<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 1999
REGISTRATION NO. 333-66957
REGISTRATION NO. 333-50861
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
POST-EFFECTIVE AMENDMENT NO. 1 ON
FORM S-3 TO FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
---------------------
SERVICE CORPORATION INTERNATIONAL
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
TEXAS 74-1488375
(STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
</TABLE>
1929 ALLEN PARKWAY
HOUSTON, TEXAS 77019
(713) 522-5141
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------------
<TABLE>
<S> <C>
JAMES M. SHELGER, ESQ. Copy to:
SENIOR VICE PRESIDENT, MARCUS A. WATTS
GENERAL COUNSEL AND LOCKE LIDDELL & SAPP LLP
SECRETARY 3400 CHASE TOWER
SERVICE CORPORATION 600 TRAVIS
INTERNATIONAL HOUSTON, TEXAS 77002
1929 ALLEN PARKWAY (713) 226-1200
HOUSTON, TEXAS 77019
(713) 522-5141
(NAME, ADDRESS, INCLUDING
ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA
CODE, OF
AGENT FOR SERVICE)
</TABLE>
POST EFFECTIVE AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
---------------------
EQUITY CORPORATION INTERNATIONAL
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 75-2521142
(STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
</TABLE>
415 SOUTH FIRST STREET, SUITE 210
LUFKIN, TEXAS 75901
(409) 631-8700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------------
<TABLE>
<S> <C>
JAMES M. SHELGER, ESQ. Copy to:
SENIOR VICE PRESIDENT, MARCUS A. WATTS
GENERAL COUNSEL AND LOCKE LIDDELL & SAPP LLP
SECRETARY 3400 CHASE TOWER
SERVICE CORPORATION 600 TRAVIS
INTERNATIONAL HOUSTON, TEXAS 77002
1929 ALLEN PARKWAY (713) 226-1200
HOUSTON, TEXAS 77019
(713) 522-5141
(NAME, ADDRESS, INCLUDING
ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA
CODE, OF
AGENT FOR SERVICE)
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement, as determined
by market conditions.
---------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(1) PRICE(1) FEE(4)
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
4 1/2% Convertible Subordinated Debentures due
2004........................................ $143,750,000 100%
- ------------------------------------------------------------------------------------------- $143,750,000 $39,963
Common Stock of Service Corporation
International(2).......................... 3,770,392 shares(3) --
=================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(i).
(2) Includes Series D Junior Participating Preferred Stock Purchase Rights
associated with the Common Stock. No additional consideration will be
received for the Common Stock or the Series D Junior Participating Preferred
Stock Purchase Rights associated therewith and, therefore, no registration
fee is required pursuant to Rule 457(i).
(3) Such number represents the number of shares of Common Stock as are initially
issuable upon conversion of the 4 1/2% Convertible Subordinated Debentures
due December 31, 2004 registered hereby and, pursuant to Rule 416, such
indeterminate number of shares of Common Stock as shall be required for
issuance upon conversion of such Debentures.
(4) Pursuant to Rule 457(b), the calculated fee of $39,963 shall be offset by
the aggregate fee of $195,189 paid in connection with (i) the preliminary
proxy statement of Equity Corporation International filed with the
Commission on August 19, 1998 and (ii) Registration Statement No. 333-66957
of Service Corporation International filed with the Commission on November
6, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PROSPECTUS
$143,750,000
SERVICE CORPORATION INTERNATIONAL
EQUITY CORPORATION INTERNATIONAL
4 1/2% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004
AND
SERVICE CORPORATION INTERNATIONAL
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF
---------------------
Trading Symbol for Common Stock:
New York Stock Exchange -- SRV
---------------------
The Debentures will mature on December 31, 2004. We will pay interest on
the Debentures on June 30 and December 31 of each year, commencing June 30,
1998. We may not redeem the Debentures prior to February 26, 2001. Thereafter,
we have the right to redeem the Debentures on the terms set forth in this
prospectus.
The Debentures are unsecured. The Debentures (1) are subordinate in right
of payment to all of the existing and future secured indebtedness of Service
Corporation International ("SCI"), (2) rank equally in right of payment with all
of SCI's existing and future unsecured senior indebtedness, and (3) rank senior
in right of payment to all of SCI's existing and future subordinated
indebtedness. Additionally, the Debentures (1) are subordinate in right of
payment to all existing and future senior secured indebtedness of Equity
Corporation International ("ECI"), (2) rank equally in right of payment with all
of ECI's existing and future unsecured senior indebtedness, and (3) rank senior
in right of payment to all of ECI's existing and future subordinated
indebtedness.
The Debentures are convertible at the option of the Debenture holders into
shares of SCI's common stock at any time prior to redemption or maturity at a
conversion rate of $38.126 principal amount of the Debentures per share of SCI's
common stock. The Debentures are convertible in denominations of $1,000,
increased in multiples of $1,000.
The Debentures and the common stock of SCI issuable upon conversion thereof
may be offered and sold from time to time by the holders named herein or their
transferees, pledgees, donees or successors on the terms set forth in this
prospectus.
Neither SCI nor ECI intends to list the Debentures on any national
securities exchange or to seek the admission thereof to trading in the Nasdaq
system.
---------------------
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.
---------------------
February 4, 1999
<PAGE> 3
ABOUT THIS PROSPECTUS
This prospectus is part of a Registration Statement on Form S-4 that SCI
filed with the Securities and Exchange Commission, as amended by a Registration
Statement on Form S-3 relating to the Debentures and the common stock of SCI
issuable upon conversion thereof under the Securities Act of 1933, as amended.
This prospectus is also part of a Registration Statement on Form S-3, as
amended, that ECI filed with the Securities and Exchange Commission relating to
the Debentures under the Securities Act of 1933, as amended. For purposes
hereof, the "registration statement" means the original registration statement
of SCI, the original registration statement of ECI and any and all amendments
thereto.
An aggregate principal amount of $143,750,000 4 1/2% Convertible
Subordinated Debentures due December 31, 2004 were originally issued by ECI. On
January 19, 1999, one of SCI's wholly owned subsidiaries merged with and into
ECI, with ECI surviving the merger as one of SCI's wholly owned subsidiaries. As
a result of the merger and pursuant to the First Supplemental Indenture dated as
of January 19, 1999 by and among ECI, SCI and Bankers Trust Company, as trustee,
the Debentures became obligations of SCI and ECI.
This prospectus provides you with a description of the Debentures and the
common stock that SCI may issue upon conversion of the Debentures. This
prospectus may also be used by the Debenture holders named in this prospectus
under the heading "Selling Securityholders" (or their transferees, pledgees,
donees or successors) to offer and sell the Debentures and the underlying common
stock of SCI on the terms described in this prospectus. You should read this
prospectus together with the additional information described under the heading
"Where To Find More Information."
WHERE TO FIND MORE INFORMATION
SCI and ECI 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 SCI and ECI at
the Commission's public reference room at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's public reference
rooms in New York, New York and Chicago, Illinois. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. The
filings of SCI and ECI with the Commission are also available to the public from
commercial document retrieval services and at the web site maintained by the
Commission at "http://www.sec.gov." SCI also invites you to visit its web site
at "http://www.sci-corp.com."
It is currently anticipated that ECI will cease filing reports under the
Securities Exchange Act of 1934, as amended, after the registration statement,
of which this prospectus is a part, becomes effective. SCI will include
summarized financial information regarding ECI in its Form 10-K as required by
the Commission.
The Commission allows SCI and ECI to "incorporate by reference" the
information they file with it, which means that they can disclose important
information to you by referring you to another document they filed separately
with the Commission. The information incorporated by reference is an important
part of this prospectus, and information that SCI and ECI file later with the
Commission will automatically update and supersede this information. SCI and ECI
incorporate by reference the documents set forth 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, as amended, until all of the securities are
sold.
SCI COMMISSION FILINGS (FILE NO. 1-06402)
- 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, June 30, 1998 and September 30, 1998;
2
<PAGE> 4
- Current Reports on Form 8-K filed March 24, 1998, May 15, 1998, December
11, 1998, January 20, 1999 and January 28, 1999;
- Description of Series D Junior Participating Preferred Stock Purchase
Rights contained in the 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 the Registration
Statement on Form 8-A.
ECI COMMISSION FILINGS (FILE NO. 0-24728)
- 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, June 30, 1998 and September 30, 1998; and
- Current Reports on Form 8-K filed February 11, 1998, February 13, 1998,
February 26, 1998, August 10, 1998, September 3, 1998, December 17, 1998,
December 22, 1998, January 4, 1999 and January 20, 1999.
SCI will provide to each person to whom a prospectus is delivered,
including any beneficial owner, a copy of any or all of these SCI or ECI filings
upon request. You may request a copy of these filings, at no cost, by writing or
by telephoning SCI at the following address:
Service Corporation International
1929 Allen Parkway
Houston, Texas 77019
(713) 522-5141
Attention: James M. Shelger
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. NEITHER SCI NOR ECI HAS AUTHORIZED ANYONE ELSE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROSPECTUS. THIS PROSPECTUS IS DATED FEBRUARY 4, 1999. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN SUCH DATE.
3
<PAGE> 5
SUMMARY
This summary highlights selected information contained elsewhere or
incorporated by reference in this prospectus. This summary may not contain all
of the information that is important to you.
THE COMPANIES
SERVICE CORPORATION INTERNATIONAL
SCI is the largest provider of death care services and products in the
world. As of January 19, 1999, SCI owned and operated 3,700 funeral service
locations, 500 cemeteries and 180 crematoria located in 18 countries on five
continents. SCI was incorporated in Texas on July 5, 1962. The term "SCI" refers
to SCI and its subsidiaries in this paragraph. Additional information concerning
SCI is included in SCI's reports filed under the Securities Exchange Act of
1934, as amended, that are incorporated by reference in this prospectus. See
"Where To Find More Information."
SCI's consolidated ratios of earnings to fixed charges for the periods
indicated are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
- -------------------------------- -----------------
1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C>
3.19 3.13 2.84 3.24 4.29 3.88
</TABLE>
See "The Companies -- Service Corporation International" for a further
discussion of SCI's consolidated ratios of earnings to fixed charges.
SCI's principal executive office is located at 1929 Allen Parkway, Houston,
Texas 77019, and its telephone number is (713) 522-5141.
EQUITY CORPORATION INTERNATIONAL
ECI is a wholly owned subsidiary of SCI and the surviving corporation of
the merger of a wholly owned subsidiary of SCI with and into ECI, which was
consummated on January 19, 1999. ECI provides death care services and products
in the United States and Canada, primarily serving communities located in
non-metropolitan and select suburban areas. Additional information concerning
ECI is included in ECI's reports filed under the Securities Exchange Act of
1934, as amended, that are incorporated by reference in this prospectus. See
"Where To Find More Information."
ECI's consolidated ratios of earnings to fixed charges for the periods
indicated are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
- -------------------------------- -----------------
1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C>
4.14 2.80 4.73 6.57 4.32 2.93
</TABLE>
See "The Companies -- Equity Corporation International" for a further
discussion of ECI's consolidated ratios of earnings to fixed charges.
ECI's principal executive office is located at 415 South First Street,
Suite 210, Lufkin, Texas 75901, and its telephone number is (409) 631-8700.
4
<PAGE> 6
THE OFFERING
Securities Offered......... (1) $143,750,000 principal amount of 4 1/2%
Convertible Subordinated Debentures due 2004 (the
"Debentures") issued under an Indenture dated as of
February 25, 1998 between ECI and Bankers Trust
Company, as trustee, as supplemented by the First
Supplemental Indenture dated January 19, 1999, by
and among ECI, SCI and Bankers Trust Company, as
trustee, and (2) the shares of SCI's common stock
issuable upon the conversion of the Debentures.
Interest Payment Dates..... June 30 and December 31 of each year, commencing
June 30, 1998.
Conversion Rights.......... The Debentures are convertible into shares of SCI's
common stock at any time prior to maturity or
redemption at a conversion price of $38.126 per
share of SCI's common stock, subject to adjustment
under certain conditions.
Optional Redemption by
ECI........................ ECI cannot redeem the Debentures prior to February
26, 2001. Thereafter, ECI can redeem the Debentures
at any time and from time to time at its option, in
whole or in part, at the redemption prices set
forth in this prospectus, plus accrued interest.
Change in Control of ECI... Upon a change in control of ECI, holders of the
Debentures will have the right, subject to certain
restrictions and conditions, to require us to
purchase all or any part of the Debentures at the
principal amount thereof, plus accrued interest. If
a change in control of ECI were to occur, we can
not guarantee that we will have sufficient funds to
pay the repurchase price for all Debentures
tendered by the holders or that we will be
permitted to purchase the Debentures tendered under
the terms of any existing or future secured
indebtedness or any existing or future indebtedness
ranking equally in right of payment with the
Debentures.
Subordination.............. The Debentures (1) are general unsecured
obligations of SCI, (2) are contractually
subordinate in right of payment to all of SCI's
existing and future secured indebtedness, (3) rank
equally in right of payment with all of SCI's
existing and future senior indebtedness that is
unsecured, and (4) rank senior in right of payment
to all of SCI's existing and future subordinated
indebtedness. The Debentures are effectively
subordinated to all current and future obligations
of SCI's subsidiaries (other than ECI), including
trade obligations, as a result of structural
subordination. The Debentures (1) are general
unsecured obligations of ECI, (2) are contractually
subordinate in right of payment to all existing and
future senior secured indebtedness of ECI, (3) rank
equally in right of payment with all of ECI's
existing and future unsecured senior indebtedness,
and (4) rank senior in right of payment to all of
ECI's existing and future subordinated
indebtedness. The Indenture and the First
Supplemental Indenture governing the Debentures do
not restrict the incurrence of secured indebtedness
or other indebtedness by SCI, ECI or any other
subsidiaries of SCI.
Use of Proceeds............ Neither SCI nor ECI will receive any of the
proceeds from the sale of the Debentures or the
shares of SCI's common stock issuable upon
conversion of the Debentures by the selling
securityholders listed in this prospectus under the
heading "Selling Securityholders."
Registration Rights........ If ECI fails to comply with certain obligations
under the Registration Rights Agreement described
in this prospectus, ECI has agreed to make
additional payments of predetermined liquidated
damages to the holders of the Debentures and the
holders of SCI's common stock issued upon
conversion of the Debentures. See "Description of
Debentures -- Registration Rights."
