<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-65711
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 15, 1998)
[Service Corp. LOGO]
SERVICE CORPORATION INTERNATIONAL
$600,000,000
6% Notes due 2005
Interest payable June 15 and December 15
ISSUE PRICE: 99.362%
The Notes will mature on December 15, 2005. Interest will accrue from December
11, 1998. The Company will have the right to redeem the Notes before their
stated maturity on the terms set forth in this Prospectus Supplement on page
S-6. The Notes are unsecured obligations of the Company and rank equally with
all other unsecured and unsubordinated indebtedness of the Company. The Company
will issue the Notes in minimum denominations of $1,000, increased in multiples
of $1,000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus Supplement or the accompanying
Prospectus. Any representation to the contrary is a criminal offense.
The principal executive offices of the Company are located at 1929 Allen
Parkway, Houston, Texas 77019, and our telephone number is (713) 522-5141.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS THE COMPANY
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note 99.362% .625% 98.737%
- ---------------------------------------------------------------------------------------------------------------------------------
Total $596,172,000 $3,750,000 $592,422,000
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes will not be listed on any securities exchange. Currently, there is no
public market for the Notes.
The Notes will be ready for delivery in book-entry form only through The
Depository Trust Company, on or about December 11, 1998.
Joint Bookrunners
CHASE SECURITIES INC. J.P. MORGAN & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC WARBURG DILLON READ LLC
ABN AMRO INCORPORATED
CREDIT SUISSE FIRST BOSTON
SG COWEN
December 8, 1998
<PAGE> 2
No person is authorized to give any information or to make any representations
other than those contained or incorporated by reference in this Prospectus
Supplement or the accompanying Prospectus, and, if given or made, such
information or representations must not be relied upon as having been
authorized. This Prospectus Supplement and the accompanying Prospectus do not
constitute an offer to sell or the solicitation of an offer to buy any
securities other than the securities described in this Prospectus Supplement or
an offer to sell or the solicitation of an offer to buy such securities in any
circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus Supplement or the accompanying Prospectus, nor any
sale made hereunder and thereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof or that the information contained or incorporated by reference
herein or therein is correct as of any time subsequent to the date of such
information.
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 Notes........................................ S-6
Underwriting................................................ S-9
Legal Matters............................................... S-10
Experts..................................................... S-10
PROSPECTUS
About this Prospectus....................................... 2
Where You Can Find More Information......................... 3
The Company................................................. 5
The Trusts.................................................. 5
Use of Proceeds............................................. 6
Ratios of Earnings to Fixed Charges......................... 6
Description of Company Debt Securities...................... 6
Description of Capital Stock................................ 32
Description of Common Stock Warrants........................ 36
Description of Preferred Securities......................... 39
Description of Preferred Securities Guarantees.............. 41
Effect of Obligations under Company Debt Securities and
Preferred Securities Guarantees........................... 44
Description of Stock Purchase Contracts and Stock Purchase
Units..................................................... 45
Plan of Distribution........................................ 46
Legal Matters............................................... 47
Experts..................................................... 47
</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 September 30, 1998, SCI owned and operated 3,370 funeral service
locations, 430 cemeteries and 180 crematoria located in 18 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 financial services segment is engaged in prearranged funeral
marketing, funeral and cemetery trust administration, investments, life
insurance operations and 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.
Acquisitions form a critical part of SCI's growth strategy. SCI continues to
aggressively pursue acquisition opportunities, 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
On November 12, 1998, the Company announced a quarterly cash dividend of $.09
per share, payable January 29, 1999 to shareholders of record on January 13,
1999.
The Company has recently increased the amount available under its commercial
paper program from $600 million to $1.4 billion.
The Company has previously announced the execution of an agreement and plan of
merger (the "Merger") with Equity Corporation International ("ECI"). The special
meeting of ECI stockholders to vote on the Merger is scheduled for December 22,
1998. The closing of the Merger remains subject, among other matters, to the
approval by ECI's stockholders and regulatory authorities. The Company and ECI
are engaged in discussions with the staff of the Federal Trade Commission
("FTC") relative to the notification provided to the FTC pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 concerning the Merger.
There can be no assurance of the outcome of these discussions or that the other
conditions to closing will be satisfied.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------- -------------------------------------------------
1998 1997* 1997* 1996 1995 1994
----------- ----------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues.................. $2,101,594 $1,870,014 $2,468,402 $2,294,194 $1,652,126 $1,117,175
Income before income
taxes................... 437,119 438,407 579,973 413,881 294,211 219,021
Income before
extraordinary loss and
cumulative effect of
change in accounting
principles.............. 282,947 282,672 374,552 265,298 183,588 131,045
Net income................ 282,947 241,870 333,750 265,298 183,588 131,045
Earnings per share:
Basic................... 1.11 1.00 1.36 1.13 .92 .76
Diluted................. 1.08 .95 1.31 1.08 .86 .71
Dividends per share....... .27 .23 .30 .24 .22 .21
Total assets.............. 12,053,975 9,737,921 10,306,863 8,869,770 7,672,387 5,161,888
Long-term debt............ 3,365,982 2,317,259 2,634,699 2,048,737 1,712,464 1,330,177
Convertible preferred
securities of SCI
Finance LLC............. -- -- -- 172,500 172,500 172,500
Stockholders' equity...... 3,003,665 2,617,543 2,726,004 2,235,317 1,975,345 1,196,622
Shares outstanding........ 257,821 251,837 252,924 236,193 234,542 189,714
Ratio of earnings to fixed
charges**............... 3.88 4.35 4.29 3.24 2.84 3.13
</TABLE>
- ---------------
* The nine months ended September 30, 1997 and year ended December 31, 1997
reflect a $40,802 (net of income taxes of $23,383) extraordinary loss on
early extinguishment of debt. In addition, SCI recorded a $68,077 gain
($42,494 net of income taxes) on the February 1997 sale of SCI's approximate
42% equity investment in ECI. This gain on the sale of SCI's equity
investment in ECI resulted in a net gain of $.18 and $.17 in basic and
diluted earnings per share, respectively, for the nine months ended September
30, 1997 and for the year ended December 31, 1997. If the Merger is
consummated and treated as a pooling of interests, the gain recognized by SCI
in 1997 on the sale of its ECI investment would be reversed in SCI's restated
financial statements for the year ended December 31, 1997.
S-4
<PAGE> 5
** For purposes of computing the ratios of earnings to fixed charges, earnings
consist of (1) income from continuing operations before income taxes
(excluding the undistributed income of entities of which the Company owns
less than 50% of the equity), (2) the minority interest of majority-owned
subsidiaries with fixed charges and (3) fixed charges (excluding capitalized
interest). Fixed charges consist of (1) interest expense, whether capitalized
or expensed, (2) amortized debt costs, (3) dividends on preferred securities
of SCI Finance LLC (which preferred securities were redeemed in June 1997)
and (4) an interest factor attributable to rentals.
USE OF PROCEEDS
The net proceeds from the sale of the Notes offered hereby (the "Notes") are
estimated to be approximately $592.3 million. The Company has incurred certain
indebtedness through the issuance of commercial paper 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 Notes for general corporate purposes,
including (i) the repayment of a portion of the commercial paper, (ii) if the
ECI Merger is consummated, the repayment of approximately $130 million to $150
million of revolving credit indebtedness of ECI, and (iii) other pending
acquisitions. Pending such uses, net proceeds may be invested in short-term
investments. As of December 4, 1998, approximately $693.1 million of commercial
paper of the Company was outstanding at a weighted average annual interest rate
of 5.67% with maturities ranging from one to 181 days. 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 NOTES
The following description of the particular terms of the Notes supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of the Senior Debt Securities set forth in the accompanying
Prospectus, to which description reference is hereby made. The Notes are Senior
Debt Securities as defined in the accompanying Prospectus. The Notes are to be
issued under the Senior Debt Indenture, which is more fully described in the
accompanying Prospectus. Except as otherwise defined herein, capitalized terms
used herein have the meanings specified in the accompanying Prospectus or in the
Senior Debt Indenture referred to therein.
The maximum aggregate principal amount of Notes that may be issued is limited to
$600,000,000. Interest at the annual rate set forth on the cover page of this
Prospectus Supplement will accrue from December 11, 1998, and is payable
semiannually on June 15 and December 15, commencing June 15, 1999, to the
persons in whose names the Notes are registered at the close of business on the
preceding June 1 or December 1, respectively. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
The Notes will mature on December 15, 2005. There is no sinking fund applicable
to the Notes.
OPTIONAL REDEMPTION
The Notes will be redeemable, in whole or in part, at the option of the Company
at any time at a redemption price equal to the greater of (i) 100% of the
principal amount of such Notes, and (ii) as determined by the Quotation Agent
(as defined below), the sum of the present values of the remaining scheduled
payments of principal and interest thereon (not including any portion of such
payments of interest accrued as of the date of redemption) discounted to the
date of redemption on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate (as defined below) plus 15
basis points plus, in each case, accrued interest thereon to the date of
redemption.
"Adjusted Treasury Rate" means, with respect to any redemption date, the rate
per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security selected
by the Quotation Agent as having a maturity comparable to the remaining term of
the Notes to be redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of such Notes.
"Comparable Treasury Price" means, with respect to any redemption date, (i) the
average of the Reference Treasury Dealer Quotations for such redemption date,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (ii) if the Trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such Quotations.
"Quotation Agent" means the Reference Treasury Dealer appointed by the Company.
