Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
the Certificates among DTC Participants on whose behalf it acts with respect
to the Certificates and to receive and transmit to DTC Participants
distributions of principal, premium, if any, and interest with respect to the
Certificates. DTC Participants and Indirect Participants with which
Certificate Owners have accounts with respect to the Certificates similarly
are required to make book-entry transfers and receive and transmit such
payments on behalf of their respective customers. Accordingly, although
Certificate Owners will not possess the Certificates, the Rules provide a
mechanism by which Certificate Owners will receive payments and will be able
to transfer their interests.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants, the ability of a Certificate Owner to pledge
the Certificates to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Certificates, may be limited
due to the lack of a physical certificate for such Certificates.
DTC will take any action permitted to be taken by a Certificateholder under
the Basic Agreement only at the direction of one or more DTC Participants to
whose accounts with DTC the Certificates are credited. Additionally, in the
event any action requires approval by Certificateholders of a certain
percentage of beneficial interest in each Pass Through Trust, DTC will take
such action only at the direction of and on behalf of DTC Participants whose
holders include undivided interests that satisfy any such percentage. DTC may
take conflicting actions with respect to other undivided interests to the
extent that such actions are taken on behalf of DTC Participants whose holders
include such undivided interests.
None of Mobil, the Lessees or the Trustee will have any liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Certificates held by Cede, as nominee for DTC, or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The applicable Prospectus Supplement will specify any additional book-entry
registration procedures applicable to Certificates denominated in a currency
other than United States dollars.
The information in this section concerning DTC and DTC's book-entry system
has been attained from sources that Mobil believes to be reliable, but neither
Mobil nor any Lessee has independently verified such information or takes
responsibility for its accuracy.
Definitive Certificates
Certificates will be issued in fully registered certificated form
("Definitive Certificates") to Certificate Owners or their nominees, rather
than to DTC or its nominee, only if (i) the Applicable Lessee advises the
Trustee in writing that DTC is no longer willing or able to discharge properly
its responsibilities as depository with respect to such Certificates and the
Trustee or such Lessee is unable to locate a qualified successor, (ii) the
Applicable Lessee, at its option, elects to terminate the book-entry system
through DTC or (iii) after the occurrence of certain events of default or
other events specified in the related Prospectus Supplement, Certificate
Owners of Certificates evidencing fractional undivided interests aggregating
not less than a majority in interest in the related Pass Through Trust advise
the Trustee, the Applicable Lessee and DTC through DTC Participants in writing
that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the Certificate Owners' best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to notify all Certificate Owners
through DTC Participants of the availability of Definitive Certificates. Upon
surrender by DTC of the global certificates representing the Certificates and
receipt of instructions for re-registration, the Trustee will reissue the
Certificates as Definitive Certificates to Certificate Owners.
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Distributions of principal, premium, if any, and interest with respect to
Certificates will thereafter be made by the Trustee directly in accordance
with the procedures set forth in the Basic Agreement and the applicable Trust
Supplements, to holders in whose names the Definitive Certificates were
registered at the close of business on the applicable record date. Such
distributions will be made by check mailed to the address of such holder as it
appears on the register maintained by the Trustee. The final payment on any
Certificate, however, will be made only upon presentation and surrender of
such Certificate at the office or agency specified in the notice of final
distribution to Certificateholders.
Definitive Certificates will be freely transferable and exchangeable at the
office of the Trustee upon compliance with the requirements set forth in the
Basic Agreement and the applicable Trust Supplements. No service charge will
be imposed for any registration of transfer or exchange, but payment of a sum
sufficient to cover any tax or other governmental charge shall be required.
PAYMENTS AND DISTRIBUTIONS
Payments of principal, premium, if any, and interest with respect to the
Secured Notes held in each Pass Through Trust will be distributed by the
Trustee, upon receipt, to Certificateholders of such Pass Through Trust on the
dates and in the currency specified in the applicable Prospectus Supplement,
except in certain cases when some or all of such Secured Notes are in default
as described in the applicable Prospectus Supplement. Payments of principal
of, and interest on, the Secured Notes held in each Pass Through Trust will be
scheduled to be received by the Trustee on the dates specified in the
applicable Prospectus Supplement (such scheduled payments of interest and
principal on the Secured Notes to the Trustee are herein referred to as
"Scheduled Payments," and the dates specified in the applicable Prospectus
Supplement for distribution of Scheduled Payments by the Trustee are herein
referred to as "Regular Distribution Dates"). Each Certificateholder of each
Pass Through Trust will be entitled to receive a pro rata share of any
distribution in respect of Scheduled Payments of principal and interest made
on the Secured Notes held in such Pass Through Trust. The Regular Distribution
Dates on which, and the amounts in which, Scheduled Payments of principal on
the Secured Notes held in each Pass Through Trust are payable will be set
forth in the accompanying Prospectus Supplement.
Payments of principal, premium, if any, and interest received by the Trustee
on account of the redemption or purchase, if any, of any of the Secured Notes
held in a Pass Through Trust, and payments received by the Trustee following
an Event of Default (as defined below) in respect of any of the Secured Notes
held in a Pass Through Trust (including payments received by the Trustee on
account of the purchase by the related Owner Trustees or Owner Participants of
such Secured Notes or payments received on account of the sale of such Secured
Notes by the Trustee) ("Special Payments") will be distributed on a date or
dates described in the accompanying Prospectus Supplement (each, a "Special
Distribution Date"). The Trustee will mail notice to the Certificateholders of
record of the related Pass Through Trust not less than 20 days prior to the
Special Distribution Date on which any Special Payment is scheduled to be
distributed by the Trustee in the event the Secured Notes are to be redeemed
or purchased prior to their maturity and, in all other instances, as soon as
practicable after the Trustee has received the Special Payment. The notice
will specify the anticipated Special Distribution Date, the amount of such
anticipated Special Payment, the reason for the Special Payment and the total
amount to be distributed if such Special Distribution Date is the same date as
a Regular Distribution Date. Each distribution of a Special Payment, other
than a final distribution, on a Special Distribution Date for a Pass Through
Trust will be made by the Trustee to the Certificateholders of such Pass
Through Trust on the record date prior to such Special Distribution Date.
The Basic Agreement requires that the Trustee establish and maintain, for
the benefit of the Certificateholders of each Pass Through Trust, one or more
non-interest bearing accounts (with respect to each such Pass Through Trust,
the "Certificate Account") for the deposit of payments representing Scheduled
Payments on the Secured Notes held in the related Pass Through Trust. The
Basic Agreement also requires that the Trustee establish and maintain, for the
benefit of the Certificateholders of each Pass Through Trust, one or more non-
interest bearing accounts (with respect to each such Pass Through Trust, the
"Special Payments Account") for the deposit of payments representing Special
Payments. Pursuant to the terms of the Basic
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Agreement, the Trustee is required to deposit any Scheduled Payments on the
Secured Notes held in the applicable Pass Through Trust received by it in the
Certificate Account for such Pass Through Trust and to deposit any Special
Payments so received by it in the Special Payments Account for such Pass
Through Trust. All amounts so deposited will be distributed by the Trustee on
a Regular Distribution Date or a Special Distribution Date, as the case may
be, to the Certificateholders of such Pass Through Trust.
If any Regular Distribution Date or Special Distribution Date is not a
business day, distributions scheduled to be made on such Regular Distribution
Date or Special Distribution Date may be made on the next succeeding business
day without interest.
