<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-10867
PROSPECTUS SUPPLEMENT
(To Prospectus dated September 5, 1996)
[SERVICE CORPORATION INTERNATIONAL LOGO]
SERVICE CORPORATION INTERNATIONAL
$300,000,000
6.30% DEALER REMARKETABLE SECURITIES(SM)("Drs.(SM)") DUE MARCH 15, 2020
Interest payable March 15 and September 15
The Dealer remarketable securities(SM)("Drs.(SM)") due March 15, 2020 (the
"Stated Maturity Date") of Service Corporation International (the "Company")
will bear interest at a rate of 6.30% per annum from March 16, 1998 to but not
including March 15, 2003 (the "First Remarketing Date"). Interest on the Drs. is
payable semi-annually on March 15 and September 15 of each year, commencing
September 15, 1998. The Drs. are subject to mandatory tender on the First
Remarketing Date and on March 15, 2010 (the "Second Remarketing Date" and
together with the "First Remarketing Date", the "Remarketing Dates"). If J.P.
Morgan Securities Inc., as Remarketing Dealer (the "Remarketing Dealer"), has
elected to remarket the Drs. on either Remarketing Date as described herein, the
Drs. will be subject to mandatory tender to the Remarketing Dealer at 100% of
the principal amount thereof for remarketing on such Remarketing Date. See
"Description of the Drs. -- Mandatory Tender of Drs.; Remarketing." If the
Remarketing Dealer elects not to remarket the Drs. on any Remarketing Date, or
for any reason does not purchase all of the Drs. on such Remarketing Date, the
Company will be required to purchase on such Remarketing Date any Drs. that have
not been purchased by the Remarketing Dealer at 100% of the principal amount
thereof plus accrued interest, if any. See "Description of the Drs. --
Repurchase."
The Drs. will not be redeemable by the Company, except on the Remarketing Dates
on the terms described in "Description of the Drs. -- Redemption."
The Drs. will be represented by one or more global securities registered in the
name of The Depository Trust Company ("DTC") or its nominee. Interests in the
global securities will be shown on, and transfers thereof will be effected only
through, records maintained by DTC and its participants. Purchasers of the Drs.
will not have the right to receive physical certificates evidencing their
ownership of the Drs. The Drs. will not be listed on any securities exchange.
Settlement for the Drs. will be made in immediately available funds and the Drs.
will trade in DTC's Same-Day Funds Settlement System until maturity. Secondary
market trading activity in the Drs. will therefore settle in immediately
available funds. All payments of principal and interest will be made by the
Company in immediately available funds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Drs. will be offered by the Underwriters at varying prices based on
prevailing market prices at the time of resale. The net proceeds to the Company
will be 103.790% of the principal amount of the Drs. and the aggregate net
proceeds to the Company will be $311,370,000 plus accrued interest, if any, from
March 16, 1998, before deducting estimated expenses of $150,000 payable by the
Company. The net proceeds include a premium paid by the Remarketing Dealer for
the right to require the mandatory tender of all outstanding Drs. See
"Underwriting."
The Drs. are being offered by the Underwriters, subject to prior sale, when, as
and if delivered to and accepted by the Underwriters, and subject to approval of
certain legal matters by Cahill Gordon & Reindel, counsel for the Underwriters,
and certain other conditions. It is expected that delivery of the Drs. will be
made through the book-entry facilities of DTC against payment therefor in
immediately available funds on or about March 16, 1998.
J.P. MORGAN & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
UBS SECURITIES
March 11, 1998
- ---------------------
"Dealer remarketable securities(SM)" and "Drs.(SM)" are service marks of J.P.
Morgan Securities Inc.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE Drs. SPECIFICALLY, THE
UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND MAY BID FOR, AND
PURCHASE, THE Drs. IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus and, if given or made, such other information or representations must
not be relied upon as having been authorized by the Company or any Underwriter.
Neither this Prospectus Supplement nor the accompanying Prospectus constitutes
an offer by the Company or by any Underwriter to sell or a solicitation of an
offer to buy any securities in any jurisdiction in which such offer or
solicitation is not authorized or in which such person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
for the Company or such Underwriter to make such offer or solicitation in such
jurisdiction. Neither the delivery of this Prospectus Supplement and the
accompanying Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company since the date hereof.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company................................................. S-3
Recent Developments......................................... S-4
Selected Financial Data..................................... S-4
Use of Proceeds............................................. S-5
Description of Drs. ........................................ S-6
Certain United States Federal Income Tax Considerations..... S-11
Underwriting................................................ S-15
Legal Matters............................................... S-16
Experts..................................................... S-16
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
Available Information....................................... 3
Incorporation of Certain Documents by Reference............. 4
The Company................................................. 5
Use of Proceeds............................................. 5
Description of Company Debt Securities...................... 5
Description of Capital Stock................................ 22
Description of Common Stock Warrants........................ 25
Plan of Distribution........................................ 27
Legal Matters............................................... 27
Experts..................................................... 27
</TABLE>
S-2
<PAGE> 3
THE COMPANY
References to the "Company" or "SCI" herein should be read as referring to
Service Corporation International and its subsidiaries, except where the context
indicates otherwise.
The Company is the largest provider of death care services and products in the
world. As of December 31, 1997, SCI owned and operated 3,127 funeral service
locations, 392 cemeteries and 166 crematoria located in 17 countries on five
continents.
SCI provides all professional services relating to funerals, burials and
cremations, including the use of funeral homes and motor vehicles, the
performance of cemetery interment services and the management and maintenance of
cemetery grounds. It sells caskets, coffins, burial vaults and garments,
cemetery interment rights, including mausoleum spaces and lawn crypts, stone and
bronze memorials, cremation receptacles and related merchandise. SCI sells its
services and products to client families both at and prior to the time of need.
In addition, SCI's finance subsidiary, Provident Services, Inc., provides
financing to independent funeral home and cemetery operators.
SCI's strategy is to:
-Continue to expand through the acquisition and construction, both
domestically and internationally, of funeral homes, cemeteries and
crematoria in areas with demographics that SCI believes to be favorable;
-Increase the operating margins of its existing and acquired facilities by
having those facilities share resources pursuant to SCI's cluster
strategy;
-Increase revenue per location through the merchandising of a broad line of
funeral and cemetery products and services, both on a pre-need and at-need
basis; and
-Increase future volume and revenues through the sale of prearranged
funeral services.
ACQUISITION STRATEGY
Over the past several years, SCI has made a significant number of acquisitions.
SCI continues to aggressively pursue acquisition opportunities, as acquisitions
form a critical part of SCI's growth strategy, which acquisitions could,
individually or in the aggregate, be significant in size. Such acquisitions
could be financed through the issuance of securities, borrowings, cash flow from
operations or a combination thereof. SCI seeks acquisitions in geographic areas
in which it presently operates, as well as in new geographic areas.
SCI's acquisition strategy focuses on acquiring premier funeral homes and
cemeteries in metropolitan areas with demographics that SCI believes to be
favorable and in which the cluster strategy can be implemented. SCI typically
retains former owners and key managers of acquired businesses in an effort to
assure that service quality is maintained and that the businesses' reputation,
heritage and local relationships remain intact. Acquired funeral homes and
cemeteries retain their original trade names in substantially all cases.
In evaluating specific properties for acquisition, SCI considers a number of
factors including demographics, location, reputation, heritage, physical size,
volume of business, profitability, available cemetery property inventory, name
recognition, aesthetics, potential for development or expansion, competitive
position, pricing structure and quality of operating management. SCI follows a
disciplined approach based on specific financial criteria for determining
acquisition prices. There can be no assurance that acquisition prospects will
continue to be available in attractive locations at prices acceptable to SCI.
S-3
<PAGE> 4
RECENT DEVELOPMENTS
For the year ended December 31, 1997, the Company has reported revenues of $2.5
billion, net income of $334 million and diluted earnings per share of $1.31
(basic of $1.36). These results represent a 7.6% increase in revenues, a 25.8%
increase in net income and a 21.3% increase in diluted earnings per share (20.4%
increase in basic) when compared to 1996.
For the three months ended December 31, 1997, the Company reported revenues of
$644 million, net income of $92 million and diluted earnings per share of $.36
(basic of $.36). These results represent a 5.7% increase in revenues, a 24.6%
increase in net income and a 20% increase in diluted earnings per share (16.1%
increase in basic) over the same period in 1996.
On February 12, 1998, the Company announced a 20% increase in its quarterly cash
dividend to $.09 per share, payable April 30, 1998 to shareholders of record on
April 15, 1998.
The Company has recently increased the amount available under its commercial
paper program from $450 million to $600 million. The Company has also
restructured its Canadian indebtedness, of which approximately US$148 million
has a put feature allowing the lender to require the Company to purchase any
outstanding indebtedness upon request. This indebtedness has a one-year
revolving period with a five-year term period, and is pre-payable at any time by
the Company.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------------- -------------------------------------------------
1997 1996 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues.................................... $1,824,408 $1,684,702 $2,294,194 $1,652,126 $1,117,175 $ 899,178
Income before income taxes.................. 438,407 299,565 413,881 294,211 219,021 173,492
Income before cumulative effect of change in
accounting principles..................... 241,870 191,542 265,298 183,588 131,045 103,092
Net income.................................. 241,870 191,542 265,298 183,588 131,045 101,061
Earnings per share:
Basic..................................... 1.00 .82 1.13 .92 .76 .61
Diluted................................... .95 .78 1.08 .86 .71 .58
Dividends per share......................... .23 .18 .24 .22 .21 .20
Total assets................................ 9,737,921 8,339,178 8,869,770 7,672,387 5,161,888 3,683,304
Long-term debt.............................. 2,317,259 1,953,333 2,048,737 1,712,464 1,330,177 1,062,222
Convertible preferred securities of
SCI Finance LLC........................... -- 172,500 172,500 172,500 172,500 --
Stockholders' equity........................ 2,617,543 2,143,213 2,235,317 1,975,345 1,196,622 884,513
Shares outstanding.......................... 251,837 235,642 236,193 234,542 189,714 169,718
Ratio of earnings to fixed charges*......... 4.35 3.19 3.24 2.84 3.13 3.19
</TABLE>
- ---------------
* Ratio of earnings to fixed charges for 1992 was 3.03. For purposes of
computing the ratio of earnings to fixed charges, earnings consist of income
from continuing operations before income taxes, less undistributed income of
equity investees which are less than 50% owned, plus the minority interest of
majority-owned subsidiaries with fixed charges and plus fixed charges
(excluding capitalized interest). Fixed charges consist of interest expense,
whether capitalized or expensed, amortization of debt costs, dividends on
preferred securities of SCI Finance LLC and one-third of rental expense which
the Company considers representative of the interest factor in the rentals.
S-4
<PAGE> 5
USE OF PROCEEDS
The net proceeds from the sale of the Drs. offered hereby are estimated to be
$311.4 million. The Company has incurred certain indebtedness under the
Company's revolving credit facilities with certain banks (the "Revolving Credit
Facilities") and through the issuance of commercial paper backed by the
Revolving Credit Facilities for acquisitions and to finance the repayment of
certain long-term debt. The Company expects to use the net proceeds from the
offering of the Drs., and the concurrent offering of $200 million aggregate
principal amount of its 6.50% Notes due 2008 (the "6.50% Notes Due 2008")
pursuant to a separate prospectus supplement, to repay a portion of the
indebtedness under the Revolving Credit Facilities and commercial paper backed
by the Revolving Credit Facilities. Pending such uses, net proceeds may be
invested in short-term investments. As of March 5, 1998, approximately $236.8
million was outstanding under the Revolving Credit Facilities at a weighted
average annual interest rate of 6.44% with maturities ranging from one to 147
days; and approximately $312.7 million of commercial paper was outstanding
backed by the Revolving Credit Facilities at a weighted average annual interest
rate of 5.67% with maturities ranging from one to 12 days. Affiliates of certain
of the Underwriters are lenders under the Revolving Credit Facilities and will
receive a portion of the proceeds from the offering. See "Underwriting." The
Company may engage in additional public or private offerings of debt which,
individually or in the aggregate, may be material in amount, for the purposes
described herein or for other purposes.
S-5
<PAGE> 6
DESCRIPTION OF THE DRS.
GENERAL
The Drs. are to be issued as a series of debt securities under the Senior
Indenture, dated as of February 1, 1993, as supplemented (the "Indenture"),
between the Company and The Bank of New York, a New York banking corporation, as
trustee (the "Trustee"), which is more fully described in the accompanying
Prospectus. The following description of the terms of the Drs. supplements the
description of the general terms and provisions of the Company Senior Debt
Securities (as defined in the accompanying Prospectus) set forth in the
accompanying Prospectus. If these descriptions are inconsistent, then the
description in this Prospectus Supplement shall govern.
The Drs. will be limited to $300,000,000 aggregate principal amount.
The Drs. will bear interest at an annual rate of 6.30% to but not including
March 15, 2003 (the "First Remarketing Date"). The Drs. will bear interest from
March 15, 1998, payable semi-annually on March 15 and September 15 of each year
(each, an "Interest Payment Date"), commencing September 15, 1998 to the persons
in whose name the Drs. are registered on the fifteenth calendar day (whether or
not a Business Day) immediately preceding the related Interest Payment Date
(each, a "Record Date"). "Business Day" means any day other than a Saturday, a
Sunday or a day on which banking institutions in The City of New York are
authorized or obligated by law, executive order or governmental decree to be
closed.
If the Remarketing Dealer remarkets the Drs. on the First Remarketing Date,
then, after the First Remarketing Date, the interest rate on the Drs. will be
reset at a fixed rate until March 15, 2010 (the "Second Remarketing Date" and
together with the First Remarketing Date, the "Remarketing Dates"), and if the
Remarketing Dealer remarkets the Drs. on the Second Remarketing Date, then,
after the Second Remarketing Date, the interest rate on the Drs. will be reset
again at a fixed rate until the Stated Maturity Date (as defined), in each case
as determined by the Remarketing Dealer based on bids requested from dealers in
the Company's publicly-traded debt securities. See "-- Mandatory Tender of Drs.;
Remarketing."
The Drs. will mature on March 15, 2020 (the "Stated Maturity Date"). If the
Remarketing Dealer elects to remarket the Drs. on either Remarketing Date, then
the Drs. will be subject to mandatory tender to the Remarketing Dealer, for
purchase at 100% of the principal amount thereof on such Remarketing Date on the
terms and subject to the conditions described herein (interest accrued to but
not including such Remarketing Date will be paid by the Company on such date to
holders on the immediately preceding Record Date). See "-- Mandatory Tender of
Drs.; Remarketing." If the Remarketing Dealer does not elect to exercise its
right to a mandatory tender of the Drs. on either Remarketing Date, or for any
reason does not purchase all of the Drs. on such Remarketing Date, then the
Company is required to repurchase any Drs. that have not been purchased by the
Remarketing Dealer from the holders thereof at 100% of the principal amount
thereof plus accrued interest, if any. See "-- Repurchase." The Drs. will not be
redeemable, except that, under the circumstances and on the terms described
under "-- Redemption," the Company may exercise its right to redeem the Drs.
from the Remarketing Dealer on either Remarketing Date.
The Drs. will be issued in the form of one or more registered global securities
and will be deposited with, or on behalf of, DTC and registered in the name of
DTC or its nominee. See "-- Book-Entry System." Settlement for the Drs. will be
made in immediately available funds and the Drs. will trade in DTC's Same-Day
Funds Settlement System until maturity. Secondary market trading activity in the
Drs. will therefore settle in immediately available funds. All payments of
principal and interest will be made by the Company in immediately available
funds.
Although the United States federal income tax treatment of the Drs. is not
certain, the terms of the Drs. provide that the Company and all holders of the
Drs. agree to treat the Drs. as fixed rate debt instruments that mature on the
First Remarketing Date for United States federal income tax purposes. See
"Certain United States Federal Income Tax Considerations."
All Company Senior Debt Securities, including Drs., issued and to be issued
under the Indenture will be unsecured and will rank pari passu with all other
Company Senior Debt Securities issued or to be issued under the Indenture and
all other unsecured and unsubordinated indebtedness of the Company from time to
time outstanding.
As of December 31, 1997, the Company had outstanding Company Senior Debt
Securities in the principal amount of $1,657 million under the Indenture. The
Indenture does not limit the amount of Company Senior Debt Securities which may
be issued thereunder.
S-6
<PAGE> 7
MANDATORY TENDER OF DRS.; REMARKETING
The following description sets forth the terms and conditions of the remarketing
of the Drs. on either Remarketing Date, if the Remarketing Dealer elects to
purchase the Drs. on such Remarketing Date for remarketing.
Mandatory Tender
If the Remarketing Dealer gives notice to the Company and the Trustee on a
Business Day not later than fifteen Business Days prior to either Remarketing
Date (each a "Notification Date") of its intention to purchase all of the
outstanding Drs., for remarketing on such Remarketing Date, all outstanding Drs.
will be automatically tendered to the Remarketing Dealer for purchase on such
Remarketing Date, except in the circumstances described under "-- Repurchase."
The purchase price of the Drs. will be equal in each case to 100% of the
principal amount thereof. When the Drs. are tendered for remarketing, the
Remarketing Dealer may remarket the Drs. for its own account at varying prices
to be determined by the Remarketing Dealer at the time of each sale or may sell
such Drs. to the Reference Corporate Dealer (defined below) submitting the
lowest firm, committed bid on the relevant Determination Date (defined below),
as described below.
