<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration Nos. 33-94452 and 33-99548
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 28, 1995)
LOGO
$50,000,000 7.25% Notes due 2002
$100,000,000 7.95% Notes due 2008
$50,000,000 8.65% Notes due 2016
Interest on the 7.25% Notes due 2002 (the "2002 Notes"), the 7.95% Notes due
2008 (the "2008 Notes") and the 8.65% Notes due 2016 (the "2016 Notes" and,
together with the 2002 Notes and the 2008 Notes, the "Notes") of Security
Capital Industrial Trust ("SCI") offered hereby is payable semi-annually on May
15 and November 15, commencing November 15, 1996. Principal installments on the
2002 Notes will commence on May 15, 1999, principal installments on the 2008
Notes will commence on May 15, 2005 and principal installments on the 2016
Notes will commence on May 15, 2010 in the amounts described herein. The 2002
Notes will mature on May 15, 2002, the 2008 Notes will mature on May 15, 2008
and the 2016 Notes will mature on May 15, 2016. See "Description of Notes--
Principal and Interest." The Notes may be redeemed at any time at the option of
SCI, in whole or in part, at a redemption price equal to the sum of (i) the
principal amount of the Notes being redeemed, plus accrued interest thereon to
the redemption date and (ii) the Make-Whole Amount (as defined), if any. See
"Description of Notes--Optional Redemption."
Each series of Notes will be represented by one or more global securities
("Global Securities") registered in the name of The Depository Trust Company
("DTC") or its nominee. Beneficial interests in the Global Securities will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. Owners of beneficial interests in the
Global Securities will be entitled to physical delivery of Notes in
certificated form only under the limited circumstances described under
"Description of Notes-- Book-Entry Procedures."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) SCI(1)(3)
- -------------------------------------------------------
<S> <C> <C> <C>
Per 2002 Note 99.888% .600% 99.288%
- -------------------------------------------------------
Per 2008 Note 99.833% .750% 99.083%
- -------------------------------------------------------
Per 2016 Note 99.710% .875% 98.835%
- -------------------------------------------------------
Total $199,632,000 $1,487,500 $198,144,500
- -------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from May 17, 1996.
(2) SCI has agreed to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting expenses payable by SCI estimated at $350,000.
The Notes are offered, subject to prior sale, when, as and if accepted by the
Underwriter and subject to approval of certain legal matters by Skadden, Arps,
Slate, Meagher & Flom, counsel for the Underwriter. It is expected that
delivery of the Notes will be made on or about May 17, 1996 through the
facilities of DTC, against payment therefor in immediately available funds.
J.P. MORGAN & CO.
May 14, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE NOTES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in
this Prospectus Supplement or the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been
authorized. This Prospectus Supplement and the Prospectus do not constitute an
offer to sell or the solicitation of an offer to buy any securities other than
the securities to which they relate or any offer to sell or the solicitation
of any offer to buy such securities in any jurisdictions in which such offer
or solicitation is unlawful. Neither the delivery of this Prospectus
Supplement or the Prospectus nor any sale made hereunder or thereunder shall,
under any circumstances, create any implication that there has been no change
in the affairs of SCI since the date hereof or thereof or that the information
contained or incorporated by reference herein or therein is correct as of any
time subsequent to the date of such information.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Ratio of Earnings to Fixed Charges......................................... S-3
Use of Proceeds............................................................ S-3
Description of Notes....................................................... S-3
Underwriting............................................................... S-7
Validity of Notes.......................................................... S-7
PROSPECTUS
Available Information...................................................... 2
Incorporation by Reference................................................. 2
Security Capital Industrial Trust.......................................... 3
Use of Proceeds............................................................ 3
Description of Debt Securities............................................. 3
Description of Preferred Shares............................................ 18
Description of Common Shares............................................... 23
Federal Income Tax Considerations.......................................... 25
Plan of Distribution....................................................... 29
Experts.................................................................... 30
Legal Matters.............................................................. 30
</TABLE>
S-2
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
For the purpose of computing these ratios, (a) "earnings" consist of earnings
from operations plus fixed charges other than capitalized interest and (b)
"fixed charges" consist of interest on borrowed funds (including capitalized
interest) and amortization of debt discount and expense.
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
PERIOD ENDED DECEMBER 31, MARCH 31,
---------------------------- ---------
1991(1) 1992 1993 1994 1995 1995 1996
------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges........ (2) (2) 11.3 3.3 2.0 2.0 2.1
</TABLE>
- --------
(1) For the period from June 14, 1991 (the date of SCI's inception) to December
31, 1991.
(2) While SCI was researching markets and assembling its initial assets,
earnings were insufficient to cover fixed charges for the periods ended
December 31, 1991 and 1992 by $195,000 and $311,000, respectively.
USE OF PROCEEDS
The net proceeds to SCI from the sale of the Notes offered hereby are
expected to be approximately $197.8 million. The net proceeds will be used to
repay borrowings under SCI's revolving line of credit and for the acquisition
and development of additional industrial properties. SCI's $350 million
unsecured revolving line of credit bears interest at the greater of the federal
funds rate plus 0.5% and prime (8.25% at May 14, 1996) or, at SCI's option,
LIBOR plus 1.25% (6.6797% at May 14, 1996), based upon SCI's current senior
debt rating, and is scheduled to mature in May 1998. At May 14, 1996, $97.2
million in borrowings were outstanding under this line of credit. SCI will
invest the remaining proceeds, pending use as described above, in short-term
money market instruments. SCI expects to make additional borrowings under the
line of credit following this offering.
DESCRIPTION OF NOTES
The following description of the terms of the Notes offered hereby (referred
to in the accompanying Prospectus as the "Debt Securities") supplements, and to
the extent inconsistent therewith replaces, the description of the general
terms and provisions of the Debt Securities set forth in the accompanying
Prospectus, to which description reference is hereby made.
GENERAL
The 2002 Notes, the 2008 Notes and the 2016 Notes each constitute a separate
series of Debt Securities (which are more fully described in the accompanying
Prospectus) to be issued pursuant to an Indenture, dated as of March 1, 1995
(the "Indenture"), between SCI and State Street Bank and Trust Company (the
"Trustee"). The 2002 Notes will be limited to an aggregate principal amount of
$50,000,000, the 2008 Notes will be limited to an aggregate principal amount of
$100,000,000 and the 2016 Notes will be limited to an aggregate principal
amount of $50,000,000. The terms of the Notes include those provisions
contained in the Indenture (the terms of which are more fully described in the
accompanying Prospectus) and those made part of the Indenture by reference to
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
Notes are subject to all such terms, and holders of Notes are referred to the
Indenture and Trust Indenture Act for a statement thereof. SCI currently has
$325,000,000 of indebtedness outstanding pursuant to the Indenture.
The Notes will be direct, senior unsecured obligations of SCI and will rank
equally with all other unsecured and unsubordinated indebtedness of SCI from
time to time outstanding. However, the Notes are effectively subordinated to
mortgages and other secured indebtedness of SCI and SCI's subsidiaries, which
encumbered certain assets of SCI and SCI's subsidiaries (approximately $144.4
million of secured debt was outstanding at March 31, 1996 on a pro forma basis
giving effect to the issuance of the Notes offered hereby and the application
of the proceeds therefrom).
S-3
<PAGE>
As of March 31, 1996, on a pro forma basis giving effect to the issuance of
the Notes offered hereby and the application of the net proceeds therefrom,
the total outstanding indebtedness of SCI and its subsidiaries was
approximately $669.0 million. SCI may incur additional indebtedness, subject
to the provisions described under "Description of Debt Securities--Certain
Covenants--Limitations on Incurrence of Debt" in the accompanying Prospectus.
Reference is made to the section entitled "Description of Debt Securities--
Certain Covenants" in the accompanying Prospectus for a description of the
covenants applicable to the Notes. The defeasance and covenant defeasance
provisions of the Indenture described under "Description of Debt Securities--
Discharge, Defeasance and Covenant Defeasance" in the accompanying Prospectus
will apply to the Notes. Each of the covenants described in the Prospectus
under the caption "Description of Debt Securities--Certain Covenants" will be
subject to defeasance.
The Notes will only be issued in fully registered form in denominations of
$1,000 and integral multiples thereof.
Except as set forth under "Description of Debt Securities--Certain
Covenants--Limitations on Incurrence of Debt" in the accompanying Prospectus,
the Indenture does not contain any other provisions that would limit the
ability of SCI to incur indebtedness or that would afford Holders of the Notes
protection in the event of a highly leveraged or similar transaction involving
SCI or in the event of a change of control. However, SCI's Amended and
Restated Declaration of Trust restricts beneficial ownership of SCI's
outstanding shares of beneficial interest, $0.01 par value per share
("Shares"), by a single person or persons acting as a group, to 9.8% of such
Shares, with certain exceptions. These restrictions are designed to preserve
SCI's status as a real estate investment trust and, therefore, may act to
prevent or hinder a change of control.
PRINCIPAL AND INTEREST
The 2002 Notes will bear interest at 7.25% per annum and will mature on May
15, 2002. The 2008 Notes will bear interest at 7.95% per annum and will mature
on May 15, 2008. The 2016 Notes will bear interest at 8.65% per annum and will
mature on May 15, 2016. The Notes will bear interest from May 17, 1996 or from
the immediately preceding Interest Payment Date (as defined below) to which
interest has been paid, payable semi-annually in arrears on May 15 and
November 15 of each year, commencing on November 15, 1996 (each, an "Interest
Payment Date"), to the persons in whose name the applicable Notes are
registered in the Security Register on the preceding May 1 or November 1
(whether or not a Business Day, as defined below), as the case may be (each, a
"Regular Record Date"). Interest on the Notes will be computed on the basis of
a 360-day year of twelve 30-day months.
Installments of principal of $250 will be paid on each $1,000 original
principal amount of the 2002 Notes annually on each May 15 (a "Principal
Payment Date"), commencing on May 15, 1999. Installments of principal of $250
will be paid on each $1,000 original principal amount of the 2008 Notes
annually on each May 15, commencing May 15, 2005. Installments of principal on
each $1,000 original principal amount of the 2016 Notes will be paid annually
on each May 15, commencing May 15, 2010 in the following amounts: $100 in
2010, $100 in 2011, $100 in 2012, $100 in 2013, $150 in 2014, $200 in 2015 and
$250 in 2016. In each case, principal on the Notes will be payable to the
persons in whose name the applicable Notes are registered in the Security
Register on the preceding May 1 (whether or not a Business Day).
The weighted average life of the 2002 Notes (as to all distributions of
principal) will be 4.5 years. The weighted average life of the 2008 Notes (as
to all distributions of principal) will be 10.5 years. The weighted average
life of the 2016 Notes (as to all distributions of principal) will be 17.7
years. In each case, the weighted average life of the Notes, for this purpose,
equals the number of years obtained by (i) multiplying the amount of each
payment of principal of the Notes by the number of years which will elapse
between the date of issuance and such payment, (ii) adding the products
obtained under clause (i), and (iii) dividing such sum by $50,000,000 in the
case of the 2002 Notes, $100,000,000 in the case of the 2008 Notes and
$50,000,000 in the case of the 2016 Notes.
S-4
<PAGE>
If any Interest Payment Date, Principal Payment Date or the Maturity Date
falls on a day that is not a Business Day, the required payment shall be made
on the next Business Day as if it were made on the date such payment was due
and no interest shall accrue on the amount so payable for the period from and
after such Interest Payment Date, Principal Payment Date or the Maturity Date,
as the case may be. "Business Day" means any day, other than a Saturday or
Sunday, on which banks in the City of New York are not required or authorized
by law or executive order to close.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of SCI, in whole or in
part, at a redemption price equal to the sum of (i) the principal amount of the
Notes being redeemed plus accrued interest thereon to the redemption date and
(ii) the Make-Whole Amount, if any, with respect to such Notes (the "Redemption
Price").
From and after the date notice has been given as provided in the Indenture,
if funds for the redemption of any Notes called for redemption shall have been
made available on such redemption date, such Notes will cease to bear interest
on the date fixed for such redemption specified in such notice and the only
right of the Holders of the Notes will be to receive payment of the Redemption
Price.
Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the Security Register, not more than 60 nor less
than 30 days prior to the date fixed for redemption. The notice of redemption
will specify, among other items, the Redemption Price and the principal amount
of the Notes held by such Holder to be redeemed.
If less than all the Notes are to be redeemed at the option of SCI, SCI will
notify the Trustee at least 45 days prior to the redemption date (or such
shorter period as satisfactory to the Trustee) of the aggregate principal
amount of the Notes to be redeemed and the redemption date. The Trustee shall
select, in such manner as it shall deem fair and appropriate, Notes to be
redeemed in whole or in part. Notes may be redeemed in part in the minimum
authorized denomination for Notes or in any integral multiple thereof.
