<PAGE>
Filed pursuant to Rule 424(b)(3)
SEC File No. 333-34336
PROSPECTUS SUPPLEMENT
(To prospectus dated April 27, 2000)
$2,500,000,000
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ [PHILLIPS PETROLEUM LOGO] +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Phillips Petroleum Company
$1,150,000,000 8.5% Notes due 2005
$1,350,000,000 8.75% Notes due 2010
---------------
We are offering and selling an aggregate of $1,150,000,000 of our 8.5%
notes due 2005 and an aggregate of $1,350,000,000 of our 8.75% notes due 2010.
Interest on the notes is payable on May 25 and November 25 of each year,
beginning November 25, 2000. The 2005 notes will mature on May 25, 2005 and the
2010 notes will mature on May 25, 2010. We may redeem some or all of the notes
at any time. We describe the redemption price under the heading "Description of
the Offered Securities -- Optional Redemption" on page S-9 of this prospectus
supplement. We will also pay accrued interest to the date of any redemption.
We have applied to have the notes listed on the Luxembourg Stock
Exchange.
The notes are unsecured and rank equally with all of our other unsecured
senior indebtedness. The notes will not be entitled to the benefit of any
sinking fund.
---------------
<TABLE>
<CAPTION>
Public Offering Underwriting Proceeds, before
Price(1) Discount Expenses to us
--------------- ------------ ----------------
<S> <C> <C> <C>
Per Note due 2005............ 99.72% .35% 99.37%
Total........................ $1,146,780,000 $4,025,000 $1,142,755,000
Per Note due 2010............ 99.541% .45% 99.091%
Total........................ $1,343,803,500 $6,075,000 $1,337,728,500
</TABLE>
(1)Plus accrued interest from May 25, 2000, if settlement occurs after
that date
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the attached prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The notes will be ready for delivery through The Depository Trust
Company, Euroclear and Clearstream Banking on or about May 25, 2000.
---------------
Joint Book-Running Managers
Merrill Lynch & Co. J.P. Morgan & Co.
---------------
Banc of America Securities LLC Chase Securities Inc.
---------------
The date of this prospectus supplement is May 18, 2000.
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Phillips................................................................... S-3
Strategic Overview......................................................... S-3
Recent Developments........................................................ S-4
Summary Historical and Pro Forma Financial Data............................ S-5
Board of Directors......................................................... S-7
Capitalization............................................................. S-8
Use of Proceeds............................................................ S-8
Description of the Offered Securities...................................... S-9
United States Tax Considerations........................................... S-16
Underwriting............................................................... S-20
Offering Restrictions...................................................... S-21
Legal Opinions............................................................. S-22
Experts.................................................................... S-22
Forward Looking Statements................................................. S-22
Where You Can Find More Information........................................ S-23
General Information........................................................ S-23
</TABLE>
Prospectus
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
About Us................................................................. 2
About the Trusts......................................................... 3
Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges
and Preferred Stock Dividends........................................... 3
Use of Proceeds.......................................................... 4
Description of Debt Securities........................................... 4
Description of Securities Warrants....................................... 13
Description of the Trust Preferred Securities............................ 14
Description of the Trust Preferred Securities Guarantees................. 15
Effect of Obligations Under the Subordinated Debt Securities and the
Guarantee............................................................... 18
Description of Preferred Stock........................................... 19
Description of Depositary Shares......................................... 20
Description of Stock Purchase Contracts and Stock Purchase Units......... 23
Description of Common Stock.............................................. 23
Plan of Distribution..................................................... 24
Legal Matters............................................................ 25
Experts.................................................................. 25
</TABLE>
---------------
The Luxembourg Stock Exchange takes no responsibility for the contents of
this document, makes no representation as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss howsoever arising
from or in reliance upon the whole or any part of the contents of this
prospectus supplement and related prospectus.
In this prospectus supplement "we," "our," "us," and "Phillips" and the
"Company" refer to Phillips Petroleum Company and its consolidated
subsidiaries.
<PAGE>
PHILLIPS
We were incorporated in Delaware on June 13, 1917, and are headquartered
in Bartlesville, Oklahoma, where our Company was founded. We conduct business
in four business segments:
. Exploration and Production ("E&P") explores for and produces crude
oil, natural gas and natural gas liquids on a worldwide basis;
. Gas Gathering, Processing and Marketing ("GPM"), in which we
participate through our ownership of an equity interest in Duke
Energy Field Services, a newly-created entity combining our historic
gas gathering, processing and marketing business with the gas
gathering and processing assets of Duke Energy Corporation;
. Refining, Marketing and Transportation ("RM&T") fractionates natural
gas liquids and refines, markets and transports crude oil and
petroleum products, primarily in the United States; and
. Chemicals manufactures and markets petrochemicals and plastics on a
worldwide basis.
Support staffs provide technical, professional and other services to the
business segments. At March 31, 2000, we employed approximately 14,600 people.
We are the parent company of our enterprise and operate through divisions and
subsidiaries.
STRATEGIC OVERVIEW
Our goal is to enhance shareholder value by positioning our business
lines for maximum growth. To achieve this goal, we are executing a long-term
plan that will reposition our four business lines so that they can grow and
compete against the very largest in the industry.
Between December 1999 and April 2000 we took three major steps that will
reposition our business for the future:
. In the E&P area, we completed the purchase of all of the Alaskan oil
and gas properties and related marine assets of Atlantic Richfield
Company ("ARCO"), except for the related transportation assets and
three tankers under construction, purchase of which will be completed
after preferential rights expire and regulatory approvals are
obtained, for an initial purchase price of $6.5 billion, including
assumption of debt. Through this major transforming transaction, the
assets and net income of our E&P segment, historically our largest,
most profitable and highest returning business, are almost doubled on
a pro forma basis.
. We have combined our GPM business with the comparable assets of Duke
Energy Corporation into a new company called Duke Energy Field
Services ("DEFS"). DEFS is the nation's largest producer of natural
gas liquids, one of the largest natural gas gatherers and marketers
and one of the largest natural gas liquids marketers.
. We have announced the signature of a letter of intent with Chevron
Corporation to form a 50/50 joint venture combining our worldwide
Chemicals business with theirs. The joint venture company is expected
to be one of the top five worldwide olefins and polyolefins
producers.
Upon completion of these transactions, we expect to be a significantly
stronger company going forward, but we remain open to further strategic
transactions within our segments to create world-scale operations and enhance
competitiveness and growth.
S-3
<PAGE>
RECENT DEVELOPMENTS
ARCO Alaska Acquisition
Following the determination by the Federal Trade Commission to object to
certain aspects of the proposed acquisition by BP Amoco Plc ("BP") of Atlantic
Richfield Company ("ARCO"), we were invited to make a proposal to acquire
ARCO's Alaskan oil and gas properties. We were successful in reaching an
agreement with BP and ARCO for the acquisition of all of ARCO's historic
Alaskan businesses, including its interest in the Prudhoe Bay field and related
fields, a 55% interest in the greater Kuparuk area, a 78% interest in the
Alpine field and 1.1 million net exploration acres. As part of this
transaction, we also agreed to acquire ARCO's Alaska oil and gas transportation
assets, including a 21.3% interest in the TransAlaska Pipeline System, and
three tankers under construction.
On April 26, 2000, we completed the purchase of all of ARCO's Alaskan oil
and gas properties and related currently operating marine assets. The purchase
is effective as of January 1, 2000, with appropriate adjustments to give the
parties the benefit of the transaction as if it had been consummated at such
earlier date. We expect to complete the balance of the acquisition late in the
second quarter or early in the third quarter of 2000, following the expiration
of preemptive rights and the grant of consents to certain contract assignments
and regulatory approvals. This acquisition is a major transforming transaction
for us providing "world-class" legacy assets and creating a new core area with
significant exploration and exploitation potential. We paid $5.5 billion for
the oil and gas properties and currently operating marine assets, will pay
approximately $700 million for the transportation assets and tankers under
construction, and at that time assume approximately $300 million of long-term
debt. We may make additional payments to BP of up to $500 million (of which $73
million has already been paid) based on a formula tied to the price of crude
oil. We will become a major new operator of the North Slope Kuparuk and Alpine
fields.