If the Remarketing Dealer remarkets the Drs. on the First Remarketing Date, then
from and including the First Remarketing Date to but excluding the Second
Remarketing Date, the Drs. will bear interest at the First Reset Interest Rate
(determined as provided below), and, if the Remarketing Dealer remarkets the
Drs. on the Second Remarketing Date, then from and including the Second
Remarketing Date to but excluding the Stated Maturity Date, the Drs. will bear
interest at the Second Reset Interest Rate (determined as provided below). If
the Remarketing Dealer elects to remarket the Drs. on either Remarketing Date,
the obligation of the Remarketing Dealer to purchase the Drs. on such
Remarketing Date is subject to several conditions set forth in a Remarketing
Agreement between the Company and the Remarketing Dealer (the "Remarketing
Agreement"). In addition, the Remarketing Dealer may terminate the Remarketing
Agreement at any time upon the occurrence of certain events set forth therein.
See "-- The Remarketing Dealer." If for any reason the Remarketing Dealer does
not purchase all outstanding Drs. on any Remarketing Date, the Company will be
required on such Remarketing Date to repurchase any Drs. that have not been
purchased by the Remarketing Dealer from the holders thereof at a price equal to
the principal amount thereof plus all accrued interest, if any. See
"-- Repurchase."
The Remarketing Dealer shall determine the interest rate the Drs. will bear from
and including the First Remarketing Date to but excluding the Second Remarketing
Date (the "First Reset Interest Rate") and from and including the Second
Remarketing Date to but excluding the Stated Maturity Date (the "Second Reset
Interest Rate" and, together with the First Reset Interest Rate, the "Reset
Interest Rates") on the third Business Day immediately preceding the relevant
Remarketing Date (each a "Determination Date") by soliciting by 3:30 p.m., New
York City time, on such Determination Date the Reference Corporate Dealers
(defined below) for firm, committed bids to purchase all outstanding Drs. at the
Dollar Price (defined below), and by selecting the lowest such firm, committed
bid (regardless of whether each of the Reference Corporate Dealers actually
submits a bid). Each bid shall be expressed in terms of the Reset Interest Rate
that the Drs. would bear (quoted as a spread over 5.63% per annum (the "Base
Rate")) based on the following assumptions:
(i) the Drs. would be sold to such Reference Corporate Dealer on the
relevant Remarketing Date for settlement on the same day;
(ii) the Drs. would mature on the Second Remarketing Date or the Stated
Maturity Date, as the case may be; and
(iii) the Drs. would bear interest at the rate bid by such Reference
Corporate Dealer, payable semi-annually on the Interest Payment Dates for
the Drs. from and including the First Remarketing Date to but excluding the
Second Remarketing Date or from and including the Second Remarketing Date
to but excluding the Stated Maturity Date, as the case may be.
The relevant Reset Interest Rate announced by the Remarketing Dealer as a result
of such process will be quoted to the nearest one hundred-thousandth (0.00001)
of one percent per annum and, absent manifest error, will be binding and
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<PAGE> 8
conclusive upon the holders of the Drs., the Company and the Trustee. The
Remarketing Dealer shall have the discretion to select the time at which each
Reset Interest Rate is determined on the relevant Determination Date.
"Dollar Price" means, with respect to each Remarketing Date, the greater of (1)
100% of the principal amount of the Drs. and (2) the discounted present value to
such Remarketing Date of the cash flows on a bond
(x) with a principal amount equal to the aggregate principal amount of
the Drs.,
(y) maturing on (i) the Second Remarketing Date (in the case of a
determination made in connection with the First Remarketing Date), or (ii)
the Stated Maturity Date (in the case of a determination made in connection
with the Second Remarketing Date) and
(z) bearing interest at a rate equal to the Base Rate,
using a discount rate equal to the Treasury Rate (defined below), payable
semi-annually (assuming a 360-day year consisting of twelve 30-day months) on
the interest payment dates of the Drs.
(i) in the case of a determination made in connection with the First
Remarketing Date, from and including the First Remarketing Date to but
excluding the Second Remarketing Date, or
(ii) in the case of a determination made in connection with the Second
Remarketing Date, from and including the Second Remarketing Date to but
excluding the Stated Maturity Date.
"Reference Corporate Dealer" means J.P. Morgan Securities Inc., Morgan Stanley &
Co. Incorporated, UBS Securities LLC, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Chase Securities Inc. If any of such persons shall cease to be
a leading dealer of publicly-traded debt securities of the Company, then the
Remarketing Dealer may replace, with the approval of the Company (not to be
unreasonably withheld), such person with any other leading dealer of publicly-
traded debt securities of the Company.
"Treasury Rate" means, with respect to any Determination Date, the annual rate
equal to the semi-annual equivalent yield to maturity or interpolated (on a
30/360 day count basis) yield to maturity on such Determination Date of the
Comparable Treasury Issue (defined below) for value on the relevant Remarketing
Date, assuming a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price (as
defined below).
"Comparable Treasury Issue" means, with respect to any Determination Date, the
United States Treasury security selected by the Remarketing Dealer as having an
actual maturity on such Determination Date (or the United States Treasury
securities selected by the Remarketing Dealer to derive an interpolated maturity
on such Determination Date) comparable to (i) the time remaining to the Second
Remarketing Date (in the case of a determination made in connection with the
First Remarketing Date), or (ii) the remaining term of the Drs. (in the case of
a determination made in connection with the Second Remarketing Date).
"Comparable Treasury Price" means, with respect to any Determination Date, (a)
the offer prices for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) on such Determination Date, as set forth on Telerate Page
500 (as defined below), adjusted to reflect settlement on the relevant
Remarketing Date if prices quoted on Telerate Page 500 are for settlement on any
date other than such Remarketing Date, or (b) if such page (or any successor
page) is not displayed or does not contain such offer prices on such Business
Day, (i) the average of five Reference Treasury Dealer Quotations for such
Remarketing Date, after excluding the highest and lowest of such Reference
Treasury Dealer Quotations (unless there is more than one highest or lowest
quotation, in which case only one such highest and/or lowest quotation shall be
excluded) or (ii) if the Remarketing Dealer obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such Reference Treasury
Dealer Quotations.
"Telerate Page 500" means the display designated as "Telerate Page 500" on Dow
Jones Markets Limited (or such other page as may replace Telerate Page 500 on
such service) or such other service displaying the offer prices specified in (a)
above as may replace Dow Jones Markets Limited.
"Reference Treasury Dealer Quotations" means, with respect to each Determination
Date and each Reference Treasury Dealer, the offer price(s) for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) for
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<PAGE> 9
settlement on the relevant Remarketing Date quoted in writing to the Remarketing
Dealer by such Reference Treasury Dealer by 3:30 p.m., New York City time, on
such Determination Date.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in
The City of New York (which may include the Remarketing Dealer) selected by the
Remarketing Dealer.
Notification of Results; Settlement
If the Remarketing Dealer has elected to remarket the Drs. on either Remarketing
Date as provided herein, then the Remarketing Dealer will notify the Company,
the Trustee and DTC by telephone, confirmed in writing, by 5:00 p.m., New York
City time, on the relevant Determination Date, of the relevant Reset Interest
Rate.
All of the outstanding Drs. will be automatically delivered to the account of
the Trustee by book-entry through DTC, pending payment of the purchase price
therefor, on the relevant Remarketing Date.
The Remarketing Dealer will make, or cause the Trustee to make, payment to DTC
by the close of business on the relevant Remarketing Date against delivery
through DTC of the Drs., of the purchase price for all of the Drs. tendered. The
purchase price of the outstanding Drs. will be equal to 100% of the principal
amount thereof. If the Remarketing Dealer does not purchase all of the Drs. on
such Remarketing Date, then the Company is obliged to make or cause to be made
such payment for all of the Drs. not purchased by the Remarketing Dealer, as
described below under "-- Repurchase." In any case, the Company will make, or
cause the Trustee to make, payment of interest due on such Remarketing Date to
holders of Drs. as of the relevant Record Date by book entry through DTC by the
close of business on such Remarketing Date.
The tender and settlement procedures described above may be modified without the
consent of the holders of the Drs. to the extent required by DTC or, if the
book-entry system is no longer available for the Drs. at the time of the
remarketing, to the extent required to facilitate the tendering and remarketing
of Drs. in certificated form. In addition, the Remarketing Dealer may modify
without any such consent the settlement procedures set forth above in order to
facilitate the settlement process.
As long as DTC's nominee holds the certificates representing any Drs. in the
book entry system of DTC, no certificates for such Drs. will be delivered by or
to any selling beneficial owner to reflect any transfer of such Drs. effected in
the remarketing. In addition, under and subject to the terms of the Drs. and the
Remarketing Agreement, the Company (i) has agreed that it will use its best
efforts to maintain the Drs. in book-entry form with DTC or any successor
thereto and to appoint a successor depositary to the extent necessary to
maintain the Drs. in book-entry form and (ii) has waived any discretionary right
it otherwise has under the Indenture to cause the Drs. to be issued in
certificated form.
For further information with respect to transfers and settlement through DTC,
see "-- Book-Entry System" below, and "Description of Company Debt
Securities -- Provisions Applicable to Company Senior Debt Securities, Company
Senior Subordinated Debt Securities and Company Subordinated Debt
Securities -- Global Securities" in the accompanying Prospectus.
The Remarketing Dealer
On or prior to the date of issuance of the Drs., the Company and the Remarketing
Dealer will enter into the Remarketing Agreement which will provide for the Drs.
to be remarketed substantially on the terms described below and in "-- Mandatory
Tender of Drs.; Remarketing." The Remarketing Dealer will not receive any fees
from the Company in connection with the remarketing, but the Company will
reimburse the Remarketing Dealer's reasonable out-of-pocket expenses under
certain circumstances.
The Company will agree to indemnify the Remarketing Dealer against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"), arising out of or in connection with its duties under
the Remarketing Agreement.
If the Remarketing Dealer elects to remarket the Drs. on either Remarketing Date
as described herein, the obligation of the Remarketing Dealer to purchase Drs.
from holders thereof will be subject to several conditions set forth in the
Remarketing Agreement. In addition, the Remarketing Agreement will provide for
the termination thereof by the Remarketing Dealer on or before either
Remarketing Date upon the occurrence of certain events, including events that
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would customarily give underwriters the right to terminate an underwriting
agreement or would give rise to a failure to satisfy a closing condition to an
underwriting agreement in the Company's public debt offerings.
As a result of these conditions and termination rights, holders of Drs. cannot
be assured that their Drs. will be purchased by the Remarketing Dealer in
connection with a mandatory tender on either Remarketing Date. The Remarketing
Dealer is not required to purchase the Drs. and no holder of any Drs. shall have
any rights or claims under the Remarketing Agreement or against the Company or
the Remarketing Dealer as a result of the Remarketing Dealer not purchasing such
Drs. If the Remarketing Dealer does not purchase all of the Drs. on either
Remarketing Date, the Company will be required to purchase on such Remarketing
Date any Drs. that have not been purchased by the Remarketing Dealer on such
Remarketing Date at 100% of the principal amount thereof plus accrued interest,
if any. See "-- Repurchase."
The Remarketing Agreement will also provide that the Remarketing Dealer may
resign at any time as Remarketing Dealer, such resignation to be effective (i)
ten Business Days after the delivery to the Company and the Trustee of notice of
such resignation or (ii) immediately upon termination of the Remarketing
Agreement. In such case, the Company shall have the right, but not the
obligation, to appoint a successor Remarketing Dealer.
The Remarketing Dealer, in its individual or any other capacity, may buy, sell,
hold and deal in any of the Drs. The Remarketing Dealer, as a holder or
beneficial owner of Drs., may exercise any vote or join in any action which any
holder or beneficial owner of Drs. may be entitled to exercise or take with like
effect as if it did not act in any capacity under the Remarketing Agreement. The
Remarketing Dealer, in its individual capacity, either as principal or agent,
may also engage in or have an interest in any financial or other transaction
with the Company as freely as if it did not act in any capacity under the
Remarketing Agreement.
REPURCHASE
If the Remarketing Dealer for any reason does not purchase all of the Drs. on
either Remarketing Date, the Company shall repurchase on such Remarketing Date,
at a price equal to 100% of the principal amount of the Drs. plus all accrued
and unpaid interest, if any, on the Drs. to (but excluding) the relevant
Remarketing Date, any Drs. that have not been purchased by the Remarketing
Dealer on such Remarketing Date.
REDEMPTION
If the Remarketing Dealer has elected to remarket the Drs. on either Remarketing
Date, the Company shall have the right to redeem the Drs., in whole but not in
part, from the Remarketing Dealer on such Remarketing Date at a redemption price
equal to the sum of (i) 100% of the aggregate principal amount of the Drs. and
(ii) the Call Price specified in the Remarketing Agreement, by giving notice of
such redemption to the Remarketing Dealer no later than the later of
(x) one Business Day prior to the relevant Determination Date or
(y) if fewer than three Reference Corporate Dealers timely submit firm,
committed bids for all outstanding Drs. to the Remarketing Dealer on the
relevant Determination Date, immediately after the deadline set by the
Remarketing Dealer for receiving such bids has passed.
In either such case, it shall pay such redemption price for the Drs. in same-day
funds by wire transfer on the relevant Remarketing Date to an account designated
by the Remarketing Dealer.
The Drs. are not otherwise subject to redemption.
BOOK-ENTRY SYSTEM
The Drs. will be issued in the form of one or more fully registered global
securities that will be deposited with, or on behalf of, DTC and registered in
the name of DTC's nominee.
DTC 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
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of Section 17A of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). DTC holds securities that its participants ("Participants") deposit with
DTC. DTC also facilitates the settlement among Participants of securities
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. DTC Participants include securities brokers
and dealers, banks, trust companies, clearing corporations, and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission (the "Commission").
Payments of principal of, premium, if any, and interest on the Drs. will be made
to Cede & Co., as nominee of DTC. DTC's practice is to credit Direct
Participant's accounts on the related payment date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to
beneficial owners of the Drs. will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Trustee or any Paying
Agent under the Indenture, or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal and interest to Cede & Co. is the responsibility of the Company or the
Trustee or any Paying Agent, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such
payments to the beneficial owners of the Drs. shall be the responsibility of
Direct and Indirect Participants.
DTC may decide to discontinue providing its services as securities depositary
with respect to the Drs. at any time by giving notice to the Company or the
Trustee. Under such circumstances, in the event that a successor securities
depositary is not obtained, Drs. certificates are required to be printed and
delivered.
Neither the Company, the Trustee, any Paying Agent nor any Registrar for the
Drs. will have any responsibility or liability for any aspect of the records
maintained by DTC relating to, or payments made on account of beneficial
ownership interests in, Drs. represented in global form, or for maintaining,
supervising or receiving any records relating to such beneficial ownership
interests maintained by DTC.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The following is a general discussion of the principal U.S. federal income tax
consequences of the purchase, ownership and disposition of the Drs. to initial
holders purchasing Drs. at the "issue price." The "issue price" of a Drs. will
equal the first price to the public (not including bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers) at which a substantial amount of the Drs. is
sold for money. This summary is based upon laws, regulations, rulings and
decisions currently in effect, all of which are subject to change, which change
may be retroactive. Moreover, it deals only with purchasers who hold Drs. as
"capital assets" (generally, property held for investment) within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"), and
does not purport to deal with persons in special tax situations, such as
financial institutions, insurance companies, regulated investment companies,
dealers in securities or currencies, persons holding Drs. as a hedge against
currency risk or as a position in a "straddle," "conversion" or another
integrated transaction for tax purposes, or U.S. Holders (as defined below)
whose functional currency is not the U.S. dollar. In addition, this discussion
only addresses the U.S. federal income tax consequences of the Drs. until the
First Remarketing Date.
As used herein, the term "U.S. Holder" means a beneficial owner of Drs. that is,
for U.S. federal income tax purposes, (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or of any political subdivision thereof
(other than a partnership that is not treated as a U.S. person under any
applicable Treasury regulations and certain partnerships that have one or more
partners who are not U.S. persons) or (iii) an estate or trust whose income is
subject to U.S. federal income tax regardless of its source. As used herein, the
term "non-U.S. Holder" means a beneficial owner of a Drs. that is, for U.S.
federal income tax purposes, (i) a nonresident alien individual, (ii) a foreign
corporation, (iii) a nonresident alien fiduciary of a foreign estate or trust
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or (iv) a foreign partnership one or more of the members of which is, for U.S.
federal income tax purposes, a nonresident alien individual, a foreign
corporation or a nonresident alien fiduciary of a foreign estate or trust.
Because the Drs. are subject to mandatory tender for purchase by the Remarketing
Dealer or purchase by the Company if not purchased by the Remarketing Dealer on
the First Remarketing Date, the Company intends to treat the Drs. as maturing on
the First Remarketing Date for U.S. federal income tax purposes and as being
reissued on the First Remarketing Date should the Remarketing Dealer remarket
the Drs. By purchasing the Drs., a holder agrees to follow such treatment for
U.S. federal income tax purposes. Because no debt instrument closely comparable
to the Drs. has been the subject of any Treasury regulation, revenue ruling or
judicial decision, the U.S. federal income tax treatment of the Drs. is not
certain. Prospective purchasers should note that no rulings have been or are
expected to be sought from the Internal Revenue Service ("IRS") with respect to
any of the issues discussed herein, and no assurance can be given that the IRS
will not take contrary positions. Accordingly, significant aspects of the U.S.
federal income tax consequences of an investment in the Drs. are uncertain, and
no assurance can be given that the IRS or the courts will agree that the Drs.
should be treated as maturing on the First Remarketing Date. Furthermore, no
advice has been received or is expected to be sought from any state, local or
foreign taxing authority as to the income, franchise, personal property or other
taxation, or as to the treatment, of the Drs. by any such state, local or
foreign jurisdiction. PROSPECTIVE PURCHASERS ARE STRONGLY URGED TO CONSULT THEIR
TAX ADVISERS REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT
IN THE DRS. (INCLUDING ALTERNATIVE CHARACTERIZATIONS OF THE DRS.). EXCEPT WHERE
INDICATED TO THE CONTRARY, THE FOLLOWING DISCUSSION ASSUMES THAT THE COMPANY'S
TREATMENT OF THE DRS. WILL BE RESPECTED FOR U.S. FEDERAL INCOME TAX PURPOSES.
