<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-13909
PRICING SUPPLEMENT (TO PROSPECTUS SUPPLEMENT DATED NOVEMBER 19, 1996 TO
PROSPECTUS DATED OCTOBER 31, 1996)
LOGO
$100,000,000 7.81% MEDIUM-TERM NOTES, SERIES A, DUE 2015
Interest on the 7.81% Medium-Term Notes, Series A, due 2015 (the "Notes") of
Security Capital Industrial Trust ("SCI") offered hereby is payable semi-
annually on February 1 and August 1, commencing August 1, 1997. Principal
installments on the Notes will commence on February 1, 2010 in the amounts
described herein. The Notes will mature on February 1, 2015. 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 the Redemption Price (as defined
herein). See "Description of Notes--Optional Redemption."
The 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 PRICING SUPPLEMENT OR THE
PROSPECTUS SUPPLEMENT OR PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
<TABLE>
<CAPTION>
INITIAL
PUBLIC UNDERWRITING
OFFERING DISCOUNTS PROCEEDS TO
PRICE(1) (2) SCI(1)(3)
------------ ------------ -----------
<S> <C> <C> <C>
Per Note.................................. 100% .75% 99.25%
Total..................................... $100,000,000 $750,000 $99,250,000
</TABLE>
- --------
(1) Plus accrued interest, if any, from February 4, 1997.
(2) SCI has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting expenses payable by SCI estimated at $200,000.
----------------
The Notes offered hereby are offered, severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
Notes will be ready for delivery in book-entry form only through the
facilities of DTC in New York, New York, on or about February 4, 1997 against
payment therefor in immediately available funds.
GOLDMAN, SACHS & CO. J.P. MORGAN & CO.
The date of this Pricing Supplement is January 30, 1997.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT 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 Pricing Supplement, the Prospectus Supplement or the Prospectus, and, if
given or made, such information or representations must not be relied upon as
having been authorized. This Pricing Supplement, the 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 Pricing Supplement, the 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
PRICING SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Ratio of Earnings to
Fixed Charges.......... P-3
Use of Proceeds......... P-3
Recent Developments..... P-3
Description of Notes.... P-4
Underwriting............ P-7
Validity of Notes....... P-8
PROSPECTUS SUPPLEMENT
Description of Notes.... S-3
Foreign Currency Risks.. S-21
United States Taxation.. S-22
Plan of Distribution.... S-31
Validity of Notes....... S-32
PROSPECTUS
Available Information... 2
Incorporation by
Reference.............. 2
Security Capital
Industrial Trust....... 3
Use of Proceeds......... 3
Ratio of Earnings to
Combined Fixed Charges
and Preferred Share
Dividends.............. 4
Description of Debt
Securities............. 4
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>
P-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>
NINE MONTHS
ENDED
PERIOD ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- --------------
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 1.9 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 $99 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 distribution 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 January 29, 1997) or, at
SCI's option, LIBOR plus 1.25% (6.6875% at January 29, 1997), based upon SCI's
current senior debt rating, and is scheduled to mature in May 1998. At January
29, 1997, $58.1 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.
RECENT DEVELOPMENTS
For the fourth quarter ended December 31, 1996, SCI generated Funds from
Operations attributable to its common shares of beneficial interest, $.01 par
value per share ("Common Shares"), of $34.6 million (unaudited) on total
revenues of $66.9 million (unaudited) compared to $25.4 million (unaudited) on
total revenues of $48.2 million (unaudited) for the quarter ended December 31,
1995. For the fourth quarter ended December 31, 1996, net earnings
attributable to Common Shares were $16.9 million (unaudited), compared to
$14.1 million (unaudited) for the quarter ended December 31, 1995. For the
year ended December 31, 1996, Funds from Operations attributable to Common
Shares were $116.9 million (unaudited) on total revenues of $233.5 million
(unaudited), compared to $84.1 million on total revenues of $158.5 million for
the year ended December 31, 1995. For the year ended December 31, 1996, net
earnings attributable to Common Shares were $53.5 million (unaudited),
compared to $42.0 million for the year ended December 31, 1995. The foregoing
information for the quarter and the year ended December 31, 1996 has been
derived from SCI's preliminary unaudited results of operations.
On January 22, 1997, SCI announced that it received a proposal from Security
Capital Group Incorporated ("SCG") to exchange SCG's REIT management and
property management companies for Common Shares. As a result of the
transaction, SCI would become an internally managed REIT, and SCG would remain
SCI's largest shareholder. SCI's Board of Trustees has formed a special
committee comprised of independent Trustees to review the proposed
transaction. The transaction is subject to approval by the special committee
and the full Board of Trustees. If the Board of Trustees approves the
transaction, a proxy statement, subject to review by the Securities and
Exchange Commission, will be mailed to SCI shareholders prior to a shareholder
vote on the proposed transaction.
P-3
<PAGE>
DESCRIPTION OF NOTES
The following description of the terms of the Notes offered hereby (referred
to in the accompanying Prospectus Supplement as the "Notes" and 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 Notes and the Debt Securities set forth in the
accompanying Prospectus Supplement and Prospectus, to which description
reference is hereby made.
GENERAL
The Notes are Medium-Term Notes, Series A. Medium-Term Notes, Series A
constitute a single series of Debt Securities (which are more fully described
in the accompanying Prospectus Supplement and 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 Notes will be
limited to an aggregate principal amount of $100,000,000. The terms of the
Notes include those provisions contained in the Indenture (the terms of which
are more fully described in the accompanying Prospectus Supplement and
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
$525,000,000 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 $146.4
million of secured debt was outstanding at September 30, 1996).
As of September 30, 1996, on a pro forma basis giving effect to the issuance
of the Notes offered hereby, the collection in October 1996 of $75.1 million
in subscriptions receivable for 4,352,406 Common Shares sold in September
1996, the issuance and sale of 2,000,000 Series C Cumulative Redeemable
Preferred Shares on November 13, 1996 and the application of the net proceeds
therefrom, the total outstanding indebtedness of SCI and its subsidiaries was
approximately $770.6 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.
P-4
<PAGE>
PRINCIPAL AND INTEREST
The Notes will bear interest at 7.81% per annum and will mature on February
1, 2015. The Notes will bear interest from February 4, 1997 or from the
immediately preceding Interest Payment Date (as defined below) to which
interest has been paid, payable semi-annually in arrears on February 1 and
August 1 of each year, commencing on August 1, 1997 (each, an "Interest
Payment Date"), to the persons in whose name the applicable Notes are
registered in the Security Register on the preceding January 15 or July 15
(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 on each $1,000 original principal amount of the
Notes will be paid annually on each February 1, commencing February 1, 2010,
in the following amounts: $200 in 2010, $150 in 2011, $150 in 2012, $200 in
2013, $200 in 2014 and $100 in 2015. 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 January 15 (whether or not a Business Day).
The weighted average life of the Notes (as to all distributions of
principal) will be 15.35 years. 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
$100,000,000.
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 unpaid 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.
P-5
<PAGE>
"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.
BOOK-ENTRY PROCEDURES
The 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 Supplement under
the caption "Description of Notes--Book-Entry Notes," 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 Notes--Book-Entry Notes" in the accompanying Prospectus Supplement.
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 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
P-6
<PAGE>
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers (including the Underwriters), 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 Underwriters 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.
UNDERWRITING
Subject to the terms and conditions of the terms agreement dated the date
hereof and the related distribution agreement dated November 19, 1996
(together, the "Underwriting Agreement"), Goldman, Sachs & Co. and J.P. Morgan
Securities Inc. (the "Underwriters") have agreed to purchase, and SCI has
agreed to sell to each Underwriter, the principal amount of the Notes set
forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
- ----------- ------------
<S> <C>
Goldman, Sachs & Co. ............................................. $ 60,000,000
J.P. Morgan Securities Inc. ...................................... 40,000,000
------------
Total......................................................... $100,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are obligated to take and pay for all of the Notes, if any are
taken.
The Underwriters have advised SCI that they initially propose to offer the
Notes directly to the public at the public offering prices set forth on the
cover page of this Pricing Supplement, and to certain dealers at such prices
less a concession not in excess of .45% of the principal amount of the Notes.
The Underwriters may allow, and such dealers may reallow, a concession not to
exceed .25% of the principal amount of the 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 Underwriters that the Underwriters intend to make
a market in the Notes but are 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 Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, the Underwriters and
their affiliates have engaged, and may in the future engage, in investment
banking and/or commercial banking transactions with SCI and its affiliates.
P-7
<PAGE>
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 Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New
York, New York. Mayer, Brown & Platt has in the past represented, and is
currently representing, SCI and certain of its affiliates, including SCG, the
owner of SCI's REIT manager.
P-8
<PAGE>
Filed Pursuant To Rule 424(b)(5)
Registration No. 333-13909
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 31, 1996)
LOGO
[LOGO OF SECURITY CAPITAL INDUSTRIAL TRUST APPEARS HERE]
$200,000,000
Medium-Term Notes, Series A
Due Nine Months or More from the Date of Issue
Security Capital Industrial Trust ("SCI") may offer from time to time its
Medium-Term Notes, Series A (the "Notes"), with an aggregate principal amount
(or in the case of Notes issued at a discount from the principal amount, an
aggregate initial offering price) of up to $200,000,000. Such aggregate
offering price is subject to reduction as a result of the sale by SCI of
certain other Debt Securities (as defined below). See "Plan of Distribution."
Unless otherwise indicated in the applicable pricing supplement to this
Prospectus Supplement (the "Pricing Supplement"), the interest rate on each
Note will be either a fixed rate established by SCI at the date of issue of
such Note, which may be zero in the case of certain Original Issue Discount
Notes (as defined below), or a floating rate set forth therein and specified
in the applicable Pricing Supplement. Notes may also be issued as Amortizing
Notes (as defined below) or as Original Issue Discount Notes. See "Description
of Notes."
Unless otherwise specified in the applicable Pricing Supplement, interest on
each Fixed Rate Note (as defined below) will be payable each March 31 and
September 30 and at its stated maturity or upon any earlier redemption or
repayment. Interest on each Floating Rate Note (as defined below) will be
payable on the date set forth herein and in the applicable Pricing Supplement.
See "Description of Notes--Interest Rate" and "--Payment of Principal and
Interest." Original Issue Discount Notes may provide that Holders (as defined
in the Indenture) of such Notes will not receive periodic payments of
interest. See "Description of Notes--Original Issue Discount Notes." Each
Fixed Rate Note and each Floating Rate Note will mature on a day nine months
or more from the date of issue, as set forth in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
the Notes may not be redeemed by SCI or at the option of the Holder prior to
maturity. Notes will be issued in denominations of $1,000 or any amount in
excess thereof which is an integral multiple of $1,000 unless otherwise
specified in the applicable Pricing Supplement.
Each Note will be issued only in fully registered form and will be represented
either by one or more global securities (the "Global Securities") registered
in the name of The Depository Trust Company, as Depositary (the "Depositary"),
or its nominee (a "Book-Entry Note"), or by a certificate issued in definitive
form, without coupons (a "Certificated Note"), as set forth in the applicable
Pricing Supplement. Beneficial interest in Global Securities representing
Book-Entry Notes will be shown only on, and transfer thereof will be effected
only through, the records maintained by the Depositary (with respect to
participants' interests) and its participants. Book-Entry Notes will not be
issuable as Certificated Notes except as described under "Description of Debt
Securities--Book-Entry Notes" in the accompanying Prospectus.