We also reached an agreement with BP and Exxon Mobil Corporation ("Exxon
Mobil") to resolve outstanding issues relating to the ownership and operation
of the Prudhoe Bay Unit ("PBU"). The agreement will take effect on July 1,
2000, and aligns our oil and gas interests in the PBU and those of Exxon Mobil
and BP on a single basis, in contrast to the previous arrangement under which
the PBU holders had different interests in the oil and the gas.
The new agreement also provides for a single operator at the PBU. Among
the parties to the aligned agreement, the aligned oil and gas interests will be
36.8% for Exxon Mobil, 36.5% for us, and 26.7% for BP. BP, current operator of
the Western Operating Area in the PBU, will become the single operator.
As a result of the acquisition and the alignment agreement regarding the
PBU, our net daily production from the assets is now expected to be 340,000
barrels of oil equivalent ("BOE") for the balance of the year 2000. We will
also receive the economic benefit of the production resulting from the
acquisition and the alignment agreement retroactive to the beginning of the
year 2000, and we expect to add a total of 2.2 billion BOE to our reserves.
GPM Joint Venture with Duke Energy
On March 31, 2000, we closed the transaction with Duke Energy that
combines Duke Energy's gas gathering and processing business with our unit. The
combined company, named Duke Energy Field Services ("DEFS"), gains a national
leadership position in natural gas liquids production (about 400,000 barrels
per day) and natural gas gathering and processing. We own 30.3% of DEFS. The
existing natural gas liquids supply arrangement between GPM and us will be
maintained by DEFS for an initial term of 15 years. In connection with the
combination, DEFS borrowed approximately $2.75 billion of short-term debt. The
proceeds of the debt were used to make one-time cash distributions of
approximately $1.2 billion to both us and Duke Energy and to pay $325 million
to Duke Energy and $20 million to us, respectively, as reimbursement for
additional assets acquired by each company since the Contribution Agreement was
signed on December 16, 1999.
S-4
<PAGE>
DEFS, headquartered in Denver, Colorado, is the nation's largest producer
of natural gas liquids, one of the largest natural gas gatherers and marketers
and one of the largest natural gas liquids marketers. DEFS operates in 11
states, including Wyoming, Colorado, Kansas, Oklahoma, New Mexico, Texas,
Louisiana, Alabama and Mississippi, and along the Gulf Coast and in
northwestern Alberta, Canada. DEFS now owns and operates approximately 70
plants and 57,000 miles of pipeline.
Chemicals Joint Venture with Chevron
On February 7, 2000, we announced the signing of a letter of intent and
exclusivity agreement with Chevron Corporation to form a 50/50 joint venture
combining their worldwide chemicals businesses with ours. Headquartered in
Houston, the joint-venture company will have assets of more than $6 billion and
will be one of the world's top producers of olefins, polyolefins, aromatics and
styrenics. The transaction has received Federal Trade Commission clearance, and
is expected to close in mid-2000, subject to final approval by the companies'
boards, the signing of definitive agreements and other regulatory approvals.
The companies expect to realize annual synergies of at least $150 million
through the joint venture by tapping efficiencies in purchasing and logistics,
enhancing feedstock flexibility, optimizing production scheduling, improving
organizational efficiency and reducing staffing.
The letter of intent contemplates that the joint-venture company will
arrange $1.6 billion of debt financing and will make one-time cash
distributions of $800 million to each parent at or shortly after closing. We
will use the proceeds to reduce debt or for other general corporate purposes.
Other Significant Developments
We currently have under way a range of development projects and
opportunities that will require significant capital investments:
. we are continuing the Eldfisk water injection project in the
Norwegian sector of the North Sea to improve oil recovery from this
field, the second largest in the Ekofisk area;
. drilling of production wells and construction of a heavy oil upgrader
pipeline and associated production facility have been approved for
the Hamaca heavy oil project in Venezuela;
. the development of the Bayu-Undan gas recycle project in the Timor
Sea has been approved by the Joint Authority for the Timor Gap Zone
of Cooperation;
. we have begun commercialization studies to evaluate findings from our
drilling program at the Bohai Bay site off China's northern coast;
. we began construction on a coker unit and a continuous catalyst
regeneration reformer at the Sweeny Complex;
. we began construction of a major petrochemical facility in Qatar; and
. we reached agreement in principle with a co-venturer to build a 700-
million-pound-per-year polyethylene facility in the United States.
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
Selected Historical Financial Information
We are providing or incorporating by reference in this prospectus
supplement selected financial information for Phillips and the ARCO Alaska
Combined Operations (ARCO Alaska). We derived this information from audited and
unaudited financial statements of Phillips and ARCO Alaska for the periods
S-5
<PAGE>
presented. The information is only a summary and you should read it together
with the financial information included or incorporated by reference to this
prospectus supplement. See "Where You Can Find More Information" on page S-21
of this prospectus supplement.
Phillips
In the table below, we provide you with our summarized historical
consolidated financial data. We prepared this information using our
consolidated financial statements as of the dates and for the periods
indicated. We derived the consolidated income statement data below for each of
the three years ended December 31, 1999, and the consolidated balance sheet
data at December 31, 1999 and 1998, from financial statements audited by Ernst
& Young LLP, independent auditors. We derived the remaining data from unaudited
consolidated financial statements.
<TABLE>
<CAPTION>
Millions of Dollars
----------------------------------------------
Three Months Ended Years Ended
March 31 December 31
------------------- -------------------------
2000 1999 1999 1998 1997
------------------- -------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA, for
period ended
Total revenues................ $ 4,768 2,539 13,852 11,845 15,424
Income before income taxes.... 542 99 1,185 421 1,900
Net income.................... 250 70 609 237 959
BALANCE SHEET DATA, at period
end
Cash and cash equivalents..... 131 138 97
Total assets.................. 15,062 15,201 14,216
Short-term debt............... 80 31 167
Long-term debt................ 3,889 4,271 4,106
Company-obligated mandatorily
redeemable
preferred securities of
capital trusts............... 650 650 650
Common stockholders' equity... 4,705 4,549 4,219
</TABLE>
ARCO Alaska
In the table below, we provide you with ARCO Alaska Combined Operations
summarized historical combined financial data. We prepared this information
using ARCO Alaska Combined Operations combined financial statements as of the
dates and for the periods indicated. We derived the consolidated income
statement data below for each of the three years ended December 31, 1999, and
the consolidated balance sheet data at December 31, 1999 and 1998, from
financial statements audited by PricewaterhouseCoopers LLP, independent
accountants. We derived the remaining data from unaudited combined financial
statements.
<TABLE>
<CAPTION>
Millions of Dollars
--------------------------------------
Three Months Years Ended December 31
Ended -----------------------
March 31, 2000 1999 1998 1997
-------------- -----------------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA, for period ended
Total revenues......................... $ 701 1,881 1,595 2,612
Income before income taxes............. 419 848 529 1,382
Net income............................. 263 555 335 853
BALANCE SHEET DATA, at period end
Cash and cash equivalents.............. 11 7 3
Total assets........................... 5,509 5,386 4,970
Total debt, including capital leases... 596 565 424
Equity investment...................... 3,853 3,833 3,516
</TABLE>
S-6
<PAGE>
Selected Pro Forma Condensed Financial Information
In the table below, we provide you with unaudited selected pro forma
condensed financial information for Phillips as if we had completed the ARCO
Alaska acquisition on January 1, 1999, for income statement purposes and on
March 31, 2000, for balance sheet purposes. The pro forma financial
information was prepared using the purchase method of accounting, with
Phillips treated as the acquiring company. The pro forma financial information
shown below has also been adjusted to reflect the impact of combining our gas
gathering, processing and marketing business with Duke Energy's, to form Duke
Energy Field Services.