5
<PAGE> 7
THE COMPANIES
SERVICE CORPORATION INTERNATIONAL
References to the "Company" or "SCI" in this prospectus should be read as
referring to Service Corporation International and its subsidiaries, except
where the context indicates otherwise.
SCI is the largest provider of death care services and products in the
world. As of January 19, 1999, SCI owned and operated 3,700 funeral service
locations, 500 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, investment management,
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.
SCI's consolidated ratios of earnings to fixed charges for the periods
indicated are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
- -------------------------------- -----------------
1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C>
3.19 3.13 2.84 3.24 4.29 3.88
</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 SCI 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.
EQUITY CORPORATION INTERNATIONAL
ECI is a wholly owned subsidiary of SCI and the surviving corporation of
the merger of a wholly owned subsidiary of SCI with and into ECI, which was
consummated on January 19, 1999. ECI provides death care services and products
in the United States and Canada, primarily serving communities located in
non-metropolitan and select suburban areas.
6
<PAGE> 8
ECI's consolidated ratios of earnings to fixed charges for the periods
indicated are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
- -------------------------------- -----------------
1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C>
4.14 2.80 4.73 6.57 4.32 2.93
</TABLE>
For purposes of calculating the ratios of earnings to fixed charges,
earnings consist of (1) income before taxes, (2) extraordinary item and (3)
fixed charges. Fixed charges include (1) interest expense and (2) an interest
factor attributable to rentals.
USE OF PROCEEDS
Neither SCI nor ECI will receive any of the proceeds from the sale of the
Debentures or the common stock, par value $1.00 per share, of SCI (the "SCI
Common Stock") issuable upon conversion of the Debentures by the selling
securityholders set forth in this prospectus under the heading "Selling
Securityholders" (the "Selling Securityholders").
DESCRIPTION OF DEBENTURES
The Debentures were initially issued and sold by ECI, pursuant to an
Indenture dated as of February 25, 1998 (the "Original Indenture") between ECI,
as issuer, and Bankers Trust Company, as trustee (the "Trustee"). The Debentures
were initially issued and sold to qualified institutional buyers ("QIBs"), as
defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"), in transactions exempt from the registration requirements of
the Securities Act, through Merrill Lynch, Pierce, Fenner & Smith Incorporated,
ABN AMRO Incorporated and Morgan Stanley & Co. Incorporated (collectively, the
"Initial Purchasers").
In connection with the merger of SCI Delaware Funeral Services, Inc., a
Delaware corporation and wholly owned subsidiary of SCI, with and into ECI (the
"Merger"), SCI, ECI and the Trustee entered into the First Supplemental
Indenture dated as of January 19, 1999 (the "Supplemental Indenture"). Pursuant
to the Supplemental Indenture, SCI became a co-obligor with ECI with respect to
the Debentures (but not a successor to ECI). Subject to the terms of the
Supplemental Indenture, SCI is jointly and severally liable with ECI for the
payment of the principal (and premium, if any) and interest on the Debentures
under the Original Indenture and the Supplemental Indenture.
The terms of the Debentures include those stated in the Original Indenture
and the Supplemental Indenture (collectively with the Original Indenture, the
"Indenture") and those provisions required by, or made a part of the Indenture
by reference to, the Trust Indenture Act of 1939, as in effect on the date of
the Indenture (the "Trust Indenture Act"). The Debentures are subject to all
such terms of the Indenture, and prospective investors are referred to the
Indenture for a statement thereof. Copies of the Original Indenture and the
Supplemental Indenture have been filed with the Securities and Exchange
Commission (the "Commission") as exhibits to the registration statement of which
this prospectus is a part.
The following summary of the Debentures is qualified in its entirety by
express reference to the Debentures and the Indenture, which are incorporated by
reference as a part of such summary. Capitalized terms used but not defined
herein have the meanings ascribed to such terms in the Indenture. References in
this section to the "Company" or "SCI" are solely to Service Corporation
International, a Texas corporation, and not its subsidiaries. References in this
section to "ECI" are solely to Equity Corporation International, a Delaware
corporation, and not its subsidiaries.
7
<PAGE> 9
GENERAL
The Debentures are general unsecured obligations of the Company and ECI,
are limited to an aggregate principal amount of $143,750,000 and will mature on
December 31, 2004. The Debentures:
- are contractually subordinate in right of payment to all existing and
future Senior Secured Indebtedness of ECI;
- rank equally in right of payment with all existing and future senior
indebtedness of ECI that is unsecured; and
- rank senior in right of payment to all existing and future subordinated
indebtedness of ECI.
The Debentures are general unsecured obligations of the Company as a joint
and several obligor with respect to payment obligations on the Debentures
following a payment failure by ECI. The Debentures:
- are contractually subordinate in right of payment to all existing and
future secured indebtedness of the Company;
- rank equally in right of payment with all existing and future Senior
Indebtedness of the Company that is unsecured; and
- rank senior in right of payment to all existing and future subordinated
indebtedness of the Company.
The Debentures are effectively subordinated to all current and future
obligations of subsidiaries of the Company (other than ECI), including trade
obligations, as a result of structural subordination. The Indenture does not
restrict the incurrence of secured indebtedness or other indebtedness of the
Company, ECI or any other subsidiaries of the Company.
The Debentures bear interest from February 25, 1998 at an interest rate of
4 1/2% per annum. Interest is payable semi-annually in arrears on June 30 and
December 31 of each year, commencing June 30, 1998, to Debenture Holders of
record at the close of business on the June 15 or December 15 preceding each
such interest payment date. Principal of and interest on the Debentures is
payable at the office of the Paying Agent. The Trustee initially will act as the
Paying Agent.
Interest may, at the option of the Company and ECI, be paid either (1) by
check mailed to the address of the person entitled thereto as it appears in the
Debenture register or (2) by wire transfer to an account maintained by such
person located in the United States. However, payments to The Depository Trust
Company, New York, New York ("DTC") will be made by wire transfer of immediately
available funds to the account of DTC or its nominee. Interest will be computed
on the basis of a 360-day year composed of twelve 30-day months.
The Debentures may be presented for conversion at the office of the
Conversion Agent and for exchange or registration of transfer at the office of
the Registrar. The Trustee initially will act as the Conversion Agent and
Registrar.
Neither the Company nor ECI intends to list the Debentures on any national
securities exchange or to seek the admission thereof to trading in the Nasdaq
system. The Initial Purchasers may make a market in the Debentures and the
underlying SCI Common Stock. However, the Initial Purchasers are not obligated
to make such a market and may discontinue any market-making activities at any
time without notice. In addition, such market-making activities are subject to
limits imposed by the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
Although prior to the registration of the Debentures under ECI's
Registration Statement No. 333-50861 the Debentures were designated for trading
on the Private Offerings, Resales and Trading through Automated Linkages system
of the National Association of Securities Dealers, Inc. ("The PORTAL Market"),
the Debentures sold hereunder will not be eligible for trading through The
PORTAL Market. No assurance can be given that an active trading market for the
Debentures will develop or, if
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<PAGE> 10
such market develops, as to the liquidity or sustainability of such market. If a
trading market does not develop or is not maintained, Holders of the Debentures
may experience difficulty in reselling, or an inability to sell, the Debentures.
If a market for the Debentures develops, any such market may be discontinued at
any time. If a public trading market develops for the Debentures, future trading
prices of the Debentures will depend on many factors, including, among other
things, prevailing interest rates, the Company's operating results and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the Debentures may trade at a discount from their
principal amount.
FORM AND DENOMINATION
The Debentures have been issued in definitive registered form, without
coupons, in denominations of $1,000 and integral multiples thereof. Debentures
sold to QIBs have been registered in book-entry form and are represented by one
or more global Debentures without coupons (each, a "Global Debenture") deposited
with a custodian for and registered in the name of a nominee of DTC in New York,
New York. Beneficial interests in any such Global Debenture are shown on, and
transfers thereof are effected only through, records maintained by DTC and its
direct and indirect participants. Any such beneficial interest may not be
exchanged for Debentures in certificated form except in the limited
circumstances described herein. No Debentures were initially sold to
institutional investors that qualify as accredited investors (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) ("Institutional Accredited
Investors") or in offshore transactions in reliance on Regulation S of the
Securities Act.
No service charge will be made for any registration of transfer or exchange
of Debentures. However, ECI may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Upon the issuance of the Global Debentures, DTC credited, on its internal
system, the respective principal amounts of the individual beneficial interests
represented by such Global Debentures to the accounts of persons who have
accounts with DTC. Ownership of beneficial interests in a Global Debenture is
limited to persons who have accounts with DTC ("Participants") or persons who
hold interests through Participants. Ownership of beneficial interests in the
Global Debentures is shown on, and the transfer of that ownership is effected
through, records maintained by DTC (with respect to interests of Participants)
and the records of Participants (with respect to interests of persons other than
Participants).
So long as DTC, or its nominee, is the registered owner or Holder of a
Global Debenture, DTC or such nominee, as the case may be, is considered the
sole owner or Holder of the Debentures represented by such Global Debenture for
all purposes under the Indenture and the Debentures. No beneficial owner of an
interest in a Global Debenture may transfer that interest except in accordance
with DTC's applicable procedures (in addition to those under the Indenture). If
(1) DTC or any successor depository notifies ECI that it is unwilling or unable
to continue as depository for a Global Debenture or ceases to be a "clearing
agency" registered or in good standing under the Exchange Act or other
applicable statute or regulation and a successor depository is not appointed by
ECI within 90 days, or (2) an Event of Default has occurred and is continuing,
owners of beneficial interests in such Global Debenture, as identified by DTC,
will receive physical delivery of Debentures in certificated form and will be
considered to be the owners or Holders of such Debentures under the Indenture or
the Debentures.
Payments of interest on and the redemption price of the Global Debentures
will be made to DTC or its nominee, as the registered owner thereof. Neither
ECI, the Trustee nor any Paying Agent will have any responsibility or liability
(1) for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global Debentures or (2) for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
ECI expects that DTC or its nominee, upon receipt of any payment in respect
of a Global Debenture held by it or its nominee, will credit Participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Debenture as shown on the
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<PAGE> 11
records of DTC or its nominee. ECI also expects that payments by Participants to
owners of beneficial interests in such Global Debenture 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 registered
in the names of nominees for such customers. However, such payments will be the
responsibility of such Participants.
Transfers between Participants in DTC are effected in accordance with DTC
rules and are settled in same-day funds. The laws of some states, however,
require that certain persons take physical delivery of securities in definitive
form.
DTC will take any action permitted to be taken by a Holder of Debentures
(including the presentation of Debentures for exchange as described below) only
at the direction of one or more Participants to whose account interests in the
Global Debentures are credited and only in respect of such portion of the
aggregate principal amount of the Debentures as to which such Participant or
Participants has or have given such direction. However, if there is an Event of
Default under the Debentures, DTC will exchange the Global Debentures for
Debentures in certificated form, which it will distribute to its Participants
and which will be legended.
If any Debenture becomes mutilated, defaced, destroyed, lost or stolen, ECI
will execute, and upon ECI's request the Trustee will authenticate and deliver,
a new Debenture, of like tenor and equal principal amount at maturity,
registered in the same manner, dated the date of its authentication in exchange
and substitution for such Debenture (upon surrender and cancellation thereof) or
in lieu of and substitution for such Debenture. If any Debenture is destroyed,
lost or stolen, the applicant for a substituted Debenture shall furnish to ECI
and the Trustee such security or indemnity as may be required by them to hold
each of them harmless. In every case of destruction, loss or theft of a
Debenture, the applicant also shall furnish to ECI satisfactory evidence of the
destruction, loss or theft of such Debenture and of the ownership thereof. Upon
the issuance of any substituted Debenture, ECI may require the payment by the
registered Holder thereof of a sum sufficient to cover fees and expenses
connected therewith.
DTC has advised ECI that DTC is (1) a limited purpose trust company
organized under the laws of the State of New York, (2) a member of the Federal
Reserve System, (3) a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and (4) a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants, thereby eliminating the need
for physical movement of securities certificates. The Participants include
securities brokers and dealers, banks (including the Trustee), trust companies,
clearing corporations and certain other organizations. Access to DTC's system is
also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly.
CONVERSION RIGHTS
Prior to the Merger, a Holder could convert the principal amount of a
Debenture into shares of the common stock of ECI at the conversion rate of
$27.09 principal amount of Debentures per share of common stock of ECI, subject
to adjustment. As a result of the Merger, a Holder may, at any time prior to
maturity, convert the principal amount of a Debenture (or any portion thereof
equal to $1,000 or an integral multiple of $1,000) into shares of SCI Common
Stock at the conversion rate of $38.126 principal amount of Debentures per share
of SCI Common Stock, subject to adjustment as described below (the "Conversion
Price"). The right to convert a Debenture called for redemption will terminate
at the close of business on the Business Day immediately preceding the
Redemption Date for such Debenture or such earlier date as the Holder presents
the Debenture for redemption (unless ECI and/or the Company shall default in
making the redemption payment when due, in which case the conversion right shall
terminate at the close of business on the date such default is cured and such
Debenture is redeemed). A Debenture for which a Holder has delivered a Change in
Control Purchase Notice exercising the option of such Holder
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<PAGE> 12
to require ECI and/or the Company to purchase such Debenture may be converted
only if such notice is withdrawn by a written notice of withdrawal delivered by
the Holder to the Paying Agent prior to the close of business on the Business
Day prior to the Change in Control Purchase Date in accordance with the
Indenture.
No payment or adjustment will be made for dividends or distributions with
respect to shares of SCI Common Stock issued upon conversion of a Debenture.
Except as otherwise provided in the Indenture, interest accrued shall not be
paid on Debentures converted. However, interest accrued through February 24,
2001 shall be paid on any Debentures called for redemption and surrendered for
conversion before the close of business on June 15, 2001. If any Holder
surrenders a Debenture for conversion between the record date for the payment of
an installment of interest and the related interest payment date, then,
notwithstanding such conversion, the interest payable on such interest payment
date will be paid on the related interest payment date to the Holder on such
record date. However, in such event, unless such Debenture has been called for
redemption, such Debenture, when surrendered for conversion, must be accompanied
by delivery by such Holder of a check or draft payable in an amount equal to the
interest payable on such interest payment date on the portion so converted. No
fractional shares will be issued upon conversion. A cash payment will be made
for any fractional interest based upon the current market price of the SCI
Common Stock.