PROSPECTIVE PURCHASERS SHOULD ALSO CONSULT THEIR TAX ADVISERS WITH RESPECT TO
ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN
TAXING JURISDICTION.
TAX TREATMENT OF U.S. HOLDERS
Assuming the characterization of the Drs. set forth above, the following tax
consequences will result with respect to U.S. Holders.
INTEREST INCOME
Interest on the Drs. will generally be taxable as ordinary income for U.S.
federal income tax purposes when received or accrued by a U.S. Holder in
accordance with its regular method of tax accounting. The Company does not
anticipate that the initial issuance of the Drs. will result in original issue
discount ("OID"), generally defined as the excess of the stated redemption price
at the maturity of the Drs. over its issue price. However, if a Drs. is issued
with OID, the holder of such debt instrument issued with OID generally will be
required to recognize as ordinary income the amount of OID on the debt
instrument as such discount accrues, in accordance with a constant yield method.
GAIN OR LOSS ON SALE OR REDEMPTION
When a Drs. is sold or redeemed, the U.S. Holder will recognize gain or loss
equal to the difference between the amount realized on the sale or redemption
(excluding any amount attributable to accrued interest not previously included
in income) and the adjusted basis in its Drs. The adjusted basis of the Drs.
generally will equal the U.S. Holder's cost, increased by any OID previously
includable in the U.S. Holder's income with respect to the Drs., and reduced by
the principal payments previously received with respect to the Drs. Gain or loss
on sale or redemption of a Drs. will generally be capital gain or loss.
Capital gains of individuals derived with respect to capital assets held for
more than one year are eligible for reduced rates of taxation depending upon the
holding period of such capital assets. The deductibility of capital losses is
subject to certain limitations.
ALTERNATIVE U.S. FEDERAL INCOME TAX TREATMENT
There can be no assurance that the IRS will agree with, or that a court will
uphold, the Company's treatment of the Drs. as maturing on the First Remarketing
Date and as thereafter being reissued should the Drs. be remarketed, and it is
possible that the IRS could assert another characterization. In particular, the
IRS could seek to treat the Drs. as maturing
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on the Stated Maturity Date and possibly also to treat the issue price of the
Drs. as including the value of the mandatory tender rights. Because of the
possible reset interest rate, if the Drs. were treated as maturing on the Stated
Maturity Date, Treasury regulations relating to contingent payment debt
obligations (the "Contingent Payment Debt Regulations") would apply. In such
case, the timing and character of income on the Drs. would be significantly
affected. Among other things, U.S. Holders, regardless of their regular method
of tax accounting, would be required to accrue income annually as OID, subject
to the adjustments described below, at a "comparable yield" on the adjusted
issue price, which could be higher than the actual cash payments received on the
Drs. in a taxable year. Furthermore, any gain realized with respect to the sale
or redemption of the Drs. would generally be treated as ordinary income, and any
loss realized would generally be treated as ordinary loss to the extent of the
U.S. Holder's ordinary income inclusions with respect to the Drs. Any remaining
loss generally would be treated as capital loss. In particular, upon the sale of
a Drs. (other than through the mandatory tender), the IRS could take the
position that the gain or loss with respect to the mandatory tender rights and
the gain or loss with respect to the debt obligation must be separately
determined, in which case any deemed loss with respect to the mandatory tender
rights would be treated as capital loss, and a corresponding amount of
additional ordinary income would need to be recognized by the U.S. Holder with
respect to the sale. The ability to use capital losses to offset ordinary income
in determining taxable income is generally limited.
PROSPECTIVE U.S. PURCHASERS ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISERS
REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE DRS.
TREATMENT OF NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to U.S. federal income or withholding tax
on payments of principal, premium (if any) or interest (including original issue
discount and accruals under the Contingent Payment Debt Regulations, if any) on
a Drs., unless such non-U.S. Holder owns actually or constructively 10% or more
of the total combined voting power of the Company, is a controlled foreign
corporation related to the Company through stock ownership or is a bank
receiving interest described in Section 881(c)(3)(A) of the Code. Sections
871(h) and 881(c) of the Code, and applicable Treasury regulations, require
that, in order to obtain the exemption from withholding tax described above,
either the beneficial owner of the Drs., or a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "Financial Institution") and that is
holding the Drs. on behalf of such beneficial owner, file a statement with the
withholding agent to the effect that the beneficial owner of the Drs. is not a
U.S. person. In general, such requirement will be fulfilled if the beneficial
owner of a Drs. certifies on IRS Form W-8, under penalties of perjury, that it
is not a U.S. person and provides its name and address, and any Financial
Institution holding the Drs. on behalf of the beneficial owner files a statement
with the withholding agent to the effect that it has received such statement
from the Holder (and furnishes the withholding agent with a copy thereof).
Generally, a non-U.S. Holder will not be subject to U.S. federal income tax on
any amount which constitutes gain upon retirement or disposition of a Drs.,
provided the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. Holder. Certain other exceptions
may be applicable, and a non-U.S. Holder should consult its tax adviser in this
regard.
If a non-U.S. Holder of a Drs. is engaged in a trade or business in the United
States, and if interest (including OID, if any) or gain on the Drs. is
effectively connected with the conduct of such trade or business, the non-U.S.
Holder, although exempt from the withholding tax discussed above, will generally
be subject to regular U.S. income tax on interest and on any gain realized on
the sale, exchange or other disposition of a Drs. in the same manner as if it
were a U.S. Holder. In lieu of the statement described above, such Holder will
be required to provide to the Company a properly executed Form 4224 (or
successor form) in order to claim an exemption from withholding tax. In
addition, if such non-U.S. Holder is a foreign corporation, it may be subject to
a branch profits tax equal to 30% (or such lower rate provided by an applicable
treaty) of its effectively connected earnings and profits for the taxable year,
subject to certain adjustments. For purposes of the branch profits tax, interest
on and any gain recognized on the sale, exchange or other disposition of a Drs.
will be included in the effectively connected earnings and profits of such
non-U.S. Holder if such interest or gain, as the case may be, is effectively
connected with the conduct by the non-U.S. Holder of a trade or business in the
United States.
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The Drs. will not be includable in the estate of a non-U.S. Holder unless the
individual is a direct or indirect 10% or greater shareholder of the Company or,
at the time of such individual's death, payments in respect of the Drs. would
have been effectively connected with the conduct by such individual of a trade
or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
A holder may be subject to backup withholding at the rate of 31% of the interest
and other "reportable payments" (including, under certain circumstances,
principal payments and sales proceeds) paid with respect to the Drs. if, in
general, the holder fails to comply with certain certification procedures and is
not an exempt recipient under applicable provisions of the Code.
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which make modifications to the withholding, backup withholding
and information reporting rules described above. The New Regulations will
generally be effective for payments made after December 31, 1998, subject to
certain transition rules. Prospective purchasers are urged to consult their tax
advisers regarding the New Regulations.
SUMMARY
THIS DISCUSSION IS INTENDED TO BE A GENERAL SUMMARY ONLY. DUE TO THE COMPLEXITY
OF THE RULES DESCRIBED ABOVE, THE CURRENT UNCERTAINTY AS TO THE MANNER OF THEIR
APPLICATIONS TO HOLDERS OF THE DRS. AND POSSIBLE CHANGES IN LAW, IT IS
PARTICULARLY IMPORTANT THAT PROSPECTIVE PURCHASERS CONSULT THEIR OWN TAX
ADVISERS REGARDING THE TAX TREATMENT OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE DRS. UNDER THE LAWS OF THE UNITED STATES AND THOSE OF ANY
STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
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UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters
named below have severally agreed to purchase, and the Company has agreed to
sell to them, severally, the respective amount of Drs. set forth opposite their
names below:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITERS AMOUNT OF DRS.
------------ --------------
<S> <C>
J.P. Morgan Securities Inc. ................................ $120,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................... 60,000,000
Morgan Stanley & Co. Incorporated........................... 60,000,000
UBS Securities LLC.......................................... 60,000,000
------------
Total.................................................. $300,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Drs. offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are committed to purchase all of the Drs.
offered hereby if any are purchased.
The Underwriters initially propose to offer the Drs. in part directly to the
public at varying prices based on prevailing market rates at the time of resale.
The Underwriters will purchase the Drs. at 99.290% of the principal amount
thereof. In addition, in consideration for the right to require the mandatory
tender of all outstanding Drs. as described above, the Remarketing Dealer will
pay to the Company, on the same date the Underwriters pay the purchase price for
the Drs., an amount equal to 4.50% of the principal amount of the Drs.
Consequently, the net proceeds to the Company will be $311,370,000, or 103.790%
of the principal amount of the Drs.
In the Underwriting Agreement, the Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
federal securities laws, or to contribute to payments the Underwriters may be
required to make in respect thereof. See also "Plan of Distribution" in the
accompanying Prospectus.
J.P. Morgan Securities Inc. ("JPMS"), Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and UBS Securities LLC and/or
their affiliates from time to time provide or may provide commercial banking
and/or investment banking services to the Company for which they receive or may
receive customary fees and expense reimbursement. JPMS is also acting as an
underwriter in connection with the offering of the 6.50% Notes Due 2008. Because
more than 10% of the net proceeds of the offering of the Drs. may be paid to
affiliates of certain Underwriters (see "Use of Proceeds"), this offering is
being conducted pursuant to the requirements of Rule 2710(c)(8) of the Conduct
Rules of the National Association of Securities Dealers, Inc.
In connection with the offering, the Underwriters may engage in transactions
that maintain or otherwise affect the price of the Drs. Specifically, the
Underwriters may overallot in connection with the offering, creating a syndicate
short position. In addition, the Underwriters may bid for, and purchase, Drs. in
the open market to cover syndicate short positions. Finally, the underwriting
syndicate may reclaim selling concessions allowed for distributing the Drs. in
the offering if the syndicate repurchases previously distributed Drs. in
syndicate covering transactions or otherwise. Any of these activities may
maintain the market price of the Drs. above independent market levels. The
Underwriters are not required to engage in these activities, and may end any of
these activities at any time.
The Drs. are a new issue of securities with no established trading market. The
Company does not intend to list the Drs. on any securities exchange. The Company
has been advised by the Underwriters that the Underwriters currently intend to
make a market in the Drs.; however, the Underwriters are not obligated to do so,
and any Underwriter may discontinue any such market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the Drs.
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LEGAL MATTERS
Certain legal matters with respect to the Drs. will be passed upon for the
Company by Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., Houston, Texas, counsel
for the Company. The validity of the Drs. offered hereby will be passed upon for
the Underwriters by Davis Polk & Wardwell, New York, New York and certain other
legal matters will be passed upon for the Underwriters by Cahill Gordon &
Reindel (a partnership including a professional corporation), New York, New
York.
EXPERTS
The consolidated financial statements and financial statement schedule of
Service Corporation International at December 31, 1996 and 1995, and for the
three years ended December 31, 1996, appearing in Service Corporation
International's Annual Report (Form 10-K) for the year ended December 31, 1996,
have been audited by Coopers & Lybrand, L.L.P., independent accountants, as set
forth in their report thereon dated March 21, 1997 incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing. See "Experts" in the accompanying
Prospectus.
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PROSPECTUS
SERVICE CORPORATION INTERNATIONAL
$1,000,000,000
COMPANY DEBT SECURITIES, COMMON STOCK
AND COMMON STOCK WARRANTS
Service Corporation International (the "Company" or "SCI") may from time to time
offer (i) debt securities (the "Company Debt Securities"), which may be any of
senior debt securities (the "Company Senior Debt Securities"), senior
subordinated debt securities (the "Company Senior Subordinated Debt Securities")
or subordinated debt securities (the "Company Subordinated Debt Securities"), in
each case consisting of debentures, notes and/or other unsecured evidences of
indebtedness, (ii) Common Stock, par value $1.00 per share ("Common Stock" or
"SCI Common Stock"), along with Series C Junior Participating Preferred Stock
Purchase Rights, and (iii) warrants to purchase Common Stock ("Common Stock
Warrants"). The Company Debt Securities, the Common Stock, along with Series C
Junior Participating Preferred Stock Purchase Rights, and the Common Stock
Warrants are collectively referred to as the "Securities," and will have an
aggregate initial offering price of up to $1,000,000,000 or the equivalent
thereof if Debt Securities are denominated in a currency other than U.S. dollars
or in currency units. The Securities may be offered as separate series, in
amounts, at prices and on terms to be determined at the time of sale.
The accompanying Prospectus Supplement sets forth with regard to the Securities
in respect of which this Prospectus is being delivered the terms of such
Securities, including, where applicable, (i) in the case of Debt Securities, the
specific title (including whether senior, senior subordinated or subordinated
and whether or not convertible), aggregate principal amount, denominations
(which may be in U.S. dollars, in any other currency or in composite
currencies), maturity (which may be fixed or extendible), interest rate, if any
(which may be fixed or variable), and time of payment of any interest, any terms
for redemption at the option of the Company or the holder, any terms for sinking
fund payments, any class or classes of stock into which the Debt Securities are
convertible or exchangeable and other conversion or exchange terms, if any, any
covenants or events of default that are in addition to or different from those
described herein, any listing on a securities exchange, the initial public
offering price and any other terms in connection with the offering and sale of
such Debt Securities, (ii) in the case of Common Stock, the initial public
offering price, and (iii) in the case of Common Stock Warrants, the duration,
exercise price, initial public offering price and any other terms in connection
with the offering and sale of such Common Stock Warrants.
The Company may sell Securities to or through underwriters, and also may sell
Securities directly to other purchasers or through agents. The accompanying
Prospectus Supplement sets forth the names of any underwriters or agents
involved in the sale of the Securities in respect of which this Prospectus is
being delivered, the amounts, if any, to be purchased by underwriters and the
compensation, if any, of such underwriters or agents.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
September 5, 1996
<PAGE> 18
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS, IF ANY, MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
SECURITIES AND, IF THE SECURITIES ARE CONVERTIBLE, THE OUTSTANDING CLASS OR
CLASSES OF STOCK OF THE COMPANY INTO OR FOR WHICH THEY ARE CONVERTIBLE, AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON ANY SECURITIES EXCHANGE ON WHICH SUCH SECURITIES
MAY BE LISTED, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No person has been authorized to give any information or to make any
representation not contained or incorporated by reference in this Prospectus or
the accompanying Prospectus Supplement and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Company or any underwriter, dealer or agent. Neither this Prospectus nor the
accompanying Prospectus Supplement constitutes an offer to sell or a
solicitation of any offer to buy Securities in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so or to any person to whom it is
unlawful to make such offer or solicitation.
In this Prospectus, references to "dollar" and "$" are to United States dollars,
and the terms "United States" and "U.S." mean the United States of America, its
states, its territories, its possessions and all areas subject to its
jurisdiction.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information....................................... 3
Incorporation of Certain Documents by Reference............. 4
The Company................................................. 5
Use of Proceeds............................................. 5
Description of Company Debt Securities...................... 5
Description of Capital Stock................................ 22
Description of Common Stock Warrants........................ 25
Plan of Distribution........................................ 27
Legal Matters............................................... 27
Experts..................................................... 27
</TABLE>
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<PAGE> 19
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). These reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at 450 Fifth Street N.W., Washington,
D.C. 20549; 500 West Madison Street, Chicago, Illinois 60661; and 7 World Trade
Center, New York, New York 10048. Copies of such material can also be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, such material can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
Additional information regarding the Company and the Securities is contained in
the Registration Statement, of which this Prospectus is a part, and the exhibits
relating thereto (the "Registration Statement") filed with the Commission under
the Securities Act of 1933, as amended (the "Act"). For further information
pertaining to the Company and the Securities, reference is made to the
Registration Statement, which may be inspected without charge at the office of
the Commission at 450 Fifth Street N.W., Washington, D.C. 20549, and copies
thereof may be obtained from the Commission at prescribed rates. This Prospectus
and the accompanying Prospectus Supplement do not contain all the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements made in
this Prospectus and the accompanying Prospectus Supplement as to the contents of
any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
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<PAGE> 20
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by SCI with the Commission are
incorporated herein by reference:
(i) SCI's Annual Report on Form 10-K for the fiscal year ended December
31, 1995;
(ii) SCI's Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 1996 and June 30, 1996;
(iii) The Company's Current Report on Form 8-K dated April 16, 1996;
(iv) Description of the Company's capital stock set forth under the
caption "Item 1. Description of Securities to be Registered -- Capital
Stock" in the Form 8, Amendment No. 3, dated September 15, 1982, to the
Company's Registration Statement on Form 8-A; and
(v) Description of the Company's preferred share purchase rights
contained in the Company's Registration Statement on Form 8-A dated July
26, 1988, as amended by Amendment No. 1 thereto filed under cover of Form 8
and dated May 11, 1990.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and to be part hereof from the date
of filing such documents. Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein (or in any other
subsequently filed document which also is incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded.
The Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon the request of any such person, a copy of any or
all of the documents which are incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to Service
Corporation International, 1929 Allen Parkway, Houston, Texas 77019, Attention:
James M. Shelger, Senior Vice President, General Counsel and Secretary,
telephone number: (713) 522-5141.
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<PAGE> 21
THE COMPANY
The Company is the largest provider of funeral and cemetery services and
products in the world. As of June 30, 1996, the Company owned and operated 2,832
funeral service locations, 331 cemeteries (including 137 funeral home and
cemetery combinations) and 146 crematoria located in North America, Europe and
the Pacific Rim.