POOL FACTORS
Unless there has been an early redemption, or a purchase of one or more of
the Secured Notes held in a Pass Through Trust by the related Owner Trustee or
Owner Participant after an Indenture Event of Default (as defined below), a
default in the payment of principal in respect of one or more issues of the
Secured Notes held in a Pass Through Trust or certain actions have been taken
following a default thereon, as described in the applicable Prospectus
Supplement, the Pool Factor (as defined below) for each Pass Through Trust
will decline in proportion to the scheduled repayments of principal on the
Secured Notes held in such Pass Through Trust as described in the applicable
Prospectus Supplement. In the event of such redemption, purchase or default,
the Pool Factor and the Pool Balance (as defined below) of each Pass Through
Trust so affected will be recomputed after giving effect thereto and notice
thereof will be mailed to the Certificateholders of such Pass Through Trust.
Each Pass Through Trust will have a separate Pool Factor.
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Balance" for each Pass Through Trust indicates, as of any Regular
Distribution Date or Special Distribution Date, the aggregate unpaid principal
amount of the Secured Notes held in such Pass Through Trust on such date plus
any amounts in respect of principal on such Secured Notes held by the Trustee
and not yet distributed. The Pool Balance for each Pass Through Trust as of
any Regular Distribution Date or Special Distribution Date shall be computed
after giving effect to the payment of principal, if any, on the Secured Notes
held in such Pass Through Trust and the distribution thereof to be made on
that date.
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Factor" for each Pass Through Trust as of any Regular Distribution Date
or Special Distribution Date is the quotient (rounded to the seventh decimal
place) computed by dividing (i) the then outstanding Pool Balance by (ii) the
aggregate original principal amount of the Certificates issued by such Pass
Through Trust. The Pool Factor for each Pass Through Trust as of any Regular
Distribution Date or Special Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Secured Notes held in such
Pass Through Trust and distribution thereof to be made on that date. The Pool
Factor for each Pass Through Trust will initially be 1.0000000; thereafter,
the Pool Factor for each Pass Through Trust will decline as described above to
reflect reductions in the Pool Balance of such Pass Through Trust. The amount
of a Certificateholder's pro rata share of the Pool Balance of a Pass Through
Trust can be determined by multiplying the original denomination of the
holder's Certificate of such Pass Through Trust by the Pool Factor for such
Pass Through Trust as of the applicable Regular Distribution Date or Special
Distribution Date. The Pool Factor and the Pool Balance for each Pass Through
Trust will be mailed to Certificateholders of such Pass Through Trust on each
Regular Distribution Date and Special Distribution Date.
REPORTS TO CERTIFICATEHOLDERS
On each Regular Distribution Date and Special Distribution Date, the Trustee
will include with each distribution of a Scheduled Payment or Special Payment
to Certificateholders of the related Pass Through Trust a statement, giving
effect to such distribution to be made on such Regular Distribution Date or
Special Distribution Date, as the case may be, setting forth the following
information (per $1,000 aggregate principal amount of Certificate for such
Pass Through Trust, as to (i) and (ii) below):
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(i) the amount of such distribution allocable to principal and the
amount allocable to premium, if any;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor for such Pass Through
Trust.
So long as the Certificates are registered in the name of Cede, as nominee
for DTC, on the record date prior to each Regular Distribution Date and
Special Distribution Date, the Trustee will request from DTC a Securities
Position Listing setting forth the names of all DTC Participants reflected on
DTC's books as holding interests in the Certificates on such record date. On
each Regular Distribution Date and Special Distribution Date, the Trustee will
mail to each such DTC Participant the statement described above and will make
available additional copies as requested by such DTC Participant for
forwarding to Certificate Owners.
In addition, after the end of each calendar year, the Trustee will prepare
for each Certificateholder of each Pass Through Trust at any time during the
preceding calendar year a report containing the sum of the amounts determined
pursuant to clauses (i) and (ii) above with respect to the Pass Through Trust
for such calendar year or, in the event such person was a Certificateholder
during only a portion of such calendar year, for the applicable portion of
such calendar year, and such other items as are readily available to the
Trustee and which a Certificateholder shall reasonably request as necessary
for the purpose of such Certificateholder's preparation of its federal income
tax returns. Such report and such other items shall be prepared on the basis
of information supplied to the Trustee by the DTC Participants and shall be
delivered by the Trustee to such DTC Participants to be available for
forwarding by such DTC Participants to Certificate Owners in the manner
described above.
At such time, if any, as the Certificates are issued in the form of
Definitive Certificates, the Trustee will prepare and deliver the information
described above to each Certificateholder of record of each Pass Through Trust
as the name and period of beneficial ownership of such Certificateholder
appears on the records of the registrar of the Certificates.
VOTING OF SECURED NOTES
The Trustee, as holder of the Secured Notes held in a Pass Through Trust,
will have the right to vote and give consents and waivers with respect to such
Secured Notes under the related Indenture. The Basic Agreement and related
Trust Supplement will set forth (i) the circumstances in which a Trustee may
direct any action or cast any vote, as the holder of the Secured Notes held in
the applicable Pass Through Trust, in its own discretion, (ii) the
circumstances in which such Trustee shall seek instructions from the
Certificateholders of such Pass Through Trust and (iii) the percentage of
Certificateholders required to direct such Trustee to take any such action.
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
The Basic Agreement defines an event of default with respect to a Trust (an
"Event of Default") as the occurrence and continuance of an event of default
under one or more of the related Indentures (an "Indenture Event of Default").
The Prospectus Supplement for a series of Certificates will specify the
Indenture Events of Default under the related Indentures. Certain of the
Indenture Events of Default will arise with reference to events of default
under the relevant Lease (a "Lease Event of Default"). Since the Secured Notes
issued under an Indenture may be held in more than one Pass Through Trust, a
continuing Indenture Event of Default under such Indenture would result in an
Event of Default under each Pass Through Trust holding such Secured Notes.
Unless otherwise provided in a Prospectus Supplement, all of the Secured Notes
issued under the same Indenture will relate only to specified Leased Property,
there will be no cross-collateralization or cross-default provisions in the
Indentures, and events resulting in an Indenture Event of Default under any
particular Indenture will not necessarily result in an Indenture Event of
Default occurring under any other Indentures. If an Indenture Event of Default
occurs in fewer than all of the Indentures related to a Pass Through Trust,
notwithstanding the treatment of Secured Notes issued under any related
Indenture under which an Indenture Event of Default has
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occurred, payments of principal and interest on the Secured Notes issued
pursuant to any related Indenture with respect to which an Indenture Event of
Default has not occurred will continue to be made as originally scheduled.
The ability of the applicable Owner Trustee or Owner Participant under the
related Indenture to cure Indenture Events of Default, including Indenture
Events of Default that result from the occurrence of a Lease Event of Default
under the related Lease, will be described in the applicable Prospectus
Supplement.
The ability of the Certificateholders with respect to any one Pass Through
Trust to cause the Indenture Trustee with respect to any Secured Notes held in
such Pass Through Trust to accelerate the Secured Notes under the related
Indenture or to direct the exercise of remedies by the Indenture Trustee under
the related Indenture will depend, in part, upon the proportion between the
aggregate principal amount of the Secured Notes outstanding under such
Indenture and held in such Pass Through Trust and the aggregate principal
amount of all Secured Notes outstanding under such Indenture. If Secured Notes
outstanding under an Indenture are held by more than one Pass Through Trust,
then each Pass Through Trust will hold Secured Notes with different terms from
the Secured Notes held in the other Pass Through Trusts and therefore the
Certificateholders of a Pass Through Trust may have divergent or conflicting
interests from those of the Certificateholders of the other Pass Through
Trusts holding Secured Notes relating to the same Indenture. In addition, so
long as the same institution acts as Trustee of each Pass Through Trust, in
the absence of instructions from the Certificateholders of any such Pass
Through Trust, the Trustee for such Pass Through Trust could for the same
reason be faced with a potential conflict of interest upon an Indenture Event
of Default. In such event, the Basic Agreement will provide that the Trustee
will resign as trustee of one or all such Pass Through Trusts, and a successor
trustee will be appointed in accordance with the terms of the Basic Agreement.