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 OTHER STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
- -----------------------------------------------------------------------------
<CAPTION>
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) SCI(2)(3)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note 100% .125% to .750% 99.875% to 99.250%
- -----------------------------------------------------------------------------
Total $200,000,000 $250,000 to $1,500,000 $199,750,000 to $198,500,000
- -----------------------------------------------------------------------------
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be sold at 100% of their principal amount. If SCI issues any Note at
a discount from or at a premium over its principal amount, the Price to
Public of any Note issued at a discount or at a premium will be set forth
in the applicable Pricing Supplement.
(2) Except as may be agreed, the commission payable to an Agent (as defined
below) for each Note sold through such Agent shall range from .125% to
.750% of the principal amount of such Notes. SCI may also sell Notes to an
Agent, as principal, at negotiated discounts, for resale to one or more
investors or other purchasers at fixed offering prices or at varying
prices related to prevailing market prices at the time of resale or
otherwise, as determined by such Agent. Unless otherwise indicated in the
applicable Pricing Supplement, any Note sold to an Agent as principal
shall be purchased by such Agent at a price equal to 100% of the principal
amount thereof less a percentage equal to the commission applicable to any
agency sale of a Note of identical maturity. SCI has agreed to indemnify
each Agent against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Act"). See "Plan of
Distribution."
(3) Before deducting expenses payable by SCI, estimated at $300,000.
The Notes are being offered on a continuing basis by SCI through J.P. Morgan
Securities Inc. and Goldman, Sachs & Co. (individually, an "Agent" and
together, the "Agents"), each of which has agreed to use its reasonable
efforts to solicit offers to purchase the Notes. SCI has reserved the right
(i) to sell Notes directly to investors in those jurisdictions in which SCI is
so permitted and (ii) to accept (but not solicit) offers to purchase Notes
from time to time through one or more additional agents or dealers, acting as
either principal or agent, on substantially the same terms as those applicable
to sales of Notes to or through the Agents. Unless otherwise specified in the
applicable Pricing Supplement, the Notes will not be listed on any securities
exchange, and there can be no assurance that the Notes offered hereby will be
sold or that there will be a secondary market for the Notes. SCI reserves the
right to withdraw, cancel or modify the offer made hereby without notice. No
termination date for the offering of the Notes has been established. Either
SCI or an Agent may reject any offer in its sole discretion in whole or in
part. See "Plan of Distribution."
J.P. MORGAN & CO. GOLDMAN, SACHS & CO.
November 19, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE AGENTS 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 TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in any
Pricing Supplement, this Prospectus Supplement, or the Prospectus, and, if
given or made, such information or representations must not be relied upon as
having been authorized. Any Pricing Supplement, 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 any Pricing Supplement, 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
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Notes.... S-3
Foreign Currency Risks.. S-21
United States Taxation.. S-22
Plan of Distribution.... S-31
Validity of Notes....... S-32
PROSPECTUS
Available Information... 2
Incorporation by
Reference.............. 2
Security Capital
Industrial Trust....... 3
Use of Proceeds......... 3
Ratio of Earnings to
Combined Fixed Charges
and Preferred Share
Dividends.............. 4
Description of Debt
Securities............. 4
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>
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DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the Prospectus as "Debt Securities") supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of Debt Securities set forth in the Prospectus, to which
description reference is hereby made.
GENERAL
The Notes constitute a single series for purposes of the Indenture, dated as
of March 1, 1995 (the "Indenture"), between SCI and State Street Bank and
Trust Company, as trustee (the "Trustee"), and are limited in amount as set
forth on the cover page of this Prospectus Supplement. For a description of
the rights attaching to different series of Debt Securities under the
Indenture, see "Description of Debt Securities" in the Prospectus.
SCI will at all times have appointed and maintained a Paying Agent (which
may be the Trustee) authorized to pay the principal of (and premium, if any)
or interest on any Notes on SCI's behalf and having an office or agency (the
"Paying Agent Office") in the City of Boston, Massachusetts or New York, New
York, where the Notes may be presented or surrendered for payment and where
notices, designations, or requests in respect of payments with respect to
Notes may be served. SCI has initially appointed the Trustee as the Paying
Agent, with its Paying Agent Office currently at 225 Franklin Street, Boston,
Massachusetts 02110.
Unless previously redeemed by SCI or repaid by SCI at the option of the
Holder, a Note will mature on the date ("Stated Maturity") nine months or more
from the date of issue that is specified on its face and in the applicable
Pricing Supplement. The "maturity" of any Note refers herein to the date on
which its principal becomes due and payable, whether at Stated Maturity, upon
redemption by SCI, repayment by SCI at the option of the Holders, or
otherwise.
Each Note will be denominated in a currency, currency unit or composite
currency ("Specified Currency") as specified on its face and in the applicable
Pricing Supplement. Purchasers of the Notes are required to pay for them by
delivery of the requisite amount of the Specified Currency to an Agent, unless
other arrangements have been made. Unless otherwise specified in the
applicable Pricing Supplement, payments on the Notes will be made in the
applicable Specified Currency in the country issuing the Specified Currency
(or, for ECUs (as defined in the Indenture), Brussels), provided that, at the
election of the Holder and in certain circumstances at SCI's option, payments
on Notes denominated in other than U.S. dollars may be made in U.S. dollars.
See "--Payment of Principal and Interest."
Each Note will be represented by either a permanent global Note registered
in the name of, or a nominee of, the Depositary (each such Note represented by
a permanent global Note being referred to below as a "Book-Entry Note") or a
certificate issued in definitive registered form, without coupons, as set
forth in the applicable Pricing Supplement. Except as set forth under "--Book-
Entry Notes" below, Book-Entry Notes will not be issuable in certificated
form. So long as the Depositary or its nominee is the registered holder of any
permanent global Note, the Depositary or its nominee, as the case may be, will
be considered the sole Holder of the Book-Entry Note or Notes represented by
such permanent global Note for all purposes under the Indenture and the Notes.
For a further description of the respective forms, denominations, and transfer
and exchange procedures for any such permanent global Note and the Book-Entry
Notes, refer to "--Book-Entry Notes" below and to the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
the authorized denominations of any Note denominated in U.S. dollars will be
$1,000 and integral multiples thereof. The authorized denominations of any
Note denominated in other than U.S. dollars will be the amount of the
Specified Currency for such Note equivalent, at the noon buying rate in The
City of New York for cable transfers for such Specified Currency (the
"Exchange Rate") on the sixth Business Day in The City of New York and in the
country issuing such currency (or, for ECUs, Brussels) next preceding the date
of issue of such Note, to U.S. $1,000 (rounded to the nearest 1,000 units of
such Specified Currency) and any greater amount that is an integral multiple
of 1,000 units of such Specified Currency unless specified in the applicable
Pricing Supplement.
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Notes will be sold in individual issues of Notes having such interest rate
and/or interest rate formula, if any, Stated Maturity, and date of original
issuance as shall be selected by the initial purchasers and agreed to by SCI.
Interest rates offered by SCI with respect to the Notes may differ depending
upon, among other things, the aggregate principal amount of the Notes
purchased in any single transaction. Unless otherwise indicated in the
applicable Pricing Supplement, each Note, except any Zero Coupon Note (as
hereinafter defined), will bear interest at a fixed rate and/or a rate
determined by reference to one or more of the Commercial Paper Rate, the Prime
Rate, LIBOR, the Treasury Rate, the CD Rate, CMT Rate or the Federal Funds
Rate, as adjusted by the Spread and/or Spread Multiplier, if any, applicable
to such Note. See "--Interest Rate." The Notes may be issued as Zero Coupon
Notes ("Zero Coupon Notes"). Zero Coupon Notes will be issued at a discount
from the principal amount payable at maturity thereof, but holders of Zero
Coupon Notes will not receive periodic payments of interest thereon.
The Notes will not be subject to any sinking fund and, unless SCI specifies
an initial date on which a Note may be redeemed by SCI (a "Redemption
Commencement Date") in the applicable Pricing Supplement, will not be
redeemable before their maturity. If SCI does specify a Redemption
Commencement Date for any Note, the applicable Pricing Supplement will also
specify one or more redemption prices ("Redemption Prices") and the redemption
period or periods ("Redemption Periods") during which such Redemption Prices
shall apply. Unless otherwise specified in the Pricing Supplement, any such
Note shall be redeemable at SCI's option at any time on or after such
specified Redemption Commencement Date at the specified Redemption Price
applicable to the Redemption Period during which such Note is to be redeemed,
together with interest accrued to the date fixed for redemption (the
"Redemption Date").
The Notes (other than Book-Entry Notes) may be presented for registration of
transfer or exchange at the Paying Agent Office in the City of Boston,
Massachusetts. With respect to transfers of Book-Entry Notes and exchanges of
permanent global Notes representing Book-Entry Notes, see "--Book-Entry
Notes."
The Indenture provisions relating to satisfaction and discharge and legal
and covenant defeasance which are described in the accompanying Prospectus
under "Description of Debt Securities--Discharge, Defeasance and Covenant
Defeasance" will apply to the Notes.
INTEREST RATE
Each Note, other than a Zero Coupon Note, will bear interest from the date
of issue or from the most recent Interest Payment Date to which interest on
such Note has been paid or duly provided for at the fixed rate per annum, or
at the rate per annum determined pursuant to the interest rate formula, stated
therein and in the applicable Pricing Supplement until the principal thereof
is paid or made available for payment. Interest will be payable on each
Interest Payment Date and at maturity or earlier date of redemption by SCI or
repayment by SCI at the option of the Holder, as specified below under "--
Payment of Principal and Interest."
Each Note, other than a Zero Coupon Note, will bear interest at either:
(a) a fixed rate (a "Fixed Rate Note"); or
(b) a variable rate determined by reference to an interest rate formula
(a "Floating Rate Note," including a Regular Floating Rate Note, an Inverse
Floating Rate Note or a Floating Rate/Fixed Rate Note (each as defined
below)), determined as follows:
(i) Unless such Floating Rate Note is designated as a Floating
Rate/Fixed Rate Note, an Inverse Floating Rate Note or as having an
Addendum (as defined below) attached, such Floating Rate Note will be
designated a "Regular Floating Rate Note" and, except as described
below or in an applicable Pricing Supplement, will bear interest at the
rate determined by reference to the applicable Interest Rate Basis (as
defined below) (i) plus or minus the applicable Spread (as defined
below), if any, and/or (ii) multiplied by the applicable Spread
Multiplier (as defined below), if any.
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(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as described below or in an
applicable Pricing Supplement, such Floating Rate Note will initially
bear interest at the rate determined by reference to the applicable
Interest Rate Basis (i) plus or minus the applicable Spread, if any,
and/or (ii) multiplied by the applicable Spread Multiplier, if any. The
interest rate in effect commencing on, and including, the date for
interest to begin accruing at the Fixed Interest Rate (the "Fixed Rate
Commencement Date") to the Maturity Date shall be the Fixed Interest
Rate, if such rate is specified in the applicable Pricing Supplement,
or if no such Fixed Interest Rate is so specified and the Floating
Rate/Fixed Rate Note is still outstanding on such day, the interest
rate in effect thereon on the day immediately preceding the Fixed Rate
Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse
Floating Rate Note," then, except as described below or in an
applicable Pricing Supplement, such Floating Rate Note will bear
interest equal to the Fixed Interest Rate specified in the related
Pricing Supplement minus the rate determined by reference to the
Interest Rate Basis (i) plus or minus the applicable Spread, if any,
and/or (ii) multiplied by the applicable Spread Multiplier, if any;
provided, however, unless otherwise specified in the applicable Pricing
Supplement, the interest rate thereon will not be less than zero.
A Floating Rate Note may also have either or both:
(a) a maximum, or ceiling, on the rate of interest that may accrue during
any interest period (a "Maximum Rate"); and
(b) a minimum, or floor, on the rate of interest that may accrue during
any interest period (a "Minimum Rate").
