<PAGE> 1
As filed with the Securities and Exchange Commission on August 9, 1994
REGISTRATION NO. 33-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
Phillips Petroleum Company
(Exact name of Registrant as specified in its charter)
----------------------
<TABLE>
<S> <C>
DELAWARE 73-0400345
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
----------------------
PHILLIPS BUILDING
BARTLESVILLE, OKLAHOMA 74004
(918) 661-6600
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
----------------------
T.C. MORRIS
SENIOR VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER
17 PHILLIPS BUILDING
BARTLESVILLE, OKLAHOMA 74004
(918) 661-8266
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
----------------------
<TABLE>
<S> <C> <C>
COPIES TO:
DALE J. BILLAM, ESQ. MARTIN D. JACOBSON, ESQ. JAMES C. VARDELL, ESQ.
Phillips Petroleum Company Simpson Thacher & Bartlett Cravath, Swaine & Moore
1234 Adams Building 425 Lexington Avenue Worldwide Plaza
Bartlesville, Oklahoma 74004 New York, New York 10017 825 Eighth Avenue
(918) 661-5638 (212) 455-7023 New York, New York 10019
(212) 474-1900
</TABLE>
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
From time to time after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM
SECURITIES TO AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
BE REGISTERED BE REGISTERED PER UNIT* OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pass Through Certificates . . . . . . $110,000,000 100% $110,000,000 $37,932
====================================================================================================================================
</TABLE>
* Estimated solely for the purpose of determining the registration fee.
----------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 9, 1994
PROSPECTUS
[LOGO OF PHILLIPS]
PASS THROUGH CERTIFICATES
Up to $110,000,000 aggregate amount of Pass Through Certificates (the
"Pass Through Certificates") may be offered for sale from time to time pursuant
to this Prospectus and one or more Prospectus Supplements. The Pass Through
Certificates may be offered in one or more series (each, a "Series") in
amounts, at prices and on terms to be determined at the time of sale. For each
Series of Pass Through Certificates offered pursuant to this Prospectus and a
Prospectus Supplement, a separate Pass Through Trust (a "Pass Through Trust")
will be formed pursuant to a separate Pass Through Trust Agreement (a "Pass
Through Agreement") between Phillips Petroleum Company (the "Company") and
Shawmut Bank Connecticut, National Association, as the Pass Through Trustee
under such Pass Through Trust. Each Pass Through Certificate in a Series will
evidence a fractional undivided interest in the related Pass Through Trust and
will have no rights, benefits or interest in respect of any other Pass Through
Trust or the Trust Property held in any other such Pass Through Trust. The
Trust Property of each Pass Through Trust will consist of equipment notes (the
"Equipment Notes") issued as nonrecourse obligations by one or more Owner
Trusts, in connection with leveraged lease transactions. The Equipment Notes
will be issued to finance a portion of the payment to be made by each such
Owner Trust of the acquisition cost for specified items of transportation
equipment that are to be leased to the Company (the "Equipment"). The
Prospectus Supplement relating to each offering will describe certain terms of
the Pass Through Certificates offered thereby, the respective Pass Through
Trusts, the Equipment Notes to be purchased by such Pass Through Trusts, the
leveraged lease transactions and the Equipment relating to such Equipment
Notes.
With respect to one or more items of Equipment, the Owner Trustee may
issue one or more Equipment Notes, each of which may have a different interest
rate and final maturity date. For each Series of Pass Through Certificates, the
Pass Through Trustee will purchase one or more Equipment Notes issued with
respect to one or more items of Equipment such that all of the Equipment Notes
held in the related Pass Through Trust will have identical interest rates, in
each case equal to the rate applicable to the Pass Through Certificates issued
by such Pass Through Trust, and such that the latest maturity date for such
Equipment Notes will occur on or before the final distribution date for such
Pass Through Certificates. For any item of Equipment, the related Equipment
Notes will be secured by a security interest in the Lease relating thereto,
including the right to receive rent payable by the Company under such Lease and
in the related items of Equipment subject to such Lease (except that for
certain vehicles included in the Equipment the security interest in such
vehicles may not be perfected). None of the Equipment Notes held in the
respective Pass Through Trusts will be obligations of, or guaranteed by, the
Company. The amounts payable by the Company under the Leases will be sufficient
to pay in full when due all principal of, and premium, if any, and interest on,
the related Equipment Notes.
Interest paid on the Equipment Notes held in each Pass Through Trust will
be passed through to the registered holders of the Pass Through Certificates
for such Pass Through Trust (for each Pass Through Trust, the
"Certificateholders") on the dates and at the rate per annum set forth in the
Prospectus Supplement relating to such Pass Through Certificates until the
final distribution date for such Pass Through Trust. Principal paid on the
Equipment Notes held in each Pass Through Trust will be passed through to the
Certificateholders in scheduled amounts on the dates set forth in the
Prospectus Supplement relating to such Pass Through Certificates until the
final distribution date for such Pass Through Trust.
The Pass Through Certificates represent interests in the related Pass
Through Trust only and all payments and distributions shall be made only from
the property of such Pass Through Trust. The Pass Through Certificates do not
represent an interest in or obligation of the Company.
The Pass Through Certificates may be sold to or through underwriters or
directly to other purchasers or through agents. The Prospectus Supplement
relating to each offering will set forth the names of any underwriters, dealers
or agents involved in the sale of the Pass Through Certificates in connection
with which this Prospectus is being delivered, the amounts, if any, to be
purchased by underwriters and the compensation, if any, of such underwriters or
agents.
Prior to their issuance, there will have been no market for the Pass
Through Certificates of any Series and there can be no assurance that one will
develop. Unless otherwise indicated in the applicable Prospectus Supplement,
the Company does not intend to apply for the listing of any Series of Pass
Through Certificates on a national securities exchange. See "Plan of
Distribution."
This Prospectus may not be used to consummate sales of any Pass Through
Certificates unless accompanied by the Prospectus Supplement applicable to the
Pass Through Certificates being sold.
----------------------
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 September ___, 1994.
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
SECURITIES OFFERED HEREBY OR OTHER SECURITIES OF THE COMPANY AT LEVELS ABOVE
THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------------
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been
authorized by the Company or any underwriter, dealer or agent. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy Securities by
anyone in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to any person to whom it is unlawful to make such offer
or solicitation in such jurisdiction.
----------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Offices of the Commission
at Room 1024 Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and
7 World Trade Center, New York, New York 10048. Copies of such material can
also be obtained from the Public Reference Section of the Commission at Room
1024 Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, such material can be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005, and the
Pacific Stock Exchange, Incorporated, 301 Pine Street, San Francisco,
California 94104, on which certain of the Company's securities are listed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1993, as amended, and its Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1994, all of which have previously been filed by the
Company with the Commission, are incorporated by reference in this Prospectus.
All documents filed by the Company pursuant to Sections 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 Securities 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 in this
Prospectus 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
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to Dale J. Billam,
Secretary, Phillips Petroleum Company, 1234 Adams Building, Bartlesville,
Oklahoma 74004 (telephone (918) 661-5638).
3
<PAGE> 4
PHILLIPS PETROLEUM COMPANY
Phillips Petroleum Company, incorporated in Delaware in 1917, is a fully
integrated oil company engaged in petroleum exploration and production on a
worldwide basis, petroleum refining and marketing, and natural gas gathering
and processing, principally in the United States. Phillips also produces and
distributes chemicals worldwide. Its principal executive offices are located in
the Phillips Building, Bartlesville, Oklahoma 74004 (telephone (918) 661-6600).
The words "Company" and "Phillips" as used in this Prospectus refer to
Phillips Petroleum Company or Phillips Petroleum Company and its consolidated
subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
The following table sets forth the Company's ratio of earnings to fixed
charges for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30 YEAR ENDED DECEMBER 31
--------------------- -------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges . . . . . . . 2.8 3.0 2.3 2.1 2.0 2.8 1.9
</TABLE>
For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income before income taxes, extraordinary items and
cumulative effect of change in accounting principle, plus fixed charges
(excluding capitalized interest and the portion of the preferred dividend
requirements of a subsidiary to the extent not deducted in determining pretax
income, but including amortization of interest previously capitalized), less
equity in undistributed earnings of companies owned less than 50 percent. Fixed
charges consist of interest (including capitalized interest) on all
indebtedness, amortization of debt discount and expense, that portion of rental
expense that the Company believes to be representative of interest and the
amounts accrued to cover the preferred stock dividend requirements of a
subsidiary. A statement setting forth the computation of the unaudited ratios
of earnings to fixed charges is filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
OUTLINE OF PASS THROUGH TRUST STRUCTURE
For each Series of Pass Through Certificates (as such terms are defined
below) offered pursuant to this Prospectus and the related Prospectus
Supplement, a separate pass through trust (a "Pass Through Trust") will be
formed pursuant to a Pass Through Trust Agreement (a "Pass Through Agreement")
between the Company and Shawmut Bank Connecticut, National Association as pass
through trustee (the "Pass Through Trustee"), for the benefit of the registered
holders (the "Certificateholders") of the series (a "Series") of certificates
(the "Pass Through Certificates") evidencing fractional undivided interests in
such Pass Through Trust. The property held in each Pass Through Trust (the
"Trust Property") will consist of equipment notes issued in connection with one
or more leveraged lease transactions (the "Equipment Notes"), as specified in
the applicable Prospectus Supplement.
As more fully described below under "Use of Proceeds," in connection with
each leveraged lease transaction, one or more Equipment Notes may be issued,
each of which may have different interest rates and final maturity dates.
Concurrently with the execution and delivery of each Pass Through Agreement,
the Pass Through Trustee, on behalf of the related Pass Through Trust, will
enter into one or more participation agreements (each, a "Participation
Agreement") pursuant to which it will, among other things, purchase one or more
Equipment Notes, such that the Equipment Notes that constitute the property of
such Pass Through Trust will have identical interest rates, in each case equal
to the rate applicable to the Pass Through Certificates issued by such Pass
Through Trust, and such that the latest maturity date for such Equipment Notes
will occur on or before the final distribution date applicable to such Pass
Through Certificates. For each Pass Through Trust, the aggregate amount of the
related Series of Pass Through Certificates will equal the aggregate principal
amount of the
4
<PAGE> 5
Equipment Notes constituting the Trust Property of such Pass Through Trust. The
Pass Through Trustee will distribute the amount of payments of principal,
premium, if any, and interest received by it as holder of the Equipment Notes
to the Certificateholders of the Pass Through Trust in which such Equipment
Notes are held. See "Description of the Pass Through Certificates" and
"Description of the Equipment Notes."