"Reference Treasury Dealer" means (i) each of Chase Securities Inc., J.P. Morgan
Securities Inc., NationsBanc Montgomery Securities LLC and Warburg Dillon Read
LLC and their respective successors; provided, however, that if any of the
foregoing shall cease to be a primary U.S. Government securities dealer in New
York City (a "Primary Treasury Dealer"), the Company shall substitute therefor
another Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer
selected by the Company.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Company, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such redemption date.
S-6
<PAGE> 7
Notice of any redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of the Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the Notes or portions thereof
called for redemption.
BOOK-ENTRY, DELIVERY AND FORM
The Notes will be issued in the form of one or more fully registered Global
Notes (the "Global Notes") that will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York, as Depositary (the "Depositary"),
and registered in the name of Cede & Co., the Depositary's nominee. Except as
set forth below, the Global Notes may be transferred, in whole and not in part,
only to another nominee of the Depositary or to a successor of the Depositary or
its nominee.
The Depositary has advised as follows: It is a limited-purpose trust company
which holds securities for its participating organizations (the "Participants")
and facilitates the settlement among Participants of securities transactions in
such securities through electronic book-entry changes in its Participants'
accounts. Participants include securities brokers and dealers (including the
Underwriters), banks and trust companies, clearing corporations and certain
other organizations. Access to the Depositary's system is also available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("indirect participants"). Persons who are not Participants may
beneficially own securities held by the Depositary only through Participants or
indirect participants.
The Depositary advises that its established procedures provide that (1) upon
issuance of the Notes by the Company, the Depositary will credit the accounts of
Participants designated by the Underwriters with the principal amounts of the
Notes purchased by the Underwriters and (2) ownership of interests in the Global
Notes will be shown on, and the transfer of the ownership will be effected only
through, records maintained by the Depositary, the Participants and the indirect
participants. The laws of some states require that certain persons take physical
delivery in definitive form of securities which they own. Consequently, the
ability to transfer beneficial interests in the Global Notes is limited to that
extent.
So long as a nominee of the Depositary is the registered owner of the Global
Notes, that nominee for all purposes will be considered the sole owner or holder
of such Global Notes under the Senior Debt Indenture. Except as provided below,
owners of beneficial interests in the Global Notes will not be entitled to have
Notes registered in their names, will not receive or be entitled to receive
physical delivery of Notes in definitive form and will not be considered the
owners or holders thereof under the Senior Debt Indenture. Accordingly, each
person owning a beneficial interest in the Global Notes 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 Senior Debt 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.
None of the Company, the Trustee, any Paying Agent or the Security Registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Notes, or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Principal and interest payments on the Notes registered in the name of the
Depositary's nominee will be made by the Trustee to the Depositary. Under the
terms of the Senior Debt Indenture, the Company and the Trustee will treat the
persons in whose names the Notes are registered as the owners of the Notes for
the purpose of receiving payment of principal of and interest on the Notes and
for all other purposes whatsoever. Therefore, none of the Company, the Trustee
or any Paying Agent has any direct responsibility or liability for the payment
of principal of or interest on the Notes to owners of beneficial interests in
the Global Notes. The Depositary has advised the Company and the Trustee that
its present practice is to credit the accounts of the Participants on the
appropriate payment date in accordance with their respective holdings in
principal
S-7
<PAGE> 8
amount of beneficial interests in the Global Notes as shown on the records of
the Depositary, unless the Depositary has reason to believe that it will not
receive payment on that payment date. Payments by Participants and indirect
participants to owners of beneficial interests in the Global Notes will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of the Participants or indirect
participants.
If the Depositary is at any time unwilling or unable to continue as depositary
and a successor depositary is not appointed by the Company within 90 days, the
Company will issue Notes in definitive form in exchange for the Global Notes. In
addition, the Company may at any time determine not to have the Notes
represented by Global Notes and, in such event, will issue Notes in definitive
form in exchange for the Global Notes. In either instance, an owner of a
beneficial interest in the Global Notes will be entitled to have Notes equal in
principal amount to such beneficial interest registered in its name and will be
entitled to physical delivery of such Notes in definitive form. Notes so issued
in definitive form will be issued in denominations of $1,000 and integral
multiples thereof and will be issued in registered form only, without coupons.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest to the Depositary will
be made by the Company in immediately available funds. The Notes will trade in
the Depository Trust Company's Same-Day Funds Settlement System until maturity,
and secondary market trading activity in the Notes will therefore settle in
immediately available funds. No assurance can be given as to the effect, if any,
of settlements in immediately available funds on trading activity in the Notes.
S-8
<PAGE> 9
UNDERWRITING
Subject to the terms and conditions contained in the 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 principal amount of Notes set forth opposite
their names below:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT OF NOTES
- ----------- ---------------
<S> <C>
Chase Securities Inc........................................ $195,000,000
J.P. Morgan Securities Inc.................................. 195,000,000
NationsBanc Montgomery Securities LLC....................... 60,000,000
Warburg Dillon Read LLC..................................... 60,000,000
ABN AMRO Incorporated....................................... 30,000,000
Credit Suisse First Boston Corporation...................... 30,000,000
SG Cowen Securities Corporation............................. 30,000,000
------------
Total............................................. $600,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, if the
Underwriters take any of the Notes, then the Underwriters are obligated to take
and pay for all of the Notes.
The Company does not intend to list the Notes on any securities exchange. The
Notes are a new issue of securities with no established trading market. The
Underwriters have advised the Company that they intend to make a market for the
Notes, but they have no obligation to do so and may discontinue market making at
any time without providing any notice. No assurance can be given as to the
liquidity of any trading market for the Notes.
The Underwriters initially propose to offer the Notes in part directly to the
public at the public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain dealers at that price less a
concession not in excess of .375% of the principal amount of the Notes. Any
Underwriter may allow, and any such dealer may reallow, a concession not in
excess of .250% of the principal amount of the Notes to certain other dealers.
After the initial public offering of the Notes, the Underwriters may from time
to time vary the offering price and other selling terms.
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 that the Underwriters may
be required to make in respect of any such liabilities. See also "Plan of
Distribution" in the accompanying Prospectus.
The Underwriters 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.
In connection with the offering of the Notes, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Underwriters may overallot in connection with the
offering of the Notes, creating a syndicate short position. In addition, the
Underwriters may bid for, and purchase, Notes in the open market to cover
syndicate shorts or to stabilize the price of the Notes. Finally, the
underwriting syndicate may reclaim selling concessions allowed for distributing
the Notes in the offering of the Notes, if the syndicate repurchases previously
distributed Notes in syndicate covering transactions, stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market price
of the Notes above independent market levels. The Underwriters are not required
to engage in any of these activities, and may end any of them at any time.
Expenses associated with this offering, to be paid by the Company, are estimated
to be $150,000.
S-9
<PAGE> 10
LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed upon for the
Company by Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., Houston, Texas, counsel
for the Company. Certain legal matters with respect to the Notes will be passed
upon for the Underwriters by Cahill Gordon & Reindel (a partnership including a
professional corporation).
EXPERTS
The consolidated financial statements of Service Corporation International at
December 31, 1997 and 1996, and for the three years ended December 31, 1997,
appearing in Service Corporation International's Annual Report (Form 10-K) for
the year ended December 31, 1997, have been incorporated herein in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of that firm as experts in accounting and auditing. See "Experts" in
the accompanying Prospectus.
S-10
<PAGE> 11
$1,500,000,000
SERVICE CORPORATION INTERNATIONAL
COMPANY DEBT SECURITIES
COMMON STOCK
COMMON STOCK WARRANTS
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
---------------------
SCI CAPITAL I
SCI CAPITAL II
SCI CAPITAL III
SCI CAPITAL IV
PREFERRED SECURITIES FULLY AND UNCONDITIONALLY GUARANTEED BY
SERVICE CORPORATION INTERNATIONAL
---------------------
Trading Symbol:
New York Stock Exchange -- SRV
---------------------
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and any supplement carefully
before you invest.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
October 15, 1998
<PAGE> 12
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About this Prospectus....................................... 2
Where You Can Find More Information......................... 3
The Company................................................. 5
The Trusts.................................................. 5
Use of Proceeds............................................. 6
Ratios of Earnings to Fixed Charges......................... 6
Description of Company Debt Securities...................... 6
Description of Capital Stock................................ 32
Description of Common Stock Warrants........................ 36
Description of Preferred Securities......................... 39
Description of Preferred Securities Guarantees.............. 41
Effect of Obligations under Company Debt Securities and
Preferred Securities Guarantees........................... 44
Description of Stock Purchase Contracts and Stock Purchase
Units..................................................... 45
Plan of Distribution........................................ 46
Legal Matters............................................... 47
Experts..................................................... 47
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may sell any combination of the securities described in
this prospectus in one of more offerings up to a total dollar amount of
$1,500,000,000. This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with additional information described
under the heading "Where You Can Find More Information."
2
<PAGE> 13
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any reports, statements or other information filed by us at the Commission's
public reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference room. Our filings with the Commission are
also available to the public from commercial document retrieval services and at
the Commission's web site at "http://www.sec.gov." We invite you to visit our
web site at "http://www.sci-corp.com."
The Commission allows us "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to another document we filed with the Commission. The information
incorporated by reference is an important part of this prospectus, and
information that we file later with the Commission will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings made with the Commission under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we sell all of
the securities. This prospectus is part of a registration statement we filed
with the Commission.