The "Spread" is the number of basis points specified in the applicable
Pricing Supplement as applying to the Interest Rate Basis (as defined below)
for such Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement as applying to the Interest Rate Basis for such
Note.
"Market Day" means:
(a) with respect to any Note, any Business Day in The City of New York
and The City of Boston; and
(b) with respect to any LIBOR Note, any Business Day in The City of New
York and The City of Boston which is also a day on which dealings in
deposits in U.S. dollars are transacted in the London interbank market (a
"London Business Day"). "Business Day," as used herein for any particular
location, means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in such location are authorized
or obligated by law or executive order to close.
"Index Maturity" means, for a Floating Rate Note, the period to maturity of
the interest or obligation on which the interest rate formula is based, as
specified in the applicable Pricing Supplement. Unless otherwise provided in
the applicable Pricing Supplement, the Trustee will be the calculation agent
(the "Calculation Agent") for Floating Rate Notes.
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Fixed Rate Note,
the Interest Payment Dates (if other than March 31 and September 30), the
Regular Record Dates (if other than March 15 and September 15), and, if
applicable, the Redemption Commencement Date, Redemption Prices and Redemption
Periods relating to such Fixed Rate Note. The applicable Pricing Supplement
relating to a Floating Rate Note will designate an interest rate basis (the
"Interest Rate Basis") for such Floating Rate Note. The Interest Rate Basis
for each Floating Rate Note will be one or more of the following:
(a) the Commercial Paper Rate for "Commercial Paper Rate Notes";
(b) the Prime Rate for "Prime Rate Notes";
(c) LIBOR for "LIBOR Notes";
(d) the Treasury Rate for "Treasury Rate Notes";
S-5
<PAGE>
(e) the CD Rate for "CD Rate Notes";
(f) the CMT Rate for "CMT Rate Notes";
(g) the Federal Funds Rate for "Federal Funds Rate Notes"; or
(h) such other interest rate formula as such Pricing Supplement sets
forth;
provided, however, that with respect to a Floating Rate/Fixed Rate Note, the
interest rate commencing on the Fixed Rate Commencement Date and continuing,
unless otherwise specified in the applicable Pricing Supplement, until the
Maturity Date shall be the Fixed Interest Rate, if such rate is specified in
the applicable Pricing Supplement, or if no such Fixed Interest Rate is so
specified, the interest rate in effect thereon on the day immediately
preceding the Fixed Rate Commencement Date. In addition, if so specified in
the applicable Pricing Supplement, a Floating Rate Note may bear interest
calculated based upon two or more Interest Rate Bases.
The applicable Pricing Supplement for a Floating Rate Note will specify the
Interest Rate Basis and, if applicable, the Calculation Agent, the Index
Maturity, the Spread and/or Spread Multiplier, the Maximum Rate, the Minimum
Rate, the Initial Interest Rate, the Interest Payment Dates, the Regular
Record Dates, the Calculation Date, the Interest Determination Date, and the
Interest Reset Date for such Note.
The interest rate on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually, annually, or otherwise (such period being
the "Interest Reset Period" for such Floating Rate Note, and the first date of
each Interest Reset Period being an "Interest Reset Date"), as specified in
the applicable Pricing Supplement. The Interest Reset Date will be:
(a) for Floating Rate Notes (other than Treasury Rate Notes) that reset
daily, each Business Day;
(b) for Floating Rate Notes (other than Treasury Rate Notes) that reset
weekly, the Wednesday of each week;
(c) for Treasury Rate Notes that reset weekly, the Tuesday of each week,
except as provided below;
(d) for Floating Rate Notes that reset monthly, the third Wednesday of
each month;
(e) for Floating Rate Notes that reset quarterly, the third Wednesday of
March, June, September and December;
(f) for Floating Rate Notes that reset semi-annually, the third Wednesday
of two months of each year as specified in the applicable Pricing
Supplement;
(g) for Floating Rate Notes that reset annually, the third Wednesday of
one month of each year as specified in the applicable Pricing Supplement;
and
(h) for Floating Rate Notes that reset at intervals other than those
described above, the days specified in the applicable Pricing Supplement;
provided, however, that the interest rate in effect from the date of issue to
the first Interest Reset Date for a Floating Rate Note will be the Initial
Interest Rate (as set forth in the applicable Pricing Supplement) and provided
further that, with respect to Floating Rate/Fixed Rate Notes, the fixed rate
of interest in effect for the period from the Fixed Rate Commencement Date
until the Maturity Date shall be the Fixed Interest Rate or the interest rate
in effect on the day immediately preceding the Fixed Rate Commencement Date,
as specified in the applicable Pricing Supplement.
If any Interest Reset Date for any Floating Rate Note would otherwise be a
day that is not a Market Day for such Floating Rate Note, the Interest Reset
Date for such Floating Rate Note shall be postponed to the next day that is a
Market Day for such Floating Rate Note (except that for a LIBOR Note, if such
Market Day is in the next succeeding calendar month, such Interest Reset Date
shall be the immediately preceding Market Day). In addition, if the Treasury
Rate is an applicable Base Rate and the Interest Determination Date would
otherwise fall on an Interest Reset Date, then such Interest Reset Date will
be postponed to the next succeeding Business Day.
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<PAGE>
The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination
Date"), for a Prime Rate Note (the "Prime Rate Interest Determination Date"),
for a CD Rate Note (the "CD Rate Interest Determination Date"), for a CMT Rate
Note (the "CMT Rate Interest Determination Date") and for a Federal Funds Rate
Note (the "Federal Funds Rate Interest Determination Date") will be the second
Market Day preceding such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for a LIBOR Note (the "LIBOR Interest
Determination Date") will be the second London Business Day preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a Treasury Rate Note (the "Treasury Interest Determination
Date") will be the day of the week in which such Interest Reset Date falls on
which Treasury bills would normally be auctioned. Treasury bills are usually
sold at auction on the Monday of each week, unless that day is a legal
holiday, in which case the auction is usually held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the
result of a legal holiday, an auction is so held on the preceding Friday, such
Friday will be the Treasury Interest Determination Date pertaining to the
Interest Reset Date occurring in the next succeeding week. If an auction date
shall fall on any Interest Reset Date for a Treasury Rate Note, then such
Interest Reset Date shall instead be the first Market Day immediately
following such auction date.
All percentages resulting from any calculations referred to in this
Prospectus Supplement will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point with five one-millionths of a
percentage point rounded upward (e.g., 9.876546% or .09876546) being rounded
to 9.87655% (or .0987655)), and all U.S. dollar amounts used in or resulting
from such calculations will be rounded to the nearest cent (with one-half cent
being rounded upwards).
In addition to any maximum interest rate that may apply to a Floating Rate
Note under the above provisions, the interest rate on the Floating Rate Notes
will in no event be higher than the maximum rate permitted by New York law, as
the same may be modified by United States law of general application. Under
present New York law, the maximum rate of interest is 25% per annum on a
simple interest basis, with certain exceptions. The limit may not apply to
Floating Rate Notes in which U.S. $2,500,000 or more has been invested.
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if determined, the
interest rate that will become effective on the next Interest Reset Date for
such Floating Rate Note. Unless otherwise specified in the applicable Pricing
Supplement, the "Calculation Date," if applicable, pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day after
such Interest Determination Date, or, if such day is not a Business Day, the
next succeeding Business Day or (ii) the Business Day immediately preceding
the applicable Interest Payment Date or the Stated Maturity, as the case may
be. The Calculation Agent's determination of any interest rate will be final
and binding in the absence of manifest error.
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any), and be payable on the dates, specified on the face
of the Commercial Paper Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, for any Interest Reset Date, the Money Market Yield
(calculated as described below) of the per annum rate (quoted on a bank
discount basis) for the relevant Commercial Paper Interest Determination Date
for commercial paper having the specified Index Maturity as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication of the Board
of Governors of the Federal Reserve System ("H.15(519)") under the heading
"Commercial Paper." If such rate is not published before 3:00 p.m., New York
City time, on the relevant Calculation Date, then the Commercial Paper Rate
for such Interest Reset Date shall be the Money Market Yield of such rate on
such Commercial Paper Interest Determination Date for commercial paper having
the specified Index Maturity as published by the Federal Reserve Bank of New
York in its daily statistical release, "Composite 3:30 p.m. Quotations for
U.S.
S-7
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Government Securities" or any successor publication published by the Federal
Reserve Bank of New York ("Composite Quotations") under the heading
"Commercial Paper." If by 3:00 p.m., New York City time, on such Calculation
Date such rate is not yet published in either H.15(519) or Composite
Quotations, the Commercial Paper Rate for such Interest Reset Date shall be
calculated by the Calculation Agent and shall be the Money Market Yield of the
arithmetic mean of the offered per annum rates (quoted on a bank discount
basis), as of 11:00 a.m., New York City time, on such Commercial Paper
Interest Determination Date, of three leading dealers of commercial paper in
The City of New York (which may include the Agents) selected by the
Calculation Agent for commercial paper of the specified Index Maturity placed
for an industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized rating agency; provided, however, that if fewer than
three dealers selected by the Calculation Agent are quoting as mentioned in
this sentence, the Commercial Paper Rate for such Interest Reset Date will be
the Commercial Paper Rate in effect on such Commercial Paper Interest
Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage) calculated
in accordance with the following formula:
360 X D
Money Market -----------
Yield = 100 X 360 -
(D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal and "M" refers to the actual number
of days in the period from the Interest Reset Date to but excluding the day
that numerically corresponds to such Interest Rate Date (or, if there is not
any such numerically corresponding day, the last day) in the calendar month
that is the number of months corresponding to the specified Index Maturity
after the month in which such Interest Reset Date falls.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any),
and will be payable on the dates specified on their faces and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, for any Interest Reset Date, the rate set forth for the relevant
Prime Rate Interest Determination Date in H.15(519) under the heading "Bank
Prime Loan." If such rate is not published before 3:00 p.m., New York City
time, on the relevant Calculation Date, then the Prime Rate for such Interest
Reset Date will be the arithmetic mean of the rates of interest publicly
announced by each bank that appears on the display designated as page
"USPRIME1" on the Reuters Monitor Money Rates Service or any successor service
(or such other page as may replace the USPRIME1 page on that service or any
successor service for the purpose of displaying prime rates or base lending
rates of major United States banks) ("Reuters Screen USPRIME1 Page") as such
bank's prime rate or base lending rate as in effect for such Prime Rate
Interest Determination Date as quoted on the Reuters Screen USPRIME1 Page on
such Prime Rate Interest Determination Date. If fewer than four such rates
appear on the Reuters Screen USPRIME1 Page on such Prime Rate Interest
Determination Date, the Prime Rate for such Interest Reset Date will be the
arithmetic mean of the prime rates or base lending rates (quoted on the basis
of the actual number of days in the year divided by a 360-day year) as of the
close of business on such Prime Rate Interest Determination Date by four major
banks in The City of New York selected by the Calculation Agent; provided,
however, that if fewer than four banks selected as provided above by the
Calculation Agent are quoting as mentioned in this sentence, the Prime Rate
for such Interest Reset Date will be the Prime Rate in effect on such Prime
Rate Interest Determination Date.
LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any), and will
be payable on the dates, specified on the face of the LIBOR Note and in the
applicable Pricing Supplement.