USE OF PROCEEDS
Each Series of Pass Through Certificates offered pursuant to this
Prospectus and a related Prospectus Supplement will be issued to facilitate the
financing of the debt portion of one or more leveraged lease transactions
entered into or to be entered into by the Company, as lessee, with respect to
one or more of the items of transportation equipment, comprised of covered
hopper and tank railroad cars (the "Rail Cars"), corporate aircraft (the
"Aircraft") and mobile aircraft refueling vehicles (the "Vehicles") that are to
be leased by the Company (the Rail Cars, Aircraft and Vehicles, collectively,
the "Equipment"), as specified in the applicable Prospectus Supplement. Each
Prospectus Supplement will provide further descriptive and identifying
information with respect to the Equipment. The proceeds from the sale of such
Pass Through Certificates will be used by the Pass Through Trustee on behalf of
the related Pass Through Trust to purchase Equipment Notes. The Equipment Notes
will be issued as nonrecourse obligations of one or more owner trusts (each, an
"Owner Trust" created pursuant to a "Trust Agreement") by Wilmington Trust
Company, not in its individual capacity but solely as the owner trustee (the
"Owner Trustee") for the benefit of the owner participant named therein (each,
an "Owner Participant"), in connection with one or more leveraged lease
transactions, in each case to finance a portion of the Owner Trust's
acquisition cost of one or more items of Equipment that are to be leased by
such Owner Trust to the Company pursuant to a separate lease agreement (each, a
"Lease"), as specified in the applicable Prospectus Supplement.
The Equipment Notes to be sold to any Pass Through Trust will be issued by
the Owner Trust and authenticated by Shawmut Bank Connecticut, National
Association, as indenture trustee (the "Indenture Trustee") under a separate
trust indenture and security agreement (each, an "Indenture") between the Owner
Trustee and the Indenture Trustee. Each Owner Participant will have provided or
will be obligated to provide, from sources other than the proceeds of the
related Equipment Notes, the portion of the acquisition cost for the related
Equipment specified in the applicable Prospectus Supplement. No Owner
Participant, however, will be personally liable for any amount payable under
the related Indenture or the Equipment Notes issued thereunder.
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
In connection with each offering of a Series of Pass Through Certificates,
a separate Pass Through Trust will be formed pursuant to a separate Pass
Through Agreement to be entered into between the Company and the Pass Through
Trustee. The following summary relates to each of the Pass Through Agreements,
the Pass Through Trusts to be formed thereby and the Pass Through Certificates
to be issued by each Pass Through Trust, except as otherwise described in the
applicable Prospectus Supplement.
The discussion that follows is a summary and does not purport to be
complete. The summary includes descriptions of the material terms of the Pass
Through Agreements, the form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The forms of the
related Indentures, Participation Agreements, Leases and Trust Agreements will
be filed as exhibits to a post-effective amendment to this Registration
Statement, 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 with the Commission in
connection with the issuance of each such Series of Pass Through Certificates.
This summary makes use of terms defined in and is qualified in its entirety by
reference to the Pass Through Agreements.
GENERAL
Unless otherwise provided in the applicable Pass Through Agreement, the
Pass Through Certificates will be issued in fully registered, certificated form
only. Each Pass Through Certificate will represent a fractional undivided
interest in the separate Pass Through Trust formed by the Pass Through
Agreement pursuant to which such Pass Through Certificate is issued. The
property of each Pass Through Trust will consist of the Equipment Notes held in
such Pass Through Trust, all monies at any time paid thereon, all monies due
and to become due thereunder and funds from time to time deposited with the
Pass Through Trustee in accounts relating to such Pass Through Trust. Each Pass
Through Certificate will represent a pro rata share of the outstanding
principal amount of the Equipment Notes and other property held in the related
Pass Through
5
<PAGE> 6
Trust and will be issued, unless otherwise specified in the applicable
Prospectus Supplement, in minimum denominations of $1,000 or any integral
multiple of $1,000, except that one Pass Through Certificate with respect to
each Pass Through Trust may be in a multiple of less than $1,000. (Pass Through
Agreement, Articles II and III)
Interest will be passed through to Certificateholders of each Pass Through
Trust at the rate per annum payable on the Equipment Notes held in such Pass
Through Trust, as set forth for such Pass Through Trust on the cover page of
the applicable Prospectus Supplement.
The Pass Through Certificates represent interests in the related Pass
Through Trust only and all payments and distributions shall be made only from
the Trust Property of such Pass Through Trust. The Pass Through Certificates do
not represent an interest in or obligation of the Company, the Pass Through
Trustee, any related Owner Participant, the Owner Trustee in its individual
capacity or any affiliate of any of the foregoing. Each Certificateholder by
its acceptance of a Pass Through Certificate agrees to look solely to the
income and proceeds from the property held in the related Pass Through Trust as
provided in the applicable Pass Through Agreement (Pass Through Agreement,
Section 3.08)
Each Pass Through Agreement does not and, except as otherwise described in
the applicable Prospectus Supplement, the Participation Agreements, the
Equipment Notes, the Indentures and the Leases will not, contain any debt or
other financial covenants or any other provisions that would afford
Certificateholders protection in the event of a highly leveraged transaction
involving the Company.
BOOK-ENTRY REGISTRATION
If specified in the applicable Prospectus Supplement, the Pass Through
Certificates will be subject to the provisions described below. Upon issuance,
each Series of the Pass Through 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"), its nominee, and no Certificateholder will be
entitled to receive a certificated Pass Through Certificate, except as set
forth below.
DTC has advised the Company that 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 was created to hold securities for its
participants ("DTC Participants") and to facilitate the clearance and
settlement of securities transactions among DTC Participants through electronic
book-entries, thereby eliminating the need for physical movement of
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's book-entry system is also 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.
Certificateholders that are not DTC Participants but desire to purchase,
sell or otherwise transfer ownership of, or other interests in, Pass Through
Certificates may do so only through DTC Participants. In addition,
Certificateholders will receive all distributions of principal and interest
from the Pass Through Trustee through the DTC Participants. Under the rules,
regulations and procedures creating and affecting DTC and its operation, DTC is
required to make book-entry transfers of Pass Through Certificates among DTC
Participants on whose behalf it acts and to receive and transmit distributions
of principal of, and premium, if any, and interest on, the Pass Through
Certificates. Under the book-entry system, Certificateholders may experience
some delay in their receipt of payments, since such payments will be forwarded
by the Pass Through Trustee to Cede, as nominee for DTC, and DTC in turn will
forward the payments to the appropriate DTC Participants. Distributions by DTC
Participants to Certificateholders will be the sole responsibility of such DTC
Participants and will be made in accordance with customary industry practices.
Accordingly, although Certificateholders will not have possession of the Pass
Through Certificates, the rules of DTC provide a mechanism by which DTC
Participants will receive payments and will be able to transfer their
interests. Although the DTC Participants are expected to convey the rights
represented by their interests in any global security to the related
Certificateholders, because DTC can only act on behalf of DTC Participants, the
ability of Certificateholders to pledge Pass Through Certificates to persons or
entities that are not DTC Participants, or to otherwise act with respect to
such Pass Through Certificates, may be limited due to the lack of physical
certificates for such Pass Through Certificates.
None of the Company, the Pass Through Trustee or any other agent of the
Company or the Pass Through Trustee will have any responsibility or liability
for any aspect of the records relating to, or payments made on account of,
beneficial
6
<PAGE> 7
ownership interests in the Pass Through Certificates or for supervising or
reviewing any records relating to such beneficial ownership interests. Since
the only "Holder" will be Cede, as nominee of DTC, Certificateholders will not
be recognized by the Pass Through Trustee as Holders, as such term is used in
the applicable Pass Through Agreement, and Certificateholders will be permitted
to exercise the rights of Holders only indirectly through DTC and DTC
Participants.
The Pass Through Certificates will be issued in fully registered,
certificated form to Certificateholders, or their nominees, rather than to DTC
or its nominee, only if (i) DTC advises the Pass Through Trustee in writing
that it is no longer willing or able or qualified to discharge properly its
responsibilities as depository with respect to the Pass Through Certificates
and the Pass Through Trustee and the Company are unable to locate a qualified
successor, (ii) the Company, at its option, elects to terminate the book-entry
system through DTC or (iii) after the occurrence of an Event of Default,
Certificateholders holding a majority of the beneficial ownership interests in
the Pass Through Certificates advise the Pass Through Trustee and DTC through
DTC Participants in writing that continuation of a book-entry system through
DTC is no longer in the best interest of the Certificateholders. In such event,
the Pass Through Trustee will notify all Certificateholders through DTC
Participants of the availability of such certificated Pass Through
Certificates. Upon surrender by DTC of the registered global certificate
representing the affected Series of Pass Through Certificates and receipt of
instructions for re-registration, the Pass Through Trustee will reissue the
Pass Through Certificates in certificated form to Certificateholders or their
nominees. Such certificated Pass Through Certificates will be freely
transferable and exchangeable at the office of the Pass Through Trustee upon
compliance with the requirements set forth in the related Pass Through
Agreement. 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 will be required.
All payments made under any Lease or any Indenture in respect of the
Equipment Notes will be in immediately available funds. Such payments will be
passed through to DTC in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers
is generally settled in clearinghouse or next-day funds. In contrast, the Pass
Through Certificates will trade in DTC's Same Day Funds Settlement System until
maturity, and secondary market trading activity in the Pass Through
Certificates will therefore be required by DTC to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the Pass
Through Certificates.
PAYMENTS AND DISTRIBUTIONS
Except under certain circumstances, after the Indenture Trustee has made
principal and interest payments to the Pass Through Trustee for each of the
Pass Through Trusts on the related Equipment Notes held in such Pass Through
Trust, the Indenture Trustee will pay the remaining balance, if any, of rental
payments received from the Company to the Owner Trustee for the benefit of the
related Owner Participant. The Pass Through Trustee for each such Pass Through
Trust will distribute to the Certificateholders of such Pass Through Trust
payments received on the Equipment Notes held in such Pass Through Trust as
described below.
Payments of principal of, and interest on the unpaid amount of, the
Equipment Notes held in each Pass Through Trust will be scheduled to be
received by the Pass Through Trustee on the dates specified in the applicable
Prospectus Supplement (such scheduled payments of principal of, and interest
on, the Equipment Notes are referred to herein as "Scheduled Payments," and the
dates specified for distributions of Scheduled Payments to the Pass Through
Trustee in the applicable Prospectus Supplement are referred to herein as
"Regular Distribution Dates"). For each Pass Through Trust, the Pass Through
Trustee will distribute on each Regular Distribution Date to the related
Certificateholders any Scheduled Payment timely received by the Pass Through
Trustee. If a Scheduled Payment is not received by the Pass Through Trustee on
or before a Regular Distribution Date but is received within five days
thereafter, it will be distributed on the date received to the
Certificateholders. Each such distribution of a Scheduled Payment will be made
by the Pass Through Trustee to the Certificateholders of record of such Pass
Through Trust on the fifteenth day prior to such Regular Distribution Date,
subject to certain exceptions. Each such Certificateholder will be entitled to
receive a pro rata share of any such distribution. (Pass Through Agreement,
Sections 4.01 and 4.02) If a Scheduled Payment is received more than five days
after the applicable Regular Distribution Date, it will be treated as a Special
Payment and will be distributed as described below.