As an additional remedy, if an Indenture Event of Default under an Indenture
shall have occurred and be continuing, the Basic Agreement provides that the
Trustee of a Pass Through Trust holding Secured Notes issued under such
Indenture may, and upon the direction of the holders of Certificates
evidencing fractional undivided interests aggregating not less than a majority
in interest of such Pass Through Trust shall, sell all or part of such Secured
Notes for cash to any person. Any proceeds received by the Trustee upon any
such sale shall be deposited in the Special Payments Account for the
Certificateholders of such series and shall be distributed to the
Certificateholders of the related Pass Through Trust on a Special Distribution
Date. The market for Secured Notes in default may be very limited, and there
can be no assurance that they could be sold for a reasonable price.
Furthermore, so long as the same institution acts as Trustee of multiple Pass
Through Trusts, it may be faced with a conflict in deciding from which Pass
Through Trust to sell Secured Notes to available buyers. If the Trustee sells
any such Secured Notes with respect to which an Indenture Event of Default
exists for less than their outstanding principal amount, the
Certificateholders of such Pass Through Trust will receive a smaller amount of
principal distributions than anticipated and will not have any claim for the
shortfall against Mobil, any Lessee, any Owner Trustee, any Owner Participant
or the Trustee. Furthermore, neither the Trustee nor the Certificateholders of
such Pass Through Trust could take any action with respect to any remaining
Secured Notes held in such Pass Through Trust so long as no Indenture Events
of Default exist with respect thereto.
Any amount, other than Scheduled Payments received on a Regular Distribution
Date, distributed to the Trustee of any Pass Through Trust by the Indenture
Trustee under any Indenture on account of the Secured Notes held in such Pass
Through Trust following an Indenture Event of Default under such Indenture
shall be deposited in the Special Payments Account for such Pass Through Trust
and shall be distributed to the Certificateholders of such Pass Through Trust
on a Special Distribution Date. In addition, if a Prospectus Supplement
provides that the applicable Owner Trustee or Owner Participant may, under
circumstances specified therein, redeem or purchase the outstanding Secured
Notes issued under the related Indenture, the price paid by such Owner Trustee
or Owner Participant to the Trustee of any Pass Through Trust for the Secured
Notes issued under such Indenture and held in such Pass Through Trust shall be
deposited in the Special Payments Account for such Pass Through Trust and
shall be distributed to the Certificateholders of such Pass Through Trust on a
Special Distribution Date.
Any funds representing payments received with respect to any Secured Notes
in default held in a Pass Through Trust, or the proceeds from the sale by the
Trustee of any such Secured Notes, held by the Trustee in
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the Special Payments Account for such Pass Through Trust shall, to the extent
practicable, be invested and reinvested by the Trustee in Permitted
Investments pending the distribution of such funds on a Special Distribution
Date. "Permitted Investments" are obligations of the United States maturing in
not more than 60 days or such lesser time as is required for the distribution
of any such funds on a Special Distribution Date.
The Basic Agreement will provide that the Trustee of a Pass Through Trust
shall, within 90 days after the occurrence of a default in respect of such
Pass Through Trust, give to the Certificateholders of such Pass Through Trust
notice, transmitted by mail, of all uncured or unwaived defaults with respect
to such Pass Through Trust known to it, provided that, except in the case of
default in the payment of principal, premium, if any, or interest on any of
the Secured Notes held in such Pass Through Trust, the Trustee shall be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interests of such Certificateholders. The
term "default" as used in this paragraph only means the occurrence of an Event
of Default with respect to a Pass Through Trust as described above, except
that in determining whether any such Event of Default has occurred, any grace
period or notice in connection therewith shall be disregarded.
The Basic Agreement contains a provision entitling the Trustee of each Pass
Through Trust, subject to the duty of the Trustee during a default to act with
the required standard of care, to be offered reasonable security or indemnity
by the Certificateholders of such Pass Through Trust before proceeding to
exercise any right or power under the Basic Agreement at the request of such
Certificateholders.
In certain cases, the holders of Certificates of a Pass Through Trust
evidencing fractional undivided interests aggregating not less than a majority
in interest of such Pass Through Trust may on behalf of the holders of all
Certificates of such Pass Through Trust waive any past default or Event of
Default with respect to such Pass Through Trust and its consequences, except
(i) a default in payment of the principal of, premium, if any, or interest on
any of the Secured Notes held in such Pass Through Trust and (ii) a default in
respect of any covenant or provision of the Basic Agreement or the related
Trust Supplement that cannot be modified or amended without the consent of
each Certificateholder of such Pass Through Trust affected thereby. Each
Indenture will provide that, with certain exceptions, the holders of a
majority in aggregate unpaid principal amount of the Secured Notes issued
thereunder and held in a related Pass Through Trust may on behalf of all such
holders waive any past default or Indenture Event of Default thereunder. In
the event of a waiver with respect to a Pass Through Trust as described above,
the principal amount of the Secured Notes issued under the related Indenture
held in such Pass Through Trust shall be counted as waived in the
determination of the majority in aggregate unpaid principal amount of Secured
Notes required to waive a default or an Indenture Event of Default under such
Indenture. Therefore, if the Certificateholders of a Pass Through Trust or
Pass Through Trusts waive a past default or Event of Default such that the
principal amount of the Secured Notes held either individually in such Pass
Through Trust or in the aggregate in such Pass Through Trusts constitutes the
required majority in aggregate unpaid principal amount under the applicable
Indenture, such past default or Indenture Event of Default under such
Indenture shall be waived.
MODIFICATIONS OF THE BASIC AGREEMENT
The Basic Agreement contains provisions permitting Mobil, the Applicable
Lessee or Applicable Lessees and the Trustee of each Pass Through Trust to
enter into a supplemental trust agreement, without the consent of the holders
of any of the Certificates of such Pass Through Trust, (i) to provide for the
formation of such Pass Through Trust and the issuance of a series of
Certificates, (ii) to evidence the succession of another corporation to Mobil
or a Lessee and the assumption by such corporation of Mobil's or such Lessee's
obligations with respect to one or more series of Certificates under the Basic
Agreement and the applicable Trust Supplement, (iii) to add to the covenants
of Mobil or a Lessee for the benefit of holders of such Certificates, or to
surrender any right or power in the Basic Agreement conferred upon Mobil or a
Lessee, (iv) to cure any ambiguity or correct or supplement any defective or
inconsistent provision of the Basic Agreement or the applicable Trust
Supplement or to make any other provisions with respect to matters or
questions arising under the Basic Agreement as may be necessary or desirable,
provided such action shall not adversely affect the interests of the holders
of such Certificates, or to correct any mistake, (v) to modify, eliminate or
add to the provisions of the Basic Agreement
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or the applicable Trust Supplement to the extent as shall be necessary to
continue the qualification of the Basic Agreement (including any supplemental
agreement) under the Trust Indenture Act and to add to the Basic Agreement
such other provisions as may be expressly permitted by the Trust Indenture
Act, (vi) to provide for a successor Trustee or to add to or change any
provision of the Basic Agreement or the applicable Trust Supplement as shall
be necessary to facilitate the administration of the Pass Through Trusts
thereunder by more than one Trustee, (vii) to correct or supplement the
description of any property constituting property of such Pass Through Trust
and (viii) to make any other amendments or modifications to the Basic
Agreement or applicable Trust Supplement, provided such amendments or
modifications shall only apply to Certificates issued thereafter.
