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Filed pursuant to Rule 424(b)(3)
SEC File No. 333-81589
PROSPECTUS
$1,000,000,000
Phillips Petroleum Company
Debt Securities
Preferred Stock
Securities Warrants
Depositary Shares
Common Stock
Stock Purchase Contracts or Units
Prepaid Stock Purchase Contracts
or
PHILLIPS 66 CAPITAL III
PHILLIPS 66 CAPITAL IV
PHILLIPS 66 CAPITAL V
PHILLIPS 66 CAPITAL VI
Trust Preferred Securities
Guaranteed by
Phillips Petroleum Company
We will provide the specific terms of these securities in supplements to
this prospectus. We can only use this prospectus to offer and sell any specific
security by also including a prospectus supplement for that security. You
should read this prospectus and the prospectus supplements carefully before you
invest.
Neither the SEC nor any state securities commission has approved these
securities or determined that this prospectus is accurate or complete. It is
illegal for anyone to tell you otherwise.
October 1, 1999
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We have not authorized anyone to tell you anything about us or the securities
covered by this prospectus except what is included or incorporated in this
prospectus or any accompanying prospectus supplement. Do not assume that there
has been no change in our affairs since the date of this prospectus. Finally,
even though you may have this prospectus or any accompanying prospectus
supplement, we are not making any offer or encouraging your interest in any
securities if it is not legal and proper for us to do so.
AVAILABLE INFORMATION
This prospectus is part of a registration statement on Form S-3 relating to
the securities covered by this prospectus. The prospectus does not include all
of the information in the registration statement. We refer you to the
registration statement and its exhibits for further information about us and
the securities.
We are subject to the Securities Exchange Act of 1934, and file reports and
other information with the SEC as required by the Exchange Act. You can
inspect and copy our reports and filings by contacting the SEC at these
offices:
Public Reference Room 7 World Trade Center Northwestern Atrium
Judiciary Plaza New York, NY 10048 Center
450 Fifth Street, NW 500 West Madison
Washington, DC 20549 Street
Chicago, IL 60661
You can also get copies of these materials from the SEC's web site
(http://www.sec.gov), or view them at the offices of these stock exchanges:
New York Stock Exchange Pacific Exchange Toronto Stock Exchange
20 Broad Street 301 Pine Street 2 First Canadian Place
New York, NY 10005 San Francisco, CA 94104
Toronto, Ontario,
Canada M5X 1J2
We have not included any separate financial statements for the Phillips
trusts. They were omitted because the trusts are wholly owned subsidiaries of
Phillips Petroleum Company, with no independent operations and we guarantee
the fee obligations relating to the trust securities. Although the trusts
would normally be required to file information with the SEC on an ongoing
basis, we expect the SEC to exempt the trusts from this filing obligation for
as long as we continue to file our information with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Our Annual Report on Form 10-K for the fiscal year ended December 31, 1998,
as amended, our Quarterly Reports on Form 10-Q for the quarters ended
March 31, and June 30, 1999, and our Current Report on Form 8-K dated as of
July 2, 1999, are incorporated by reference in this prospectus. All future
filings that we make under Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act until we sell all of the securities we are offering are deemed
incorporated into and part of this prospectus once filed. Any statement in
this prospectus, in any prospectus supplement, or in any document incorporated
by reference that is different from any statement contained in any later-filed
document should be regarded as changed by that later statement. Once so
changed, the earlier statement is no longer considered part of this prospectus
or any prospectus supplement.
If you ask us by phone or in writing, we will give you a copy of any of the
materials incorporated (other than exhibits, unless the exhibits are
themselves specifically incorporated). Please make your request to Dale J.
Billam, Secretary, 1234 Adams Building, Bartlesville, Oklahoma 74004,
telephone 918-661-5638.
ABOUT US
Phillips Petroleum Company was incorporated in Delaware in 1917. We are a
fully integrated oil company with worldwide petroleum exploration and
production and chemicals manufacturing and distribution businesses,
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and U.S. petroleum refining and marketing and natural gas gathering, processing
and marketing businesses. Our principal executive offices are Phillips
Building, Bartlesville, Oklahoma 74004, telephone 918-661-6600.
ABOUT THE TRUSTS
The four trusts are Delaware business trusts formed to raise capital for us
by issuing common securities to us and preferred securities issued under this
prospectus and one or more prospectus supplements, and investing the proceeds
in subordinated debt securities issued by us.
We will directly or indirectly own all of the common securities of each of
our trust subsidiaries. The common securities will rank equally with, and each
trust will make payments on the common securities in proportion to, the trust
preferred securities, except that if an event of default occurs under the
declaration of one of the trusts, our rights, as holder of the common
securities, to payments will be subordinated to your rights as holder of the
trust preferred securities. We will, directly or indirectly, acquire common
securities in an aggregate liquidation amount equal to 3 percent of the total
capital of each of our trusts.
Each of our trusts has a term of approximately 55 years, but may terminate
earlier as provided in its declaration. Each of our trusts' business and
affairs will be conducted by the trustees we appoint, as the direct or indirect
holder of all the common securities. We, as holder of the common securities,
are entitled to appoint, remove or replace any of, or increase or decrease the
number of, the trustees of each of our trusts. The trustees' duties and
obligations are governed by the trusts' declarations. Prior to the issuance of
any trust preferred securities, we will insure that a majority of the trusts'
trustees are persons who are our employees or officers or affiliates and that
one trustee of each trust is a financial institution that will not be an
affiliate of ours and that will act as property trustee and indenture trustee
for purposes of the Trust Indenture Act of 1939, pursuant to the terms set
forth in a prospectus supplement. In addition, unless the property trustee
maintains a principal place of business in the State of Delaware and meets the
other requirements of applicable law, one trustee of each of our trusts will
have its principal place of business or reside in the State of Delaware.
We will pay all of our trusts' fees and expenses, including those relating
to any offering of trust preferred securities. In addition, we guarantee
payments on the trust preferred securities to the extent our trusts can
themselves make payments on the trust preferred securities.
The office of the Delaware trustee for each trust is The Bank of New York
(Delaware), White Clay Center, Route 273, Newark, Delaware 19711. Each trust's
principal place of business is c/o Phillips Petroleum Company, 3 Phillips
Building, Bartlesville, Oklahoma 74004.
RATIO OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Below is a table showing the ratios of earnings to fixed charges and of
earnings to combined fixed charges and preferred stock dividends for the
periods indicated:
<TABLE>
<CAPTION>
Six Months
Ended
June 30 Years Ended December 31
---------- ------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges..... 2.2 5.7 2.0 5.4 6.9 3.4 3.2
Ratio of earnings to combined fixed
charges and preferred stock
dividends............................. 2.2 5.7 2.0 5.4 6.9 3.4 3.2
</TABLE>
For this table, earnings are our income before income taxes and
extraordinary items, plus fixed charges (excluding capitalized interest and the
portion of the preferred dividend requirement of a subsidiary not previously
deducted from pretax income, but including amortization of amounts previously
capitalized), less
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our equity in undistributed earnings of companies of which we own less than
50 percent. Fixed charges are interest (including capitalized interest) on all
of our debt, amortization of debt discounts and expenses incurred on issuance,
that portion of our rental expense we believe represents interest, and the
amounts we have accrued to cover the preferred stock dividend requirements of a
subsidiary and our trusts. We filed an unaudited statement showing these ratios
as an exhibit to the registration statement in which this prospectus is
included.
USE OF PROCEEDS
We plan to add the proceeds we receive from sales of securities to our
general funds and to use them for general corporate purposes. These could
include capital expenditures, repayment or purchase of our already issued
long-term debt, investment in subsidiaries, additions to working capital,
repayment of short-term commercial paper notes, acquisitions and other
business opportunities. Any proceeds of securities issued by any of our trusts
would be used to purchase subordinated debt securities from us.
DESCRIPTION OF THE DEBT SECURITIES
We may issue debt securities, consisting of notes, debentures or other
evidences of indebtedness, from time to time in one or more series, in the
case of senior debt securities, under a Senior Debt Indenture dated as of
September 15, 1990, as supplemented by Supplemental Indenture No. 1 dated as
of May 23, 1991, between Phillips and U.S. Bank Trust National Association, as
successor to Continental Bank, National Association, as trustee, and in the
case of subordinated debt securities, under a Subordinated Debt Indenture
dated as of May 23, 1996, between Phillips and the Bank of New York, as
trustee. We may refer below to the senior debt indenture and the subordinated
debt indenture as the "indentures." The indentures are included as exhibits to
the Registration Statement of which this prospectus is a part.