After any prepayment of principal, any redemption or any default in
respect of some or all of the Equipment Notes held in any Pass Through Trust,
any Certificateholder of such Pass Through Trust should refer to the Pool
Balance and the Pool Factor (as such terms are defined below) for such Pass
Through Trust reported periodically by the Pass Through Trustee, in
7
<PAGE> 8
order to calculate such Certificateholder's pro rata share of such Pass Through
Trust. See "Pool Factors" and "Statements to Certificateholders" below.
For any Pass Through Trust, any payments of principal, premium, if any, or
interest, other than Scheduled Payments, received by the Pass Through Trustee
on any of the Equipment Notes held in such Pass Through Trust, including
payments received (i) for the prepayment of such Equipment Notes in connection
with certain events specified in the applicable Prospectus Supplement, (ii)
upon an Indenture Event of Default in respect of such Equipment Notes or the
exercise of remedies under the related Indenture, and (iii) on account of the
sale of such Equipment Notes by the Pass Through Trustee (such payments are
referred to herein as "Special Payments"), will be distributed on the dates
determined as set forth in the applicable Prospectus Supplement (each, a
"Special Distribution Date" and, together with the Regular Distribution Dates,
the "Distribution Dates"). Prior to any Special Payment for any Pass Through
Trust, the Pass Through Trustee will notify the Certificateholders of record of
such Pass Through Trust of such Special Payment and the anticipated Special
Distribution Date therefor in accordance with the Pass Through Agreement. Each
distribution of a Special Payment, other than the final distribution, for any
Pass Through Trust will be made by the Pass Through Trustee to the
Certificateholders of record of such Pass Through Trust on the fifteenth day
prior to such Special Distribution Date, unless otherwise specified in the
applicable Prospectus Supplement. Each such Certificateholder will be entitled
to receive a pro rata share of any such distribution. (Pass Through Agreement,
Section 4.02)
Each Pass Through Agreement requires that the Pass Through Trustee
establish and maintain, for the related Pass Through Trust and for the benefit
of the related Certificateholders, one or more non-interest bearing accounts
(each a "Certificate Account") for the deposit of Scheduled Payments on the
Equipment Notes held in such Pass Through Trust and one or more accounts which
will, except in connection with Permitted Investments as discussed below, be
non-interest bearing (each a "Special Payments Account") for the deposit of
Special Payments on such Equipment Notes. The Pass Through Trustee is required
to deposit any Scheduled Payments relating to a Pass Through Trust received by
it in the related Certificate Account and to deposit any Special Payments so
received by it in the related Special Payments Account pending distribution
thereof. (Pass Through Agreement, Section 4.01) Special Payments that are not
promptly distributed by the Pass Through Trustee will, to the extent
practicable, be invested by the Pass Through Trustee in Permitted Investments
pending the distribution of such funds on a Special Distribution Date, and the
income and earnings on such investments will be distributed with such Special
Payment. "Permitted Investments" are obligations of the United States of
America (for the payment of which its full faith and credit is pledged)
maturing in not more than 60 days or such lesser time as is necessary for the
distribution of any such funds on a Special Distribution Date. (Pass Through
Agreement, Article I and Section 4.04)
Distributions by the Pass Through Trust from the Certificate Account or
the Special Payments Account of any Pass Through Trust on any Distribution Date
will be paid to each Certificateholder of record of such Pass Through Trust on
the applicable record date at its address appearing on the register maintained
for such Pass Through Trust. (Pass Through Agreement, Section 4.02) The final
distribution for each Pass Through Trust, however, will be made only upon
presentation and surrender of the Pass Through Certificates for such Pass
Through Trust at the office or agency of the Pass Through Trustee specified in
the notice of such final distribution given by the Pass Through Trustee. The
Pass Through Trustee will mail such notice of the final distribution to the
Certificateholders of such Pass Through Trust, specifying the date set for such
final distribution and the amount of such distribution. (Pass Through
Agreement, Section 11.01) See "Termination of Pass Through Trusts" below.
If any Distribution Date is not a Business Day, distributions scheduled to
be made on such Distribution Date may be made on the next succeeding Business
Day without additional interest. (Pass Through Agreement, Section 12.09)
POOL FACTORS
Except as provided below, the Pool Factor (as defined below) for any Pass
Through Trust will decline in proportion to the scheduled repayments of
principal on the Equipment Notes held in such Pass Through Trust as described
in the applicable Prospectus Supplement. Where any Equipment Note held in a
Pass Through Trust has been prepaid, a scheduled repayment of principal thereon
has not been made or certain actions have been taken following a default
thereon, as discussed in the applicable Prospectus Supplement or below in
"Events of Default and Certain Rights Upon an Event of Default," the Pool
Factor and the Pool Balance (as defined below) of such Pass Through Trust 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.
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Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Balance" for each Pass Through Trust indicates, as of any date, the
aggregate unpaid principal amount of the Equipment Notes held in such Pass
Through Trust on such date plus any amounts in respect of principal on such
Equipment Notes held by the Pass Through Trustee and not yet distributed. The
Pool Balance for each Pass Through Trust as of any Distribution Date will be
computed after giving effect to the payment of principal, if any, on the
Equipment Notes held in such Pass Through Trust and the distribution thereof
being made on that date. (Pass Through Agreement, Article I)
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Factor" for each Pass Through Trust as of any Distribution Date is the
quotient (rounded to the seventh decimal place) computed by dividing (i) the
Pool Balance by (ii) the aggregate original principal amount of the Pass
Through Certificates issued in respect of such Pass Through Trust. The Pool
Factor for each Pass Through Trust as of any Distribution Date shall be
computed after giving effect to the payment of principal, if any, on the
Equipment Notes held in such Pass Through Trust and the distribution thereof
being 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. For any Pass Through Trust, the amount of any
Certificateholder's pro rata share of the Pool Balance of such Pass Through
Trust can be determined by multiplying the original denomination of such
Certificateholder's Pass Through Certificate by the Pool Factor for such Pass
Through Trust as of the applicable Distribution Date. (Pass Through Agreement,
Article I)
STATEMENTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Pass Through Trustee will include with each
distribution of a Scheduled Payment or Special Payment to Certificateholders of
record of the related Pass Through Trust a statement, giving effect to such
distribution being made on such Distribution Date, setting forth the following
information (per $1,000 in aggregate amount of Pass Through Certificates for
such Pass Through Trust, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and
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.
In addition, after the end of each calendar year, the Pass Through Trustee
will prepare for each person who at any time during the preceding calendar year
was a Certificateholder of record a report containing the sum of the amounts
determined pursuant to clauses (i) and (ii) above with respect to the related
Pass Through Trust for such calendar year or, in the event such person was a
Certificateholder during a portion of such calendar year, for the applicable
portion of such calendar year. (Pass Through Agreement, Section 4.03)
VOTING OF EQUIPMENT NOTES
The Pass Through Trustee, as holder of the Equipment Notes held in each
Pass Through Trust, has the right to vote and give consents and waivers in
respect of such Equipment Notes under the related Indentures. Each Pass Through
Agreement sets forth the circumstances in which the Pass Through Trustee shall
direct any action or cast any vote as the holder of the Equipment Notes held in
such Pass Through Trust at its own discretion and the circumstances in which
the Pass Through Trustee shall seek instructions from the Certificateholders of
such Pass Through Trust. Prior to an Event of Default (as defined below) with
respect to any Pass Through Trust, the principal amount of the Equipment Notes
held in such Pass Through Trust directing any action or being voted for or
against any proposal will be in proportion to the principal amount of Pass
Through Certificates held by the Certificateholders of such Pass Through Trust
taking the corresponding position. (Pass Through Agreement, Article VI and
Section 10.01)
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
Each Pass Through Agreement defines an event of default for the
corresponding Pass Through 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 Indenture Events of Default under the
Indentures will be described in the applicable Prospectus Supplement and will
include events of default under the related Leases ("Lease Events of Default").
Since the Equipment Notes outstanding under an Indenture may be held in more
than one Pass Through Trust, a continuing Indenture Event of
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Default under such Indenture would result in an Event of Default with respect
to each such Pass Through Trust. All of the Equipment Notes issued under the
same Indenture will relate to the items of Equipment identified and described
in a Prospectus Supplement. There will be no cross-collateralization or
cross-default provisions in the Indentures; consequently, 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
Indenture. If an Indenture Event of Default occurs in fewer than all of the
Indentures related to a Pass Through Trust, the Equipment Notes issued pursuant
to the related Indentures with respect to which an Indenture Event of Default
has not occurred will continue to be held in such Pass Through Trust and
payments of principal of, premium, if any, and interest on such Equipment Notes
will continue to be distributed to the Certificateholders of such Pass Through
Trust as originally scheduled.
Under each Indenture the Owner Trustee will have the right under certain
circumstances to cure an Indenture Event of Default that results from the
occurrence of a Lease Event of Default under the related Lease. If the Owner
Trustee chooses to exercise such cure right, the Indenture Event of Default and
consequently the Event of Default under any Pass Through Trust holding the
related Equipment Notes will be deemed to be cured. See the applicable
Prospectus Supplement for a more detailed discussion of certain provisions
described in this paragraph.