- Annual Report on Form 10-K for the fiscal year ended December 31, 1997;
- Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1998 and June 30, 1998;
- Current Reports on Form 8-K dated March 24, 1998 and May 14, 1998;
- Description of Series D Junior Participating Preferred Stock Purchase
Rights contained in Registration Statement on Form 8-A dated May 15,
1998; and
- Description of 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 Registration
Statement on Form 8-A.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Service Corporation International
1929 Allen Parkway
Houston, Texas 77019
(713) 522-5141
Attention: James M. Shelger
We have not included separate financial statements of any of the SCI
Capital Trusts in this prospectus. We do not think that those financial
statements would be material to holders of the preferred securities of the SCI
Capital Trusts because (1) all of the voting securities of each of the SCI
Capital Trusts will be owned by us directly or indirectly and we file reports
with the Commission, (2) none of the SCI Capital Trusts has any independent
operations and each of the SCI Capital Trusts exists to issue securities to us
and (3) we guarantee the payments due on the preferred securities of the SCI
Capital Trusts.
The SCI Capital Trusts currently do not file annual, quarterly and special
reports, proxy statements or other information with the Commission. In the
future, if the SCI Capital Trusts are required to file such reports with the
Commission, the SCI Capital Trusts will register with the Commission or seek an
exemption from the Commission.
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<PAGE> 14
You should rely only on the information contained or incorporated by
reference in this prospectus or any supplement. Neither Service Corporation
International nor the SCI Capital Trusts have authorized anyone else to provide
you with different information. We are not making an offer of these securities
in any state where the offer is not permitted. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
4
<PAGE> 15
THE COMPANY
Service Corporation International (the "Company" or "SCI") was incorporated
in Texas on July 5, 1962 and is the largest provider of death care services and
products in the world. As of June 30, 1998, the Company owned and operated 3,292
funeral service locations, 422 cemeteries and 174 crematoria located in 18
countries on five continents. The Company's principal executive offices are
located at 1929 Allen Parkway, Houston, Texas 77019, telephone number: (713)
522-5141.
THE TRUSTS
SCI Capital I, SCI Capital II, SCI Capital III and SCI Capital IV (each, an
"SCI Capital Trust") are statutory business trusts formed under Delaware law. As
sponsor of each SCI Capital Trust ("Sponsor"), the Company executed a separate
declaration of trust for each SCI Capital Trust. As Delaware trustee of each SCI
Capital Trust (the "Delaware Trustee"), Chase Manhattan Bank Delaware filed a
separate certificate of trust for each SCI Capital Trust with the Delaware
Secretary of State on September 29, 1998. The Sponsor and the Delaware Trustee
will amend and restate each declaration of trust in its entirety (each, as so
amended and restated, a "Declaration") as of the date the preferred securities
of the SCI Capital Trusts ("Preferred Securities") are issued initially.
The SCI Capital Trusts exist solely to (1) issue Preferred Securities and
common securities of the SCI Capital Trusts (the "Common Securities" and,
together with the Preferred Securities, the "Trust Securities"), (2) invest the
gross proceeds of the Trust Securities in debt securities of the Company
("Company Debt Securities") and (3) engage in other necessary or incidental
activities. The Company will own all of the Common Securities, directly or
indirectly. The Common Securities will rank pari passu with the Preferred
Securities, and the SCI Capital Trusts will make payments on the Common
Securities pro rata with the Preferred Securities. However, if an event of
default occurs under the Declaration of an SCI Capital Trust (a "Declaration
Event of Default"), the rights of the holders of the Common Securities to
payment of distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the Preferred Securities.
The Company will acquire, directly or indirectly, Common Securities in an
aggregate liquidation amount equal to 3 percent of the total capital of each SCI
Capital Trust. The term of each SCI Capital Trust is approximately 55 years, but
may terminate earlier as provided in the Declaration of each SCI Capital Trust.
The trustees of the SCI Capital Trusts (the "SCI Capital Trustees") will conduct
the business and affairs of the SCI Capital Trusts. The holder of the Common
Securities will be entitled to appoint, remove or replace any of, or increase or
reduce the number of, the SCI Capital Trustees of an SCI Capital Trust. The
duties and obligations of the SCI Capital Trustees are governed by the
Declarations of the SCI Capital Trusts. A majority of the SCI Capital Trustees
(the "Regular Trustees") of each SCI Capital Trust will be employees, officers
or affiliates of the Company. Chase Bank of Texas, National Association ("Chase
Bank of Texas"), shall act as property trustee and as indenture trustee (the
"Institutional Trustee") for purposes of the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). Chase Manhattan Bank Delaware shall act as
Delaware Trustee as required by Delaware law. The Company will pay all fees and
expenses related to the SCI Capital Trusts and the offering of Trust Securities.
The Delaware Trustee's office in the State of Delaware is Chase Manhattan
Bank Delaware, 1201 N. Market Street, Wilmington, Delaware 19801. Each SCI
Capital Trust's principal executive office is c/o Service Corporation
International, 1929 Allen Parkway, Houston, Texas 77019, telephone number: (713)
522-5141.
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<PAGE> 16
USE OF PROCEEDS
The net proceeds the Company receives from the sale or sales of the
securities offered under this prospectus (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.
The SCI Capital Trusts will use all proceeds they receive from the sale or
sales of the Preferred Securities to purchase Company Debt Securities from the
Company. Any prospectus supplement relating to a particular offering of
Securities may identify additional and/or different uses for the proceeds of
that offering of Securities.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's consolidated ratios of earnings to fixed charges for the
periods indicated are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
- ---------------------------- ----------------
1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
3.19 3.13 2.84 3.24 4.29 4.27
</TABLE>
For purposes of computing the ratios of earnings to fixed charges, earnings
consist of (1) income from continuing operations before income taxes (excluding
the undistributed income of entities of which the Company owns less than 50% of
the equity), (2) the minority interest of majority-owned subsidiaries with fixed
charges and (3) fixed charges (excluding capitalized interest). Fixed charges
consist of (1) interest expense, whether capitalized or expensed, (2) amortized
debt costs, (3) dividends on preferred securities of SCI Finance LLC (which
preferred securities were redeemed in June 1997) and (4) an interest factor
attributable to rentals.
DESCRIPTION OF COMPANY DEBT SECURITIES
The Company Debt Securities will constitute any of (1) senior debt
securities ("Company Senior Debt Securities"), (2) senior subordinated debt
securities ("Company Senior Subordinated Debt Securities") or (3) subordinated
debt securities ("Company Subordinated Debt Securities"). Company Senior Debt
Securities will be issued under a 1998 Senior Indenture (the "Senior Debt
Indenture") to be entered into between the Company and The Bank of New York, as
trustee. Company Senior Subordinated Debt Securities will be issued under a 1998
Senior Subordinated Indenture (the "Senior Subordinated Debt Indenture") to be
entered into between the Company and Chase Bank of Texas, as trustee. Company
Subordinated Debt Securities will be issued under a 1998 Subordinated Indenture
to be entered into between the Company and Chase Bank of Texas, as
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<PAGE> 17
trustee (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 Chase Bank of
Texas (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, which may include medium term notes,
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 (1) limit the amount of Company Debt Securities, Senior
Indebtedness (as defined in "-- Provisions Applicable Solely to Company Senior
Subordinated Debt Securities and Company Subordinated Debt Securities -- Events
of Default"), debentures, notes or other types of indebtedness that may be
issued by the Company or any of its Subsidiaries or (2) 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
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.
A prospectus supplement relating to any Company Debt Securities offered
will include specific terms relating to the offering. These terms will include
the following, among others, to the extent applicable to the offered Company
Debt Securities:
- the title of such Company Debt Securities;
- classification as Company Senior Debt Securities, Company Senior
Subordinated Debt Securities or Company Subordinated Debt Securities,
aggregate principal amount, purchase price and denomination;
- whether such Company Debt Securities that constitute Company Senior
Subordinated Debt Securities or Company Subordinated Debt Securities are
convertible into common stock, par value $1.00 per share ("Common
Stock"), of the Company and, if so, the terms and
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<PAGE> 18
conditions of conversion including the initial conversion price or
conversion rate and any adjustments thereto, the conversion period and
other conversion provisions;
- the date or dates on which such Company Debt Securities will mature;
- the method used to calculate amounts payable for principal of or premium,
if any, or interest, if any, on or upon the redemption of such Company
Debt Securities;
- 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;
- the date or dates on which any such interest will be payable;
- 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;
- 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);
- 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;
- any index used to determine the amount of payments of principal of and
any premium and interest on such Company Debt Securities;
- any special United States federal income tax consequences; and
- any other specified terms of such Company Debt Securities, including any
additional, or deleted or different, events of default or remedies or
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. However, 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 below
the prevailing market rate at the time of issuance 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
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<PAGE> 19
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 (1) by the Depositary for such Global Security to the nominee of the
Depositary, (2) by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or (3) 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 (1) by the
dealers, underwriters or agents with respect to such Company Debt Securities or
(2) 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 (1) 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, (2) will not
receive or be entitled to receive physical delivery of any such Company Debt
Securities in definitive form and (3) 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.
9
<PAGE> 20
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. In such event, the Company will
issue individual Company Debt Securities 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 receive, on
terms acceptable to the Company and the Depositary for such Global Security,
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 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. Unless otherwise
specified by the Company, individual Company Debt Securities of such series so
issued will be issued in denominations 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:
- 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;
- 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
- 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.
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<PAGE> 21
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.