The following description only summarizes the terms of the indentures and
the debt securities. For more information, you should read the indentures.
General
The indentures do not limit the aggregate principal amount of debt
securities that may be issued. We may issue the debt securities in one or more
series pursuant to an indenture supplemental to the indenture or a resolution
of our Board of Directors or a special committee appointed by the Board.
You should review the prospectus supplement for the following terms of the
debt securities being offered:
. the designation of the debt securities;
. the aggregate principal amount of the debt securities;
. the percentage of the principal amount (i.e., price) at which the debt
securities will be issued;
. the date or dates on which the debt securities will mature and the
right, if any, to extend such date or dates;
. the rate or rates, if any, per year, at which the debt securities will
bear interest, or the method of determining such rate or rates;
. the date or dates from which such interest will accrue, the interest
payment dates on which such interest will be payable or the manner of
determination of such interest payment dates and the record dates for
the determination of holders to whom interest is payable on any interest
payment dates;
. the right, if any, to extend the interest payment periods and the
duration of that extension;
. provisions for a sinking purchase or other analogous fund, if any;
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. the period or periods, if any, within which, the price or prices of
which, and the terms and conditions upon which the debt securities may
be redeemed, in whole or in part, at our option or at your option;
. the form of the debt securities;
. any provisions for payment of additional amounts for taxes and any
provision for redemption, if we must pay such additional amounts in
respect of any debt security;
. the terms and conditions, if any, upon which we may have to repay the
debt securities at your option (which option may be conditional) and the
price or prices in the currency or currency unit in which the debt
securities are payable;
. the currency, currencies or currency units for which you may purchase
the debt securities and the currency, currencies or currency units in
which principal and interest, if any, on the debt securities may be
payable;
. the terms and conditions, if any, pursuant to which the debt securities
may be converted or exchanged for the cash value of other securities
issued by us or by a third party;
. terms and conditions, if any, pursuant to which principal and premium,
if any, and interest, if any, on the debt securities are payable at our
or your option, in securities or other property; and
. any other specific terms of the debt securities.
We will pay principal, premium, if any, and interest, if any, and you may
present for transfer or surrender for payment the debt securities, at the
corporate trust office of the trustee in New York, New York. However, we may
pay interest by check mailed to you at your address as it appears in the
security register.
If a prospectus supplement specifies that a series of debt securities is
denominated in a currency or currency unit other than United States dollars,
that prospectus supplement will also specify the denomination in which we will
issue those debt securities and the coin or currency in which we will pay the
principal, premium, if any, and interest, if any, on those debt securities,
which may be United States dollars based upon the exchange rate for the other
currency or currency unit existing at the time a payment is due.
The indentures contain no covenants or other provisions to afford you
protection if there is a highly leveraged transaction or a change in control of
Phillips, except as may be described under "Certain Terms of the Senior Debt
Securities--Limitation on Mergers and Sales of Assets" on page 8 and "Certain
Terms of the Sudordinated Debt Securities--Limitation on Mergers and Sales of
Assets" on page 11.
Form, Exchange, Registration, Transfer and Payment
Unless otherwise specified in the applicable prospectus supplement, we will
issue the debt securities in fully registered form without coupons and in
denominations of $1,000 and integral multiples thereof. We will not impose a
service charge for any transfer or exchange of the debt securities, but we or
the trustee may require you to make a payment to cover any associated tax or
other government charge.
If we issue debt securities in bearer form, we will describe in the
applicable prospectus supplement the special restrictions and considerations,
including special offering restrictions and special United States federal
income tax considerations, applicable to those debt securities and to payment
on and transfer and exchange of those debt securities. Bearer debt securities
will be transferable by delivery.
Unless otherwise provided in the applicable prospectus supplement, we will
pay principal and premium, if any, or interest, if any, and you may surrender
for payment or transfer the debt securities, at the offices of the trustee. Or
we may pay interest by check mailed to you at your address as it appears in the
security register. We will make payment on debt securities in bearer form at
such non-U.S. paying agencies as we may choose.
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Book-Entry Debt Securities
We may issue the debt securities of a series in whole or in part in the form
of one or more global securities that will be deposited with, or on behalf of,
a global depositary, or its nominee, identified in the applicable prospectus
supplement. In this case, we will issue global securities in a denomination or
aggregate denomination equal to the portion of the aggregate principal amount
of outstanding debt securities of the series to be represented by such global
security or securities. Unless and until it is exchanged in whole or in part
for debt securities in definitive registered form, a global security may not be
registered for transfer or exchange except as a whole by the global depositary
for such global security to a nominee for such global depositary and except in
the circumstances described in the applicable prospectus supplement.
A prospectus supplement will provide the specific terms of the depositary
arrangement with respect to any portion of a series of debt securities to be
represented by a global security and a description of the global depositary.
Certain Terms of the Senior Debt Securities
Certain Covenants of Phillips
Limitation On Liens. We will not, and will not permit any Restricted
Subsidiary (as defined below) to, incur, issue, assume or guarantee any
indebtedness for borrowed money secured by a mortgage, pledge or other lien
("Mortgage") on any Restricted Property (as defined below), or on any shares of
stock or indebtedness of a Restricted Subsidiary, unless the senior debt
securities are secured equally and ratably with (or prior to) such secured
indebtedness. The previous sentence does not apply if the aggregate amount of
all indebtedness so secured (other than indebtedness secured by excepted
Mortgages referred to in the following sentence), together with all
Attributable Debt (as defined below) of ours and our Restricted Subsidiaries in
respect of sale and leaseback transactions involving Restricted Property,
except sale and leaseback transactions, the proceeds of which are applied to
the retirement of funded debt, would not exceed 10 percent of Consolidated
Adjusted Net Assets (as defined below) as shown on our latest audited
consolidated financial statements. This restriction will not apply to:
. Mortgages on property of, or on any shares of stock or indebtedness of,
any corporation existing at the time such corporation becomes a
Subsidiary (as defined below);
. Mortgages on property existing at the time of acquisition (including
acquisition through merger or consolidation) or to secure the payment of
all or any part of the purchase price or construction cost of it or to
secure any indebtedness incurred prior to, at the time of, or within six
months after that acquisition or completion of that property for the
purpose of financing all or any part of the purchase price or
construction cost of it;
. Mortgages on substantially unimproved property to secure the cost of
exploration, drilling or development of, or improvements to, that
property;
. Mortgages in favor of us or a Restricted Subsidiary; or
. any extension, renewal or replacement of any Mortgage referred to above.
The following types of transactions do not create indebtedness secured by
Mortgage:
. sale or transfer of crude oil, natural gas or natural gas liquids in
place for a period of time until, or in an amount such that, the
purchaser will realize a specified amount of money or of such oil, gas
or gas liquids, or any other interest in property commonly referred to
as a "production payment;" or
. the Mortgage of any of our property or property of any Subsidiary in
favor of governmental entities to secure partial progress, advance or
other payments to us or any Subsidiary pursuant to any contract or
statute, or the Mortgage of any property to secure indebtedness of the
pollution control or industrial revenue bond type.
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Limitation On Sales And Leasebacks. Neither we nor any Restricted Subsidiary
may enter into any sale and leaseback transaction involving any Restricted
Property which has been owned or operated by us or that Restricted Subsidiary
for more than six months unless:
. we or that Restricted Subsidiary could mortgage the property in an
amount equal to the Attributable Debt with respect to the sale and
leaseback transaction without equally and ratably securing the
securities of each series;
. since the date of the senior debt indenture and within a period
beginning 12 months before the consummation of the sale and leaseback
transaction and ending 12 months after the consummation of that sale and
leaseback transaction, we or any Restricted Subsidiary has expended or
will expend for any Restricted Property an amount equal to:
. the greater of (x) the net proceeds of that sale and leaseback
transaction and (y) the fair market value of the Restricted Property
leased at the time of entering into that transaction, as determined
by our Board of Directors (the greater of the sums specified in
clauses (x) and (y) are referred to as the "Net Proceeds of the
transaction") and we elect to designate that amount as satisfying
any obligation it would otherwise have under the last bullet point
below; or
. a part of the Net Proceeds of the transaction and we elect to
designate that amount as satisfying part of the obligation we would
otherwise have under the last bullet point below and apply an amount
equal to the remainder of such Net Proceeds as provided in the last
bullet point below; or
. we, within 12 months of the consummation of that sale and leaseback
transaction, apply an amount equal to the Net Proceeds of such
transaction (less any amount elected under the second bullet point
above) to the retirement of our Funded Debt ranking equally with the
securities of each series.