Each Pass Through Agreement provides that if an Indenture Event of Default
under an Indenture relating to Equipment Notes held in the corresponding Pass
Through Trust shall have occurred and be continuing, the Pass Through Trustee
(i) may vote all of the Equipment Notes issued under such Indenture that are
held in such Pass Through Trust, and (ii) upon the direction of the
Certificateholders evidencing fractional undivided interests aggregating not
less than a majority in interest of the Pass Through Certificates at the time
outstanding in respect of such Pass Through Trust shall vote a corresponding
majority of such Equipment Notes, in each case in favor of directing the
related Indenture Trustee to declare the unpaid principal amount of all
Equipment Notes issued under such Indenture and any accrued and unpaid interest
thereon to be due and payable. Each Pass Through Agreement also provides that
if an Indenture Event of Default under an Indenture relating to Equipment Notes
held in the corresponding Pass Through Trust shall have occurred and be
continuing, the Pass Through Trustee may, and upon the direction of the
Certificateholders evidencing fractional undivided interests aggregating not
less than a majority in interest of the Pass Through Certificates at the time
outstanding in respect of such Pass Through Trust shall, vote Equipment Notes
issued under such Indenture that are held in such Pass Through Trust in favor
of directing the related Indenture Trustee as to the time, method and place of
conducting any proceeding for any remedy available to such Indenture Trustee or
of exercising any trust or power conferred on such Indenture Trustee under such
Indenture. (Pass Through Agreement, Sections 6.01 and 6.04)
If the Equipment Notes outstanding under an Indenture are held by more
than one Pass Through Trust, then the ability of the Certificateholders of any
one Pass Through Trust to cause the Indenture Trustee for any Equipment Notes
held in such Pass Through Trust to accelerate the payment on such Equipment
Notes under the related Indenture or to direct the exercise of remedies by such
Indenture Trustee under the related Indenture will depend, in part, upon the
proportion between the aggregate principal amount of the Equipment Notes
outstanding under such Indenture and held in such Pass Through Trust and the
aggregate principal amount of all Equipment Notes outstanding under such
Indenture. If the Equipment Notes outstanding under an Indenture are held by
more than one Pass Through Trust, then each such Pass Through Trust will hold
Equipment Notes with different terms from those of the Equipment Notes held in
any other Pass Through Trust 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 Equipment Notes
relating to the same Indenture. In addition, so long as the same institution or
an affiliate of such institution acts as Pass Through Trustee of each Pass
Through Trust, in the absence of instructions from the Certificateholders of
any such Pass Through Trust, the Pass Through 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 initial Pass Through
Trustee has indicated that it would resign as Pass Through Trustee of one or
all of such Pass Through Trusts, and a successor pass through trustee would be
appointed in accordance with the terms of the applicable Pass Through
Agreement. See "The Pass Through Trustee; the Indenture Trustee" below for a
discussion of resignation procedures.
As an additional remedy, if an Indenture Event of Default under an
Indenture has occurred and is continuing, each Pass Through Agreement provides
that the Pass Through Trustee of the corresponding Pass Through Trust holding
Equipment Notes issued under such Indenture may, and upon the direction of the
Certificateholders evidencing fractional undivided interests aggregating not
less than a majority in interest of the Pass Through Certificates at the time
outstanding in respect of such Pass Through Trust will, sell all or part of
such Equipment Notes for cash to any person at a price or prices that it may
reasonably deem advisable. Any proceeds received by such Pass Through Trust
upon any such sale will be deposited in the Special Payments Account for such
Pass Through Trust and will be distributed to the Certificateholders of such
Pass
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Through Trust on a Special Distribution Date. (Pass Through Agreement, Sections
6.01 and 6.02) The market for Equipment 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 or any affiliate of such
institution acts as Pass Through Trustee of each Pass Through Trust, it may be
faced with a conflict in deciding from which Pass Through Trust to sell
Equipment Notes to available buyers. If the Pass Through Trustee sells any such
Equipment Notes with respect to which an Indenture Event of Default exists for
less than the outstanding principal amount thereof, 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 the Pass Through Trustee, the Company, the Owner Trust, the Owner
Trustee or any related Owner Participant. Furthermore, neither the Pass Through
Trustee nor the Certificateholders of such Pass Through Trust could take any
action with respect to any remaining Equipment Notes held in such Pass Through
Trust so long as no Indenture Event of Default existed with respect thereto.
For any Pass Through Trust, any amount distributed to the Pass Through
Trustee by the Indenture Trustee under any Indenture on account of the
Equipment Notes held in such Pass Through Trust following an Indenture Event of
Default under such Indenture will be deposited in the Special Payments Account
for such Pass Through Trust and will be distributed to the Certificateholders
of such Pass Through Trust on a Special Distribution Date. In addition, if,
following an Indenture Event of Default under any Indenture, the related Owner
Trustee exercises its option, if any, to prepay or purchase the outstanding
Equipment Notes issued under such Indenture as described in the related
Prospectus Supplement, the price paid by such Owner Trustee to the Pass Through
Trustee for such Equipment Notes held in such Pass Through Trust will be
deposited in the related Special Payments Account and will be distributed to
the Certificateholders of such Pass Through Trust on a Special Distribution
Date. (Pass Through Agreement, Sections 4.01 and 4.02)
Any funds representing payments received with respect to any Equipment
Notes held in a Pass Through Trust in default, or the proceeds from the sale by
the Pass Through Trustee of any such Equipment Notes, held by the Pass Through
Trustee in the Special Payments Account for such Pass Through Trust will, to
the extent practicable, be invested by the Pass Through Trustee in Permitted
Investments pending the distribution of such funds on a Special Distribution
Date. (Pass Through Agreement, Article I and Section 4.04)
Each Pass Through Agreement provides that the Pass Through Trustee will,
within 90 days after the occurrence of a default (as defined below) under the
corresponding Pass Through Trust, notify the Certificateholders of such Pass
Through Trust by mail of all uncured or unwaived defaults with respect to such
Pass Through Trust known to it. The Pass Through Trustee will 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, except in the case
of default in the payment of principal of, premium, if any, or interest on any
of the Equipment Notes held in such Pass Through Trust. The term "default," for
the purpose of the provision described in this paragraph only, means the
occurrence of any 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. (Pass Through Agreement, Section 7.02)
Each Pass Through Agreement provides that for the corresponding Pass
Through Trust, subject to the duty of the Pass Through Trustee during a default
to act with the required standard of care, the Pass Through Trustee is entitled
to be indemnified by the Certificateholders of such Pass Through Trust before
proceeding to exercise any right or power under such Pass Through Trust at the
request of such Certificateholders. (Pass Through Agreement, Section 7.03)
In certain cases, the Certificateholders of a Pass Through Trust
evidencing fractional undivided interests aggregating not less than a majority
in interest of the Pass Through Certificates at the time outstanding in respect
of such Pass Through Trust may on behalf of all the Certificateholders of such
Pass Through Trust waive any past default or Event of Default with respect to
such Pass Through Trust and thereby annul any direction given by such
Certificateholders to the Pass Through Trustee or the related Indenture Trustee
with respect thereto, except (i) a default in the deposit or distribution of
any Scheduled Payment or Special Payment, (ii) a default in payment of the
principal of, premium, if any, or interest on any of the Equipment Notes held
in such Pass Through Trust and (iii) a default in respect of any covenant or
provision of the corresponding Pass Through Agreement that cannot be modified
or amended without the consent of each Certificateholder of such Pass Through
Trust affected thereby. Any such waiver, however, will be effective to waive
any such past default or Event of Default if, but only if, the correlative
Indenture Event of Default has been waived under the related Indenture by the
requisite holders of the Equipment Notes outstanding thereunder. (Pass Through
Agreement, Section 6.05)
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Each Indenture will provide that, with certain exceptions, the holders of
a majority in aggregate unpaid principal amount of the Equipment Notes issued
thereunder may on behalf of all such holders waive any past default or
Indenture Event of Default thereunder. If, as described above, the
Certificateholders of a Pass Through Trust elect to waive a past default or
Event of Default with respect to such Pass Through Trust, the principal amount
of the Equipment Notes issued under the related Indenture and held in such Pass
Through Trust will be counted in favor of the waiver of the corresponding past
default or Indenture Event of Default under the related Indenture when the
Indenture Trustee determines whether such past default or Indenture Event of
Default has been waived by the requisite majority in aggregate unpaid principal
amount of Equipment Notes under such Indenture. If, for example, the Equipment
Notes issued under an Indenture held in a Pass Through Trust constitute only
45% in aggregate unpaid principal amount of the Equipment Notes issued and
unpaid under such Indenture, even if all the Certificateholders of such Pass
Through Trust were to instruct the Pass Through Trustee not to waive a past
default or Event of Default with respect to such Pass Through Trust and,
consequently, to vote such Equipment Notes against the waiver of the
corresponding past default or Indenture Event of Default under such Indenture,
the Equipment Notes so voted by the Pass Through Trustee on behalf of such Pass
Through Trust would not alone be sufficient under the terms of such Indenture
to compel the Indenture Trustee to refrain from giving such waiver. Moreover,
there would be no assurance that the Certificateholders of any other Pass
Through Trust holding Equipment Notes issued under such Indenture would at such
time vote such Equipment Notes against such waiver. 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 Equipment
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 will be waived whether or not
the Certificateholders of any other Pass Through Trust holding Equipment Notes
issued under such Indenture waive such past default or Event of Default with
respect to such other Pass Through Trust.
MODIFICATIONS OF THE AGREEMENTS
Each Pass Through Agreement contains provisions permitting the Company and
the Pass Through Trustee to enter into an agreement supplemental to the
corresponding Pass Through Trust, without the consent of the Certificateholders
of such Pass Through Trust, to (i) evidence the succession of another
corporation to the Company and the assumption by such corporation of the
Company's obligations under such Pass Through Agreement, (ii) add to the
covenants of the Company for the protection of the related Certificateholders,
(iii) surrender any right or power conferred upon the Company in such Pass
Through Agreement, (iv) cure any ambiguity or correct or supplement any
defective or inconsistent provision of such Pass Through Agreement, or make any
other provisions in regard to matters or questions arising thereunder, provided
that such action will not adversely affect the interests of the related
Certificateholders, (v) correct or amplify the description of property that
constitutes Trust Property or the conveyance of such property to the Pass
Through Trustee, (vi) evidence and provide for a successor Pass Through Trustee
for such Pass Through Trust, (vii) modify, eliminate or add to the provisions
of such Pass Through Agreement to the extent necessary to qualify such Pass
Through Agreement under the Trust Indenture Act or any similar federal statute
enacted thereafter, or (viii) add, eliminate or change any provision under such
Pass Through Agreement that will not adversely affect the interests of the
Certificateholders, provided that in each case such modification does not cause
the corresponding Pass Through Trust to become taxable as an "association,"
within the meaning of Treasury Regulation Section 301.7701-4 (Pass Through
Agreement, Section 9.01).