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Unless otherwise indicated in the applicable Pricing Supplement, LIBOR for
any Interest Reset Date will be determined by the Calculation Agent as
follows:
(a) The Calculation Agent will determine either (i) the arithmetic mean
of the offered rates for deposits in U.S. dollars for the period of the
applicable Index Maturity commencing on the Interest Reset Date which
appear on the Reuters Screen LIBO Page at approximately 11:00 a.m., London
time, on such LIBOR Interest Determination Date if at least two such
offered rates appear on the Reuters Screen LIBO Page ("LIBOR Reuters"), or
(ii) the rate for deposits in U.S. dollars for the period of the applicable
Index Maturity commencing on the Interest Reset Date that appears on the
Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR Interest
Determination Date ("LIBOR Telerate"). "Reuters Screen LIBO Page" means the
display designated as Page "LIBO" on the Reuters Monitor Money Rate Service
(or such other page as may replace the LIBO page on the service for the
purpose of displaying London interbank offered rates of major banks).
"Telerate Page 3750" means the display designated as page "3750" on the
Telerate Service (or such other page as may replace the 3750 page on that
service or such other service or services as may be nominated by the
British Bankers' Association for the purpose of displaying London interbank
offered rates for U.S. dollar deposits). If neither LIBOR Reuters nor LIBOR
Telerate is specified in the applicable Pricing Supplement, LIBOR will be
determined as if LIBOR Telerate had been specified. If fewer than two
offered rates appear on the Reuters Screen LIBO Page, or if no rate appears
on the Telerate Page 3750, as applicable, LIBOR in respect of that LIBOR
Interest Determination Date will be determined as if the parties had
specified the rate described in (b) below.
(b) If fewer than two offered rates appear on the Reuters Screen LIBO
Page or no rate appears on Telerate Page 3750, as applicable, the
Calculation Agent will request the principal London offices of four major
banks in the London interbank market, as selected by the Calculation Agent,
to provide the Calculation Agent with its offered quotation for deposits in
U.S. dollars for the period of the applicable Index Maturity to prime banks
in the London interbank market at approximately 11:00 a.m., London time,
commencing on the second London Business Day immediately following such
LIBOR Interest Determination Date and in a principal amount equal to an
amount of not less than U.S. $1 million that is representative of a single
transaction in such market at such time. If at least two quotations are
provided, LIBOR in respect of that LIBOR Interest Determination Date will
be the arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR in respect of that LIBOR Interest Determination Date will
be the arithmetic mean of the rates quoted by three major banks in The City
of New York selected by the Calculation Agent at approximately 11:00 a.m.,
New York City time, commencing on the second London Business Day
immediately following such LIBOR Interest Determination Date for loans in
U.S. dollars to leading European banks, for the period of the applicable
Index Maturity and in a principal amount equal to an amount of not less
than U.S. $1 million that is representative for a single transaction in
such market at such time; provided, however, that if fewer than three banks
selected as aforesaid by the Calculation Agent are quoting rates as
mentioned in this sentence, the rate of interest in effect for the
applicable period will be the LIBOR in effect on such LIBOR Interest
Determination Date.
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier,
if any), and will be payable on the dates specified on the face of the
Treasury Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, for any Interest Reset Date, the rate for the auction on the
relevant Treasury Interest Determination Date of direct obligations of the
United States ("Treasury Bills") having the specified Index Maturity as
published in H.15(519) under the heading "U.S. Government Securities/Treasury
Bills/Auction Average (Investment)" or, if not so published by 3:00 p.m., New
York City time, on the relevant Calculation Date, the auction average rate
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) for such auction as otherwise
announced by the United States Department of the Treasury. If the results of
such auction of
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Treasury bills having the specified Index Maturity are not published or
reported as provided above by 3:00 p.m., New York City time, on such
Calculation Date, or if no such auction is held during such week, then the
Treasury Rate shall be the rate set forth in H.15(519) for the relevant
Treasury Interest Determination Date for the specified Index Maturity under
the heading "U.S. Government Securities/Treasury Bills/Secondary Market." If
such rate is not so published by 3:00 p.m., New York City time, on the
relevant Calculation Date, the Treasury Rate for such Interest Reset Date
shall be calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates as of approximately 3:30 p.m., New York City time,
on such Treasury Interest Determination Date, of three primary United States
government securities dealers in The City of New York selected by the
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if fewer than
three dealers selected as provided above by the Calculation Agent are quoting
as mentioned in this sentence, the Treasury Rate for such Interest Reset Date
will be the Treasury Rate in effect on such Treasury Interest Determination
Date.
CD RATE NOTES
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any), and
will be payable on the dates, specified on the face of the CD Rate Note and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, for any Interest Reset Date, the rate for the relevant CD Interest
Determination Date for negotiable U.S. dollar certificates of deposit having
the specified Index Maturity as published in H.15(519) under the heading "CDs
(Secondary Market)." If such rate is not published before 3:00 p.m., New York
City time, on the relevant Calculation Date, then the CD Rate for such
Interest Reset Date shall be the rate on such CD Rate Interest Determination
Date for negotiable certificates of deposit having the specified Index
Maturity as published in Composite Quotations under the heading "Certificates
of Deposit." If by 3:00 p.m., New York City time, on such Calculation Date
such rate is not published in either H.15(519) or Composite Quotations, the CD
Rate for such Interest Reset Date shall be calculated by the Calculation Agent
and shall be the arithmetic mean of the secondary market offered rates, as of
10:00 a.m., New York City time, on such CD Rate Interest Determination Date,
of three leading nonbank dealers of negotiable U.S. dollar certificates of
deposit in The City of New York selected by the Calculation Agent for
negotiable U.S. dollar certificates of deposit of major United States money
market banks in the market for negotiable U.S. dollar certificates of deposit
with a remaining maturity closest to the specified Index Maturity in a
denomination of U.S. $5,000,000; provided, however, that if fewer than three
dealers selected as provided above by the Calculation Agent are quoting as
mentioned in this sentence, the CD Rate for such Interest Reset Date will be
the CD Rate in effect on such CD Rate Interest Determination Date.
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rates (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any),
and will be payable on the dates, specified on the face of the CMT Rate Note
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any CMT Rate Interest Determination Date, the rate
displayed on the Designated CMT Telerate Page under the caption ". . .
Treasury Constant Maturities . . . Federal Reserve Board Release H.15 . . .
Mondays Approximately 3:45 p.m.," under the column for the Designated CMT
Maturity Index for (i) if the Designated CMT Telerate Page is 7055, the rate
on such CMT Rate Interest Determination Date and (ii) if the Designated CMT
Telerate Page is 7052, the weekly or monthly average, as specified in the
applicable Pricing Supplement, for the week or the month, as applicable, ended
immediately preceding the week in which the related CMT Rate Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page or is not displayed by 3:00 p.m., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate Interest Determination
Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index as published in the relevant H.15(519). If such rate is no
longer published or is not published by 3:00 p.m., New York City time, on the
related Calculation Date, then the CMT Rate on such CMT Rate Interest
Determination
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Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index (or other United States Treasury rate for the Designated CMT
Maturity Index) for the CMT Rate Interest Determination Date with respect to
such Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 p.m., New York
City time, on the related Calculation Date, then the CMT Rate on the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity, based on the arithmetic mean of the secondary
market closing offer side prices as of approximately 3:30 p.m., New York City
time, on such CMT Rate Interest Determination Date reported, according to
their written records, by three leading primary United States government
securities dealers (each, a "Reference Dealer") in The City of New York (which
may include the Agent or its affiliates) selected by the Calculation Agent
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Notes") with an original maturity
of approximately the Designated CMT Maturity Index and a remaining term to
maturity of not less than such Designated CMT Maturity Index minus one year.
If the Calculation Agent is unable to obtain three such Treasury Note
quotations, the CMT Rate on such CMT Rate Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 p.m., New York City time, on such CMT Rate Interest
Determination Date of three Reference Dealers in The City of New York (from
five such Reference Dealers selected by the Calculation Agent and eliminating
the highest quotation (or, in the event of equality, one of the highest) and
the lowest quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity of the number of years that is the
next highest to the Designated CMT Maturity Index and a remaining term to
maturity closest to the Designated CMT Maturity Index and in an amount of at
least U.S. $100 million. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided, however, that if fewer
than three Reference Dealers so selected by the Calculation Agent are quoting
as mentioned herein, the CMT Rate determined as of such CMT Rate Interest
Determination Date will be the CMT Rate in effect on such CMT Rate Interest
Determination Date. If two Treasury Notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the Calculation Agent will
obtain from five Reference Dealers quotations for the Treasury Note with the
shorter remaining term to maturity and will use such quotations to calculate
the CMT Rate as set forth above.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service (or any successor service) on the page specified in the applicable
Pricing Supplement (or any other page as may replace such page on that service
(or any successor service) for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519)) for the purpose of displaying Treasury
Constant Maturities as reported in H.15(519). If no such page is specified in
the applicable Pricing Supplement, the Designated CMT Telerate Page shall be
7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will
be calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
FEDERAL FUNDS RATE NOTES
Federal Funds Rates Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any), and will be payable on the dates, specified on the
face of the Federal Funds Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, for any Interest Reset Date, the rate on the relevant
Federal Funds Interest Determination Date for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)." If such rate is not
published before
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3:00 p.m., New York City time, on the relevant Calculation Date, then the
Federal Funds Rate for such Interest Reset Date will be the rate on such
Federal Funds Interest Determination Date as published in Composite Quotations
under the heading "Federal Funds/Effective Rate." If by 3:00 p.m., New York
City time, on such Calculation Date such rate is not published in either
H.15(519) or Composite Quotations, the Federal Funds Rate for such Interest
Reset Date shall be calculated by the Calculation Agent and shall be the
arithmetic mean of the rates, as of 9:00 a.m., New York City time, on such
Federal Funds Interest Determination Date, for the last transaction in
overnight Federal Funds arranged by three leading brokers of Federal Funds
transactions in The City of New York selected by the Calculation Agent;
provided, however, that if fewer than three brokers selected by the
Calculation Agent are quoting as mentioned in this sentence, the Federal Funds
Rate for such Interest Reset Date will be the Federal Funds Rate in effect on
such Federal Funds Interest Determination Date.
RENEWABLE NOTES
SCI may also issue from time to time renewable Floating Rate Notes
("Renewable Notes") that will bear interest at the interest rate (calculated
with reference to a Interest Rate Basis and the Spread and/or Spread
Multiplier, if any, and subject to a minimum interest rate and maximum
interest rate, if any) specified in the Renewable Notes and in the applicable
Pricing Supplement. Renewable Notes will be issued only in book-entry form.
Renewable Notes will mature on an Interest Payment Date as specified in the
applicable Pricing Supplement (the "Initial Maturity Date"), unless the
maturity of all or any portion of the principal amount thereof is extended in
accordance with the procedures described below. On the Interest Payment Dates
in each year specified in the applicable Pricing Supplement (each such
Interest Payment Date, an "Election Date"), the maturity of the Renewable
Notes will be extended to the Interest Payment Date occurring twelve months
after such Election Date (or to such other date as is specified in the
applicable Pricing Supplement), unless the Holder thereof elects to terminate
the automatic extension of the maturity of the Renewable Notes or of any
portion thereof having a principal amount of U.S. $1,000 or any multiple of
U.S. $1,000 in excess thereof by delivering a notice to such effect to the
Paying Agent not less than nor more than a number of days to be specified in
the applicable Pricing Supplement prior to such Election Date. Such option may
be exercised with respect to less than the entire principal amount of the
Renewable Notes; provided, however, that the principal amount for which such
option is not exercised is at least U.S. $1,000 or any larger amount that is
an integral multiple of U.S. $1,000. Notwithstanding the foregoing, the
maturity of the Renewable Notes may not be extended beyond the Final Maturity
Date as specified in the applicable Pricing Supplement (the "Final Maturity
Date"). If the Holder elects to terminate the automatic extension of the
maturity of any portion of the principal amount of the Renewable Notes and
such election is not revoked as described below, such portion will become due
and payable on the Interest Payment Date falling six months (unless another
period is specified in the applicable Pricing Supplement) after the Election
Date prior to which the Holder made such election.