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Note, the excess, if any of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
(exclusive of interest accrued to the date of redemption or accelerated
payment) that would have been payable in respect of such dollar if such
redemption or accelerated payment had not been made, determined by discounting,
on a semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Notes being redeemed or paid.
"Reinvestment Rate" means 0.25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding
sentence and the Reinvestment Rate shall be interpolated or extrapolated from
such yields on a straight-line basis, rounding in each of such relevant periods
to the nearest month. For the purposes of calculating the Reinvestment Rate,
the most recent Statistical Release published prior to the date of
determination of the Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated "H.15(519)" or
any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by SCI.
S-5
<PAGE>
BOOK-ENTRY PROCEDURES
Each series of Notes will be issued in the form of one or more Global
Securities that will be deposited with, or on behalf of DTC and registered in
the name of DTC's nominee. Except as described in the accompanying Prospectus
under the caption "Description of Debt Securities--Book-Entry Procedures," the
Notes will not be issuable in definitive form. So long as the Notes are
represented by one or more Global Securities, DTC's nominee will be considered
the sole owner or holder of the Notes for all purposes under the Indenture,
and the beneficial owners of the Notes will be entitled only to those rights
and benefits afforded to them in accordance with DTC's regular operating
procedures. See "Description of Debt Securities--Book-Entry Procedures" in the
accompanying Prospectus.
The following is based on information furnished by DTC:
DTC will act as securities depository for the Notes. The Notes will be
issued as fully registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One fully registered Note certificate will be
issued with respect to each of the Notes.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. DTC holds securities that its participants
(the "Participants") deposit with DTC. DTC also facilitates the settlement
among Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers (including the Underwriter), banks, trust companies, clearing
corporations, and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly. The rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriter in immediately
available funds. All payments of principal and interest will be made by SCI in
immediately available funds or the equivalent, so long as DTC continues to
make its Same-Day Funds Settlement System available to SCI.
S-6
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement (the
"Underwriting Agreement") dated the date hereof, J.P. Morgan Securities Inc.
(the "Underwriter") has agreed to purchase, and SCI has agreed to sell to the
Underwriter, all of the Notes offered hereby.
Under the terms and conditions of the Underwriting Agreement, the Underwriter
is obligated to take and pay for all of the Notes if any are taken.
The Underwriter has advised SCI that it initially proposes to offer the Notes
directly to the public at the public offering prices set forth on the cover
page of this Prospectus Supplement, and to certain dealers at such prices less
a concession not in excess of .350% of the principal amount of the 2002 Notes,
.450% of the principal amount of the 2008 Notes and .500% of the principal
amount of the 2016 Notes. The Underwriter may allow, and such dealers may
reallow, a concession not in excess of .250% of the principal amount of the
2002 Notes, .250% of the principal amount of the 2008 Notes and .250% of the
principal amount of the 2016 Notes to certain other dealers. After the initial
public offering, the public offering prices and such concessions may be
changed.
The Notes are a new issue of securities with no established trading market.
SCI has been advised by the Underwriter that the Underwriter intends to make a
market in the Notes but is not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the
liquidity of the trading markets for the Notes.
SCI has agreed to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, the Underwriter and
its affiliates have engaged, and may in the future engage, in investment
banking and/or commercial banking transactions with SCI and its affiliates.
VALIDITY OF NOTES
The validity of the Notes offered hereby will be passed upon for SCI by
Mayer, Brown & Platt, Chicago, Illinois. Certain legal matters will be passed
upon for the Underwriter by Skadden, Arps, Slate, Meagher & Flom, New York, New
York. Mayer Brown & Platt has in the past represented, and is currently
representing, SCI and certain of its affiliates, including Security Capital
Group Incorporated, the owner of SCI's REIT manager.
S-7
<PAGE>
PROSPECTUS
LOGO
$600,000,000 DEBT SECURITIES, PREFERRED SHARES AND COMMON SHARES*
----------------
Security Capital Industrial Trust ("SCI") may from time to time offer in one
or more series its (i) unsecured senior debt securities (the "Debt
Securities"), (ii) Preferred Shares of Beneficial Interest, par value $0.01 per
share (the "Preferred Shares"), and (iii) Common Shares of Beneficial Interest,
par value $0.01 per share (the "Common Shares"). The Debt Securities, Preferred
Shares and Common Shares (collectively, the "Offered Securities") may be
offered, separately or together, in separate series, in amounts, at prices and
on terms to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Debt
Securities, the specific title, aggregate principal amount, currency, form
(which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of SCI or repayment at
the option of the Holder, terms for sinking fund payments, and any initial
public offering price; (ii) in the case of Preferred Shares, the specific title
and stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; and (iii) in the case of
Common Shares, any initial public offering price. In addition, such specific
terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the Offered Securities, in each case as may be
appropriate to preserve the status of SCI as a real estate investment trust
("REIT") for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered
Securities covered by such Prospectus Supplement.
The Offered Securities may be offered directly by SCI, through agents
designated from time to time by SCI, or to or through underwriters or dealers.
If any agents or underwriters are involved in the sale of any of the Offered
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such series of Offered Securities.
----------------
*Pursuant to Rule 429 under the Securities Act of 1933, as amended (the
"Securities Act"), this Prospectus also relates to an additional $89,999,994 of
the Offered Securities which were registered under a previous registration
statement.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
----------------
THE DATE OF THIS PROSPECTUS IS DECEMBER 28, 1995.
<PAGE>
AVAILABLE INFORMATION
SCI is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. SCI's outstanding Common Shares and Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest, $0.01 par value per share (the "Series
A Preferred Shares"), are listed on the New York Stock Exchange (the "NYSE")
under the symbols "SCN" and "SCN-PRA", respectively, and all such reports,
proxy statements and other information filed by SCI with the NYSE may be
inspected at the NYSE's offices at 20 Broad Street, New York, New York 10005.
This Prospectus constitutes part of a registration statement on Form S-3
(together with all amendments and exhibits, the "Registration Statement") filed
by SCI with the Commission under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement.
INCORPORATION BY REFERENCE
There are incorporated herein by reference the following documents
heretofore filed by SCI with the Commission:
(a) SCI's Annual Report on Form 10-K for the fiscal year ended December
31, 1994;
(b) SCI's Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1995, June 30, 1995 and September 30, 1995;
(c) SCI's Current Reports on Form 8-K dated April 6, 1995, May 9, 1995,
June 16, 1995 and August 2, 1995;
(d) The description of the Series A Preferred Shares contained under the
caption "Description of Series A Preferred Shares" in SCI's prospectus
supplement dated June 16, 1995 to the prospectus dated April 27, 1995
forming a part of SCI's registration statement on Form S-3 (File No. 33-
90940) filed with the Commission pursuant to Rule 424(b) under the
Securities Act and the related description contained under the caption
"Description of Preferred Shares" in such prospectus;
(e) The description of the Common Shares contained in SCI's registration
statement on Form 8-A; and
(f) The description of SCI's preferred share purchase rights contained in
SCI's registration statement on Form 8-A.
All documents subsequently filed by SCI pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act prior to the termination of the offering of the
Offered Securities, shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein, or in any subsequently filed document which is incorporated or deemed
to be incorporated by reference herein, modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
SCI will provide without charge to each person, including any beneficial
owner, to whom a copy of this Prospectus is delivered, upon the written or oral
request of such person, a copy of any or all of the documents incorporated
herein by reference, other than exhibits to such documents unless such exhibits
are specifically incorporated by reference into such documents. Requests should
be addressed to Secretary, Security Capital Industrial Trust, 7777 Market
Center Avenue, El Paso, Texas 79912, telephone number: (915) 877-3900.
2
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCI, through its REIT manager, Security Capital Industrial Incorporated (the
"REIT Manager" or "REIT Management"), is the largest publicly held, fully
integrated operating company, based on equity market capitalization, focused
exclusively on meeting the distribution space needs of national, regional and
local industrial real estate users throughout the United States. SCI
distinguishes itself from its competition by being the only entity that
combines all of the following:
1. A national operating strategy targeting the largest 1,000 users of
distribution space;
2. A disciplined investment strategy based on proprietary research that
targets high growth markets with sustainable demand for SCI's targeted
product--low finish distribution space;
3. An organizational structure and service delivery system built around the
customer; SCI believes its service approach is unique to the real estate
industry as it combines national scope and expertise with strong local
presence; and
4. 220 professionals in 24 offices which REIT Management believes comprise
the deepest and most experienced management team in industrial real
estate.
The cornerstone of SCI's operating strategy is the SCI National Operating
System(TM) comprised of the Market Officer Group, the National Services Group
and the National Development Group that provides an exceptional level of
customer service, marketing and development on a national, regional and local
basis.
SCI engages in the acquisition, development, marketing, operation and long-
term ownership of distribution facilities, and the development of master-
planned distribution parks and build-to-suit facilities for its customers. SCI,
through its REIT Manager, is a fully integrated operating company with a
significant level of expertise in market research; building and land
acquisition and due diligence; master-planned distribution park design and
building construction; marketing; asset and leasing management; capital markets
and financial operations. SCI deploys capital in markets with excellent long-
term growth prospects and in markets where SCI can achieve a strong market
position through the acquisition and development of generic, flexible
facilities designed for both warehousing and light manufacturing uses.
SCI's executive offices are located at 14100 East 35th Place, Aurora,
Colorado 80011 and its telephone number is (303) 375-9292. SCI's predecessor
was formed in June 1991 as a Delaware corporation, and SCI was re-formed as a
Maryland real estate investment trust in January 1993.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the net
proceeds from the sale of the Offered Securities will be used for the
acquisition and development of additional industrial properties, as suitable
opportunities arise, for the repayment of certain outstanding indebtedness at
such time, for capital improvements to properties and for general corporate
purposes.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture, dated as of March 1,
1995 (the "Indenture"), between SCI and State Street Bank and Trust Company
(the "Trustee"). The Indenture has been incorporated by reference as an exhibit
to the Registration Statement of which this Prospectus is a part and is
available for inspection at the corporate trust office of the Trustee at 225
Franklin Street, Boston, Massachusetts 02110 or as described above under
"Available Information." The Indenture is subject to, and governed by, the
Trust Indenture Act of 1939, as amended (the "TIA"). The statements made
hereunder relating to the Indenture and the Debt Securities to be issued
thereunder are summaries of certain provisions thereof, do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indenture and such Debt Securities. All section
references appearing herein are to sections of the Indenture, and capitalized
terms used but not defined herein shall have the respective meanings set forth
in the Indenture.
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GENERAL
The Debt Securities will be direct, unsecured and unsubordinated obligations
of SCI and will rank equally with all other unsecured and unsubordinated
indebtedness of SCI from time to time outstanding. The Indenture provides that
the Debt Securities may be issued without limit as to aggregate principal
amount, in one or more series, in each case as established from time to time in
or pursuant to authority granted by a resolution of the Board of Trustees (the
"Board") of SCI or as established in one or more indentures supplemental to the
Indenture. All Debt Securities of one series need not be issued at the same
time and, unless otherwise provided, a series may be reopened, without the
consent of the Holders of the Debt Securities of such series, for issuances of
additional Debt Securities of such series (Section 301).