This unaudited selected pro forma condensed financial information should
be read in conjunction with the separate historical financial statements and
accompanying notes of Phillips and ARCO Alaska, and Phillips' pro forma
financial information, all of which are incorporated by reference in the
prospectus supplement. You should not rely on the unaudited selected pro forma
financial information as an indication of the results of operations or
financial position that would have been achieved if the ARCO Alaska
acquisition or the Duke Energy transaction had taken place earlier. Nor should
you rely on it as an indicator of the results of operations or financial
position of Phillips after the completion of these transactions.
<TABLE>
<CAPTION>
Millions of Dollars
--------------------------
Three Months Year Ended
Ended December 31
March 31, 2000 1999
-------------- -----------
<S> <C> <C>
INCOME STATEMENT DATA, for period ended
Total revenues....................................... $ 5,286 15,024
Income before income taxes........................... 799 1,452
Net income........................................... 404 780
BALANCE SHEET DATA, at period end
Cash and cash equivalents............................ 331
Total assets......................................... 20,918
Total debt, including capital leases................. 9,426
Common stockholders' equity.......................... 4,656
</TABLE>
BOARD OF DIRECTORS
The composition of Phillips' Board of Directors was as of the date of
this prospectus supplement:
<TABLE>
<CAPTION>
Name Principal Activities Age Director Since
- ---- -------------------- --- --------------
<S> <C> <C> <C>
Norman R. Augustine..... Chairman of the Executive Committee of the 64 1989
Board of Directors of Lockheed Martin Corporation
David L. Boren.......... President of University of Oklahoma 59 1994
Robert E. Chappell, Investment and management consultant 63 1990
Jr.....................
Robert M. Devlin........ Chairman, President and Chief Executive Officer 59 2000
of American General Corporation
Lawrence S. Senior Foreign Policy Advisor for Baker, Donelson, 69 1993
Eagleburger............ Bearman & Caldwell
Larry D. Horner......... Chairman of Pacific USA Holdings Corporation 66 1991
J.J. Mulva.............. Chief Executive Officer of Phillips 53 1994
Randall L. Tobias....... Chairman Emeritus of Eli Lilly and Company 58 1992
Victoria J. Tschinkel... Senior Consultant to Landers & Parsons 52 1993
Kathryn C. Turner....... Chairperson and Chief Executive Officer of 52 1995
Standard Technology, Inc.
</TABLE>
The business address of each director is Phillips Building,
Bartlesville, Oklahoma 74004.
S-7
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Phillips at March
31, 2000, and as adjusted to reflect (i) the issuance of commercial paper, (ii)
the issuance of the Offered Securities, and (iii) the application of the
proceeds therefrom as set forth under "Use of Proceeds."
<TABLE>
<CAPTION>
Millions of
Dollars
------------------
Actual As Adjusted
------ -----------
<S> <C> <C>
Notes payable and long-term debt other than the notes
offered hereby(1)......................................... $3,969 5,976(2)
Notes offered hereby....................................... -- 2,500
Company-obligated mandatorily redeemable preferred
securities of capital trusts.............................. 650 650
Common stockholders' equity(3)............................. 4,705 4,705
------ ------
Total Capitalization..................................... $9,324 13,831
====== ======
</TABLE>
Except as indicated in the paragraph above no material change has
occurred in the table above since March 31, 2000.
- --------
(1) This does not include approximately $1 billion of debt expected to be
incurred or assumed upon acquisition of the transportation assets and
tankers under construction. See "Recent Developments--ARCO Alaska
Acquisition" on page S-4.
(2) $4,507 million of commercial paper was issued on April 26, 2000.
(3) At March 31, 2000, Common Stockholders' Equity was composed of:
<TABLE>
<S> <C>
Common stock -- 500,000,000 shares authorized at $1.25 par value
Issued (306,380,511 shares)
Par value........................................................ $ 384
Capital in excess of par......................................... 2,104
Treasury stock (at cost: 24,203,708 shares)....................... (1,207)
Compensation and Benefits Trust (at cost: 28,358,258 shares)...... (961)
Accumulated other comprehensive income
Foreign currency translation adjustments.......................... (58)
Unrealized gains on securities.................................... 8
Unearned employee compensation -- Long-Term Stock Savings Plan..... (282)
Retained earnings.................................................. 4,717
-------
Total Common Stockholders' Equity.................................. $ 4,705
=======
</TABLE>
USE OF PROCEEDS
Our net proceeds from the sale of the notes after deducting expenses are
estimated to be $2,478,683,500 and are expected to be applied towards refunding
commercial paper incurred to pay for the ARCO Alaskan assets. The commercial
paper carries an effective interest rate of approximately 6.68%. Any funds not
used to repay the commercial paper will be used for general corporate purposes.
S-8
<PAGE>
DESCRIPTION OF THE OFFERED SECURITIES
The following description of the particular terms of the 2005 notes and
2010 notes (we refer to them as the "Offered Securities") supplements and
should be read in conjunction with the general description of the Senior Debt
Securities included in the accompanying prospectus. To the extent this
description is inconsistent with the description in the prospectus, this
description will control and replace the inconsistent prospectus description.
The Offered Securities will be issued each as separate series of Senior Debt
Securities under an Indenture dated as of September 15, 1990, as supplemented
by Supplemental Indenture No. 1 dated May 23, 1991 (we refer to the indenture
as so supplemented as the "Senior Indenture"), between us and U.S. Bank Trust
National Association, formerly First Trust National Association (as successor
to Continental Bank, National Association), as trustee (which we refer to as
the "Trustee"). The statements in these descriptions relating to the Offered
Securities and the Senior Indenture are brief summaries only, are not complete
and are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Senior Indenture and the Offered Securities, forms of
which are available from us.
General
The 2005 notes will mature on May 25, 2005. The 2010 notes will mature on
May 25, 2010. At maturity, holders will be paid 100% of the principal amount of
the Offered Securities. Each series of Offered Securities will bear interest
from May , 2000, at the annual rate for that series stated on the cover page of
this prospectus supplement. Interest will be payable semiannually (and
calculated on a 360-day year basis consisting of twelve 30-day months) on May
25 and November 25 of each year, commencing November 25, 2000, to the holders
of record of the Offered Securities at the close of business on the preceding
May 10 or November 10 , whether or not that day is a business day. All payments
of interest and principal will be payable in United States dollars.
Principal and interest on the Offered Securities will be payable, and the
Offered Securities may be presented for transfer and exchange, at the corporate
trust office or agency of the Trustee in New York, New York or Chicago,
Illinois. Payment of interest may also be made by check mailed to the
registered holders, at our option.
We have appointed Banque Generale du Luxembourg as the Luxembourg Paying
and Transfer Agent. We will maintain a paying and transfer agent in Luxembourg
as long as the Offered Securities are listed on the Luxembourg Stock Exchange.
For as long as the Offered Securities are listed on the Luxembourg Stock
Exchange, we will publish any changes as to the identity or location of the
Luxembourg Paying and Transfer Agent in a leading daily newspaper in
Luxembourg, which is expected to be the Luxemburger Wort.
Neither the Senior Indenture nor the Offered Securities contain covenants
or other provisions to afford protection to the holders of Offered Securities
in the event of a recapitalization, holding company merger, or other
transaction (leveraged or otherwise) with us, our management or our affiliates,
except to the limited extent described under "Description of the Debt
Securities -- Limitation on Mergers and Sales of Assets" in the accompanying
prospectus.
The Offered Securities will be senior unsecured obligations and will rank
equally in right of payment to all of our other unsecured senior indebtedness.
Optional Redemption
Each series of the Offered Securities will be redeemable, in whole or in
part, at our option at any time or from time to time at a redemption price
equal to the greater of (i) 100 percent of the principal amount of the Offered
Securities of such series to be redeemed, and (ii) as determined by the
Quotation Agent (as defined below), the sum of the present values of the
remaining scheduled payments of principal and interest on such
S-9
<PAGE>
Offered Securities (not including any portion of such payments of interest
accrued as of the date of redemption) discounted to the date of redemption on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate (as defined below) plus 25 basis points for the
2005 notes or 35 basis points for the 2010 notes plus, in the case of each of
clause (i) and (ii) above, accrued interest thereon to the date of redemption.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the
remaining term of the 2005 notes or 2010 notes to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such Offered Securities.