. This restriction will not apply to certain sale and leaseback
transactions
. between us and a Restricted Subsidiary or between Restricted
Subsidiaries, or
. involving the taking back of a lease for a period of less than three
years.
Certain Definitions.
. "Attributable Debt" means the total net amount of rent (discounted at
the rate per year indicated in the senior debt indenture) required to be
paid during the remaining term of any lease.
. "Consolidated Adjusted Net Assets" means the total amount of assets
after deducting
. all current liabilities (excluding any which are by their terms
extendible or renewable at the option of the obligor to a time more
than 12 months after the time as of which the amount is being
computed), and
. total prepaid expenses and deferred charges.
. "Restricted Property" means
. any interest in property located in the United States (including any
interest in property located off the coast of the United States
operated pursuant to leases from any governmental entity) which is
producing crude oil, natural gas or natural gas liquids in paying
quantities, or
. any refining or manufacturing plant located in the United States,
except
. related transportation or marketing facilities, or
. any refining or manufacturing plant or portion of it which, in the
opinion of our Board of Directors, is not a principal plant in
relation to our activities and those of our Restricted
Subsidiaries, taken as a whole.
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. "Restricted Subsidiary" means any Subsidiary which owns a Restricted
Property if substantially all of the tangible property in which that
Subsidiary has an interest is
. located in the United States, or
. is located off the coast of the United States and is operated
pursuant to leases from any governmental entity.
We currently have no Restricted Subsidiaries.
. "Subsidiary" means a corporation, a majority of the outstanding voting
stock of which is owned, directly or indirectly, by us or by one or more
other Subsidiaries, or by us and one or more other Subsidiaries.
Limitation on Mergers and Sales of Assets
We will not consolidate with, or merge into, any corporation or convey or
transfer its properties and assets substantially as an entirety to any person
or entity unless the successor entity is a corporation organized under the
laws of the United States or any state or the District of Columbia and
expressly assumes our obligations under the senior debt indenture.
If, upon any such consolidation, merger, conveyance or transfer with or
into any entity or of any Restricted Subsidiary with or to any other
Subsidiary, any Restricted Property of ours or of any Restricted Subsidiary or
any shares of stock or indebtedness of any Restricted Subsidiary would become
subject to any Mortgage (other than a Mortgage permitted under the limitation
on liens described above, without our having to secure the senior debt
securities equally and ratably), we will secure the senior debt securities
(together with, at our option, other securities ranking on an equal basis with
the senior debt securities) prior to all liens other than any already
existing.
Events of Default, Waiver, and Notice
As to each series of senior debt securities, the senior debt indenture
defines an Event of Default as being:
. default for 30 days in payment of any interest on the senior debt
securities of that series; default in payment of principal and premium,
if any, on the senior debt securities of that series when due either at
maturity, upon redemption, by declaration or otherwise;
. default by us in the performance of any other of the covenants or
agreements in the senior debt indenture which is not remedied for a
period of 90 days after notice; and
. certain events of bankruptcy, insolvency and reorganization.
The senior debt indenture provides that the trustee may withhold notice to
the securityholders of any default (except in payment of principal or of
interest or premium on the senior debt securities) if the trustee considers it
in the interest of securityholders to do so.
The senior debt indenture provides that,
. if there is an Event of Default due to the default in the payment of
principal, interest or premium, if any, on any series of senior debt
securities, either the trustee or the holders of 25 percent in principal
amount of the senior debt securities of all series affected and then
outstanding may declare the principal of all such senior debt securities
due and payable immediately, and
. if there is an Event of Default resulting from default in the
performance of any other of the covenants or agreements in the senior
debt indenture or certain events of bankruptcy, insolvency and
reorganization, either the trustee or the holders of 25 percent in
principal amount of all senior debt securities then outstanding (treated
as one class) may declare the principal of all senior debt securities
due and payable immediately, but upon certain conditions the holders of
a majority in principal amount of the senior debt securities of such
series (or of all series, as the case may be) then outstanding may annul
the declarations and may waive the past defaults (except defaults in
payment of principal of or interest or premium on the senior debt
securities).
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The holders of a majority in principal amount of the senior debt securities
of any and all series affected and then outstanding may direct the time, method
and place of conducting any proceeding for any remedy available to the trustee
under the senior debt indenture, provided that the senior debt securityholders
have offered to the trustee reasonable indemnity against expenses and
liabilities. The senior debt indenture requires us to file annually with the
trustee a certificate as to the absence of certain defaults under the senior
debt indenture.
Modifications of the Indenture
The senior debt indenture contains provisions permitting us and the trustee,
with the consent of the holders of at least 66 2/3 percent in principal amount
of the senior debt securities of all series affected by such modification at
the time outstanding, to modify the senior debt indenture or any supplemental
indenture or the rights of the holders of the senior debt securities; provided
that no such modification may:
. extend the fixed maturity of any senior debt security, or reduce its
principal amount (including in the case of a discounted security the
amount payable in the event of acceleration or the amount provable in
bankruptcy) or any redemption premium, or reduce the rate or extend the
time of payment of interest, or make the principal of, or interest or
premium on, the senior debt securities payable in any coin or currency
other than that provided in the senior debt securities, or impair or
affect the right of any senior debt securityholder to institute suit for
payment or the right of prepayment, if any, at the option of the holder,
without the consent of the holder of each senior debt security so
affected, or
. reduce the percentage of senior debt securityholders whose consent is
required for any such modification without the consent of such
securityholders.
Defeasance
The senior debt indenture provides that we, at our option:
. will be discharged from obligations in respect of the senior debt
securities of a series (except for certain obligations to register the
transfer or exchange of senior debt securities, replace stolen, lost or
mutilated senior debt securities, maintain paying agencies and hold
moneys for payment in trust); or
. need not comply with certain restrictive covenants of the senior debt
indenture (including those described here),
in each case if we deposit, in trust with the trustee or the defeasance agent,
money or U.S. government obligations that, through the payment of interest and
principal, will provide money sufficient to pay all the principal (including
any mandatory sinking fund payments) of, and interest and premium, if any, on,
the senior debt securities of such series on their due dates.
To exercise this option, we must deliver to the trustee and the defeasance
agent, if any, an opinion of counsel to the effect that
. the deposit and related defeasance would not cause the holders of the
senior debt securities of such series to recognize income, gain or loss
for federal income tax purposes and, in the case of a discharge, such
opinion must be accompanied by a private letter ruling to that effect
received from the IRS or a revenue ruling pertaining to a comparable
form of transaction to that effect published by the IRS, and
. if listed on any national securities exchange, such senior debt
securities would not be delisted from such exchange as a result of the
exercise of such option.
Governing Law
The senior debt indenture and the senior debt securities will be governed
by, and construed in accordance with, the laws of New York State.
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The Trustee
We may have normal banking relationships with U.S. Bank Trust National
Association in the ordinary course of business.
Certain Terms of the Subordinated Debt Securities
Subordination
The subordinated debt securities will be subordinated and junior in right of
payment to certain other indebtedness of ours to the extent set forth in the
applicable prospectus supplement.
Issuance of Subordinated Debt Securities to a Trust
If subordinated debt securities are issued to a trust or a trustee of that
trust in connection with the issuance of trust securities by the trust, those
subordinated debt securities subsequently may be distributed proportionately to
the holders of the trust securities in connection with the dissolution of the
trust if certain events described in the prospectus supplement relating to
those trust securities occur. Only one series of subordinated debt securities
will be issued to a trust or a trustee of that trust in connection with the
issuance of trust securities by the trust.
Certain Covenants of Phillips
If subordinated debt securities are issued to a trust or a trustee of that
trust in connection with the issuance of trust securities by that trust and
. there is an Event of Default (as defined on page 11) or
. we are in default with respect to our payments under the related
preferred securities guarantee or common securities guarantee,
then
. we will not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make a liquidation payment with
respect to, any of our capital stock, other than
. purchases or acquisitions of shares of our common stock in
connection with the satisfaction by us of our obligations under any
employee benefit plans,
. as a result of a reclassification of our capital stock or the
exchange or conversion of one class or series of our capital stock
for another class or series of our capital stock or
. the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged,
or make any guarantee payments with respect to the above, and
. we will not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities (including
guarantees) which rank on an equal basis with or junior to those
subordinated debt securities.