The Company was incorporated in Texas on July 5, 1962. The Company's principal
executive offices are located at 1929 Allen Parkway, Houston, Texas 77019,
telephone number: (713) 522-5141. As used herein, unless the context indicates
otherwise, the terms "Company" and "SCI" refer to the Company and its
subsidiaries.
USE OF PROCEEDS
Except as may be otherwise set forth in the Prospectus Supplement accompanying
this Prospectus, the net proceeds to the Company from the sale or sales of the
Securities will be used for general corporate purposes including (without
limitation) repurchases of outstanding long-term debt securities, capital
expenditures, investments in subsidiaries, working capital, repayment of
borrowings under bank credit agreements, acquisitions and other business
opportunities.
DESCRIPTION OF COMPANY DEBT SECURITIES
The Company Debt Securities will constitute any of Company Senior Debt
Securities, Company Senior Subordinated Debt Securities or Company Subordinated
Debt Securities and will be issued, in the case of Company Senior Debt
Securities, under a Senior Indenture (the "Senior Debt Indenture") dated as of
February 1, 1993, between the Company and The Bank of New York, as trustee; in
the case of Company Senior Subordinated Debt Securities, under a Senior
Subordinated Indenture (the "Senior Subordinated Debt Indenture") to be entered
into between the Company and Texas Commerce Bank National Association ("Texas
Commerce Bank"), as trustee; and, in the case of Company Subordinated Debt
Securities under a Subordinated Indenture dated as of September 1, 1991, as
amended by the First Amendment thereto dated as of August 23, 1996, each being
between the Company and Texas Commerce Bank, as trustee (collectively, the
"Subordinated Debt Indenture"). The Senior Debt Indenture, the Senior
Subordinated Debt Indenture and the Subordinated Debt Indenture are sometimes
hereinafter referred to individually as an "Indenture" and collectively as the
"Indentures." Each of The Bank of New York and Texas Commerce Bank (and any
successors thereto as trustees under the respective Indentures) is hereinafter
referred to as the "Trustee" with respect to the Indenture under which it acts
as Trustee. The Indentures are filed as exhibits to the Registration Statement.
The following summaries of certain provisions of the Indentures and the Company
Debt Securities do not purport to be complete, and such summaries are subject to
the detailed provisions of the applicable Indenture to which reference is hereby
made for a full description of such provisions, including the definition of
certain capitalized terms used herein but not otherwise defined herein. Whenever
defined terms of the applicable Indenture are referred to, such defined terms
are incorporated herein by reference as part of the statement made, and the
statement is qualified in its entirety by such reference. The Indentures are
substantially identical, except for certain covenants of the Company, events of
default and provisions relating to subordination and conversion.
The Company Debt Securities may be issued from time to time in one or more
series. The following description of the Company Debt Securities sets forth
certain general terms and provisions of the Company Debt Securities of all
series. The particular terms of each series of Company Debt Securities offered
by any Prospectus Supplement will be described therein.
PROVISIONS APPLICABLE TO COMPANY SENIOR DEBT SECURITIES, COMPANY SENIOR
SUBORDINATED DEBT SECURITIES AND COMPANY SUBORDINATED DEBT SECURITIES
General. The Company Debt Securities will be unsecured senior, senior
subordinated or subordinated obligations of the Company and may be issued from
time to time in one or more series. The Indentures will not limit the amount of
Company Debt Securities, Senior Indebtedness, debentures, notes or other types
of indebtedness that may be issued by the Company or any of its Subsidiaries nor
will they restrict transactions between the Company and its Affiliates, the
payment of dividends or the making of investments by the Company or the transfer
of assets by the Company to its Subsidiaries. The Company currently conducts
substantially all its operations through Subsidiaries. Consequently, the rights
of the Company to receive assets of any Subsidiary (and thus the ability of
holders of Company Debt Securities to
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<PAGE> 22
benefit indirectly from such assets) are subject to the prior claims of
creditors of that Subsidiary. Other than as may be set forth in any Prospectus
Supplement, the Indentures and the Company Debt Securities will not contain any
covenants or other provisions that are intended to afford holders of the Company
Debt Securities special protection in the event of a highly leveraged
transaction by the Company. As of June 30, 1996, the Company (including its
subsidiaries) had outstanding approximately $2,146 million of secured debt or
Senior Indebtedness and approximately $42 million of unsecured subordinated
debt. Such amounts included $521 million of indebtedness of the Company's
subsidiaries.
Reference is made to the Prospectus Supplement relating to any Company Debt
Securities for the following terms of and information relating to such Company
Debt Securities (to the extent such terms are applicable thereto): (i) the title
of such Company Debt Securities; (ii) classification as Company Senior Debt
Securities, Company Senior Subordinated Debt Securities or Company Subordinated
Debt Securities, aggregate principal amount, purchase price and denomination;
(iii) whether such Company Debt Securities that constitute Company Senior
Subordinated Debt Securities or Company Subordinated Debt Securities are
convertible into Common Stock and, if so, the terms and conditions upon which
such conversion will be effected including the initial conversion price or
conversion rate and any adjustments thereto in addition to or different from
those described herein, the conversion period and other conversion provisions in
addition to or in lieu of those described herein; (iv) the date or dates on
which such Company Debt Securities will mature; (v) the method by which amounts
payable in respect of principal of or premium, if any, or interest, if any, on
or upon the redemption of such Company Debt Securities may be calculated; (vi)
the interest rate or rates (or the method by which such will be determined), and
the dates from which such interest, if any, will accrue; (vii) the date or dates
on which any such interest will be payable; (viii) the place or places where and
the manner in which the principal of and premium, if any, and interest, if any,
on such Company Debt Securities will be payable and the place or places where
such Company Debt Securities may be presented for transfer and, if applicable,
conversion; (ix) the obligations, if any, of the Company to redeem, repay or
purchase such Company Debt Securities pursuant to any sinking fund or analogous
provisions or at the option of a holder thereof or the right, if any, of the
Company to redeem, repay or purchase such Company Debt Securities at its option
and the period or periods within which, the price or prices at which and the
terms and conditions upon which such Company Debt Securities will be redeemed,
repaid or purchased pursuant to any such obligation or right (including the form
or method of payment thereof if other than cash); (x) any terms applicable to
such Company Debt Securities issued at an original issue discount below their
stated principal amount, including the issue price thereof and the rate or rates
at which such original issue discount shall accrue; (xi) any index used to
determine the amount of payments of principal of and any premium and interest on
such Company Debt Securities; (xii) any special United States federal income tax
consequences; and (xiii) any other specified terms of such Company Debt
Securities, including any additional or different events of default or remedies
or any additional covenants provided with respect to such Company Debt
Securities, and any terms which may be required by or advisable under applicable
laws or regulations.
Unless otherwise specified in any Prospectus Supplement, the Company Debt
Securities will be issued only in fully registered form and in denominations of
$1,000 and any integral multiple thereof. No service charge will be made for any
transfer or exchange of any Company Debt Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Company Debt Securities may bear interest at a fixed rate or a floating rate.
Company Debt Securities bearing no interest or interest at a rate that at the
time of issuance is below the prevailing market rate may be sold at a discount
below their stated principal amount. Special United States federal income tax
considerations applicable to any such discounted Company Debt Securities or to
certain Company Debt Securities issued at par that are treated as having been
issued at a discount for United States federal income tax purposes will be
described in the applicable Prospectus Supplement.
The Indentures and the Company Debt Securities will be governed by Texas law.
Global Securities. The Company Debt Securities of a series may be issued in
whole or in part in the form of one or more global securities ("Global
Securities") that will be deposited with, or on behalf of, a depositary (the
"Depositary") identified in the Prospectus Supplement relating to such series.
Global Securities may be issued only in fully registered form and in either
temporary or permanent form. Unless and until it is exchanged in whole or in
part for the individual Company Debt Securities represented thereby, a Global
Security may not be transferred except as a whole by the Depositary for such
Global Security to the nominee of the Depositary or by a nominee of such
Depositary to such
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<PAGE> 23
Depositary or another nominee of such Depositary or by such Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.
The specific terms of the depositary arrangement with respect to a series of
Company Debt Securities will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global Security
or its nominee will credit, on its book-entry registration and transfer system,
the respective principal amounts of the individual Company Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depositary. Such accounts shall be designated by the dealers,
underwriters or agents with respect to such Company Debt Securities or by the
Company if such Company Debt Securities are offered and sold directly by the
Company. Ownership of beneficial interests in a Global Security will be limited
to persons that have accounts with the applicable Depositary ("participants") or
persons that may hold interests through participants. Ownership of beneficial
interests in such Global Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the applicable
Depositary or its nominee (with respect to interests of participants) and the
records of participants (with respect to interests of persons other than
participants). 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
a Global Security.
So long as the Depositary for a Global Security or its nominee is the registered
owner of such Global Security, such Depositary or its nominee, as the case may
be, will be considered the sole owner or holder of the Company Debt Securities
of the series represented by such Global Security for all purposes under the
Indenture governing such Company Debt Securities. Except as provided below,
owners of beneficial interests in a Global Security will not be entitled to have
any of the individual Company Debt Securities of the series represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Company Debt Securities in definitive form
and will not be considered the owners or holders thereof under the Indenture
governing such Company Debt Securities. Accordingly, each person owning a
beneficial interest in a Global Security must rely on the procedures of the
Depositary and, if the beneficial owner is not a participant, on the procedures
of the participant through which the beneficial owner owns its interest, to
exercise any rights of a holder under the Indenture. The Company understands
that under existing practice, if the Company requests any action of the holders,
or a beneficial owner desires to take any action a holder is entitled to take,
the Depositary would act upon the instructions of, or authorize, the participant
to take such action.
Payments of principal of and premium, if any, and interest, if any, on
individual Company Debt Securities represented by a Global Security registered
in the name of a 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 Security
representing such Company Debt Securities. None of the Company, the Trustee for
such Company Debt Securities, any paying agent and the registrar for such
Company Debt Securities will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests of the Global Security for such Company Debt Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Company expects that the Depositary for a series of Company Debt Securities
or its nominee, upon receipt of any payment of principal, premium or interest in
respect of a Global Security representing any such Company Debt Securities,
immediately will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Security for such Company Debt Securities as shown on the records
of such Depositary or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such Global Security 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." Such payments will be
the responsibility of such participants.
If the Depositary for a series of Company Debt Securities is at any time
unwilling, unable or ineligible to continue as depositary and a successor
Depositary is not appointed by the Company within 90 days, the Company will
issue individual Company Debt Securities of such series in exchange for the
Global Security representing such series of Company Debt Securities. In
addition, the Company may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement relating to such Company Debt
Securities, determine not to have any Company Debt Securities of a series
represented by one or more Global Securities and, in such event, will issue
individual Company Debt Securities
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<PAGE> 24
of such series in exchange for the Global Security or Securities representing
such series of Company Debt Securities. Further, if the Company so specifies
with respect to the Company Debt Securities of a series, an owner of a
beneficial interest in a Global Security representing Company Debt Securities of
such series may, on terms acceptable to the Company and the Depositary for such
Global Security, receive individual Company Debt Securities of such series in
exchange for such beneficial interests, subject to any limitations described in
the Prospectus Supplement relating to such Company Debt Securities. In any such
instance, an owner of a beneficial interest in a Global Security will be
entitled to a physical delivery of individual Company Debt Securities of the
series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Company Debt Securities registered in its
name. Individual Company Debt Securities of such series so issued will be issued
in denominations, unless otherwise specified by the Company, of $1,000 and
integral multiples thereof.
Consolidation, Merger, Sale. Each Indenture provides that the Company may
consolidate or merge with or into any other corporation, and may sell, lease,
exchange or otherwise dispose of all or substantially all of its property and
assets to any other corporation authorized to acquire and operate the same,
provided that in any such case (i) immediately after such transaction the
Company or such other corporation formed by or surviving any such consolidation
or merger, or to which such sale, lease, exchange or other disposition shall
have been made, will not be in default in the performance or observance of any
of the terms, covenants and conditions in the Indenture to be kept or performed
by the Company, (ii) the corporation (if other than the Company) formed by or
surviving any such consolidation or merger, or to which such sale, lease,
exchange or other disposition shall have been made, shall be a corporation
organized under the laws of the United States of America, any state thereof or
the District of Columbia, and (iii) the corporation (if other than the Company)
formed by such consolidation, or into which the Company shall have been merged,
or the corporation which shall have acquired or leased such property and assets,
shall assume, by a supplemental indenture, the Company's obligations under such
Indenture. In case of any such consolidation, merger, sale, lease, exchange or
other disposition and upon any such assumption by the successor corporation,
such successor corporation shall succeed to and be substituted for the Company,
with the same effect as if it had been named in such Indenture as the Company
and subject to the conditions set forth in the Indenture, and the Company shall
be relieved of any further obligation under such Indenture and any Company Debt
Securities issued thereunder.
Discharge and Defeasance. The Company may discharge or defease its obligations
with respect to each series of Company Debt Securities as set forth below.
The Company may discharge all of its obligations (except those set forth below)
to holders of any series of Company Debt Securities issued under any Indenture,
which Company Debt Securities have not already been delivered to the Trustee for
cancellation and which either have become due and payable or are by their terms
due and payable within one year (or are to be called for redemption within one
year) by depositing with the Trustee cash or U.S. Government Obligations, or a
combination thereof, as trust funds in an amount certified to be sufficient to
pay when due the principal of and premium, if any, and interest, if any, on all
outstanding Company Debt Securities of such series and to make any mandatory
sinking fund payments thereon when due.
Unless otherwise provided in the applicable Prospectus Supplement, the Company
may also discharge at any time all of its obligations (except those set forth
below) to holders of any series of Company Debt Securities issued under any
Indenture (other than convertible Company Debt Securities) ("defeasance") if,
among other things: (i) the Company irrevocably deposits with the Trustee cash
or U.S. Government Obligations, or a combination thereof, as trust funds in an
amount certified to be sufficient to pay the principal of and premium, if any,
and interest, if any, on all outstanding Company Debt Securities of such series
when due and to make any mandatory sinking fund payments thereon when due, and
such funds have been so deposited for 91 days; (ii) such deposit will not result
in a breach or violation of, or cause a default under, any agreement or
instrument to which the Company is a party or by which it is bound; and (iii)
the Company delivers to the Trustee an opinion of counsel to the effect that the
holders of such series of Company Debt Securities will not recognize income,
gain or loss for United States federal income tax purposes as a result of such
defeasance, and that such defeasance will not otherwise alter the United States
federal income tax treatment of principal and interest payments on such series
of Company Debt Securities. Such opinion of counsel must be based on a ruling of
the Internal Revenue Service or a change in United States federal income tax law
occurring after the date of the Indenture relating to the Company Debt
Securities of such series, since such a result would not occur under current tax
law.
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<PAGE> 25
In the event of such discharge and defeasance of a series of Company Debt
Securities, the holders thereof would be entitled to look only to such trust
funds for payment of the principal of and any premium and interest on such
Company Debt Securities.
Notwithstanding the foregoing, no discharge or defeasance described above shall
affect the following obligations to or rights of the holders of any series of
Company Debt Securities: (i) rights of registration of transfer and exchange of
Company Debt Securities of such series; (ii) rights of substitution of
mutilated, defaced, destroyed, lost or stolen Company Debt Securities of such
series; (iii) rights of holders of Company Debt Securities of such series to
receive payments of principal thereof and interest, if any, thereon when due and
to receive mandatory sinking fund payments, if any, thereon when due from the
trust funds held by the Trustee; (iv) the rights, obligations, duties and
immunities of the Trustee; (v) the rights of holders of Company Debt Securities
of such series as beneficiaries with respect to property deposited with the
Trustee payable to all or any of them; (vi) the obligations of the Company to
maintain an office or agency in respect of Company Debt Securities of such
series; and (vii) if applicable, the obligations of the Company with respect to
the conversion of Company Debt Securities of such series into Common Stock.
Modification of the Indenture. Each Indenture provides that the Company and the
Trustee may enter into supplemental indentures without the consent of the
holders of the Company Debt Securities to (i) evidence the assumption by a
successor corporation of the obligations of the Company under such Indenture,
(ii) add covenants or new events of default for the protection of the holders of
such Company Debt Securities, (iii) cure any ambiguity or correct any
inconsistency in the Indenture, (iv) establish the form and terms of any series
of Company Debt Securities and to provide for adjustment of conversion rights,
(v) evidence the acceptance of appointment by a successor trustee, (vi) amend
the Indenture in any other manner which the Company may deem necessary or
desirable and which will not adversely affect the interests of the holders of
Company Debt Securities issued thereunder, or (vii) in the case of Company
Senior Debt Securities, secure such Company Senior Debt Securities with any
property or assets.
Each Indenture also contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Company Debt Securities then Outstanding of each series
affected by such supplemental Indenture, to add any provisions to, or change in
any manner or eliminate any of the provisions of, such Indenture or modify in
any manner the rights of the holders of the Company Debt Securities of such
series; provided that the Company and the Trustee may not, without the consent
of the holder of each outstanding Company Debt Security affected thereby, (i)
extend the stated maturity of the principal of any Company Debt Security, reduce
the principal amount thereof, reduce the rate or extend the time of payment of
any interest thereon, reduce or alter the method of computation of any amount
payable on redemption, repayment or purchase thereof, reduce the portion of the
principal amount of any Original Issue Discount Security payable upon
acceleration or provable in bankruptcy, change the coin or currency in which
principal and interest, if any, are payable, impair or affect the right to
institute suit for the enforcement of any payment, repayment or purchase thereof
or, if applicable, adversely affect the right to convert Company Debt
Securities, any right of repayment at the option of the holder or (solely with
respect to the Senior Subordinated Debt Indenture) change, amend or modify the
subordination provisions of such Indenture or any of the definitions used in the
subordination provisions of such Indenture or consent to the departure from any
of the terms of the subordination provisions of such Indenture in each case in
any manner that would adversely affect the holders of any of the Company Senior
Subordinated Debt Securities issued thereunder, or (ii) reduce the percentage in
aggregate principal amount of Company Debt Securities of any series issued under
such Indenture, the consent of the holders of which is required for any such
modification.