Each Pass Through Agreement also provides that the Company and the Pass
Through Trustee, with the consent of the Certificateholders evidencing
fractional undivided interests aggregating not less than a majority in interest
of the Pass Through Certificates at the time outstanding in respect of the
corresponding Pass Through Trust, may execute supplemental agreements adding
any provisions to or changing or eliminating any of the provisions of such Pass
Through Agreement or modifying the rights of such Certificateholders. No such
supplemental agreement may, however, without the consent of each such
Certificateholder so affected, (a) reduce in any manner the amount of, or delay
the timing of, any receipt by the Pass Through Trustee of payments on the
Equipment Notes held in such Pass Through Trust, or distributions in respect of
any Pass Through Certificate of such Pass Through Trust, or change any date of
payment on any such Pass Through Certificate or change the place of payment
where, or the coin or currency in which, such Pass Through Certificates are
payable, or impair the right of any such Certificateholder to institute suit
for the enforcement of any payment when due, (b) except as provided in such
Pass Through Agreement, permit the disposition of any Equipment Note held in
such Pass Through Trust, or permit the creation of any lien on the Trust
Property or otherwise deprive any Certificateholder of the benefit of the
ownership of the Equipment Notes held in such Pass Through Trust or the lien of
the related Indenture, (c) reduce the percentage of the aggregate fractional
undivided interests of such Pass Through Trust that is required to approve any
supplemental agreement
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or any waiver provided for in such Pass Through Agreement or (d) cause the Pass
Through Trust to become taxable as an "association," within the meaning of
Treasury Regulation Section 301.7701-4. (Pass Through Agreement, Section 9.02)
MODIFICATIONS, CONSENTS AND WAIVERS UNDER THE INDENTURES AND RELATED AGREEMENTS
If the Pass Through Trustee, as the holder of any Equipment Notes held in
a Pass Through Trust, receives a request for its consent to any amendment,
modification or waiver under the Indenture or other document relating to such
Equipment Notes (including any Lease), the Pass Through Trustee will 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
Pass Through Trustee will request instructions from such Certificateholders as
to whether or not to consent to such amendment, modification or waiver. The
Pass Through Trustee will vote or consent with respect to such Equipment Notes
in the same proportion as the Pass Through Certificates of such Pass Through
Trust are actually voted by such Certificateholders by a certain date specified
in such notice to Certificateholders. If an Event of Default relating to such
Indenture has occurred and is continuing under such Pass Through Trust, the
Pass Through Trustee may, in the absence of instructions from
Certificateholders holding a majority in interest of the Pass Through
Certificates at the time outstanding in respect of such Pass Through Trust, in
its own discretion consent to such amendment, modification or waiver, and may
so notify the related Indenture Trustee. (Pass Through Agreement, Section
10.01)
TERMINATION OF PASS THROUGH TRUSTS
The obligations of the Company and the Pass Through 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 corresponding Pass Through Agreement and
the disposition of all property held in such Pass Through Trust. The Pass
Through Trustee will notify each Certificateholder of record of such Pass
Through Trust by mail of, among other things, 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 for each Certificateholder of such Pass Through Trust will
be made only upon surrender of such Certificateholder's Pass Through
Certificates at the office or agency of the Pass Through Trustee specified in
such termination notice. (Pass Through Agreement, Section 11.01)
THE PASS THROUGH TRUSTEE; THE INDENTURE TRUSTEE
Shawmut Bank Connecticut, National Association will be the initial Pass
Through Trustee for each of the Pass Through Trusts. The Pass Through Trustee
and any of its affiliates may hold Pass Through Certificates in their own
names. (Pass Through Agreement, Section 7.05)
Unless otherwise specified in the related Prospectus Supplement, Shawmut
Bank Connecticut, National Association may also be the Indenture Trustee under
the Indentures under which the Equipment Notes have been or will be issued.
Shawmut Bank Connecticut, National Association may act as trustee under other
indentures with respect to other indebtedness of the Company. The Company from
time to time may borrow from, and maintain deposit accounts with, Shawmut Bank
Connecticut, National Association and its affiliates.
The Pass Through Trustee may resign under any or all of the Pass Through
Trusts at any time. The Pass Through Trustee is required to resign with respect
to a Pass Through Trust if it obtains knowledge of an Avoidable Tax (generally,
a state or local tax on such Pass Through Trust or its Certificateholders that
would be avoided if the Pass Through Trustee were located in another state)
unless the Company agrees to pay such tax. If the Pass Through Trustee fails to
comply with Section 310 of the Trust Indenture Act or ceases to be eligible to
continue as Pass Through Trustee with respect to a Pass Through Trust and, in
either such case, fails to so comply or to resign after written request by any
Certificateholder that has been a bona fide Certificateholder of the applicable
Pass Through Trust for at least six months or if the Pass Through Trustee
becomes incapable of acting as Pass Through Trustee or becomes insolvent, then
the Company may remove such Pass Through Trustee, or any Certificateholder of
such Pass Through Trust for at least six months may, on behalf of itself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of such Pass Through Trustee and the appointment of a successor
trustee. In addition, the Pass Through Trustee of any Pass Through Trust may be
removed without cause by the Certificateholders holding more than 50% in
aggregate amount of the related Pass Through Certificates. In the case of the
resignation or removal of the Pass Through Trustee, the Company will appoint a
successor, subject to the right of the Certificateholders holding more than 50%
in aggregate amount of the related Pass Through Certificates to appoint a
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different successor within one year thereafter. If no successor Pass Through
Trustee is appointed and accepts its appointment, then any Certificateholder
that has been a bona fide Certificateholder of the relevant Pass Through Trust
for at least six months may, or the resigning Pass Through Trustee may,
petition a court for the appointment of a successor. The resignation or removal
of the Pass Through Trustee for any Pass Through Trust and the appointment of
the successor trustee for such Pass Through Trust does not become effective
until acceptance of the appointment by the successor trustee. (Pass Through
Agreement, Section 7.09) 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. All
references in this Prospectus to the Pass Through Trustee are to the respective
trustees acting in such capacity under each of the Pass Through Trusts and
should be read to take into account the possibility that each of the Pass
Through Trusts could have a different successor trustee in the event of such a
resignation or removal.
Each Pass Through Agreement provides that the Company will pay the Pass
Through Trustee's fees and expenses. Each Pass Through Agreement further
provides that the Pass Through Trustee in its individual capacity will be
entitled to indemnification by the Company for, and will be held harmless
against, any loss, liability or expense and any tax (other than taxes
attributable to the Pass Through Trustee's compensation) incurred by the Pass
Through Trustee in its individual capacity in connection with the acceptance or
administration of the corresponding Pass Through Trust, except to the extent
incurred through its own willful misconduct, bad faith or negligence or by
reason of a breach of any of its representations or warranties set forth in
such Pass Through Agreement or any related documents. In certain circumstances,
the Pass Through Trustee will be entitled to be reimbursed from, and will have
a lien prior to the Pass Through Certificates upon, the applicable Pass Through
Trust for any tax (other than income or similar taxes) incurred in its trust
capacity in connection with the acceptance or administration of such Pass
Through Trust. (Pass Through Agreement, Section 7.07)
DESCRIPTION OF THE EQUIPMENT NOTES
The discussion that follows is a summary that does not purport to be
complete and is qualified in its entirety by the detailed information appearing
in the applicable Prospectus Supplement. The following summary includes
descriptions of the material terms of the Equipment Notes and the Indentures.
Except as otherwise indicated below or as described in the applicable
Prospectus Supplement, the following summary will apply to the Equipment Notes,
the Indentures, the Leases and the Participation Agreements related to the
Equipment. Additional provisions with respect to the Equipment Notes, the
Indentures, the Leases and the Participation Agreements relating to any
particular offering of Pass Through Certificates will be described in the
applicable Prospectus Supplement. To the extent that any provision in any
Prospectus Supplement is inconsistent with any provision of this summary, the
provision of such Prospectus Supplement will control.
GENERAL
The Equipment Notes will be issued as nonrecourse obligations of the
applicable Owner Trust, in each case by the Owner Trustee under such Owner
Trust for the benefit of the Owner Participant under such Owner Trust, and will
be authenticated under an Indenture by the Indenture Trustee. All of the
Equipment Notes issued under the same Indenture will relate to, and will be
secured by, one or more items of Equipment identified and described in the
relevant Prospectus Supplement, subject to certain exceptions with respect to
the Vehicles (as described below under "Description of the Equipment
Notes--Security"). The applicable Owner Trustee will lease the related
Equipment to the Company pursuant to a Lease between the Owner Trustee and the
Company. The Equipment to be subject to each Lease and the Equipment Notes
issued under the related Indenture will be identified and described in the
applicable Prospectus Supplement. Upon the commencement of any Lease of the
Equipment, the Company will be obligated to make rental payments under the
related Lease that will be sufficient to pay the scheduled payments of
principal of and interest on the related Equipment Notes when, and as scheduled
to be, due and payable. The Equipment Notes will not, however, be obligations
of, or guaranteed by, the Company. The Company's obligations to pay rent and to
cause other payments to be made under each Lease will be general obligations of
the Company.
PRINCIPAL AND INTEREST PAYMENTS
Interest received by the Pass Through Trustee on the Equipment Notes
constituting Trust Property of each Pass Through Trust will be passed through
to the Certificateholders of such Pass Through Trust on a pro rata basis on the
dates and at the rate per annum set forth in the applicable Prospectus
Supplement. Interest on the Equipment Notes will be calculated on the basis of
a 360-day year consisting of twelve 30-day months.
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<PAGE> 15
Each Pass Through Trust will hold Equipment Notes on which principal is
payable in scheduled amounts and on specified dates as set forth in the
applicable Prospectus Supplement. Principal received by the Pass Through
Trustee on such Equipment Notes will be passed through to the
Certificateholders of such Pass Through Trust on a pro rata basis as set forth
in the applicable Prospectus Supplement.
PREPAYMENT
The applicable Prospectus Supplement will describe the circumstances,
whether voluntary or involuntary, under which the related Equipment Notes may
or must be prepaid prior to the stated maturity date thereof, in whole or in
part, the premium, if any, applicable upon certain prepayments and other terms
applying to the prepayment of such Equipment Notes.
SECURITY
The Equipment Notes issued under each of the Indentures will be secured by
(i) an assignment by the related Owner Trust to the Indenture Trustee of such
Owner Trust's rights (except for certain limited rights described below) under
the Lease or Leases to which it is a party covering the related item or items
of Equipment including the right to receive rent and other payments thereunder,
(ii) a security interest granted to the Indenture Trustee in such related
Equipment, subject to the rights of the Company under such Lease or Leases and
to certain other permitted liens and encumbrances, except that a security
interest in the Vehicles will not be perfected until the occurrence of
specified circumstances relating to the deterioration in the credit standing of
the Company. Accordingly, prospective holders of the Pass Through Certificates
should not rely on the existence of a perfected security interest in the
Vehicles. The assignment by the Owner Trust to the Indenture Trustee of its
rights under each Lease will exclude rights of the Owner Trustee and the
related Owner Participant relating to (i) indemnification by the Company for
certain matters, (ii) proceeds of public liability insurance payable to the
Owner Trustee and the Indenture Trustee in their respective individual
capacities and to the Owner Participant under insurance maintained by the
Company under such Lease and (iii) proceeds of any insurance policies
separately maintained by such Owner Trustee in its individual capacity or by
such Owner Participant. The right of the Indenture Trustee, however, to
exercise any of the rights of the Owner Trustee under the related Lease, except
the right to receive payments of rent due thereunder, will be subject to
certain limitations as described in the applicable Prospectus Supplement.
There will be no cross-collateralization provisions in the Indentures and
consequently the Equipment Notes issued by an Owner Trust will not be secured
by any items of Equipment held by any other Owner Trust or the Leases relating
thereto. There will be no cross-default provisions in the Indentures and
consequently events resulting in an Indenture Event of Default under any
particular Indenture may not result in an Indenture Event of Default occurring
under any other Indenture.