If subordinated debt securities are issued to a trust or a trustee of that
trust in connection with the issuance of trust securities by the trust and we
have given notice of our election to defer payments of interest on the
subordinated debt securities by extending the interest payment period as
provided in the indenture and the period, or any extension of it, is
continuing, then:
. we will not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make a liquidation payment with
respect to, any of our capital stock, and
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. we will not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities (including
guarantees) which rank equal or junior to the subordinated debt
securities.
If subordinated debt securities are issued to a trust or a trustee of that
trust in connection with the issuance of trust securities of that trust, for so
long as the trust securities remain outstanding, we covenant:
. to directly or indirectly maintain 100 percent ownership of the common
securities of the trust, but any permitted successor of ours under the
indenture may succeed to our ownership of the common securities;
. to use our reasonable efforts to cause the trust (a) to remain a
statutory business trust, except in connection with the distribution of
subordinated debt securities to the holders of trust securities in
liquidation of the trust, the redemption of all of the trust securities
of the trust, or certain mergers, consolidations or amalgamations, each
as permitted by the declaration of the trust, and (b) to otherwise
continue not to be classified as an association taxable as a corporation
or partnership for United States federal income tax purposes; and
. to use our reasonable efforts to cause each holder of trust securities
to be treated as owning an undivided beneficial interest in the
subordinated debt securities.
Limitation on Mergers and Sales of Assets
We will not consolidate with, or merge into, any corporation or convey or
transfer our properties and assets substantially as an entirety to any person
or entity unless the successor entity is a corporation organized under the laws
of the United States or any state or the District of Columbia and expressly
assumes our obligations under the subordinated debt indenture.
Events of Default, Waiver and Notice
The subordinated debt indenture provides that any of the following events
constitutes an "Event of Default" with respect to each series of subordinated
debt securities:
. default for 30 days in payment of any interest on the subordinated debt
securities of that series, including any additional interest, when due;
provided that a valid extension of the interest payment period by us
does not constitute a default in the payment of interest for this
purpose;
. default in payment of principal and premium, if any, on the subordinated
debt securities of that series when due either at maturity, upon
redemption, by declaration or otherwise; provided that a valid extension
of the maturity of the subordinated debt securities of that series does
not constitute a default for this purpose;
. default by us in the performance of any other of the covenants or
agreements in the subordinated debt indenture which continues for a
period of 90 days after notice;
. certain events of bankruptcy, insolvency or reorganization; or
. if subordinated debt securities are issued to a trust or a trustee of
the trust in connection with the issuance of trust securities by the
trust, the voluntary or involuntary dissolution, winding-up or
termination of the trust, except in connection with the distribution of
subordinated debt securities to the holders of trust securities in
liquidation of the trust, the redemption of all of the trust securities
of the trust, or certain mergers, consolidations or amalgamations, each
as permitted by the declaration of the trust.
The subordinated debt indenture provides that the trustee may withhold
notice to the holders of a series of subordinated debt securities (except in
payment of principal or of interest or premium on the subordinated debt
securities) if the trustee considers it in the interest of such holders to do
so.
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The subordinated debt indenture provides that if an Event of Default on any
series of subordinated debt securities occurs, either the trustee or the
holders of 25 percent in principal amount of the subordinated debt securities
of that series then outstanding may declare the principal of all subordinated
debt securities of that series due and payable immediately.
The holders of a majority in principal amount of the subordinated debt
securities of any and all series affected and then outstanding may direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee under the subordinated debt indenture, provided that the holders of
the subordinated debt securities have offered to the debt trustee reasonable
indemnity against expenses and liabilities. In accordance with the subordinated
debt indenture, we must file annually with the trustee a certificate as to the
absence of certain defaults under the subordinated debt indenture.
Modification of the Indenture
Under the subordinated debt indenture, we and the trustee may, with the
consent of the holders of at least a majority in principal amount of the
subordinated debt securities of all series affected by the modification then
outstanding, modify the subordinated debt indenture or any supplemental
indenture or the rights of the holders of the subordinated debt securities.
However, no such modification can:
. extend the fixed maturity of any subordinated debt security,
. reduce its principal amount (including in the case of a discounted
subordinated debt security the amount payable upon acceleration or the
amount provable in bankruptcy) or any redemption premium on it,
. reduce the rate or extend the time of payment of interest,
. make the principal of, or interest or premium on, the subordinated debt
securities payable in any coin or currency other than that provided in
the subordinated debt securities, or
. impair or affect the right of any holder of subordinated debt securities
to institute suit for payment or the right of prepayment, if any, at the
option of the holder,
each without the consent of the holder of each subordinated debt security so
affected, or
. reduce the above percentage of subordinated debt securities the consent
of the holders of which is required for any such modification without
the consent of the holders of each subordinated debt security affected.
Defeasance and Discharge
Under the subordinated debt indenture, we, at our option:
. will be discharged from obligations in respect of the subordinated debt
securities of a series (except for certain obligations to register the
transfer or exchange of subordinated debt securities, replace stolen,
lost or mutilated subordinated debt securities, maintain paying agencies
and hold moneys for payment in trust) or
. need not comply with certain restrictive covenants of the subordinated
debt indenture (including those described here),
in each case if we deposit, in trust with the trustee or the defeasance agent,
money or U.S. government obligations which through the payment of interest and
principal will provide money, sufficient to pay all the principal (including
any mandatory sinking fund payments) of, and interest and premium, if any, on,
the subordinated debt securities of that series on the due dates of the
subordinated debt securities.
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To exercise the above option, we must deliver to the trustee and the
defeasance agent, if any, an opinion of counsel that:
. the deposit and related defeasance would not cause the holders of the
subordinated debt securities of that series to recognize income, gain or
loss for federal income tax purposes and, in the case of a discharge
pursuant to the first bullet point above, the opinion will be
accompanied by a private letter ruling to that effect from the IRS or a
revenue ruling concerning a comparable form of transaction to that
effect published by the IRS, and
. if listed on any national securities exchange, the subordinated debt
securities would not be delisted from that exchange as a result of the
exercise of the option.
Governing Law
The subordinated debt indenture and the subordinated debt securities will be
governed by, and construed in accordance with, the laws of New York State.
The Trustee
We may have normal banking relationships with The Bank of New York in the
ordinary course of business.
DESCRIPTION OF SECURITIES WARRANTS
General
We may issue warrants to purchase securities or other securities or rights
of ours (including rights to receive payment in cash or securities based on the
value, rate or price of one or more specified commodities, currencies or
indices) or securities of other issuers or any combination of the foregoing.
Warrants may be issued independently or together with any securities and may be
attached to or separate from such securities. Each series of warrants will be
issued under a separate warrant agreement (each a "Warrant Agreement") to be
entered into between us and a warrant agent ("Warrant Agent"). The following
sets forth certain general terms and provisions of the warrants offered hereby.
Further terms of the warrants and the applicable warrant Agreement are set
forth in the applicable Prospectus Supplement.