The Senior Subordinated Debt Indenture may not be amended to alter the
subordination of any outstanding Company Senior Subordinated Debt Securities,
and the Subordinated Debt Indenture may not be amended to alter the
subordination of any outstanding Company Subordinated Debt Securities, in each
case without the consent of each holder of Senior Indebtedness then outstanding
that would be adversely affected thereby.
Each of the Indentures provides that the term "Original Issue Discount Security"
means any Company Debt Security that provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof pursuant to the terms of the Indenture.
In each of the Indentures, the definition of the term "Outstanding," with
reference to Company Debt Securities, provides that in determining whether the
holders of the requisite aggregate principal amount of Outstanding Company Debt
Securities of any or all series have given any request, demand, authorization,
direction, notice, consent or waiver under
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<PAGE> 26
the applicable Indenture, the principal amount of an Original Issue Discount
Security that shall be deemed to be Outstanding for such purposes shall be the
portion of the principal amount thereof that would be due and payable as of the
date of such determination (as certified by the Company to the Trustee) upon a
declaration of acceleration of the maturity thereof pursuant to the terms of the
Indenture.
PROVISIONS APPLICABLE SOLELY TO COMPANY SENIOR DEBT SECURITIES
General. Company Senior Debt Securities will be issued under the Senior Debt
Indenture, and each series will rank pari passu as to the right of payment of
principal, premium, if any, and interest, if any, with each other series and
with all other Senior Indebtedness of the Company.
Events of Default. Unless otherwise specified in the Prospectus Supplement, an
Event of Default is defined under the Senior Debt Indenture with respect to the
Company Senior Debt Securities of any series issued thereunder as being any one
or more of the following events:
(i) default in the payment of any installment of interest upon any of
the Company Senior Debt Securities of such series as and when the same
shall become due and payable, and continuance of such default for a period
of 30 days;
(ii) default in the payment of the principal of any of the Company
Senior Debt Securities of such series as and when the same shall become due
and payable either at maturity, upon redemption, by declaration or
otherwise;
(iii) default in the payment or satisfaction of any sinking fund or
other purchase obligation with respect to Company Senior Debt Securities of
such series, as and when such obligation shall become due and payable;
(iv) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the
Company Senior Debt Securities of such series or in the Senior Debt
Indenture continuing for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Company by the Trustee by registered or certified
mail, or to the Company and the Trustee by the holders of at least 25
percent in aggregate principal amount of the Company Senior Debt Securities
of such series then Outstanding;
(v) without the consent of the Company, a court having jurisdiction
shall enter an order for relief with respect to the Company under the
Bankruptcy Code or, without the consent of the Company, a court having
jurisdiction shall enter a judgment, order or decree adjudging the Company
a bankrupt or insolvent, or enter an order for relief for reorganization,
arrangement, adjustment or composition of or in respect of the Company
under the Bankruptcy Code or applicable state insolvency law and the
continuance of any such judgment, order or decree is unstayed and in effect
for a period of 60 consecutive days;
(vi) the Company shall institute proceedings for entry of an order for
relief with respect to the Company under the Bankruptcy Code or for an
adjudication of insolvency, or shall consent to the institution of
bankruptcy or insolvency proceedings against it, or shall file a petition
seeking, or seek or consent to, reorganization, arrangement, composition or
relief under the Bankruptcy Code or any applicable state law, or shall
consent to the filing of such petition or to the appointment of a receiver,
custodian, liquidator, assignee, trustee, sequestrator or similar official
of the Company or of substantially all of its property, or the Company
shall make a general assignment for the benefit of creditors as recognized
under the Bankruptcy Code;
(vii) default under any bond, debenture, note or other evidence of
Indebtedness for money borrowed by the Company or any Subsidiary or under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any Subsidiary (other than Non-Recourse Indebtedness),
whether such Indebtedness exists on the date of the Senior Debt Indenture
or shall thereafter be created, which default shall have resulted in such
Indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable, or any default in
payment of such Indebtedness (after the expiration of any applicable grace
periods and the presentation of any debt instruments, if required), if the
aggregate amount of all such Indebtedness which has been so accelerated and
with respect to which there has been such a default in payment shall exceed
$5,000,000, without each such default and acceleration having been
rescinded or annulled within a period of 30 days after there shall have
been given to the
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<PAGE> 27
Company by the Trustee by registered mail, or to the Company and the
Trustee by the holders of at least 25 percent in aggregate principal amount
of the Company Senior Debt Securities of such series then Outstanding, a
written notice specifying each such default and requiring the Company to
cause each such default and acceleration to be rescinded or annulled and
stating that such notice is a "Notice of Default" under the Senior Debt
Indenture; or
(viii) any other Event of Default provided with respect to the Company
Senior Debt Securities of such series.
If an Event of Default with respect to Company Senior Debt Securities of any
series then Outstanding occurs and is continuing, then and in each and every
such case, unless the principal of all of the Company Senior Debt Securities of
such series shall have already become due and payable, either the Trustee or the
holders of not less than 25 percent in aggregate principal amount of the Company
Senior Debt Securities of such series then Outstanding, by notice in writing to
the Company (and to the Trustee if given by Securityholders), may declare the
unpaid principal amount (or, if the Company Senior Debt Securities of such
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of such series) of all the Company
Senior Debt Securities of such series and the interest, if any, accrued thereon
to be due and payable immediately, and upon any such declaration the same shall
become and shall be immediately due and payable, anything in the Senior Debt
Indenture or in the Company Senior Debt Securities of such series contained to
the contrary notwithstanding. This provision, however, is subject to the
condition that, if at any time after the unpaid principal amount (or such
specified amount) of the Company Senior Debt Securities of such series shall
have been so declared due and payable and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest, if any, upon all of the Company Senior Debt Securities
of such series and the principal of any and all Company Senior Debt Securities
of such series which shall have become due otherwise than by acceleration (with
interest on overdue installments of interest, if any, to the extent that payment
of such interest is enforceable under applicable law and on such principal at
the rate borne by the Company Senior Debt Securities of such series to the date
of such payment or deposit) and the reasonable compensation, disbursements,
expenses and advances of the Trustee, and any and all defaults under the Senior
Debt Indenture, other than the nonpayment of such portion of the principal
amount of and accrued interest, if any, on Company Senior Debt Securities of
such series which shall have become due by acceleration, shall have been cured
or shall have been waived in accordance with the Senior Debt Indenture or
provision deemed by the Trustee to be adequate shall have been made therefor,
then and in every such case the holders of a majority in aggregate principal
amount of the Company Senior Debt Securities of such series then Outstanding, by
written notice to the Company and to the Trustee, may rescind and annul such
declaration and its consequences; but no such rescission and annulment shall
extend to or shall affect any subsequent default, or shall impair any right
consequent thereon. If any Event of Default with respect to the Company
specified in clause (v) or (vi) above occurs, the unpaid principal amount (or,
if the Company Senior Debt Securities of any series then Outstanding are
Original Issue Discount Securities, such portion of the principal amount as may
be specified in the terms of each such series) and accrued interest on all
Company Senior Debt Securities of each series then Outstanding shall ipso facto
become and be immediately due and payable without any declaration or other act
by the Trustee or any Securityholder. If the Trustee shall have proceeded to
enforce any right under the Senior Debt Indenture and such proceedings shall
have been discontinued or abandoned because of such rescission or annulment or
for any other reason or shall have been determined adversely to the Trustee,
then and in every such case the Company, the Trustee and the Securityholders
shall be restored respectively to their several positions and rights under the
Senior Debt Indenture, and all rights, remedies and powers of the Company, the
Trustee and the Securityholders shall continue as though no such proceeding had
been taken. Except with respect to an Event of Default pursuant to clause (i),
(ii) or (iii) above, the Trustee shall not be charged with knowledge of any
Event of Default unless written notice thereof shall have been given to the
Trustee by the Company, a paying agent or any Securityholder.
The Senior Debt Indenture provides that, subject to the duty of the Trustee
during default to act with the required standard of care, the Trustee will be
under no obligation to exercise any of its rights or powers under the Senior
Debt Indenture at the request or direction of any of the holders of Company
Senior Debt Securities issued under the Senior Debt Indenture, unless such
holders shall have offered to the Trustee reasonable security or indemnity.
No holder of any Company Senior Debt Securities of any series then Outstanding
shall have any right by virtue of or by availing of any provision of the Senior
Debt Indenture to institute any suit, action or proceeding in equity or at law
upon or under or with respect to the Senior Debt Indenture or the Company Senior
Debt Securities or for the appointment of a
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<PAGE> 28
receiver or trustee or similar official, or for any other remedy under the
Senior Debt Indenture or under the Company Senior Debt Securities, unless such
holder previously shall have given to the Trustee written notice of default and
of the continuance thereof, and unless the holders of not less than 25 percent
in aggregate principal amount of the Company Senior Debt Securities of such
series then Outstanding shall have made written request to the Trustee to
institute such action, suit or proceeding in its own name as Trustee and shall
have offered to the Trustee such reasonable indemnity as it may require against
the costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding. Notwithstanding any other provisions in the Senior Debt Indenture,
however, the right of any holder of any Company Senior Debt Security to receive
payment of the principal of and interest, if any, on such Company Senior Debt
Security, on or after the respective due dates expressed in such Company Senior
Debt Security, or to institute suit for the enforcement of any such payment on
or after such respective dates shall not be impaired or affected without the
consent of such holder.
The holders of at least a majority in aggregate principal amount of the Company
Senior Debt Securities of any series then Outstanding shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee with respect to the Company Senior Debt Securities of such series;
provided that (subject to certain exceptions) the Trustee shall have the right
to decline to follow any such direction if the Trustee shall determine upon
advice of counsel that the action or proceeding so directed may not lawfully be
taken or if the Trustee in good faith shall determine that the action or
proceeding so directed would involve the Trustee in personal liability. The
holders of 66 2/3% in aggregate principal amount of the Company Senior Debt
Securities of any series then Outstanding may on behalf of the holders of all of
the Company Senior Debt Securities of such series waive any past default or
Event of Default and its consequences except a default in the payment of
interest, if any, on, or the principal of, the Company Senior Debt Securities of
such series. Upon any such waiver the Company, the Trustee and the holders of
the Company Senior Debt Securities of such series shall be restored to their
former positions and rights under the Senior Debt Indenture, respectively; but
no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon. Whenever any default or Event of
Default shall have been waived as permitted, said default or Event of Default
shall for all purposes of the Senior Company Debt Securities and the Senior Debt
Indenture be deemed to have been cured and to be not continuing.
The Trustee shall, within 90 days after the occurrence of a default, with
respect to Company Senior Debt Securities of any series then Outstanding, mail
to all holders of Company Senior Debt Securities of such series, as the names
and the addresses of such holders appear upon the Company Senior Debt Securities
register, notice of all defaults known to the Trustee with respect to such
series, unless such defaults shall have been cured before the giving of such
notice (the term "defaults" for the purpose of these provisions being hereby
defined to be the events specified in clauses (i), (ii), (iii), (iv), (v), (vi),
(vii) and (viii) of "-- Provisions Applicable Solely to Company Senior Debt
Securities -- Events of Default" above, not including periods of grace, if any,
provided for therein and irrespective of the giving of the written notice
specified in said clause (iv) or (vii) but in the case of any default of the
character specified in said clause (iv) or (vii) no such notice to
Securityholders shall be given until at least 60 days after the giving of
written notice thereof to the Company pursuant to said clause (iv) or (vii), as
the case may be); provided, that, except in the case of default in the payment
of the principal of or interest, if any, on any of the Company Senior Debt
Securities, or in the payment or satisfaction of any sinking fund or other
purchase obligation, the Trustee shall be protected in withholding such notice
if and so long as the Trustee in good faith determines that the withholding of
such notice is in the best interests of the Securityholders.
The Company is required to furnish to the Trustee annually a statement as to the
fulfillment by the Company of all of its obligations under the Senior Debt
Indenture.
Limitation on Liens. The Company may not, nor may any Subsidiary, mortgage,
pledge, encumber or subject to any lien or security interest to secure any
obligation of the Company or any obligation of any Subsidiary (other than
obligations owing to the Company or a wholly owned Subsidiary) any assets,
whether owned as of the date the Senior Debt Indenture was executed or
thereafter acquired, without effectively providing that the Company Senior Debt
Securities shall be secured equally and ratably with (or prior to) any other
obligation so secured, unless, after giving effect thereto, the aggregate amount
of all such secured debt of the Company and its Subsidiaries (excluding secured
Indebtedness existing as of the date the Senior Debt Indenture was executed and
any extensions, renewals or refundings thereof that do not increase the
principal amount of Indebtedness so extended, renewed or refunded and excluding
secured Indebtedness
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<PAGE> 29
incurred pursuant to clauses (i), (ii), (iii) and (iv) set forth in this
paragraph below) would not exceed 10% of Consolidated Net Worth of the Company
and its Subsidiaries; provided, that this restriction will not prevent the
Company or any Subsidiary: (i) from acquiring and retaining property subject to
mortgages, pledges, encumbrances, liens or security interests existing thereon
at the date of acquisition thereof, or from creating within one year of such
acquisition mortgages, pledges, encumbrances or liens upon property acquired by
it after the date of the Senior Debt Indenture, as security for purchase money
obligations incurred by it in connection with the acquisition of such property,
whether payable to the person from whom such property is acquired or otherwise;
(ii) from mortgaging, pledging, encumbering or subjecting to any lien or
security interest Current Assets to secure Current Liabilities; (iii) from
extending, renewing or refunding any Indebtedness secured by a mortgage, pledge,
encumbrance, lien or security interest on the same property theretofore subject
thereto, provided that the principal amount of such Indebtedness so extended,
renewed or refunded shall not be increased; or (iv) from securing the payment of
workmen's compensation or insurance premiums or from making good faith pledges
or deposits in connection with bids, tenders, contracts (other than contracts
for the payment of money) or leases, deposits to secure public or statutory
obligations, deposits to secure surety or appeal bonds, pledges or deposits in
connection with contracts made with or at the request of the United States
Government or any agency thereof, or pledges or deposits for similar purposes in
the ordinary course of business.
"Consolidated Net Worth" means, at any date, the sum of (i) the par value (or
value stated on the books of the Company) of the capital stock of all classes of
the Company (including preferred stock), plus (or minus in the case of a
deficit) (ii) the amount of the consolidated surplus, whether capital or earned,
of the Company and its Subsidiaries, determined in accordance with generally
accepted accounting principles.
"Current Assets" of any Person includes all assets of such Person which would be
classified as current assets in accordance with generally accepted accounting
principles.
"Current Liabilities" of any Person includes all liabilities of such Person
which would be classified as current liabilities in accordance with generally
accepted accounting principles.
Limitation on Sale and Leaseback Transactions. Neither the Company nor any
Subsidiary will enter into any transaction with any bank, insurance company or
other lender or investor, or to which any such lender or investor is a party,
providing for the leasing to the Company or a Subsidiary of any real property
(except a lease for a temporary period not to exceed three years by the end of
which it is intended that the use of such real property by the lessee will be
discontinued) which has been or is to be sold or transferred by the Company or
such Subsidiary to such lender or investor or to any Person to whom funds have
been or are to be advanced by such lender or investor on the security of such
real property unless either: (i) such transaction is the substantial equivalent
of a mortgage, pledge, encumbrance, lien or security interest which the Company
or any Subsidiary would have been permitted to create under the covenant
described in "-- Provisions Applicable Solely to Company Senior Debt
Securities -- Limitation on Liens" without equally and ratably securing the
Company Senior Debt Securities, or (ii) the Company within 120 days after such
transaction applied (and in any such case the Company covenants that it will so
apply) an amount equal to the greater of (a) the net proceeds of the sale of the
real property leased pursuant to such transaction or (b) the fair value of the
real property so leased at the time of entering into such transaction (as
determined by the Board of Directors) to the retirement of Funded Debt of the
Company; provided that the amount to be applied to the retirement of Funded Debt
of the Company shall be reduced by: (x) the principal amount of any Company
Senior Debt Securities (for this purpose if the Company Senior Debt Securities
of that series are Original Issue Discount Securities, the principal amount of
the Outstanding Company Senior Debt Securities of that series shall be computed
and adjusted as may be specified in the terms of that series) delivered within
120 days after such sale to the Trustee for retirement and cancellation and (y)
the principal amount of Funded Debt, other than Company Senior Debt Securities,
voluntarily retired by the Company within 120 days after such sale; provided,
that no retirement referred to in this clause (ii) may be effected by payment at
maturity or pursuant to any mandatory sinking fund payment or any mandatory
prepayment provision.
"Funded Debt" means Indebtedness for money borrowed which by its terms matures
at or is extendible or renewable at the option of the obligor to a date more
than 12 months after the date of the creation of such Indebtedness.
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<PAGE> 30
PROVISION APPLICABLE SOLELY TO COMPANY SENIOR SUBORDINATED DEBT SECURITIES
Prohibition on Incurrence of Senior Subordinated Debt. The Company will not
incur or suffer to exist Indebtedness that is or purports to be, pursuant to its
terms or the terms of any agreement relating thereto, senior in right of payment
to the Company Senior Subordinated Debt Securities and subordinate or junior in
right of payment to any other Indebtedness of the Company; provided that no
Indebtedness of the Company shall be deemed to be subordinate to any other
Indebtedness of the Company solely by virtue of any such other Indebtedness
being secured or otherwise having the benefit of any lien or security interest.