The Conversion Price will be subject to adjustment upon the occurrence of
certain events, including:
- the issuance of shares of SCI Common Stock as a dividend or distribution
on the SCI Common Stock;
- the subdivision or combination of the outstanding SCI Common Stock;
- the issuance to all or substantially all holders of SCI Common Stock of
rights or warrants to subscribe for or purchase SCI Common Stock (or
securities convertible into SCI Common Stock) at a price per share less
than the then current market price per share, as defined;
- the distribution to all or substantially all holders of SCI Common Stock
of shares of capital stock of the Company (other than SCI Common Stock),
evidences of indebtedness or other non-cash assets (including securities
of any company other than the Company);
- the distribution to all or substantially all holders of SCI Common Stock
of rights or warrants to subscribe for securities of the Company (other
than those referred to in the third bullet above); and
- the distribution to all or substantially all holders of SCI Common Stock
of cash in an aggregate amount that (together with (1) any cash and the
fair market value of other consideration payable in respect of any tender
offer by the Company or a Subsidiary of the Company for SCI Common Stock
consummated within the preceding 12 months not triggering a Conversion
Price adjustment and (2) all other cash distributions to all or
substantially all holders of SCI Common Stock made within the preceding
12 months not triggering a Conversion Price adjustment) exceeds an amount
equal to 10% of the Company's market capitalization on the Business Day
immediately preceding the day on which the Company declares such
distribution.
In the event of a distribution pro rata to holders of SCI Common Stock of rights
to subscribe for additional shares of the Company's capital stock (other than
those referred to in the third bullet above), the Company may, instead of making
any adjustment in the Conversion Price, make proper provisions so that each
Holder who converts a Debenture (or any portion thereof) after the record date
for such distribution and prior to the expiration or redemption of such rights
shall be entitled to receive upon such conversion, in addition to the shares of
SCI Common Stock issuable upon conversion, an appropriate number of such rights.
No adjustment of the Conversion Price will be required to be made until the
cumulative adjustments require an increase or decrease of at least 1% in the
Conversion Price as last adjusted.
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<PAGE> 13
The term "all or substantially all" as used in the previous paragraph has
not been interpreted under New York law (which is the governing law of the
Indenture) to represent a specific quantitative test. As a consequence, in the
event the Holders of the Debentures were to assert that an adjustment to the
conversion privilege of the Debentures was required under the Indenture and the
Company were to contest such assertion, there could be no assurance as to how a
court would interpret the phrase under New York law. The interpretation of the
phrase under New York law may have the effect of preventing the Trustee or the
Holders of the Debentures from successfully asserting that the Conversion Price
is subject to adjustment or that the Debentures are convertible into other
shares of stock and other securities and property that the Holders would have
owned immediately after the transaction if the Holders had converted the
Debentures immediately before the effective date of the transaction.
Certain adjustments to the Conversion Price to reflect the Company's
issuance of certain rights, warrants, evidences of indebtedness, securities or
other property (including cash) to holders of the SCI Common Stock may result in
constructive distributions taxable as dividends to Holders of the Debentures.
Similarly, if instead of adjusting the Conversion Price upon a pro rata
distribution of rights to subscribe for additional shares of the Company's
capital stock, as described above, the Company elects at such time to alter the
consideration receivable by the Holders of the Debentures upon conversion to
include the rights such Holders would have been entitled to if conversion had
occurred prior to the record date for such distribution of rights, the
alteration may result in constructive distributions taxable as dividends to
Holders of the Debentures.
OPTIONAL REDEMPTION BY ECI
The Debentures may not be redeemed at the option of ECI on or prior to
February 26, 2001. Thereafter, the Debentures may be redeemed at the option of
ECI, in whole or in part, upon not less than 30 nor more than 60 days' notice by
mail.
The redemption prices (expressed as a percentage of principal amount) are
as follows for the 12-month period beginning on February 26 of the following
years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2001.............................................. 102.53%
2002.............................................. 101.88%
2003.............................................. 101.22%
2004.............................................. 100.56%
</TABLE>
in each case together with accrued interest up to but not including the
Redemption Date.
If less than all of the outstanding Debentures are to be redeemed, the
Trustee shall select the Debentures to be redeemed in principal amounts of
$1,000 or multiples thereof by lot, pro rata or by another method the Trustee
considers fair and appropriate. If a portion of a Holder's Debentures is
selected for partial redemption and such Holder converts a portion of such
Debentures, such converted portion shall be deemed to be of the portion selected
for redemption.
PURCHASE OF DEBENTURES AT THE OPTION OF HOLDERS UPON A CHANGE IN CONTROL OF ECI
Following the Merger, in the event of a Change in Control of ECI, each
Holder will have the option, subject to the terms and conditions of the
Indenture, to require ECI to purchase all or any part (provided that the
principal amount must be $1,000 or an integral multiple thereof) of the Holder's
Debentures as of the date that is 50 Business Days after the occurrence of such
Change in Control (the "Change in Control Purchase Date"). The purchase price
shall be equal to 100% of the principal amount thereof, plus accrued interest up
to but not including the Change in Control Purchase Date.
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<PAGE> 14
Within 20 Business Days after the occurrence of a Change in Control of ECI,
ECI shall mail to the Trustee and to each Holder and cause to be published a
written notice of the Change in Control, setting forth, among other things, the
terms and conditions of, and the procedures required for exercise of, the
Holder's right to require the purchase of such Holder's Debentures.
To exercise the purchase right upon a Change in Control of ECI, a Holder
must deliver written notice of such exercise to the Paying Agent at any time
prior to the close of business on the Business Day prior to the Change in
Control Purchase Date. The notice of exercise must specify the Debentures with
respect to which the purchase right is being exercised. The notice of exercise
may be withdrawn by the Holder by a written notice of withdrawal delivered to
the Paying Agent at any time prior to the close of business on the Business Day
prior to the Change in Control Purchase Date.
A Change in Control of ECI shall be deemed to have occurred if any of the
following occurs after January 19, 1999, the effective date of the Merger:
(1) the acquisition by any Person (including any syndicate or group
deemed to be a "person" under Section 13(d)(3) or 14(d)(2) of the Exchange
Act or any successor provision) of beneficial ownership, directly or
indirectly, through a purchase, merger, or other acquisition transaction or
series of transactions, of shares of capital stock of ECI entitling such
Person to exercise more than 50% of the total voting power of all shares of
capital stock of ECI entitling the holders thereof to vote generally in
elections of directors; or
(2) any consolidation of ECI with, or merger of ECI into, any other
Person, any merger of another Person into ECI, or any sale, lease or
exchange of all or substantially all of the property and assets of ECI
(other than a merger which (x) does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of capital stock
of ECI or (y) is effected primarily to change the jurisdiction of
incorporation of ECI and results in reclassification, conversion, or
exchange of outstanding shares of common stock of ECI solely into shares of
common stock of the surviving entity); or
(3) at any time during any consecutive two-year period, individuals
who at the beginning of such period constituted the Board of Directors of
ECI (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of ECI was
approved by a vote of at least two-thirds of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of ECI then
in office.
The above provisions with respect to change in control apply only upon a Change
in Control of ECI and not upon a change in control of the Company.
A "beneficial owner" shall be determined in accordance with Rule 13d-3
promulgated by the Commission under the Exchange Act, as in effect on the date
of execution of the Indenture, except that the Indenture requires that the
number of shares of capital stock of ECI entitling the holders thereof to vote
generally in the election of directors shall be deemed to include, in addition
to all outstanding shares of capital stock of ECI entitling the holders thereof
to vote generally in the election of directors and Unissued Shares deemed to be
held by the Person with respect to which the Change in Control determination is
being made, all Unissued Shares deemed to be held by all other persons. As
defined in the Indenture, "Unissued Shares" means shares of capital stock of ECI
not outstanding that are subject to options, warrants, rights to purchase, or
conversion privileges exercisable within 60 days of the date of determination of
a Change in Control and that, upon issuance, will entitle the holders thereof to
vote generally in the election of directors.
The term "all or substantially all" as used in clause (2) of the definition
of Change in Control above has not been interpreted under New York law (which is
the governing law of the Indenture) to represent a specific quantitative test.
As a consequence, in the event the Holders of the Debentures were to elect to
exercise their rights under the Indenture and ECI were to contest such election,
there could be no
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<PAGE> 15
assurance as to how a court would interpret the phrase under New York law. The
interpretation of the phrase under New York law may have the effect of
preventing the Trustee or the Holders of the Debentures from successfully
asserting that a Change in Control has occurred.
Subject to the limitation on mergers and consolidations discussed below,
ECI could, in the future, enter into certain transactions, including certain
recapitalizations of ECI and transfers of less than substantially all of the
property and assets of ECI, that would not constitute a Change in Control under
the Indenture, but that would increase the amount of secured indebtedness (or
other indebtedness) of ECI outstanding at such time or otherwise adversely
affect the Holders of the Debentures. There are no restrictions in the Indenture
on the creation of secured indebtedness (or other indebtedness) by ECI or its
subsidiaries, and, under certain circumstances, the incurrence of significant
amounts of additional indebtedness could have an adverse effect on ECI's ability
to service its indebtedness, including the Debentures.
If a Change in Control of ECI were to occur, there can be no assurance that
ECI would have sufficient funds to pay the Change in Control Purchase Price for
all Debentures tendered by the Holders thereof. The exercise by any Holder of
Debentures of the right to require ECI to repurchase Debentures as a result of
the occurrence of a Change in Control could create an event of default under
future Senior Secured Indebtedness of ECI ranking senior in right of payment
with the Debentures or unsecured senior indebtedness of ECI ranking equally in
right of payment with the Debentures, as a result of which any repurchase could,
absent a waiver, also be blocked by the subordination provisions of the
Debentures. See "-- Subordination of Debentures." Failure by ECI to repurchase
the Debentures when required will result in an Event of Default (as defined in
the Indenture) whether or not such repurchase is permitted by the subordination
provisions of the Indenture. Pursuant to the Supplemental Indenture, the Company
became a co-obligor with respect to the payment of principal (and premium, if
any) and interest on the Debentures, including with respect to any redemption
obligations of ECI.
Other than granting Holders the option to require ECI to purchase all or
part of their Debentures upon the occurrence of a Change in Control as described
in "-- Purchase of Debentures at the Option of Holders Upon a Change in Control
of ECI," the Indenture does not contain any covenants or other provisions
designed to afford Holders protection in the event of takeovers,
recapitalizations, highly leveraged transactions or similar restructurings
involving ECI.
The Merger was a Change in Control within the meaning of the Indenture. As
a result of the Merger, as provided in the Indenture, ECI has become obligated
to mail to the Trustee and each Holder and to publish a written notice of the
Change in Control on or before February 17, 1999. ECI will be required to
repurchase the Debentures from any Holder who exercises its purchase right on or
before March 31, 1999. Failure by ECI to repurchase the Debentures from any
Holder who exercises its purchase right in connection with the Merger will
result in an Event of Default under the Indenture.
SUBORDINATION OF DEBENTURES
To the extent set forth in the Indenture, the Debentures are subordinated
and subject in right of payment to the prior payment in full of all Senior
Secured Indebtedness of ECI, whether outstanding on the date of the Indenture or
thereafter created, assumed or guaranteed. Upon any payment or distribution of
assets of ECI in any dissolution, winding-up, liquidation or reorganization of
ECI (whether in an insolvency or bankruptcy proceeding or otherwise), all Senior
Secured Indebtedness must be paid in full (including the principal thereof,
interest thereon and fees and expenses relating thereto) before any payment is
made in respect of the Debentures.
In the event of a default in payment (whether at maturity or at a date
fixed for prepayment or by acceleration or otherwise) of principal or interest
on or other discount due in respect of Senior Secured Indebtedness, no payment
may be made by ECI in respect of the Debentures until payment in full of the
Senior Secured Indebtedness then due or cure, waiver or cessation of the
default. Upon a default with respect to any Senior Secured Indebtedness (other
than a default in the payment of principal of or interest on Senior Secured
Indebtedness) permitting a holder thereof to accelerate its maturity, and upon
written notice of such default to the Trustee and ECI by any holder of such
Senior Secured Indebtedness or its
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<PAGE> 16
representative, then, unless and until such default has been cured, waived in
writing or has ceased to exist, no payment may be made by ECI in respect of the
Debentures.
Nothing in the above-described subordination provisions will prevent the
making of any payment in respect of the Debentures for a period of more than 180
days after the date such written notice of default is given unless the maturity
of the Senior Secured Indebtedness has been accelerated, in which case no
payment on the Debentures may be made until such acceleration has been waived or
such Senior Secured Indebtedness has been paid in full. No such subordination
will prevent the occurrence of any Event of Default with respect to the
Debentures. However, as a result of these subordination provisions, in the event
of insolvency, Holders may recover less ratably than other creditors of ECI.
In the event that, notwithstanding the foregoing, the Trustee or any Holder
of the Debentures receives any payment or distribution of assets of ECI of any
kind in contravention of any of the subordination provisions of the Indenture
(whether in cash, property or securities) in respect of the Debentures before
all Senior Secured Indebtedness is paid in full, then such payment or
distribution will be held by the recipient in trust for the benefit of holders
of Senior Secured Indebtedness or their representatives to the extent necessary
to make payment in full of all Senior Secured Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Secured Indebtedness.
By reason of the subordination provisions described above, in the event of
ECI's bankruptcy, dissolution or reorganization, holders of Senior Secured
Indebtedness may receive more ratably, and Holders of the Debentures may receive
less ratably, than other creditors of ECI. Such subordination will not prevent
the occurrence of any Event of Default under the Indenture.
The Debentures are general unsecured obligations of the Company as a
co-obligor with respect to payment obligations on the Debentures following a
payment failure by ECI. The Debentures (1) are contractually subordinate in
right of payment to all of the Company's existing and future secured
indebtedness, (2) rank equally in right of payment with all of the Company's
existing and future Senior Indebtedness that is unsecured and (3) rank senior in
right of payment to all of the Company's existing and future subordinated
indebtedness.
The Indenture does not limit the amount of future or additional
indebtedness, including secured indebtedness, that the Company or ECI can
create, incur, assume or guarantee, nor will the Indenture limit the amount of
indebtedness that any other subsidiaries of the Company can incur. The Company
currently has no secured indebtedness which would rank senior in right of
payment to the Debentures. ECI currently has no Senior Secured Indebtedness
which would rank senior in right to payment to the Debentures.