Reference is made to the Prospectus Supplement relating to the series of Debt
Securities being offered for the specific terms thereof, including:
(1) the title of such series of Debt Securities;
(2) the aggregate principal amount of such series of Debt Securities and
any limit on such principal amount;
(3) the percentage of the principal amount at which the Debt Securities
of such series will be issued and, if other than the full principal amount
thereof, the portion of the principal amount thereof payable upon
declaration of acceleration of the maturity thereof, or the method by which
any such portion shall be determined;
(4) the date or dates, or the method by which such date or dates will be
determined, on which the principal of the Debt Securities of such series
will be payable and the amount of principal payable thereon;
(5) the rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which the Debt Securities
of such series will bear interest, if any;
(6) the date or dates, or the method by which such date or dates will be
determined, from which any such interest will accrue, the Interest Payment
Dates on which any such interest will be payable, the Regular Record Dates
for such Interest Payment Dates, or the method by which such dates shall be
determined, the Person to whom, and the manner in which, such interest
shall be payable, and the basis upon which interest shall be calculated if
other than that of a 360-day year comprised of twelve 30-day months;
(7) the place or places where the principal of (and premium or Make-Whole
Amount (as defined), if any) and interest and Additional Amounts, if any,
on the Debt Securities of such series will be payable, where such Debt
Securities may be surrendered for registration of transfer or exchange and
where notices or demands to or upon SCI in respect of such Debt Securities
and the Indenture may be served;
(8) the period or periods within which, the price or prices (including
the premium or Make-Whole Amount, if any) at which, the currency or
currencies in which, and the other terms and conditions upon which the Debt
Securities of such series may be redeemed, as a whole or in part, at the
option of SCI, if SCI is to have such an option;
(9) the obligation, if any, of SCI to redeem, repay or purchase the Debt
Securities of such series pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or periods
within which, the date or dates upon which, the price or prices at which,
the currency or currencies, currency unit or units or composite currency or
currencies in which, and the other terms and conditions upon which such
Debt Securities shall be redeemed, repaid or purchased, as a whole or in
part, pursuant to such obligation;
(10) if other than United States dollars, the currency or currencies in
which the Debt Securities of such series are denominated and payable, which
may be a foreign currency or units of two or more foreign currencies or a
composite currency or currencies, and the terms and conditions relating
thereto;
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(11) whether the amount of payments of principal of (and premium or Make-
Whole Amount, if any) or interest, if any, on the Debt Securities of such
series may be determined with reference to an index, formula or other
method (which index, formula or method may be, but need not be, based on a
currency, currencies, currency unit or units or composite currency or
currencies) and the manner in which such amounts shall be determined;
(12) whether the principal of (and premium or Make-Whole Amount, if any)
or interest or Additional Amounts, if any, on the Debt Securities of such
series are to be payable, at the election of SCI or a Holder, in a currency
or currencies, currency unit or units or composite currency or currencies,
other than that in which such Debt Securities are denominated or stated to
be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, and the time and manner
of, and identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies in which
such Debt Securities are denominated or stated to be payable and the
currency or currencies in which such Debt Securities are to be so payable;
(13) any deletions from, modifications of or additions to the terms of
such series of Debt Securities with respect to the Events of Default or
covenants set forth in the Indenture;
(14) whether the Debt Securities of such series will be issued in
certificated or book-entry form;
(15) whether the Debt Securities of such series will be in registered or
bearer form and, if in registered form, the denominations thereof if other
than $1,000 and any integral multiple thereof and, if in bearer form, the
denominations thereof if other than $5,000 and the terms and conditions
relating thereto;
(16) the applicability, if any, of the defeasance and covenant defeasance
provisions of Article Fourteen of the Indenture to such series of Debt
Securities and any provisions in modification thereof, in addition thereto
or in lieu thereof;
(17) if the Debt Securities of such series are to be issued upon the
exercise of debt warrants, the time, manner and place for such Debt
Securities to be authenticated and delivered;
(18) whether and under what circumstances SCI will pay Additional Amounts
as contemplated in the Indenture on the Debt Securities of such series in
respect of any tax, assessment or governmental charge and, if so, whether
SCI will have the option to redeem such Debt Securities rather than pay
such Additional Amounts; and
(19) any other terms of such series of Debt Securities not inconsistent
with the provisions of the Indenture (Section 301).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
or bear no interest or bear interest at a rate which at the time of issuance is
below market rates ("Original Issue Discount Securities"). Special United
States federal income tax, accounting and other considerations applicable to
Original Issue Discount Securities will be described in the applicable
Prospectus Supplement.
Except as set forth below under "--Certain Covenants--Limitations on
Incurrence of Debt," the Indenture does not contain any other provisions that
would limit the ability of SCI to incur indebtedness or that would afford
Holders of Debt Securities protection in the event of a highly leveraged or
similar transaction involving SCI or in the event of a change of control.
However, SCI's Amended and Restated Declaration of Trust, as amended and
supplemented (the "Declaration of Trust"), restricts beneficial ownership of
SCI's outstanding shares of beneficial interest by a single person, or persons
acting as a group, to 9.8% of such shares, with certain exceptions (including
an exception in the case of Security Capital Group Incorporated "SCG")). See
"Description of Common Shares--Restriction on Size of Holdings." Additionally,
the Articles Supplementary relating to the Series A Preferred Shares restrict
beneficial ownership of the Series A Preferred Shares by a person, or persons
acting as a group, to 25% of the Series A Preferred Shares, with limited
exceptions. Similarly, the Articles Supplementary for each other series of
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Preferred Shares will contain certain provisions restricting the ownership and
transfer of the Preferred Shares. See "Description of Preferred Shares--
Restrictions on Ownership." These restrictions are designed to preserve SCI's
status as a REIT and, therefore, may act to prevent or hinder a change of
control. Reference is made to the applicable Prospectus Supplement for
information with respect to any deletions from, modifications of or additions
to the Events of Default or covenants of SCI that are described below,
including any addition of a covenant or other provision providing event risk or
similar protection.
DENOMINATIONS
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series issued in registered form will be issuable in
denominations of $1,000 and integral multiples thereof. Unless otherwise
described in the applicable Prospectus Supplement, the Debt Securities of any
series issued in bearer form will be issuable in denominations of $5,000
(Section 302).
PRINCIPAL AND INTEREST
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium or Make-Whole Amount, if any) and interest on any
series of Debt Securities will be payable at the corporate trust office of the
Trustee, initially located at 225 Franklin Street, Boston, Massachusetts 02110;
provided that, at the option of SCI, payment of interest may be made by check
mailed to the address of the Person entitled thereto as it appears in the
Security Register or by wire transfer of funds to such Person to an account
maintained within the United States (Sections 301, 305, 306, 307 and 1002).
If any Interest Payment Date, Principal Payment Date or the Maturity Date
falls on a day that is not a Business Day, the required payment shall be made
on the next Business Day as if it were made on the date such payment was due
and no interest shall accrue on the amount so payable for the period from and
after such Interest Payment Date, Principal Payment Date or the Maturity Date,
as the case may be. "Business Day" means any day, other than a Saturday or
Sunday, on which banks in Boston, Massachusetts are not required or authorized
by law or executive order to close. Any interest not punctually paid or duly
provided for on any Interest Payment Date with respect to any Debt Security
("Defaulted Interest") will forthwith cease to be payable to the Holder on the
applicable Regular Record Date and may either be paid to the person in whose
name such Debt Security is registered at the close of business on a special
record date (the "Special Record Date") for the payment of such Defaulted
Interest to be fixed by the Trustee, notice of which shall be given to the
Holder of such Debt Security not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner, all as more
completely described in the Indenture (Section 307).
MERGER, CONSOLIDATION OR SALE
SCI may consolidate with, or sell, lease or convey all or substantially all
of its assets to, or merge with or into, any other entity, provided that (a)
either SCI shall be the continuing entity, or the successor entity (if other
than SCI) formed by or resulting from any such consolidation or merger or which
shall have received the transfer of such assets is a Person organized and
existing under the laws of the United States or any State thereof and shall
expressly assume payment of the principal of (and premium or Make-Whole Amount,
if any) and any interest (including Additional Amounts, if any) on all of the
Debt Securities outstanding and the due and punctual performance and observance
of all of the covenants and conditions contained in the Indenture; (b)
immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of SCI or any Subsidiary as a result
thereof as having been incurred by SCI or such Subsidiary at the time of such
transaction, no Event of Default under the Indenture, and no event which, after
notice or the lapse of time, or both, would become such an Event of Default,
shall have occurred and be continuing; and (c) an officer's certificate and
legal opinion covering such conditions shall be delivered to the Trustee
(Sections 801 and 803).
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CERTAIN COVENANTS
Limitations on Incurrence of Debt. SCI will not, and will not permit any
Subsidiary to, incur any Debt (as defined below) if, immediately after giving
effect to the incurrence of such additional Debt and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Debt of SCI
and its Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles is greater than 60% of the sum of
(without duplication) (i) SCI's Total Assets (as defined below) as of the end
of the calendar quarter covered in SCI's Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, most recently filed with the
Commission (or, if such filing is not permitted under the Exchange Act, with
the Trustee) prior to the incurrence of such additional Debt and (ii) the
purchase price of any real estate assets or mortgages receivable acquired, and
the amount of any securities offering proceeds received (to the extent that
such proceeds were not used to acquire real estate assets or mortgages
receivable or used to reduce Debt), by SCI or any Subsidiary since the end of
such calendar quarter, including those proceeds obtained in connection with the
incurrence of such additional Debt (Section 1004).
In addition to the foregoing limitation on the incurrence of Debt, SCI will
not, and will not permit any Subsidiary to, incur any Debt secured by any
mortgage, lien, charge, pledge, encumbrance or security interest of any kind
upon any of the property of SCI or any Subsidiary if, immediately after giving
effect to the incurrence of such additional Debt and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Debt of SCI
and its Subsidiaries on a consolidated basis which is secured by any mortgage,
lien, charge, pledge, encumbrance or security interest on property of SCI or
any Subsidiary is greater than 40% of the sum of (i) SCI's Total Assets as of
the end of the calendar quarter covered in SCI's Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, most recently filed with the
Commission (or if such filing is not permitted under the Exchange Act, with the
Trustee) prior to the incurrence of such additional Debt and (ii) the purchase
price of any real estate assets or mortgages receivable acquired, and the
amount of any securities offering proceeds received (to the extent that such
proceeds were not used to acquire real estate assets or mortgages receivable or
used to reduce Debt), by SCI or any Subsidiary since the end of such calendar
quarter, including those proceeds obtained in connection with the incurrence of
such additional Debt (Section 1004).
In addition to the foregoing limitations on the incurrence of Debt, no
Subsidiary may incur any unsecured Debt other than intercompany Debt
subordinate to the Debt Securities; provided, however, that SCI or a Subsidiary
may acquire an entity that becomes a Subsidiary that has unsecured Debt if the
incurrence of such Debt (including any guarantees of such Debt assumed by SCI
or any Subsidiary) was not intended to evade the foregoing restrictions and the
incurrence of such Debt (including any guarantees of such Debt assumed by SCI
or any Subsidiary) would otherwise be permitted under the Indenture (Section
1004).
SCI and its Subsidiaries may not at any time own Total Unencumbered Assets
equal to less than 150% of the aggregate outstanding principal amount of the
Unsecured Debt of SCI and its Subsidiaries on a consolidated basis (Section
1004).
In addition to the foregoing limitations on the incurrence of Debt, SCI will
not, and will not permit any Subsidiary to, incur any Debt if the ratio of
Consolidated Income Available for Debt Service (as defined below) to the Annual
Service Charge (as defined below) for the four consecutive fiscal quarters most
recently ended prior to the date on which such additional Debt is to be
incurred shall have been less than 1.5, on a pro forma basis after giving
effect thereto and to the application of the proceeds therefrom, and calculated
on the assumption that (i) such Debt and any other Debt incurred by SCI and its
Subsidiaries since the first day of such four-quarter period and the
application of the proceeds therefrom, including to refinance other Debt, had
occurred at the beginning of such period; (ii) the repayment or retirement of
any other Debt by SCI and its Subsidiaries since the first day of such four-
quarter period had been incurred, repaid or retired at the beginning of such
period (except that, in making such computation, the amount of Debt under any
revolving credit facility shall be computed based upon the average daily
balance of such Debt during such period); (iii)
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in the case of Acquired Debt (as defined below) or Debt incurred in connection
with any acquisition since the first day of such four-quarter period, the
related acquisition had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition being included in such
pro forma calculation; and (iv) in the case of any acquisition or disposition
by SCI or its Subsidiaries of any asset or group of assets since the first day
of such four-quarter period, whether by merger, stock purchase or sale, or
asset purchase or sale, such acquisition or disposition or any related
repayment of Debt had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition or disposition being
included in such pro forma calculation (Section 1004).
Existence. Except as permitted under "--Merger, Consolidation or Sale," SCI
will do or cause to be done all things necessary to preserve and keep in full
force and effect its existence, rights (charter and statutory) and franchises;
provided, however, that SCI shall not be required to preserve any right or
franchise if it determines that the preservation thereof is no longer desirable
in the conduct of its business and that the loss thereof is not disadvantageous
in any material respect to the Holders of the Debt Securities (Section 1005).
Maintenance of Properties. SCI will cause all of its properties used or
useful in the conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of SCI may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that SCI and its Subsidiaries shall not be prevented from selling or
otherwise disposing for value its properties in the ordinary course of business
(Section 1006).
Insurance. SCI will, and will cause each of its Subsidiaries to, keep all of
its insurable properties insured against loss or damage at least equal to their
then full insurable value with financially sound and reputable insurance
companies (Section 1007).
Payment of Taxes and Other Claims. SCI will pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon the income, profits or property of SCI or any Subsidiary and
(ii) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a lien upon the property of SCI or any Subsidiary;
provided, however, that SCI shall not be required to pay or discharge or cause
to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings (Section 1008).