An election to terminate the automatic extension of maturity may be revoked
as to any portion of the Renewable Notes having a principal amount of U.S.
$1,000 or any multiple of U.S. $1,000 in excess thereof by delivering a notice
to such effect to the Paying Agent on any day following the effective date of
the election to terminate the automatic extension of maturity and prior to the
fifteenth calendar day before the date on which such portion would otherwise
mature. Such a revocation may be made for less than the entire principal
amount of the Renewable Notes for which the automatic extension of maturity
has been terminated; provided, however, that the principal amount of the
Renewable Notes for which the automatic extension of maturity has been
terminated and for which such a revocation has not been made is at least U.S.
$1,000 or any larger amount that is an integral multiple of U.S. $1,000.
Notwithstanding the foregoing, a revocation may not be made during the period
from and including a Regular Record Date to but excluding the immediately
succeeding Interest Payment Date.
An election to terminate the automatic extension of the maturity of the
Renewable Notes, if not revoked as described above by the Holder making the
election or any subsequent Holder, will be binding upon such subsequent
Holder.
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Renewable Notes may be redeemed in whole or in part at the option of SCI on
the Interest Payment Dates in each year specified in the applicable Pricing
Supplement, commencing with the Interest Payment Date specified in the
applicable Pricing Supplement, at a redemption price of 100% of the principal
amount of the Renewable Notes to be redeemed, together with accrued and unpaid
interest to the date of redemption. Notwithstanding anything to the contrary
in this Prospectus Supplement, notice of redemption will be provided by
mailing a notice of such redemption to each Holder by first class mail,
postage prepaid, at least 30 and not more than 60 calendar days prior to the
date fixed for redemption.
Renewable Notes may also be issued, from time to time, with the Spread
and/or Spread Multiplier to be reset by a remarketing agent in remarketing
procedures (the "Remarketing Procedures") to be specified in such Renewable
Notes and in the applicable Pricing Supplement. A description of the
Remarketing Procedures, the terms of the remarketing agreement between SCI and
the remarketing agent and the terms of any additional agreements with other
parties that may be involved in the Remarketing Procedures will be set forth
in the applicable Pricing Supplement.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Fixed Rate Note (other than an
Amortizing Note) will indicate whether SCI has the option to extend the
maturity of such Fixed Rate Note for one or more periods of one or more whole
years (each an "Extension Period") up to but not beyond the date (the "Final
Maturity Date") set forth in such Pricing Supplement. If SCI has such option
with respect to any such Fixed Rate Note (an "Extendible Note"), the following
procedures will apply, unless modified as set forth in the applicable Pricing
Supplement.
SCI may exercise such option with respect to an Extendible Note by notifying
the Paying Agent of such exercise at least 45 but not more than 60 calendar
days prior to the stated maturity date originally in effect with respect to
such Note (the "Original Maturity Date") or, if the stated maturity date of
such Note has already been extended, prior to the stated maturity date then in
effect (an "Extended Maturity Date"). No later than 40 calendar days prior to
the Original Maturity Date or an Extended Maturity Date, as the case may be
(each, a "Maturity Date"), the Paying Agent will mail to the Holder of such
Extendible Note a notice (the "Extension Notice") relating to such Extension
Period, first class mail, postage prepaid, setting forth (a) the election of
SCI to extend the maturity of such Extendible Note; (b) the new Extended
Maturity Date; (c) the interest rate applicable to the Extension Period; and
(d) the provisions, if any, for redemption during the Extension Period,
including the date or dates on which, the period or periods during which and
the price or prices at which such redemption may occur during the Extension
Period. Upon the mailing by the Paying Agent of an Extension Notice to the
Holder of an Extendible Note, the maturity of such Note shall be extended
automatically, and, except as modified by the Extension Notice and as
described in the next paragraph, such Note will have the same terms it had
prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 a.m., New York City
time, on the twentieth calendar day prior to the Maturity Date then in effect
for an Extendible Note (or, if such day is not a Business Day, not later than
10:00 a.m., New York City time, on the immediately succeeding Business Day),
SCI may, at its option, revoke the interest rate, in the case of Fixed Rate
Notes, or Spread and/or Spread Multiplier, in the case of Floating Rate Notes,
provided for in the Extension Notice and establish a higher interest rate for
the Extension Period by causing the Paying Agent to send notice of such higher
interest rate, in the case of Fixed Rate Notes, or Spread and/or Spread
Multiplier, in the case of Floating Rate Notes, to the Holder of such Note by
first class mail, postage prepaid, or by such other means as shall be agreed
between SCI and the Paying Agent. Such notice shall be irrevocable. All
Extendible Notes with respect to which the Maturity Date is extended in
accordance with an Extension Notice will bear such higher interest rate, in
the case of Fixed Rate Notes, or Spread and/or Spread Multiplier, in the case
of Floating Rate Notes, for the Extension Period, whether or not tendered for
repayment.
If SCI elects to extend the maturity of an Extendible Note, the Holder of
such Note will have the option to require SCI to repay such Note on the
Maturity Date then in effect at a price equal to the principal amount thereof
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plus all accrued and unpaid interest to such date. In order for an Extendible
Note to be so repaid on such Maturity Date, the Holder thereof must follow the
procedures set forth below under "Repayment at the Option of the Holder" for
optional repayment, except that the period for delivery of such Note or
notification to the Paying Agent shall be at least 25 but not more than 35
calendar days prior to the Maturity Date then in effect and except that a
Holder who has tendered an Extendible Note for repayment pursuant to an
Extension Notice the Holder may, by written notice to the Paying Agent, revoke
any such tender for repayment until 3:00 p.m., New York City time, on the
twentieth calendar day prior to the Maturity Date then in effect (or, if such
day is not a Business Day, until 3:00 p.m., New York City time, on the
immediately succeeding Business Day).
ORIGINAL ISSUE DISCOUNT NOTES
Original Issue Discount Notes are Notes issued at a discount from the
principal amount payable at maturity (including any Zero Coupon Note) and
which are considered to be issued with original issue discount which must be
included in income for United States federal income tax purposes at a constant
rate ("Original Issue Discount Notes"). See "United States Taxation." Certain
additional considerations relating to Original Issue Discount Notes may be
described in the Pricing Supplement relating thereto.
AMORTIZING NOTES
SCI may from time to time offer Notes for which payments of principal and
interest are made over the life of the Notes ("Amortizing Notes"). Unless
otherwise specified in the applicable Pricing Supplement, interest on each
Amortizing Note will be computed on the basis of a 360-day year of twelve 30-
day months. Payments with respect to Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. Further information concerning additional terms and
provisions of Amortizing Notes will be specified in the applicable Pricing
Supplement, including a table setting forth repayment information for such
Amortizing Notes.
OTHER PROVISIONS, ADDENDA
Any provisions with respect to the Notes, including the determination of an
Interest Rate Basis, the specification of Interest Rates Basis, calculation of
the interest rate applicable to a Floating Rate Note, its Interest Payment
Dates or any other matter relating thereto may be modified by the terms
specified under "Other Provisions" on the face thereof or in an addendum (an
"Addendum") relating thereto, if so specified on the face thereof and in the
applicable Pricing Supplement.
PAYMENT OF PRINCIPAL AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, payments of
principal of (and premium, if any) and interest on all Notes will be made in
the applicable Specified Currency; provided, however, that payments of
principal (and premium, if any) and interest on Notes denominated in other
than U.S. dollars will nevertheless be made in U.S. dollars:
(a) at the option of the Holders of such Notes under the procedures
described in the two following paragraphs; and
(b) at SCI's option in the case of imposition of exchange controls or
other circumstances beyond SCI's control as described in the last paragraph
under this heading.
Unless otherwise specified in the applicable Pricing Supplement, and except
as provided in the next paragraph, payments of interest and principal (and
premium, if any) for any Note denominated in other than U.S. dollars will be
made in U.S. dollars if the registered Holder of such Note on the relevant
Regular Record Date, or at maturity, as the case may be, has transmitted a
written request for such payment in U.S. dollars to the Paying Agent at the
Paying Agent Office on or before such Regular Record Date, or the date 15 days
before maturity, as the case may be. Such request may be in writing (mailed or
hand delivered) or by cable or other
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form of facsimile transmission. Any such request made for any Note by a
registered Holder will remain in effect for any further payments of interest
and principal (and premium, if any) on such Note payable to such Holder,
unless such request is revoked on or before the relevant Regular Record Date
or the date 15 days before maturity, as the case may be. Holders of Notes
denominated in other than U.S. dollars whose Notes are registered in the name
of a broker or nominee should contact such broker or nominee to determine
whether and how to elect to receive payments in U.S. dollars.
The U.S. dollar amount to be received by a Holder of a Note denominated in
other than U.S. dollars who elects to receive payment in U.S. dollars will be
determined by the exchange rate agent (the "Exchange Rate Agent"), at
approximately 11:00 a.m., New York City time, on the second Business Day
preceding the applicable Payment Date, by selecting the indicative quotations
for the Specified Currency appearing at such time on the bank composite or
multi-contributor pages of the Quoting Source (as defined below) for the first
three banks, in descending order of their appearance on a list of banks to be
agreed to by SCI and the Exchange Rate Agent prior to such second Business
Day, which are offering quotes on the Quoting Source. The Exchange Rate Agent
shall select from among the selected quotations the one which will yield the
largest number of U.S. dollars upon conversion from such Specified Currency.
The "Quoting Source" shall mean Reuters Monitor Foreign Exchange Service, or
if the Exchange Rate Agent determines that such service is not available,
Telerate Monitor Foreign Exchange Service. If the Exchange Rate Agent
determines that neither Service is available, SCI and the Exchange Rate Agent
shall agree on a comparable display or other comparable manner of obtaining
quotations and such display or manner shall become the Quoting Source.
In the case of a Specified Currency other than ECUs, if (i) fewer than three
bid quotations are available at the time a determination is to be made by the
Exchange Rate Agent pursuant to the preceding paragraph, or (ii) the Exchange
Rate Agent received no later than 12:00 noon, New York City time, on such
second Business Day preceding the applicable Payment Date notice from SCI that
there exist exchange controls or other circumstances beyond SCI's control
rendering such Specified Currency unavailable, then the Exchange Rate Agent
shall, prior to such Payment Date, notify SCI and the Trustee of the noon
buying rate in New York City for cable transfers, in the Specified Currency
indicated in such notice, as certified for customers purposes by the Federal
Reserve Bank of New York (the "Market Exchange Rate") as of such second
Business Day. If the Market Exchange Rate for such date is not then available,
the Exchange Rate Agent shall immediately notify SCI and the Trustee of the
most recently available Market Exchange Rate for such Specified Currency. In
the case of ECUs, if: (i) fewer than three bid quotations are available at the
time a determination is to be made by the Exchange Rate Agent pursuant to the
preceding paragraph, or (ii) the Exchange Rate Agent received no later than
12:00 noon, New York City time, on such second Business Day preceding the
applicable Payment Date notice from SCI that (A) there exist exchange controls
or other circumstances beyond SCI's control, rendering ECUs unavailable or (B)
ECUs are no longer used in the European Monetary System, rendering ECUs
unavailable, then the Exchange Rate Agent shall, prior to such Payment Date,
notify SCI and the Trustee of the rate of conversion for ECUs into U.S.
dollars, determined as of such second Business Day on the following basis: The
component currencies of the ECUs for this purpose (the "Components") shall be
the currency amounts that were components of the ECUs as of the last date on
which ECUs were used in the European Monetary System. The equivalent of ECUs
in U.S. dollars shall be calculated by aggregating the U.S. dollar equivalent
of the Components. The U.S. dollar equivalent of each of the Components shall
be determined by the Exchange Rate Agent on the basis of the most recently
available Market Exchange Rate for the Components, or as otherwise specified
to the Exchange Rate Agent by SCI.