EVENTS OF DEFAULT; NOTICE AND WAIVER
If an Event of Default (other than an Event of Default resulting from
bankruptcy, insolvency or reorganization of ECI) occurs and is continuing, the
Trustee may, by notice to ECI, declare all unpaid principal of and accrued
interest to the date of acceleration on the Debentures then outstanding to be
due and payable immediately. Also, in such event, the Holders of at least 25% in
principal amount of the Debentures then outstanding may notify ECI and the
Trustee with respect to such event, and upon the request of such Holders the
Trustee shall declare all unpaid principal of and accrued interest to the date
of acceleration on the Debentures then outstanding to be due and payable
immediately. In the event ECI defaults solely in its payment obligations on the
Debentures, the Trustee may make written demand upon the Company for such
payment obligation. Upon any default by the Company in such payment obligations,
any remedy which the Trustee or any Holder is authorized to bring against ECI
under the Indenture may be brought, under the same circumstances and conditions
(including notice requirements), against the Company. If an Event of Default
resulting from certain events of bankruptcy, insolvency or reorganization of ECI
shall occur, all unpaid principal of and accrued interest on the Debentures then
outstanding shall become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders.
The Indenture provides that the Holders of a majority in principal amount
of the Debentures may on behalf of all Holders waive any existing default or
Event of Default and its consequences except (1) a
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<PAGE> 17
default in the payment of principal of or accrued interest on the Debentures or
(2) any default in respect of any provision of the Indenture that cannot be
modified or amended without the consent of the Holder of each Debenture
affected.
The following are Events of Default under the Indenture:
- failure of ECI or the Company, upon notice from the Trustee, to pay
interest for 30 days after the same is due or failure to pay principal
when due;
- failure of ECI to comply with any of its other agreements contained in
the Debentures or the Indenture for 60 days after receipt of notice of
such failure;
- default under any bond, debenture, note or other evidence of indebtedness
for money borrowed of ECI having an aggregate outstanding principal
amount in excess of $25 million, which default shall have resulted in
such indebtedness being accelerated, without such indebtedness being
discharged, or such acceleration having been rescinded or annulled,
within ten days from the date of such acceleration; and
- certain events of bankruptcy or insolvency, including without limitation
appointment of a Custodian of ECI's property.
The Trustee shall, within 90 days after the occurrence of any default known
to it, give to the Holders notice of such default. However, except in the case
of a default in the payment of principal of or interest on any of the
Debentures, the Trustee may withhold such notice if it in good faith determines
that the withholding of such notice is in the interests of the Holders.
No Holder may pursue any remedy under the Indenture or the Debentures
against ECI or the Company (except actions for payment of overdue principal or
interest or for the conversion of the Debentures), unless:
- the Holder gives to the Trustee written notice of a continuing Event of
Default;
- the Holders of at least 25% in principal amount of the outstanding
Debentures make a written request to the Trustee to pursue the remedy;
- such Holder or Holders offer satisfactory indemnity to the Trustee
against any loss, liability or expense;
- the Trustee does not comply with the request within 60 days after receipt
of the request and the offer of indemnity; and
- the Trustee shall not have received during such 60-day period a contrary
direction from the Holders of at least a majority in principal amount of
the outstanding Debentures.
ECI must deliver an Officer's Certificate to the Trustee within 90 days
after the end of each fiscal year of ECI as to the signer's knowledge of ECI's
compliance with all conditions and covenants on its part contained in the
Indenture, and stating whether or not the signer knows of any default or Event
of Default. If such signer knows of such a default or Event of Default, the
Officer's Certificate shall describe the default or Event of Default and the
efforts to remedy the same.
AMENDMENT
ECI and the Trustee may amend or supplement the Indenture or the Debentures
without notice to any Holder but with the written consent of the Holders of at
least a majority in principal amount of the outstanding Debentures. The Holders
of a majority in principal amount of the Debentures then outstanding may waive
compliance in a particular instance by ECI with any provision of the Indenture
or the
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Debentures without notice to any Holder. However, without the consent of the
Holder of each Debenture affected thereby, an amendment, supplement or waiver
may not:
- reduce the principal amount of Debentures whose Holders must consent to
an amendment, supplement or waiver;
- reduce the rate of or change the time for payment of interest on any
Debenture;
- reduce the principal of or premium on or change the fixed maturity of any
Debenture or alter the redemption provisions with respect thereto in a
manner adverse to the Holder thereof;
- alter the conversion provisions with respect to any Debenture in a manner
adverse to the Holder thereof;
- waive a default in the payment of the principal of or premium or interest
on any Debenture;
- reduce the percentage of Debentures necessary to waive defaults or Events
of Default or to amend or supplement the Indenture or the Debentures;
- modify the subordination provisions of the Indenture in a manner adverse
to the Holders; or
- make any Debenture payable in money other than that stated in the
Debenture.
ECI and the Trustee may amend or supplement the Indenture or the Debentures
without notice to or consent of any Holder in certain events:
- to comply with the certain conversion, adjustment, liquidation and merger
provisions described in the Indenture;
- to provide for uncertificated Debentures in addition to or in place of
certificated Debentures;
- to cure any ambiguity, defect or inconsistency, or to make any other
change that does not adversely affect the rights of the Holders;
- to comply with the provisions of the Trust Indenture Act; or
- to appoint a successor Trustee.
REGISTRATION RIGHTS
ECI entered into a Registration Rights Agreement dated February 25, 1998
with the Initial Purchasers (the "Registration Rights Agreement"), pursuant to
which ECI filed Registration Statement No. 333-50861 to register resales of the
Debentures and the shares of common stock of ECI into which the Debentures were
convertible prior to the Merger. ECI filed the registration statement on April
23, 1998 and the registration statement was declared effective on May 5, 1998.
As a result of the Merger, the Company and ECI have filed a registration
statement (of which this prospectus is a part) to register resales of the
Debentures and the shares of SCI Common Stock into which the Debentures are
convertible. The Company and ECI will use their reasonable efforts to keep such
registration statement effective until the earliest of:
- two years after the latest date of original issuance of the Debentures;
- the date when all securities registrable thereunder (the "Registrable
Securities") shall have been disposed of; and
- the date on which the Debentures or the underlying SCI Common Stock may
be sold by non-affiliates of the Company pursuant to Rule 144(k) under
the Securities Act (the "Effectiveness Period").
The Company will provide to each holder of Registrable Securities copies of
the prospectus which is a part of the registration statement and take certain
other actions as are required to permit unrestricted
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resales of the Registrable Securities. A holder of Registrable Securities that
sells such Registrable Securities pursuant to the registration statement (1)
will be required to be named as a selling securityholder in the related
prospectus and to deliver a prospectus to purchasers, (2) will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and (3) will be bound by the provisions of the Registration
Rights Agreement, including certain indemnification obligations. At least five
business days prior to any intended resale of Registrable Securities, the holder
thereof must notify ECI of such intention and provide ECI with such information
with respect to such holder and the intended distribution as may be reasonably
required to amend the registration statement or supplement the prospectus.
The Company and ECI will be permitted to suspend the use of the prospectus
that is a part of the registration statement for a period not to exceed an
aggregate of 60 days in any 12-month period, under certain circumstances
relating to pending corporate developments, public filings with the Commission
and similar events. If the prospectus is unavailable for an aggregate period in
excess of 60 days in any 12-month period (in each case, a "Registration Event"),
ECI has agreed to pay liquidated damages to each Holder of the Debentures and
each holder of the SCI Common Stock issued upon conversion of the Debentures.
The liquidated damages will accrue upon the occurrence of any Registration Event
and until such time as there are no Registration Events which have occurred and
are continuing at a rate equal to one-half of one percent (0.5%) per annum of
the principal amount of the Debentures and will be payable on the interest
payment dates for the Debentures.
This summary of certain provisions of the Registration Rights Agreement is
subject to, and qualified in its entirety by reference to, all the provisions of
the Registration Rights Agreement, a copy of the form of which is available upon
request.
DEFEASANCE
The Indenture provides that (1) ECI will be discharged from all obligations
in respect of the outstanding Debentures (except for certain obligations to
register the transfer or exchange of Debentures, to replace stolen, lost or
mutilated Debentures, to provide for conversion of Debentures, to maintain
paying agents and hold money for repayment in trust, and to repurchase
Debentures in the event of a Change in Control of ECI) or (2) ECI may omit to
comply with certain restrictive covenants (not including the obligation to
provide for conversion of Debentures or repurchase Debentures in the event of a
Change in Control of ECI), and that such omission will not be deemed to be an
Event of Default, in either case (1) or (2) upon irrevocable deposit with the
Trustee, in trust, of money and/or U.S. Government Obligations that will provide
money in an amount sufficient in the written opinion of a nationally recognized
firm of independent public accountants to pay the principal of, premium, if any,
and each installment of interest on the outstanding Debentures. With respect to
clause (2), the obligations under the Indenture (other than with respect to such
covenants) and the Events of Default (other than the Event of Default relating
to such covenants) will remain in full force and effect.
Such trust may only be established if, among other things:
- in the case of clause (1), ECI has delivered to the Trustee an Opinion of
Counsel to the effect that ECI has received from, or there has been
published by, the Internal Revenue Service a ruling or there has been a
change in law, which in the opinion of counsel to ECI provides that
holders of the Debentures will not recognize gain or loss for federal
income tax purposes as a result of such deposit, defeasance and discharge
and will be subject to federal income tax on the same amount, in the same
manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred;
- in the case of clause (2), ECI has delivered to the Trustee an Opinion of
Counsel to the effect that the holders of the Debentures will not
recognize gain or loss for federal income tax purposes as a result of
such deposit and defeasance and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred;
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- no Event of Default (or event that with the passing of time or the giving
of notice, or both, would constitute an Event of Default) shall have
occurred or be continuing;
- ECI has delivered to the Trustee an Opinion of Counsel to the effect that
such deposit shall not cause the Trustee or the trust so created to be
subject to the Investment Company Act of 1940, as amended; and
- certain other customary conditions precedent are satisfied.
MERGERS AND CONSOLIDATIONS
Subject to the right of the Holders to require ECI to purchase the
Debentures in the event of a Change in Control of ECI, ECI may consolidate or
merge with or into any other corporation, and ECI may transfer all or
substantially all its property and assets to any other corporation, provided
that (1) either ECI is the resulting or surviving corporation, or the successor
corporation is a domestic corporation and the successor expressly assumes, by
supplemental indenture executed and delivered to the Trustee, payment of the
principal of and interest on the Debentures and performance and observance of
every covenant of the Indenture, and (2) immediately before and immediately
after giving effect to such transaction, no default or Event of Default shall
have occurred and be continuing. Thereafter, all obligations of ECI under the
Indenture and the Debentures will terminate.
GOVERNING LAW
The Indenture, the Debentures and the Registration Rights Agreement are
governed by, and will be construed and enforced in accordance with, the laws of
the State of New York.
CONCERNING THE TRUSTEE
Bankers Trust Company is the Trustee under the Indenture.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of ECI, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The Trustee is permitted to engage in other
transactions. However, if the Trustee acquires any conflicting interest and
there exists a default with respect to the Debentures, the Trustee must
eliminate such conflict or resign.
The Holders of a majority in principal amount of all outstanding Debentures
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy or power available to the Trustee, provided that such
direction (1) does not conflict with any law or the Indenture, (2) is not unduly
prejudicial to the rights of another Holder or the Trustee and (3) does not
involve the Trustee in personal liability.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain United States federal
income tax considerations to holders of the Debentures. This discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings, and judicial decisions in
effect as of the date of this prospectus, all of which are subject to change
(possibly with retroactive effect) or different interpretations.
This discussion does not deal with all aspects of United States federal
income taxation that may be important to holders of the Debentures or shares of
SCI Common Stock and does not deal with tax consequences arising under the laws
of any foreign, state or local jurisdiction. This discussion is for general
information only, and does not purport to address all tax consequences that may
be important to particular purchasers in light of their personal circumstances,
or to certain types of purchasers (such as certain financial institutions,
insurance companies, tax-exempt entities, dealers in securities or persons who
hold the Debentures or SCI Common Stock in connection with a straddle) that may
be subject to special rules. This discussion assumes that each holder holds the
Debentures and the shares of SCI Common Stock received upon conversion thereof
as capital assets, and that the Debentures are properly characterized as debt
instruments for federal income tax purposes.
For the purpose of this discussion, a "Non-U.S. Holder" refers to any
holder who is not a United States person. The term "United States person" means
(1) a citizen or resident of the United States, (2) a corporation or partnership
created or organized in the United States or any state thereof, (3) an estate
the income of which is includible in income for United States federal income tax
purposes regardless of its source, or (4) a trust subject to primary supervision
by a court in the United States and control by one or more United States
fiduciaries.
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THEIR
OWNERSHIP AND DISPOSITION OF THE DEBENTURES, INCLUDING CONVERSION OF THE
DEBENTURES, AND THE EFFECT THAT THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON SUCH
TAX CONSEQUENCES.
OWNERSHIP OF DEBENTURES
Interest on Debentures. Interest on the Debentures will be taxable to a
holder as ordinary interest income in accordance with the holder's method of tax
accounting at the time that such interest is accrued or received. The Debentures
are not being issued with original issue discount ("OID") within the meaning of
the Code.
Adjustments to Conversion Price. Adjustments to the conversion price as
provided in the Indenture in most cases will not constitute a taxable event for
a holder. However, certain corporate transactions, such as distributions of
assets to holders of SCI Common Stock, may cause a deemed taxable distribution
to the holders of the Debentures when the conversion price is adjusted to
reflect such a transaction.
Sale or Exchange of Debentures or Shares of SCI Common Stock. In general, a
holder of the Debentures will recognize gain or loss upon the sale, redemption,
retirement or other disposition of the Debentures measured by the difference
between the amount realized (except to the extent attributable to the payment of
accrued interest) and the holder's adjusted tax basis in the Debentures. A
holder's tax basis in the Debentures generally will equal the cost of the
Debentures to the holder, increased by the amount of any market discount
previously taken into income by the holder or decreased by any bond premium
amortized by the holder with respect to the Debentures. (For the basis and
holding period of shares of SCI Common Stock, see "-- Conversion of
Debentures.") In general, each holder of SCI Common Stock into which the
Debentures have been converted will recognize gain or loss upon the sale,
exchange or other disposition of the SCI Common Stock under rules similar to
those applicable to the Debentures. Subject to the market discount rules
discussed below, the gain or loss on the disposition of the Debentures or shares
of SCI Common Stock generally will be capital gain or loss.