Provision of Financial Information. Whether or not SCI is subject to Section
13 or 15(d) of the Exchange Act, SCI will, to the extent permitted under the
Exchange Act, file with the Commission the annual reports, quarterly reports
and other documents which SCI would have been required to file with the
Commission pursuant to such Section 13 or 15(d) (the "Financial Statements") if
SCI were so subject, such documents to be filed with the Commission on or prior
to the respective dates (the "Required Filing Dates") by which SCI would have
been required so to file such documents if SCI were so subject. SCI will also
in any event (x) within 15 days of each Required Filing Date (i) transmit by
mail to all Holders of Debt Securities, as their names and addresses appear in
the Security Register, without cost to such Holders, copies of the annual
reports and quarterly reports which SCI would have been required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act if SCI were
subject to such Sections and (ii) file with the Trustee copies of the annual
reports, quarterly reports and other documents which SCI would have been
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if SCI were subject to such Sections and (y) if filing such
documents by SCI with the Commission is not permitted under the Exchange Act,
promptly upon written request and payment of the reasonable cost of duplication
and delivery, supply copies of such documents to any prospective Holder
(Section 1009).
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EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (a) default in the
payment of any installment of interest or Additional Amounts payable on any
Debt Security of such series which continues for 30 days; (b) default in the
payment of the principal of (or premium or Make-Whole Amount, if any, on) any
Debt Security of such series at its Maturity; (c) default in making any sinking
fund payment as required for any Debt Security of such series; (d) default in
the performance of any other covenant of SCI contained in the Indenture (other
than a covenant added to the Indenture solely for the benefit of a series of
Debt Securities issued thereunder other than such series), continued for 60
days after written notice as provided in the Indenture; (e) default in the
payment of an aggregate principal amount exceeding $10,000,000 of any evidence
of indebtedness of SCI or any mortgage, indenture or other instrument under
which such indebtedness is issued or by which such indebtedness is secured,
such default having occurred after the expiration of any applicable grace
period and having resulted in the acceleration of the maturity of such
indebtedness, but only if such indebtedness is not discharged or such
acceleration is not rescinded or annulled; (f) the entry by a court of
competent jurisdiction of one or more judgments, orders or decrees against SCI
or any of its Subsidiaries in an aggregate amount (excluding amounts fully
covered by insurance) in excess of $10,000,000 and such judgments, orders or
decrees remain undischarged, unstayed and unsatisfied in an aggregate amount
(excluding amounts fully covered by insurance) in excess of $10,000,000 for a
period of 30 consecutive days; (g) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of
SCI or any Significant Subsidiary or for all or substantially all of either of
its property; and (h) any other Event of Default provided with respect to a
particular series of Debt Securities (Section 501). The term "Significant
Subsidiary" means each significant subsidiary (as defined in Regulation S-X
promulgated under the Securities Act) of SCI.
If an Event of Default under the Indenture with respect to Debt Securities of
any series at the time Outstanding occurs and is continuing, then in every such
case, unless the principal of all of the Outstanding Debt Securities of such
series shall already have become due and payable, the Trustee or the Holders of
not less than 25% in principal amount of the Outstanding Debt Securities of
such series may declare the principal (or, if the Debt Securities of such
series are Original Issue Discount Securities or Indexed Securities, such
portion of the principal as may be specified in the terms thereof) of, and the
Make-Whole Amount, if any, on, all of the Debt Securities of such series to be
due and payable immediately by written notice thereof to SCI (and to the
Trustee if given by the Holders). However, at any time after such a declaration
of acceleration with respect to Debt Securities of any series has been made,
but before a judgment or decree for payment of the money due has been obtained
by the Trustee, the Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of such series may rescind and annul such
declaration and its consequences if (a) SCI shall have deposited with the
Trustee all required payments of the principal of (and premium or Make-Whole
Amount, if any) and interest, and any Additional Amounts, on the Debt
Securities of such series, plus certain fees, expenses, disbursements and
advances of the Trustee and (b) all Events of Default, other than the
nonpayment of accelerated principal (or specified portion thereof and the Make-
Whole Amount, if any) or interest, with respect to Debt Securities of such
series have been cured or waived as provided in the Indenture (Section 502).
The Indenture also provides that the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of any series may waive any
past default with respect to such series and its consequences, except a default
(x) in the payment of the principal of (or premium or Make-Whole Amount, if
any) or interest or Additional Amounts payable on any Debt Security of such
series or (y) in respect of a covenant or provision contained in the Indenture
that cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security affected thereby (Section 513).
The Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the Indenture; provided, however, that the
Trustee may withhold notice to the Holders of any series of Debt Securities of
any default with respect to such series (except a default in the payment of the
principal of (or premium or Make-Whole Amount, if any) or interest or
Additional Amounts payable on any Debt Security
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of such series or in the payment of any sinking fund installment in respect of
any Debt Security of such series) if the Responsible Officers of the Trustee
consider such withholding to be in the interest of such Holders (Section 601).
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute
proceedings in respect of an Event of Default from the Holders of not less than
25% in principal amount of the Outstanding Debt Securities of such series, as
well as an offer of reasonable indemnity (Section 507). This provision will not
prevent, however, any Holder of Debt Securities from instituting suit for the
enforcement of payment of the principal of (and premium or Make-Whole Amount,
if any), interest on, and Additional Amounts payable with respect to, such Debt
Securities at the respective due dates thereof (Section 508).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under the Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
(Section 602). The Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of any series shall have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or of exercising any trust or power conferred upon
the Trustee. However, the Trustee may refuse to follow any direction which is
in conflict with any law or the Indenture, which may involve the Trustee in
personal liability or which may be unduly prejudicial to the Holders of Debt
Securities of such series not joining therein (Section 512).
Within 120 days after the close of each fiscal year, SCI must deliver to the
Trustee a certificate, signed by one of several specified officers, stating
whether or not such officer has knowledge of any default under the Indenture
and, if so, specifying each such default and the nature and status thereof
(Section 1010).
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture may be made with the consent of
the Holders of not less than a majority in principal amount of all Outstanding
Debt Securities which are affected by such modification or amendment; provided,
however, that no such modification or amendment may, without the consent of the
Holder of each such Debt Security affected thereby, (a) change the Stated
Maturity of the principal of (or premium or Make-Whole Amount, if any), or any
installment of principal of or interest or Additional Amounts payable on, any
such Debt Security; (b) reduce the principal amount of, or the rate or amount
of interest on, or any premium or Make-Whole Amount payable on redemption of,
or any Additional Amounts payable with respect to, any such Debt Security, or
reduce the amount of principal of an Original Issue Discount Security or Make-
Whole Amount, if any, that would be due and payable upon declaration of
acceleration of the maturity thereof or would be provable in bankruptcy, or
adversely affect any right of repayment of the Holder of any such Debt
Security; (c) change the Place of Payment, or the coin or currency, for payment
of principal of (and premium or Make-Whole Amount, if any), or interest on, or
any Additional Amounts payable with respect to, any such Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any such Debt Security; (e) reduce the above-stated percentage
of Outstanding Debt Securities of any series necessary to modify or amend the
Indenture, to waive compliance with certain provisions thereof or certain
defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture; or (f) modify any of the foregoing
provisions or any of the provisions relating to the waiver of certain past
defaults or certain covenants, except to increase the required percentage to
effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holder of such Debt Security
(Section 902).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities have the right to waive compliance by SCI with certain
covenants in the Indenture (Section 1012).
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Modifications and amendments of the Indenture may be made by SCI and the
Trustee without the consent of any Holder of Debt Securities for any of the
following purposes: (i) to evidence the succession of another Person to SCI as
obligor under the Indenture; (ii) to add to the covenants of SCI for the
benefit of the Holders of all or any series of Debt Securities or to surrender
any right or power conferred upon SCI in the Indenture; (iii) to add Events of
Default for the benefit of the Holders of all or any series of Debt Securities;
(iv) to add or change any provisions of the Indenture to facilitate the
issuance of, or to liberalize certain terms of, Debt Securities in bearer form,
or to permit or facilitate the issuance of Debt Securities in uncertificated
form, provided that such action shall not adversely affect the interests of the
Holders of the Debt Securities of any series in any material respect; (v) to
change or eliminate any provisions of the Indenture, provided that any such
change or elimination shall become effective only when there are no Debt
Securities Outstanding of any series created prior thereto which are entitled
to the benefit of such provision; (vi) to secure the Debt Securities; (vii) to
establish the form or terms of Debt Securities of any series and any related
coupons; (viii) to provide for the acceptance of appointment by a successor
Trustee or facilitate the administration of the trusts under the Indenture by
more than one Trustee; (ix) to cure any ambiguity, defect or inconsistency in
the Indenture or to make any other changes, provided that in each case, such
action shall not adversely affect the interests of Holders of Debt Securities
of any series in any material respect; (x) to close the Indenture with respect
to the authentication and delivery of additional series of Debt Securities or
to qualify, or maintain qualification of, the Indenture under the TIA; or (xi)
to supplement any of the provisions of the Indenture to the extent necessary to
permit or facilitate defeasance and discharge of any series of such Debt
Securities, provided that such action shall not adversely affect the interests
of the Holders of the Debt Securities of any series in any material respect
(Section 901).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof; (ii) the principal amount
of a Debt Security denominated in a Foreign Currency that shall be deemed
outstanding shall be the United States dollar equivalent, determined on the
issue date for such Debt Security, of the principal amount (or, in the case of
an Original Issue Discount Security, the United States dollar equivalent on the
issue date of such Debt Security of the amount determined as provided in (i)
above); (iii) the principal amount of an Indexed Security that shall be deemed
outstanding shall be the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such Indexed
Security pursuant to Section 301 of the Indenture; and (iv) Debt Securities
owned by SCI or any other obligor upon the Debt Securities or any Affiliate of
SCI or of such other obligor shall be disregarded (Section 101).
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501). A meeting may be called at any time
by the Trustee, and also, upon request, by SCI or the Holders of at least 10%
in principal amount of the Outstanding Debt Securities of such series, in any
such case upon notice given as provided in the Indenture (Section 1502). Except
for any consent that must be given by the Holder of each Debt Security affected
by certain modifications and amendments of the Indenture, any resolution
presented at a meeting or adjourned meeting duly reconvened at which a quorum
is present may be adopted by the affirmative vote of the Holders of a majority
in principal amount of the Outstanding Debt Securities of such series;
provided, however, that, except as referred to above, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the Holders of a
specified percentage, which is less than a majority, in principal amount of the
Outstanding Debt Securities of a series may be adopted at a meeting or
adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the Holders of such specified percentage in principal
amount of the Outstanding Debt Securities of such series. Any resolution passed
or decision taken at any meeting of Holders of Debt Securities of any series
duly held in accordance with the Indenture will be binding on all Holders of
Debt Securities of such series. The quorum at any meeting called to adopt a
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resolution, and at any reconvened meeting, will be Persons holding or
representing a majority in principal amount of the Outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the Holders
of not less than a specified percentage in principal amount of the Outstanding
Debt Securities of a series, the Persons holding or representing such specified
percentage in principal amount of the Outstanding Debt Securities of such
series will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that the Indenture expressly provides may be made, given or taken by the
Holders of a specified percentage in principal amount of all Outstanding Debt
Securities affected thereby, or of the Holders of such series and one or more
additional series: (i) there shall be no minimum quorum requirement for such
meeting and (ii) the principal amount of the Outstanding Debt Securities of
such series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into account
in determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture (Section 1504).
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided by the Indenture to be given or taken by a specified
percentage in principal amount of the Holders of any or all series of Debt
Securities may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such specified percentage of Holders in
person or by agent duly appointed in writing; and, except as otherwise
expressly provided in the Indenture, such action shall become effective when
such instrument or instruments are delivered to the Trustee. Proof of execution
of any instrument or of a writing appointing any such agent shall be sufficient
for any purpose of the Indenture and (subject to Article Six of the Indenture)
conclusive in favor of the Trustee and SCI, if made in the manner specified
above (Section 1507).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
SCI may discharge certain obligations to Holders of any series of Debt
Securities that have not already been delivered to the Trustee for cancellation
and that either have become due and payable or will become due and payable
within one year (or scheduled for redemption within one year) by irrevocably
depositing with the Trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable in an amount sufficient to pay the entire indebtedness
on such Debt Securities in respect of principal (and premium or Make-Whole
Amount, if any) and interest and Additional Amounts payable to the date of such
deposit (if such Debt Securities have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be (Section 1401).
The Indenture provides that, if the provisions of Article Fourteen are made
applicable to the Debt Securities of or within any series pursuant to Section
301 of the Indenture, SCI may elect either (a) to defease and be discharged
from any and all obligations with respect to such Debt Securities (except for
the obligation to pay Additional Amounts, if any, upon the occurrence of
certain events of tax, assessment or governmental charge with respect to
payments on such Debt Securities and the obligations to register the transfer
or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") (Section 1402) or (b) to be released from its obligations with
respect to such Debt Securities under Sections 1004 to 1009, inclusive, of the
Indenture (being the restrictions described under "--Certain Covenants") and,
if provided pursuant to Section 301 of the Indenture, its obligations with
respect to any other covenant, and any omission to comply with such obligations
shall not constitute a default or an Event of Default with respect to such Debt
Securities ("covenant defeasance") (Section 1403), in either case upon the
irrevocable deposit by SCI with the Trustee, in trust, of an amount, in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at Stated
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Maturity, or Government Obligations (as defined below), or both, applicable to
such Debt Securities which through the scheduled payment of principal and
interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium or Make-Whole Amount, if any)
and interest on such Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor (Section 1404).