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
The Company will be prohibited from consolidating with or merging into any
other corporation under circumstances in which the Company is not the surviving
corporation, or from conveying, transferring or leasing all or substantially
all of its assets as an entirety to any person, unless among other things, (i)
the successor or transferee corporation expressly assumes all the obligations
of the Company contained in the Participation Agreements, Leases, and certain
related agreements, and (ii) immediately before and after giving effect to such
transaction, no Lease Event of Default under any Lease shall be in existence.
PAYMENTS AND LIMITATIONS OF LIABILITY
All payments of principal, of premium, if any, and interest on any
Equipment Notes will be made only from the assets subject to the lien of the
related Indenture or the income and proceeds received by the Indenture Trustee
therefrom, including rent payable by the Company under the related Lease. The
Equipment Notes will not be direct obligations of, or guaranteed by, the
Company. The Company's obligations to pay rent and to cause other payments to
be made under each Lease will be general obligations of the Company.
Neither the Owner Trustee nor the Indenture Trustee (in their individual
capacities) nor any Owner Participant will be liable to any Certificateholder
or, in the case of the Owner Trustee, in its individual capacity, to the
Company or the Indenture Trustee for any amounts payable under the Equipment
Notes or the Indentures or, except as provided in the Indentures and
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<PAGE> 16
the Participation Agreements and except for the gross negligence or willful
misconduct of the Owner Trustee, for any liability thereunder.
INDENTURE EVENTS OF DEFAULT AND REMEDIES
For any Pass Through Trust, the applicable Prospectus Supplement will
describe the Indenture Events of Default under the Indentures related to the
Equipment Notes to be held by such Pass Through Trust, the remedies that the
related Indenture Trustee may exercise with respect to the related Equipment,
either at their own initiative or upon instructions from holders of the related
Equipment Notes, and other provisions relating to the occurrence of an
Indenture Event of Default the exercise of remedies and any limitations or
restrictions thereon. There will be no 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 under any other Indenture.
THE LEASES
The following terms will be applicable to each Lease:
TERMS AND RENTALS. Each item of Equipment will be leased by an Owner Trust to
the Company for a term commencing on the date of the Owner Trustee's acceptance
thereof pursuant to the related Participation Agreement and expiring on a date
not earlier than the latest maturity date of the related Equipment Notes,
unless previously terminated or extended, as permitted by the related Lease.
The scheduled rental payments by the Company under each Lease will be payable
on the dates specified in the applicable Prospectus Supplement. The respective
payments will be assigned under the related Indenture by the Owner Trust to the
Indenture Trustee to provide the funds necessary to make payments of principal
and interest due from such Owner Trust on the Equipment Notes issued under such
Indenture. Any Prospectus Supplement may provide that, under certain
circumstances, the scheduled rental payments under any applicable Lease may be
adjusted; in that case, however, each such Lease will provide that under no
circumstances will the adjusted rental payments that the Company will be
unconditionally obligated to make or cause to be made under such Lease and any
other Lease to which the same Owner Trust is a party, after such adjustment be
less than the scheduled payments of principal and interest on the Equipment
Notes issued under the Indenture relating to such Lease or Leases. See
"Description of the Equipment Notes--Payments and Limitations of Liability."
Scheduled payments of principal and interest on the Equipment Notes will be
made on the dates specified in the applicable Prospectus Supplement.
NET LEASE. The Company's obligations under each Lease in respect of the
Equipment leased thereunder will be those of a lessee under a "net lease."
Accordingly, the Company will be obligated to pay all costs of operating the
Equipment and its expenses, to maintain, service, repair and overhaul the
Equipment so as to keep the Equipment in good condition, ordinary wear and tear
excepted, and in a manner consistent with the Company's maintenance practices
in respect of similar equipment owned or leased by it. In the case of a Lease
of an Aircraft, the Company will be obligated to maintain the airworthiness
certification of such Aircraft in good standing at all times under the Federal
Aviation Act. Generally, the Company will be obligated to replace or cause to
be replaced all parts that may from time to time be incorporated or installed
in or attached to any item of Equipment and that may become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use. The Company will be obligated to make all modifications
to the Equipment which are required by law and will have the right to make
other alterations, modifications and additions to the Equipment so long as such
alterations, modifications or additions do not materially decrease the value,
utility or remaining economic useful life of such Equipment. See the applicable
Prospectus Supplement for a description of certain limitations, if any,
applicable to provisions described in this paragraph.
INSURANCE. Unless otherwise indicated in the applicable Prospectus Supplement
the Company will, at its own expense, cause to be carried and maintained with
insurance companies (which may be captive insurance companies affiliated with
the Company) (i) physical damage insurance in respect of all Equipment and (ii)
public liability insurance with respect to third-party personal injury and
property damage, in such amounts and against such risks customarily insured
against by the Company in respect of equipment owned or leased by it similar in
type to the Equipment. There is no assurance that any insurance will be carried
in the future, or, if it is carried, as to the amount of such insurance or as
to the amount of the deductible limits in respect of such insurance. See the
applicable Prospectus Supplement for a description of any insurance
16
<PAGE> 17
obligations of the Company not described in this paragraph or any limitations
applicable to provisions described in this paragraph.
LEASE EVENTS OF DEFAULT; REMEDIES. The applicable Prospectus Supplement will
describe the Lease Events of Default under the related Leases, the remedies
that the Owner Trustee may exercise with respect to the related Equipment, and
other provisions relating to the occurrence of a Lease Event of Default and the
exercise of remedies.
THE PARTICIPATION AGREEMENTS
Pursuant to each Participation Agreement, the Company will make certain
representations relating to itself and the related Equipment. The Company also
will agree to indemnify each Indenture Trustee, each Owner Participant and each
Owner Trustee, and certain parties affiliated with the foregoing (but not
including holders of the Equipment Notes or the Certificateholders), for
certain liabilities, losses, fees and expenses and for certain other matters
arising out of the transactions described herein or relating to the applicable
Equipment or the use thereof. In addition, under certain circumstances the
Company will be required to indemnify such persons against certain taxes,
levies and duties and for certain other matters relating to such transactions
or the applicable Equipment. Subject to certain restrictions, each
Participation Agreement will permit the related Owner Participant to convey all
of its right, title and interest in the related Owner Trust. Moreover, if so
provided in the applicable Prospectus Supplement, a Participation Agreement may
provide that, in certain circumstances the Company may assume the related Owner
Trust's obligation under the related Equipment Notes on a full recourse basis
upon a purchase of the related Equipment by the Company.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Simpson Thacher & Bartlett, tax counsel to the Company,
the following discussion accurately describes the principal United States
federal income tax consequences of ownership and disposition of the Pass
Through Certificates, and should be read in conjunction with any additional
discussion of federal income tax consequences included in the applicable
Prospectus Supplement. This opinion is based on laws, regulations, rulings and
decisions in effect as of the date hereof. Changes to existing law, which could
have retroactive effect, may alter the consequences described below. This
opinion does not purport to address federal income tax consequences applicable
to particular categories of investors, some of which (for example, insurance
companies and foreign investors) may be subject to special rules. This summary
discusses only Pass Through Certificates held as capital assets for federal
income tax purposes. Persons considering purchasing interests in Pass Through
Certificates should consult their own tax advisors with regard to the
application of the United States federal income tax laws to their particular
situations as well as any tax consequences arising under the laws of any state,
local or foreign jurisdiction. 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 on a Pass Through Trust would result in a reduction in the
amounts available for distribution to the Certificateholders of such Pass
Through Trust.
GENERAL
The Pass Through Trusts will not be classified as associations taxable as
corporations, but rather, will be classified as grantor trusts under Section
671 of the Internal Revenue Code of 1986, as amended (the "Code"), and each
Certificateholder will be treated as the owner of a pro rata undivided interest
in each of the Equipment Notes and any other property held in the related Pass
Through Trust.
Each Certificateholder will be required to report on its federal income
tax return its pro rata share of the entire income from each of the Equipment
Notes and any other property held in the related Pass Through Trust in
accordance with such Certificateholder's method of accounting. A
Certificateholder using the cash method of accounting must take into account
its pro rata share of income as and when such income is considered to have been
received by the Pass Through Trustee. A Certificateholder using an accrual
method of accounting must take into account its pro rata share of income as it
accrues or is received by the Pass Through Trustee, whichever is earlier. Each
Certificateholder will generally be entitled to deduct its share of the Pass
Through Trustee's fees and expenses incurred in connection with its
administration of the related Pass Through Trust. However, a noncorporate
Certificateholder's allocable share of the Pass Through Trustee's fees and
expenses may be a "miscellaneous itemized deduction" as defined in Section 67
of the Code. Under that Section, "miscellaneous itemized deductions" will be
deductible by a noncorporate Certificateholder only to the extent that the
aggregate of such
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<PAGE> 18
deductions (including those arising from transactions unrelated to holding the
Pass Through Certificates) exceed 2% of such Certificateholder's adjusted gross
income.
A purchaser of an interest in a Pass Through Certificate will be treated
as purchasing an interest in each Equipment Note and any other property in the
related Pass Through Trust at a price determined by allocating the purchase
price paid for the Pass Through Certificate among such Equipment Notes and
other property in proportion to their relative fair market values at the time
of purchase of the Pass Through Certificate. Unless otherwise indicated in a
Prospectus Supplement, the Company anticipates that when all the Equipment
Notes have been acquired by the related Pass Through Trust, the purchase price
paid for a Pass Through Certificate of such Pass Through Trust by an original
purchaser of such Pass Through Certificate should be allocated among the
Equipment Notes held in such Pass Through Trust in proportion to their
respective principal amounts.
If an Equipment Note held by a Pass Through Trust is prepaid, a
Certificateholder will be considered to have sold his pro rata share of that
Equipment Note, and will recognize gain or loss equal to the difference between
its aggregate adjusted basis in the Equipment Note and the amount realized on
the sale (except to the extent attributable to accrued interest, which would be
taxable as interest income if not previously included in income). Subject to
the market discount provisions of the Code (described below), any such gain or
loss will be long-term capital gain or loss if the Equipment Note is considered
to have been held for more than one year. Net capital gains of individuals are,
under certain circumstances, taxed at lower rates than items of ordinary
income. With respect to the Equipment Notes, although the matter is not
entirely free from doubt, an Owner Participant's conveyance of its interest in
an Owner Trust will not constitute a taxable event to the holders of interests
in the related Equipment Notes. If the Company were to assume an Owner Trust's
obligations under the related Equipment Notes upon a purchase of the related
Equipment by the Company, such assumption would be treated as a taxable
exchange of the respective Equipment Notes resulting in the recognition of
taxable gain or loss under the rules discussed above. For this purpose the
amount realized will be equal to the fair market value of the
Certificateholder's pro rata share of the respective Equipment Notes at such
time. However, under proposed Treasury regulations not currently in effect,
the Company's assumption of the Owner Trust's obligations under the
circumstances described above would not be treated as a taxable exchange of the
Equipment Notes. It is impossible to predict whether, or in what form, final or
temporary regulations might be promulgated and what the substance or effective
date of such regulations might be.