If (1) the Company Debt Securities have not already been delivered to the
Trustee for cancellation and (2) the Company Debt Securities 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), 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 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:
- 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;
- 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
- 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.
The 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.
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:
- the rights of registration of transfer and exchange of Company Debt
Securities of such series;
- the rights of substitution of mutilated, defaced, destroyed, lost or
stolen Company Debt Securities of such series;
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<PAGE> 22
- the 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;
- the rights, obligations, duties and immunities of the Trustee;
- 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;
- the obligations of the Company to maintain an office or agency in respect
of Company Debt Securities of such series; and
- 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:
- evidence the assumption by a successor corporation of the obligations of
the Company under such Indenture;
- add covenants or new events of default for the protection of the holders
of such Company Debt Securities;
- cure any ambiguity or correct any inconsistency in the Indenture;
- establish the form and terms of any series of Company Debt Securities and
provide for adjustment of conversion rights, if any;
- evidence the acceptance of appointment by a successor trustee;
- 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
- 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. However, without the consent of the holder of each outstanding
Company Debt Security affected thereby, the Company and the Trustee may not make
any of the following modifications:
- extend the stated maturity of the principal of any Company Debt Security;
- reduce the principal amount of any Company Debt Security;
- reduce the rate or extend the time of payment of any interest on any
Company Debt Security;
- reduce or alter the method of computation of any amount payable on
redemption, repayment or purchase of any Company Debt Security;
- reduce the portion of the principal amount of any Original Issue Discount
Security payable upon acceleration or provable in bankruptcy;
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<PAGE> 23
- 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 of any Company Debt Security;
- 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
- reduce the percentage in aggregate principal amount of Company Debt
Securities of any series issued under such Indenture.
Without the consent of each holder of Senior Indebtedness then outstanding
that would be adversely affected, (1) the Senior Subordinated Debt Indenture may
not be amended to alter the subordination of any outstanding Company Senior
Subordinated Debt Securities and (2) the Subordinated Debt Indenture may not be
amended to alter the subordination of any outstanding Company Subordinated Debt
Securities.
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 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.
Issuance of Company Debt Securities to an SCI Capital Trust. Unless
otherwise specified in the prospectus supplement, the Declaration of each SCI
Capital Trust, as amended and restated, will provide that, in the event Company
Debt Securities are issued to an SCI Capital Trust or a trustee of such trust in
connection with the issuance of Trust Securities by such SCI Capital Trust, such
Company Debt Securities subsequently may be distributed pro rata to the holders
of such Trust Securities in connection with the dissolution of such SCI Capital
Trust upon the occurrence of certain events described in the prospectus
supplement relating to such Trust Securities. Only one series of Company Debt
Securities will be issued to an SCI Capital Trust or an SCI Capital Trustee in
connection with the issuance of Trust Securities by such SCI Capital Trust.
Certain Covenants of the Company. Unless otherwise specified in the
prospectus supplement, in the event that Company Debt Securities are issued to
an SCI Capital Trust or an SCI Capital Trustee pursuant to a Declaration, the
Company will make certain covenants as set forth below and as further set forth
in the applicable prospectus supplement.
The Company will covenant that, if Company Debt Securities are issued to an
SCI Capital Trust or an SCI Capital Trustee in connection with the issuance of
Trust Securities by such SCI Capital Trust and (1) there shall have occurred any
event that would constitute a Declaration Event of Default or (2) the Company
shall be in default with respect to its payment of any obligations
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<PAGE> 24
under the related Preferred Securities Guarantee or Common Securities Guarantee
(as such terms are defined in "Description of Preferred Securities
Guarantees -- General"), then:
- the Company shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase or make a liquidation
payment with respect to, any of its capital stock or make any guarantee
payments with respect to the foregoing, other than:
-- purchases or acquisitions of shares of SCI capital stock in connection
with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its
obligations pursuant to any contract or security requiring the Company
to purchase shares of Common Stock;
-- as a result of a reclassification of SCI capital stock or the exchange
or conversion of one class or series of SCI capital stock for another
class or series of SCI capital stock; or
-- the purchase of fractional interests in shares of SCI capital stock
pursuant to the conversion or exchange provisions of such SCI capital
stock or the security being converted or exchanged; and
- the Company shall not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities (including
guarantees) issued by the Company which rank pari passu with or junior to
such Company Debt Securities.
The Company also will covenant that, if Company Debt Securities are issued
to an SCI Capital Trust or an SCI Capital Trustee in connection with the
issuance of Trust Securities by such SCI Capital Trust and the Company shall
have given notice of its election to defer payments of interest on such Company
Debt Securities by extending the interest payment period as provided in the
appropriate Indenture and such period, or any extension thereof, shall be
continuing, then:
- the Company shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase or make a liquidation
payment with respect to, any of its capital stock or make any guarantee
payments with respect to the foregoing, other than:
-- purchases or acquisitions of shares of SCI capital stock in connection
with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its
obligations pursuant to any contract or security requiring the Company
to purchase shares of Common Stock;
-- as a result of a reclassification of SCI capital stock or the exchange
or conversion of one class or series of SCI capital stock for another
class or series of SCI capital stock; or
-- the purchase of fractional interests in shares of SCI capital stock
pursuant to the conversion or exchange provisions of such SCI capital
stock or the security being converted or exchanged; and
- the Company shall not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities (including
guarantees) issued by the Company which rank pari passu with or junior to
such Company Debt Securities.
In the event Company Debt Securities are issued to an SCI Capital Trust or
an SCI Capital Trustee in connection with the issuance of Trust Securities of
such SCI Capital Trust, for so long as such Trust Securities remain outstanding,
the Company also will covenant:
- to directly or indirectly maintain 100 percent ownership of the Common
Securities of such SCI Capital Trust (provided, however, that any
permitted successor of the Company under the Indentures may succeed to
the Company's ownership of such Common Securities);
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<PAGE> 25
- to use its reasonable efforts to cause such SCI Capital Trust:
-- to remain a statutory business trust, except in connection with the
distribution of Company Debt Securities to the holders of Trust
Securities in liquidation of such SCI Capital Trust, the redemption of
all of the Trust Securities of such SCI Capital Trust, or certain
mergers, consolidations or amalgamations, each as permitted by the
Declaration of such SCI Capital Trust; and
-- to otherwise continue not to be classified as an association taxable
as a corporation or partnership for United States federal income tax
purposes; and
- to use its reasonable efforts to cause each holder of Trust Securities to
be treated as owning an undivided beneficial interest in the Company Debt
Securities.
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:
(1) 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;
(2) 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;
(3) 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;
(4) 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;
(5) 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;
(6) 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
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<PAGE> 26
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;
(7) 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 $50,000,000,
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 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
(8) 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. 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.
The right to make such a declaration 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, (i) the Company shall pay or shall deposit
with the Trustee a sum sufficient to pay (a) all matured installments of
interest, if any, upon all of the Company Senior Debt Securities of such series,
(b) 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 (c) the reasonable compensation, disbursements, expenses
and advances of the Trustee, and (ii) any and all defaults
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<PAGE> 27
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. 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 (5)
or (6) 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 (1), (2) or
(3) 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 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;
- 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;
- such holders 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, the right of
any holder of any Company Senior Debt Security to receive payment of the
principal of and interest, if any, on such
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<PAGE> 28
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.
However, 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. 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.
Within 90 days after the occurrence of a default, with respect to Company
Senior Debt Securities of any series then Outstanding, the Trustee shall 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. 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 term "defaults" for the purpose of
these provisions is defined to be the events specified in clauses (1), (2), (3),
(4), (5), (6), (7) and (8) 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 (4) or (7) but in the case of any default of the
character specified in said clause (4) or (7) 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 (4) or (7), as the case may be.
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. Neither the Company nor any Subsidiary may 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,
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<PAGE> 29
renewals or refundings thereof that do not increase the principal amount of
Indebtedness so extended, renewed or refunded and excluding secured Indebtedness
incurred pursuant to the items set forth in this paragraph below) would not
exceed 10% of Consolidated Assets of the Company and its Subsidiaries. However,
this restriction will not prevent the Company or any Subsidiary from:
- acquiring and retaining property subject to mortgages, pledges,
encumbrances, liens or security interests existing thereon at the date of
acquisition thereof, or creating mortgages, pledges, encumbrances or
liens upon property acquired by it within one year of the date of
acquisition thereof to secure debt which does not exceed the aggregate
acquisition price (including without duplication any debt assumed in
connection with such acquisition or otherwise existing with respect to
the acquired property) of all property so encumbered;
- mortgaging, pledging, encumbering or subjecting to any lien or security
interest Current Assets to secure Current Liabilities;
- 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
- securing the payment of workmen's compensation or insurance premiums or
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 Assets" means, as to any Person, total consolidated assets
(including assets subject to Capitalized Leases) of such Person and of its
Consolidated Subsidiaries, as 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:
- 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
- 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 (1) the net proceeds of the sale of the real property
leased pursuant to such transaction or (2) the fair
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<PAGE> 30
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.
The amount to be applied to the retirement of Funded Debt of the Company shall
be reduced by (1) the principal amount of any Company Senior Debt Securities
delivered within 120 days after such sale to the Trustee for retirement and
cancellation (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) and (2) the principal
amount of Funded Debt, other than Company Senior Debt Securities, voluntarily
retired by the Company within 120 days after such sale. No retirement referred
to in this paragraph 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.