Such a trust may only be established if, among other things, SCI has
delivered to the Trustee an Opinion of Counsel (as specified in the Indenture)
to the effect that the Holders of such Debt Securities will not recognize
income, gain or loss for United States federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to United States
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance or covenant defeasance had
not occurred, and such Opinion of Counsel, in the case of defeasance, must
refer to and be based upon a ruling of the Internal Revenue Service or a change
in applicable United States federal income tax law occurring after the date of
the Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations of
the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the Foreign Currency in which the Debt Securities of such series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other government, which, in
either case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government Obligation
held by such custodian for the account of the holder of a depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the
Government Obligation evidenced by such depository receipt (Section 101).
Unless otherwise provided in the applicable Prospectus Supplement, if after
SCI has deposited funds and/or Government Obligations to effect defeasance or
covenant defeasance with respect to Debt Securities of any series, (a) the
Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to Section 301 of the Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been,
and will be, fully discharged and satisfied through the payment of the
principal of (and premium or Make-Whole Amount, if any) and interest on such
Debt Security as they become due out of the proceeds yielded by converting the
amount so deposited in respect of such Debt Security into the currency,
currency unit or composite currency in which such Debt Security becomes payable
as a result of such election or such cessation of usage based on the applicable
market exchange rate (Section 1405). "Conversion Event" means the cessation of
use of (i) a currency, currency unit or composite currency (other than the ECU
or other currency unit) both by the government of the country which issued such
currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community, (ii) the
ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium or
Make-Whole Amount, if any) and interest on any Debt Security that is payable in
a Foreign Currency that ceases to be used by its government of issuance shall
be made in United States dollars (Section 101).
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In the event SCI effects covenant defeasance with respect to any Debt
Securities and such Debt Securities are declared due and payable because of the
occurrence of any Event of Default other than the Event of Default described in
clause (d) under "--Events of Default, Notice and Waiver" with respect to
Sections 1004 to 1009, inclusive, of the Indenture (which Sections would no
longer be applicable to such Debt Securities) or described in clause (g) under
"--Events of Default, Notice and Waiver" with respect to any other covenant as
to which there has been covenant defeasance, the amount in such currency,
currency unit or composite currency in which such Debt Securities are payable
plus Government Obligations on deposit with the Trustee, will be sufficient to
pay amounts due on such Debt Securities at the time of their Stated Maturity
but may not be sufficient to pay amounts due on such Debt Securities at the
time of the acceleration resulting from such Event of Default. However, SCI
would remain liable to make payment of such amounts due at the time of
acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
REGISTRATION AND TRANSFER
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount and
tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the Trustee referred to above. In
addition, subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series may be surrendered for
conversion or registration of transfer thereof at the corporate trust office of
the Trustee referred to above. Every Debt Security surrendered for registration
of transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer. No service charge will be made for any registration of
transfer or exchange of any Debt Securities, but SCI may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith (Section 305). SCI may at any time designate a transfer
agent (in addition to the Trustee) with respect to any series of Debt
Securities. If SCI has designated such a transfer agent or transfer agents, SCI
may at any time rescind the designation of any such transfer agent or approve a
change in the location at which any such transfer agent acts, except that SCI
will be required to maintain a transfer agent in each Place of Payment for such
series (Section 1002).
Neither SCI nor the Trustee shall be required to (i) issue, register the
transfer of or exchange Debt Securities of any series during a period beginning
at the opening of business 15 days before any selection of Debt Securities of
that series to be redeemed and ending at the close of business on the day of
mailing of the relevant notice of redemption; (ii) register the transfer of or
exchange any Debt Security, or portion thereof, called for redemption, except
the unredeemed portion of any Debt Security being redeemed in part; or (iii)
issue, register the transfer of or exchange any Debt Security which has been
surrendered for repayment at the option of the Holder, except the portion, if
any, of such Debt Security not to be so repaid (Section 305).
BOOK-ENTRY PROCEDURES
The Debt Securities of a series may be issued in whole or in part in the form
of one or more global securities ("Global Securities") that will be deposited
with, or on behalf of, a depository (the "Depository") identified in the
applicable Prospectus Supplement relating to such series. Global Securities, if
any, are expected to be deposited with The Depository Trust Company, as
Depository. Global Securities may be issued in fully registered form and may be
issued in either temporary or permanent form. Unless and until it is exchanged
in whole or in part for the individual Debt Securities represented thereby, a
Global Security may not be transferred except as a whole by the Depository for
such Global Security to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository or by the
Depository or any nominee of such Depository to a successor Depository or any
nominee of such successor.
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The specific terms of the depository arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series. Unless otherwise indicated in the applicable
Prospectus Supplement, SCI anticipates that the following provisions will apply
to depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depository ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by SCI if such Debt Securities are offered and sold directly by
SCI. Ownership of beneficial interests in a Global Security will be limited to
Participants or persons that may hold interests through Participants. Ownership
of beneficial interests in such Global Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the applicable Depository or its nominee (with respect to beneficial interests
of Participants) and records of Participants (with respect to beneficial
interests of persons who hold through Participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and laws may impair the ability to
own, pledge or transfer beneficial interests in a Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Except as provided below or in the applicable Prospectus Supplement,
owners of beneficial interests in a Global Security will not be entitled to
have any of the individual Debt Securities of the series represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities of such series in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
Payments of principal of, any premium or Make-Whole Amount and any interest
on, or any Additional Amounts payable with respect to, individual Debt
Securities represented by a Global Security registered in the name of a
Depository or its nominee will be made to the Depository or its nominee, as the
case may be, as the registered owner of the Global Security representing such
Debt Securities. None of SCI, the Trustee, any Paying Agent or the Security
Registrar for such Debt Securities will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global Security for such Debt Securities
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
SCI expects that the Depository for a series of Debt Securities or its
nominee, upon receipt of any payment of principal, premium, Make-Whole Amount
or interest in respect of a permanent Global Security representing any of such
Debt Securities, immediately will credit Participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of such Global Security for such Debt Securities as shown on
the records of such Depository or its nominee. SCI also expects that payments
by Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such Participants.
If a Depository for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depository and a successor depository is
not appointed by SCI within 90 days, SCI will issue individual Debt Securities
of such series in exchange for the Global Security representing such series of
Debt Securities. In addition, SCI may, at any time and in its sole discretion,
subject to any limitations described in the applicable Prospectus Supplement
relating to such Debt Securities, determine not to have any Debt Securities of
such series represented by one or more Global Securities and, in such event,
will issue individual Debt Securities of such series in exchange for the Global
Security or Securities representing such series of Debt Securities.
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Individual Debt Securities of such series so issued will be issued in
denominations, unless otherwise specified by SCI, of $1,000 and integral
multiples thereof.
CERTAIN DEFINITIONS
"Acquired Debt" means Debt of a Person (i) existing at the time such Person
becomes a Subsidiary or (ii) assumed in connection with the acquisition of
assets from such Person, in each case, other than Debt incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary or such
acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary.
"Annual Service Charge" as of any date means the maximum amount which is
payable in any period for interest on, and original issue discount of, Debt of
SCI and its Subsidiaries and the amount of dividends which are payable in
respect of any Disqualified Stock.
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
"Consolidated Income Available for Debt Service" for any period means
Earnings from Operations (as defined below) of SCI and its Subsidiaries plus
amounts which have been deducted, and minus amounts which have been added, for
the following (without duplication): (a) interest on Debt of SCI and its
Subsidiaries, (b) provision for taxes of SCI and its Subsidiaries based on
income, (c) amortization of debt discount, (d) provisions for gains and losses
on properties and property depreciation and amortization, (e) the effect of any
noncash charge resulting from a change in accounting principles in determining
Earnings from Operations for such period and (f) amortization of deferred
charges.
"Debt" of SCI or any Subsidiary means any indebtedness of SCI or any
Subsidiary, whether or not contingent, in respect of (i) borrowed money or
evidenced by bonds, notes, debentures or similar instruments, (ii) indebtedness
secured by any mortgage, pledge, lien, charge, encumbrance or any security
interest existing on property owned by SCI or any Subsidiary, (iii) the
reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued or amounts representing the balance deferred
and unpaid of the purchase price of any property or services, except any such
balance that constitutes an accrued expense or trade payable, or all
conditional sale obligations or obligations under any title retention
agreement, (iv) the principal amount of all obligations of SCI or any
Subsidiary with respect to redemption, repayment or other repurchase of any
Disqualified Stock or (v) any lease of property by SCI or any Subsidiary as
lessee which is reflected on SCI's Consolidated Balance Sheet as a capitalized
lease in accordance with generally accepted accounting principles, to the
extent, in the case of items of indebtedness under (i) through (iii) above,
that any such items (other than letters of credit) would appear as a liability
on SCI's Consolidated Balance Sheet in accordance with generally accepted
accounting principles, and also includes, to the extent not otherwise included,
any obligation by SCI or any Subsidiary to be liable for, or to pay, as
obligor, guarantor or otherwise (other than for purposes of collection in the
ordinary course of business), Debt of another Person (other than SCI or any
Subsidiary) (it being understood that Debt shall be deemed to be incurred by
SCI or any Subsidiary whenever SCI or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
(ii) is convertible into or exchangeable or exercisable for Debt or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the Stated Maturity of the
series of Debt Securities.
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"Earnings from Operations" for any period means net earnings excluding gains
and losses on sales of investments, net, as reflected in the financial
statements of SCI and its Subsidiaries for such period determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Encumbrance" means any mortgage, pledge, lien, charge, encumbrance or any
security interest existing on property owned by SCI or any Subsidiary securing
indebtedness for borrowed money, other than a Permitted Encumbrance.
"Permitted Encumbrances" means leases, Encumbrances securing taxes,
assessments and similar charges, mechanics liens and other similar
Encumbrances.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which a majority of (a) the voting power of the voting equity
securities or (b) in the case of a partnership or any other entity other than a
corporation, the outstanding equity interest of which are owned, directly or
indirectly, by such Person. For the purposes of this definition, "voting equity
securities" means equity securities having voting power for the election of
directors, whether at all times or only so long as no senior class of security
has such voting power by reason of any contingency.
"Total Assets" as of any date means the sum of (i) Undepreciated Real Estate
Assets and (ii) all other assets of SCI and its Subsidiaries determined in
accordance with generally accepted accounting principles (but excluding
accounts receivable and intangibles).
"Total Unencumbered Assets" means the sum of (i) those Undepreciated Real
Estate Assets not subject to an Encumbrance and (ii) the value (determined in
accordance with generally accepted accounting principles) of all other assets
(other than accounts receivable and intangibles) of SCI and its Subsidiaries
not subject to an Encumbrance.
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of SCI and its
Subsidiaries on such date, before depreciation and amortization determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Unsecured Debt" means Debt of the types described in clauses (i), (iii) and
(iv) of the definition thereof which is not secured by any mortgage, lien,
charge, pledge or security interest of any kind upon any of the properties of
SCI or any Subsidiary.
NO PERSONAL LIABILITY
No past, present or future trustee, officer, employee or shareholder, as
such, of SCI or any successor thereof shall have any liability for any
obligations of SCI under the Debt Securities or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Debt Securities by accepting such Debt Securities waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of Debt Securities (Section 111).
TRUSTEE
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect
to such series (Section 608). In the event that two or more persons are acting
as Trustee with respect to different series of Debt Securities, each such
Trustee shall be a Trustee of a trust under the Indenture separate and apart
from the trust administered by any other Trustee (Sections 101 and 609), and,
except as otherwise indicated herein, any action described herein to be taken
by the Trustee may be taken by each such Trustee with respect to, and only with
respect to, the one or more series of Debt Securities for which it is Trustee
under the Indenture.
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DESCRIPTION OF PREFERRED SHARES
GENERAL
Subject to limitations prescribed by Maryland law and the Declaration of
Trust, the Board is authorized to issue, from the authorized but unissued
shares of beneficial interest of SCI, Preferred Shares in series and to
establish from time to time the number of Preferred Shares to be included in
such series and to fix the designation and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the shares of each
series, and such other subjects or matters as may be fixed by resolution of the
Board or duly authorized committee thereof. At November 13, 1995, 5,400,000
Series A Preferred Shares were issued and outstanding and held of record by
approximately 260 shareholders.