PROVISIONS APPLICABLE SOLELY TO COMPANY SENIOR SUBORDINATED DEBT SECURITIES AND
COMPANY SUBORDINATED DEBT SECURITIES
Events of Default. Unless otherwise specified in the Prospectus Supplement, an
Event of Default is defined under each of the Senior Subordinated Indenture and
Subordinated Indenture (together, the "Subordinated Indentures") with respect to
the Company Senior Subordinated Debt Securities and Company Subordinated Debt
Securities (together, the "Subordinated Securities") of any series issued under
such Subordinated Indentures being as one or more of the following events:
(i) default in the payment of any installment of interest upon any of
the Subordinated Securities of such series as and when the same shall
become due and payable, and continuance of such default for a period of 30
days;
(ii) default in the payment of the principal of any of the Subordinated
Securities of such series as and when the same shall become due and payable
either at maturity, upon redemption, by declaration or otherwise;
(iii) default in the payment or satisfaction of any sinking fund or
other purchase obligation with respect to any of the Subordinated
Securities of such series, as and when such obligation shall become due and
payable;
(iv) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the
Subordinated Securities of such series or in the Subordinated Indenture
applicable to such series continuing for a period of 60 days after the date
on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Company by the Trustee by registered mail, or
to the Company and the Trustee by the holders of at least 25 percent in
aggregate principal amount of the Subordinated Securities of such series
issued under the applicable Subordinated Indenture then Outstanding;
(v) without the consent of the Company a court having jurisdiction shall
enter an order for relief with respect to the Company under the Bankruptcy
Code or without the consent of the Company a court having jurisdiction
shall enter a judgment, order or decree adjudging the Company a bankrupt or
insolvent, or enter an order for relief for reorganization, arrangement,
adjustment or composition of or in respect of the Company under the
Bankruptcy Code or applicable state insolvency law and the continuance or
any such judgment, order or decree is unstayed and in effect for a period
of 60 consecutive days;
(vi) the Company shall institute proceedings for entry of an order for
relief with respect to the Company under the Bankruptcy Code or for an
adjudication of insolvency, or shall consent to the institution of
bankruptcy or insolvency proceedings against it, or shall file a petition
seeking, or seek or consent to reorganization, arrangement, composition or
relief under the Bankruptcy Code or any applicable state law, or shall
consent to filing of such petition or to the appointment of a receiver,
custodian, liquidator, assignee, trustee, sequestrator or similar official
of the Company or of substantially all of its property, or the Company
shall make a general assignment for the benefit of creditors as recognized
under the Bankruptcy Code;
(vii) default under any bond, debenture, note or other evidence of
Indebtedness for money borrowed by the Company or under any mortgage,
indenture or instrument under which there may be issued or by which there
may be secured or evidenced any Indebtedness for money borrowed by the
Company, whether such Indebtedness exists on the date of the applicable
Subordinated Indenture or shall thereafter be created, which default shall
have resulted in such Indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise have become due and
payable, or any default in payment of such Indebtedness (after the
expiration of any applicable grace periods and the presentation of any debt
instrument, if required), if the aggregate amount of all such Indebtedness
which has been so accelerated and with respect to which there has been such
a default in payment
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<PAGE> 31
shall exceed $5,000,000, without each such default and acceleration having
been rescinded or annulled within a period of 30 days after there shall
have been given to the Company by the Trustee by registered mail, or to the
Company and the Trustee by the holders of at least 25 percent in aggregate
principal amount of the Subordinated Securities of such series then
Outstanding, a written notice specifying each such default and requiring
the Company to cause each such default and acceleration to be rescinded or
annulled and stating that such notice is a "Notice of Default" under the
applicable Subordinated Indenture; or
(viii) any other Event of Default provided with respect to the
Subordinated Securities of such series under the applicable Subordinated
Indenture.
If an Event of Default with respect to Subordinated Securities of any series
then Outstanding occurs and is continuing, then and in each and every such case,
unless the principal of all of the Subordinated Securities of such series shall
have already become due and payable, either the Trustee or the holders of not
less than 25 percent in aggregate principal amount of the Subordinated
Securities of such series then Outstanding, by notice in writing to the Company
(and to the Trustee if given by Securityholders), may declare the unpaid
principal amount (or, if the Subordinated Securities of such series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of such series) of all the Subordinated Securities of
such series and the interest, if any, accrued thereon to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in the applicable Subordinated Indenture
or in the Subordinated Securities of such series contained to the contrary
notwithstanding. This provision, however, is subject to the condition that, if
at any time after the unpaid principal amount (or such specified amount) of the
Subordinated Securities of such series shall have been so declared due and
payable and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered, the Company shall pay or shall deposit with
the Trustee a sum sufficient to pay all matured installments of interest, if
any, upon all of the Subordinated Securities of such series and the principal of
any and all Subordinated Securities of such series which shall have become due
otherwise than by acceleration (with interest on overdue installments of
interest, if any, to the extent that payment of such interest is enforceable
under applicable law and on such principal at the rate borne by the Subordinated
Securities of such series to the date of such payment or deposit) and the
reasonable compensation, disbursements, expenses and advances of the Trustee,
its agents, attorneys and counsel, and any and all defaults under the applicable
Subordinated Indenture, other than the nonpayment of such portion of the
principal amount of and accrued interest, if any, on Subordinated Securities of
such series which shall have become due by acceleration, shall have been cured
or shall have been waived in accordance with the applicable Subordinated
Indenture or provision deemed by the Trustee to be adequate shall have been made
therefor -- then and in every such case the holders of a majority in aggregate
principal amount of the Subordinated Securities of such series then Outstanding,
by written notice to the Company and to the Trustee, may rescind and annul such
declaration and its consequences; but no such rescission and annulment shall
extend to or shall affect any subsequent default, or shall impair any right
consequent thereon. If any Event of Default with respect to the Company
specified in clause (v) or (vi) above occurs, the unpaid principal amount (or,
if the Subordinated Securities of any series then Outstanding are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of each such series) and accrued interest on all Subordinated
Securities of each series then Outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act by the Trustee
or any Securityholder. If the Trustee shall have proceeded to enforce any right
under the applicable Subordinated Indenture and such proceedings shall have been
discontinued or abandoned because of such rescission or annulment or for any
other reason or shall have been determined adversely to the Trustee, then and in
every such case the Company, the Trustee and the Securityholders shall be
restored respectively to their several positions and rights under the applicable
Subordinated Indenture, and all rights, remedies and powers of the Company, the
Trustee and the Securityholders shall continue as though no such proceeding had
been taken. Except with respect to an Event of Default pursuant to clause (i),
(ii) or (iii) above, the Trustee shall not be charged with knowledge of any
Event of Default unless written notice thereof shall have been given to the
Trustee by the Company, a Paying Agent or any Securityholder.
Each of the Subordinated Indentures provides that, subject to the duty of the
Trustee during default to act with the required standard of care, the Trustee
will be under no obligation to exercise any of its rights or powers under such
Subordinated Indenture at the request or direction of any of the holders of
Subordinated Securities issued under such Subordinated Indenture, unless such
holders shall have offered to the Trustee reasonable security or indemnity.
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<PAGE> 32
No holder of any Subordinated Securities of any series then Outstanding shall
have any right by virtue of or by availing of any provision of the applicable
Subordinated Indenture to institute any suit, action or proceeding in equity or
at law upon or under or with respect to such Subordinated Indenture or the
Subordinated Securities issued under such Subordinated Indenture or for the
appointment of a receiver or trustee or similar official, or for any other
remedy under such Subordinated Indenture or thereunder, unless such holder
previously shall have given to the Trustee written notice of default and of the
continuance thereof, as provided in such Subordinated Indenture, and unless the
holders of not less than 25 percent in aggregate principal amount of the
Subordinated Securities of such series then Outstanding shall have made written
request to the Trustee to institute such action, suit or proceeding in its own
name as Trustee under such Subordinated Indenture and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding.
Notwithstanding any other provisions in the applicable Subordinated Indenture,
but subject to the subordination provisions of the applicable Subordinated
Indenture, the right of any holder of any Subordinated Security to receive
payment of the principal of and interest, if any, on such Subordinated Security,
on or after the respective due dates expressed in such Subordinated Security,
or, if applicable, to convert such Subordinated Security as provided in the
applicable Subordinated Indenture, or to institute suit for the enforcement of
any such payment on or after such respective dates or for the enforcement of any
such right to convert shall not be impaired or affected without the consent of
such holder.
The holders of a majority in aggregate principal amount of the Subordinated
Securities of any series then Outstanding shall have the right to direct the
time, method, and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee with
respect to Subordinated Securities of such series; provided, that (subject to
certain exceptions) the Trustee shall have the right to decline to follow any
such direction if the Trustee shall determine upon advice of counsel that the
action or proceeding so directed may not lawfully be taken or if the Trustee in
good faith shall determine that the action or proceeding so directed would
involve the Trustee in personal liability. The holders of a majority in
aggregate principal amount of the Subordinated Securities of any series then
Outstanding may on behalf of the holders of all of the Subordinated Securities
of such series waive any past default or Event of Default under the applicable
Subordinated Indenture and its consequences except a default in the payment of
interest, if any, on, or the principal of, the Subordinated Securities of such
series. Upon any such waiver the Company, the Trustee and the holders of the
Subordinated Securities of such series shall be restored to their former
positions and rights under the applicable Subordinated Indenture, respectively;
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon. Whenever any default or Event of
Default shall have been waived as permitted, said default or Event of Default
shall for all purposes of the applicable Subordinated Securities and the
applicable Subordinated Indenture be deemed to have been cured and to be not
continuing.
The Trustee shall, within 90 days after the occurrence of a default, with
respect to Subordinated Securities of any series then Outstanding, mail to all
holders of Subordinated Securities of such series, as the names and the
addresses of such holders appear upon the applicable Subordinated Security
register, notice of all defaults known to the Trustee with respect to such
series, unless such defaults shall have been cured before the giving of such
notice (the term "defaults" for the purpose of these provisions being hereby
defined to be the events specified in clauses (i), (ii), (iii), (iv), (v), (vi),
(vii) and (viii) of " -- Provisions Applicable Solely to Company Senior
Subordinated Debt Securities and Company Subordinated Debt Securities -- Events
of Default" above, not including periods of grace, if any, provided for therein
and irrespective of the giving of the written notice specified in clause (iv) or
(vii) but in the case of any default of the character specified in said clause
(iv) or (vii) no such notice to Securityholders shall be given until at least 60
days after the giving of written notice thereof to the Company pursuant to said
clause (iv) or (vii), as the case may be); provided that except in the case of
default in the payment of the principal of or interest, if any, on any of the
Subordinated Securities, or in the payment or satisfaction of any sinking fund
or other purchase obligation, the Trustee shall be protected in withholding such
notice if and so long as the Trustee in good faith determines that the
withholding of such notice is in the best interests of the Securityholders.
The Company is required to furnish to the Trustee annually a statement as to the
fulfillment by the Company of all of its obligations under the applicable
Subordinated Indenture.
Subordination. The Subordinated Securities will be subordinate and junior in
right to payment, to the extent set forth in the applicable Subordinated
Indenture, to all Senior Indebtedness (as defined below for each of the
Subordinated
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<PAGE> 33
Indentures) of the Company. If the Company should default in the payment of any
principal of or premium or interest on any Senior Indebtedness when the same
becomes due and payable, whether at maturity or at a date fixed for prepayment
or by declaration of acceleration or otherwise, then, upon written notice of
such default to the Company by the holders of such Senior Indebtedness or any
trustee therefor and subject to certain rights of the Company to dispute such
default and subject to proper notification of the Trustee, unless and until such
default shall have been cured or waived or shall have ceased to exist, no direct
or indirect payment (in cash, property, securities, by set-off or otherwise)
will be made or agreed to be made for principal of or premium, if any, or
interest, if any, on the applicable Subordinated Securities, or in respect of
any redemption, retirement, purchase or other acquisition of the applicable
Subordinated Securities other than those made in capital stock of the Company
(or cash in lieu of fractional shares thereof) pursuant to any conversion right
of the Subordinated Securities or otherwise made in capital stock of the
Company.
"Senior Indebtedness" is defined in the Senior Subordinated Debt Indenture as
Indebtedness of the Company outstanding at any time except (i) any Indebtedness
of the Company that pursuant to its terms or the terms of any agreement relating
thereto or by operation of law is subordinate or junior in right of payment to
any other Indebtedness of the Company; provided that no Indebtedness of the
Company shall be deemed to be subordinate to any other Indebtedness of the
Company solely by virtue of any such other Indebtedness being secured or
otherwise having the benefit of any lien or security interest, (ii) any
Indebtedness as to which, by the terms of the instrument creating or evidencing
the same, it is provided that such Indebtedness is not senior in right of
payment to the Company Senior Subordinated Debt Securities, (iii) the Company
Senior Subordinated Debt Securities, (iv) the Company's subordinated
indebtedness, (v) any Indebtedness of the Company to a wholly owned Subsidiary
of the Company, (vi) interest accruing after the filing of a petition initiating
certain bankruptcy or insolvency proceedings unless such interest is an allowed
claim enforceable against the Company in a proceeding under federal or state
bankruptcy laws and (vii) trade accounts payable.
"Senior Indebtedness" is defined in the Subordinated Debt Indenture as
Indebtedness of the Company outstanding at any time except (i) any Indebtedness
as to which, by the terms of the instrument creating or evidencing the same, it
is provided that such Indebtedness is not senior in right of payment to the
Company Subordinated Debt Securities, (ii) the Company Subordinated Debt
Securities, (iii) the Company's existing subordinated indebtedness, (iv) any
Indebtedness of the Company to a wholly owned Subsidiary of the Company, (v)
interest accruing after the filing of a petition initiating certain bankruptcy
or insolvency proceedings unless such interest is an allowed claim enforceable
against the Company in a proceeding under federal or state bankruptcy laws and
(vi) trade accounts payable.
"Indebtedness" is defined in each Subordinated Indenture as, with respect to any
Person, (i)(a) the principal of and premium and interest, if any, on
indebtedness for money borrowed of such Person evidenced by bonds, notes,
debentures or similar obligations, including any guaranty by such Person of any
indebtedness for money borrowed of any other Person, whether any such
indebtedness or guaranty is outstanding on the date of the applicable
Subordinated Indenture or is thereafter created, assumed or incurred, (b) the
principal of and premium and interest, if any, on indebtedness for money
borrowed, incurred, assumed or guaranteed by such Person in connection with the
acquisition by it or any of its subsidiaries of any other businesses, properties
or other assets and (c) lease obligations which such Person capitalizes in
accordance with Statement of Financial Accounting Standards No. 13 promulgated
by the Financial Accounting Standards Board or such other generally accepted
accounting principles as may be from time to time in effect, (ii) any other
indebtedness of such Person, including any indebtedness representing the
deferred and unpaid balance of the purchase price of any property or interest
therein, including any such balance that constitutes a trade account payable,
and any guaranty, endorsement or other contingent obligation of such Person in
respect of any indebtedness of another, which is outstanding on the date of the
applicable Subordinated Indenture or is thereafter created, assumed or incurred
by such Person and (iii) any amendments, modifications, refundings, renewals or
extensions of any indebtedness or obligation described as Indebtedness in clause
(i) or (ii) above.
If (i) without the consent of the Company a court having jurisdiction shall
enter (a) an order for relief with respect to the Company under the United
States federal bankruptcy laws, (b) a judgment, order or decree adjudging the
Company as bankrupt or insolvent or (c) an order for relief for reorganization,
arrangement, adjustment or composition of or in respect of the Company under the
United States federal bankruptcy laws or state insolvency laws or (ii) the
Company shall institute proceedings for the entry of an order for relief with
respect to the Company under the United States federal bankruptcy laws or for an
adjudication of insolvency, or shall consent to the institution of bankruptcy or
insolvency proceedings against it, or shall file a petition seeking, or seek or
consent to reorganization, arrangement, composition or similar relief under the
United States federal bankruptcy laws or any applicable state law, or shall
consent to the filing of
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<PAGE> 34
such petition or to the appointment of a receiver, custodian, liquidator,
assignee, trustee, sequestrator or similar official in respect of the Company or
of substantially all of its property, or the Company shall make a general
assignment for the benefit of creditors, then all Senior Indebtedness (including
any interest thereon accruing after the commencement of any such proceedings)
will first be paid in full before any payment or distribution, whether in cash,
securities or other property, is made on account of the principal of or premium,
if any, or interest, if any, on the applicable Subordinated Securities. In such
event, any payment or distribution on account of the principal of or premium, if
any, or interest, if any, on the applicable Subordinated Securities, whether in
cash, securities or other property (other than securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in the
subordination provisions with respect to the applicable Subordinated Securities,
to the payment of all Senior Indebtedness then outstanding and to any securities
issued in respect thereof under any such plan of reorganization or
readjustment), which would otherwise (but for the subordination provisions) be
payable or deliverable in respect of the applicable Subordinated Securities will
be paid or delivered directly to the holders of Senior Indebtedness in
accordance with the priorities then existing among such holders until all Senior
Indebtedness (including any interest thereon accruing after the commencement of
any such proceedings) has been paid in full. In the event of any such
proceeding, after payment in full of all sums owing with respect to Senior
Indebtedness, the holders of Subordinated Securities, together with the holders
of any obligations of the Company ranking on a parity with the Subordinated
Securities issued under the applicable Subordinated Indenture, will be entitled
to be repaid from the remaining assets of the Company the amounts at the time
due and owing on account of unpaid principal of or any interest on the
Subordinated Securities issued under the applicable Subordinated Indenture and
such other obligations before any payment or other distribution, whether in
cash, property or otherwise, shall be made on account of any capital stock or
obligations of the Company ranking junior to the Subordinated Securities issued
under the applicable Subordinated Indenture and such other obligations. If,
notwithstanding the foregoing, any payment or distribution on the Subordinated
Securities issued under the applicable Subordinated Indenture of any character,
whether in cash, securities or other property (other than securities of the
Company or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in the subordination provisions with respect to the Subordinated
Securities issued under the applicable Subordinated Indenture, to the payment of
all Senior Indebtedness then outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), shall be
received by the Trustee or any holder of any Subordinated Securities issued
under the applicable Subordinated Indenture in contravention of any of the terms
of the applicable Subordinated Indenture, such payment or distribution will be
received in trust for the benefit of, and will be paid over or delivered and
transferred to, the holders of the Senior Indebtedness then outstanding in
accordance with the priorities then existing among such holders for application
to the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all such Senior Indebtedness in full. In the event of the
failure of the Trustee or any holder to endorse or assign any such payment,
distribution or security, each holder of Senior Indebtedness is irrevocably
authorized to endorse or assign the same.