The applicable prospectus supplement will describe the following terms of
any warrants in respect of which this prospectus is being delivered:
. the title of such warrants;
. the aggregate number of such warrants;
. the price or prices at which such warrants will be issued;
. the currency or currencies, including composite currencies, in which the
price of such warrants may be payable;
. the securities or other securities or rights of ours (including rights
to receive payment in cash or securities based on the value, rate or
price of one or more specified commodities, currencies or indices) or
securities of other issuers or any combination of the foregoing
purchasable upon exercise of such warrants;
. the price at which and the currency or currencies, including composite
currencies, in which the securities purchasable upon exercise of such
warrants may be purchased;
. the date on which the right to exercise such warrants shall commence and
the date on which such right shall expire;
. if applicable, the minimum or maximum amount of such warrants which may
be exercised at any one time;
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. if applicable, the designation and terms of the securities with which
such warrants are issued and the number of such Warrants issued with
each such Security;
. if applicable, the date on and after which such warrants and the related
securities will be separately transferable;
. information with respect to book-entry procedures, if any;
. if applicable, a discussion of certain United States Federal income tax
considerations; and
. any other terms of such warrants, including terms, procedures and
limitations relating to the exchange and exercise of such warrants.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
General
Each trust may issue only one series of trust preferred securities, the
terms of which will be described in the applicable prospectus supplement. The
declaration of each trust authorizes the regular trustees of the trust to issue
one series of trust preferred securities. The declaration will be qualified as
an indenture under the Trust Indenture Act. The trust preferred securities will
have the terms, including distributions, redemption, voting, liquidation rights
and other preferred, deferred or other special rights or restrictions as are
described in the declaration or made part of the declaration by the Trust
Indenture Act. These terms will mirror the terms of the subordinated debt
securities held by the trust and described in the applicable prospectus
supplement. You should read the prospectus supplement relating to the trust
preferred securities of the trust for specific terms, including:
. the distinctive designation of the trust preferred securities;
. the number of trust preferred securities issued by the trust;
. the annual distribution rate (or method of determining that rate) for
trust preferred securities issued by the trust and the date or dates
upon which distributions will be payable, except that distributions on
the trust preferred securities will be payable on a periodic basis to
holders of the trust preferred securities as of a record date in each
period during which the trust preferred securities are outstanding;
. whether distributions on trust preferred securities issued by the trust
will be cumulative, and, in the case of trust preferred securities that
have cumulative distribution rights, the date or dates or method of
determining the date or dates from which distributions on trust
preferred securities issued by that trust will be cumulative;
. the amount or amounts that will be paid out of the assets of the trust
to the holders of trust preferred securities of the trust upon voluntary
or involuntary dissolution, winding-up or termination of the trust;
. the obligation, if any, of the trust to purchase or redeem trust
preferred securities issued by the trust and the price or prices at
which, the period or periods within which, and the terms and conditions
upon which, trust preferred securities issued by the trust will be
purchased or redeemed, in whole or in part, pursuant to that obligation;
. the voting rights, if any, of trust preferred securities issued by the
trust in addition to those required by law, including the number of
votes per trust preferred security and any requirement for the approval
by the holders of trust preferred securities, or of trust preferred
securities issued by one or more trusts, or of both, as a condition to
specified action or amendments to the declaration of that trust;
. the terms and conditions, if any, upon which the subordinated debt
securities may be distributed to holders of trust preferred securities;
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. if applicable, any securities exchange upon which the trust preferred
securities will be listed; and
. any other relevant rights, preferences, privileges, limitations or
restrictions of trust preferred securities issued by the trust not
inconsistent with the declaration of the trust or with applicable law.
We will guarantee all trust preferred securities offered by this prospectus
to the extent set forth under "Description of the Trust Preferred Securities
Guarantees," beginning below on this page. You should review carefully any
prospectus supplement relating to the trust preferred securities for a
description of certain United States federal income tax considerations
applicable to that offering of the trust preferred securities.
In connection with the issuance of trust preferred securities, each trust
will issue one series of common securities. The declaration of each trust
authorizes the regular trustees of that trust to issue one series of common
securities that have the terms, including distributions, redemption, voting,
liquidation rights or other restrictions, that are described in the
declaration. The terms of the common securities issued by a trust will be
substantially identical to the terms of the trust preferred securities issued
by that trust and the common securities will rank equally, and payments will be
made on them proportionately, with the trust preferred securities except that,
upon an event of default under the declaration, the rights of the holders of
the common securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the trust preferred securities. Except in certain limited
circumstances, the common securities will also carry the right to vote to
appoint, remove or replace any of the trustees of a trust. Phillips will own,
directly or indirectly, all of the common securities of each trust.
Enforcement of Certain Rights by Holders of Trust Preferred Securities
If an event of default under the declaration of one of the trusts occurs,
then the holders of trust preferred securities of that trust would rely on the
enforcement by the institutional trustee of its rights as a holder of the
applicable series of subordinated debt securities against us. In addition, the
holders of a majority in liquidation amount of the trust preferred securities
of that trust may direct the time, method and place of conducting any
proceeding for any remedy available to the institutional trustee or direct the
exercise of any trust or power conferred on the institutional trustee under the
applicable declaration, including the right to direct the institutional trustee
to exercise the remedies available to it as a holder of the subordinated debt
securities. If the institutional trustee does not enforce its rights under the
applicable series of subordinated debt securities, a holder of trust preferred
securities may institute a legal proceeding directly against us to enforce the
institutional trustee's rights under the applicable series of subordinated debt
securities without first instituting any legal proceeding against the
institutional trustee or any other person or entity.
Notwithstanding the above, if an event of default under the applicable
declaration occurs and that event is attributable to our failure to pay
interest or principal on the applicable series of subordinated debt securities
on the applicable due date (or in the case of redemption, on the redemption
date), then a holder of trust preferred securities of that trust may directly
institute a proceeding for enforcement of payment on the subordinated debt
securities having a principal amount equal to the aggregate liquidation amount
of the trust preferred securities of that holder on or after the respective due
date specified in the applicable series of subordinated debt securities. In
connection with such a direct action, we will be subrogated to the rights of
the holder of trust preferred securities under the applicable declaration to
the extent of any payment we make to that holder in such a direct action.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the trust preferred
securities guarantees which we will execute and deliver for the benefit of the
holders of trust preferred securities. Each guarantee will be qualified as an
indenture under the Trust Indenture Act. The Bank of New York will act as
indenture trustee under each guarantee for purposes of the Trust Indenture Act.
The terms of each guarantee will be set forth in the guarantee and made part of
the guarantee by the Trust Indenture Act.
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Because the following is only a summary of the guarantee, it does not
contain all of the information that you may find useful. For more information,
you should read the form of guarantee, which is filed as an exhibit to the
Registration Statement of which this prospectus forms a part. Each guarantee
will be held by the guarantee trustee for the benefit of the holders of the
trust preferred securities of the applicable trust.
General
Pursuant to each guarantee, we will irrevocably and unconditionally agree to
pay in full, to the holders of the trust preferred securities issued by a
trust, the guarantee payments (described below) (except to the extent paid by
that trust), as and when due, regardless of any defense, right of set-off or
counterclaim which that trust may have or assert. The following payments with
respect to trust preferred securities issued by a trust to the extent not paid
by that trust are called guarantee payments, and will be subject to the
guarantee (without duplication):
. any accrued and unpaid distributions that must be paid on the trust
preferred securities, to the extent the trust has funds available;
. the redemption price, including all accrued and unpaid distributions, to
the extent the trust has funds available, with respect to any trust
preferred securities called for redemption by that trust; and
. upon a voluntary or involuntary dissolution, winding-up or termination
of the trust (other than in connection with the distribution of
subordinated debt securities to the holders of trust preferred
securities or the redemption of all of the trust preferred securities),
the lesser of:
. the aggregate of the liquidation amount and all accrued and unpaid
distributions on the trust preferred securities to the date of
payment, to the extent the trust has funds available and
. the amount of assets of the trust that remain available for
distribution to holders of the trust preferred securities in
liquidation of the trust.
The redemption price and liquidation amount will be fixed at the time the
trust preferred securities are issued. we may satisfy our obligation to make a
guarantee payment by directly paying the holders of trust preferred securities
or by causing the applicable trust to pay the holders.
Each guarantee will not apply to any payment of distributions except to the
extent the trust has funds available. If we do not make interest payments on
the subordinated debt securities purchased by a trust, the trust will not be
able to pay distributions on the trust preferred securities issued by it. See
"Description of the Debt Securities--Certain Terms of the Subordinated Debt
Securities--Certain Covenants of Phillips" beginning on page 10. The guarantee,
when taken together with our obligations under the subordinated debt
securities, the subordinated debt indenture and the declaration, including its
obligations to pay costs, expenses, debts and liabilities of the trust (other
than with respect to the trust's securities), will provide a full and
unconditional guarantee on a subordinated basis by us of payments due on the
trust preferred securities.
We have also agreed separately to irrevocably and unconditionally guarantee
the obligations of the trusts with respect to the common securities to the same
extent as the guarantees, except that upon an event of default under the
subordinated debt indenture, holders of trust preferred securities will have
priority over holders of common securities with respect to distributions and
payments on liquidation, redemption or otherwise.