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. 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 Debt
Indenture and Subordinated Debt 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:
(1) 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;
(2) 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;
(3) 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;
(4) 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
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<PAGE> 31
Subordinated Securities of such series issued under the applicable
Subordinated Indenture then Outstanding;
(5) 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;
(6) 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;
(7) 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 shall exceed
$50,000,000, 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
(8) 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. Upon any such declaration, the same shall become and shall be
immediately due and payable, anything in the applicable
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<PAGE> 32
Subordinated Indenture or in the Subordinated Securities of such series
contained to the contrary notwithstanding.
The right to make such a declaration 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, (i) the Company shall pay or shall deposit
with the Trustee a sum sufficient to pay (a) all matured installments of
interest, if any, upon all of the Subordinated Securities of such series, (b)
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 (c) the reasonable compensation, disbursements, expenses and advances of the
Trustee, its agents, attorneys and counsel, and (ii) 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. 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 (5)
or (6) 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 (1),
(2) or (3) 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.
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
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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;
- 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;
- such holders 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. However, 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.
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.
Within 90 days after the occurrence of a default, with respect to
Subordinated Securities of any series then Outstanding, the Trustee shall 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. 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
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withholding of such notice is in the best interests of the Securityholders. The
term "defaults" for the purpose of these provisions is defined to be the events
specified in clauses (1), (2), (3), (4), (5), (6), (7) and (8) 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 (4) or (7) but in the case of any default of
the character specified in said clause (4) or (7) 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 (4) or (7), as the
case may be).
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 of the Company. If the Company defaults 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 (1) for
principal of or premium, if any, or interest, if any, on the applicable
Subordinated Securities, or (2) 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:
- 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);
- 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;
- the Company Senior Subordinated Debt Securities;
- the Company's subordinated indebtedness;
- any Indebtedness of the Company to a wholly owned Subsidiary of the
Company;
- 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
- trade accounts payable.
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"Senior Indebtedness" is defined in the Subordinated Debt Indenture as
Indebtedness of the Company outstanding at any time, except:
- 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;
- the Company Subordinated Debt Securities;
- the Company's existing subordinated indebtedness;
- any Indebtedness of the Company to a wholly owned Subsidiary of the
Company;
- 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
- trade accounts payable.
"Indebtedness" is defined in each Subordinated Indenture as, with respect
to any Person, (1)(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, (2) 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 (3) any amendments, modifications, refundings, renewals or
extensions of any indebtedness or obligation described as Indebtedness in clause
(1) or (2) above.
If (1) 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 (2) the
Company shall (a) 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, (b) consent to the institution of bankruptcy
or insolvency proceedings against it, (c) 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, (d) shall
consent to the filing of 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 (e) 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.
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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. 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.
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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 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:
- issuances of shares of Common Stock as a dividend or distribution on the
Common Stock;
- subdivisions, combinations and reclassifications of the Common Stock;
- redemptions 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. 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
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<PAGE> 38
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 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:
- 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:
-- the certificate number or numbers of the Company Subordinated Debt
Security or Securities which the holder will deliver to be purchased;
-- 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
-- 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
- 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.
The 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
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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:
- the certificate number or numbers of the Company Subordinated Debt
Security or Securities in respect of which such notice of withdrawal is
being submitted;
- the principal amount of the Company Subordinated Debt Security or
Securities with respect to which such notice of withdrawal is being
submitted; and
- 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 (1) the Change in Control Purchase Date with
respect to such Company Subordinated Debt Securities and (2) 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:
- Any person (as defined below), 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 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") 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 defined below) of the Company then outstanding. For
purposes of this paragraph, 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 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.
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- 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).
- 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.
For purposes of the Change in Control provisions of the Subordinated Debt
Indenture, "person" shall mean a "person" as defined in or for purposes of the
Exchange Act, including any "group" acting for the purpose of acquiring, holding
or disposing of securities within the meaning of the Exchange Act.
"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:
- the events causing a Change in Control and the date of such Change in
Control;
- the date by which the Change in Control Purchase Notice pursuant to the
Subordinated Debt Indenture must be given;
- the Change in Control Purchase Date;
- the Change in Control Purchase Price;
- the name and address of the Trustee;
- that the Company Subordinated Debt Securities must be surrendered to the
Trustee to collect payment;
- 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;
- the procedures the holder must follow to exercise rights under the
Subordinated Debt Indenture and a brief description of those rights; and
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- 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. 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.
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.
Chase Bank of Texas will serve as Trustee under the Senior Subordinated
Debt Indenture and as Trustee under the Subordinated Debt Indenture. No
securities were outstanding as of June 30, 1998 under the Senior Subordinated
Debt Indenture or the Subordinated Debt Indenture. Chase Bank of Texas currently
serves as Trustee under (1) the Debenture Indenture (the "Debenture Indenture")
dated as of June 15, 1992, between the Company and Chase Bank of Texas, as
trustee, and (2) the Guarantees of Notes of Subsidiaries Indenture (the
"Guarantees Indenture") dated as of May 1, 1970, between the Company and Chase
Bank of Texas, as trustee. Debt of the Company issued pursuant to the Debenture
Indenture and the Guarantees Indenture constitutes Senior Indebtedness. As of
June 30, 1998, the Company had outstanding approximately $47.7 million principal
amount of Senior Indebtedness issued pursuant to the Debenture Indenture and
approximately $43.7 million principal amount of guarantees issued pursuant to
the Guarantees Indenture.
The Bank of New York will serve as Trustee under the Senior Debt Indenture.
As of June 30, 1998, there were no Securities outstanding under such Senior Debt
Indenture. The Bank of New York currently serves as Trustee under the Senior
Indenture dated as of February 1, 1993 (the "1993 Senior Debt Indenture")
pursuant to which unsecured debt securities of SCI are outstanding representing
approximately $2,378.3 million of Senior Indebtedness as of June 30, 1998.
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, Chase Bank of Texas, as trustee under
the Senior Subordinated Debt Indenture, the Subordinated Debt Indenture, the
Debenture Indenture and the
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Guarantees Indenture, and The Bank of New York, as trustee under the Senior Debt
Indenture and the 1993 Senior Debt 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 June 30, 1998, 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 June 30, 1998, the
Company had outstanding 257,186,137 shares of Common Stock, and 24,573,855
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 May 14, 1998 (the "Rights Agreement") between the Company and Harris
Trust and Savings Bank, as rights agent (the "Rights Agent").
COMMON STOCK
Subject to the prior rights of holders of shares of Preferred Stock, the
holders of shares of Common Stock:
- are entitled to such dividends as may be declared by the Board of
Directors of the Company out of funds legally available therefor;
- are entitled to one vote per share;
- have no preemptive or conversion rights;
- are not subject to, or entitled to the benefits of, any redemption or
sinking fund provision; and
- are entitled upon liquidation to receive the assets of the Company
remaining after the payment of corporate debts and the satisfaction of
the liquidation preference of Preferred Stock.
Voting is non-cumulative. The outstanding shares of Common Stock are fully paid
and non-assessable.
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, 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 from time to time could
restrict the payment of dividends on the Common Stock. At June 30, 1998, the
Company's net worth (as defined) was $2.937 billion.
The Transfer Agent and Registrar for the Common Stock is Harris Trust and
Savings Bank, Chicago, Illinois.
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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:
- the requirement of a four-fifths vote of outstanding shares of capital
stock:
-- 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;
-- to remove directors with or without cause; and
-- to amend or repeal any of these provisions;
- the creation of a classified Board of Directors consisting of three
classes;
- the establishment of a minimum of nine and a maximum of 15 directors;
- the ability of the directors, by four-fifths vote, to remove a director,
subject to approval by a majority vote of the shareholders; and
- the right of directors to fill vacancies on the board without the
approval of shareholders.
SHAREHOLDER RIGHTS PLAN
On July 28, 1998 (the "Record Date"), the Company paid a dividend of one
preferred share purchase right (a "Right") for each outstanding share of Common
Stock of the Company to the stockholders of record on that date. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series D Junior Participating Preferred Stock, par value $1.00 per
share (the "Series D Preferred Shares"), of the Company at a price of $220 per
one one-thousandth of a Series D Preferred Share (the "Purchase Price"), subject
to adjustment. The description and terms of the Rights are set forth in the
Rights Agreement.
Until the earlier to occur of (1) 10 days following 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 outstanding
Common Stock or (2) 10 business days (or such later date as may be determined by
action of the Board of Directors prior to such time as any person or group of
affiliated persons becomes an Acquiring Person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 20% or more of the outstanding Common Stock (the earlier of such dates
being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Stock certificates outstanding as of the Record
Date, by such Common Stock certificate with a copy of a Summary of Rights
attached thereto.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the Common Stock. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new Common Stock certificates issued after the
Record Date upon transfer or new issuance of Common Stock will contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier redemption or expiration of the Rights), the surrender for
transfer of any certificates for Common Stock outstanding as of the Record Date,
even without such notation or a copy of a Summary of Rights being attached
thereto, will also constitute the 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 ("Rights
Certificates") will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and such separate Right Certificates
alone will evidence the Rights.
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The Rights are not exercisable until the Distribution Date. The Rights will
expire on July 28, 2008 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Series D Preferred Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (1) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Series D
Preferred Shares, (2) upon the grant to holders of the Series D Preferred Shares
of certain rights or warrants to subscribe for or purchase Series D Preferred
Shares at a price, or securities convertible into Series D Preferred Shares with
a conversion price, less than the then-current market price of the Series D
Preferred Shares or (3) upon the distribution to holders of the Series D
Preferred Shares of evidences of indebtedness or assets (excluding regular
periodic cash dividends paid out of earnings or retained earnings or dividends
payable in Series D Preferred Shares) or of subscription rights or warrants
(other than those referred to above).