Conversions of Debentures. A holder of the Debentures will not recognize
gain or loss on the conversion of the Debentures into shares of SCI Common
Stock, except upon the receipt of cash in lieu of
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a fractional share. The holder's tax basis in the shares of SCI Common Stock
received upon conversion of the Debentures will equal the holder's aggregate
basis in the Debentures exchanged therefor (less any portion thereof allocable
to a fractional share). The holding period of the shares of SCI Common Stock
received by the holder upon conversion of the Debentures will include the period
during which the holder held the Debentures prior to the conversion. Cash
received in lieu of a fractional share of SCI Common Stock should be treated as
a payment in exchange for such fractional share. Gain or loss recognized on the
receipt of cash paid in lieu of a fractional share generally will equal the
difference between the amount of cash received and the amount of tax basis
allocable to the fractional share.
Market Discount. The resale of the Debentures may be affected by the
"market discount" provisions of the Code. Market discount on a Debenture will
generally equal the amount, if any, by which the principal amount of the
Debenture exceeds the holder's acquisition price. Subject to a de minimis
exception, these provisions generally require a holder of a Debenture acquired
at a market discount to treat as ordinary income any gain recognized on the
disposition of such Debenture to the extent of the "accrued market discount" at
the time of disposition. If a Debenture with accrued market discount is
converted into SCI Common Stock pursuant to the conversion feature, the amount
of such accrued market discount generally will be taxable as ordinary income
upon disposition of the SCI Common Stock. Market discount on a Debenture will be
treated as accruing on a straight-line basis over the term of such Debenture or,
at the election of the holder, under a constant-yield method. A holder of a
Debenture acquired at a market discount may be required to defer the deduction
of a portion of the interest on any indebtedness incurred or maintained to
purchase or carry the Debenture until the Debenture is disposed of in a taxable
transaction, unless the holder elects to include market discount in income as it
accrues.
Amortizable Premium. A purchaser of a Debenture at a premium over its
stated principal amount, plus accrued interest, generally may elect to amortize
such premium ("Section 171 premium") from the purchase date to the Debenture's
maturity date under a constant-yield method that reflects semiannual compounding
based on the Debenture's payment period. Amortizable premium, however, will not
include any premium attributable to a Debenture's conversion feature. The
premium attributable to the conversion feature is the excess, if any, of the
Debenture's purchase price over what the Debenture's fair market value would be
if there were no conversion feature. Amortized Section 171 premium is treated as
an offset to interest income on a Debenture and not as a separate deduction.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO NON-U.S. HOLDERS
Interest on Debentures. Generally, interest paid on the Debentures to a
Non-U.S. Holder will not be subject to United States federal income tax if:
- such interest is not effectively connected with the conduct of a trade or
business within the United States by such Non-U.S. Holder;
- the Non-U.S. Holder does not actually or constructively own 10% or more
of the total voting power of all classes of stock of the Company entitled
to vote and is not a "controlled foreign corporation" with respect to
which the Company is a "related person" within the meaning of the Code;
and
- the beneficial owner, under penalty of perjury, certifies to the payor
that the owner is not a United States person and provides the owner's
name and address. If certain requirements are satisfied, the
certification described above may be provided by a securities clearing
organization, a bank, or other financial institution that holds
customers' securities in the ordinary course of its trade or business.
For this purpose, the holder of the Debentures would be deemed to own
constructively the SCI Common Stock into which it could be converted.
A holder that is not exempt from tax under these rules generally will be subject
to United States federal income tax withholding at a rate of 30% unless (1) the
interest is effectively connected with the conduct of a United States trade or
business, in which case the interest will be subject to the United States
federal income tax on net income that applies to the United States persons
generally, or (2) an applicable income tax treaty provides for a lower rate of,
or exemption from, withholding tax.
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Sale or Exchange of Debentures or Shares of SCI Common Stock. A Non-U.S.
Holder generally will not be subject to United States federal income tax on gain
recognized upon the sale or other disposition of Debentures or shares of SCI
Common Stock unless the gain is effectively connected with the conduct of a
trade or business within the United States by the Non-U.S. Holder or, in the
case of a Non-U.S. Holder who is a nonresident alien individual and holds the
SCI Common Stock as a capital asset, such holder is present in the United States
for 183 or more days in the taxable year. However, if ECI were to become a
"United States real property holding corporation," a Non-U.S. Holder may be
subject to federal income tax with respect to gain realized on the disposition
of Debentures or shares of SCI Common Stock. In that case, any withholding tax
withheld pursuant to the rules applicable to dispositions of a "United States
real property interest" will be creditable against such Non-U.S. Holder's United
States federal income tax liability and may entitle such Non-U.S. Holder to a
refund upon furnishing required information to the IRS.
Conversion of Debentures. A Non-U.S. Holder generally will not be subject
to United States federal income tax on the conversion of a Debenture into shares
of SCI Common Stock. To the extent a Non-U.S. Holder receives cash in lieu of a
fractional share on conversion, such cash may give rise to gain that would be
subject to the rules described above with respect to the sale or exchange of a
Debenture or SCI Common Stock.
Dividends on Shares of SCI Common Stock. Generally, any distribution on
shares of SCI Common Stock to a Non-U.S. Holder will be subject to United States
federal income tax withholding at a rate of 30% unless (1) the dividend is
effectively connected with the conduct of a trade or business within the United
States by the Non-U.S. Holder, in which case the dividend will be subject to the
United States federal income tax on net income that applies to United States
persons generally (and, with respect to corporate holders under certain
circumstances, the branch profits tax), or (2) an applicable income tax treaty
provides for a lower rate of, or exemption from, withholding tax. A Non-U.S.
Holder may be required to satisfy certain certification requirements in order to
claim a reduction of or exemption from withholding under the foregoing rules.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. Holders. Information reporting and backup withholding may apply to
payments of principal, interest or dividends on or the proceeds of the sale or
other disposition of the Debentures or shares of SCI Common Stock with respect
to certain noncorporate U.S. Holders. Such U.S. Holders generally will be
subject to backup withholding at a rate of 31% unless, among other conditions,
the U.S. Holder supplies a taxpayer identification number, and certain other
information, certified under penalties of perjury, to the payor or otherwise
establishes an exemption from backup withholding. Any amount withheld under
backup withholding is allowable as a credit against the U.S. Holder's federal
income tax.
Non-U.S. Holders. Generally, information reporting and backup withholding
of United States federal income tax at a rate of 31% may apply to payments of
principal, interest and dividends to Non-U.S. Holders if the payee fails to
certify that the holder is a Non-U.S. person. The 31% backup withholding tax
will not apply to interest or dividends subject to the 30% withholding tax
discussed above.
The payment of the proceeds of the disposition of the Debentures or shares
of SCI Common Stock to or through the United States office of a United States or
foreign broker will be subject to information reporting and backup withholding
unless the owner provides a required certification or otherwise establishes an
exemption. The proceeds of the disposition by a Non-U.S. Holder of the
Debentures or SCI Common Stock to or through a foreign office of a broker
generally will not be subject to backup withholding. However, if the broker is a
U.S. person, a controlled foreign corporation for United States tax purposes, or
a foreign person 50% or more of whose gross income from all sources for certain
periods is from activities that are effectively connected with a United States
trade or business, information reporting generally will apply unless the broker
has documentary evidence in its files of the Non-U.S. Holder's foreign status
and has no actual knowledge to the contrary.
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NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding and
information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations generally will be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
DESCRIPTION OF CAPITAL STOCK OF SCI
GENERAL
As of September 30, 1998, the Company had authorized capital stock
consisting of 500,000,000 shares of SCI Common Stock and 1,000,000 shares of
preferred stock, $1.00 par value per share (the "Preferred Stock"). As of
September 30, 1998, the Company had outstanding 257,820,737 shares of SCI Common
Stock, and 24,402,060 shares were reserved for future issuance. No shares of
Preferred Stock were outstanding on such date.
The following description of SCI 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").
SCI COMMON STOCK
Subject to the prior rights of holders of shares of Preferred Stock, the
holders of shares of SCI 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 SCI 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, SCI Common Stock; except that under the terms of credit
agreements with certain banks the Company is required to maintain a net worth
(as defined) in excess of $1.1 billion. This net worth requirement could from
time to time restrict the payment of dividends on SCI Common Stock. At September
30, 1998, the Company's net worth (as defined) was $3.004 billion.
The transfer agent and registrar for the SCI 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 AGREEMENT
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 SCI
Common Stock to the shareholders of record on that date. Each Right entitles the
registered holder to purchase from the Company one one-thousandth of a share of
the 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 SCI
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 SCI Common Stock (the earlier of such
dates being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the SCI Common Stock certificates outstanding as of the Record
Date, by such SCI Common Stock certificate with a copy of a summary of the
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 SCI Common Stock. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new SCI Common Stock certificates issued after the
Record Date upon transfer or new issuance of SCI 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 SCI Common Stock outstanding as of the Record
Date, even without such notation or a copy of a summary of the Rights being
attached thereto, will also constitute the transfer of the Rights associated
with the SCI 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 SCI
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 SCI Common Stock or a stock
dividend on the SCI Common Stock payable in SCI Common Stock or subdivisions,
consolidations or combinations of the SCI 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 SCI
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 SCI Common Stock. In the event of any merger,
consolidation or other transaction in which SCI Common Stock is exchanged, each
Series D Preferred Share will be entitled to receive 1,000 times the amount
received per share of SCI Common Stock. These rights are protected by customary
antidilution provisions. Each Series D Preferred Share will have one vote,
voting together with the SCI 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 SCI 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 SCI 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 SCI
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 SCI Common Stock (or
of a number of shares of preferred stock, or fraction thereof, having equivalent
value to one share of SCI 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
25
<PAGE> 27
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 SCI
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 SCI 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, the Company has the authority to issue
up to 1,000,000 shares of Preferred Stock. The Board of Directors of the Company
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 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 Preferred
Stock) can be paid on SCI Common Stock and before any other distribution on or
redemption of any SCI 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"), among other
things, amend or repeal any provision of, or add any provision to, the Articles
of Incorporation or Bylaws if such action would alter or change the preferences,
rights, privileges or powers of, or the restrictions provided for the benefit
of, the Preferred Stock. Except for matters on which the Preferred Stock is
entitled to vote as a class, shares of outstanding Preferred Stock vote together
with SCI 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 the 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 SCI Common Stock and restriction on the rights of such
shareholders to receive dividends. The Board of Directors has designated and
26
<PAGE> 28
reserved for issuance 500,000 shares of Preferred Stock as Series D Preferred
Shares, which may be issued upon the exercise of Rights that are associated with
SCI Common Stock. See "-- Shareholder Rights Agreement."