Certain Covenants of Phillips
In each guarantee, we will covenant that, so long as any trust preferred
securities issued by the applicable trust remain outstanding, if there is an
event of default under that guarantee or the declaration of that trust, then:
. we will not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make liquidation payment with respect
to, any of our capital stock, other than
. purchases or acquisitions of shares of our common stock in
connection with the satisfaction by us of our obligations under any
employee benefit plans or the satisfaction by us of our obligations
pursuant to any contract or security requiring us to purchase shares
of our common stock,
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. as a result of a reclassification of our capital stock or the
exchange or conversion of one class or series of our capital stock
for another class or series of our capital stock, or
. the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged,
or make any guarantee payments with respect to the above, and
. we will not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities (including
guarantees) issued by us which rank equally with or junior to such
subordinated debt securities.
Modification of the Trust Preferred Securities Guarantees; Assignment
Except with respect to any changes that do not adversely affect the rights
of holders of trust preferred securities (in which case no vote will be
required), each guarantee may be amended only with the prior approval of the
holders of at least a majority in liquidation amount of the outstanding trust
preferred securities issued by the applicable trust. The manner of obtaining
the approval of holders of trust preferred securities will be set forth in an
accompanying prospectus supplement. All guarantees and agreements contained in
a guarantee will bind our successors, assigns, receivers, trustees and
representatives and will inure to the benefit of the holders of the trust
preferred securities of the applicable Phillips trust then outstanding.
Termination
Each guarantee will terminate as to the trust preferred securities issued by
the applicable trust:
. upon full payment of the redemption price of all trust preferred
securities of the trust,
. upon distribution of the subordinated debt securities held by the trust
to the holders of the trust preferred securities, or
. upon full payment of the amounts payable in accordance with the
declaration of the trust upon liquidation of the trust.
Each guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of trust preferred securities issued by
the applicable trust must restore payment of any sums paid under the trust
preferred securities or the guarantee.
Events of Default
An event of default under a guarantee will occur if we fail to perform any
of its payment or other obligations under it.
The holders of a majority in liquidation amount of the trust preferred
securities relating to the guarantee may direct the time, method and place of
conducting any proceeding for any remedy available to the guarantee trustee in
respect of the guarantee or to direct the exercise of any trust or power
conferred on that trustee under those trust preferred securities. If that
trustee fails to enforce the guarantee, any holder of trust preferred
securities relating to that guarantee may institute a legal proceeding directly
against us to enforce the guarantee trustee's rights under the guarantee,
without first instituting a legal proceeding against the relevant trust, that
trustee or any other person or entity.
Notwithstanding the above, if we fail to make a guarantee payment, a holder
of trust preferred securities may directly institute a proceeding against us
for enforcement of the guarantee for that payment. We waive any right or remedy
to require that any action be brought first against the trust or any other
person or entity before proceeding directly against us.
The guarantee trustee, before the occurrence of a default with respect to a
guarantee, performs only the duties specifically set forth in the guarantee
and, after default, will exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject to
the above, the guarantee trustee is under no obligation to exercise any of the
powers vested in it by a guarantee at the request of any holder of trust
preferred securities, unless offered reasonable indemnity against the costs,
expenses and liabilities which might be incurred.
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Status of the Trust Preferred Securities Guarantees
The guarantees will constitute unsecured obligations of ours and will rank:
. subordinate and junior in right of payment to all our other liabilities,
. equally with the most senior preferred or preference stock now or later
issued by us and with any guarantee now or later entered into by us in
respect of any preferred or preference stock of any affiliate of ours,
and
. senior to our common stock.
The terms of the trust preferred securities provide that each holder of
trust preferred securities issued by an applicable trust agrees to the
subordination provisions and other related terms of the guarantee.
The guarantees will constitute a guarantee of payment and not of collection.
That is, the guaranteed party may institute a legal proceeding directly against
the guarantor to enforce its rights under the guarantee without instituting a
legal proceeding against any other person or entity.
Information Concerning the Trust Preferred Securities Guarantee Trustee
We and certain of our affiliates maintain banking relationships with the
guarantee trustee.
Governing Law
The guarantees will be governed by and construed in accordance with the laws
of New York State.
EFFECT OF OBLIGATIONS UNDER THE
SUBORDINATED DEBT SECURITIES AND THE GUARANTEE
As set forth in the declaration of each trust, the sole purpose of each
trust is to issue securities evidencing undivided beneficial interests in the
assets of that trust, and to invest the proceeds from that issuance and sale in
the subordinated debt securities.
As long as payments of interest and other payments are made when due on the
subordinated debt securities, those payments will be enough to cover
distributions and payments due on a trust's securities because of the following
factors:
. the aggregate principal amount of subordinated debt securities will be
equal to the sum of the aggregate stated liquidation amount of the
trust's securities;
. the interest rate and the interest and other payment dates on the
subordinated debt securities will match the distribution rate and
distribution and other payment dates for the trust preferred securities;
. we will pay, and the applicable trust will not be obligated to pay,
directly or indirectly, all costs, expenses, debt and obligations of the
applicable trust (other than with respect to the trust securities); and
. the declaration provides that the trustees will not take or cause or
permit the applicable trust to, among other things, engage in any
activity that is not consistent with the purposes of the applicable
trust.
We guarantee all payments of distributions (to the extent funds are
available) and other payments due on the trust preferred securities (to the
extent funds are available) as set forth under "Description of the Trust
Preferred Securities Guarantees" beginning on page 15. If we do not make
interest payments on the subordinated debt securities purchased by the
applicable trust, the trust will not have enough funds to pay distributions on
the trust preferred securities.
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The guarantee does not apply to any payment of distributions unless and
until the applicable trust has enough funds to pay any distributions. The
guarantee covers the payment of distributions and other payments on the trust
preferred securities only if and to the extent that we have made a payment of
interest or principal on the subordinated debt securities held by the
applicable trust as its sole asset.
The guarantee, when taken together with our obligations under the
subordinated debt securities and the subordinated debt indenture and our
obligations under the declaration, including our obligations to pay costs,
expenses, debts and liabilities of the applicable trust (other than with
respect to the trust securities), provides a full and unconditional guarantee
of amounts on the trust preferred securities.
If we fail to make interest or other payments on the subordinated debt
securities when due (taking account of any extension period), the declaration
provides a mechanism whereby the holders of the trust preferred securities,
using the procedures described in "Certain Terms of the Trust Preferred
Securities--Book-Entry Only Issuance--The Depository Trust Company" and "--
Voting Rights" in any accompanying prospectus supplement, may direct the
institutional trustee to enforce its rights under the subordinated debt
securities. If the institutional trustee fails to enforce its rights under the
subordinated debt securities, a holder of trust preferred securities may
institute a legal proceeding against us to enforce the institutional trustee's
rights under the subordinated debt securities without first instituting any
legal proceeding against the institutional trustee or any other person or
entity.
Notwithstanding the above, if an event of default under the declaration has
occurred and is attributable to our failure to pay interest or principal on the
subordinated debt securities on the applicable due date (or in the case of
redemption on the redemption date), then a holder of trust preferred securities
may institute a direct action for payment on or after the respective due date
specified in the subordinated debt securities. In connection with such a direct
action, we will be subrogated to the rights of that holder of trust preferred
securities under the declaration to the extent of any payment made by us to
that holder in the direct action.
We acknowledge, under the guarantee, that the guarantee trustee will enforce
the guarantee on behalf of the holders of the trust preferred securities. If we
fail to make payments under the guarantee, the guarantee provides a mechanism
whereby the holders of the trust preferred securities may direct the trustee to
enforce its rights. Any holder of trust preferred securities may institute a
legal proceeding directly against us to enforce that trustee's rights under the
guarantee without first instituting a legal proceeding against the applicable
trust, that trustee, or any other person or entity.
We and each of the trusts believe that the above mechanisms and obligations,
taken together, provide a full and unconditional guarantee by Phillips of
payments due on the trust preferred securities. See "Description of the Trust
Preferred Securities--General" beginning on page 14.
DESCRIPTION OF PREFERRED STOCK
The following description sets forth certain general terms and provisions of
the preferred stock to which any prospectus supplement may relate. The
prospectus supplement relating to any series of the preferred stock being
offered will describe certain terms of that series of preferred stock. If so
indicated in the prospectus supplement, the terms of that particular series of
preferred stock may differ from the terms set forth below.
The descriptions of the preferred stock set forth below and in any
prospectus supplement are summaries only and do not contain all of the
information that you may find useful. For more information, you should read the
certificate of designations relating to the particular series of the preferred
stock, which will be filed with the SEC promptly after the offering of that
series of preferred stock.