Reference is made to the Prospectus Supplement relating to the series of
Preferred Shares offered thereby for the specific terms thereof, including:
(1) The title and stated value of such series of Preferred Shares;
(2) The number of shares of such series of Preferred Shares offered, the
liquidation preference per share and the offering price of such Preferred
Shares;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to Preferred Shares of such series;
(4) The date from which dividends on Preferred Shares of such series
shall cumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for Preferred
Shares of such series;
(6) The provision for a sinking fund, if any, for Preferred Shares of
such series;
(7) The provision for redemption, if applicable, of Preferred Shares of
such series;
(8) Any listing of such series of Preferred Shares on any securities
exchange;
(9) The terms and conditions, if applicable, upon which Preferred Shares
of such series will be convertible into Common Shares, including the
conversion price (or manner of calculation thereof);
(10) Whether interests in Preferred Shares of such series will be
represented by global securities;
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such series of Preferred Shares;
(12) A discussion of federal income tax considerations applicable to
Preferred Shares of such series;
(13) The relative ranking and preferences of Preferred Shares of such
series as to dividend rights and rights upon liquidation, dissolution or
winding up of the affairs of SCI;
(14) Any limitations on issuance of any series of Preferred Shares
ranking senior to or on a parity with such series of Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of SCI; and
(15) Any limitations on direct or beneficial ownership and restrictions
on transfer of Preferred Shares of such series, in each case as may be
appropriate to preserve the status of SCI as a REIT.
RANK
Unless otherwise specified in the applicable Prospectus Supplement, the
Preferred Shares of each series will, with respect to dividend rights and
rights upon liquidation, dissolution or winding up of the affairs of SCI, rank
(i) senior to all classes or series of Common Shares, and to all equity
securities ranking junior to such series of Preferred Shares; (ii) on a parity
with all equity securities issued by SCI the terms of which specifically
provide that such equity securities rank on a parity with Preferred Shares of
such series; and (iii) junior to all equity securities issued by SCI the terms
of which specifically provide that such equity securities rank senior to
Preferred Shares of such series.
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DIVIDENDS
Holders of Preferred Shares of each series shall be entitled to receive,
when, as and if declared by the Board, out of assets of SCI legally available
for payment, cash dividends at such rates and on such dates as will be set
forth in the applicable Prospectus Supplement. Each such dividend shall be
payable to holders of record as they appear on the share transfer books of SCI
on such record dates as shall be fixed by the Board.
Dividends on any series of the Preferred Shares may be cumulative or
noncumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board fails to declare a dividend
payable on a dividend payment date on any series of the Preferred Shares for
which dividends are noncumulative, then the holders of such series of the
Preferred Shares will have no right to receive a dividend in respect of the
dividend period ending on such dividend payment date, and SCI will have no
obligation to pay the dividend accrued for such period, whether or not
dividends on such series are declared payable on any future dividend payment
date.
If Preferred Shares of any series are outstanding, no full dividends shall be
declared or paid or set apart for payment on the Preferred Shares of SCI of any
other series ranking, as to dividends, on a parity with or junior to the
Preferred Shares of such series for any period unless (i) if such series of
Preferred Shares has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Preferred Shares of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Shares does not have a cumulative dividend,
full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Preferred Shares of such
series. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the Preferred Shares of any series and the
shares of any other series of Preferred Shares ranking on a parity as to
dividends with the Preferred Shares of such series, all dividends declared upon
Preferred Shares of such series and any other series of Preferred Shares
ranking on a parity as to dividends with such Preferred Shares shall be
declared pro rata so that the amount of dividends declared per share on the
Preferred Shares of such series and such other series of Preferred Shares shall
in all cases bear to each other the same ratio that accrued dividends per share
on the Preferred Shares of such series (which shall not include any cumulation
in respect of unpaid dividends for prior dividend periods if such series of
Preferred Shares does not have a cumulative dividend) and such other series of
Preferred Shares bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on
Preferred Shares of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if such
series of Preferred Shares has a cumulative dividend, full cumulative dividends
on the Preferred Shares of such series have been or contemporaneously are
declared and paid or declared and a sum sufficient of the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period or (ii) if such series of Preferred Shares does not have a cumulative
dividend, full dividends on the Preferred Shares of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend period,
no dividends (other than in Common Shares or other capital shares ranking
junior to the Preferred Shares of such series as to dividends and upon
liquidation) shall be declared or paid or set aside for payment or other
distribution shall be declared or made upon the Common Shares or any other
capital shares of SCI ranking junior to or on a parity with the Preferred
Shares of such series as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid to
or made available for a sinking fund for the redemption of any shares of any
such series) by SCI (except by conversion into or exchange for other capital
shares of SCI ranking junior to the Preferred Shares of such series as to
dividends and upon liquidation).
Any dividend payment made on a series of Preferred Shares shall first be
credited against the earliest accrued but unpaid dividend due with respect to
shares of such series which remains payable.
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REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Shares
of a series will be subject to mandatory redemption or redemption at the option
of SCI, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of Preferred Shares of
such series that shall be redeemed by SCI in each year commencing after a date
to be specified, at a redemption price per share to be specified, together with
an amount equal to all accrued and unpaid dividends thereon (which shall not,
if such series of Preferred Shares does not have a cumulative dividend, include
any cumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Shares of any series is payable only from the
net proceeds of the issuance of capital shares of SCI, the terms of such series
of Preferred Shares may provide that, if no such capital shares shall have been
issued or to the extent the net proceeds from any issuance are insufficient to
pay in full the aggregate redemption price then due, Preferred Shares of such
series shall automatically and mandatorily be converted into shares of the
applicable capital shares of SCI pursuant to conversion provisions specified in
the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Shares
has a cumulative dividend, full cumulative dividends on all Preferred Shares of
any series shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past dividend periods and the then current dividend period or (ii) if such
series of Preferred Shares does not have a cumulative dividend, full dividends
on all Preferred Shares of any series shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for the then current dividend period, no Preferred Shares of
any series shall be redeemed unless all outstanding Preferred Shares of such
series are simultaneously redeemed; provided, however, that the foregoing shall
not prevent the purchase or acquisition of Preferred Shares of such series
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding Preferred Shares of such series, and, unless (i) if such series
of Preferred Shares has a cumulative dividend, full cumulative dividends on all
Preferred Shares of any series shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period or (ii) if such series of Preferred Shares does not have a cumulative
dividend, full dividends on all Preferred Shares of any series shall have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend period,
SCI shall not purchase or otherwise acquire directly or indirectly any
Preferred Shares of such series (except by conversion into or exchange for
capital shares of SCI ranking junior to the Preferred Shares of such series as
to dividends and upon liquidation).
If fewer than all of the outstanding Preferred Shares of any series are to be
redeemed, the number of shares to be redeemed will be determined by SCI and
such shares may be redeemed pro rata from the holders of record of Preferred
Shares of such series in proportion to the number of Preferred Shares of such
series held by such holders (with adjustments to avoid redemption of fractional
shares) or by lot in a manner determined by SCI.
Notice of redemption will be mailed at least 30 days but not more than 90
days before the redemption date to each holder of record of Preferred Shares of
any series to be redeemed at the address shown on the share transfer books of
SCI. Each notice shall state: (i) the redemption date; (ii) the number of
shares and series of the Preferred Shares to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Shares
are to be surrendered for payment of the redemption price; (v) that dividends
on the Preferred Shares to be redeemed will cease to accrue on such redemption
date; and (vi) the date upon which the holder's conversion rights, if any, as
to such Preferred Shares shall terminate. If fewer than all the Preferred
Shares of any series are to be redeemed, the notice mailed to each such holder
thereof shall also specify the number of Preferred Shares to be redeemed from
each such holder. If notice of
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redemption of any Preferred Shares has been given and if the funds necessary
for such redemption have been set aside by SCI in trust for the benefit of the
holders of any Preferred Shares so called for redemption, then from and after
the redemption date dividends will cease to accrue on such Preferred Shares,
and all rights of the holders of such Preferred Shares will terminate, except
the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of SCI, then, before any distribution or payment shall be made to
the holders of any Common Shares or any other class or series of shares of
beneficial interest of SCI ranking junior to such series of Preferred Shares in
the distribution of assets upon any liquidation, dissolution or winding up of
SCI, the holders of each series of Preferred Shares shall be entitled to
receive out of assets of SCI legally available for distribution to shareholders
liquidating distributions in the amount of the liquidation preference per share
(set forth in the applicable Prospectus Supplement), plus an amount equal to
all dividends accrued and unpaid thereon (which shall not include any
cumulation in respect of unpaid dividends for prior dividend periods if such
series of Preferred Shares does not have a cumulative dividend). After payment
of the full amount of the liquidating distributions to which they are entitled,
the holders of Preferred Shares of such series will have no right or claim to
any of the remaining assets of SCI. In the event that, upon any such voluntary
or involuntary liquidation, dissolution or winding up, the available assets of
SCI are insufficient to pay the amount of the liquidating distributions on all
outstanding Preferred Shares of such series and the corresponding amounts
payable on all shares of other classes or series of capital shares of SCI
ranking on a parity with Preferred Shares of such series in the distribution of
assets, then the holders of Preferred Shares of such series and all other such
classes or series of capital shares shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Shares of such series, the remaining assets of SCI shall be
distributed among the holders of any other classes or series of capital shares
ranking junior to the Preferred Shares of such series upon liquidation,
dissolution or winding up, according to their respective rights and preferences
and in each case according to their respective number of shares. For such
purposes, the consolidation or merger of SCI with or into any other entity, or
the sale, lease or conveyance of all or substantially all of the property or
business of SCI, shall not be deemed to constitute a liquidation, dissolution
or winding up of SCI.
VOTING RIGHTS
Holders of the Preferred Shares of each series will not have any voting
rights, except as set forth below or in the applicable Prospectus Supplement or
as otherwise required by applicable law. The following is a summary of the
voting rights that, unless provided otherwise in the applicable Prospectus
Supplement, will apply to each series of Preferred Shares (as in the case of
the Series A Preferred Shares).
If six quarterly dividends (whether or not consecutive) payable on the
Preferred Shares of such series or any other series of Preferred Shares ranking
on a parity with such series of Preferred Shares with respect in each case to
the payment of dividends, amounts upon liquidation, dissolution and winding up
("Parity Shares") are in arrears, whether or not earned or declared, the number
of Trustees then constituting the Board will be increased by two, and the
holders of Preferred Shares of such series, voting together as a class with the
holders of any other series of Parity Shares (any such other series, the
"Voting Preferred Shares"), will have the right to elect two additional
trustees to serve on the Board at any annual meeting of shareholders or a
properly called special meeting of the holders of Preferred Shares of such
series and such Voting Preferred Shares and at each subsequent annual meeting
of shareholders until all such dividends and dividends for the current
quarterly period on the Preferred Shares of such series and such other Voting
Preferred Shares have been paid or declared and set aside for payment. Such
voting rights will terminate when all such accrued and unpaid dividends have
been declared and paid or set aside for payment. The term of office of all
trustees so elected will terminate with the termination of such voting rights.
For so long as SCG and certain of its
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affiliates beneficially own in excess of 10% of the outstanding Common Shares,
in any such vote by holders of Preferred Shares of such series, SCG and certain
of its affiliates shall vote their Preferred Shares of such series, if any, in
the same respective percentages as the Preferred Shares of such series and
Voting Preferred Shares that are not held by such persons.
The approval of two-thirds of the outstanding Preferred Shares of such series
and all other series of Voting Preferred Shares similarly affected, voting as a
single class, is required in order to (i) amend the Declaration of Trust to
affect materially and adversely the rights, preferences or voting power of the
holders of the Preferred Shares of such series or the Voting Preferred Shares;
(ii) enter into a share exchange that affects the Preferred Shares of such
series, consolidate with or merge into another entity, or permit another entity
to consolidate with or merge into SCI, unless in each such case each Preferred
Share of such series remains outstanding without a material and adverse change
to its terms and rights or is converted into or exchanged for preferred shares
of the surviving entity having preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption thereof identical to that of a Preferred Share of such
series (except for changes that do not materially and adversely affect the
holders of the Preferred Shares of such series); or (iii) authorize,
reclassify, create, or increase the authorized amount of any class of shares
having rights senior to the Preferred Shares of such series with respect to the
payment of dividends or amounts upon liquidation, dissolution or winding up.
However, SCI may create additional classes of Parity Shares and other series of
Preferred Shares ranking junior to such series of Preferred Shares with respect
in each case to the payment of dividends, amounts upon liquidation, dissolution
and winding up ("Junior Shares"), increase the authorized number of Parity
Shares and Junior Shares and issue additional series of Parity Shares and
Junior Shares without the consent of any holder of Preferred Shares of such
series.
Except as provided above and as required by law, the holders of Preferred
Shares of each series will not be entitled to vote on any merger or
consolidation involving SCI or a sale of all or substantially all of the assets
of SCI.