SALES OR EXCHANGES OF PASS THROUGH CERTIFICATES
A Certificateholder that sells or exchanges a Pass Through Certificate
will be considered to have sold his pro rata portion of the property held by
the Pass Through Trust, and will recognize gain or loss on the basis discussed
in the preceding paragraph.
MARKET DISCOUNT
A purchaser of a Pass Through Certificate generally will be considered to
have acquired an interest in an Equipment Note at a "market discount" to the
extent the remaining principal amount of such Equipment Note allocable to the
Pass Through Certificate exceeds the Certificateholder's tax basis allocable to
such Equipment Note, 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 of Sections 1276
through 1278 of the Code with regard to its interest in such Equipment Note.
In the case of a sale or certain other disposition of indebtedness subject
to the market discount rules, Section 1276 of the Code requires that gain, if
any, from such sale or disposition be treated as ordinary income to the extent
such gain represents a market discount that has accrued during the period such
indebtedness was held. If such indebtedness is disposed of in a nontaxable
transaction (other than a nonrecognition transaction described in Code Section
1276(d)), accrued market discount will be includable as ordinary income as if
the Certificateholder had sold the Equipment Note at its then market value.
In the case of a partial principal payment on indebtedness subject to the
market discount rules, Section 1276 of the Code requires that such payment 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.
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Generally, market discount accrues under a straight line method or, at the
election of the taxpayer, a constant interest method. However, in the case of
installment obligations (such as the Equipment Notes), the manner in which the
market discount is to be accrued has been left to Treasury regulations not yet
promulgated. Until such Treasury regulations are issued, the explanatory
Conference Report to the Tax Reform Act of 1986 (the "Conference Report")
indicates that holders of installment obligations with a market discount (which
do not have original issue discount) may elect to accrue the market discount
either on the basis of a constant interest rate or as follows: the amount of
the market discount that is deemed to accrue is the amount of the market
discount that bears the same ratio to the total amount of the 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 installment
obligation as of the beginning of such period.
Under Section 1277 of the Code, if in any taxable year interest paid or
accrued on indebtedness incurred or continued to purchase or carry indebtedness
subject to the market discount rules exceeds the interest currently includable
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.
Section 1278 of the Code allows a taxpayer to make an election to include
market discount in his gross income currently. If such election is made, the
rules of Sections 1276 and 1277 (described above) will not apply to the
taxpayer.
PREMIUM
A Certificateholder will be considered to have acquired an interest in an
Equipment Note at a premium to the extent such Certificateholder's tax basis
allocable to such Equipment Note exceeds the remaining principal amount of such
Equipment Note allocable to such Certificateholder's Pass Through Certificate.
In that event, a Certificateholder that holds such Pass Through Certificate as
a capital asset may elect (in accordance with applicable Code provisions) to
amortize such premium as an offset to interest income under Section 171 of the
Code with corresponding reductions in the Certificateholder's tax basis in such
Equipment Note. Generally, such amortization is on a constant yield basis. In
the case of installment obligations (such as the Equipment Notes), however, the
Conference Report indicates a Congressional intent that amortization will be in
accordance with the same rules that will apply to the accrual of market
discount on installment obligations. See "Market Discount."
Since the Equipment Notes may be called at a premium prior to maturity,
amortizable premium may be determined by reference to an early call date. Due
to the complexities of the amortizable premium rules, particularly where there
is more than one possible call date and the amount of any premium is uncertain,
Certificateholders are urged to consult their tax advisors as to the amount of
any such amortizable premium.
If a Certificateholder acquires an interest in an Equipment Note at a
premium and elects to amortize such premium, and the Internal Revenue Service
successfully challenges the amount of amortization claimed for a particular
period, then such Certificate Owner would be precluded from offsetting interest
income on the Equipment Note for such period with the amount of the disallowed
amortization, and the basis of such Equipment Note would be increased
accordingly.
ORIGINAL ISSUE DISCOUNT
Under a reasonable interpretation of applicable Treasury regulations on
original issue discount, it is not anticipated that the Equipment Notes (and,
consequently, the Pass Through Certificates) will be issued with original issue
discount.
BACKUP WITHHOLDING
Payments made on the Pass Through Certificates, and proceeds from the sale
or exchange 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 an exempt recipient under the
Code. Any such withholding amounts will be allowed as a credit against the
Certificateholder's federal income tax and may entitle such Certificateholder
to a refund, provided that the required information is furnished to the
Internal Revenue Service.
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CERTAIN STATE TAXES
The Pass Through Trustee is a national banking association with its
corporate trust office in Hartford, Connecticut. Shipman & Goodwin, special
counsel for the Pass Through Trustee, has advised the Company that, in its
opinion, under currently applicable law, assuming that each Pass Through Trust
will not be classified as an association taxable as a corporation for federal
income tax purposes, but rather will be classified as a grantor trust under
Section 671 of the Code, and assuming that each Pass Through Trust does not
otherwise engage in business in Connecticut, (i) the Pass Through Trusts 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 State of
Connecticut or any political subdivision thereof and (ii) Certificateholders
that are not residents of or otherwise subject to tax in Connecticut 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 State of
Connecticut or any political subdivision thereof as a result of purchasing,
owning (including receiving payments with respect to) or selling a Pass Through
Certificate.
Neither the Pass Through Trusts nor the Certificateholders will be
indemnified for any state or local taxes imposed on them, and the imposition of
any such taxes on a Pass Through Trust would result in a reduction in the
amounts available for distribution to the Certificateholders of such Pass
Through Trust. In general, should a Certificateholder 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, Pass
Through Certificates may not be purchased by, or with the assets of, any
employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or individual retirement account or
plan subject to Section 4975 of the Code. Certain governmental plans and
non-electing church plans, however, are not subject to Title I of ERISA or
Section 4975 of the Code and, therefore, may purchase the Pass Through
Certificates.
PLAN OF DISTRIBUTION
The Pass Through Certificates may be sold to or through underwriters,
directly to other purchasers or through agents.
The distribution of the Pass Through Certificates may be effected from
time to time in one or more transactions at a fixed price or prices, which may
be changed, or at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices.
In connection with the sale of Pass Through Certificates, underwriters or
agents may receive compensation from the Company or from purchasers of Pass
Through Certificates for whom they may act as agents in the form of discounts,
concessions or commissions. Underwriters may sell Pass Through Certificates to
or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters or commissions from
the purchasers for whom they may act as agents. Underwriters, dealers and
agents that participate in the distribution of Pass Through Certificates may be
deemed to be underwriters, and any discounts or commissions received by them
from the Company and any profit on the resale of Pass Through Certificates by
them may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from the Company will be described, in the applicable
Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters
and agents who participate in the distribution of Pass Through Certificates may
be entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company does not intend to apply for the listing of any Series of Pass Through
Certificates on a national securities exchange. If the Pass Through
Certificates of any Series are sold to or through underwriters, the
underwriters may make a market in such Pass Through Certificates, as permitted
by applicable laws and regulations. No underwriter would be obligated, however,
to make a market in such Pass Through Certificates, and any such market-making
could be discontinued at any time at the sole discretion of the underwriters.
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Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the Pass Through Certificates of any Series.
Certain of the underwriters or agents and their associates may be
customers of, engage in transactions with, and perform services for, the
Company in the ordinary course of business.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, the
legality of the Pass Through Certificates offered hereby will be passed upon
for the Company by special counsel to the Company, Simpson Thacher & Bartlett,
425 Lexington Avenue, New York, New York 10017, and for the underwriters and
certain other purchasers by Cravath, Swaine & Moore, Worldwide Plaza, 825
Eighth Avenue, New York, New York 10019. Unless otherwise indicated in the
applicable Prospectus Supplement, both Simpson Thacher & Bartlett and Cravath,
Swaine & Moore may rely on the opinion of Shipman & Goodwin, counsel for
Shawmut Bank Connecticut, National Association, individually and as Pass
Through Trustee, as to matters relating to the authorization, execution and
delivery of the Pass Through Agreement and of each Series of Pass Through
Certificates by the Pass Through Trustee.
EXPERTS
The consolidated financial statements and schedules of the Company
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993, as amended, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. Such consolidated financial statements
and schedules 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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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Company in connection with the
offering described in this Registration Statement (other than underwriting
discounts and commissions) are as follows:
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,932
Printing and engraving expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000
Blue Sky expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Trustee's fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500
Fees of rating agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,068
========
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $558,500
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article III, Section 14 of the Bylaws of the Company, as amended, provides
for indemnification of officers, directors and employees of the Company to the
extent authorized by the General Corporation Law of the State of Delaware.
Pursuant to Section 145 of the Delaware General Corporation Law, the Company
generally has the power to indemnify its present and former directors,
officers, employees and agents against expenses incurred by them in connection
with any suit to which they are, or are threatened to be made, a party by
reason of their serving in such positions so long as they acted in good faith
and in a manner they reasonably believed to be in, or not opposed to, the best
interests of the corporation, and with respect to any criminal action, they had
no reasonable cause to believe their conduct was unlawful. With respect to
suits by or in the right of a corporation, however, indemnification is not
available if such person is adjudged to be liable for negligence or misconduct
in the performance of his duty to the corporation unless the court determines
that indemnification is appropriate. In addition, the Company has the power to
purchase and maintain insurance for such persons. The statute also expressly
provides that the power to indemnify authorized thereby is not exclusive of any
rights granted under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
Pursuant to authority conferred by stockholders at the annual meeting of
the Company on April 30, 1987, the Company has entered into Indemnity
Agreements with each of its directors. The Indemnity Agreements establish
contract rights in favor of the Company's directors and thus give them
assurances that the indemnity provided would continue despite possible future
changes or amendments to the Company's Bylaws or the Restated Certificate of
Incorporation. The Indemnity Agreements generally provide that the directors
are entitled to indemnification to the fullest extent permitted by law against
liabilities arising from any claims made against them arising from acts or
omissions alleged to have been committed while acting as directors and solely
because of their being directors.
Also at the annual meeting of the Company on April 30, 1987, stockholders
approved an amendment to the Company's Restated Certificate of Incorporation to
eliminate the personal liability of each director of the Company to the Company
or its shareholders for monetary damages for breach of fiduciary duty under
certain circumstances. The amendment is consistent with amendments to the
Delaware General Corporation Law effective July 1, 1986.