The Basic Agreement also contains provisions permitting Mobil, the
Applicable Lessee or Applicable Lessees and the Trustee of a related Pass
Through Trust, with the consent of the Certificateholders of such Pass Through
Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of such Pass Through Trust, and, with respect to any
Leased Property, with the consent of the applicable Owner Trustee (such
consent not to be unreasonably withheld), to execute supplemental trust
agreements adding any provisions to or changing or eliminating any of the
provisions of the Basic Agreement, to the extent relating to such Pass Through
Trust and the applicable Trust Supplement, or modifying the rights of the
Certificateholders, except that no such supplemental trust agreement may,
without the consent of each Certificateholder so affected thereby, (a) reduce
in any manner the amount of, or delay the timing of, any receipt by the
Trustee of payments on the Secured Notes held in such Pass Through Trust or
distributions in respect of any Certificate related to such Pass Through
Trust, or change the date or place of any payment in respect of any such
Certificate, or make distributions payable in coin or currency other than that
provided for in such Certificates, or impair the right of any
Certificateholder of such Pass Through Trust to institute suit for the
enforcement of any such payment when due, (b) permit the disposition of any
Secured Note held in such Pass Through Trust, except as provided in the Basic
Agreement or the applicable Trust Supplement, or otherwise deprive any
Certificateholder of the benefit of the ownership of the applicable Secured
Notes, (c) reduce the percentage of the aggregate fractional undivided
interests of such Pass Through Trust provided for in the Basic Agreement or
the applicable Trust Supplement, the consent of the holders of which is
required for any such supplemental trust agreement or for any waiver provided
for in the Basic Agreement or such Trust Supplement, or (d) modify any of the
provisions relating to the rights of the Certificateholders in respect of the
waiver of events of default or receipt of payment except to increase the
percentage of the aggregate fractional undivided interests of such Pass
Through Trust required for such a waiver.
MODIFICATION OF INDENTURE AND RELATED AGREEMENTS
In the event that the Trustee, as the holder of any Secured Notes held in a
Pass Through Trust, receives a request for its consent to any amendment,
modification or waiver under the Lease or other document relating to such
Secured Notes, the Trustee shall mail a notice of such proposed amendment,
modification or waiver to each Certificateholder of such Pass Through Trust as
of the date of such notice. The Trustee shall request instructions from the
Certificateholders of such Pass Through Trust as to whether or not to consent
to such amendment, modification or waiver. The Trustee shall vote or consent
with respect to such Secured Notes in such Past Through Trust in the same
proportion as the Certificates of such Pass Through Trust were actually voted
by the holders thereof by a certain date. Notwithstanding the foregoing, if an
Event of Default in respect of such Pass Through Trust shall have occurred and
be continuing, the Trustee may in its own discretion consent to such
amendment, modification or waiver, and may so notify the Indenture Trustee to
which such consent relates.
TERMINATION OF THE PASS THROUGH TRUSTS
The obligations of Mobil, the Applicable Lessee and the Trustee with respect
to a Pass Through Trust will terminate upon the distribution to the
Certificateholders of such Pass Through Trust of all amounts required to be
distributed to them pursuant to the Basic Agreement and the applicable Trust
Supplement and the disposition of all property held in such Pass Through
Trust. The Trustee will send to each Certificateholder of record of
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such Pass Through Trust notice of the termination of such Pass Through Trust,
the amount of the proposed final payment and the proposed date for the
distribution of such final payment for such Pass Through Trust. The final
distribution to any Certificateholder of such Pass Through Trust will be made
only upon surrender of such Certificateholder's Certificates at the office or
agency of the Trustee specified in such notice of termination.
DELAYED PURCHASE
A Prospectus Supplement may specify that, pending availability of some or
all of the Secured Notes intended to be purchased with the proceeds of an
issuance of Certificates, such proceeds may, as more fully described in such
Prospectus Supplement, be (a) invested by the Trustee in United States
government obligations or certain other limited investments described in such
Prospectus Supplement ("Specified Investments"), in which event Mobil or the
Applicable Lessee would be responsible for paying to the Trustee amounts equal
to any loss on such investments and any deficiency in the earnings of such
investments under the amount scheduled to be distributed on such Certificates
in respect of interest and would be entitled to receive any earnings on such
investments in excess of the amount so needed for distribution on the
Certificates, or (b) used by the Trustee to acquire debt instruments issued on
an interim basis by Mobil or by one or more of the Applicable Lessees and
guaranteed by Mobil, in each case having an interest rate and payment
provisions corresponding to the interest rate and payment provisions of the
Secured Notes intended to be purchased with such proceeds and requiring
repayment to the Trustee at the time the Trustee is to purchase such Secured
Notes. Any such debt instruments will be secured by a collateral account that
may be invested in Specified Investments or by other security described in the
applicable Prospectus Supplement.
To the extent that the full amount of the proceeds from the sale of any
Certificates is not used to purchase Secured Notes on or prior to the date set
forth in the applicable Prospectus Supplement, an amount equal to the unused
proceeds will be distributed by the Trustee to the holders of record of such
Certificates on a pro rata basis on a Special Distribution Date, together with
interest thereon at a rate equal to the rate applicable to such Certificates,
but without premium.
THE TRUSTEE
Except as otherwise provided in the Prospectus Supplement, State Street Bank
and Trust Company will be the Trustee for each of the Pass Through Trusts.
With certain exceptions, the Trustee will make no representations as to the
validity or sufficiency of the Basic Agreement, the Trust Supplements, the
Certificates, the Secured Notes, the Indentures, the Leases or other related
documents. The Trustee shall not be liable with respect to any series of
Certificates for any action taken or omitted to be taken by it in good faith
in accordance with the direction of the holders of a majority in principal
amount of outstanding Certificates of such series. Subject to such provisions,
such Trustee shall be under no obligation to exercise any of its rights or
powers under the Basic Agreement at the request of any holders of Certificates
issued thereunder unless they shall have offered to the Trustee indemnity
satisfactory to it. The Basic Agreement provides that the Trustee in its
individual or any other capacity may acquire and hold Certificates issued
thereunder and, subject to certain conditions, may otherwise deal with Mobil
and the Lessees and, with respect to the Leased Property, with any Owner
Trustee and Owner Participant with the same rights it would have if it were
not the Trustee.
The Trustee may resign with respect to any or all of the Pass Through Trusts
at any time, in which event Mobil and the Applicable Lessee will be obligated
to appoint a successor trustee. If the Trustee ceases to be eligible to
continue as Trustee with respect to a Pass Through Trust or becomes incapable
of acting as Trustee or becomes insolvent, Mobil and the Applicable Lessee may
remove such Trustee, or any Certificateholder of such Pass Through Trust for
at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of such
Trustee and the appointment of a successor trustee. Any resignation or removal
of the Trustee with respect to a Pass Through Trust and appointment of a
successor
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trustee for such Pass Through Trust does not become effective until acceptance
of the appointment by the successor trustee. Pursuant to such resignation and
successor trustee provisions, it is possible that a different trustee could be
appointed to act as the successor trustee with respect to each Pass Through
Trust related to a single offering of Certificates. All references in this
Prospectus to the Trustee should be read to take into account the possibility
that the Pass Through Trusts could have different successor trustees in the
event of such a resignation or removal.