Interest will be payable to the person in whose name a Note is registered
(which for a permanent global Note representing Book-Entry Notes will be the
Depositary or a nominee of the Depositary) at the close of business on the
Regular Record Date next preceding each Interest Payment Date; provided,
however, that interest payable at maturity will be payable to the person to
whom principal shall be payable (which for permanent global Notes representing
Book-Entry Notes will be the Depositary or a nominee of the Depositary). The
first payment of interest on any Note originally issued between a Regular
Record Date and an Interest Payment Date will be made on the second such
Interest Payment Date next succeeding its date of issue to the registered
owner on the
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Regular Record Date relating to such second Interest Payment Date. Unless
otherwise indicated in the applicable Pricing Supplement, the "Regular Record
Date" for any Floating Rate Note shall be the date 15 calendar days before
each Interest Payment Date, whether or not such date shall be a Business Day,
and the "Regular Record Date" for any Fixed Rate Note shall be the March 15
and September 15 next preceding the March 31 and September 30 Interest Payment
Dates unless otherwise indicated in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable:
(a) for Floating Rate Notes that reset daily, on the third Wednesday of
each month or on the third Wednesday of March, June, September, and
December of each year (as indicated in the applicable Pricing Supplement);
(b) for Floating Rate Notes that reset weekly, on the third Wednesday of
each month or on the third Wednesday of March, June, September, and
December of each year (as indicated in the applicable Pricing Supplement);
(c) for Floating Rate Notes that reset monthly, on the third Wednesday of
each month or on the third Wednesday of March, June, September, and
December of each year (as indicated in the applicable Pricing Supplement);
(d) for Floating Rate Notes that reset quarterly, on the third Wednesday
of March, June, September, and December of each year;
(e) for Floating Rate Notes that reset semi-annually, on the third
Wednesday of the two months of each year specified in the applicable
Pricing Supplement;
(f) for Floating Rate Notes that reset annually, on the third Wednesday
of the month specified in the applicable Pricing Supplement; and
(g) for Floating Rate Notes that reset at intervals other than those
described above, on the days specified in the applicable Pricing
Supplement,
each an "Interest Payment Date," and in each case, at maturity. If an Interest
Payment Date (other than at Stated Maturity, a Redemption Date or an Optional
Repayment Date (as defined below under "Repayment at the Option of the
Holder")) with respect to any Floating Rate Note would otherwise fall on a day
that is not a Market Day with respect to such Note (and for any Note
denominated in other than U.S. dollars, a Business Day in the country issuing
the Specified Currency (or, for ECUs, Brussels)), such Interest Payment Date
will be on the next succeeding Market Day (with interest accruing to but
excluding the next succeeding Market Day) (or, in the case of a LIBOR Note, if
such day falls in the next calendar month, the next preceding Market Day (with
interest accruing to but excluding the next preceding Market Day)). If the
Stated Maturity, Redemption Date or Optional Repayment Date of a Floating Rate
Note falls on a day that is not a Market Day (and for any Note denominated in
other than U.S. dollars, a Business Day in the country issuing the Specified
Currency (or, for ECUs, Brussels)), the required payment of principal,
premium, if any, and interest will be made on the next succeeding Market Day
as if made on the date such payment was due, and no interest will accrue on
such payment for the period from and after the Stated Maturity, Redemption
Date or Optional Repayment Date, as the case may be, to the date of such
payment on the next succeeding Market Day.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments in respect of Fixed Rate Notes and Floating Rate Notes will equal the
amount of interest accrued from and including the immediately preceding
Interest Payment Date in respect of which interest has been paid or duly made
available for payment (or from and including the date of issue, if no interest
has been paid or duly made available for payment) to but excluding the
applicable Interest Payment Date or the Stated Maturity, as the case may be.
For a Floating Rate Note, accrued interest from (and including) the date of
issue or from (and including) the last date to which interest has been paid is
calculated by multiplying the face amount of such Floating Rate Note by an
accrued interest factor. Such accrued interest factor is computed by adding
the interest factor
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calculated for each day from (and including) the date of issue, or from (and
including) the last date to which interest has been paid, but excluding the
date for which accrued interest is being calculated. The interest factor
(expressed as a decimal) for each such day is computed by dividing the
interest rate (expressed as a decimal) applicable to such date by 360 for
Commercial Paper Rate Notes, Prime Rate Notes, LIBOR Notes, CD Rate Notes, or
Federal Funds Rate Notes, or by the actual number of days in the year for
Treasury Rate Notes or CMT Rate Notes. Interest on Fixed Rate Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
A payment on any Fixed Rate Note due on any day that is not a Market Day
(and, for any Note denominated in other than U.S. dollars, a Business Day in
the country issuing the Specified Currency (or, for ECUs, Brussels)) need not
be made on such a day, but may be made on the next succeeding Market Day with
the same force and effect as if made on the due date, and no interest shall
accrue for the period from and after such date.
Payment of the principal of (and premium, if any) and any interest due with
respect to any Note (other than a Book-Entry Note) at maturity will be made in
immediately available funds upon surrender of such Note at the Paying Agent
Office, provided that the Note is presented to the Paying Agent in time for
the Paying Agent to make such payments in such funds in accordance with its
normal procedures. Payments of interest on any Note (other than any Book-Entry
Note) other than at maturity will be made by check mailed to the address of
the Person (which, in the case of a permanent global Note representing Book-
Entry Notes, shall be the Depositary) entitled thereto as it appears in the
Security Register or by wire transfer to such account as may have been
appropriately designated by such Person. Payments in respect of Book-Entry
Notes are further discussed under "--Book-Entry Notes."
If the principal of (and premium, if any) or interest on any Note is payable
in other than U.S. dollars and such Specified Currency is not available due to
the imposition of exchange controls or other circumstances beyond the control
of SCI, SCI will be entitled to satisfy its obligations to Holders of the
Notes by making such payment in U.S. dollars on the basis of the most recently
available Exchange Rate. Any payment made under such circumstances in U.S.
dollars where the required payment is in other than U.S. dollars will not
constitute an Event of Default under the Indenture.
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by SCI at the option of the Holders thereof
prior to Stated Maturity only if one or more optional repayment dates are
specified in the applicable Pricing Supplement ("Optional Repayment Dates").
If so specified, the Notes will be subject to repayment at the option of the
Holders thereof on any Optional Repayment Date in whole or in part in
increments of U.S. $1,000 or such other minimum denomination specified in the
applicable Pricing Supplement (provided that any remaining principal amount
thereof shall be at least U.S. $1,000 or such other minimum denomination), at
a repayment price equal to 100% of the unpaid principal amount to be repaid
(or, if this Note is an Original Issue Discount Note, such lesser amount as
provided therein), together with unpaid interest accrued to the date of
repayment. For any Note to be repaid, such Note must be received, together
with the form thereon entitled "Option to Elect Repayment" duly completed, by
the Trustee at its Corporate Trust Office (or such other address of which SCI
shall from time to time notify the Holders) not more than 60 nor less than 30
calendar days prior to the date of repayment. Exercise of such repayment
option by the Holder will be irrevocable.
Only the Depositary may exercise the repayment option in respect of Global
Securities representing Book-Entry Notes. Accordingly, holders of beneficial
interests ("Beneficial Owners") of a permanent global Note that desire to have
all or any portion of the Book-Entry Notes represented by such permanent
global Note repaid must instruct the participant through which they own their
interest to direct the Depositary to exercise the repayment option on their
behalf by delivering the related permanent global Note and duly completed
election form to the Trustee as aforesaid. In order to ensure that such
permanent global Note and election form are received by the Trustee on a
particular day, the applicable Beneficial Owner must so instruct the
participant through which it owns its interest before such participant's
deadline for accepting instructions for that day.
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Different firms may have different deadlines for accepting instructions from
their customers. Accordingly, Beneficial Owners should consult the
participants through which they own their interest for the respective
deadlines for such participants. All instructions given to participants from
Beneficial Owners of permanent global Notes relating to the option to elect
repayment shall be irrevocable. In addition, at the time such instructions are
given, each such Beneficial Owner shall cause the participant through which it
owns its interest to transfer such Beneficial Owner's interest in the
permanent global Note or Notes representing the related Book-Entry Notes, on
the Depositary's records, to the Trustee. See "--Book-Entry Notes."
If applicable, SCI will comply with the requirements of Rule 14e-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
other securities laws or regulations in connection with any such repayment.
SCI may at any time purchase Notes at any price or prices in the open market
or otherwise. Notes so purchased by SCI may, at the discretion of SCI, be
held, resold or surrendered to the Trustee for cancellation.
OPTIONAL REDEMPTION
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be redeemable prior to their Stated Maturity. If so specified in the
applicable Pricing Supplement, the Notes will be redeemable at the option of
SCI at any time after the date or dates specified therein. If one or more such
dates are so specified with respect to any Note, the applicable Pricing
Supplement will also specify one or more redemption prices (expressed as a
percentage of the principal amount of such Note) ("Redemption Prices") and the
redemption period or periods ("Redemption Periods") during which such
Redemption Prices shall apply. Unless otherwise specified in the Pricing
Supplement, any such Note shall be redeemable at the option of SCI at the
specified Redemption Price applicable to the Redemption Period during which
such Note is to be redeemed, together with interest accrued to the Redemption
Date.
If so specified in the applicable Pricing Supplement, the Notes will be
redeemable at SCI's option, as a whole or from time to time in part in
increments of U.S. $1,000 or such other minimum denomination specified in the
applicable Pricing Supplement (provided that any remaining principal amount
thereof shall be at least U.S. $1,000 or such other minimum denomination), on
any date prior to their Stated Maturity at a Redemption Price equal to 100% of
the principal amount thereof plus accrued interest to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date), plus a Make-Whole Premium, if any.
The "Make-Whole Premium" in respect of any Note is intended to be the
amount, if any, which, when added to the then outstanding principal amount of
such Note, would, if invested on the Redemption Date of such Note in U.S.
Treasury securities with maturities equal to the Remaining Life of the Notes,
have a yield to maturity equal to the original yield to maturity of the Notes,
based on the initial public offering price of the Notes set forth in the
applicable Pricing Supplement. The amount of the Make-Whole Premium in respect
of the principal amount of any Note to be redeemed will be calculated by SCI
and will be the excess, if any, of (i) the sum of the present values, as of
the Redemption Date of such Note, of (A) the respective interest payments
(exclusive of the amount of accrued interest to the Redemption Date) on such
Note that, but for such redemption, would have been payable on their
respective Interest Payment Dates after such Redemption Date, and (B) the
payment of such principal amount that, but for such redemption, would have
been payable on the Stated Maturity over (ii) the amount of such principal to
be redeemed. Such present values will be determined in accordance with
generally accepted principles of financial analysis by discounting the amounts
of such payments of interest and principal from their respective Stated
Maturities to such Redemption Date at a discount rate equal to the Treasury
Yield.
The "Treasury Yield" in respect of any Note to be redeemed shall be
determined as of the date on which notice of redemption of such Note is sent
to the Holder thereof by reference to the most recent Federal Reserve
Statistical Release H.15(519) (or successor publication) which has become
publicly available not more than two Business Days prior to such date (or, if
such Statistical Release (or successor publication) is no longer published or
no longer contains the applicable data, to the most recently published issue
of The Wall Street Journal (Eastern Edition) published not more than two
Business Days prior to such date that contains such data or, if
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The Wall Street Journal (Eastern Edition) is no longer published or no longer
contains such data, to any publicly available source of similar market data),
and shall be the most recent weekly average yield on actively traded U.S.