SELLING SECURITYHOLDERS
The following table sets forth information with respect to the Selling
Securityholders as of February 4, 1999 and the respective principal amounts of
the Debentures beneficially owned by each Selling Securityholder that may be
offered pursuant to this prospectus. Such information has been obtained from the
Selling Securityholders. None of the Selling Securityholders has, or within the
past three years has had, any position, office or other material relationship
with the Company or any of its predecessors or affiliates, except as noted
below.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
PRINCIPAL AMOUNT SCI COMMON STOCK
OF DEBENTURES BENEFICIALLY OWNED
BENEFICIALLY OWNED AND OFFERED
SELLING SECURITYHOLDER AND OFFERED HEREBY(4) HEREBY(1)(2)(4)
---------------------- --------------------- -------------------
<S> <C> <C>
OCM Convertible Trust................................... $ 1,450,000 38,031
Delta Air Lines Master Trust............................ 800,000 20,983
State Employees Retirement Plan of the State of
Delaware.............................................. 350,000 9,180
State of Connecticut Combined Investment Funds.......... 1,250,000 32,786
Partner Reinsurance Company Ltd. ....................... 250,000 6,557
Chrysler Corporation Master Retirement Trust............ 1,000,000 26,228
Combined Insurance Company of America................... 500,000 13,114
Ratheon Company Master Pension Trust.................... 500,000 13,114
Vanguard Convertible Securities Fund, Inc. ............. 900,000 23,605
Northwestern Mutual Life Insurance Company(3)........... 7,000,000 183,601
High Bridge Capital Corporation......................... 7,000,000 183,601
Phoenix Convertible Fund................................ 2,500,000 65,572
AIM Balanced Fund....................................... 2,500,000 65,572
AIM VI Growth & Income.................................. 2,000,000 52,457
AIM Charter Fund........................................ 10,000,000 262,288
Silverton International Fund Limited.................... 1,875,000 49,179
Hatchbeam & Co. ........................................ 250,000 6,557
General Motors Employees Domestic Group Pension Trust... 5,523,000 144,861
General Motors Foundation............................... 203,000 5,324
Motor Insurance Corporation............................. 1,274,000 33,415
CFW-C, L.P. ............................................ 7,500,000 288,517
Merrill Lynch, Pierce, Fenner & Smith Incorporated...... 4,320,000 113,308
HSBC Securities Inc. ................................... 1,350,000 35,408
Paloma Securities L.L.C. ............................... 2,275,000 59,670
Mainstay Convertible Fund............................... 5,500,000 144,258
Chase Manhattan N.A., Trustee for IBM Retirement Fund... 3,825,000 100,325
Bankers Trust, Trustee for Chrysler Corporation Employee
#1 Pension Plan dated 4/1/89.......................... 2,310,000 60,588
State Street Bank, Custodian for GE Pension Trust....... 1,200,000 31,474
Franklin & Marshall College............................. 165,000 4,327
Deeprock & Co. ......................................... 1,500,000 39,343
Lehman Brothers International (Europe).................. 20,500,000 537,690
McMahon Securities Company, L.P. ....................... 100,000 2,622
Argent Classic Convertible Arbitrage Fund L.P. ......... 4,500,000 118,029
J. P. Morgan & Co., Inc. ............................... 6,000,000 157,372
TQA Vantage Fund, Ltd. ................................. 2,300,000 60,326
</TABLE>
27
<PAGE> 29
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
PRINCIPAL AMOUNT SCI COMMON STOCK
OF DEBENTURES BENEFICIALLY OWNED
BENEFICIALLY OWNED AND OFFERED
SELLING SECURITYHOLDER AND OFFERED HEREBY(4) HEREBY(1)(2)(4)
---------------------- --------------------- -------------------
<S> <C> <C>
Laterman Strategies 90's L.L.C. ........................ $ 400,000 10,491
Laterman & Co. ......................................... 250,000 6,557
Deutsche Bank A.G. ..................................... 1,200,000 31,474
Bankers Trust International............................. 3,000,000 78,686
California Public Retirement System..................... 4,250,000 111,472
Dean Witter Convertible Securities Trust................ 3,000,000 78,686
Tribeca Investments, L.L.C. ............................ 4,000,000 104,915
Offshore Strategies Ltd. ............................... 850,000 22,294
R2 Investments L.D.C. .................................. 1,200,000 31,474
NationsBanc Montgomery Securities LLC................... 5,000,000 131,144
Chrysler Insurance Company -- Total Return.............. 30,000 786
Credit Suisse First Boston Corporation.................. 1,000,000 26,228
Mainstay VP Convertible Portfolio....................... 1,000,000 26,228
The Class IC Company, Ltd. ............................. 500,000 13,114
Q Investments, L.P. .................................... 1,100,000 28,851
Northern Life Insurance Co. ............................ 3,000,000 78,686
PaineWebber Incorporated................................ 1,000,000 26,228
Forest Alternative Strategies Fund Series A5............ 930,000 24,392
Forest Alternative Strategies Fund Series A5I........... 60,000 1,573
Forest Global Convertible Fund Series A5................ 980,000 25,704
LLT Limited............................................. 30,000 786
Teachers Insurance and Annuity Association of America... 3,000,000 78,686
Associated Physicians Insurance Company................. 30,000 786
Premera Blue Cross...................................... 700,000 18,360
Service Life and Casualty Insurance Company............. 50,000 1,311
Service Lloyds Insurance Company........................ 50,000 1,311
MSC Life................................................ 30,000 786
Catholic Mutual Relief Society of America............... 200,000 5,245
Chrysler Insurance Company.............................. 800,000 20,983
Catholic Mutual Relief Society Retirement Plan and
Trust................................................. 100,000 2,622
Catholic Relief Insurance Company of America............ 200,000 5,245
Pioneer Insurance Company............................... 50,000 1,311
Medico Life Insurance Company........................... 200,000 5,245
Middle Cities Risk Management Trust..................... 100,000 2,622
Wisconsin Mutual Insurance Company...................... 100,000 2,622
Lincoln Mutual Life Insurance Company................... 40,000 1,049
Lebanon Mutual Insurance Company........................ 50,000 1,311
Guaranty Income Life Insurance Company.................. 200,000 5,245
Millers Casualty Insurance Company of Texas............. 150,000 3,934
Western Home Insurance Company.......................... 100,000 2,622
United Teacher Associates Insurance Company............. 200,000 5,245
Midwest Security Life................................... 100,000 2,622
Lone Star Life Insurance Company........................ 400,000 10,491
Grain Dealers Mutual Insurance.......................... 100,000 2,622
Frontier Insurance Company.............................. 500,000 13,114
Guarantee Trust Life Insurance Company.................. 500,000 13,114
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
PRINCIPAL AMOUNT SCI COMMON STOCK
OF DEBENTURES BENEFICIALLY OWNED
BENEFICIALLY OWNED AND OFFERED
SELLING SECURITYHOLDER AND OFFERED HEREBY(4) HEREBY(1)(2)(4)
---------------------- --------------------- -------------------
<S> <C> <C>
Physicians Mutual Insurance Company..................... $ 200,000 5,245
Reassurance Company of Hannover......................... 200,000 5,245
Chicago Mutual Insurance Company........................ 30,000 786
State National Insurance Company........................ 70,000 1,836
Washington International Insurance Company.............. 200,000 5,245
World Insurance Company................................. 200,000 5,245
Secura Insurance, a Mutual Company...................... 200,000 5,245
Police & Fireman's Insurance Company.................... 60,000 1,573
NCMIC................................................... 150,000 3,934
Mid-America Life Insurance Company...................... 50,000 1,311
Integrity Mutual Insurance Company...................... 150,000 3,934
Illinois Founders Insurance Company..................... 50,000 1,311
Holy Family Society..................................... 50,000 1,311
American Public Entity Excess Pool...................... 50,000 1,311
Baltimore Life Insurance Company........................ 150,000 3,934
Condor Insurance Company................................ 80,000 2,098
Cumberland Insurance Company............................ 30,000 786
First Mercury Insurance Company......................... 300,000 7,868
First Patriot Insurance Company......................... 40,000 1,049
Medmarc Insurance Company............................... 200,000 5,245
Old Guard Fire Insurance Company........................ 100,000 2,622
Old Guard Insurance Company............................. 200,000 5,245
Phico Insurance Company................................. 200,000 5,245
Westward Life Insurance Company......................... 80,000 2,098
Fort Dearborn Life Insurance Company.................... 150,000 3,934
Goodville Mutual Casualty Company....................... 30,000 786
Kanawha Insurance Company............................... 30,000 786
</TABLE>
- ---------------
(1) Includes shares of SCI Common Stock issuable upon conversion of the
Debentures.
(2) Assumes a conversion price of $38.126 per share, and a cash payment in lieu
of any fractional share interest; such conversion price is subject to
adjustment as described under "Description of Debentures -- Conversion
Rights." Accordingly, the number of shares of SCI Common Stock issuable upon
conversion of the Debentures may increase or decrease from time to time.
Under the terms of the Indenture, fractional shares will not be issued upon
conversion of the Debentures. Cash will be paid in lieu of fractional
shares, if any.
(3) Includes $250,000 in principal amount held in the Northwestern Mutual Life
Insurance Company Group Annuity Separate Account.
(4) Reflects information known to ECI regarding Selling Securityholders, but may
include duplicative Debenture amounts because the Selling Securityholders
identified above may have sold, transferred or otherwise disposed of the
Debentures in transactions exempt from the registration requirements of the
Securities Act, and the identity of the transferors can not be readily
determined by ECI.
The Debentures offered hereby were originally issued by ECI and sold by the
Initial Purchasers, in a transaction exempt from the registration requirements
of the Securities Act, to persons reasonably believed by such Initial Purchasers
to be "qualified institutional buyers" (as defined in Rule 144A under the
Securities Act). The Selling Securityholders (which term includes their
transferees, pledgees, donees or their successors) may from time to time offer
and sell pursuant to this prospectus any or all of the Debentures and SCI Common
Stock issued upon conversion of the Debentures.
29
<PAGE> 31
The Selling Securityholders identified above may have sold, transferred or
otherwise disposed of, in transactions exempt from the registration requirements
of the Securities Act, all or a portion of their Debentures since the date on
which the information in the preceding table is presented. Information
concerning the Selling Securityholders may change from time to time and any such
changed information will be set forth in supplements to this prospectus if and
when necessary. Because the Selling Securityholders may offer all or some of the
Debentures that they hold and/or the SCI Common Stock issuable upon conversion
thereof pursuant to the offering contemplated by this prospectus, no estimate
can be given as to the amount of the Debentures or the SCI Common Stock issuable
upon conversion thereof that will be held by the Selling Securityholders upon
the termination of any such sales. See "Plan of Distribution."
In addition, the per share conversion price, and therefore the number of
shares issuable upon conversion of the Debentures, is subject to adjustment
under certain circumstances. Accordingly, the aggregate principal amount of the
Debentures and the number of shares of SCI Common Stock issuable upon conversion
thereof offered hereby may increase or decrease.
From time to time, Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN
AMRO Incorporated and Morgan Stanley & Co. Incorporated have provided investment
banking services to ECI, for which they have received customary fees. From time
to time, J.P. Morgan & Co., Inc. has provided, and continues to provide,
investment banking services to the Company, for which it has received or will
receive customary fees. J.P. Morgan & Co., Inc., NationsBanc Montgomery
Securities LLC and Credit Suisse First Boston Corporation were underwriters in a
public offering of senior debt securities of the Company completed in December
1998. J.P. Morgan & Co., Inc. and a predecessor to NationsBanc Montgomery
Securities LLC were underwriters in a public offering of senior debt securities
of the Company completed in March 1998. J.P. Morgan & Co., Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated were underwriters in a public
offering of senior debt securities of the Company completed in April 1997. J.P.
Morgan & Co., Inc. was an underwriter in a public offering of senior debt
securities of the Company completed in May 1996. None of the other Selling
Securityholders has had any position, office or other material relationship with
the Company or its affiliates within the last three years.
The Company and ECI will pay the expenses of registering the Debentures and
SCI Common Stock being sold hereunder.
PLAN OF DISTRIBUTION
Neither the Company nor ECI will receive any of the proceeds from the sale
of the Debentures and SCI Common Stock offered hereby. The Debentures and SCI
Common Stock may be sold from time to time to purchasers directly by the Selling
Securityholders. Alternatively, the Selling Securityholders may from time to
time offer the Debentures and SCI Common Stock through brokers, dealers or
agents who may receive compensation in the form of discounts, concessions or
commissions from the Selling Securityholders and/or the purchasers of the
Debentures and SCI Common Stock for whom they may act as agent. The Selling
Securityholders and any such brokers, dealers or agents who participate in the
distribution of the Debentures and SCI Common Stock may be deemed to be
"underwriters," and any profits on the sale of the Debentures and SCI Common
Stock by them and any discounts, commissions or concessions received by any such
brokers, dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. To the extent the Selling Securityholders
may be deemed to be underwriters, the Selling Securityholders may be subject to
certain statutory liabilities of, including, but not limited to, Sections 11, 12
and 17B of the Securities Act and Rule 10b-5 under the Exchange Act.
The Debentures and SCI Common Stock offered hereby may be sold from time to
time in one or more transactions at fixed prices, at prevailing market prices at
the time of sale, at varying prices
30
<PAGE> 32
determined at the time of sale or at negotiated prices. The Debentures and SCI
Common Stock may be sold by one or more of the following methods, without
limitation:
- a block trade in which the broker or dealer so engaged will attempt to
sell the Debentures and SCI Common Stock as agent but may position and
resell a portion of the block as principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resales by such broker
or dealer for its account pursuant to this prospectus;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- an exchange distribution in accordance with the rules of such exchange;
- face-to-face transactions between sellers and purchasers without a
broker-dealer; and
- through the writing of options.
At any time a particular offer of the Debentures and SCI Common Stock is
made, a revised prospectus or prospectus supplement, if required, will be
distributed which will set forth the aggregate amount and type of securities
being offered and the terms of the offering, including (1) the name or names of
any underwriters, dealers or agents, (2) any discounts, commissions, concessions
and other items constituting compensation from the Selling Securityholder and
(3) any discounts, commissions or concessions allowed or reallowed or paid to
dealers. Such prospectus supplement and, if necessary, a post-effective
amendment to the registration statement of which this prospectus is a part, will
be filed with the Commission to reflect the disclosure of additional information
with respect to the distribution of the Debentures and SCI Common Stock. In
addition, the Debentures and SCI Common Stock covered by this prospectus may be
sold in private transactions or under Rule 144 rather than pursuant to this
prospectus.
To the best knowledge of the Company and ECI, there are currently no plans,
arrangements or understandings between any Selling Securityholders and any
broker, dealer, agent or underwriter regarding the sale of the Debentures and
SCI Common Stock by the Selling Securityholders. There is no assurance that any
Selling Securityholder will sell any or all of the Debentures and SCI Common
Stock offered by it hereunder or that any such Selling Securityholder will not
transfer, devise or gift such Debentures and SCI Common Stock by other means not
described herein.
The Selling Securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M of the Exchange Act. Regulation M of the Exchange Act may limit the timing of
purchases and sales of any of the Debentures and SCI Common Stock by the Selling
Securityholders and any other such person. Furthermore, Regulation M of the
Exchange Act may restrict the ability of any person engaged in the distribution
of the Debentures and SCI Common Stock to engage in market-making activities
with respect to the particular Debentures and SCI Common Stock being distributed
for a period of up to five business days prior to the commencement of such
distribution. All of the foregoing may affect the marketability of the
Debentures and SCI Common Stock and the ability of any person or entity to
engage in market-making activities with respect to the Debentures and SCI Common
Stock.
Pursuant to the Registration Rights Agreement, ECI has agreed to pay
substantially all of the expenses incidental to the registration, offering and
sale of the Debentures and SCI Common Stock to the public other than
commissions, fees and discounts of underwriters, brokers, dealer and agents. In
addition, pursuant to the Registration Rights Agreement, each of ECI and the
Selling Securityholders will be indemnified by the other against certain
liabilities, including certain liabilities under the Securities Act, or will be
entitled to contribution in connection therewith.
31
<PAGE> 33
LEGAL MATTERS
The validity of the issuance of the Debentures and the underlying SCI
Common Stock offered hereby will be passed upon for the Company and ECI by Locke
Liddell & Sapp LLP.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1997 and
1996 and the consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997,
incorporated by reference in this prospectus, have been included herein in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in accounting and auditing.
The consolidated balance sheet of ECI as of December 31, 1997 and 1996 and
the consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997, incorporated by
reference in this prospectus, have been included herein in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in accounting and auditing.
32
<PAGE> 34
- ------------------------------------------------------
- ------------------------------------------------------
NEITHER THE COMPANY, ECI OR THE SELLING SECURITYHOLDERS HAVE AUTHORIZED ANY
DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, YOU SHOULD NOT RELY ON
ANY SUCH INFORMATION OR REPRESENTATION AS HAVING BEEN AUTHORIZED BY THE COMPANY,
ECI OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS IS NOT AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS CORRECT AS OF ANY DATE OTHER THAN FEBRUARY 4, 1999, THE DATE OF
THIS PROSPECTUS.
---------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
About This Prospectus................... 2
Where To Find More Information.......... 2
Summary................................. 4
The Companies........................... 6
Use of Proceeds......................... 7
Description of Debentures............... 7
Certain United States Federal Income Tax 20
Consequences..........................
Description of Capital Stock of SCI..... 23
Selling Securityholders................. 27
Plan of Distribution.................... 30
Legal Matters........................... 32
Experts................................. 32
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$143,750,000
SERVICE CORPORATION
INTERNATIONAL
EQUITY CORPORATION
INTERNATIONAL
4 1/2% CONVERTIBLE
SUBORDINATED DEBENTURES
DUE 2004
AND
SERVICE CORPORATION
INTERNATIONAL
COMMON STOCK ISSUABLE
UPON CONVERSION THEREOF
---------------------
[SCI LOGO]
PROSPECTUS
FEBRUARY 4, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 35
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate (except for the Securities and Exchange
Commission registration fee) of the fees and expenses payable by the Company in
connection with the distribution of the securities offered hereby:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 42,407
Printing costs.............................................. 20,000
Legal fees and expenses..................................... 20,000
Accounting fees and expenses................................ 10,000
Miscellaneous............................................... 7,593
--------
Total............................................. $100,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
THE COMPANY
The Company is a Texas corporation.