The Basic Agreement provides that Mobil or the Applicable Lessee will pay
the Trustee's fees and expenses and indemnify the Trustee against certain
liabilities.
DESCRIPTION OF THE SECURED NOTES
The statements made under this caption are summaries and do not purport to
be complete. Such statements are qualified in their entirety by, and reference
is made to, the entire Prospectus and detailed information appearing in the
applicable Prospectus Supplement.
To the extent that any provision in any Prospectus Supplement is
inconsistent with any provision in this summary, the provision of such
Prospectus Supplement will control.
GENERAL
All Secured Notes related to a Leased Property and held in a Pass Through
Trust will be issued under a separate Indenture between the related Owner
Trustee of an Owner Trust for the benefit of the related Owner Participant,
and the related Indenture Trustee. Such Secured Notes will be nonrecourse
obligations of the applicable Owner Trust. Each such Secured Note will be
authenticated under an Indenture by the Indenture Trustee.
With respect to each Leased Property, the related Owner Trustee has acquired
or will acquire such Leased Property and, unless otherwise provided in the
Prospectus Supplement, has granted or will grant a lien on and a security
interest in such Leased Property to the related Indenture Trustee as security
for the payments of the related Secured Notes, and has leased or will lease
such Leased Property to the Applicable Lessee pursuant to the related Lease
which has been or will be assigned to the related Indenture Trustee. Pursuant
to each such Lease, the Applicable Lessee will be obligated to make or cause
to be made rental and other payments to the related Indenture Trustee on
behalf of the related Owner Trustee in amounts that will be sufficient to make
payments of the principal and interest and, except in the limited
circumstances set forth in the applicable Prospectus Supplement, premium, if
any, due in respect of such Secured Notes when and as due and payable.
PRINCIPAL AND INTEREST PAYMENTS
Interest received by the Trustee on the Secured Notes held in each Pass
Through Trust will be passed through to the Certificateholders of such Pass
Through Trust on the dates and at the rate per annum set forth in the
applicable Prospectus Supplement until the final distribution date for such
Pass Through Trust. Principal received by the Trustee on the Secured Notes
held in each Pass Through Trust will be passed through to the
Certificateholders of such Pass Through Trust in scheduled amounts on the
dates set forth in the applicable Prospectus Supplement until the final
distribution date for such Pass Through Trust.
If any date scheduled for any payment of principal, premium, if any, or
interest with respect to the Secured Notes is not a business day, such payment
will be made on the next succeeding business day without any additional
interest.
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REDEMPTION
The applicable Prospectus Supplement will describe the circumstances,
whether voluntary or involuntary, under which the Secured Notes may be
redeemed or purchased prior to the stated maturity date thereof, in whole or
in part, the premium, if any, applicable upon certain redemptions or purchases
and other terms applying to the redemptions or purchases of such Secured
Notes.
SECURITY
The Secured Notes to be held in the Pass Through Trusts will be secured by
(i) an assignment by the related Owner Trustee to the related Indenture
Trustee of such Owner Trustee's rights (except for certain rights, including
those described below) under the Lease or Leases with respect to the related
Leased Property including the right to receive payments of rent thereunder,
(ii) an assignment of certain of such Owner Trustee's rights under the Parent
Guaranty relating to such Leased Property, and (iii) to the extent provided in
the applicable Prospectus Supplement, a mortgage or other security interest in
such Leased Property or in construction contracts or other agreements,
collateral accounts or other security, in each case subject to the rights of
the Lessee under the Lease related thereto and other rights, if any, described
in the applicable Prospectus Supplement.
Under the terms of each Lease, the Applicable Lessee's obligations in
respect of the related Leased Property will be those of a lessee under a "net
lease." Accordingly, such Lessee will be obligated, among other things, to pay
all costs and expenses of operating and maintaining the Leased Property. With
respect to the Leased Property, the assignment by the related Owner Trustee to
the related Indenture Trustee of its rights under the related Lease will
exclude, among other things, rights of such Owner Trustee and the related
Owner Participant relating to indemnification by such Lessee for certain
matters, insurance proceeds payable to such Owner Trustee in its individual
capacity and to such Owner Participant under liability insurance maintained by
such Lessee pursuant to such Lease or by such Owner Trustee or such Owner
Participant, insurance proceeds payable to such Owner Trustee in its
individual capacity or to such Owner Participant under certain casualty
insurance maintained by such Owner Trustee or such Owner Participant pursuant
to such Lease and any rights of such Owner Participant or such Owner Trustee
to enforce payment of the foregoing amounts and their respective rights to the
proceeds of the foregoing. Such rights excluded from the assignment shall be
referred to as "Excepted Payments."
The applicable Prospectus Supplement will specify the required insurance
coverage, if any, with respect to the Leased Property.
Unless otherwise specified in the applicable Prospectus Supplement, the
Secured Notes will not be cross-collateralized and consequently the Secured
Notes issued in respect of any Leased Property will not be secured by any
other Leased Property or the Lease related thereto. Unless and until an
Indenture Event of Default with respect to a Leased Property has occurred and
is continuing, the related Indenture Trustee may exercise only limited rights
of the related Owner Trustee under the related Lease.
Funds, if any, held from time to time by the Indenture Trustee with respect
to any Leased Property, prior to the distribution thereof, will be invested
and reinvested by such Indenture Trustee. Such investment and reinvestment
will be at the direction of the Applicable Lessee, as agent for the related
Owner Trustee (except in the case of a related Lease Event of Default under
the applicable Lease) in certain investments described in the related
Indenture. The net amount of any loss resulting from any such investments will
be paid by such Lessee, as agent for such Owner Trustee.
ADDITIONAL NOTES
Under certain circumstances and conditions as described in the applicable
Prospectus Supplement, for the purpose of providing funds to finance the cost
of certain modifications, alterations, additions, improvements or replacement
parts to any particular item of Leased Property, a Lessee may cause the
financing of such additional costs through the issuance and sale by the Owner
Trustee of additional Secured Notes (the "Additional Notes").
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The terms, conditions and designations of such Additional Notes will be set
forth in a supplement to the related Indenture. All rent and other amounts
payable by the Applicable Lessee under the related Lease will be adjusted to
the extent necessary to provide for rent and other amounts sufficient to
provide for the payment, when due, of all scheduled payments of principal of,
premium (except for those instances where such Lessee shall not be responsible
for such premium), if any, and interest on the Secured Notes, including the
Additional Notes so issued.
PAYMENTS AND LIMITATION OF LIABILITY
Each Leased Property will be leased by the applicable Owner Trustee to the
Applicable Lessee pursuant to a Lease for a term commencing not later than the
delivery date thereof to such Owner Trustee and expiring on a date not earlier
than the latest maturity date of the related Secured Notes, unless previously
terminated as permitted by the terms of such Lease. The basic rent or hire and
other payments under each such Lease will be payable by the Applicable Lessee
in accordance with the terms specified in such Lease and will be described in
the applicable Prospectus Supplement, and (other than Excepted Payments) will
be assigned by the applicable Owner Trustee under the applicable Indenture to
an Indenture Trustee to provide the funds necessary to pay principal and
interest and, except in the limited circumstances set forth in the applicable
Prospectus Supplement, premium, if any, due in respect of the Secured Notes
issued under such Indenture. In certain cases, the basic rent payments under a
Lease may be adjusted, but each Lease will provide that under no circumstances
will the rental payments which the Applicable Lessee is obligated to make or
cause to be made be less than the scheduled payments of principal and interest
on the related Secured Notes. The balance of any basic rent payment under each
Lease, after payment of amounts due on the Secured Notes issued under the
Indenture corresponding to such Lease, will be paid over to the applicable
Owner Trustee. The Applicable Lessee's obligation to pay rent and to cause
other payments to be made under each Lease will be general obligations of such
Lessee.