"Comparable Treasury Price" means, with respect to any redemption date,
(i) the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest of such Reference Treasury Dealer
quotations, or (ii) if the Trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such Quotations.
"Quotation Agent" means the Reference Treasury Dealer appointed by us.
"Reference Treasury Dealer" means (i) each of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, J.P. Morgan Securities Inc. and their respective
successors; provided, however, that if any of the foregoing shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), we shall substitute therefor another Primary Treasury Dealer; and
(ii) any other Primary Treasury Dealer selected by us.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by us, of the bid and asked prices for the Comparable Treasury Issue (expressed
in each case as a percentage of its principal amount) quoted in writing to the
Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on
the third business day preceding such redemption date.
Notice of any redemption will be published as provided below and will be
mailed at least 30 days but not more than 60 days before the redemption date to
each holder of the Offered Securities to be redeemed. Unless we default in
payment of the redemption price, on and after the redemption date, interest
will cease to accrue on the Offered Securities or portions thereof called for
redemption. Upon presentation and surrender of the Offered Securities at the
place of payment specified in the notice, the Offered Securities shall be paid
and redeemed by us at the applicable redemption price together with the
interest accrued thereon. If less than all the Offered Securities are to be
redeemed, the Trustee shall select, in such manner as in its sole discretion it
shall deem appropriate and fair, the Offered Securities or portions thereof to
be redeemed.
Prescription
Money deposited with the Trustee or any paying agent for payment on the
Offered Securities and remaining unclaimed for 3 years after the date upon
which the Offered Securities shall have become due and payable shall be repaid
to us on written demand. The holder thereafter must look to us for any payment
which the holder is entitled to collect.
S-10
<PAGE>
Governing Law
The Senior Indenture and the Offered Securities will be governed by, and
construed in accordance with, the laws of New York State.
Further Issues
We may from time to time, without notice to or the consent of the
registered holders of the Offered Securities, create and issue further notes
ranking equally and ratably with the Offered Securities in all respects (or in
all respects except for the payment of interest accruing prior to the issue
date of such further notes or except for the first payment of interest
following the issue date of such further notes), so that such further notes
shall be consolidated and form a single series with the Offered Securities and
shall have the same terms as to status, redemption or otherwise as the Offered
Securities. Any further notes shall be issued subject to an agreement
supplemental to the Senior Indenture.
Notices
Notices to holders of the Offered Securities will be published in
authorized newspapers in The City of New York, in London, and, so long as the
Offered Securities are listed on the Luxembourg Stock Exchange, in Luxembourg.
It is expected that publication will be made in The City of New York in The
Wall Street Journal, in London in the Financial Times and in a leading daily
newspaper in Luxembourg, which is expected to be the Luxemburger Wort. We will
be deemed to have given such notice on the date of each publication or, if
published more than once, on the date of the first such publication.
Meetings of Holders
The Senior Indenture contains provisions for convening meetings of the
holders of Offered Securities. A meeting may be called at any time by the
Trustee, upon request by us or upon request by the holders of at least 10% in
principal amount of the outstanding Offered Securities of any or all series.
Notice will be given to the holders of such notes. To be entitled to vote at
any meeting a person shall be a holder of the note with respect to which the
meeting is being held or a person appointed as a proxy by a holder. Each holder
is entitled to one vote for each $1,000 principal amount of Offered Securities
held by him.
Book-Entry System
The Offered Securities will be issued in the form of one or more fully
registered global notes ("Global Notes") which will be deposited with, or on
behalf of The Depository Trust Company ("DTC" or the "Depositary") as the
depositary, and registered in the name of Cede & Co., DTC's nominee. Beneficial
interests in the Global Notes will be represented through book-entry accounts
of financial institutions acting on behalf of beneficial owners as direct and
indirect participants in DTC (a "participant"). Investors may elect to hold
interests in the Global Notes through either DTC (in the United States),
Clearstream Banking, societe anonyme ("Clearstream Banking") or Morgan Guaranty
Trust Company of New York, Brussels Office, as operator of the Euroclear system
(in Europe) if they are participants of such systems, or indirectly through
organizations which are participants in such systems. Clearstream Banking and
Euroclear will hold interests on behalf of their participants through
customers' securities accounts in Clearstream Banking's and Euroclear's names
on the books of their respective depositaries, which in turn will hold such
interests in customers' securities accounts in the names of their respective
depositaries (the "U.S. Depositaries") on the books of DTC. Citibank, N.A. will
act as the U.S. Depositary for Clearstream Banking and The Chase Manhattan Bank
will act as the U.S. Depositary for Euroclear. Except under circumstances
described below, the Offered Securities will not be issuable in definitive
form. The laws of some states require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such limits and
such laws may impair the ability to transfer beneficial interests in the Global
Notes.
S-11
<PAGE>
So long as the Depositary or its nominee is the registered owner of the
Global Notes, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Offered Securities represented by
the Global Notes for all purposes under the Senior Indenture. Except as
provided below, owners of beneficial interests in the Global Notes will not be
entitled to have Offered Securities represented by the Global Notes registered
in their names, will not receive or be entitled to receive physical delivery of
the Offered Securities in definitive form and will not be considered the owners
or holders thereof under the Senior Indenture.
Principal and interest payments on the Offered Securities registered in
the name of the Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Notes. None
of we, the Trustee, any paying agent or registrar for the Offered Securities
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial interests in the Global
Notes or for maintaining, supervising or reviewing any records relating to such
beneficial interests.
We expect that the Depositary for the Offered Securities or its nominee,
upon receipt of any payment of principal or interest, will credit the
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Notes as
shown on the records of the Depositary or its nominee. We also expect that
payments by participants to owners of beneficial interest in the Global Notes
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name", and will be the
responsibility of such participants.
If the Depositary is at any time unwilling or unable to continue as
depositary and a successor Depositary is not appointed by us within 90 days, we
will issue Offered Securities in definitive form in exchange for the Global
Notes. In addition, we may at any time and in our sole discretion determine not
to have the Offered Securities represented by the Global Notes and, in such
event, will issue the Offered Securities in definitive form in exchange for the
Global Notes. In any such instance, an owner of a beneficial interest in the
Global Notes will be entitled to physical delivery in definitive form of
Offered Securities represented by the Global Notes equal in principal amount to
such beneficial interest and to have such Offered Securities registered in its
name. Offered Securities so issued in definitive form will be issued as
registered Offered Securities in denominations of $1,000 and integral multiples
thereof, unless otherwise specified by us. Our definitive Offered Securities
can be transferred by presentation for registration to the Registrar at its
New York or Luxembourg offices and must be duly endorsed by the holder or his
attorney duly authorized in writing, or accompanied by a written instrument or
instruments of transfer in form satisfactory to us or the Trustee duly executed
by the holder or his attorney duly authorized in writing. We may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any exchange or registration of transfer of
definitive Offered Securities.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. The Depositary holds securities deposited
with it by its participants and facilitates the settlement of transactions
among its participants in such securities through electronic computerized book-
entry changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers (including the underwriters), banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own the Depositary. Access to the
Depositary'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 participant, either directly or indirectly.
S-12
<PAGE>
According to the Depositary, the foregoing information with respect to
the Depositary has been provided to the financial community for informational
purposes only and is not intended to serve as a representation, warranty or
contract modification of any kind.
Clearstream Banking is incorporated under the laws of Luxembourg as a
professional depositary. Clearstream Banking holds securities for its customers
and facilitates the clearance and settlement of securities transactions between
Clearstream customers through electronic book-entry changes in accounts of
Clearstream customers, thereby eliminating the need for physical movement of
certificates. Clearstream Banking provides to Clearstream customers, among
other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Clearstream Banking interfaces with domestic markets in several
countries. As a bank, Clearstream Banking is subject to regulation by the
Luxembourg Commission for the Supervision of the Financial Sector (Commission
de Surveillance du Secteur Financier). Clearstream customers are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the underwriters. Indirect access to
Clearstream Banking is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream customer either directly or indirectly.