Each of the Subordinated Indentures will provide that Senior Indebtedness shall
not be deemed to have been paid in full unless the holders thereof shall have
received cash, securities or other property equal to the amount of such Senior
Indebtedness then outstanding. Upon the payment in full of all Senior
Indebtedness, the holders of Subordinated Securities of each series shall be
subrogated to all rights of any holders of Senior Indebtedness to receive any
further payments or distributions applicable to such Senior Indebtedness until
the indebtedness evidenced by the Subordinated Securities of such series shall
have been paid in full, and such payments or distributions received by such
holders, by reason of such subrogation, of cash, securities or other property
that otherwise would be paid or distributed to the holders of Senior
Indebtedness with respect to such series, shall, as between the Company and its
creditors other than the holders of such Senior Indebtedness, on the one hand,
and such holders, on the other hand, be deemed to be a payment by the Company on
account of such Senior Indebtedness, and not on account of the Subordinated
Securities of such series.
By reason of such subordination, in the event of the insolvency of the Company,
holders of Senior Indebtedness and holders of other obligations of the Company
that are not subordinated to Senior Indebtedness may receive more, ratably, than
holders of the Subordinated Securities. Such subordination will not prevent the
occurrence of an Event of Default or limit the right of acceleration in respect
of the Subordinated Securities.
Conversion. Each of the Subordinated Indentures may provide that a series of
Subordinated Securities may be convertible into Common Stock (or cash in lieu
thereof). The following provisions will apply to Company Debt Securities that
are
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<PAGE> 35
convertible Subordinated Securities unless otherwise provided in the Prospectus
Supplement for such Company Debt Securities.
The holder of any convertible Subordinated Securities will have the right
exercisable at any time prior to maturity, subject to prior redemption or
purchase by the Company, to convert such Subordinated Securities into shares of
Common Stock at the conversion price or conversion rate set forth in the
Prospectus Supplement, subject to adjustment. The holder of convertible
Subordinated Securities may convert any portion thereof which is $1,000 in
principal amount or any integral multiple thereof.
In certain events, the conversion price or conversion rate will be subject to
adjustment as set forth in the applicable Subordinated Indenture. Such events
include issuance of shares of Common Stock as a dividend or distribution on the
Common Stock; subdivisions, combinations and reclassifications of the Common
Stock; redemption of the preferred share purchase rights associated with the
Common Stock; the issuance to all holders of Common Stock of rights or warrants
entitling the holders thereof (for a period not exceeding 45 days) to subscribe
for or purchase shares of Common Stock at a price per share less than the then
current market price per share of Common Stock (as determined pursuant to the
applicable Subordinated Indenture); and the distribution to substantially all
holders of Common Stock of evidences of indebtedness, equity securities
(including equity interests in the Company's Subsidiaries) other than Common
Stock, or other assets (excluding cash dividends paid from surplus) or
subscription rights or warrants (other than those referred to above). No
adjustment of the conversion price or conversion rate will be required unless an
adjustment would require a cumulative increase or decrease of at least 1% in
such price or rate. The Company has been advised by its counsel that certain
adjustments in the conversion price or conversion rate in accordance with the
foregoing provisions may result in constructive distributions to either holders
of the Subordinated Securities issued under the applicable Subordinated
Indenture or holders of Common Stock that would be taxable pursuant to Treasury
Regulations issued under Section 305 of the Internal Revenue Code of 1986, as
amended. The amount of any such taxable constructive distribution will be the
fair market value of the Common Stock that is treated as having been
constructively received, such value being determined as of the time the
adjustment resulting in the constructive distribution is made.
Fractional shares of Common Stock will not be issued upon conversion, but, in
lieu thereof, the Company will pay a cash adjustment based on the then current
market price for the Common Stock. Upon conversion, no adjustments will be made
for accrued interest or dividends. Accordingly, convertible Subordinated
Securities surrendered for conversion between an interest payment date and on or
prior to the record date pertaining to the subsequent interest payment date will
not be considered Outstanding and no interest will be paid on the related
interest payment date. Convertible Subordinated Securities surrendered for
conversion during the period between the close of business on any record date
for an interest payment date for such convertible Subordinated Security and the
opening of business on the related interest payment date (or on the related
interest payment date) shall be considered Outstanding for purposes of payment
of interest on such related interest payment date and therefore must be
accompanied by payment of an amount equal to the interest thereon which the
registered holder is to receive.
In the case of any consolidation or merger of the Company (with certain
exceptions) or any sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Company, the holder of
convertible Subordinated Securities, after the consolidation, merger, sale,
lease, exchange or other disposition, will have the right to convert such
convertible Subordinated Securities into the kind and amount of securities, cash
and other property that the holder would have been entitled to receive upon or
in connection with such consolidation, merger, sale, lease, exchange or other
disposition, if the holder had held the Common Stock issuable upon conversion of
such convertible Subordinated Securities issued under the applicable
Subordinated Indenture immediately prior to such consolidation, merger, sale,
lease, exchange or other disposition.
PROVISIONS APPLICABLE SOLELY TO COMPANY SUBORDINATED DEBT SECURITIES
Purchase of Company Subordinated Debt Securities at Option of the Holder upon
Change in Control. Unless otherwise specified in the Prospectus Supplement, if
on or prior to maturity there shall have occurred a Change in Control (as
defined below), the Company Subordinated Debt Securities shall be purchased, at
the option of the holder thereof, by the Company at the purchase price specified
in the Company Subordinated Debt Securities (the "Change in Control Purchase
Price"), on the date that is 35 business days after the occurrence of the Change
in Control (the "Change in
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Control Purchase Date"), subject to the subordination provisions of the
Subordinated Debt Indenture and satisfaction by or on behalf of the holder of
the following requirements:
(i) The delivery of a written notice of purchase (a "Change in Control
Purchase Notice") to the Trustee at any time prior to the close of business
on the Change in Control Purchase Date stating (a) the certificate number
or numbers of the Company Subordinated Debt Security or Securities which
the holder will deliver to be purchased, (b) the portion of the principal
amount of the Company Subordinated Debt Security or Securities which the
holder will deliver to be purchased, which portion must be $1,000 or an
integral multiple thereof, and (c) that such Company Subordinated Debt
Security or Securities shall be purchased on the Change in Control Purchase
Date pursuant to the terms and conditions specified in such Company
Subordinated Debt Securities; and
(ii) The delivery of the Company Subordinated Debt Securities, by hand
or by registered mail prior to, on or after the Change in Control Purchase
Date (together with all necessary endorsements) to the Trustee; provided,
however, that such Change in Control Purchase Price shall be so paid
pursuant to the Subordinated Debt Indenture only if the Company
Subordinated Debt Securities so delivered to the Trustee conform in all
respects to the description thereof set forth in the related Change in
Control Purchase Notice.
As provided in the Subordinated Debt Indenture, any holder delivering to the
Trustee the Change in Control Purchase Notice may withdraw such Change in
Control Purchase Notice by delivery at any time prior to or before the close of
business on the Change in Control Purchase Date of a written notice of
withdrawal to the Trustee specifying (i) the certificate number or numbers of
the Company Subordinated Debt Security or Securities in respect of which such
notice of withdrawal is being submitted; (ii) the principal amount of the
Company Subordinated Debt Security or Securities with respect to which such
notice of withdrawal is being submitted; and (iii) the principal amount, if any,
of the Company Subordinated Debt Security or Securities which remain subject to
the original Change in Control Purchase Notice, and which have been or will be
delivered for purchase by the Company.
Upon receipt by the Company of the Change in Control Purchase Notice, the holder
of the Company Subordinated Debt Securities in respect of which such Change in
Control Purchase Notice was given shall (unless such Change in Control Purchase
Notice is withdrawn) thereafter be entitled to receive solely the Change in
Control Purchase Price with respect to such Company Subordinated Debt
Securities. Such Change in Control Purchase Price shall be paid to such holder
promptly following the later of (x) the Change in Control Purchase Date with
respect to such Company Subordinated Debt Securities and (y) the time of
delivery of such Company Subordinated Debt Securities to the Trustee by the
holder thereof in the manner required by the Subordinated Debt Indenture.
Company Subordinated Debt Securities in respect of which a Change in Control
Purchase Notice has been given by the holder thereof may not be converted into
shares of Common Stock on or after the date of the delivery of such Change in
Control Purchase Notice, unless such Change in Control Purchase Notice has first
been validly withdrawn as specified in the Subordinated Debt Indenture.
Notwithstanding the foregoing, there shall be no purchase of any Company
Subordinated Debt Securities if there has occurred and is continuing an Event of
Default (other than a default in the payment of the Change in Control Purchase
Price) as defined in the Subordinated Debt Indenture.
A "Change in Control" shall be deemed to have occurred at such time as any of
the following events shall occur:
(i) Any person (for purposes of the Change in Control provisions of the
Subordinated Debt Indenture only, the term "person" shall mean a "person"
as defined in or for purposes of the Securities Exchange Act of 1934 as
amended (and including any rule or regulation promulgated pursuant thereto
and including any successor statute or any rule or regulation promulgated
pursuant thereto, the "Exchange Act"), including any "group" acting for the
purpose of acquiring, holding or disposing of securities within the meaning
of the Exchange Act), together with its Affiliates and Associates (as
defined below), shall file a report under or in response to Schedule 13D or
14D-1 (or any successor schedule, form or report) pursuant to the Exchange
Act disclosing that such person has become the beneficial owner (as the
term "beneficial owner" is defined pursuant to the Exchange Act) of either
(A) 50% or more of the shares of Common Stock then outstanding or (B) 50%
or more of the voting power of the Voting Stock (as hereinafter defined) of
the Company then outstanding; provided, however, that for purposes of this
clause (i), a person shall not be deemed the beneficial owner of (1) any
securities tendered pursuant to a tender offer or exchange offer made by or
on behalf of such person, or its Affiliates or Associates, until such
tendered securities are accepted for purchase or exchange thereunder, or
(2) any securities in respect of which beneficial ownership by such
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<PAGE> 37
person arises solely as a result of a revocable proxy delivered in response
to a proxy or consent solicitation that is made pursuant to, and in
accordance with, the Exchange Act and not then reportable on Schedule 13D
(or any successor schedule, form or report) under the Exchange Act.
(ii) There shall be consummated any sale, transfer, lease or conveyance
of all or substantially all of the properties and assets of the Company to
any other corporation or corporations or other person or persons (other
than a Subsidiary of the Company).
(iii) There shall be consummated any consolidation of the Company with
or merger of the Company with or into any other corporation or corporations
or entity or entities (whether or not affiliated with the Company) in which
the Company is not the sole surviving or continuing corporation or pursuant
to which the shares of Common Stock outstanding immediately prior to the
consummation of such consolidation or merger are converted into cash,
securities or other property, other than a consolidation or merger in which
the holders of shares of Common Stock receive, directly or indirectly, (A)
75% or more of the common stock of the sole surviving or continuing
corporation outstanding immediately following the consummation of such
consolidation or merger and (B) securities representing 75% or more of the
combined voting power of the Voting Stock of the sole surviving or
continuing corporation outstanding immediately following the consummation
thereof of such consolidation or merger.
"Associate" shall have the meaning ascribed to such term pursuant to the
Exchange Act as in effect on the date of the Subordinated Debt Indenture.
"Voting Stock" shall mean, with respect to any person, the capital stock of such
person having general voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or trustees of such persons
(irrespective of whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).
Within 15 business days after the occurrence of a Change in Control, the Company
shall mail a written notice of Change in Control by first-class mail to the
Trustee and to each Holder (and to beneficial owners as required by applicable
law) and shall cause a copy of such notice to be published at least once in the
national edition of The Wall Street Journal. The notice shall include or
transmit a form of Change in Control Purchase Notice to be completed by the
holder and shall state: (i) the events causing a Change in Control and the date
of such Change in Control; (ii) the date by which the Change in Control Purchase
Notice pursuant to the Subordinated Debt Indenture must be given; (iii) the
Change in Control Purchase Date; (iv) the Change in Control Purchase Price; (v)
the name and address of the Trustee; (vi) that the Company Subordinated Debt
Securities must be surrendered to the Trustee to collect payment; (vii) that the
Change in Control Purchase Price for any Company Subordinated Debt Security as
to which a Change in Control Purchase Notice has been given and not withdrawn
will be paid promptly following the later of the Change in Control Purchase Date
or the time of surrender of such Company Subordinated Debt Securities; (viii)
the procedures the holder must follow to exercise rights under the Subordinated
Debt Indenture and a brief description of those rights; and (ix) the procedures
for withdrawing a Change in Control Purchase Notice.
Prior to 12:00 Noon (local time in the City of New York) on the business day
following the Change in Control Purchase Date, the Company shall deposit with
the Trustee an amount of cash in immediately available funds or securities, if
expressly permitted under the Subordinated Debt Indenture, sufficient to pay the
aggregate Change in Control Purchase Price of all Company Subordinated Debt
Securities or portions thereof which are to be purchased. If a deposit is made
with the Trustee of the aforesaid amount of cash or securities, the Company
Subordinated Debt Securities or portions thereof with respect to which a Change
in Control Purchase Notice has been delivered and not validly withdrawn shall
become due and payable as of the business day following the applicable Change in
Control Purchase Date, and on and after such date interest on such Company
Subordinated Debt Securities shall cease and all other rights of the holders
thereof shall terminate, other than the right to receive the Change in Control
Purchase Price upon delivery of such Company Subordinated Debt Securities to the
Trustee. To the extent that the aggregate amount of cash deposited by the
Company exceeds the aggregate Change in Control Purchase Price of the Company
Subordinated Debt Securities or portions thereof to be purchased, then promptly
after the Change in Control Purchase Date, the Trustee shall return any such
excess to the Company, together with interest or dividends, if any, thereon.
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CONCERNING THE TRUSTEES
Each of the Trustees is a depositary for funds of, makes loans to and performs
other services for the Company and certain of its affiliates in the normal
course of business.
Texas Commerce Bank will serve as Trustee under the Senior Subordinated
Indenture and serves as Trustee under the Subordinated Indenture, under which no
securities were outstanding as of June 30, 1996. Texas Commerce Bank also serves
as Trustee under (i) the Debenture Indenture (the "Debenture Indenture") dated
as of June 15, 1992, between the Company and Texas Commerce Bank, as trustee,
and (ii) the Guarantees of Notes of Subsidiaries Indenture (the "Guarantees
Indenture") dated as of May 1, 1970, between the Company and Texas Commerce
Bank, as trustee. Debt of the Company issued pursuant to the Debenture Indenture
and the Guarantees Indenture constitutes Senior Indebtedness. As of June 30,
1996, the Company had outstanding approximately $31 million principal amount of
Senior Indebtedness issued pursuant to the Debenture Indenture and approximately
$59 million principal amount of guarantees issued pursuant to the Guarantees
Indenture.
The Bank of New York serves as Trustee under the Senior Indenture pursuant to
which unsecured debt securities of SCI are outstanding representing
approximately $1,436 million of Senior Indebtedness as of June 30, 1996.
Pursuant to the Trust Indenture Act, a trustee under an indenture may be deemed
to have a conflicting interest, and may, under certain circumstances set forth
in the Trust Indenture Act, be required to resign as trustee under such
indenture, if the securities issued under such indenture are in default (as such
term is defined in such indenture) and the trustee is the trustee under another
indenture under which any other securities of the same obligor are outstanding,
subject to certain exceptions set forth in the Trust Indenture Act. In such
event, the obligor must take prompt steps to have a successor trustee appointed
in the manner provided in the indenture from which the trustee has resigned.
Pursuant to the Trust Indenture Act, Texas Commerce Bank, as proposed trustee
under the Senior Subordinated Indenture and as trustee under the Subordinated
Indenture, the Debenture Indenture and the Guarantees Indenture, could be
required to resign as trustee under one or more of such indentures should a
default occur under one or more of such indentures. In such event, the Company
would be required to take prompt steps to have a successor trustee or successor
trustees appointed in the manner provided in the applicable indenture or
indentures.
DESCRIPTION OF CAPITAL STOCK
GENERAL
As of August 16, 1996, the Company had authorized capital stock consisting of
1,000,000 shares of Preferred Stock, $1.00 par value per share (the "Preferred
Stock"), and 500,000,000 shares of Common Stock. As of August 16, 1996, the
record date for the two for one stock split approved by the Company's Board of
Directors on June 13, 1996 (the "Stock Split"), the Company had outstanding,
after giving effect to the Stock Split, 235,603,988 shares of Common Stock, and
37,891,314 shares were reserved for future issuance. No shares of Preferred
Stock were outstanding on such date.