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General
Under our restated certificate of incorporation, our Board of Directors is
authorized, without further stockholder action, to provide for the issuance of
up to 300,000,000 shares of preferred stock, with or without par value, in one
or more series, with the voting powers and designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions, set forth in resolutions providing for the
issuance adopted by the board or a duly authorized committee of the Board. We
may amend our restated certificate of incorporation to increase the number of
authorized shares of preferred stock in the manner provided in its certificate
of incorporation and the Delaware General Corporation Law.
The preferred stock will have the dividend, liquidation, redemption, voting
and conversion rights set forth in the prospectus supplement relating to a
particular series of the preferred stock. You should review the applicable
prospectus supplement for specific terms, including:
. the title and liquidation preference per share of the preferred stock of
that series and the number of shares offered;
. the price at which the preferred stock of that series will be issued;
. the dividend rate (or method of calculation), the dates on which
dividends will be payable, whether such dividends will be cumulative or
noncumulative and, if cumulative, the dates from which dividends will
begin to accumulate;
. any redemption or sinking fund provisions of the preferred stock of that
series;
. any conversion provisions of the preferred stock of that series;
. whether we have elected to offer depositary shares with respect to the
preferred stock of that series as described below under "Description of
Depositary Shares";
. the voting rights, if any, of the preferred stock of that series; and
. any additional dividend, liquidation, redemption, sinking fund and other
rights, preferences, privileges, limitations and restrictions of the
preferred stock of that series.
The preferred stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the prospectus supplement relating to a
particular series of the preferred stock, each series of the preferred stock
will rank equally as to dividends and distributions in the event of a
liquidation with any outstanding preferred stock of ours and each other series
of the preferred stock.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any prospectus supplement of certain
provisions of any deposit agreement and any related depositary shares and
depositary receipts summarizes the material terms of that deposit agreement and
of the depositary shares and depositary receipts. This summary does not contain
all of the information that you may find useful. For more information, please
review the form of deposit agreement and form of depositary receipts relating
to each series of the preferred stock, which will be filed with the SEC
promptly after the offering of that series of preferred stock.
General
We may elect to have shares of preferred stock represented by depositary
shares. The shares of any series of the preferred stock underlying the
depositary shares will be deposited under a separate deposit agreement between
us and a bank or trust company we select. The prospectus supplement relating to
a series of depositary shares will set forth the name and address of this
preferred stock depositary. Subject to the terms of the deposit agreement, each
owner of a depositary share will be entitled, proportionately, to all the
rights, preferences and privileges of the preferred stock represented by such
depositary share (including dividend, voting, redemption, conversion, exchange
and liquidation rights).
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The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement, each of which will represent the applicable
interest in a number of shares of a particular series of the preferred stock
described in the applicable prospectus supplement.
A holder of depositary shares will be entitled to receive the shares of
preferred stock (but only in whole shares of preferred stock) underlying those
depositary shares. If the depositary receipts delivered by the holder evidence
a number of depositary shares in excess of the whole number of shares of
preferred stock to be withdrawn, the depositary will deliver to that holder at
the same time a new depositary receipt for the excess number of depositary
shares.
Dividends and Other Distributions
The preferred stock depositary will distribute all cash dividends or other
cash distributions in respect of the preferred stock to the record holders of
depositary receipts in proportion, insofar as possible, to the number of
depositary shares owned by those holders.
If there is a distribution other than in cash in respect of the preferred
stock, the preferred stock depositary will distribute property received by it
to the record holders of depositary receipts in proportion, insofar as
possible, to the number of depositary shares owned by those holders, unless the
preferred stock depositary determines that it is not feasible to make such a
distribution. In that case, the preferred stock depositary may, with our
approval, adopt any method that it deems equitable and practicable to effect
the distribution, including a public or private sale of the property and
distribution of the net proceeds from the sale to the holders.
The amount distributed in any of the above cases will be reduced by any
amount we or the preferred stock depositary are required to withhold on account
of taxes.
Conversion and Exchange
If any preferred stock underlying the depositary shares is subject to
provisions relating to its conversion or exchange as set forth in an applicable
prospectus supplement, each record holder of depositary shares will have the
right or obligation to convert or exchange those depositary shares pursuant to
those provisions.
Redemption of Depositary Shares
Whenever we redeem a share of preferred stock held by the preferred stock
depositary, the preferred stock depositary will redeem as of the same
redemption date a proportionate number of depositary shares representing the
shares of preferred stock that were redeemed. The redemption price per
depositary share will be equal to the aggregate redemption price payable with
respect to the number of shares of preferred stock underlying the depositary
shares. If fewer than all the depositary shares are to be redeemed, the
depositary shares to be redeemed will be selected by lot or proportionately as
we may determine.
After the date fixed for redemption, the depositary shares called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the depositary shares will cease, except the right to receive the
redemption price.
Voting
Upon receipt of notice of any meeting at which the holders of any shares of
preferred stock underlying the depositary shares are entitled to vote, the
preferred stock depositary will mail the information contained in the notice to
the record holders of the depositary receipts. Each record holder of the
depositary receipts on the record date (which will be the same date as the
record date for the preferred stock) may then instruct the preferred stock
depositary as to the exercise of the voting rights pertaining to the number of
shares of preferred stock underlying that holder's depositary shares. The
preferred stock depositary will try to vote the number of shares of preferred
stock underlying the depositary shares in accordance with the instructions, and
we will agree to take all reasonable action which the preferred stock
depositary deems necessary to enable the preferred stock depositary to do so.
The preferred stock depositary will abstain from voting the preferred stock to
the extent that it does not receive specific written instructions from holders
of depositary receipts representing the preferred stock.
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Record Date
Whenever
. any cash dividend or other cash distribution becomes payable, any
distribution other than cash is made, or any rights, preferences or
privileges are offered with respect to the preferred stock, or
. the preferred stock depositary receives notice of any meeting at which
holders of preferred stock are entitled to vote or of which holders of
preferred stock are entitled to notice, or of the mandatory conversion
of or any election by us to call for the redemption of any preferred
stock,
the preferred stock depositary will in each instance fix a record date (which
will be the same as the record date for the preferred stock) for the
determination of the holders of depositary receipts:
. who will be entitled to receive dividend, distribution, rights,
preferences or privileges or the net proceeds of any sale, or
. who will be entitled to give instructions for the exercise of voting
rights at any such meeting or to receive notice of the meeting or the
redemption or conversion, subject to the provisions of the deposit
agreement.
Amendment and Termination of the Deposit Agreement
We and the preferred stock depositary may at any time agree to amend the
form of depositary receipt and any provision of the deposit agreement.
However, any amendment that materially and adversely alters the rights of
holders of depositary shares will not be effective unless the amendment has
been approved by the holders of at least a majority of the depositary shares
then outstanding. The deposit agreement may be terminated by us or by the
preferred stock depositary only if all outstanding shares have been redeemed or
if a final distribution in respect of the underlying preferred stock has been
made to the holders of the depositary shares in connection with the
liquidation, dissolution or winding up of Phillips.
Charges of Preferred Stock Depositary
We will pay all charges of the preferred stock depositary including charges
in connection with the initial deposit of the preferred stock, the initial
issuance of the depositary receipts, the distribution of information to the
holders of depositary receipts with respect to matters on which preferred stock
is entitled to vote, withdrawals of the preferred stock by the holders of
depositary receipts or redemption or conversion of the preferred stock, except
for taxes (including transfer taxes, if any) and other governmental charges and
any other charges expressly provided in the deposit agreement to be at the
expense of holders of depositary receipts or persons depositing preferred
stock.
Miscellaneous
Neither we nor the preferred stock depositary will be liable if either of us
is prevented or delayed by law or any circumstance beyond our control in
performing any obligations under the deposit agreement. The obligations of the
preferred stock depositary under the deposit agreement are limited to
performing its duties under the agreement without negligence or bad faith. Our
obligations under the deposit agreement are limited to performing our duties in
good faith. Neither we nor the preferred stock depositary is obligated to
prosecute or defend any legal proceeding in respect of any depositary shares or
preferred stock unless satisfactory indemnity is furnished. We and the
preferred stock depositary may rely on advice of or information from counsel,
accountants or other persons that they believe to be competent and on documents
that they believe to be genuine.
The preferred stock depositary may resign at any time or be removed by us,
effective upon the acceptance by its successor of its appointment. If we have
not appointed a successor preferred stock depositary and the successor
depositary has not accepted its appointment within 60 days after the preferred
stock depositary delivered a resignation notice to us, the preferred stock
depositary may terminate the deposit agreement. See "Amendment and Termination
of the Deposit Agreement" above.