In addition to the indemnification provision of the Company's Bylaws and
the Indemnity Agreements, the Company's directors and officers are covered by
Directors' and Officers' liability insurance with a limit of $100 million,
which insurance is subject to exclusions, deductibles and conditions.
The above discussion of the Company's Bylaws, Section 145 of the Delaware
General Corporation Law and the Company's Indemnity Agreements with its
directors is not intended to be exhaustive and is respectively qualified in its
entirety by such Bylaws, statute and Agreements.
II-1
<PAGE> 23
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
<S> <C>
1* Form of Underwriting Agreement relating to Pass Through Certificates
4(a)(1)* Form of Pass Through Trust Agreement between Phillips Petroleum Company and the Pass Through Trustee
4(a)(2)* Form of Pass Through Certificate (included in 4(a)(1))
4(b)(1)* Form of Trust Indenture and Security Agreement between the Owner Trustee and the Indenture Trustee
4(b)(2)* Form of Equipment Note (included in Exhibit 4(b)(1))
4(c)* Form of Participation Agreement among Phillips Petroleum Company, as Lessee, an Owner Participant, an Owner Trustee,
an Indenture Trustee and the Pass Through Trustee
4(d)* Form of Trust Agreement between an Owner Participant and an Owner Trustee
4(e)* Form of Lease Agreement between an Owner Trustee, as the Lessor, and Phillips Petroleum Company, as Lessee
5(a)* Opinion of Simpson Thacher & Bartlett, special counsel for Phillips Petroleum Company
5(b)* Opinion of Shipman & Goodwin, counsel for the Pass Through Trustee
8(a)* Tax Opinion of Simpson Thacher & Bartlett, counsel for Phillips Petroleum Company (included under the caption
"Federal Income Tax Consequences" in the Prospectus)
8(b)* Tax Opinion of Shipman & Goodwin, counsel for the Pass Through Trustee (included under the caption
"Certain State Taxes" in the Prospectus (included in Exhibit 5(b))
12 Computation of Ratio of Earnings to Fixed Charges (incorporated by reference to Exhibit 12 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994)
23(a) Consent of Simpson Thacher & Bartlett, counsel for Phillips Petroleum Company (included in Exhibit 5(a))
23(b) Consent of Shipman & Goodwin, counsel for the Pass Through Trustee (included in Exhibit 5(b))
23(c) Consent of Ernst & Young LLP which appears on page II-5 of the Registration Statement
24 Powers of Attorney
25* Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Shawmut Bank Connecticut,
National Association as Pass Through Trustee
</TABLE>
- ----------------------------------
* To be filed pursuant to an amendment.
II-2
<PAGE> 24
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) To
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933, as amended (the "Securities Act"); (ii) To reflect in the
prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post- effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement; (iii)
To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration:
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do
not apply if the information required to be included in a post- effective
amendment by those paragraphs is contained in periodic reports filed by
the registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bartlesville, State of Oklahoma, on the 9th day of
August, 1994.
PHILLIPS PETROLEUM COMPANY
By: W. W. Allen
------------------------------------------
(W. W. Allen, Chairman of the
Board of Directors and Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
W. W. Allen
------------------------------- Chairman of the Board of Directors August 9, 1994
(W.W. Allen) and Chief Executive Officer;
Principal Executive Officer
T.C. Morris
------------------------------- Senior Vice President, Treasurer and August 9, 1994
(T.C. Morris) Chief Financial Officer; Principal
Financial Officer
L.F. Francis
------------------------------- Controller and General Tax Officer; August 9, 1994
(L.F. Francis) Principal Accounting Officer
W.W. ALLEN, NORMAN R. AUGUSTINE, GEORGE B. )
BEITZEL, CHARLES L. BOWERMAN, ROBERT E. )
CHAPPELL, JR., LAWRENCE S. EAGLEBURGER, )
JAMES B. EDWARDS, LARRY D. HORNER, E. )
DOUGLAS KENNA, J.J. MULVA, RANDALL L. )
TOBIAS, VICTORIA J. TSCHINKEL, J.L. ) Directors August 9, 1994
WHITMIRE )
)
By T.C. Morris
------------------------------
(T.C. Morris, Attorney-in-fact)
</TABLE>
II-4
<PAGE> 26
EXHIBIT 23(C)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Phillips Petroleum
Company for the registration of Phillips Petroleum Company's Pass Through
Certificates and to the incorporation by reference therein of our report dated
March 8, 1994, with respect to the consolidated financial statements and
schedules of Phillips Petroleum Company included in its Annual Report (Form
10-K) for the year ended December 31, 1993, as amended, filed with the
Securities and Exchange Commission.
Ernst & Young LLP
Tulsa, Oklahoma
August 9, 1994
II-5
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
<S> <C>
1* Form of Underwriting Agreement relating to Pass Through Certificates
4(a)(1)* Form of Pass Through Trust Agreement between Phillips Petroleum Company and the Pass Through Trustee
4(a)(2)* Form of Pass Through Certificate (included in 4(a)(1))
4(b)(1)* Form of Trust Indenture and Security Agreement between the Owner Trustee and the Indenture Trustee
4(b)(2)* Form of Equipment Note (included in Exhibit 4(b)(1))
4(c)* Form of Participation Agreement among Phillips Petroleum Company, as Lessee, an Owner Participant, an Owner Trustee,
an Indenture Trustee and the Pass Through Trustee
4(d)* Form of Trust Agreement between an Owner Participant and an Owner Trustee
4(e)* Form of Lease Agreement between an Owner Trustee, as the Lessor, and Phillips Petroleum Company, as Lessee
5(a)* Opinion of Simpson Thacher & Bartlett, special counsel for Phillips Petroleum Company
5(b)* Opinion of Shipman & Goodwin, counsel for the Pass Through Trustee
8(a)* Tax Opinion of Simpson Thacher & Bartlett, counsel for Phillips Petroleum Company (included under the caption
"Federal Income Tax Consequences" in the Prospectus)
8(b)* Tax Opinion of Shipman & Goodwin, counsel for the Pass Through Trustee (included under the caption
"Certain State Taxes" in the Prospectus (included in Exhibit 5(b))
12 Computation of Ratio of Earnings to Fixed Charges (incorporated by reference to Exhibit 12 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994)
23(a) Consent of Simpson Thacher & Bartlett, counsel for Phillips Petroleum Company (included in Exhibit 5(a))
23(b) Consent of Shipman & Goodwin, counsel for the Pass Through Trustee (included in Exhibit 5(b))
23(c) Consent of Ernst & Young LLP which appears on page II-5 of the Registration Statement
24 Powers of Attorney
25* Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Shawmut Bank Connecticut,
National Association as Pass Through Trustee
</TABLE>
- ----------------------------------
* To be filed pursuant to an amendment.
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
W. W. Allen
----------------------------------
W. W. Allen
Chairman of the Board of Directors
and Chief Executive Officer
Date: July 11, 1994
II-6
<PAGE> 2
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
W. W. Allen
----------------------------------
W. W. Allen
Chairman of the Board of Directors
and Chief Executive Officer
Principal Executive Officer
Phillips Petroleum Company
Date: July 11, 1994
II-7
<PAGE> 3
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints L.F. Francis and J.A. Carrig, jointly and severally, as his true and
lawful attorneys-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign any and all registration statements and amendments thereto
(including post-effective amendments) to be filed by Phillips Petroleum Company
on Form S-3 or other applicable forms relating to Equipment Certificates, Pass
Through Certificates, and Lease Certificates and/or similar securities, and to
filed the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each said
attorney- in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each said attorney-in-fact and agent, or any
of them, or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
T. C. Morris
------------------------------------
T. C. Morris, Senior Vice President,
Treasurer, Chief Financial Officer;
Principal Financial Officer
Phillips Petroleum Company
Date: July 11, 1994
II-8
<PAGE> 4
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris and J.A. Carrig, jointly and severally, as his true and
lawful attorneys-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign any and all registration statements and amendments thereto
(including post- effective amendments) to be filed by Phillips Petroleum
Company on Form S-3 or other applicable forms relating to Equipment
Certificates, Pass Through Certificates, and Lease Certificates and/or similar
securities, and to filed the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto each said attorney- in-fact and agent full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each said
attorney-in-fact and agent, or any of them, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
L.F. Francis
----------------------------------
L.F. Francis
Controller and General Tax Officer,
Principal Accounting Officer
Phillips Petroleum Company
Date: July 11, 1994
II-9
<PAGE> 5
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Norman R. Augustine
----------------------------------
Norman R. Augustine, Director
Phillips Petroleum Company
Date: July 11, 1994
II-10
<PAGE> 6
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
George B. Beitzel
----------------------------------
George B. Beitzel, Director
Phillips Petroleum Company
Date: July 11, 1994
II-11
<PAGE> 7
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Charles L. Bowerman
----------------------------------
Charles L. Bowerman, Director
Phillips Petroleum Company
Date: July 11, 1994
II-12
<PAGE> 8
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Robert E. Chappell, Jr.
----------------------------------
Robert E. Chappell, Jr., Director
Phillips Petroleum Company
Date: July 11, 1994
II-13
<PAGE> 9
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Lawrence S. Eagleburger
----------------------------------
Lawrence S. Eagleburger, Director
Phillips Petroleum Company
Date: July 11, 1994
II-14
<PAGE> 10
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
James B. Edwards
----------------------------------
James B. Edwards, Director
Phillips Petroleum Company
Date: July 11, 1994
II-15
<PAGE> 11
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Larry D. Horner
----------------------------------
Larry D. Horner, Director
Phillips Petroleum Company
Date: July 11, 1994
II-16
<PAGE> 12
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
E. Douglas Kenna
----------------------------------
E. Douglas Kenna, Director
Phillips Petroleum Company
Date: July 11, 1994
II-17
<PAGE> 13
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
J. J. Mulva
----------------------------------
J. J. Mulva, Director
Phillips Petroleum Company
Date: July 11, 1994
II-18
<PAGE> 14
EXHIBIT 24.1
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Randall L. Tobias
----------------------------------
Randall L. Tobias, Director
Phillips Petroleum Company
Date: July 11, 1994
II-19
<PAGE> 15
EXHIBIT 24.1
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Victoria J. Tschinkel
----------------------------------
Victoria J. Tschinkel, Director
Phillips Petroleum Company
Date: July 11, 1994
II-20
<PAGE> 16
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby authorizes and
appoints T.C. Morris, L.F. Francis and J.A. Carrig, jointly and severally, as
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all registration statements and
amendments thereto (including post-effective amendments) to be filed by
Phillips Petroleum Company on Form S-3 or other applicable forms relating to
Equipment Certificates, Pass Through Certificates, and Lease Certificates
and/or similar securities, and to filed the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
J. Whitmire
----------------------------------
J. Whitmire, Director
Phillips Petroleum Company
Date: July 11, 1994
II-21