Distributions with respect to the Offered Securities held beneficially
through Clearstream Banking will be credited to cash accounts of Clearstream
customers in accordance with its rules and procedures, to the extent received
by the U.S. Depositary for Clearstream Banking.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Euroclear includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries. Euroclear is operated by
the Brussels, Belgium office of Morgan Guaranty Trust Company of New York (the
"Euroclear Operator"), under contract with Euroclear Clearance Systems S.C., a
Belgian cooperative corporation (the "Cooperative"). All operations are
conducted by the Euroclear Operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Cooperative. The Cooperative establishes policy for Euroclear on behalf
of Euroclear participants. Euroclear participants include banks (including
central banks), securities brokers and dealers and other professional financial
intermediaries and may include the underwriters. Indirect access to Euroclear
is also available to other firms that clear through or maintain a custodial
relationship with a Euroclear participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System, and applicable
Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within Euroclear,
withdrawals of securities and cash from Euroclear, and receipts of payments
with respect to securities in Euroclear. All securities in Euroclear are held
on a fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear participants, and has no record of or
relationship with persons holding through Euroclear participants.
Distributions with respect to the Offered Securities held beneficially
through Euroclear will be credited to the cash accounts of Euroclear
participants in accordance with the Terms and Conditions, to the extent
received by the U.S. Depositary for Euroclear.
S-13
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Investors that acquire, hold and transfer interests in the Offered
Securities by book-entry through accounts with the Euroclear Operator or any
other securities intermediary are subject to the laws and contractual
provisions governing their relationship with their intermediary, as well as the
laws and contractual provisions governing the relationship between such an
intermediary and each other intermediary, if any, standing between themselves
and our Global Notes.
Under Belgian law, the Euroclear Operator is required to pass on the
benefits of ownership in any interests in securities on deposit with it (such
as dividends, voting rights and other entitlements) to any person credited with
such interests in securities on its records.
So long as the Offered Securities are listed on the Luxembourg Stock
Exchange and the rules of the Luxembourg Stock Exchange require, we will
maintain a Luxembourg Paying and Transfer Agent and the holders of the Offered
Securities will be able to receive payments on the Offered Securities and
effect transfers of the Offered Securities at the offices of the Luxembourg
Paying and Transfer Agent or through or via Euroclear or Clearstream Banking.
Payment of Additional Amounts
We will, subject to the exceptions and limitations set forth below, pay
as additional interest on the Offered Securities, such additional amounts as
are necessary in order that the net payment by us or a paying agent of the
principal of and interest on the Offered Securities to a person who is not a
United States Holder (as defined below), after deduction for any present or
future tax, assessment or other governmental charge of the United States or a
political subdivision or taxing authority thereof or therein, imposed by
withholding with respect to the payment, will not be less than the amount that
would have been payable in respect of our Offered Securities had no such
withholding or deduction been required.
Our obligation to pay additional amounts shall not apply:
(1) to any tax, assessment or other governmental charge that is
imposed or withheld solely because the holder, or a fiduciary, settler,
beneficiary, member or shareholder of the holder if the holder is an
estate, trust, partnership or corporation, or a person holding a power
over an estate or trust administered by a fiduciary holder:
(a) is or was present or engaged in a trade or business in
the United States or has or had a permanent establishment in the
United States;
(b) has a current or former relationship with the United
States, including a relationship as a citizen or resident thereof;
(c) is or has been a foreign or domestic personal holding
company, a passive foreign investment company or a controlled
foreign corporation with respect to the United States or a
corporation that has accumulated earnings to avoid United States
federal income tax;
(d) is or was a "10-percent shareholder" of Phillips as
defined in section 871(h)(3) of the United States Internal Revenue
Code or any successor provision; or
(e) is a bank receiving payments on an extension of credit
made pursuant to a loan agreement entered into in the ordinary
course of its trade or business.
(2) to any holder that is not the sole beneficial owner of the
Offered Securities, or a portion thereof, or that is a fiduciary or
partnership, but only to the extent that a beneficiary or settlor with
respect to the fiduciary, a beneficial owner or member of the
partnership would not have been entitled to the payment of an additional
amount had the beneficiary, settler, beneficial owner or member received
directly its beneficial or distributive share of the payment;
S-14
<PAGE>
(3) to any tax, assessment or other governmental charge that is
imposed or withheld solely by reason of the failure of the holder or any
other person to comply with certification, identification or information
reporting requirements concerning the nationality, residence, identity
or connection with the United States of the holder or beneficial owner
of such Offered Securities, if compliance is required by statute, by
regulation of the United States Treasury Department or by an applicable
income tax treaty to which the United States is a party as a
precondition to exemption from, or reduction of, such tax, assessment or
other governmental charge;
(4) to any tax, assessment or other governmental charge that is
imposed otherwise than by withholding by Phillips or a paying agent from
the payment;
(5) to any tax, assessment or other governmental charge that is
imposed or withheld solely by reason of a change in law, regulation or
administrative or judicial interpretation that becomes effective more
than 15 days after the payment becomes due or is duly provided for,
whichever occurs later;
(6) to any estate, inheritance, gift, sales, excise, transfer,
wealth or personal property tax or similar tax, assessment or other
governmental charge;
(7) to any tax, assessment or other governmental charge required
to be withheld by any paying agent from any payment of principal of or
interest on any Offered Security, if such payment can be made without
such withholding by any other paying agent; or
(8) in the case of any combination of the above items.
The Offered Securities are subject in all cases to any tax, fiscal or
other law or regulation or administrative or judicial interpretation
applicable. Except as specifically provided under this heading "Payment of
Additional Amounts" and under the heading "Description of the Offered
Securities--Redemption for Tax Reasons," we do not have to make any payment
with respect to any tax, assessment or other governmental charge imposed by any
government or a political subdivision or taxing authority.
Redemption for Tax Reasons
If, as a result of any change in, or amendment to, the laws (or any
regulations or rulings promulgated thereunder) of the United States (or any
political subdivision or taxing authority thereof or therein), or any change
in, or amendments to, an official position regarding the application or
interpretation of such laws, regulations or rulings, which change or amendment
is announced or becomes effective on or after the date of this prospectus
supplement, Phillips becomes or, based upon a written opinion of independent
counsel selected by us, will become obligated to pay Additional Amounts as
described herein under the heading "Description of the Offered Securities--
Payment of Additional Amounts," then Phillips may, at its option redeem, as a
whole, but not in part, the Offered Securities on not less than 30 nor more
than 60 days prior notice, at a redemption price equal to 100% of their
principal amount, together with interest accrued but unpaid thereon to the date
fixed for redemption.
Clearing and Settlement
Initial settlement for the Offered Securities will be made in immediately
available funds. Secondary market trading between DTC participants will occur
in the ordinary way in accordance with DTC rules and will be settled in
immediately available funds using the Depositary's Same-Day Funds Settlement
System. Secondary market trading between Clearstream customers and/or Euroclear
participants will occur in the ordinary way in accordance with the applicable
rules and operating procedures of Clearstream Banking and Euroclear and will be
settled using the procedures applicable to conventional eurobonds in
immediately available funds.
S-15
<PAGE>
Cross-market transfers between persons holding directly or indirectly
through DTC on the one hand, and directly or indirectly through Clearstream
customers or Euroclear participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by the U.S. Depositary; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its rules
and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to the U.S. Depositary to
take action to effect final settlement on its behalf by delivering or receiving
the Offered Securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Clearstream customers and Euroclear participants may not deliver instructions
directly to their respective U.S. Depositaries.