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DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
We may issue stock purchase contracts representing contracts obligating
holders to purchase from us and us to sell to the holders a specified number of
shares of common stock or preferred stock at a future date or dates. The price
per share of common stock or preferred stock may be fixed at the time the stock
purchase contracts are issued or may be determined by reference to a specific
formula set forth in the stock purchase contracts.
The stock purchase contracts may be issued separately or as a part of units,
often known as stock purchase units, consisting of a stock purchase contract
and either
. senior debt securities, subordinated debt securities
. debt obligations of third parties including U.S. Treasury securities, or
. trust preferred securities of a trust,
securing the holder's obligations to purchase the common stock or preferred
stock under the stock purchase contracts. The stock purchase contracts may
require us to make periodic payments to the holders of the stock purchase units
or vice versa, and such payments may be unsecured or prefunded on some basis.
The stock purchase contracts may require holders to secure their obligations in
a specified manner and in certain circumstances we may deliver newly issued
prepaid stock purchase contracts, often known as prepaid securities, upon
release to a holder of any collateral securing each holder's obligations under
the original stock purchase contract.
The applicable prospectus supplement will describe the terms of any stock
purchase contracts or stock purchase units and, if applicable, prepaid
securities. The description in the prospectus supplement will not contain all
of the information that you may find useful. For more information, you should
review the stock purchase contracts, the collateral arrangements and depositary
arrangements, if applicable, relating to such stock purchase contracts or stock
purchase units and, if applicable, the prepaid securities and the document
pursuant to which the prepaid securities will be issued, which will be filed
with the SEC promptly after the offering of such stock purchase contracts or
stock purchase units and, if applicable, prepaid securities.
DESCRIPTION OF COMMON STOCK
The following summary does not contain all of the information that you may
find useful. For more information, you should review the applicable provisions
of the Delaware General Corporation Law and our restated certificate of
incorporation.
General. We are authorized to issue up to 500,000,000 shares of common
stock. At August 31, 1999, we had 306,380,511 shares of common stock issued
(including 24,417,848 shares held in our treasury) of which 28,647,987 shares
of common stock were held by the Compensation and Benefits Plan Trust for
issuance under various employee or non-employee director incentive,
compensation and option plans.
Dividends. Holders of common stock will receive dividends when, as and if
declared by the Board of Directors out of legally available funds, subject to
the rights of holders of preferred stock.
Voting Rights. Subject to the rights, if any, of the holders of any series
of preferred stock, all voting rights are vested in the holders of shares of
common stock, each share being entitled to one vote on all matters presented
for a vote, including the election of directors. Holders of shares of common
stock have non-cumulative voting rights, which means that the holders of more
than 50 percent of the shares voting for the election of directors can elect
100 percent of the directors, and, in that event, the holders of the remaining
shares voting for the election of directors will not be able to elect any
directors.
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Rights Upon Liquidation. In the event of our voluntary or involuntary
liquidation, dissolution or winding up, after there have been paid to or set
aside for the holders of all series of preferred stock the full preferential
amounts to which such holders are entitled, the holders of common stock will be
entitled to share equally and ratably in any assets remaining after the payment
of all of our debts and liabilities.
Preferred Share Purchase Rights. We have outstanding one preferred share
purchase right for each outstanding share of common stock. Each such right
entitles the registered holder to purchase from us one one-hundredth of a share
of Series B Junior Participating Preferred Stock, par value $1.00 per share, at
a price of $75 per one one-hundredth of a share of Series B Junior
Participating Stock, subject to adjustment, or to purchase shares of common
stock or the stock of an acquiring company at a discount in the event that any
person or group of affiliated persons acquires beneficial ownership of 20
percent or more of our outstanding common stock.
Shares of Series B Junior Participating Stock purchasable upon exercise of
the preferred share purchase rights will not be redeemable. Each share of
Series B Junior Participating Stock will be entitled, when, as and if declared,
to a minimum preferential quarterly dividend payment of $1 per share but will
be entitled to an aggregate dividend of 100 times the dividend declared per
share of common stock. In the event of liquidation, the holders of the Series B
Junior Participating Stock will be entitled to a minimum preferential
liquidation payment of $100 per share (plus any accrued but unpaid dividends)
but will be entitled to an aggregate payment of 100 times the payment made per
share of common stock. Each share of Series B Junior Participating Stock will
have 100 votes, voting together with the common stock. Finally, in the event of
any merger, consolidation or other transaction in which shares of common stock
are converted or exchanged, each share of Series B Junior Participating Stock
will be entitled to receive 100 times the amount received per share of common
stock. These rights are protected by customary antidilution provisions.
Any time before the acquisition by a person or entity of the beneficial
ownership of 20 percent or more of our outstanding common stock, our board of
directors may redeem the preferred share purchase rights in whole, but not in
part, at a price of $.01 per right. The redemption of the rights may be made
effective at such time, on such basis and with such conditions as the board of
directors in its sole discretion may establish. Immediately upon any redemption
of the rights, the right to exercise the rights will terminate and the only
right of the holders of rights will be to receive the redemption price.
For so long as the rights are redeemable, we may, except with respect to the
redemption price, amend the rights in any manner. After the rights are no
longer redeemable, we may, except with respect to the redemption price, amend
the rights in any manner that does not adversely affect the interests of
holders of the rights.
Until a right is exercised, the holder of the right, as such, will have no
rights as a stockholder, including the right to vote or to receive dividends.
Miscellaneous. The issued and outstanding shares of common stock are fully
paid and non-assessable. Holders of shares of common stock have no preemptive
rights. Holders of shares of common stock may not convert their shares into any
other class of capital stock. ChaseMellon Shareholder Services LLC is the
transfer agent, registrar and dividend disbursement agent for the common stock.
PLAN OF DISTRIBUTION
We and/or one of its trusts may sell the securities offered in this
prospectus in any of, or any combination of, the following ways: (i) directly
to purchasers, (ii) through agents, (iii) through underwriters, and
(iv) through dealers.
We, any trust and/or any agent of either of them may directly solicit offers
to purchase these securities. The applicable prospectus supplement will name
any agent, who may be deemed to be an underwriter as that
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term is defined in the Securities Act of 1933, involved in the offer or sale of
the securities in respect of which this prospectus is delivered, and will set
forth any commissions payable by us to that agent. Unless otherwise indicated
in the prospectus supplement, any such agency will be acting in a best efforts
basis for the period of its appointment (ordinarily five business days or
less). Agents, dealers and underwriters may be customers of, engage in
transactions with, or perform services for us in the ordinary course of
business.
If we utilize an underwriter or underwriters in the sale, we will execute an
underwriting agreement with such underwriters at the time of sale to them and
will set forth in the applicable prospectus supplement the names of the
underwriters and the terms of the transaction. The underwriters will use the
prospectus supplement to make releases of the securities in respect of which
this prospectus is delivered to the public.
If we and/or any trust utilizes a dealer in the sale of the securities in
respect of which this prospectus is delivered, we and/or the trust, as the case
may be, will sell the securities to the dealer, as principal. The dealer may
then resell the securities to the public at varying prices to be determined by
the dealer at the time of resale. The prospectus supplement will set forth the
name of the dealer and the terms of the transaction.
Agents, underwriters, and dealers may be entitled under the relevant
agreements to indemnification by us and/or any trust, as the case may be,
against certain liabilities, including liabilities under the Securities Act of
1933.
The applicable prospectus supplement will set forth the place and time of
delivery for the securities in respect of which this prospectus is delivered.
LEGAL MATTERS
The validity of the securities offered by this prospectus (other than the
trust preferred securities) and certain matters relating thereto will be passed
upon for us by Robert C. Koch, Esq., Senior Counsel, and for the underwriters
and certain purchasers by Davis Polk & Wardwell. Certain matters of Delaware
law relating to the validity of the trust preferred securities will be passed
upon on behalf of the trusts by Morris, Nichols, Arsht & Tunnell, special
Delaware counsel to the trusts. Certain United States federal income taxation
matters, as required, will be passed upon for us and the trusts by Simpson
Thacher & Bartlett, special tax counsel to us and the trusts.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K
for the year ended December 31, 1998, as amended, as set forth in their report,
which is incorporated by reference in this prospectus and elsewhere in the
registration statement. Our financial statements and schedule are incorporated
by reference in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
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