Article 2.02-1 of the Texas Business Corporation Act (the "TBCA") provides
that any director or officer of a Texas corporation may be indemnified against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by him in connection with or in defending any action, suit or
proceeding in which he was, is, or is threatened to be made a named defendant by
reason of his position as director or officer, provided that he conducted
himself in good faith and reasonably believed that, in the case of conduct in
his official capacity as a director or officer of the corporation, such conduct
was in the corporation's best interests; and, in all other cases, that such
conduct was at least not opposed to the corporation's best interests. In the
case of a criminal proceeding, a director or officer may be indemnified only if
he had no reasonable cause to believe his conduct was unlawful. If a director or
officer is wholly successful, on the merits or otherwise, in connection with
such a proceeding, such indemnification is mandatory.
Under the Company's Restated Articles of Incorporation, as amended (the
"Articles of Incorporation"), no director of the Company will be liable to the
Company or any of its shareholders for monetary damages for an act or omission
in the director's capacity as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its shareholders,
(ii) for acts or omission not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) for any transaction for which
the director received an improper benefit, whether or not the benefit resulted
from an action taken within the scope of the director's office, (iv) for acts or
omissions for which the liability of a director is expressly provided by
statute, or (v) for acts related to an unlawful stock repurchase or dividend
payment. The Articles of Incorporation further provide that, if the statutes of
Texas are amended to further limit the liability of a director, then the
liability of the Company's directors will be limited to the fullest extent
permitted by any such provision.
The Company's Bylaws provide for indemnification of officers and directors
of the Company and persons serving at the request of the Company in such
capacities for other business organizations against certain losses, costs,
liabilities, and expenses incurred by reason of their positions with the Company
or such other business organizations. The Company also has policies insuring its
officers and directors and certain officers and directors of its wholly owned
subsidiaries against certain liabilities for actions taken in such capacities,
including liabilities under the Securities Act of 1933, as amended.
For a statement of the Company's undertakings with respect to
indemnification of directors and officers, see Item 17 below.
II-1
<PAGE> 36
ECI
ECI is a Delaware corporation.
Subsection (a) of Section 145 of the Delaware General Corporation Law (the
"DGCL") empowers a Delaware corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a Delaware corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145 further provides that (i) to the extent a director or officer
of a Delaware corporation has been successful on the merits or otherwise in the
defense of any action, suit or proceeding referred to in subsections (a) and (b)
of Section 145 or in the defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith; (ii) indemnification
provided for by Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; (iii) indemnification provided by
Section 145 shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of such person's heirs, executors and
administrators; and (iv) the corporation may purchase and maintain insurance on
behalf of a director or officer of the corporation against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
Paragraph 13 of ECI's Amended and Restated Certificate of Incorporation
provides that no director of the corporation shall be liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director provided that such provision shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law;
II-2
<PAGE> 37
(iii) under Section 174 of the DGCL; or (iv) for any transaction from which the
director derived an improper personal benefit.
Article VIII of ECI's Amended and Restated Bylaws further provides that ECI
shall indemnify its directors, officers, employees and agents to the fullest
extent permitted by applicable law. ECI is generally required to indemnify its
directors, officers, employees, and agents against all judgments, fines,
settlements, legal fees, and other expenses incurred in connection with pending
or threatened legal proceedings because of the person's position with ECI or
another entity that the person serves at ECI's request, subject to certain
conditions, and to advance funds to enable them to defend against such
proceedings.
ECI has entered into indemnification agreements with each of its directors
and executive officers, which agreements contain provisions indemnifying such
parties against certain liabilities within the scope required by ECI's Amended
and Restated Certificate of Incorporation and Amended and Restated Bylaws. ECI
also maintains directors' and officers' liability insurance covering such
persons in their official capacities with ECI and its subsidiaries.
For a statement of ECI's undertakings with respect to indemnification of
directors and officers, see Item 17 below.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 -- Restated Articles of Incorporation of SCI. (Incorporated
by reference to Exhibit 3.1 to SCI's Form S-3 dated
August 27, 1996).
4.2 -- Articles of Amendment to Restated Articles of
Incorporation of SCI. (Incorporated by reference to
Exhibit 3.1 to SCI's Form 10-Q for the fiscal quarter
ended September 30, 1996).
4.3 -- Bylaws of SCI, as amended. (Incorporated by reference to
Exhibit 3.7 to SCI's Form 10-K for the fiscal year ended
December 31, 1991).
4.4 -- Rights Agreement dated as of May 14, 1998 between SCI and
Harris Trust and Savings Bank. (Incorporated by reference
to Exhibit 1 to SCI's Form 8-A dated May 15, 1998).
4.5 -- Purchase Agreement dated February 19, 1998 between ECI,
Merrill, Lynch & Co., ABN AMRO Incorporated and Morgan
Stanley & Co. Incorporated (the "Initial Purchasers").
(Incorporated by reference to Exhibit 4.1 to ECI's Form
S-3 dated April 23, 1998).
4.6 -- Registration Rights Agreement dated February 25, 1998
between ECI and the Initial Purchasers. (Incorporated by
reference to Exhibit 4.2 to ECI's Form S-3 dated April
23, 1998).
4.7 -- Indenture dated February 25, 1998 between ECI and Bankers
Trust Company. (Incorporated by reference to Exhibit 4.3
to ECI's Form S-3 dated April 23, 1998).
4.8 -- First Supplemental Indenture dated as of January 19, 1999
by and among ECI, SCI and Bankers Trust Company.
4.9 -- Specimen of 4 1/2% Convertible Subordinated Debentures
due 2004. (Incorporated by reference to Exhibit 4.4 to
ECI's Form S-3 dated April 23, 1998).
5 -- Opinion of Locke Liddell & Sapp LLP.
12.1 -- SCI's Ratio of Earnings to Fixed Charges. (Incorporated
by reference to Exhibit 12.1 to SCI's Form 10-Q for the
fiscal quarter ended September 30, 1998).
</TABLE>
II-3
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
12.2 -- SCI's Ratio of Earnings to Fixed Charges. (Incorporated
by reference to Exhibit 12.1 to SCI's Form 10-K for the
fiscal year ended December 31, 1997).
12.3 -- ECI's Ratio of Earnings to Fixed Charges.
12.4 -- ECI's Ratio of Earnings to Fixed Charges. (Incorporated
by reference to Exhibit 12.1 to ECI's Form S-3 dated
April 23, 1998).
23.1 -- Consent of Locke Liddell & Sapp LLP. (Included in their
opinion filed as Exhibit 5).
23.2 -- Consent of SCI's Independent Accountants.
(PricewaterhouseCoopers LLP).
23.3 -- Consent of ECI's Independent Accountants.
(PricewaterhouseCoopers LLP).
*24 -- Powers of Attorney for SCI.
25 -- Statement of Eligibility and Qualification Under the
Trust Indenture Act of 1939 of a Corporation Designated
to Act as Trustee on Form T-1 by Bankers Trust Company.
(Incorporated by reference to Exhibit 25.1 to ECI's Form
S-3 dated April 23, 1998).
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission (the "Commission") pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrants pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-4
<PAGE> 39
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Act, each filing of the registrants' annual
reports pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrants
pursuant to the foregoing provisions, or otherwise, the registrants have been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrants of expenses incurred or paid by a director, officer
or controlling person of the registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrants will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by them is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-5
<PAGE> 40
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Service
Corporation International certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Houston, State of Texas, on this 4th
day of February, 1999.
SERVICE CORPORATION INTERNATIONAL
By: /s/ JAMES M. SHELGER
------------------------------------
James M. Shelger
Senior Vice President, General
Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board and February 4, 1999
- ----------------------------------------------------- Chief Executive Officer
R. L. Waltrip
* Senior Vice President and February 4, 1999
- ----------------------------------------------------- Chief Financial Officer
George R. Champagne (Principal Financial
Officer)
* Corporate Controller of SCI February 4, 1999
- ----------------------------------------------------- Management Corporation (a
Wesley T. McRae subsidiary of SCI)
(Principal Accounting
Officer)
* Director February 4, 1999
- -----------------------------------------------------
Anthony L. Coelho
* Director February 4, 1999
- -----------------------------------------------------
Jack Finkelstein
* Director February 4, 1999
- -----------------------------------------------------
A.J. Foyt, Jr.
* Director February 4, 1999
- -----------------------------------------------------
James H. Greer
* Director February 4, 1999
- -----------------------------------------------------
L. William Heiligbrodt
</TABLE>
II-6
<PAGE> 41
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director February 4, 1999
- -----------------------------------------------------
B.D. Hunter
* Director February 4, 1999
- -----------------------------------------------------
John W. Mecom, Jr.
* Director February 4, 1999
- -----------------------------------------------------
Clifton H. Morris, Jr.
* Director February 4, 1999
- -----------------------------------------------------
E.H. Thornton, Jr.
* Director February 4, 1999
- -----------------------------------------------------
W. Blair Waltrip
* Director February 4, 1999
- -----------------------------------------------------
Edward E. Williams
</TABLE>
*By: /s/ JAMES M. SHELGER
-------------------------------
James M. Shelger
Attorney-in-Fact
II-7
<PAGE> 42
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Equity
Corporation International certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Houston, State of Texas, on this 4th
day of February, 1999.
EQUITY CORPORATION INTERNATIONAL
By: /s/ CURTIS G. BRIGGS
----------------------------------
Curtis G. Briggs
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CURTIS G. BRIGGS President and Director February 4, 1999
- -----------------------------------------------------
Curtis G. Briggs
/s/ JOHN H. LOHMAN, JR. Treasurer (Principal Financial February 4, 1999
- ----------------------------------------------------- Officer and Principal Accounting
John H. Lohman, Jr. Officer)
/s/ SUZANNE DINEFF Director February 4, 1999
- -----------------------------------------------------
Suzanne Dineff
/s/ LISA M. NEWBURN Director February 4, 1999
- -----------------------------------------------------
Lisa M. Newburn
</TABLE>
II-8
<PAGE> 43
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 -- Restated Articles of Incorporation of SCI. (Incorporated
by reference to Exhibit 3.1 to SCI's Form S-3 dated
August 27, 1996).
4.2 -- Articles of Amendment to Restated Articles of
Incorporation of SCI. (Incorporated by reference to
Exhibit 3.1 to SCI's Form 10-Q for the fiscal quarter
ended September 30, 1996).
4.3 -- Bylaws of SCI, as amended. (Incorporated by reference to
Exhibit 3.7 to SCI's Form 10-K for the fiscal year ended
December 31, 1991).
4.4 -- Rights Agreement dated as of May 14, 1998 between SCI and
Harris Trust and Savings Bank. (Incorporated by reference
to Exhibit 1 to SCI's Form 8-A dated May 15, 1998).
4.5 -- Purchase Agreement dated February 19, 1998 between ECI,
Merrill, Lynch & Co., ABN AMRO Incorporated and Morgan
Stanley & Co. Incorporated (the "Initial Purchasers").
(Incorporated by reference to Exhibit 4.1 to ECI's Form
S-3 dated April 23, 1998).
4.6 -- Registration Rights Agreement dated February 25, 1998
between ECI and the Initial Purchasers. (Incorporated by
reference to Exhibit 4.2 to ECI's Form S-3 dated April
23, 1998).
4.7 -- Indenture dated February 25, 1998 between ECI and Bankers
Trust Company. (Incorporated by reference to Exhibit 4.3
to ECI's Form S-3 dated April 23, 1998).
4.8 -- First Supplemental Indenture dated as of January 19, 1999
by and among ECI, SCI and Bankers Trust Company.
4.9 -- Specimen of 4 1/2% Convertible Subordinated Debentures
due 2004. (Incorporated by reference to Exhibit 4.4 to
ECI's Form S-3 dated April 23, 1998).
5 -- Opinion of Locke Liddell & Sapp LLP.
12.1 -- SCI's Ratio of Earnings to Fixed Charges. (Incorporated
by reference to Exhibit 12.1 to SCI's Form 10-Q for the
fiscal quarter ended September 30, 1998).
12.2 -- SCI's Ratio of Earnings to Fixed Charges. (Incorporated
by reference to Exhibit 12.1 to SCI's Form 10-K for the
fiscal year ended December 31, 1997).
12.3 -- ECI's Ratio of Earnings to Fixed Charges.
12.4 -- ECI's Ratio of Earnings to Fixed Charges. (Incorporated
by reference to Exhibit 12.1 to ECI's Form S-3 dated
April 23, 1998).
23.1 -- Consent of Locke Liddell & Sapp LLP. (Included in their
opinion filed as Exhibit 5).
23.2 -- Consent of SCI's Independent Accountants.
(PricewaterhouseCoopers LLP).
23.3 -- Consent of ECI's Independent Accountants.
(PricewaterhouseCoopers LLP).
*24 -- Powers of Attorney of SCI.
25 -- Statement of Eligibility and Qualification Under the
Trust Indenture Act of 1939 of a Corporation Designated
to Act as Trustee on Form T-1 by Bankers Trust Company.
(Incorporated by reference to Exhibit 25.1 to ECI's Form
S-3 dated April 23, 1998).
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 4.8
===============================================================================
SERVICE CORPORATION INTERNATIONAL
AND
EQUITY CORPORATION INTERNATIONAL
TO
BANKERS TRUST COMPANY
AS TRUSTEE
----------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of January 19, 1999
----------------------------------
Supplementing and Amending Indenture Dated as of February 25, 1998
===============================================================================
<PAGE> 2
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of January 19,
1999 and effective and conditioned upon the consummation of the Merger (as
defined below) (this "Supplemental Indenture"), is by and among Equity
Corporation International, a corporation duly organized and existing under the
laws of the State of Delaware ("ECI"), having its principal executive office at
415 South First Street, Suite 210, Lufkin, Texas 75901, Service Corporation
International, a corporation duly organized and existing under the laws of the
State of Texas ("SCI"), having its principal executive office at 1929 Allen
Parkway, Houston, Texas 77019, and Bankers Trust Company, a banking corporation
duly organized and existing under the laws of the State of New York, as Trustee
(the "Trustee").