Because of time-zone differences, credits of the Offered Securities
received in Clearstream Banking or Euroclear as a result of a transaction with
a DTC participant will be made during subsequent securities settlement
processing and dated the business day following DTC settlement date. Such
credits or any transactions in the Offered Securities settled during such
processing will be reported to the relevant Clearstream Customers or Euroclear
Participants on such business day. Cash received in Clearstream Banking or
Euroclear as a result of sales of the Offered Securities by or through a
Clearstream customer or a Euroclear participant to a DTC participant will be
received with value on the DTC settlement date but will be available in the
relevant Clearstream Banking or Euroclear cash account only as of the business
day following settlement in DTC.
Although DTC, Clearstream Banking and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of the Offered Securities
among participants of DTC, Clearstream Banking and Euroclear, they are under no
obligation to perform or continue to perform such procedures and such
procedures may be discontinued at any time.
UNITED STATES TAX CONSIDERATIONS
The following statements describe the material United States federal
income tax consequences of the ownership and disposition of Offered Securities
to initial holders of the Offered Securities purchasing the Offered Securities
at the public offering price set forth on the cover page of this prospectus
supplement. These statements are based on the Internal Revenue Code of 1986, as
amended to the date hereof (the "Code"), administrative pronouncements,
judicial decisions and existing and proposed Treasury Regulations, and
interpretations of the foregoing, changes to any of which subsequent to the
date of this Prospectus Supplement may affect the tax consequences described
herein. These statements address only the tax consequences to initial holders
holding Offered Securities as capital assets within the meaning of section 1221
of the Code. They do not discuss all of the tax consequences that may be
relevant to holders in light of their particular circumstances or to holders
subject to special rules, such as certain financial institutions, insurance
companies, dealers in securities or foreign currencies, United States Holders
(as defined below) whose functional currency (as defined in Code Section 985)
is not the U.S. dollar, persons holding Offered Securities in connection with a
hedging transaction, "straddle", conversion transaction or other integrated
transaction, traders in securities that elect to mark to market, holders liable
for alternative minimum tax or persons who have ceased to be United States
citizens or to be taxed as resident aliens. Persons considering the purchase of
the Offered Securities should consult their tax advisors concerning the
application of United States federal income tax laws, as well as the laws of
any state, local or foreign taxing jurisdictions, to their particular
situations.
As used herein, a "United States Holder" of Offered Securities means a
beneficial owner that is for United States federal income tax purposes:
. a citizen or resident of the United States,
. a corporation or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof,
S-16
<PAGE>
. an estate or trust the income of which is subject to United States
federal income taxation regardless of its source or
. any other person whose income from Offered Securities is effectively
connected with the conduct of a United States trade or business.
As used herein, the term "United States Alien Holder" means a beneficial
owner of Offered Securities that is, for United States federal income tax
purposes:
. a nonresident alien individual,
. a foreign corporation,
. a nonresident alien fiduciary of a foreign estate or trust or
. a foreign partnership one or more of the members of which is a
nonresident alien individual, a foreign corporation or a nonresident
alien fiduciary of a foreign estate or trust.
Tax Consequences to United States Holders
Payments of Interest
Interest on Offered Securities will generally be taxable to a United
States Holder as ordinary interest income at the time it accrues or is received
in accordance with the United States Holder's method of accounting for federal
income tax purposes.
Sale, Exchange or Retirement
Upon the sale, exchange or retirement of Offered Securities, a United
States Holder will recognize gain or loss equal to the difference between the
amount realized on the sale, exchange or retirement of the Offered Securities
and the holder's adjusted tax basis in the Offered Securities. A United States
Holder's adjusted tax basis in Offered Securities will equal the cost of the
Offered Securities to such Holder. The amount realized excludes any amounts
attributable to unpaid interest accrued between interest payment dates and not
previously included in income, which will be taxable as ordinary income. Such
gain or loss will be capital gain or loss and will be long-term capital gain or
loss if at the time of the sale, exchange or retirement the Offered Securities
has been held for more than one year. Under current law, the excess of net
long-term capital gains over net short-term capital losses is taxed at a lower
rate than ordinary income for certain non-corporate taxpayers. The distinction
between capital gain or loss and ordinary income or loss is also relevant for
purposes of, among other things, the limitations on the deductibility of
capital losses.
Tax Consequences to United States Alien Holders
Under present United States federal tax law, and subject to the
discussion below concerning backup withholding:
(a) payments of principal, interest and premium on the Offered Securities
by Phillips or its paying agent to any United States Alien Holder will be
exempt from the 30% United States federal withholding tax, provided that (i)
such Holder does not own, actually or constructively, 10% or more of the total
combined voting power of all classes of stock of Phillips entitled to vote,
(ii) such Holder is not a controlled foreign corporation related, directly or
indirectly, to Phillips through stock ownership, and (iii) the requirement to
certify such holder's non-U.S. status, as set forth in section 871(h) or
section 881(c) of the Code, has been fulfilled with respect to the beneficial
owner, as discussed below;
(b) a United States Alien Holder of Offered Securities will not be
subject to United States federal income tax on gain realized on the sale,
exchange or retirement of such Offered Securities, unless (i) such
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<PAGE>
Holder is an individual who is present in the United States for 183 days or
more in the taxable year of the disposition, and either the gain is
attributable to an office or other fixed place of business maintained by such
individual in the United States or, generally, such individual has a "tax home"
in the United States or (ii) such gain is effectively connected with the
Holder's conduct of a trade or business in the United States; and
(c) Offered Securities held by an individual who is not, for United
States estate tax purposes, a resident or citizen of the United States at the
time of his death will not be subject to United States federal estate tax,
provided that the individual does not own, actually or constructively, 10% or
more of the total combined voting power of all classes of stock of Phillips
entitled to vote and, at the time of such individual's death, payments with
respect to such Offered Securities would not have been effectively connected to
the conduct by such individual of a trade or business in the United States.
The certification requirement referred to in subparagraph (a) will be
fulfilled if the beneficial owner of Offered Securities certifies on IRS Form
W-8, Form W-8 BEN, Form W-8 IMY, or successor form,as appropriate, under
penalties of perjury, that it is not a United States person and provides its
name and address, and (i) such beneficial owner files such Form W-8, Form W-8
BEN, Form W-8 IMY, or successor form, as appropriate, with the withholding
agent or (ii) in the case of Offered Securities held on behalf of the
beneficial owners by a securities clearing organization, bank or other
financial institution holding customers' securities in the ordinary course of
its trade or business, such financial institution files with the withholding
agent a statement that it has received the Form W-8, Form W-8 BEN, Form W-8
IMY, or successor form, as appropriate, from the Holder and furnishes the
withholding agent with a copy thereof. Special rules may apply with respect to
Offered Securities held by a foreign partnership. Prospective investors,
including foreign partnerships and their partners, should consult their tax
advisers regarding possible additional reporting requirements.
If a United States Alien Holder of Offered Securities is engaged in a
trade or business in the United States, and if interest on the Offered
Securities (or gain realized on its sale, exchange or other disposition) is
effectively connected with the conduct of such trade or business, the United
States Alien Holder, although exempt from the withholding tax discussed in the
preceding paragraphs, will be subject to regular United States income tax on
such effectively connected income, generally in the same manner as if it were a
United States Holder. See "Tax Consequences to United States Holders" above. In
lieu of the certificate described in the preceding paragraph, such a Holder
will be required to provide to the withholding agent a properly executed IRS
Form W-8 ECI or successor form, as appropriate, to claim an exemption from
withholding tax. In addition, if such United States Alien Holder is a foreign
corporation, it may be subject to a 30% branch profits tax (unless reduced or
eliminated by an applicable treaty) on its earnings and profits for the taxable
year attributable to such effectively connected income, subject to certain
adjustments.