Except in certain circumstances involving a Lessee's purchase of Leased
Property and the assumption of the Secured Notes related thereto, the Secured
Notes will not be obligations of, or guaranteed by, any Lessee or Mobil. None
of the Owner Trustees, the Owner Participants or the Indenture Trustees shall
be personally liable to any holder of such Secured Notes for amounts payable
under such Secured Notes, or, except as provided in the Indentures relating
thereto in the case of the Owner Trustees and the Indenture Trustees, for any
liability under such Indentures. Except in the circumstances referred to
above, all amounts payable under any Secured Notes (other than payments made
in connection with an optional redemption or purchase by the related Owner
Trustee or the related Owner Participant) will be made only from the assets
subject to the lien of the related Indenture with respect to such Leased
Property or the income and proceeds received by the related Indenture Trustee
therefrom (including rent payable by the Applicable Lessee under the related
Lease).
Except as otherwise provided in the related Indentures, no Owner Trustee
shall be personally liable for any amount payable or for any statements,
representations, warranties, agreements or obligations under such Indentures
or under the Secured Notes except for its own willful misconduct or gross
negligence. None of the Owner Participants shall have any duty or
responsibility under the Indentures or under such Secured Notes to the related
Indenture Trustee or to any holder of any such Secured Note.
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
Each Lessee and Mobil is prohibited from consolidating with or merging into
any other corporation or transferring substantially all of its assets to
another corporation unless such Lessee or Mobil, as the case may be, is the
continuing corporation or, among other things, (a) the successor corporation
shall be a corporation organized and existing under the laws of the United
States or any State or the District of Columbia or, in the case of Mobil, any
other jurisdiction, and (b) the successor corporation shall expressly assume
the due and punctual performance and observance of all the covenants and
conditions of the operative documents to which such Lessee or Mobil, as the
case may be, is a party and which are to be performed thereby.
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DEFEASANCE OF THE INDENTURES AND THE SECURED NOTES IN CERTAIN CIRCUMSTANCES
Unless otherwise specified in the applicable Prospectus Supplement, the
applicable Indenture will provide that the obligations of the related
Indenture Trustee and the related Owner Trustee in respect of any series of
Secured Notes issued in accordance with the terms of such Indenture shall be
deemed to have been discharged and paid in full (except for certain
obligations, including the obligations to register the transfer or exchange of
Secured Notes, to replace stolen, lost, destroyed or mutilated Secured Notes
and to maintain paying agencies and hold money for payment in trust) upon the
irrevocable deposit with the related Indenture Trustee of money or certain
obligations of the United States or any agency or instrumentality thereof the
payment of which is backed by the full faith and credit of the United States
which, through the payment of principal and interest in respect thereof in
accordance with their terms, will provide money in an aggregate amount
sufficient to pay when due (including as a consequence of redemption in
respect of which notice is given on or prior to the date of such deposit)
principal of, premium, if any, and interest on such Secured Notes. Such
discharge may occur only if, among other things, there has been published by
the Internal Revenue Service a ruling to the effect that holders of such
Secured Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit, defeasance and discharge and will be
subject to federal income tax on the same amount and in the same manner and at
the same time as would have been the case if such deposit, defeasance and
discharge had not occurred.
Upon such defeasance, or upon payment in full of the principal of, premium,
if any, and interest on all Secured Notes issued under any Indenture on the
maturity date therefor or deposit with the applicable Indenture Trustee of
money sufficient therefor no earlier than one year prior to the date of such
maturity, the holders of such Secured Notes will have no beneficial interest
in or other rights with respect to the related Leased Property or other assets
subject to the lien of such Indenture (other than amounts or obligations
deposited to effect such discharge) and such lien shall terminate.
ASSUMPTION OF OBLIGATIONS BY LESSEE
A Prospectus Supplement may specify that, with respect to any Leased
Property and subject to the satisfaction of the conditions described in such
Prospectus Supplement, the Applicable Lessee may, upon the exercise of any
purchase and certain other termination options it may have under the related
Lease, assume on a full recourse basis all of the obligations of the related
Owner Trustee under the Indenture with respect to such Leased Property,
including the obligations to make payments in respect of the related Secured
Notes. In such event, such Lessee shall execute a supplemental indenture to
the related Indenture (such supplemental indenture, together with the related
Indenture, a "Company Indenture"). The Parent Guaranty will continue to apply
to such Lessee's obligations. Unless otherwise specified in the applicable
Prospectus Supplement, the Leased Property will continue to be subject to the
lien of the Company Indenture, and the Company Indenture will incorporate
certain relevant provisions of the Lease so terminated, including (among
others) provisions relating to maintenance, possession and use of the related
Leased Property, liens, insurance, possession and events of default.
THE PARENT GUARANTIES
As described in the applicable Prospectus Supplement, Mobil will
unconditionally guarantee the full and prompt payment of all amounts payable
by the Applicable Lessee under the related Lease when and as the same shall
become due and payable. Each Parent Guaranty will be enforceable without any
need first to enforce any Lease against the Applicable Lessee. Each Parent
Guaranty will be an unsecured obligation of Mobil.
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FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of the
Certificates by a Certificate Owner purchasing Certificates in the initial
offering thereof and should be read in conjunction with any additional
discussion of federal income tax consequences included in the applicable
Prospectus Supplement. This summary is based on laws, regulations, rulings and
decisions now in effect, all of which are subject to change by legislative,
administrative or judicial action. The discussion below does not purport to
address federal income tax consequences applicable to particular categories of
investors, some of which (for example, insurance companies or foreign
investors) may be subject to special rules. The Pass Through Trusts are not
indemnified for any federal income taxes that may be imposed upon them, and
the imposition of any such taxes could result in a reduction in the amounts
available for distribution to the Certificate Owners of a Pass Through Trust.
In connection with each offering of Certificates, Mobil and the Applicable
Lessee will receive an opinion from Debevoise & Plimpton, or other counsel
specified in the applicable Prospectus Supplement, that, based upon the
applicable law then in effect, the following discussion, as amended or
supplemented by the applicable Prospectus Supplement, properly describes in
general the anticipated principal United States federal income tax
consequences of acquiring, holding and disposing of the Certificates.
INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE,
LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE CERTIFICATES, INCLUDING THE ADVISABILITY OF
MAKING ANY ELECTION DISCUSSED BELOW, IN LIGHT OF THEIR OWN PARTICULAR
CIRCUMSTANCES.
GENERAL
Based upon an interpretation of analogous authorities under currently
applicable law, each Pass Through Trust will be classified as a grantor trust
(and not as an association taxable as a corporation) and each Certificate
Owner will be treated as the owner of a pro rata undivided interest in the
Secured Notes or any other property held in the applicable Pass Through Trust.
Each Certificate Owner will be required to report on its federal income tax
return its pro rata share of the entire income from the Secured Notes and any
other property in the applicable Pass Through Trust, in accordance with such
Certificate Owner's method of accounting. Thus, a Certificate Owner using the
cash method of accounting will take into account its pro rata share of income
as and when received by the Trustee in respect of the applicable Pass Through
Trust, and a Certificate Owner using an accrual method of accounting will take
into account its pro rata share of income as it accrues or is received by the
Trustee in respect of the applicable Pass Through Trust, whichever is earlier.