The number of outstanding Rights and the number of one one-thousandths of a
Series D Preferred Share issuable upon exercise of each Right are also subject
to adjustment in the event of a stock split of the Common Stock or a stock
dividend on the Common Stock payable in Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.
Series D Preferred Shares purchasable upon exercise of the Rights will not
be redeemable. Each Series D Preferred Share will be entitled to a minimum
preferential quarterly dividend payment of $1 per share but will be entitled to
an aggregate dividend of 1,000 times the dividend declared per share of Common
Stock. In the event of liquidation, the holders of the Series D Preferred Shares
will be entitled to a minimum preferential liquidation payment of $1,000 per
share but will be entitled to an aggregate payment of 1,000 times the payment
made per share of Common Stock. In the event of any merger, consolidation or
other transaction in which Common Stock is exchanged, each Series D Preferred
Share will be entitled to receive 1,000 times the amount received per share of
Common Stock. These rights are protected by customary antidilution provisions.
Each Series D Preferred Share will have one vote, voting together with the
Common Stock.
Because of the nature of the Series D Preferred Shares' dividend and
liquidation rights, the value of the one one-thousandth interest in a Series D
Preferred Share purchasable upon exercise of each Right should approximate, to
some degree, the value of one share of Common Stock.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then-current exercise price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction will have a market value of two times the
exercise price of the Right. In the event that any person or group of affiliated
or associated persons becomes an Acquiring Person, proper provision shall be
made so that each holder of a Right, other than Rights beneficially owned by the
Acquiring Person (which will thereafter be void), will thereafter have the right
to receive upon exercise that number of shares of Common Stock having a market
value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
Common Stock, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by such person or group which will have become void),
in whole or in part, at an exchange ratio of one share of Common Stock (or of a
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number of shares of preferred stock, or fraction thereof, having equivalent
value to one share of Common Stock) per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Series D Preferred Shares will be issued
(other than fractions which are integral multiples of one one-thousandth of a
Series D Preferred Share, which may, at the election of the Company, be
evidenced by depositary receipts) and in lieu thereof, an adjustment in cash
will be made based on the market price of the Series D Preferred Shares on the
last trading day prior to the date of exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
Common Stock, the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the "Redemption Price").
The redemption of the Rights may be made effective at such time on such basis
with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to lower the threshold for exercisability of the Rights from 20% to not less
than the greater of (1) any percentage greater than the largest percentage of
the outstanding Common Stock then known to the Company to be beneficially owned
by any person or group of affiliated or associated persons and (2) 10%, except
that from and after such time as any person or group of affiliated or associated
persons becomes an Acquiring Person no such amendment may adversely affect the
interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder 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
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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 noncumulative. 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 500,000 shares of the Company's Preferred Stock as Series D Junior
Participating Preferred Stock, which may be issued upon the exercise of the
Rights that are associated with the Common Stock. See "-- Shareholder Rights
Plan" above.
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue warrants to purchase Common Stock ("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:
- the offering price;
- 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;
- 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
- 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.
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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
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:
(1) the issuance of Common Stock as a dividend or distribution on the
Common Stock;
(2) subdivisions and combinations of the Common Stock;
(3) 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
(4) 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).
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If the Company shall distribute any rights or warrants to acquire capital
stock pursuant to clause (4) 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. 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, the Company may 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 (4) above.
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. Any such adjustment not so made
will be carried forward and taken into account in any subsequent adjustment. 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 (1) a reclassification or change of the Common Stock, (2) a
consolidation or merger involving the Company or (3) 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 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.
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DESCRIPTION OF PREFERRED SECURITIES
Each SCI Capital Trust may issue, from time to time, only one series of
Preferred Securities having terms described in the prospectus supplement
relating thereto. The Declaration of each SCI Capital Trust authorizes the
Regular Trustees of such SCI Capital Trust to issue on behalf of such SCI
Capital Trust one series of Preferred Securities. The Declaration will be
qualified as an indenture under the Trust Indenture Act. The Preferred
Securities will have such terms, including distributions, redemption, voting,
liquidation rights and such other preferred, deferred or other special rights or
such restrictions as shall be set forth in the Declaration or made part of the
Declaration by the Trust Indenture Act and which will mirror the terms of the
Company Debt Securities held by the SCI Capital Trust and described in the
prospectus supplement relating thereto.
Reference is made to the prospectus supplement relating to the Preferred
Securities of the SCI Capital Trust for specific terms, including, without
limitation:
- the distinctive designation of such Preferred Securities;
- the number of Preferred Securities issued by such SCI Capital Trust;
- the annual distribution rate (or method of determining such rate) for
Preferred Securities issued by such SCI Capital Trust and the date or
dates upon which such distributions shall be payable (provided, however,
that distributions on such Preferred Securities shall be payable on a
periodic basis to holders of such Preferred Securities as of a record
date in each period during which such Preferred Securities are
outstanding);
- whether distributions on Preferred Securities issued by such SCI Capital
Trust shall be cumulative, and, in the case of Preferred Securities
having such cumulative distribution rights, the date or dates or method
of determining the date or dates from which distributions on Preferred
Securities issued by such SCI Capital Trust shall be cumulative;
- the amount or amounts which shall be paid out of the assets of such SCI
Capital Trust to the holders of the Preferred Securities of such SCI
Capital Trust upon voluntary or involuntary dissolution, winding-up or
termination of such SCI Capital Trust;
- the obligation, if any, of such SCI Capital Trust to purchase or redeem
Preferred Securities issued by such SCI Capital Trust and the price or
prices at which, the period or periods within which, and the terms and
conditions upon which, Preferred Securities issued by such SCI Capital
Trust shall be purchased or redeemed, in whole or in part, pursuant to
such obligation;
- the voting rights, if any, of Preferred Securities issued by such SCI
Capital Trust in addition to those required by law, including the number
of votes per Preferred Security and any requirement for the approval by
the holders of Preferred Securities, or of Preferred Securities issued by
one or more SCI Capital Trust, or of both, as a condition to specified
action or amendments to the Declaration of such SCI Capital Trust;
- the terms and conditions, if any, upon which the Company Debt Securities
may be distributed to holders of Preferred Securities;
- if applicable, any Securities exchange upon which the Preferred
Securities shall be listed; and
- any other relevant rights, preferences, privileges, limitations or
restrictions of Preferred Securities issued by such SCI Capital Trust not
inconsistent with the Declaration of such SCI Capital Trust or with
applicable law.
All Preferred Securities offered hereby will be guaranteed by the Company
to the extent set forth below under "Description of Preferred Securities
Guarantees." Certain United States federal
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income tax considerations applicable to any offering of Preferred Securities
will be described in the prospectus supplement relating thereto.
In connection with the issuance of Preferred Securities, each SCI Capital
Trust will issue one series of Common Securities. The Declaration of each SCI
Capital Trust authorizes the Regular Trustees of such trust to issue on behalf
of such SCI Capital Trust one series of Common Securities having such terms
including distributions, redemption, voting, liquidation rights or such
restrictions as shall be set forth therein. The terms of the Common Securities
issued by an SCI Capital Trust will be substantially identical to the terms of
the Preferred Securities issued by such SCI Capital Trust and the Common
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Preferred Securities except that, upon a Declaration Event of Default,
the rights of the holders of the Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the Preferred Securities. Except in
certain limited circumstances, the Common Securities will also carry the right
to vote to appoint, remove or replace any of the SCI Capital Trustees of an SCI
Capital Trust. All of the Common Securities of each SCI Capital Trust will be
directly or indirectly owned by the Company.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default occurs and is continuing, then the
holders of Preferred Securities of such SCI Capital Trust would rely on the
enforcement by the Institutional Trustee of its rights as holder of the
applicable series of Company Debt Securities against the Company. In addition,
the holders of a majority in liquidation amount of the Preferred Securities of
such SCI Capital Trust will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Institutional
Trustee or to direct the exercise of any trust or power conferred upon the
Institutional Trustee under the applicable Declaration, including the right to
direct the Institutional Trustee to exercise the remedies available to it as a
holder of the Company Debt Securities.
If the Institutional Trustee fails to enforce its rights under the
applicable series of Company Debt Securities, a holder of Preferred Securities
of such SCI Capital Trust may institute a legal proceeding directly against the
Company to enforce the Institutional Trustee's rights under the applicable
series of Company Debt Securities without first instituting any legal proceeding
against the Institutional Trustee or any other person or entity. Notwithstanding
the foregoing, if a Declaration Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay interest or
principal on the applicable series of Company Debt Securities on the date such
interest or principal is otherwise payable (or in the case of redemption, on the
redemption date), then a holder of Preferred Securities of such SCI Capital
Trust may directly institute a proceeding for enforcement of payment to such
holder of the principal of or interest on the applicable series of Company Debt
Securities having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder (a "Direct Action") on or after the
respective due date specified in the applicable series of Company Debt
Securities. In connection with such Direct Action, the Company will be
subrogated to the rights of such holder of Preferred Securities under the
applicable Declaration to the extent of any payment made by the Company to such
holder of Preferred Securities in such Direct Action.