Backup Withholding and Information Reporting
Under current United States federal income tax law, information reporting
requirements apply to certain payments of principal, premium and interest made
to, and to the proceeds of sales before maturity by, non-corporate United
States Holders. In addition, a 31% backup withholding tax will apply if the
noncorporate United States Holder (i) fails to furnish its Taxpayer
Identification Number ("TIN") which, for an individual, is his Social Security
Number, (ii) furnishes an incorrect TIN, (iii) is notified by the IRS that it
has failed to properly report payments of interest and dividends, or (iv) under
certain circumstances, fails to certify, under penalty of perjury, that it has
furnished a correct TIN and has not been notified by the IRS that it is subject
to backup withholding for failure to report interest and dividend payments.
Holders should consult their tax advisers regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption if applicable.
Backup withholding will not apply to payments made on Offered Securities
if the certifications required by Sections 871(h) and 881(c) as described above
are received, provided that Phillips or its paying agent, as the case may be,
does not have actual knowledge that the payee is a United States person.
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<PAGE>
Under current Treasury Regulations, payments on the sale, exchange or
other disposition of Offered Securities made to or through a foreign office of
a broker generally will not be subject to backup withholding. However, if such
broker is:
. a United States person,
. a controlled foreign corporation for United States federal income tax
purposes,
. a foreign person 50% or more of whose gross income for certain
periods is effectively connected with a United States trade or
business or
. in the case of payments made after December 31, 2000, a foreign
partnership with certain connections to the United States,
then information reporting will be required unless the broker has in its
records documentary evidence that the beneficial owner is not a United States
person and certain other conditions are met or the beneficial owner otherwise
establishes an exemption. Backup withholding may apply to any payment that such
broker is required to report if the broker has actual knowledge that the payee
is a United States person. Payments to or through the United States office of a
broker will be subject to backup withholding and information reporting unless
the Holder certifies, under penalties of perjury, that it is not a United
States person or otherwise establishes an exemption.
United States Alien Holders of Offered Securities should consult their
tax advisers regarding the application of information reporting and backup
withholding in their particular situations, the availability of an exemption
therefrom, and the procedure for obtaining such an exemption, if available. Any
amounts withheld from a payment to a United States Alien Holder under the
backup withholding rules will be allowed as a credit against such Holder's
United States federal income tax liability and may entitle such Holder to a
refund, provided that the required information is furnished to the IRS.
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UNDERWRITING
Subject to the terms and conditions contained in the underwriting
agreement, dated May 18, 2000, among us and the several underwriters named
below, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P.
Morgan Securities Inc. are acting as representatives, we have agreed to sell to
the underwriters, and the underwriters have severally agreed to purchase from
us, the aggregate principal amount of the Offered Securities set forth after
their respective names below. The obligations of the underwriters are subject
to certain conditions. The underwriters must purchase all of the Offered
Securities if they purchase any.
<TABLE>
<CAPTION>
Principal Principal
Amount of Amount of
Underwriter 2005 Notes 2010 Notes
----------- -------------- --------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................ $ 288,075,000 $ 338,175,000
J.P. Morgan Securities Inc....................... 288,075,000 338,175,000
Banc of America Securities LLC................... 230,000,000 270,000,000
Chase Securities Inc. ........................... 230,000,000 270,000,000
ABN AMRO Incorporated............................ 13,800,000 16,200,000
Barclays Bank PLC................................ 13,800,000 16,200,000
BNP Capital Markets Limited...................... 13,800,000 16,200,000
Deutsche Bank Securities Inc. ................... 13,800,000 16,200,000
Greenwich NatWest................................ 13,800,000 16,200,000
Scotia Capital (USA) Inc. ....................... 13,800,000 16,200,000
Sumitomo Bank Securities Inc. ................... 13,800,000 16,200,000
Blaylock & Partners, L.P. ....................... 5,750,000 6,750,000
Guzman & Company................................. 5,750,000 6,750,000
The Williams Capital Group, L.P. ................ 5,750,000 6,750,000
-------------- --------------
Total....................................... $1,150,000,000 $1,350,000,000
============== ==============
</TABLE>
The underwriters have advised us that they propose initially to offer the
Offered Securities to the public at the public offering prices set forth on the
cover page of this prospectus supplement, and to certain
dealers at such prices less a concession not in excess of .2% of the principal
amount of the 2005 notes and .3% of the principal amount of the 2010 notes. The
underwriters may allow, and such dealers may reallow, a discount not in excess
of .125% of the principal amount of the 2005 notes and .125% of the principal
amount of the 2010 notes to certain other dealers. After the initial public
offering, the public offering prices, concessions and discounts may be changed.
The Offered Securities are new issues of securities with no established
trading market. We have been advised by the representatives that they intend to
make a market in the Offered Securities, but they are not obligated to do so
and may discontinue market-making at any time without notice. We can provide no
assurance as to the liquidity of, or any trading market for, the Offered
Securities. We have applied to have the notes listed on the Luxembourg Stock
Exchange.
In connection with the offering, the underwriters are permitted to engage
in certain transactions that stabilize the price of the Offered Securities in
accordance with Regulation M under the Securities Exchange Act of 1934, as
amended. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Offered Securities. If the
underwriters create a short position in the Offered Securities in connection
with the offering, that is, if they sell a greater aggregate principal amount
of Offered Securities than is set forth on the cover of this prospectus
supplement, the underwriters may reduce that short position by purchasing
Offered Securities in the open market. In general, purchases of a security for
the purpose of stabilization or to reduce a short position could cause the
price of the security to be higher than it might be in the absence of such
purchases. Such activities, if commenced, may be discontinued at any time.
S-20
<PAGE>
Neither we nor any underwriter makes any representation or prediction as
to the direction or magnitude of any effect that the transactions described
above may have on the price of the Offered Securities. In addition, neither we
nor any underwriter makes any representation that the underwriters will engage
in such transactions or that such transactions, once commenced, will not be
discontinued without notice.
It is expected that delivery of the Offered Securities will be made
against payment therefor on or about May 25, 2000, which is the fifth business
day following the date hereof (such settlement cycle being herein referred to
as "T+5"). Purchasers of Offered Securities should note that the ability to
settle secondary market trades of the Offered Securities effected on the date
of pricing and the next succeeding business day may be affected by the T+5
settlement.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or if
indemnification is not allowed, to contribute to payments the underwriters
maybe required to make because of those liabilities.
In the ordinary course of business, certain of the underwriters and their
affiliates have from time to time provided investment banking, general
financing and banking and financial advisory services to us and have also acted
as representatives of various other underwriters in connection with public
offerings of our securities.
Some of the underwriters or their affiliates may hold our commercial
paper and may receive a portion of the net proceeds of the offering which is
used to refund commercial paper. If more than 10% of the net proceeds of the
offering are paid to the underwriters or their affiliates of some of the
underwriters, the offering will be made pursuant to the provisions of section
(c)(8) of Rule 2710 of the NASD Conduct Rules.
We estimate that we will spend $1,800,000 for fees and expenses
associated with the offering of the Offered Securities.
OFFERING RESTRICTIONS
The Offered Securities are offered for sale in the United States and in
jurisdictions outside the United States, subject to applicable law.
Each of the underwriters has agreed that it will not offer, sell or
deliver any of the Offered Securities, directly or indirectly, or distribute
this prospectus supplement or the accompanying prospectus or any other offering
material relating to the Offered Securities, in or from any jurisdiction except
under circumstances that will to the best knowledge and belief of such
underwriter result in compliance with the applicable laws and regulations
thereof and which will not impose any obligations on us except as set forth in
the underwriting agreement.
Specifically, each underwriter has represented and agreed that it and
each of its affiliates:
. has not offered or sold and, prior to the expiry of the period of six
months from the time of closing, will not offer or sell any Offered
Securities to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities
Regulations 1995;
. has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the Offered Securities in, from or otherwise involving
the United Kingdom; and
S-21
<PAGE>
. has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the
issue of the Offered Securities to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996, as amended, or
is a person to whom such documents may otherwise lawfully be issued
or passed on.
LEGAL OPINIONS
Robert C. Koch, Esq., Senior Counsel of Phillips, is passing upon the
legality of the Offered Securities for us.