CONVERSION RIGHTS
The terms and conditions, if any, upon which Preferred Shares of any series
are convertible into Common Shares will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
Common Shares into which the Preferred Shares of such series are convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Shares of such series or SCI, the events requiring an adjustment of
the conversion price and provisions affecting conversion in the event of the
redemption of the Preferred Shares of such series.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common Shares--Restriction on Size
of Holdings," for SCI to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
shares of beneficial interest may be owned by five or fewer individuals at any
time during the last half of any taxable year. Therefore, the Articles
Supplementary for each series of Preferred Shares will contain certain
provisions restricting the ownership and transfer of the Preferred Shares (the
"Preferred Shares Ownership Limit Provision"). Except as otherwise described in
the applicable Prospectus Supplement relating thereto, the provisions of each
Articles Supplementary relating to the Preferred Shares Ownership Limit will
provide (as in the case of the Series A Preferred Shares) as summarized below.
The Preferred Shares Ownership Limit Provision will provide that, subject to
certain exceptions contained in such Articles Supplementary, no person, or
persons acting as a group, may beneficially own more than 25% of any series of
Preferred Shares outstanding at any time, except as a result of SCI's
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redemption of Preferred Shares. Shares acquired in excess of the Preferred
Shares Ownership Limit Provision must be redeemed by SCI at a price equal to
the average daily per share closing sale price during the 30-day period ending
on the business day prior to the redemption date. Such redemption is not
applicable if a person's ownership exceeds the limitations due solely to SCI's
redemption of Preferred Shares; provided that thereafter any additional
Preferred Shares acquired by such person shall be Excess Shares (as hereinafter
defined). See "Description of Common Shares--Restriction on Size of Holdings."
From and after the date of notice of such redemption, the holder of the
Preferred Shares thus redeemed shall cease to be entitled to any distribution
(other than distributions declared prior to the date of notice of redemption),
voting rights and other benefits with respect to such shares except the right
to receive payment of the redemption price determined as described above. The
Preferred Shares Ownership Limit Provision may not be waived with respect to
certain affiliates of SCI.
All certificates representing shares of Preferred Shares will bear a legend
referring to the restrictions described above.
DESCRIPTION OF COMMON SHARES
GENERAL
The Declaration of Trust authorizes SCI to issue up to 150,000,000 Shares of
Beneficial Interest, $0.01 par value, consisting of Common Shares, Preferred
Shares and such other types or classes of shares of beneficial interest as the
Board may create and authorize from time to time. At November 13, 1995,
approximately 81,409,860 Common Shares were issued and outstanding and held of
record by approximately 1,150 shareholders.
The following description sets forth certain general terms and provisions of
the Common Shares to which any Prospectus Supplement may relate, including a
Prospectus Supplement which provides for Common Shares issuable pursuant to
subscription offerings or rights offerings or upon conversion of Preferred
Shares which are offered pursuant to such Prospectus Supplement and convertible
into Common Shares for no additional consideration. The statements below
describing the Common Shares are in all respects subject to and qualified in
their entirety by reference to the applicable provisions of the Declaration of
Trust and SCI's Bylaws.
The outstanding Common Shares are fully paid and, except as set forth below
under "--Shareholder Liability," non-assessable. Each Common Share entitles the
holder to one vote on all matters requiring a vote of shareholders, including
the election of Trustees. Holders of Common Shares do not have the right to
cumulate their votes in the election of Trustees, which means that the holders
of a majority of the outstanding Common Shares can elect all of the Trustees
then standing for election. Holders of Common Shares are entitled to such
distributions as may be declared from time to time by the Board out of funds
legally available therefor. Holders of Common Shares have no conversion,
redemption, preemptive or exchange rights to subscribe to any securities of
SCI. In the event of a liquidation, dissolution or winding up of the affairs of
SCI, the holders of the Common Shares are entitled to share ratably in the
assets of SCI remaining after provision for payment of all liabilities to
creditors and payment of liquidation preferences and accrued dividends, if any,
on the Series A Preferred Shares, and subject to the rights of holders of other
series of Preferred Shares, if any. The right of holders of the Common Shares
are subject to the rights and preferences established by the Board for the
Series A Preferred Shares and any other series of Preferred Shares which may
subsequently be issued by SCI. See "Description of Preferred Shares."
PURCHASE RIGHTS
On December 7, 1993, the Board declared a dividend of one preferred share
purchase right (a "Purchase Right") for each Common Share outstanding, payable
to holders of Common Shares of record at the close of business on December 31,
1993. The holders of any additional Common Shares issued after such date and
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before the redemption or expiration of the Purchase Rights are also entitled to
receive one Purchase Right for each such additional Common Share. Each Purchase
Right entitles the holder under certain circumstances to purchase from SCI one
one-hundredth of a share of Series A Junior Participating Preferred Shares, par
value $0.01 per share (the "Participating Preferred Shares") at a price of
$40.00 per one one-hundredth of a Participating Preferred Share, subject to
adjustment. Purchase Rights are exercisable when a person or group of persons
(other than SCG) acquires 20% or more of the outstanding Common Shares or
announces a tender offer or exchange offer for 25% or more of the outstanding
Common Shares. Under certain circumstances, each Purchase Right entitles the
holder to purchase, at the Purchase Right's then current exercise price, a
number of Common Shares having a market value of twice the Purchase Right's
exercise price. The acquisition of SCI pursuant to certain mergers or other
business transactions would entitle each holder to purchase, at the Purchase
Right's then current exercise price, a number of the acquiring company's common
shares having a market value at that time equal to twice the Purchase Right's
exercise price. The Purchase Rights held by certain 20% shareholders (other
than SCG) would not be exercisable. The Purchase Rights will expire on December
7, 2003 and are subject to redemption in whole, but not in part, at a price of
$0.01 per Purchase Right payable in cash, shares of SCI or any other form of
consideration determined by the Board.
TRANSFER AGENT
The transfer agent and registrar for the Common Shares is The First National
Bank of Boston, 150 Royall Street, Canton, Massachusetts 02021. The Common
Shares are listed on the NYSE under the symbol "SCN."
RESTRICTION ON SIZE OF HOLDINGS
The Declaration of Trust restricts beneficial ownership of SCI's outstanding
shares of beneficial interest by a single person, or persons acting as a group,
to 9.8% of such shares. The purposes of the restriction are to assist in
protecting and preserving SCI's REIT status and to protect the interest of
shareholders in takeover transactions by preventing the acquisition of a
substantial block of shares unless the acquiror makes a cash tender offer for
all outstanding shares. For SCI to qualify as a REIT under the Code, not more
than 50% in value of its outstanding shares of beneficial interest may be owned
by five or fewer individuals at any time during the last half of any taxable
year. The restriction permits five persons to acquire up to a maximum of 9.8%
each, or an aggregate of 49% of the outstanding shares, and, thus, assists the
Board in protecting and preserving SCI's REIT status for tax purposes. This
restriction does not apply to SCG, which counts as numerous holders for
purposes of the tax rule, because its shares are attributed to its shareholders
for purposes of this rule.
Shares of beneficial interest owned by a person or group of persons in excess
of 9.8% (other than SCG and 30% in the case of certain shareholders who
acquired shares prior to SCI's initial public offering) of the outstanding
shares of beneficial interest ("Excess Shares") are subject to redemption by
SCI, at its option, upon 30 days' notice, at a price equal to the average daily
per share closing sale price during the 30-day period ending on the business
day prior to the redemption date. SCI may make payment of the redemption price
at any time or times up to the earlier of five years after the redemption date
or liquidation of SCI. SCI may refuse to effect the transfer of any shares of
beneficial interest which would make the transferee a holder of Excess Shares.
Shareholders of SCI are required to disclose, upon demand of the Board, such
information with respect to their direct and indirect ownership of shares of
SCI as the Board deems necessary to comply with the provisions of the Code
pertaining to qualification, for tax purposes, of REITs, or to comply with the
requirements of any other appropriate taxing authority.
The 9.8% restriction does not apply to acquisitions by an underwriter in a
public offering and sale of shares of beneficial interest of SCI or to any
transaction involving the issuance of shares of beneficial interest in which a
majority of the Board determines that the eligibility of SCI to qualify as a
REIT for federal income tax purposes will not be jeopardized or the
disqualification of SCI as a REIT is advantageous to the shareholders. SCG's
ownership of shares is attributed for tax purposes to its shareholders. The
Board has
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exempted SCG from this restriction and has permitted certain other shareholders
who acquired shares prior to SCI's initial public offering to acquire up to 30%
of the outstanding shares of beneficial interest.
TRUSTEE LIABILITY
The Declaration of Trust provides that Trustees shall not be individually
liable for any obligation or liability incurred by or on behalf of SCI or by
Trustees for the benefit and on behalf of SCI. Under the Declaration of Trust
and Maryland law governing REITs, Trustees are not liable to SCI or the
shareholders for any act or omission except for acts or omissions which
constitute bad faith, willful misfeasance or gross negligence in the conduct of
his duties.
SHAREHOLDER LIABILITY
Both Maryland statutory law governing REITs organized under the laws of that
state and the Declaration of Trust provide that shareholders shall not be
personally or individually liable for any debt, act, omission or obligation of
SCI or the Board. The Declaration of Trust further provides that SCI shall
indemnify and hold each shareholder harmless from all claims and liabilities to
which the shareholder may become subject by reason of his being or having been
a shareholder and that SCI shall reimburse each shareholder for all legal and
other expenses reasonably incurred by the shareholder in connection with any
such claim or liability, except to the extent that such claim or liability
arises out of the shareholder's bad faith, willful misconduct or gross
negligence and provided that such shareholder gives SCI prompt notice of any
such claim or liability and permits SCI to conduct the defense thereof. In
addition, SCI is required to, and as a matter of practice does, insert a clause
in its management and other contracts providing that shareholders assume no
personal liability for obligations entered into on behalf of SCI. Nevertheless,
with respect to tort claims, contractual claims where shareholder liability is
not so negated, claims for taxes and certain statutory liability, the
shareholders may, in some jurisdictions, be personally liable to the extent
that such claims are not satisfied by SCI. Inasmuch as SCI carries public
liability insurance which it considers adequate, any risk of personal liability
to shareholders is limited to situations in which SCI's assets plus its
insurance coverage would be insufficient to satisfy the claims against SCI and
its shareholders.
FEDERAL INCOME TAX CONSIDERATIONS
SCI intends to operate in a manner that permits it to satisfy the
requirements for taxation as a REIT under the applicable provisions of the
Code. No assurance can be given, however, that such requirements will be met.
The following is a description of the federal income tax consequences to SCI
and its shareholders of the treatment of SCI as a REIT. Since these provisions
are highly technical and complex, each prospective purchaser of the Offered
Securities is urged to consult his or her own tax advisor with respect to the
federal, state, local, foreign and other tax consequences of the purchase,
ownership and disposition of the Offered Securities.
Based upon certain representations of SCI with respect to the facts as set
forth and explained in the discussion below, in the opinion of Mayer, Brown &
Platt, counsel to SCI, SCI has been organized in conformity with the
requirements for qualification as a REIT beginning with its taxable year ending
December 31, 1993, and its proposed method of operation described in this
Prospectus and as represented by management will enable it to satisfy the
requirements for such qualification.
This opinion is based on certain assumptions relating to the organization and
operation of SCI Limited Partnership--I, SCI Limited Partnership--II, SCI
Limited Partnership--III and SCI Limited Partnership--IV (the "Partnerships")
and of any other partnerships in which SCI will hold an interest, and is
conditioned upon certain representations made by SCI as to certain factual
matters relating to SCI's organization and intended or expected manner of
operation. In addition, this opinion is based on the law existing and in effect
on the date hereof. SCI's qualification and taxation as a REIT will depend upon
SCI's ability to meet on a continuing basis, through actual operating results,
asset composition, distribution levels and diversity of stock ownership, the
various qualification tests imposed under the Code discussed below. Mayer,
Brown & Platt
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will not review compliance with these tests on a continuing basis. No assurance
can be given that SCI will satisfy such tests on a continuing basis.
In brief, if certain detailed conditions imposed by the REIT provisions of
the Code are met, entities, such as SCI, that invest primarily in real estate
and that otherwise would be treated for federal income tax purposes as
corporations, are generally not taxed at the corporate level on their "REIT
taxable income" that is currently distributed to shareholders. This treatment
substantially eliminates the "double taxation" (at both the corporate and
shareholder levels) that generally results from the use of corporations.
If SCI fails to qualify as a REIT in any year, however, it will be subject to
federal income taxation as if it were a domestic corporation, and its
shareholders will be taxed in the same manner as shareholders of ordinary
corporations. In this event, SCI could be subject to potentially significant
tax liabilities, and therefore the amount of cash available for distribution to
its shareholders would be reduced or eliminated.