PROPOSED TAX LEGISLATION
As a part of President Clinton's Fiscal 1999 Budget Proposal, the Treasury
Department has proposed legislation (the "Proposed Legislation") that, among
other things, will treat as equity for United States federal income tax purposes
certain debt instruments that are not shown as indebtedness on the consolidated
balance sheet of the SCI Capital Trusts. A similar proposal was
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included in President Clinton's 1998 Budget Proposal but was not included in
either the Taxpayer Relief Act of 1997 or the I.R.S. Restructuring and Reform
Bill of 1998. No assurance can be given that the Proposed Legislation will not
ultimately be enacted in the future, that such future legislation would not have
a retroactive effective date and that such future legislation would not prevent
SCI from deducting interest on the Company Debt Securities.
DESCRIPTION OF PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the guarantees by
the Company with respect to the Preferred Securities of each of the SCI Capital
Trusts (each, a "Preferred Securities Guarantee"), which will be executed and
delivered by the Company for the benefit of the holders from time to time of
Preferred Securities. Each Preferred Securities Guarantee will be qualified as
an indenture under the Trust Indenture Act. Chase Bank of Texas will act as
indenture trustee under each Preferred Securities Guarantee for purposes of the
Trust Indenture Act (the "Preferred Guarantee Trustee"). The terms of each
Preferred Securities Guarantee will be those set forth in such Preferred
Securities Guarantee and those made part of such Preferred Securities Guarantee
by the Trust Indenture Act. This summary of the material terms of the Preferred
Securities Guarantees does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference to,
the form of Preferred Securities Guarantee and the Trust Indenture Act. Each
Preferred Securities Guarantee will be held by the Preferred Guarantee Trustee
for the benefit of the holders of the Preferred Securities of the applicable SCI
Capital Trust.
GENERAL
Pursuant to each Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree, to the extent set forth therein, to pay
in full, to the holders of the Preferred Securities issued by an SCI Capital
Trust, the Guarantee Payments (as defined below) (except to the extent paid by
such SCI Capital Trust), as and when due, regardless of any defense, right of
set-off or counterclaim which such SCI Capital Trust may have or assert. The
following payments with respect to Preferred Securities issued by an SCI Capital
Trust to the extent not paid by such SCI Capital Trust (the "Guarantee
Payments"), will be subject to the Preferred Securities Guarantee thereon
(without duplication):
- any accrued and unpaid distributions which are required to be paid on
such Preferred Securities, to the extent such SCI Capital Trust shall
have funds available therefor;
- the redemption price, including all accrued and unpaid distributions (the
"Redemption Price"), to the extent such SCI Capital Trust has funds
available therefor with respect to any Preferred Securities called for
redemption by such SCI Capital Trust; and
- upon a voluntary or involuntary dissolution, winding-up or termination of
such SCI Capital Trust (other than in connection with the distribution of
Company Debt Securities to the holders of Preferred Securities or the
redemption of all of the Preferred Securities), the lesser of:
-- the aggregate of the liquidation amount and all accrued and unpaid
distributions on such Preferred Securities to the date of payment, to
the extent such SCI Capital Trust has funds available therefor; and
-- the amount of assets of such SCI Capital Trust remaining available for
distribution to holders of such Preferred Securities in liquidation of
such SCI Capital Trust.
The Redemption Price and liquidation amount will be fixed at the time the
Preferred Securities are issued. The Company's obligation to make a Guarantee
Payment may be satisfied by direct
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payment of the required amounts by the Company to the holders of Preferred
Securities or by causing the applicable SCI Capital Trust to pay such amounts to
such holders.
Each Preferred Securities Guarantee will not apply to any payment of
distributions except to the extent such SCI Capital Trust shall have funds
available therefor. If the Company does not make interest payments on the
Company Debt Securities purchased by an SCI Capital Trust, such SCI Capital
Trust will not pay distributions on the Preferred Securities issued by such SCI
Capital Trust and will not have funds available therefore. The Preferred
Securities Guarantee, when taken together with the Company's obligations under
the Company Debt Securities, the Indenture and the Declaration, including its
obligations to pay costs, expenses, debts and liabilities of such SCI Capital
Trust (other than with respect to the Trust Securities), will provide a full and
unconditional guarantee on a subordinated basis by the Company of payments due
on the Preferred Securities.
The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the SCI Capital Trusts with respect to the Common
Securities (the "Common Securities Guarantees") to the same extent as the
Preferred Securities Guarantees, except that upon an event of default under the
applicable Indenture, holders of Preferred Securities shall have priority over
holders of Common Securities with respect to distributions and payments on
liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
Unless otherwise specified in the prospectus supplement, in each Preferred
Securities Guarantee, the Company will covenant that, so long as any Preferred
Securities issued by the applicable SCI Capital Trust remain outstanding, if
there shall have occurred any event that would constitute a Declaration Event of
Default or an event of default under such Preferred Securities Guarantee, then:
- the Company shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase or make liquidation
payment with respect to, any of its capital stock or make any guarantee
payments with respect to the foregoing, other than:
-- purchases or acquisitions of shares of SCI capital stock in connection
with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its
obligations pursuant to any contract or security requiring the Company
to purchase shares of Common Stock;
-- as a result of a reclassification of SCI capital stock or the exchange
or conversion of one class or series of SCI capital stock for another
class or series of SCI capital stock; or
-- the purchase of fractional interests in shares of SCI capital stock
pursuant to the conversion or exchange provisions of such SCI capital
stock or the security being converted or exchanged; and
- the Company shall not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities (including
guarantees) issued by the Company which rank pari passu with or junior to
such Company Debt Securities.
MODIFICATION OF THE PREFERRED SECURITIES GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required),
each Preferred Securities Guarantee may be amended only with the prior approval
of the holders of not less than a majority in liquidation amount of the
outstanding Preferred Securities issued by the applicable SCI Capital Trust. The
manner of obtaining any such approval of holders of such Preferred Securities
will be as set forth in an accompanying prospectus supplement. All guarantees
and agreements contained in a Preferred
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Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Preferred Securities of the applicable SCI Capital Trust then outstanding.
TERMINATION
Each Preferred Securities Guarantee will terminate as to the Preferred
Securities issued by the applicable SCI Capital Trust (1) upon full payment of
the Redemption Price of all Preferred Securities of such SCI Capital Trust, (2)
upon distribution of the Company Debt Securities held by such SCI Capital Trust
to the holders of the Preferred Securities of such SCI Capital Trust or (3) full
payment of the amounts payable in accordance with the Declaration of such SCI
Capital Trust upon liquidation of such SCI Capital Trust. Each Preferred
Securities Guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of Preferred Securities issued by the
applicable SCI Capital Trust must restore payment of any sums paid under such
Preferred Securities or such Preferred Securities Guarantee.
EVENT OF DEFAULT
An event of default under a Preferred Securities Guarantee will occur upon
the failure of the Company to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
relating to such Preferred Securities Guarantee have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Preferred Guarantee Trustee in respect of the Preferred Securities Guarantee
or to direct the exercise of any trust or power conferred upon the Preferred
Guarantee Trustee under such Preferred Securities. If the Preferred Guarantee
Trustee fails to enforce such Preferred Securities Guarantee, any holder of
Preferred Securities relating to such Preferred Securities Guarantee may
institute a legal proceeding directly against the Company to enforce the
Preferred Guarantee Trustee's rights under such Preferred Securities Guarantee,
without first instituting a legal proceeding against the relevant SCI Capital
Trust, the Preferred Guarantee Trustee or any other person or entity.
Notwithstanding the foregoing, if the Company has failed to make a guarantee
payment, a holder of Preferred Securities may directly institute a proceeding
against the Company for enforcement of the Preferred Securities Guarantee for
such payment. The Company waives any right or remedy to require that any action
be brought first against such SCI Capital Trust or any other person or entity
before proceeding directly against the Company.
STATUS OF THE PREFERRED SECURITIES GUARANTEES
The Preferred Securities Guarantees will constitute unsecured obligations
of the Company and will rank:
- subordinate and junior in right of payment to all other liabilities of
the Company;
- pari passu with the most senior preferred or preference stock now or
hereafter issued by the Company and with any guarantee now, or hereafter
entered into by the Company in respect of any preferred or preference
stock of any affiliate of the Company; and
- senior to the Common Stock.
The terms of the Preferred Securities provide that each holder of Preferred
Securities issued by the applicable SCI Capital Trust by acceptance thereof
agrees to the subordination provisions and other terms of the Preferred
Securities Guarantee relating thereto.
The Preferred Securities Guarantees will constitute a guarantee of payment
and not of collection (that is, that the guaranteed party may institute a legal
proceeding directly against the guarantor to
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enforce its rights under the Preferred Securities Guarantee without instituting
a legal proceeding against any other person or entity).
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE
The Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to a Preferred Securities Guarantee, undertakes to perform only such
duties as are specifically set forth in such Preferred Securities Guarantee.
After default, the Preferred Guarantee Trustee shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Preferred Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by a Preferred Securities
Guarantee at the request of any holder of Preferred Securities, unless offered
reasonable indemnity against the costs, expenses and liabilities which might be
incurred thereby.
The Company and certain of its affiliates maintain a banking relationship
with the Preferred Guarantee Trustee.
GOVERNING LAW
The Preferred Securities Guarantees will be governed by and construed in
accordance with the internal laws of the State of Texas.