Davis Polk & Wardwell of New York City is passing upon the legality of
the Offered Securities for the underwriters. Such firm from time to time acts
as counsel for us.
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, 1999, 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.
The combined balance sheets of ARCO Alaska Combined Operations as of
December 31, 1999 and 1998, and the related combined statements of operations
and comprehensive earnings, and cash flows for each of the years in the three-
year period ended December 31, 1999, which appear in the Phillips Current
Report on Form 8-K, dated March 15, 2000, have been incorporated by reference
herein in reliance upon the report, dated March 22, 2000, of
PricewaterhouseCoopers LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
FORWARD LOOKING STATEMENTS
This prospectus supplement contains forward-looking statements about
Phillips' exploration and production business, and the acquisition of all of
ARCO's Alaska operations, the impact on Phillips' reserves, production,
earnings and cash flow. Where in any forward-looking statement, Phillips has
expressed an estimate, potential expectation or belief as the future results,
such expectation or belief is expressed in good faith and believed to have a
reasonable basis. However, there can be no assurance that the statement of
expectation or belief will result or be achieved. The actual results may be
affected by a variety of risks, which could cause the stated expectation or
belief to differ materially. Some of the important risk factors, but not
necessarily all such factors that may cause expectations or results to differ,
particularly as to reserves, production, earning and cash flow are:
consummation of the acquisition of the ARCO assets; state and federal
government and third-party approvals; the price of oil; interest rates on
financing; production results, environmental laws and the costs of compliance
with such laws; legislative, tax and regulatory developments; and the
integration of ARCO personnel, business systems and operations with those of
the company.
S-22
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
The SEC allows us to incorporate by reference the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. We incorporate by reference the documents
listed below:
. Annual Report on Form 10-K for the year ended December 31, 1999.
. Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2000.
. Current Reports on Form 8-K filed on February 10, February 15, April
13, April 18, May 8, May 11, and May 18, 2000.
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 send your request to Dale J.
Billam, Secretary, 1234 Adams Building, Bartlesville, Oklahoma 74004, telephone
(918) 661-5638.
GENERAL INFORMATION
Application has been made to list the Offered Securities on the
Luxembourg Stock Exchange. In connection with the listing application, the
certificate of incorporation and the by-laws of Phillips and a legal notice
relating to the issuance of the Offered Securities have been deposited prior to
listing with the Chief Registrar of the District Court of Luxembourg (Greffier
en Chef du Tribunal d'Arrondissement de et a Luxembourg), where copies thereof
may be obtained upon request. Copies of the documents referred to under "Where
You Can Find More Information" together with this prospectus supplement, the
accompanying prospectus, the Senior Indenture and Phillips' current annual and
quarterly reports, as well as all future annual reports, quarterly reports and
current reports, so long as any of the Offered Securities are outstanding, will
be made available at the main office of Banque Generale du Luxembourg S.A. in
Luxembourg. Banque Generale du Luxembourg S.A. will act as intermediary between
the Luxembourg Stock Exchange and Phillips and the holders of the Offered
Securities. In addition, copies of the annual reports, quarterly reports and
current reports of Phillips may be obtained free of charge at such office.
ARCO Alaska financial statements are incorporated into the Current Report
filed by us on April 18, 2000. ARCO Alaska has become a subsidiary of ours and
we do not presently intend to publish any separate ARCO Alaska financial
statements in the future.
Except as disclosed in this prospectus supplement, the prospectus, and
the documents incorporated by reference herein, there has been no material
adverse change in the financial position of Phillips since December 31, 2000.
Neither Phillips nor any of its subsidiaries is involved in litigation,
arbitration, or administrative proceedings relating to claims or amounts that
are material in the context of the issue of the Offered Securities and Phillips
is not aware of such litigation, arbitration, or administrative proceedings
pending or threatened.
Phillips accepts responsibility for the information contained in this
prospectus supplement and the accompanying prospectus. This prospectus
supplement and the related prospectus may be used only for the purposes for
which they have been published. We have not, and the underwriters have not,
authorized any person to provide you with any information other than the
information contained or incorporated in the prospectus or prospectus
supplement and made available for inspection by the public.
The resolutions relating to the sale and issuance of the Offered
Securities were adopted by the Board of Directors of Phillips on March 10,
2000, and by the Designated Officers authorized to determine the specific terms
of the issue on May 18, 2000.
S-23
<PAGE>
The notes have been accepted for clearance through the facilities of DTC,
Euroclear and Clearstream Banking.
The 2005 notes have been assigned Euroclear and Clearstream Banking
Common Code No. 011200290, International Security Identification Number (ISIN)
US718507BP05 and CUSIP No. 718507BP0.
The 2010 notes have been assigned Euroclear and Clearstream Banking
Common Code No. 011200320, International Security Identification Number (ISIN)
US718507BQ87 and CUSIP No. 718507BQ8.
S-24
<PAGE>
Filed pursuant to Rule 424(b)(3)
SEC File No. 333-34336
PROSPECTUS
$6,000,000,000
Phillips Petroleum Company
Debt Securities
Preferred Stock
Securities Warrants
Depositary Shares
Common Stock
Stock Purchase Contracts or Units
Prepaid Stock Purchase Contracts
----------------
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.
April 27, 2000
<PAGE>
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, 1999,
and our Current Reports on Form 8-K dated as of February 4, 2000, February 15,
2000, April 13, 2000, and April 18, 2000, 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,
2
<PAGE>
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>
Years Ended December 31
------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges................... 3.6 2.0 5.4 6.9 3.4
Ratio of earnings to combined fixed charges and
preferred stock dividends........................... 3.6 2.0 5.4 6.9 3.4
</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
3
<PAGE>
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;
4
<PAGE>
. 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.
5
<PAGE>
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.
6
<PAGE>
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 rights of Phillips
(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 to be entered into between us and a warrant agent
we select.
You should review the applicable prospectus supplement for the specific
terms of any warrants that may be offered, including:
. the title of the warrants;
. the aggregate number of the warrants;
. the price or prices at which the warrants will be issued;
. the currency or currencies, including composite currencies, in which the
price of the warrants may be payable;
. the securities or rights of Phillips (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 the
warrants may be purchased;
. the date on which the right to exercise the warrants will commence and
the date on which that right will expire;
. if applicable, the minimum or maximum amount of the warrants that may be
exercised at any one time;
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. if applicable, the designation and terms of the securities with which
the warrants are issued and the number of warrants issued with each such
security;
. if applicable, the date on and after which the 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 the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the 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 February 29, 2000, we had 306,380,511 shares of common stock issued
(including 24,244,976 shares held in our treasury) of which 28,358,258 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, 1999, 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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PRINCIPAL OFFICES OF
PHILLIPS PETROLEUM COMPANY
Phillips Building
Bartlesville, Oklahoma 74004
TRUSTEE
U.S. Bank Trust National Association
100 Wall Street
New York, New York 10005
LUXEMBOURG STOCK EXCHANGE LISTING,
PAYING AND TRANSFER AGENT
Banque Generale du Luxembourg S.A.
50 Avenue J.F. Kennedy
L-2951 Luxembourg
LEGAL ADVISORS
To Phillips Petroleum as to To the Underwriters
United States Law as to the United States Law
Robert C. Koch, Esq. Davis Polk & Wardwell
Senior Counsel 450 Lexington Avenue
Phillips Petroleum Company New York New York 10017
1230 Adams Building
Bartlesville, Oklahoma 74004
AUDITORS TO
PHILLIPS PETROLEUM
Ernst & Young LLP
3900 One Williams Ctr.
Tulsa, Oklahoma 74101
<PAGE>
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$2,500,000,000
[PHILLIPS PETROLEUM LOGO]
Phillips Petroleum Company
$1,150,000,000 8.5% Notes due 2005
$1,350,000,000 8.75% Notes due 2010
-----------------------
PROSPECTUS SUPPLEMENT
-----------------------
Merrill Lynch & Co.
J.P. Morgan & Co.
Banc of America Securities LLC
Chase Securities Inc.
May 18, 2000
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