If a Pass Through Trust will hold more than one Secured Note, a purchaser of
a Certificate will be treated as purchasing an interest in each Secured Note
and any other property in the related Pass Through Trust at a price determined
by allocating the purchase price paid for the Certificate among such Secured
Notes and other property in proportion to their fair market values at the time
of purchase of the Certificate.
SALES OF CERTIFICATES
A Certificate Owner that sells a Certificate will recognize gain or loss (in
the aggregate) equal to the difference between the amount realized on the sale
(except to the extent attributable to accrued interest, which will be taxable
as interest income) and the Certificate Owner's adjusted tax basis in the
Certificate. Subject to the market discount provisions of the Internal Revenue
Code of 1986, as amended (the "Code") (described below), any such gain or loss
will be capital gain or loss if the Certificate was held as a capital asset
and, if the Certificate was held for more than one year, will be long-term
capital gain or loss. Any long-term capital gains realized will be taxable to
corporate taxpayers at the rates applicable to ordinary income and to
individual taxpayers at a maximum marginal rate of 28%. Any capital losses
realized will be deductible by a corporate
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taxpayer only to the extent of capital gains and by an individual taxpayer
only to the extent of capital gains plus $3,000 of other income.
MARKET DISCOUNT
A purchaser of a Certificate (other than an original purchaser of a
Certificate at the offering price set forth in the applicable Prospectus
Supplement) will be considered to have acquired an interest in a Secured Note
held in the applicable Pass Through Trust at a "market discount" to the extent
the remaining principal amount of such Secured Note allocable to such
Certificate exceeds the purchaser's tax basis allocable to such Secured Note,
unless the excess does not exceed a prescribed de minimis amount. In the event
such excess exceeds the de minimis amount, the Certificate Owner will be
subject to the market discount rules with regard to its interest in the
Secured Note.
In the case of a sale or other disposition of indebtedness subject to the
market discount rules, gain, if any, from such sale or disposition must be
treated as ordinary income to the extent such gain represents market discount
that has accrued during the period in which the indebtedness was held. If such
indebtedness is disposed of in a nontaxable transaction, the accrued market
discount (subject to certain exceptions) will be includible in ordinary income
as if the Certificate Owner had sold the Certificate at its then market value.
In the case of a partial principal payment on indebtedness subject to the
market discount rules, such payment must be included in gross income as
ordinary income to the extent such payment does not exceed the market discount
that has accrued during the period such indebtedness was held. The amount of
any accrued market discount later required to be included in income upon a
disposition or subsequent partial principal payment will be reduced by the
amount of accrued market discount previously included in income.
Generally, market discount accrues under a straight line method, or, at the
election of the taxpayer, under a constant interest method. However, in the
case of amortizing obligations, until Treasury regulations are issued, the
explanatory Conference Committee Report to the Tax Reform Act of 1986 (the
"Conference Report") indicates that holders of amortizing obligations with
market discount (that do not also have original issue discount) may elect to
accrue market discount either on the basis of a constant interest rate or as
follows: the amount of market discount that is deemed to accrue is the amount
of market discount that bears the same ratio to the total amount of remaining
market discount that the amount of stated interest paid in the accrual period
bears to the total amount of stated interest remaining to be paid on the
amortizing obligation as of the beginning of such period.
If in any taxable year interest paid or accrued on a loan incurred or
continued to purchase or carry indebtedness subject to the market discount
rules exceeds the interest currently includible in income with respect to such
indebtedness, deduction of the excess interest must be deferred to the extent
of the market discount allocable to the taxable year. The deferred portion of
any interest expense will generally be deductible when such market discount is
included in income upon the sale or other disposition (including repayment) of
the indebtedness.
A taxpayer may elect to include market discount in its gross income
currently. If such election is made, the rules described above regarding the
treatment of certain gain as ordinary income and the deferral of interest
expense will not apply to the taxpayer.
PREMIUM
A Certificate Owner generally will be considered to have acquired an
interest in a Secured Note held in the applicable Pass Through Trust at a
premium to the extent the Certificate Owner's tax basis allocable to such
Secured Note exceeds the remaining principal amount of the Secured Note
allocable to such Certificate Owner's Certificate. In that event, a
Certificate Owner who holds such Certificate as a capital asset may elect to
amortize that premium as an offset to interest income with corresponding
reductions in the Certificate Owner's tax basis
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in its interest in the Secured Note. This election is made by claiming the
bond premium on the Certificate Owner's tax return. Generally, if the
foregoing election is made such amortization is taken on a constant yield
basis. However, in the case of amortizing obligations, the Conference Report
indicates a Congressional intent that amortization should be in accordance
with the same rules that apply to the accrual of market discount on amortizing
obligations. See "Market Discount."
Under current Treasury regulations, in the case of Secured Notes that may be
called at a premium prior to maturity, amortizable bond premium may be
determined by reference to an early call date. Under proposed Treasury
regulations issued in June 1996, a holder of an obligation that may be called
at a premium prior to maturity generally would not be entitled to determine
the amount of amortizable bond premium by reference to an early call date, but
may be allowed, if an early call occurred, to deduct all or part of any
unamortized bond premium in the year of such call. The proposed regulations
provide that they will apply with respect to debt instruments issued on or
after 60 days following the date final regulations are published in the
Federal Register. Any Prospectus Supplement to which such final regulations
may apply will so indicate.
Due to the complexities of the amortizable premium rules, particularly if
there is more than one possible call date and the amount of any premium is
uncertain, Certificate Owners are urged to consult their own tax advisors as
to the amount of any such amortizable premium and the advisability of making
an amortization election.
ORIGINAL ISSUE DISCOUNT
Unless otherwise specified in the applicable Prospectus Supplement, subject
to the aggregation rules discussed below, the Secured Notes will not be issued
with original issue discount. Under the aggregation rules set forth in the
current Treasury Regulations, if one investor purchases Certificates issued by
more than one Pass Through Trust, certain of that investor's interests in the
Secured Notes in those Trusts must in certain circumstances be treated
together as a single debt instrument, which, for purposes of calculating and
amortizing any original issue discount, has a single issue price, maturity
date, stated redemption price at maturity, and yield to maturity. If such
aggregation rules were applicable to an investor, such Secured Notes could be
treated with respect to such investor as having been issued with original
issue discount. Generally, a holder of a debt instrument issued with original
issue discount that is not de minimis must include such original issue
discount in income for federal income tax purposes as it accrues, in advance
of the receipt of the cash attributable to such income, under a method that
takes into account the compounding of interest. Certificate Owners are urged
to consult their own tax advisors regarding the application of the aggregation
rules.
BACKUP WITHHOLDING
Payments made on the Certificates, and proceeds from the sale of the
Certificates to or through certain brokers, may be subject to a "backup"
withholding tax of 31% unless the Certificate Owner complies with certain
reporting procedures or is exempt from such requirements. Any such withheld
amounts are allowed as a credit against the Certificate Owner's federal income
tax and may entitle such Certificate Owner to a refund, provided the required
information is furnished to the Internal Revenue Service ("the IRS").
Furthermore, certain penalties may be imposed by the IRS on a Certificate
Owner who is required to supply information but who does not do so in the
proper manner.