EFFECT OF OBLIGATIONS UNDER COMPANY DEBT
SECURITIES AND PREFERRED SECURITIES GUARANTEES
As set forth in the Declaration, the sole purpose of each of the SCI
Capital Trusts is to issue the Trust Securities evidencing undivided beneficial
interests in the assets of each of the SCI Capital Trusts and to invest the
proceeds from such issuance and sale in the Company Debt Securities.
As long as payments of interest and other payments are made when due on the
Company Debt Securities, such payments will be sufficient to cover distributions
and payments due on the Trust Securities because of the following factors:
- the aggregate principal amount of Company Debt Securities will be equal
to the sum of the aggregate stated liquidation amount of the Trust
Securities;
- the interest rate and the interest and other payment dates on the Company
Debt Securities will match the distribution rate and distribution and
other payment dates for the Preferred Securities;
- the Company shall pay all, and the applicable SCI Capital Trust shall not
be obligated to pay, directly or indirectly, all costs, expenses, debt,
and obligations of the applicable SCI Capital Trust (other than with
respect to the Trust Securities); and
- the Declaration further provides that the SCI Trustees shall not take or
cause or permit the applicable SCI Capital Trust to, among other things,
engage in any activity that is not consistent with the purposes of the
applicable SCI Capital Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by the Company as and to the extent set forth under
"Description of Preferred Securities Guarantees." If the Company does not make
interest payments on the Company Debt Securities purchased by the applicable SCI
Capital Trust, it is expected that the applicable SCI Capital Trust will not
have sufficient funds to pay distributions on the Preferred Securities. The
Preferred Securities Guarantee does not apply to any payment of distributions
unless and until the applicable SCI Capital Trust has
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sufficient funds for the payment of such distributions. The Preferred Securities
Guarantee covers the payment of distributions and other payments on the
Preferred Securities only if and to the extent that the Company has made a
payment of interest or principal on the Company Debt Securities held by the
applicable SCI Capital Trust as its sole asset. The Preferred Securities
Guarantee, when taken together with the Company's obligations under the Company
Debt Securities and the Indentures and its obligations under the Declaration,
including its obligations to pay costs, expenses, debts and liabilities of the
applicable SCI Capital Trust (other than with respect to the Trust Securities),
provide a full and unconditional guarantee of amounts on the Preferred
Securities.
If the Company fails to make interest or other payments on the Company Debt
Securities when due (taking account of any extension period), the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using the
procedures described in any accompanying prospectus supplement, may direct the
Institutional Trustee to enforce its rights under the Company Debt Securities.
If the Institutional Trustee fails to enforce its rights under the Company Debt
Securities, a holder of Preferred Securities may institute a legal proceeding
against the Company to enforce the Institutional Trustee's rights under the
Company Debt Securities without first instituting any legal proceeding against
the Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest or
principal on the Company Debt Securities on the date such interest or principal
is otherwise payable (or in the case of redemption on the redemption date), then
a holder of Preferred Securities may institute a Direct Action for payment on or
after the respective due date specified in the Company Debt Securities. In
connection with such Direct Action, the Company will be subrogated to the rights
of such holder of Preferred Securities under the Declaration to the extent of
any payment made by the Company to such holder of Preferred Securities in such
Direct Action. The Company, under the Preferred Securities Guarantee,
acknowledges that the Preferred Guarantee Trustee shall enforce the Preferred
Securities Guarantee on behalf of the holders of the Preferred Securities. If
the Company fails to make payments under the Preferred Securities Guarantee, the
Preferred Securities Guarantee provides a mechanism whereby the holders of the
Preferred Securities may direct the Preferred Guarantee Trustee to enforce its
rights thereunder. Any holder of Preferred Securities may institute a legal
proceeding directly against the Company to enforce the Preferred Guarantee
Trustee's rights under the Preferred Securities Guarantee without first
instituting a legal proceeding against the applicable SCI Capital Trust, the
Preferred Guarantee Trustee, or any other person or entity.
The Company and each of the SCI Capital Trusts believe that the above
mechanisms and obligations, taken together, provide a full and unconditional
guarantee by the Company of payments due on the Preferred Securities. See
"Description of Preferred Securities Guarantees -- General."
DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
The Company may issue stock purchase contracts ("Stock Purchase
Contracts"), representing contracts obligating holders to purchase from the
Company, and the Company to sell to the holders, a specified number of shares of
Common Stock at a future date or dates. The price per share of Common Stock may
be fixed at the time the Stock Purchase Contracts are issued or may be
determined by reference to a specific formula set forth in the Stock Purchase
Contracts. The Stock Purchase Contracts may be issued separately or as a part of
stock purchase units ("Stock Purchase Units") consisting of a Stock Purchase
Contract and either (1) Company Senior Debt Securities, Company Senior
Subordinated Debt Securities or Company Subordinated Debt Securities, (2) debt
obligations of third parties, including U.S. Treasury Securities, or (3)
Preferred Securities of an SCI Capital Trust, securing the holder's obligations
to purchase the Common Stock under the Stock
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Purchase Contracts. The Stock Purchase Contracts may require the Company to make
periodic payments to the holders of the Stock Purchase Units or vice versa, and
such payments may be unsecured or prefunded on some basis. The Stock Purchase
Contracts may require holders to secure their obligations thereunder in a
specified manner and in certain circumstances the Company may deliver newly
issued prepaid Stock Purchase Contracts ("Prepaid Securities") upon release to a
holder of any collateral securing such holder's obligations under the original
Stock Purchase Contract.
The applicable prospectus supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units and, if applicable, Prepaid
Securities. The description in the prospectus supplement will not purport to be
complete and will be qualified in its entirety by reference to (1) the Stock
Purchase Contracts, (2) the collateral arrangements and depositary arrangements,
if applicable, relating to such Stock Purchase Contracts or Stock Purchase Units
and (3) if applicable, the Prepaid Securities and the document pursuant to which
such Prepaid Securities will be issued.
PLAN OF DISTRIBUTION
The Company and/or any SCI Capital Trust 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. The place and time of
delivery for the Securities will be set forth in the prospectus supplement.
In connection with the sale of Securities, underwriters may receive
compensation from the Company, from any SCI Capital Trust 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/or any SCI
Capital Trust, and any profit on the resale of Securities by them may be deemed
to be underwriting discounts and commissions, under the Securities Act of 1933,
as amended (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 and/or any SCI
Capital Trust, underwriters and agents who participate in the distribution of
Securities may be entitled to indemnification by the Company and/or any SCI
Capital Trust against certain liabilities, including liabilities under the Act.
The Company and/or any SCI Capital Trust may grant to the underwriters
options to purchase additional Securities, to cover over-allotments, if any, at
the public offering price (with additional underwriting discounts or
commissions), as may be set forth in the prospectus supplement relating thereto.
If the Company and/or any SCI Capital Trust grants any over-allotment option,
the terms of such over-allotment option will be set forth in the prospectus
supplement for such Securities.
Securities may also be offered and sold, if so indicated in the applicable
prospectus supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more firms ("remarketing firms"), acting as principals for their own
accounts or as agents for the Company and/or an SCI Capital Trust. Any
remarketing firm will be identified and the terms of its agreements, if any,
with the Company and/or an SCI Capital Trust and its compensation will be
described in the applicable prospectus supplement.
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Remarketing firms may be deemed to be underwriters, as that term is defined in
the Act, in connection with the Securities remarketed thereby.
Offers to purchase Securities may be solicited directly by the Company
and/or any SCI Capital Trust and the sale thereof may be made by the Company
and/or any SCI Capital Trust directly to institutional investors or others, who
may be deemed to be underwriters within the meaning of the Act with respect to
any resale thereof. The terms of any such sales will be described in the
prospectus supplement relating thereto.
If so indicated in the prospectus supplement, the Company and/or any SCI
Capital Trust will authorize underwriters or other persons acting as the
Company's and/or any SCI Capital Trust's agents to solicit offers by certain
institutions to purchase Securities from the Company and/or any SCI Capital
Trust, 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 and/or the appropriate SCI Capital
Trust. The obligations of any purchaser under any such contract will be subject
to the condition that the purchase of the 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.
Each series of Securities will be a new issue and, other than the Common
Stock, which is listed on the New York Stock Exchange, will have no established
trading market. The Company may elect to list any series of Securities on an
exchange, and in the case of the Common Stock, on any additional exchange, but,
unless otherwise specified in the applicable prospectus supplement, the Company
shall not be obligated to do so. No assurance can be given as to the liquidity
of the trading market for any of the Securities.
Underwriters, dealers, agents and remarketing firms may be customers of,
engage in transactions with, or perform services for, the Company and its
subsidiaries in the ordinary course of business.
LEGAL MATTERS
The validity of the Company Debt Securities, the Common Stock and related
Junior Participating Preferred Stock Purchase Rights, the Common Stock Warrants,
the Stock Purchase Contracts, the Stock Purchase Units and the Preferred
Securities Guarantees will be passed upon for the Company by Liddell, Sapp,
Zivley, Hill & LaBoon, L.L.P., Houston, Texas, special counsel for the Company.
The validity of the Preferred Securities and certain other matters related to
the SCI Capital Trusts will be passed upon for the SCI Capital Trusts by
Richards, Layton & Finger, PA, special Delaware counsel for the SCI Capital
Trusts.
EXPERTS
The consolidated financial statements of Service Corporation International
at December 31, 1997 and 1996, and for each of the three years in the period
ended December 31, 1997, appearing in Service Corporation International's Annual
Report (Form 10-K) for the year ended December 31, 1997, incorporated by
reference in this prospectus, have been incorporated herein in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
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