The following description of the Common Stock does not purport to be complete
and is qualified in its entirety by reference to applicable provisions of Texas
law, the Company's Restated Articles of Incorporation (the "Articles of
Incorporation"), the Company's Bylaws (the "Bylaws"), and the Rights Agreement
dated as of July 18, 1988, as amended (the "Rights Agreement"), between the
Company and Society National Bank, as successor agent thereunder (the "Rights
Agent").
COMMON STOCK
Subject to the prior rights of holders of shares of the Preferred Stock, the
holders of shares of Common Stock (i) are entitled to such dividends as may be
declared by the Board of Directors of the Company out of funds legally available
therefor; (ii) are entitled to one vote per share; (iii) have no preemptive or
conversion rights; (iv) are not subject to, or entitled to the benefits of, any
redemption or sinking fund provision; and (v) are entitled upon liquidation to
receive the assets of the Company remaining after the payment of corporate debts
and the satisfaction of liquidation preference of the Preferred Stock. Voting is
non-cumulative. The outstanding shares of Common Stock are fully paid and
non-assessable.
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<PAGE> 39
Under the terms of the credit agreements between the Company and its bank
lenders, there are no restrictions upon the payment of cash dividends on, or the
repurchase of, the Common Stock; except that under the terms of credit
agreements with certain banks SCI is required to maintain a net worth (as
defined) in excess of $1.1 billion. This net worth requirement increases
annually and could from time to time restrict the payment of dividends on the
Common Stock. At June 30, 1996, the net worth (as defined) was $2.266 billion.
The Transfer Agent and Registrar for the Common Stock is Society National Bank,
Houston, Texas.
CERTAIN PROVISIONS AFFECTING CONTROL OF THE COMPANY
The Articles of Incorporation contain various provisions that may be deemed to
have an anti-takeover effect. These provisions include the following: (i) the
requirement of a four-fifths vote of outstanding shares of capital stock (a) to
approve the merger or consolidation of the Company, or the exchange by the
Company of its securities, with a holder of 10% or more of the Company's capital
stock, (b) to remove directors with or without cause and (c) to amend or repeal
any of these provisions; (ii) the creation of a classified Board of Directors
consisting of three classes; (iii) the establishment of a minimum of nine and a
maximum of 15 directors; (iv) the ability of the directors, by four-fifths vote,
to remove a director, subject to approval by a majority vote of the
shareholders; and (v) the right of directors to fill vacancies on the board
without the approval of shareholders.
SHAREHOLDER RIGHTS PLAN
On July 18, 1988, the Board of Directors of the Company (i) declared a dividend
of one preferred share purchase right (a "Right") for each share of Common Stock
outstanding at the close of business on July 28, 1988 (the "Record Date") and
(ii) provided that one Right will be issued with each share of Common Stock that
shall become outstanding after the Record Date and prior to the earliest of the
Distribution Date (as hereinafter defined), the date the Rights are redeemed or
the date the Rights expire. Each Right entitles the registered holder to
purchase from the Company one-three hundredth (1/300) interest in a share of
Series C Junior Participating Preferred Stock, $1.00 par value (a "Preferred
Share"), of the Company, at a price of $28 1/3 per one-three hundredth (1/300)
interest (the "Purchase Price"), upon the terms and subject to the conditions
set forth in the Rights Agreement.
Until the earlier of (i) ten days after a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired
beneficial ownership of 20% or more of the Common Stock outstanding or (ii) ten
business days after the commencement of, or public announcement of, a tender or
exchange offer the consummation of which would result in beneficial ownership by
a person or group of 20% or more of the Common Stock outstanding (the earlier of
such dates being called the "Distribution Date"), the Rights are evidenced, with
respect to any certificate for Common Stock outstanding as of the Record Date,
by such certificate together with a copy of a summary of rights and, with
respect to any certificate for Common Stock issued after the Record Date and
before the Distribution Date (or earlier redemption or expiration of the
Rights), by such certificate, which will bear notation incorporating the Rights
Agreement by reference.
Until the Distribution Date (or earlier redemption or expiration of the Rights),
(i) the Rights will be transferred with and only with the Common Stock and (ii)
the surrender for transfer of any certificate for Common Stock will also
constitute the surrender for transfer of the Rights associated with the Common
Stock represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of Common Stock as of the
close of business on the Distribution Date, and such separate Right Certificates
alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will expire on
July 28, 1998, unless extended or earlier redeemed by the Company as described
below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment to prevent dilution in the event of certain actions taken by the
Company.
If any person becomes an Acquiring Person, each holder of a Right, other than
the Acquiring Person, will thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price of a Right, that number of
shares of Common Stock that, at the time of such transaction, will have a market
value of two times the Purchase Price of a
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Right. If the Company is acquired in a merger or other business combination or
50% or more of its consolidated assets or earning power is sold, each holder of
a Right will thereafter have the right to receive, upon the exercise thereof at
the then current Purchase Price of a Right, that number of shares of common
stock of the Acquiring Person that, at the time of the transaction, will have a
market value of two times the Purchase Price of a Right.
Under certain circumstances, after a person becomes an Acquiring Person, the
Board of Directors of the Company may exchange the Rights (other than Rights
owned by the Acquiring Person, which are void), in whole or in part, at an
exchange ratio of one share of Common Stock per Right (subject to adjustment).
At any time before a person has become an Acquiring Person, the Company may
redeem the Rights in whole, but not in part, at a price of $.01 per Right,
subject to adjustment (the "Redemption Price"). Immediately upon the action of
the Board of Directors to redeem the Rights, the Company will announce the
redemption, the right to exercise the Rights will terminate, and the only right
of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no rights as
a shareholder of the Company, including, without limitation, the right to vote
or to receive dividends.
The Rights have certain anti-takeover effects. The Rights will cause substantial
dilution to a person or group that attempts to acquire the Company without
conditioning the offer on a substantial number of Rights being acquired. The
Rights should not interfere with any merger or other business combination
approved by the Board of Directors of the Company since the Board of Directors
may, at its option, at any time prior to the time a person has become an
Acquiring Person, redeem all but not less than all the then outstanding Rights
at the Redemption Price.
PREFERRED STOCK
Under the Articles of Incorporation, SCI has the authority to issue 1,000,000
shares of Preferred Stock. The Board of Directors of SCI is empowered, without
approval of the shareholders, to cause shares of Preferred Stock to be issued in
one or more series, with the number of shares of each series and the rights,
preferences and limitations of each series to be determined by it. Among the
specific matters that may be determined by the Board of Directors are the rate
of dividends, redemption and conversion prices and terms and amounts payable in
the event of liquidation. Dividends on the Preferred Stock, both for the current
period and all past periods, must be paid or set apart for payment before any
dividends (other than in stock junior to the Preferred Stock) can be paid on the
Common Stock and before any other distribution on or redemption of any Common
Stock by the Company. The holders of Preferred Stock will be entitled to one
vote per share in the election of directors and on all matters submitted to
shareholders. The Company may not, without the approval of the holders of at
least two-thirds of the outstanding shares of Preferred Stock (and subject to
the provisions of the Articles of Incorporation referred to under "-- Certain
Provisions Affecting Control of the Company" above), among other things, amend
or repeal any provision of, or add any provision to, the Articles of
Incorporation or Bylaws of the Company if such action would alter or change the
preferences, rights, privileges or powers of, or the restrictions provided for
the benefit of, the Preferred Stock. Except for matters on which the Preferred
Stock is entitled to vote as a class, shares of outstanding Preferred Stock vote
together with the Common Stock. Voting is non-cumulative. If dividends payable
on any series shall be in arrears in an amount equivalent to six dividend
payments, the holders of Preferred Stock voting as a class have the right to
elect two directors to the Board of Directors to serve until all past due
dividends have been paid. Issuance of Preferred Stock could involve dilution of
the equity of the holders of Common Stock and restriction on the rights of such
shareholders to receive dividends. The Board of Directors has designated and
reserved for issuance 950,000 shares of the Company's Preferred Stock as Series
C Junior Participating Preferred Stock, which may be issued upon the exercise of
the preferred share purchase rights that are associated with the Common Stock.
See "-- Shareholder Rights Plan" above.
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DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants (which may be titled either
"options" or "warrants") for the purchase of Common Stock. The Common Stock
Warrants may be issued independently or together with any Securities offered by
any Prospectus Supplement and may be attached to or separate from such
Securities. Each series of Common Stock Warrants will be issued under a separate
warrant agreement (a "Warrant Agreement") to be entered into between the Company
and a bank or trust company, as Warrant Agent, all as set forth in the
Prospectus Supplement relating to the particular issue of offered Common Stock
Warrants. The Warrant Agent will act solely as an agent of the Company in
connection with certificates representing Common Stock Warrants (the "Common
Stock Warrant Certificates") and will not assume any obligation or relationship
of agency or trust for or with any holders of Common Stock Warrant Certificates
or beneficial owners of Common Stock Warrants. The form of Warrant Agreement,
including the form of Common Stock Warrant Certificate representing the Common
Stock Warrants, is filed as an exhibit to the Registration Statement to which
this Prospectus pertains. The following summaries of certain provisions of the
form of Warrant Agreement and Common Stock Warrant Certificate do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Warrant Agreement and the Common Stock Warrant
Certificate.
GENERAL
Reference is made to the accompanying Prospectus Supplement relating to the
Common Stock Warrants, if Common Stock Warrants are offered, for the following
terms of the Common Stock Warrants:
(i) the offering price;
(ii) the number of shares of Common Stock purchasable upon exercise of
each such Common Stock Warrant and the price at which such number of shares
of Common Stock may be purchased upon such exercise;
(iii) the date on which the right to exercise such Common Stock Warrants
shall commence and the date on which such right shall expire (the
"Expiration Date"); and
(iv) any other terms of such Common Stock Warrants (and the accompanying
Prospectus Supplement may state that any of the terms set forth herein are
inapplicable to such series).
Common Stock Warrants for the purchase of Common Stock will be offered and
exercisable for U.S. dollars only and will be in registered form only.
Common Stock Warrant Certificates may be exchanged for new Common Stock Warrant
Certificates of different denominations, may (if in registered form) be
presented for registration or transfer, and may be exercised at the corporate
trust office of the Warrant Agent or any other office indicated in the
applicable Prospectus Supplement. Prior to the exercise of any Common Stock
Warrants, holders of such Common Stock Warrants will not have any rights of
holders of the Common Stock purchasable upon such exercise, including the right
to receive payments of dividends, if any, on the Common Stock purchasable upon
such exercise or to exercise any applicable right to vote.
EXERCISE OF COMMON STOCK WARRANTS
Each Common Stock Warrant will entitle the holder thereof to purchase such
shares of Common Stock at such exercise price as shall in each case be set forth
in, or calculable from, the Prospectus Supplement relating to the offered Common
Stock Warrants. After the close of business on the Expiration Date (or such
later date to which such Expiration Date may be extended by the Company),
unexercised Common Stock Warrants will become void.
Common Stock Warrants may be exercised by delivering to the Warrant Agent
payment as provided in the applicable Prospectus Supplement of the amount
required to purchase the Common Stock purchasable upon such exercise together
with certain information set forth on the reverse side of the Common Stock
Warrant Certificate. Common Stock Warrants will be deemed to have been exercised
upon receipt of payment of the exercise price, subject to the receipt of the
Common Stock Warrant Certificate evidencing such Common Stock Warrants. Upon
receipt of such payment and the Common Stock Warrant Certificate properly
completed and duly executed at the corporate trust office of the Warrant Agent
or any other office indicated in the applicable Prospectus Supplement, the
Company will, as soon as practicable, issue and deliver the Common Stock
purchasable upon such exercise. If fewer than all of the Common Stock Warrants
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represented by such Common Stock Warrant Certificate are exercised, a new Common
Stock Warrant Certificate will be issued for the remaining amount of Common
Stock Warrants.
AMENDMENTS AND SUPPLEMENTS TO WARRANT AGREEMENT
The Warrant Agreement for a series of Common Stock Warrants may be amended or
supplemented without the consent of the holders of the Common Stock Warrants
issued thereunder to effect changes that are not inconsistent with the
provisions of the Common Stock Warrants and that do not adversely affect the
interests of the holders of the Common Stock Warrants.
COMMON STOCK WARRANT ADJUSTMENTS
Unless otherwise indicated in the applicable Prospectus Supplement, the exercise
price of, and the number of shares of Common Stock covered by, a Common Stock
Warrant are subject to adjustment in certain events, including: (i) the issuance
of Common Stock as a dividend or distribution on the Common Stock; (ii)
subdivisions and combinations of the Common Stock; (iii) the issuance to all
holders of Common Stock of certain rights or warrants entitling them to
subscribe for or purchase Common Stock within 45 days after the date fixed for
the determination of the shareholders entitled to receive such rights or
warrants, at less than the current market price (as defined in the Warrant
Agreement for such series of Common Stock Warrants); and (iv) the distribution
to all holders of Common Stock of evidences of indebtedness or assets of the
Company (excluding certain cash dividends and distributions described below) or
rights or warrants to subscribe for or purchase such evidences of indebtedness
or assets (excluding those referred to above). If the Company shall distribute
any rights or warrants to acquire capital stock pursuant to clause (iv) above
(the "Capital Stock Rights"), pursuant to which separate certificates
representing such Capital Stock Rights will be distributed subsequent to the
initial distribution of such Capital Stock Rights (whether or not such
distribution shall have occurred prior to the date of the issuance of a series
of Common Stock Warrants), such subsequent distribution shall be deemed to be
the distribution of such Capital Stock Rights; provided that the Company may, in
lieu of making any adjustment in the exercise price of, and the number of shares
of Common Stock covered by, a Common Stock Warrant upon a distribution of
separate certificates representing such Capital Stock Rights, make proper
provision so that each holder of such a Common Stock Warrant who exercises such
Common Stock Warrant (or any portion thereof) (a) before the record date for
such distribution of separate certificates shall be entitled to receive upon
such exercise shares of Common Stock issued with Capital Stock Rights and (b)
after such record date and prior to the expiration, redemption or termination of
such Capital Stock Rights shall be entitled to receive upon such exercise, in
addition to the shares of Common Stock issuable upon such exercise, the same
number of such Capital Stock Rights as would a holder of the number of shares of
Common Stock that such Common Stock Warrant so exercised would have entitled the
holder thereof to acquire in accordance with the terms and provisions applicable
to the Capital Stock Rights if such Common Stock Warrant was exercised
immediately prior to the record date for such distribution. Common Stock owned
by or held for the account of the Company or any majority owned subsidiary shall
not be deemed outstanding for the purpose of any adjustment required pursuant to
clause (iv) of this paragraph.
No adjustment in the exercise price of, and the number of shares of Common Stock
covered by, a Common Stock Warrant will be made for regular quarterly or other
periodic or recurring cash dividends or distributions or for cash dividends or
distributions to the extent paid from retained earnings. No adjustment will be
required unless such adjustment would require a change of at least 1% in the
exercise price then in effect; provided that any such adjustment not so made
will be carried forward and taken into account in any subsequent adjustment; and
provided further that any such adjustment not so made shall be made no later
than three years after the occurrence of the event requiring such adjustment to
be made or carried forward. Except as stated above, the exercise price of, and
the number of shares of Common Stock covered by, a Common Stock Warrant will not
be adjusted for the issuance of Common Stock or any securities convertible into
or exchangeable for Common Stock, or securities carrying the right to purchase
any of the foregoing.
In the case of (i) a reclassification or change of the Common Stock, (ii) a
consolidation or merger involving the Company or (iii) a sale or conveyance to
another corporation of the property and assets of the Company as an entirety or
substantially as an entirety, in each case as a result of which holders of the
Company's Common Stock shall be entitled to receive stock, securities, other
property or assets (including cash) with respect to or in exchange for such
Common Stock, the holders of the Common Stock Warrants then outstanding will be
entitled thereafter to convert such Common
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Stock Warrants into the kind and amount of shares of stock and other securities
or property which they would have received upon such reclassification, change,
consolidation, merger, sale or conveyance had such Common Stock Warrants been
exercised immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance.
PLAN OF DISTRIBUTION
The Company may sell Securities to or through underwriters, and also may sell
Securities directly to other purchasers or through agents. The distribution of
the Securities may be effected from time to time in one or more transactions at
a fixed price or prices, which may be changed, or at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices.
In connection with the sale of Securities, underwriters may receive compensation
from the Company or from purchasers of Securities for whom they may act as
agents in the form of discounts, concessions or commissions. Underwriters may
sell Securities to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters
and/or commissions from the purchasers for whom they may act as agents.
Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be underwriters, and any discounts or commissions
received by them from the Company, and any profit on the resale of Securities by
them may be deemed to be underwriting discounts and commissions, under the Act.
Any such underwriter or agent will be identified, and any such compensation
received from the Company will be described, in the Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Act.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Securities from the Company, pursuant to
contracts providing for payments and delivery on a future date. Institutions
with which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such institutions must be
approved by the Company. The obligations of any purchaser under any such
contract will be subject to the condition that the purchase of the offered
Securities shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject. The underwriters and such other
agents will not have any responsibility in respect of the validity or
performance of such contracts.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., Houston, Texas, special
counsel for the Company.
EXPERTS
The consolidated financial statements of Service Corporation International at
December 31, 1995 and 1994, and for the three years ended December 31, 1995
appearing in Service Corporation International's Annual Report (Form 10-K) for
the year ended December 31, 1995, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their report thereon incorporated
herein by reference in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.
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