CERTAIN MASSACHUSETTS TAXES
The Trustee is a Massachusetts trust company with its corporate trust office
at Two International Place, Boston, Massachusetts 02110. Bingham, Dana & Gould
LLP, counsel to the Trustee, has advised Mobil that, in its opinion, under
currently applicable law, assuming that each Pass Through Trust will not be
taxable as a corporation, but, rather, will be classified as a grantor trust
for federal income tax purposes, (i) the Pass Through Trusts will not be
subject to any tax (including, without limitation, net or gross income,
tangible or intangible
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property, net worth, capital, franchise or doing business tax), fee or other
governmental charge under the laws of the Commonwealth of Massachusetts or any
political subdivision thereof, and (ii) Certificate Owners who are not
residents of or otherwise subject to tax in Massachusetts will not be subject
to any tax (including, without limitation, net or gross income, tangible or
intangible property, net worth, capital franchise or doing business tax), fee
or other governmental charge under the laws of the Commonwealth of
Massachusetts or any political subdivision thereof as a result of purchasing,
holding (including receiving payments with respect to) or selling a
Certificate. Neither the Pass Through Trusts nor the Certificate Owners will
be indemnified for any state or local taxes imposed on them, and the
imposition of any such taxes on any Pass Through Trust could result in a
reduction in the amounts available for distribution to the Certificate Owners
of such Pass Through Trust. In general, should a Certificate Owner or a Pass
Through Trust be subject to any state or local tax which would not be imposed
if the Trustee were located in a different jurisdiction in the United States,
the Trustee will resign and a new trustee in such other jurisdiction will be
appointed.
ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Certificates may, subject to certain legal restrictions, be purchased and held
by an employee benefit plan (a "Plan") subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or an individual
retirement account or an employee benefit plan subject to section 4975 of the
Code. A fiduciary of a Plan must determine that the purchase and holding of a
Certificate is consistent with its fiduciary duties under ERISA and does not
result in a non-exempt prohibited transaction as defined in section 406 of
ERISA or section 4975 of the Code. Employee benefit plans which are
governmental plans (as defined in section 3(32) of ERISA) and certain church
plans (as defined in section 3(33) of ERISA) are not subject to Title I of
ERISA or section 4975 of the Code. The Certificates may, subject to certain
legal restrictions, be purchased and held by such plans.
PLAN OF DISTRIBUTION
Certificates may be sold to one or more underwriters for public offering and
sale by them or to investors or other persons directly or through one or more
dealers or agents. Any such underwriter, dealer or agent involved in the offer
and sale of the Certificates will be named in the applicable Prospectus
Supplement.
The Certificates may be sold at a fixed price or prices, which may be
changed, or from time to time at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
Dealer trading may take place in certain of the Certificates, including
Certificates not listed on any securities exchange. Neither Mobil nor the
Lessees intend to apply for listing of the Certificates on a national
securities exchange. Mobil and the Lessees also may, from time to time,
authorize underwriters acting as their agents to offer and sell the
Certificates upon the terms and conditions as shall be set forth in any
Prospectus Supplement. In connection with the sale of Certificates,
underwriters may be deemed to have received compensation from Mobil and the
Applicable Lessee in the form of underwriting discounts or commissions and may
also receive commissions from purchasers of Certificates for whom they may act
as agent. Underwriters may sell Certificates to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions (which may be changed
from time to time) from the purchasers for whom they may act as agent.
If a dealer is used directly by Mobil or a Lessee in the sale of
Certificates in respect of which this Prospectus is delivered, such
Certificates will be sold to the dealer, as principal. The dealer may then
resell such Certificates to the public at varying prices to be determined by
such dealer at the time of resale. Any such dealer and the terms of any such
sale will be set forth in the Prospectus Supplement relating thereto.
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Certificates may be offered and sold through agents designated by Mobil and
the Applicable Lessee from time to time. Any such agent involved in the offer
or sale of the Certificates in respect of which this Prospectus is delivered
will be named in, and any commissions payable by Mobil and such Lessee to such
agent will be set forth in, the applicable Prospectus Supplement. Unless
otherwise indicated in the applicable Prospectus Supplement, any such agent
will be acting on a best efforts basis for the period of its appointment.
Offers to purchase Certificates may be solicited directly by Mobil and the
Applicable Lessees and sales thereof may be made by Mobil and the Applicable
Lessees directly to institutional investors or others who may be deemed to be
underwriters within the meaning of the Securities Act with respect to any
resale thereof. The terms of any such sales will be described in the
Prospectus Supplement relating thereto. Except as set forth in the applicable
Prospectus Supplement, no director, officer or employee of Mobil or the
Lessees will solicit or receive a commission in connection with direct sales
by Mobil or the Lessees of the Certificates, although such persons may respond
to inquiries by potential purchasers and perform ministerial and clerical work
in connection with any such direct sales.
Any underwriting compensation paid by Mobil and the Applicable Lessee to
underwriters, dealers or agents in connection with the offering of
Certificates, and any discounts, concessions or commissions allowed by
underwriters to participating dealers, will be set forth in an applicable
Prospectus Supplement. Underwriters, dealers and agents participating in the
distribution of the Certificates may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the Certificates may be deemed to be underwriting discounts and
commissions under the Securities Act. Underwriters, dealers and agents may be
entitled, under agreements with Mobil and the Applicable Lessee, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by Mobil
and such Lessee for certain expenses.
Underwriters, dealers and agents and their affiliates may engage in
transactions with, or perform services for, Mobil and its subsidiaries from
time to time.
If so indicated in an applicable Prospectus Supplement and subject to
existing market conditions, Mobil and the Applicable Lessee will authorize
dealers acting as Mobil's and such Lessee's agents to solicit offers by
certain institutions to purchase Certificates at the public offering price set
forth in such Prospectus Supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date or dates stated
in such Prospectus Supplement. Each Contract will be for an amount not less
than, and the aggregate principal amount of Certificates sold pursuant to
Contracts shall not be less nor more than, the respective amounts stated in
such Prospectus Supplement. Institutions with whom Contracts, when authorized,
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and other
institutions, but will in all cases be subject to the approval of Mobil and
the Applicable Lessee. Contracts will not be subject to any conditions except
the purchase by an institution of the Certificates covered by its Contracts
shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject. A
commission indicated in the applicable Prospectus Supplement will be granted
to underwriters and agents soliciting purchases of Certificates pursuant to
Contracts accepted by Mobil and the Applicable Lessee. Agents and underwriters
will have no responsibility in respect of the delivery or performance of
Contracts.
If an underwriter or underwriters are utilized in the sale of any
Certificates, the applicable Prospectus Supplement will contain a statement as
to the intention, if any, of such underwriters at the date of such Prospectus
Supplement to make a market in the Certificates. No assurances can be given
that there will be a market for the Certificates.
The place and time of delivery for the Certificates in respect of which this
Prospectus is delivered will be set forth in the applicable Prospectus
Supplement.
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LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Certificates and the Parent Guaranties will be passed upon for
Mobil and the Lessees by Ralph N. Johanson, Jr., Managing Counsel, Corporate,
Finance and Securities of Mobil and by Debevoise & Plimpton, 875 Third Avenue,
New York, New York 10022, and for any agents or underwriters by Shearman &
Sterling, 599 Lexington Avenue, New York, New York 10022. Unless otherwise
indicated in the applicable Prospectus Supplement, Mr. Johanson, Debevoise &
Plimpton and Shearman & Sterling will rely on the opinion of counsel for the
Trustee as to certain matters relating to the authorization, execution and
delivery of such Certificates by, and the valid and binding effect thereof on,
such Trustee.
EXPERTS
The consolidated financial statements of Mobil incorporated by reference in
Mobil's Annual Report (Form 10-K) for the year ended December 31, 1995, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
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