RECITALS OF ECI AND SCI
1. ECI has executed and delivered to the Trustee its
Indenture, dated as of February 25, 1998 (the "Indenture"), to provide for the
issuance of its 4 1/2% Convertible Subordinated Debentures due 2004 in an
original principal amount of $143,750,000, all of which are currently
outstanding (the "Securities").
2. Effective at such time as a Certificate of Merger is filed
with the Secretary of State of the State of Delaware, SCI Delaware Funeral
Services, Inc., a Delaware corporation and a wholly owned subsidiary of SCI
("Merger Sub"), will be merged with and into ECI pursuant to the provisions of
the General Corporation Law of the State of Delaware (the "Merger"), as a result
of which ECI will become a wholly owned subsidiary of SCI.
3. Each share of common stock of ECI which is issued and
outstanding immediately prior to the Merger will be, by virtue of the Merger and
without any action on the part of the holder thereof, converted into the number
of shares of the common stock, par value $1.00 per share, of SCI (the "SCI
Shares") determined by the provisions of the Agreement and Plan of Merger dated
as of August 6, 1998, as amended by the First Amendment to Agreement and Plan of
Merger dated as of December 14, 1998, by and among ECI, SCI and Merger Sub.
4. In connection with the Merger, ECI and SCI, pursuant to
appropriate resolutions of their respective boards of directors, have duly
determined to make, execute and deliver to the Trustee this Supplemental
Indenture in order to reflect the results of the Merger as required by the
Indenture and to provide for SCI to become a co-obligor with respect to certain
obligations of ECI arising under the Indenture and the Securities.
5. Pursuant to Section 4.11 of the Indenture, ECI, as the
survivor to the Merger, and SCI, as the company whose shares will be issued upon
conversion of the Securities, are required to execute and deliver to the Trustee
an indenture, supplemental to the Indenture, prior to the consummation of the
Merger.
-2-
<PAGE> 3
6. The Indenture provides that, without the consent of any
Holders, ECI and the Trustee may enter into a supplemental indenture to comply
with Section 4.11 of the Indenture, among other things.
7. The Board of Directors of ECI has determined that the
provisions of this Supplemental Indenture are considered reasonably necessary to
protect the interests of the Holders of the Securities.
8. ECI has determined that this Supplemental Indenture may
therefore be entered into without the consent of any Holder in accordance with
Section 11.1 of the Indenture.
9. ECI and SCI have duly authorized the execution and delivery
of this Supplemental Indenture and all things necessary have been done to make
this Supplemental Indenture a valid agreement of ECI and SCI, in accordance with
its terms.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually
agreed, for the equal and proportionate benefit of the respective Holders from
time to time of the Securities, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.1 INDENTURE TERMS.
Capitalized terms used but not defined in this Supplemental
Indenture have the respective meanings assigned to them in the Indenture.
ARTICLE TWO
CONCERNING THE SECURITIES
SECTION 2.1 CONVERSION PRIVILEGE.
The Holder of each Security outstanding on the date hereof
shall have the right from and after the effective date hereof, during the period
such Security shall be convertible as specified in Section 4.1 of the Indenture,
to convert such Security only into the number of SCI Shares, and cash in lieu of
fractional SCI Shares, receivable upon the effectiveness of the Merger by a
holder of the number of shares of Common Stock of the Company into which such
Security could have been converted immediately prior to the Merger, subject to
adjustment as provided in Section 2.2 herein.
-3-
<PAGE> 4
SECTION 2.2 CONVERSION PRICE.
The price at which SCI Shares shall be delivered upon
conversion of the Securities (the "Conversion Price") shall be the price
specified in paragraph 8 of the Securities, as adjusted in accordance with
Article 4 of the Indenture prior to the Merger. For events subsequent to the
effective date of this Supplemental Indenture, the Conversion Price shall be
adjusted in a manner as nearly equivalent as may be practical to the adjustments
provided for in Article 4 of the Indenture.
SECTION 2.3 SCI AS A CO-OBLIGOR.
ECI, SCI and the Trustee hereby agree that as of the effective
date of this Supplemental Indenture, SCI shall become a co-obligor with ECI (but
not as a successor to ECI) under the Indenture, as modified by this Supplemental
Indenture, and the Securities, and shall be jointly and severally liable with
ECI for the due and punctual payment of the principal of (and premium, if any)
and interest on the Securities, as fully and effectively as if SCI had
originally been an obligor under such Securities; provided, however, that SCI is
not assuming, or becoming a co- obligor for, the performance of any obligation
or liability of ECI under the Indenture or the Securities other than such
payments; provided further, that the obligations of SCI under the Indenture, as
supplemented by this Supplemental Indenture, and the Securities shall be (i)
subordinate and junior in right of payment to the prior payment in full of all
secured indebtedness of SCI, (ii) rank pari passu in right of payment with all
Senior Indebtedness of SCI that is unsecured, and (iii) rank senior in right of
payment to all subordinated indebtedness of SCI. "Senior Indebtedness of SCI"
means indebtedness which is not by its terms subordinate or junior in any
respect to any other indebtedness or other obligation of SCI.
SECTION 2.4 SEC REPORTS.
In the event that ECI is no longer subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, SCI shall file all
reports and other information and documents which it is required to file with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and within 15 days
after it files them with the SEC, SCI shall file copies of all such reports,
information and other documents with the Trustee. In such event, the notes to
the consolidated financial statements of SCI shall include "summarized financial
information" concerning ECI as required by the SEC. The Trustee acknowledges
that ECI, in the event it is no longer subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, will not be required to prepare
separate financial statements pursuant to Section 6.2 of the Indenture.
-4-
<PAGE> 5
ARTICLE THREE
CONCERNING THE TRUSTEE
SECTION 3.1 TERMS AND CONDITIONS.
The Trustee accepts this Supplemental Indenture and agrees to
perform the duties of the Trustee upon the terms and conditions herein and in
the Indenture set forth.
SECTION 3.2 NO RESPONSIBILITY.
The Trustee shall not be responsible in any manner whatsoever
for or in respect of (i) the validity or sufficiency of this Supplemental
Indenture, the authorization or permissibility of this Supplemental Indenture
pursuant to the terms of the Indenture or the due execution thereof by ECI or
SCI or (ii) the recitals herein contained, all such recitals being made by ECI
and SCI. The Trustee shall not be responsible in any manner to determine the
correctness of provisions contained in this Supplemental Indenture relating
either to the kind or amount of securities receivable by Holders of Securities
upon the conversion of their Securities after the Merger or to any adjustment
provided herein.
ARTICLE FOUR
EFFECT OF EXECUTION AND DELIVERY HEREOF
From and after the execution and delivery of this Supplemental
Indenture, (i) the Indenture shall be deemed to be amended and modified as
provided herein, (ii) this Supplemental Indenture shall form a part of the
Indenture, (iii) except as modified and amended by this Supplemental Indenture,
the Indenture shall continue in full force and effect, (iv) the Securities shall
continue to be governed by the Indenture, as modified and amended by this
Supplemental Indenture, and (v) every Holder of Securities heretofore and
hereafter authenticated and delivered under the Indenture shall be bound by this
Supplemental Indenture.
ARTICLE FIVE
MISCELLANEOUS PROVISIONS
SECTION 5.1 HEADINGS DESCRIPTIVE.
The headings of the several Articles and Sections of this
Supplemental Indenture are inserted for convenience only and shall not in any
way affect the meaning or construction of any provision of this Supplemental
Indenture.
-5-
<PAGE> 6
SECTION 5.2 RIGHTS AND OBLIGATIONS OF THE TRUSTEE.
All of the provisions of the Indenture, including but not
limited to the compensation and indemnity obligations pursuant to Section 9.7 of
the Indenture, with respect to the rights, privileges, immunities, powers and
duties of the Trustee shall be applicable in respect of this Supplemental
Indenture as fully and with the same effect as if set forth herein in full. In
the event ECI defaults solely in its payment obligations under clauses (1) or
(2) of Section 8.1 of the Indenture, the Trustee shall immediately make written
demand upon SCI for such payment obligations. Upon any default by SCI in such
payment obligations, any remedy which the Trustee or any security holder is
authorized to bring against ECI under Article 8 of the Indenture may be brought,
under the same circumstances and conditions (including notice requirements),
against SCI.
SECTION 5.3 SUCCESSORS AND ASSIGNS.
This Supplemental Indenture shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto and the Holders of any Securities then outstanding.
SECTION 5.4 COUNTERPARTS.
This Supplemental Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
SECTION 5.5 GOVERNING LAW.
This Supplemental Indenture shall be governed by and construed
in accordance with the laws of the State of New York.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
EQUITY CORPORATION INTERNATIONAL
By: /s/ James P. Hunter, III
------------------------------------------
Name: James P. Hunter, III
Title: Chairman, President and
Chief Executive Officer
SERVICE CORPORATION INTERNATIONAL
By: /s/ James M. Shelger
------------------------------------------
Name: James M. Shelger
Title: Senior Vice President, General
Counsel and Secretary
BANKERS TRUST COMPANY, as Trustee
By: /s/ Ednora G. Linares
------------------------------------------
Name: Ednora G. Linares
Title: Assistant Vice President
-7-
<PAGE> 1
Exhibit 5
[Letterhead of Locke Liddell & Sapp LLP]
February 4, 1999
Service Corporation International
1929 Allen Parkway
Houston, Texas 77019
Equity Corporation International
415 South First Street, Suite 210
Lufkin, Texas 75901
Gentlemen:
We have acted as counsel for Service Corporation International, a
Texas corporation ("SCI"), and Equity Corporation International, a Delaware
corporation ("ECI"), in connection with the registration, pursuant to SCI's
Post-Effective Amendment No. 1 on Form S-3 to Form S-4 Registration Statement
and ECI's Post-Effective Amendment No. 1 to Form S-3 Registration Statement to
be filed with the Securities and Exchange Commission (collectively, the
"Post-Effective Amendment") under the Securities Act of 1933, as amended, with
respect to (1) $143,750,000 principal amount of 4 1/2% Convertible Subordinated
Debentures due 2004 (the "Debentures") pursuant to an Indenture dated as of
February 25, 1998, between ECI and Bankers Trust Company, as Trustee (the
"Indenture"), as supplemented by the First Supplemental Indenture dated January
19, 1999, by and among ECI, SCI and Bankers Trust Company, as Trustee (the
"First Supplemental Indenture"), and (2) the shares of SCI's common stock, par
value $1.00 per share (the "SCI Common Stock"), to be issued upon conversion of
the Debentures.
In rendering this opinion, we have examined the corporate records of
SCI and ECI, including (i) SCI's Restated Articles of Incorporation, as amended,
SCI's Bylaws, as amended, and SCI's minutes of meetings of its directors, and
(ii) ECI's Restated Articles of Incorporation, as amended, ECI's Bylaws, as
amended, and ECI's minutes of meetings of its directors. We have also examined
<PAGE> 2
Service Corporation International
Equity Corporation International
February 4, 1999
Page 2
(i) the Indenture, (ii) the First Supplemental Indenture, (iii) the
Post-Effective Amendment, together with the exhibits thereto, and (iv) such
other documents as we have deemed necessary for the purposes of expressing the
opinions contained herein. With respect to certain factual matters, we have
relied on statements of officers of SCI and ECI.
Based upon the foregoing, we are of the following opinions:
(1) The Debentures have been duly authorized, executed, authenticated,
issued and delivered and constitute valid and legally binding obligations of SCI
and ECI, enforceable against SCI and ECI in accordance with their terms and
entitled to the benefits of the Indenture and First Supplemental Indenture,
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium (including, without limitation, all laws relating to
fraudulent transfers), or other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally, or by general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
(2) The shares of SCI Common Stock issuable upon conversion of the
Debentures have been duly and validly authorized and reserved for issuance, and
when issued and delivered in accordance with the provisions of the Debentures,
the Indenture and First Supplemental Indenture, will be duly and validly issued
and fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as Exhibit 5 to the Post-Effective Amendment and to the use
of our name in the prospectus forming a part of the Post-Effective Amendment
under the caption "Legal Matters."
Very truly yours,
/s/ Locke Liddell & Sapp LLP
LOCKE LIDDELL & SAPP LLP
<PAGE> 1
EXHIBIT 12.3
EQUITY CORPORATION INTERNATIONAL
RATIO OF EARNINGS TO FIXED CHARGES
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1997 1998
-------- --------
<S> <C> <C>
Income before taxes $ 17,349 $ 22,447
Fixed charges:
Interest expense 3,758 10,698
Capitalized interest 22 101
Interest income netted
against expense 41 --
Interest factor portion
of rentals (1/3) 500 760
-------- --------
4,321 11,559
-------- --------
Pretax income before fixed
charges 21,670 34,006
Less:
Capitalized interest (22) (101)
Interest income (41) --
-------- --------
Earnings before income taxes
and fixed charges $ 21,607 $ 33,905
======== ========
Ratio of earnings to fixed
charges 5.00 2.93
======== ========
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
OF SERVICE CORPORATION INTERNATIONAL
We consent to the incorporation by reference in the registration statement
of Service Corporation International on Post-Effective Amendment No. 1 on Form
S-3 to Form S-4 (File No. 333-66957) and of Equity Corporation International on
Post-Effective Amendment No. 1 to Form S-3 (File No. 333-50861) of our report
dated March 18, 1998, on our audits of the consolidated financial statements and
financial statement schedule of Service Corporation International ("SCI") as of
December 31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997, which report is included in the Annual Report on Form 10-K of
SCI for the Year Ended December 31, 1997. We also consent to the reference to
our firm under the caption "Experts."
/s/ PRICEWATERHOUSECOOPERS LLP
Houston, Texas
February 4, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
OF EQUITY CORPORATION INTERNATIONAL
We consent to the incorporation by reference in the registration statement
of Service Corporation International on Post-Effective Amendment No. 1 on Form
S-3 to Form S-4 (File No. 333-66957) and of Equity Corporation International on
Post-Effective Amendment No. 1 to Form S-3 (File No. 333-50861) of our report
dated March 5, 1998, on our audits of the consolidated financial statements and
financial statement schedule of Equity Corporation International ("ECI") as of
December 31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997, which report is included in the Annual Report on Form 10-K of
ECI for the Year Ended December 31, 1997. We also consent to the reference to
our firm under the caption "Experts."
/s/ PRICEWATERHOUSECOOPERS LLP
Houston, Texas
February 4, 1999