SCI elected REIT status effective beginning with its taxable year ended
December 31, 1993 and the Board believes that SCI has operated and currently
intends that SCI will operate in a manner that permits it to qualify as a REIT
in each taxable year thereafter. There can be no assurance, however, that this
expectation will be fulfilled, since qualification as a REIT depends on SCI
continuing to satisfy numerous asset, income and distribution tests described
below, which in turn will be dependent in part on SCI's operating results.
The following summary is based on existing law, is not exhaustive of all
possible tax considerations and does not give a detailed discussion of any
state, local, or foreign tax considerations, nor does it discuss all of the
aspects of federal income taxation that may be relevant to a prospective
shareholder in light of his or her particular circumstances or to certain types
of shareholders (including insurance companies, tax-exempt entities, financial
institutions or broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) subject to special treatment under
the federal income tax laws.
TAXATION OF SCI
To qualify as a REIT under the Code for a taxable year, SCI must meet certain
organizational and operational requirements.
ASSET TESTS
At the close of each quarter of SCI's taxable year, SCI must satisfy certain
tests relating to the nature of its assets (determined in accordance with
generally accepted accounting principles). First, at least 75% of the value of
SCI's total assets must be represented by interests in real property, interests
in mortgages on real property, shares in other REITs, cash, cash items, and
government securities, and qualified temporary investments. Second, although
the remaining 25% of SCI's assets generally may be invested without
restriction, securities in this class may not exceed either (i) in the case of
securities of any non-government issuer, 5% of the value of SCI's total assets
or (ii) 10% of the outstanding voting securities of any one issuer.
GROSS INCOME TESTS
For each taxable year at least 75% of SCI's gross income must be derived from
certain real estate sources, including rents from real property and interest on
mortgage obligations. Real estate sources for purposes of those requirements
also include gains from the sale of real property not held primarily for sale
to customers in the ordinary course of business, dividends on REIT shares,
interest on loans secured by mortgages on real property and income from
foreclosure property. For rents to qualify, they may not be based on the income
or profits of any person, except that they may be based on a percentage or
percentages of gross income or receipts, and, subject to certain limited
exceptions, the REIT's management of the property and rendering of services to
tenants must either be with respect to usual or customary services or furnished
through a qualified independent contractor.
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In addition to deriving 75% of its gross income from the sources listed
above, at least 95% of SCI's gross income for the taxable year must be derived
from real estate sources described above or from dividends, interest, gains
from the sale or disposition of stock or other securities that are not dealer
property and specified other items. Dividends (including SCI's share of any
dividends paid by SCI Development Services Incorporated) and interest on any
obligations not collateralized by an interest in real property qualify for
purposes of the 95% test, but not for purposes of the 75% test.
SCI must also derive less than 30% of its gross income for each taxable year
from the sale or other disposition of: (i) real property held for less than
four years (other than foreclosure property and by reason of involuntary
conversion); (ii) stock or securities held for less than one year; and (iii)
property in a prohibited transaction.
For purposes of the gross income tests, where SCI invests in a partnership,
including the Partnerships, SCI will be treated as receiving its share of the
income and loss of the partnership, and the gross income of the partnership
will retain the same character in the hands of SCI as it has in the hands of
the partnership.
Ownership Restrictions
SCI must satisfy certain ownership restrictions under the Code that limit (i)
concentration of ownership of its shares of capital stock by specified persons
and (ii) ownership by SCI of its tenants. The Declaration of Trust restricts
the transfer of shares when necessary to maintain SCI's qualification as a REIT
under these standards. See "Description of Common Shares--Restrictions on Size
of Holdings." However, because the Code imposes broad attribution rules in
determining constructive ownership, no assurance can be given that these
restrictions would be effective in maintaining SCI's REIT status.
Annual Distribution Requirements
So long as SCI qualifies for taxation as a REIT and distributes at least 95%
of its real estate investment trust taxable income (computed without respect to
net capital gains or the dividends paid deduction) for each taxable year to its
shareholders annually, SCI itself will not be subject to federal income tax on
that portion of such income distributed to shareholders. SCI will be taxed at
regular corporate rates on all income not distributed to shareholders.
Nevertheless, it is SCI's policy to distribute at least 95% of its taxable
income. REITs may also incur taxes for certain other activities.
Tax Aspects of SCI's Investments in the Partnerships
A significant portion of SCI's investments are through the Partnerships. SCI
will include its proportionate share of (i) each Partnership's income, gains,
losses, deductions and credits for purposes of the various REIT gross income
tests and in its computation of its REIT taxable income and (ii) the assets
held by each Partnership for purposes of the REIT asset tests.
SCI's interest in the Partnerships involves special tax considerations,
including the possibility of a challenge by the Internal Revenue Service (the
"IRS") of the status of the Partnerships as partnerships (as opposed to
associations taxable as corporations) for federal income tax purposes. If a
Partnership were to be treated as an association, such Partnership would be
taxable as a corporation and therefore subject to an entity-level tax on its
income. In such a situation, the character of SCI's assets and items of gross
income would change, which may preclude SCI from satisfying the REIT asset
tests and may preclude SCI from satisfying the REIT gross income tests (see "--
Failure to Qualify" below, for a discussion of the effect of SCI's failure to
meet such tests). Based on certain representations of SCI, in the opinion of
Mayer, Brown, & Platt, under existing federal income tax law and regulations,
the Partnerships will be treated for federal income tax purposes as
partnerships, and not as associations taxable as corporations. Such opinion,
however, is not binding on the IRS.
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Failure to Qualify
If SCI fails to qualify for taxation as a REIT in any taxable year and
certain relief provisions do not apply, SCI will be subject to tax (including
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Distributions to shareholders in any year in which SCI fails to qualify
as a REIT will not be deductible by SCI, nor generally will they be required to
be made under the Code. In such event, to the extent of current and accumulated
earnings and profits, all distributions to shareholders will be taxable as
ordinary income, and subject to certain limitations in the Code, corporate
distributees may be eligible for the dividends-received deduction. Unless
entitled to relief under specific statutory provisions, SCI also will be
disqualified from re-electing taxation as a REIT for the four taxable years
following the year during which qualification was lost.
TAXATION OF SCI'S SHAREHOLDERS
Distributions paid to SCI's shareholders out of current or accumulated
earnings and profits of SCI will generally be taxed to them as ordinary income.
Such distributions are not eligible for the dividends-received deduction for
corporations. SCI's earnings and profits will first be allocated to any
outstanding Preferred Shares. A distribution of net capital gains by SCI will
generally be treated as a long-term capital gain to shareholders to the extent
properly designated by SCI as a capital gain distribution and regardless of the
length of time a shareholder has held his shares. Capital gains distributions
are not eligible for the dividends-received deduction for corporations. Any
loss on a sale of shares that were held for six months or less and with respect
to which a capital gain distribution was received will be treated as a long-
term capital loss, up to the amount of the capital gain distribution received
with respect to such shares. A distribution in excess of current or accumulated
earnings and profits will constitute a nontaxable return of capital, to the
extent of the shareholder's basis in his shares. To the extent such a
distribution exceeds such basis, it will be treated as capital gain to those
shareholders holding their shares as capital assets. SCI will notify each
shareholder as to the portions of each distribution that, in its view,
constitute ordinary income, capital gain or return of capital. Should SCI incur
ordinary or capital losses, shareholders will not be entitled to include such
losses in their own income tax returns.
OTHER TAX CONSIDERATIONS
SCI Development Services Incorporated
SCI Development Services Incorporated will pay Federal and state income taxes
at the full applicable corporate rates on its income prior to payment of any
dividends. SCI Development Services Incorporated will attempt to minimize the
amount of such taxes, but there can be no assurance whether or the extent to
which measures taken to minimize taxes will be successful. To the extent that
SCI Development Services Incorporated is required to pay Federal, state or
local taxes, the cash available for distribution by SCI Development Services
Incorporated to its shareholders will be reduced accordingly.
Tax on Built-in Gain
Pursuant to Notice 88-19. 1988-1 C.B. 486, a C corporation that elects to be
taxed as a REIT has to recognize any gain that would have been realized if the
C corporation had sold all of its assets for their respective fair market
values at the end of its last taxable year before the taxable year in which it
qualifies to be taxed as a REIT and immediately liquidated unless the REIT
elects to be taxed under rules similar to the rules of Section 1374 of the
Code.
Since SCI has made this election, if during the 10-year period beginning on
the first day of the first taxable year for which SCI qualifies as a REIT (the
"Recognition Period"), SCI recognizes gain on the disposition of any asset held
by SCI as of the beginning of such Recognition Period, then, to the extent of
the excess of (a) the fair market value of such asset as of the beginning of
such Recognition Period over (b) SCI's
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adjusted basis in such asset as of the beginning of such Recognition Period
(the "Built-in Gain"), such gain will be subject to tax at the highest regular
corporate rate. Because SCI acquires many of its properties in fully taxable
transactions and presently expects to hold each property beyond the Recognition
Period, it is not anticipated that SCI will pay a substantial corporate level
tax on its Built-in Gain.
Backup Withholding
SCI will report to its domestic shareholders and to the IRS the amount of
distributions paid during each calendar year, and the amount of tax withheld,
if any, with respect thereto. Under the backup withholding rules, a shareholder
may be subject to backup withholding at applicable rates with respect to
distributions paid unless such shareholder (i) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact or
(ii) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. A shareholder that does not
provide SCI with its correct taxpayer identification number may also be subject
to penalties imposed by the IRS. Any amount paid as backup withholding will be
credited against the shareholder's income tax liability. In addition, SCI may
be required to withhold a portion of capital gain distributions made to any
shareholders who fail to certify their non-foreign status to SCI.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE,
OWNERSHIP, AND SALES OF COMMON SHARES, PREFERRED SHARES OR DEBT SECURITIES IN
AN ENTITY ELECTING TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE,
OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
PLAN OF DISTRIBUTION
SCI may sell the Offered Securities to one or more underwriters for public
offering and sale by them or may sell the Offered Securities to investors
directly or through agents, which agents may be affiliated with SCI. Direct
sales to investors may be accomplished through subscription offerings or
through subscription rights distributed to SCI's shareholders. In connection
with subscription offerings or the distribution of subscription rights to
shareholders, if all of the underlying Offered Securities are not subscribed
for, SCI may sell such unsubscribed Offered Securities to third parties
directly or through agents and, in addition, whether or not all of the
underlying Offered Securities are subscribed for, SCI may concurrently offer
additional Offered Securities to third parties directly or through agents,
which agents may be affiliated with SCI. Any underwriter or agent involved in
the offer and sale of the Offered Securities will be named in the applicable
Prospectus Supplement.
The distribution of the Offered Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed,
or at prices related to the prevailing market prices at the time of sale or at
negotiated prices (any of which may represent a discount from the prevailing
market price). SCI also may, from time to time, authorize underwriters acting
as SCI's agents to offer and sell the Offered Securities upon the terms and
conditions set forth in the applicable Prospectus Supplement. In connection
with the sale of Offered Securities, underwriters may be deemed to have
received compensation from SCI in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Offered
Securities for whom they may act as agent. Underwriters may sell Offered
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by SCI to underwriters or agents in
connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating
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dealers, will be set forth in the applicable Prospectus Supplement.
Underwriters, dealers and agents participating in the distribution of the
Offered Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
Offered Securities may be deemed to be underwriting discounts and commissions,
under the Securities Act. Underwriters, dealers and agents may be entitled,
under agreements entered into with SCI, to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Securities Act. Any such indemnification agreements will be described in the
applicable Prospectus Supplement.
If so indicated in the applicable Prospectus Supplement, SCI will authorize
dealers acting as SCI's agents to solicit offers by certain institutions to
purchase Offered Securities from SCI at the public offering price set forth in
such Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date or dates stated in such
Prospectus Supplement. Each Contract will be for an amount not less than, and
the aggregate principal amount of Offered Securities sold pursuant to Contracts
shall be not less nor more than, the respective amounts stated in the
applicable Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions but will in all cases be subject to the
approval of SCI. Contracts will not be subject to any conditions except (i) the
purchase by an institution of the Offered Securities covered by its Contracts
shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and
(ii) if the Offered Securities are being sold to underwriters, SCI shall have
sold to such underwriters the total principal amount of the Offered Securities
less the principal amount thereof covered by Contracts.
Certain of the underwriters and their affiliates may be customers of, engage
in transactions with and perform services for SCI and its subsidiaries in the
ordinary course of business.
EXPERTS
The financial statements and related schedules of SCI incorporated by
reference herein and in the Registration Statement have been audited or
reviewed by Arthur Andersen LLP, independent public accountants, to the extent
and for the periods indicated in their reports, and have been incorporated by
reference herein and in the Registration Statement in reliance upon the
authority of that firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Offered Securities will be passed upon for SCI by Mayer,
Brown & Platt, Chicago, Illinois. Mayer, Brown & Platt has in the past
represented and is currently representing SCI and certain of its affiliates,
including SCG.
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