Treasury securities adjusted to a constant maturity equal to the Remaining
Life of the Notes and, if applicable, converted to a bond equivalent yield
basis as described below. The "Remaining Life of the Notes" shall equal the
number of years from the Redemption Date to the Stated Maturity of the Notes;
provided that if the Remaining Life of the Notes being redeemed is not equal
to the constant maturity of a U.S. Treasury security for which a weekly
average yield is specified in the applicable source, then the Remaining Life
of the Notes shall be rounded to the nearest one-twelfth of one year and the
Treasury Yield shall be obtained by linear interpolation (computed to the
fifth decimal place (one thousandth of a percentage point) and then rounded to
the fourth decimal place (one hundredth of a percentage point)), after
rounding to the nearest one-twelfth of one year, from the weekly average
yields of (a) the actively traded U.S. Treasury security with a maturity
closest to and less than the Remaining Life of the Notes and (b) the actively
traded U.S. Treasury security with a maturity closest to and greater than the
Remaining Life of the Notes, except that if the Remaining Life of the Notes is
less than three months, the weekly average yield on actively traded U.S.
Treasury securities adjusted to a constant maturity of three months shall be
used. The Treasury Yield shall, if expressed on a yield basis other than that
equivalent to a bond equivalent yield basis, be converted to a bond equivalent
yield basis and shall be computed to the fifth decimal place (one thousandth
of a percentage point) and then rounded to the fourth decimal place (one
hundredth of a percentage point).
Notice of redemption will be provided by mailing a notice of such redemption
to each Holder by first class mail, postage prepaid, at least 30 days and not
more than 60 days prior to the date fixed for redemption to the respective
address of each Holder as that address appears in the Security Register.
SCI may purchase Notes at any price in the open market or otherwise. Notes
so purchased by SCI may, at the discretion of SCI, be held or resold or
surrendered to the Trustee for cancellation.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes of like tenor and having the same date
of issue will be represented by a single permanent global Note. Each permanent
global Note representing Book-Entry Notes will be deposited with, or on behalf
of, The Depository Trust Company, as Depositary (the "Depositary"), located in
the Borough of Manhattan, The City of New York, and will be registered in the
name of the Depositary or a nominee of the Depositary. Currently, the
Depositary will accept the deposit of only permanent global Notes denominated
in U.S. dollars.
Ownership of beneficial interests in a permanent global Note representing
Book-Entry Notes will be limited to institutions that have accounts with the
Depositary or its nominee ("participants") or persons that may hold interests
through participants. In addition, ownership of beneficial interests by
participants in such a permanent global Note will be evidenced only by, and
the transfer of that ownership interest will be effected only through, records
maintained by the Depositary or its nominee for such permanent global Note.
Ownership of beneficial interests in such a permanent global Note by persons
that hold through participants will be evidenced only by, and the transfer of
that ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such
securities in definitive form. Such laws may impair the ability to transfer
beneficial interests in such a permanent global Note.
SCI has been advised by the Depositary that upon the issuance of a permanent
global Note representing Book-Entry Notes, and the deposit of such permanent
global Note with the Depositary, the Depositary will immediately credit, on
its book-entry registration and transfer system, the respective principal
amounts of the Book-Entry Notes represented by such permanent global Note to
the accounts of participants. The accounts to be credited shall be designated
by the soliciting Agent or, to the extent that the Book-Entry Notes are
offered and sold directly, by SCI.
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Payment of principal of and any premium and interest on Book-Entry Notes
represented by any permanent global Note registered in the name of or held by
the Depositary or its nominee will be made to the Depositary or its nominee,
as the case may be, as the registered owner and Holder of the permanent global
Note representing such Book-Entry Notes. Neither SCI, the Trustee, nor any
agent of SCI or the Trustee will have any responsibility or liability for any
aspect of the Depositary's records or any participant's records relating to or
payments made on account of beneficial ownership interests in a permanent
global Note representing such Book-Entry Notes or for maintaining, supervising
or reviewing any of the Depositary's records or any participant's records
relating to such beneficial ownership interests.
SCI has been advised by the Depositary that upon receipt of any payment of
principal of or any premium or interest in respect of a permanent global Note,
the Depositary will immediately credit, on its book-entry registration and
transfer system, accounts of participants with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such permanent global Note as shown on the records of the Depositary.
Payments by participants to owners of beneficial interests in a permanent
global Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name," and will be the
sole responsibility of such participants.
No permanent global Note described above may be transferred except as a
whole by the Depositary for such permanent global Note to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary.
A permanent global Note representing Book-Entry Notes is exchangeable for
definitive Notes registered in the name of, and a transfer of a permanent
global Note may be registered to, any Person other than the Depositary or its
nominee, only if:
(a) the Depositary notifies SCI that it is unwilling or unable to
continue as Depositary for such permanent global Note or if at any time the
Depositary ceases to be a clearing agency registered under the Exchange
Act;
(b) SCI in its sole discretion determines that such permanent global Note
shall be exchangeable for definitive Notes in registered form; or
(c) any event shall have happened and be continuing that constitutes or,
after notice or lapse of time, or both, would constitute an Event of
Default with respect to the Notes.
Any permanent global Note that is exchangeable pursuant to the preceding
sentence shall be exchangeable in whole for definitive Notes in registered
form, of like tenor and of an equal aggregate principal amount, in
denominations of U.S. $1,000 and integral multiples of U.S. $1,000 in excess
thereof. Such definitive Notes shall be registered in the name or names of
such person or persons as the Depositary shall instruct the Trustee. It is
expected that such instructions may be based upon directions received by the
Depositary from its participants with respect to ownership of beneficial
interests in such permanent global Note.
Except as provided above, owners of beneficial interests in such permanent
global Note will not be entitled to receive physical delivery of Notes in
definitive form and will not be considered the Holders thereof for any purpose
under the Indenture, and no permanent global Note representing Book-Entry
Notes shall be exchangeable, except for another permanent global Note of like
denomination and tenor to be registered in the name of the Depositary or its
nominee. Accordingly, each person owning a beneficial interest in such
permanent global Note must rely on the procedures of the Depositary and, if
such person is not a participant, on the procedures of the participant through
which such person owns its interest, to exercise any rights of a Holder under
the Indenture.
The Indenture provides that the Depositary, as a Holder, may appoint agents
and otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver, or other action which a
Holder is entitled to give or take under the Indenture. SCI understands that,
under existing industry
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practices, in the event that SCI requests any action of Holders or an owner of
a beneficial interest in such permanent global Note desires to give or take
any action that a Holder is entitled to give or take under the Indenture, the
Depositary would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning
through them.
The Depositary has advised SCI that the Depositary is a limited purpose
trust company organized under the laws of the State of New York, 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 under the
Exchange Act. The Depositary was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the
need for physical movement of securities certificates. The Depositary's
participants include securities brokers and dealers (including the Agents),
banks, trust companies, clearing corporations, and certain other
organizations, some of whom (or their representatives) own the Depositary.
Access to the Depositary's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or indirectly.
FOREIGN CURRENCY RISKS
GOVERNING LAW AND JUDGMENTS
The Notes will state that they will be governed by and construed in
accordance with the laws of the State of New York. Courts in the United States
have not customarily rendered judgments for money damages denominated in any
currency other than the U.S. dollar. The Judiciary Law of the State of New
York provides, however, that judgment rendered in an action based upon an
obligation denominated in a currency other than U.S. dollars will be rendered
in the foreign currency of the underlying obligation and converted into U.S.
dollars at a rate of exchange prevailing on the date of the entry of the
judgment or decree.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Notes that are denominated in a Specified Currency other
than U.S. dollars ("Foreign Currency Notes") entails significant risks that
are not associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of
significant market changes in rates of exchange between U.S. dollars and such
Specified Currency, the possibility of significant changes in rates of
exchange between U.S. dollars and such Specified Currency resulting from
official redenomination with respect to such Specified Currency and the
possibility of the imposition or modification of foreign exchange controls by
either the United States or foreign governments. Such risks generally depend
on factors over which SCI has no control, such as economic and political
events, and on the supply of and demand for the relevant currencies. In recent
years, rates of exchange between the U.S. dollar and certain foreign
currencies, and between certain foreign currencies and other foreign
currencies, have been volatile, and such volatility may be expected in the
future. Fluctuations that have occurred in any particular exchange rate in the
past are not necessarily indicative, however, of fluctuations that may occur
in the rate during the term of any Foreign Currency Note. Depreciation of the
Specified Currency of a Foreign Currency Note against U.S. dollars would
result in a decrease in the effective yield of such Foreign Currency Note
below its coupon rate and, in certain circumstances, could result in a loss to
the investor on a U.S. dollar basis.
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a Specified Currency (other than U.S. dollars) at the time of payment of
principal of, or premium, if any, or interest on, a Foreign Currency Note.
There can be no assurance that exchange controls will not restrict or prohibit
payments of principal (and premium, if any) or interest in any such Specified
Currency. Even if there are no actual exchange controls, it is possible that
such Specified Currency
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would not be available to SCI when payments on such Notes are due because of
circumstances beyond the control of SCI.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT, AND ANY
PRICING SUPPLEMENT WILL NOT, DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES
DENOMINATED IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A CURRENCY
OR COMPOSITE CURRENCY OTHER THAN U.S. DOLLARS, AND SCI DISCLAIMS ANY
RESPONSIBILITY TO ADVISE PROSPECTIVE INVESTORS OF SUCH RISKS AS THEY EXIST AT
THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME
TO TIME. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN SUCH NOTES. SUCH NOTES
ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH
RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
Unless otherwise specified in the applicable Pricing Supplement, no Foreign
Currency Note will be sold in or to residents of the country issuing the
Specified Currency of such Foreign Currency Note. The information set forth in
this Prospectus Supplement is directed to prospective purchasers who are
United States residents, and SCI disclaims any responsibility to advise
prospective purchasers who are residents of countries other than the United
States with respect to any matters that may affect the purchase, holding or
receipt of payments of principal (and premium, if any) or interest on such
Foreign Currency Notes. Such persons should consult their own counsel with
regard to such matters.
Pricing Supplements relating to Foreign Currency Notes will contain
information concerning historical exchange rates for the applicable Specified
Currency against the U.S. dollar or other relevant currency, a description of
such currency or currencies and any exchange controls affecting such currency
or currencies. The information therein concerning exchange rates is furnished
as a matter of information only and should not be regarded as indicative of
the range of or trends in fluctuations in currency exchange rates that may
occur in the future.
UNITED STATES TAXATION
The following discussion is a summary of the principal United States federal
income tax consequences of ownership and disposition of Notes. It deals only
with Notes held as capital assets by initial purchasers and not with special
classes of holders, such as dealers in securities or currencies, banks, tax-
exempt organizations, life insurance companies, persons that hold Notes that
are a hedge or that are hedged against currency risks or that are part of a
straddle or conversion transaction or persons whose functional currency is not
the U.S. dollar. Moreover, the summary deals only with Notes that are due to
mature 30 years or less from the date on which they are issued. The United
States federal income tax consequences of ownership of Notes that are due to
mature more than 30 years from their date of issue will be discussed in an
applicable Pricing Supplement. The summary is based on the Internal Revenue
Code of 1986, as amended (the "Code"), its legislative history, final,
temporary and proposed regulations thereunder, administrative rulings and
court decisions, all as currently in effect and all subject to change at any
time, perhaps with retroactive effect.
Prospective purchasers of Notes should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any other taxing jurisdiction, of the ownership and
disposition of Notes.
UNITED STATES HOLDERS
PAYMENTS OF INTEREST
Payments of "qualified stated interest" (as defined below under "Original
Issue Discount--General") on a Note, whether payable in U.S. dollars or a
currency, composite currency or basket of currencies other than U.S. dollars
(a "foreign currency"), generally will be taxable to a United States Holder as
ordinary income at the time it is received or accrued, depending on the
holder's method of accounting for tax purposes. A United States
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Holder is a beneficial owner of a Note who or that is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created in or organized under the laws of the United States or any political
subdivision thereof or (iii) otherwise subject to United States federal income
taxation on a net income basis in respect of a Note.
If an interest payment is denominated in, or determined by reference to, a
foreign currency, the amount of income recognized by a cash basis United
States Holder will be the U.S. dollar value of the interest payment, based on
the exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact received in or converted into U.S. dollars.
An accrual basis United States Holder may determine the amount of income
recognized with respect to an interest payment denominated in, or determined
by reference to, a foreign currency in accordance with either of two methods.
Under the first method, the amount of income accrued by a United States Holder
will be based on the average exchange rate in effect during the interest
accrual period (or, with respect to an accrual period that spans two taxable
years, the part of the period within the taxable year).
Under the second method, the United States Holder may elect to determine the
amount of income accrued on the basis of the exchange rate in effect on the
last day of the accrual period or, in the case of an accrual period that spans
two taxable years, the exchange rate in effect on the last day of the part of
the period within the taxable year. Additionally, if a payment of interest is
actually received within five business days of the last day of the accrual
period or taxable year, an electing accrual basis United States Holder may
instead translate such accrued interest into U.S. dollars at the exchange rate
in effect on the day of actual receipt. Any such election will apply to all
debt instruments held by the United States Holder at the beginning of the
first taxable year to which the election applies or thereafter acquired by the
United States Holder, and will be irrevocable without the consent of the
Internal Revenue Service (the "Service").
Upon receipt of the interest payment (including a payment attributable to
accrued but unpaid interest upon the sale or retirement of a Note) denominated
in, or determined by reference to, a foreign currency, the accrual-basis
United States Holder thereof will recognize ordinary income or loss measured
by the difference between (x) the average exchange rate used to accrue
interest income, or the exchange rate as determined under the second method
described above if the United States Holder elects that method, and (y) the
exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars.
ORIGINAL ISSUE DISCOUNT
GENERAL. A Note, other than a Note with a term of one year or less (a
"short-term Note"), will be treated as issued at an original issue discount (a
"Original Issue Discount Note") if the excess of the Note's "stated redemption
price at maturity" over its issue price is more than a "de minimis amount" (as
defined below). Generally, the issue price of a Note will be the first price
at which a substantial amount of Notes included in the issue of which the Note
is a part is sold to the public (excluding bond houses, brokers, or similar
persons or organizations acting in the capacity of underwriters, placement
agents, or wholesalers). The stated redemption price at maturity of a Note is
the total of all payments provided by the Note that are not payments of
"qualified stated interest." Qualified stated interest is generally stated
interest that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate (with
certain exceptions for lower rates paid during some periods). Special rules
for "Variable Rate Notes" (as defined below under "Original Issue Discount--
Variable Rate Notes") are described below under "Original Issue Discount--
Variable Rate Notes."
In general, if the excess of a Note's stated redemption price at maturity
over its issue price is less than 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to its
maturity, or in the case of Amortizing Notes, the weighted average maturity as
determined under the applicable regulations (the "de minimis amount"), then
such excess, if any, constitutes "de minimis original issue discount" and the
Note is not an Original Issue Discount Note. Unless the election described
below under "Election to Treat All Interest as Original Issue Discount" is
made, a United States Holder of a Note with de minimis original issue discount
must include such de minimis original issue discount in income as capital gain
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as stated principal payments on the Note are made. The includible amount with
respect to each such payment will equal the product of the total amount of the
Note's de minimis original issue discount and a fraction, the numerator of
which is the amount of the principal payment made and the denominator of which
is the stated principal amount of the Note.
United States Holders of Original Issue Discount Notes having a maturity of
more than one year from their date of issue, whether a holder uses the cash or
accrual method of accounting, must, generally, include in ordinary gross
income, before the receipt of cash attributable to such income original issue
discount ("OID") calculated on a constant-yield method before the receipt of
cash attributable to such income. The amount of OID includible in income by a
United States Holder of a Original Issue Discount Note is the sum of the daily
portions of OID with respect to the Original Issue Discount Note for each day
during the taxable year or portion of the taxable year on which the United
States Holder holds such Original Issue Discount Note ("accrued OID"). The
daily portion is determined by allocating to each day in any "accrual period"
a pro rata portion of the OID allocable to that accrual period. Accrual
periods with respect to a Note may be of any length selected by the United
States Holder and may vary in length over the term of the Note as long as (i)
no accrual period is longer than one year and (ii) each scheduled payment of
interest or principal on the Note occurs on either the final or first day of
an accrual period. In the case of an initial holder, the amount of OID
allocable to an accrual period equals the excess of (a) the product of the
Original Issue Discount Note's "adjusted issue price" at the beginning of the
accrual period and such Note's yield to maturity (determined on the basis of
compounding at the close of each accrual period and properly adjusted for the
length of the accrual period) over (b) the sum of the payments of qualified
stated interest on the Note allocable to the accrual period. The "adjusted
issue price" of an Original Issue Discount Note at the beginning of any
accrual period is the issue price of the Note increased by (x) the amount of
accrued OID for each prior accrual period and decreased by (y) the amount of
any payments previously made on the Note that were not qualified stated
interest payments. For purposes of determining the amount of OID allocable to
an accrual period, if an interval between payments of qualified stated
interest on the Note contains more than one accrual period, the amount of
qualified stated interest payable at the end of the interval (including any
qualified stated interest that is payable on the first day of the accrual
period immediately following the interval) is allocated on a pro rata basis to
each accrual period in the interval, and the adjusted issue price at the
beginning of each accrual period in the interval must be increased by the
amount of any qualified stated interest that has accrued prior to the first
day of the accrual period but that is not payable until the end of the
interval. The amount of OID allocable to an initial short accrual period may
be computed using any reasonable method if all other accrual periods other
than a final short accrual period are of equal length. The amount of OID
allocable to the final accrual period is the difference between (x) the amount
payable at the maturity of the Note (other than any payment of qualified
stated interest) and (y) the Note's adjusted issue price as of the beginning
of the final accrual period.
ACQUISITION PREMIUM. A United States Holder that purchases a Note for an
amount less than or equal to the sum of all amounts payable on the Note after
the purchase date other than payments of qualified stated interest but in
excess of the Note's adjusted issue price (as determined above under "Original
Issue Discount--General") (any such excess being "acquisition premium") and
that does not make the election described below under "Election to Treat All
Interest as Original Issue Discount" is permitted to reduce the daily portions
of OID by a fraction, the numerator of which is the excess of the United
States Holder's adjusted basis in the Note immediately after its purchase by
such holder over the adjusted issue price of the Note, and the denominator of
which is the excess of the sum of all amounts payable on the Note after the
purchase date, other than payments of qualified stated interest, over the
Note's adjusted issue price.
MARKET DISCOUNT. A Note, other than a short-term Note, will be treated as
purchased at a market discount (a "Market Discount Note") if (i) the amount
for which a United States Holder purchased the Note is less than the Note's
issue price (as determined above under "Original Issue Discount--General") and
(ii) the Note's stated redemption price at maturity or, in the case of an
Original Issue Discount Note, the Note's "revised issue price," exceeds the
amount for which the United States Holder purchased the Note by at least 1/4
of 1 percent of such Note's stated redemption price at maturity or revised
issue price, respectively, multiplied by the number of
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complete years (or weighted average years in the case of Amortizing Notes) to
the Note's maturity. If such excess is not sufficient to cause the Note to be
a Market Discount Note, then such excess constitutes "de minimis market
discount" and such Note is not subject to the rules discussed in the following
paragraphs. The Code provides that, for these purposes, the "revised issue
price" of a Note generally equals its issue price, increased by the amount of
any OID that has accrued on the Note.
Any gain recognized on the maturity or disposition of a Market Discount Note
will be treated as ordinary income to the extent that such gain does not
exceed the accrued market discount on such Note. Any principal payment (or, in
the case of an Original Issue Discount Note, any payment that is not a payment
of qualified stated interest) on a Market Discount Note will be treated as
ordinary income to the extent of the market discount that has not been
previously included in income and is treated as having accrued at the time of
such payment. Alternatively, a United States Holder of a Market Discount Note
may elect to include market discount in income currently as it accrues over
the life of the Note. Such an election shall apply to all debt instruments
with market discount acquired by the electing United States Holder on or after
the first day of the first taxable year to which the election applies. This
election may not be revoked without the consent of the Service. A United
States Holder's tax basis in a Market Discount Note is increased by the amount
of market discount included in such holder's income under such an election.
Market discount on a Market Discount Note will accrue on a straight-line
basis unless the United States Holder elects to accrue such market discount on
a constant-yield method. Such an election shall apply only to the Note with
respect to which it is made and may not be revoked. A United States Holder of
a Market Discount Note that does not elect to include market discount in
income currently generally will be required to defer deductions for net direct
interest expense related to such Note in an amount not exceeding the accrued
market discount on such Note until the maturity or disposition of such Note.
PRE-ISSUANCE ACCRUED INTEREST. If (i) a portion of the initial purchase
price of a Note is attributable to pre-issuance accrued interest, (ii) the
first stated interest payment on the Note is to be made within one year of the
Note's issue date and (iii) the payment will equal or exceed the amount of
pre-issuance accrued interest, then the United States Holder may elect to
decrease the issue price of the Note by the amount of pre-issuance accrued
interest. In that event, a portion of the first stated interest payment will
be treated as a return of the excluded pre-issuance accrued interest and not
as an amount payable on the Note.
NOTES SUBJECT TO CONTINGENCIES INCLUDING OPTIONAL REDEMPTION. ln general, if
a Note provides for an alternative payment schedule or schedules applicable
upon the occurrence of a contingency or contingencies (other than a remote or
incidental contingency), the timing and amounts of the payments that comprise
each payment schedule are known as of the issue date and one of such schedules
is significantly more likely than not to occur, the yield and maturity of the
Note are determined by assuming that the payments will be made according to
that payment schedule. If there is no single payment schedule that is
significantly more likely than not to occur (other than because of a mandatory
sinking fund), the Notes will be subject to special rules governing contingent
payment obligations that will be discussed in the applicable Pricing
Supplement.
Notwithstanding the general rules for determining yield and maturity in the
case of Notes subject to contingencies, if SCI or the Holder has an
unconditional option or options, exercisable on one or more dates during the
term of such Note, that, if exercised, would require payments to be made on
the Note under an alternative payment schedule or schedules, then (i) in the
case of an option or options of SCI, SCI will be deemed to exercise or not
exercise an option or combination of options in the manner that minimizes the
yield on the Note and (ii) in the case of an option or options of the Holder,
the Holder will be deemed to exercise or not exercise an option or combination
of options in the manner that maximizes the yield on the Note. If both SCI and
the Holder have options described in the preceding sentence, those rules apply
to such options in the order in which they may be exercised. For purposes of
those calculations, the yield on the Note is determined by using any date on
which the Note may be redeemed or repurchased as the maturity date and the
amount payable on such date in accordance with the terms of the Note as the
principal amount payable at maturity.
If a contingency (including the exercise of an option) actually occurs or
does not occur contrary to an assumption made according to the above rules (a
"change in circumstances") then, except to the extent that a
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portion of the Note is repaid as a result of the change in circumstances and
solely for purposes of determining the amount and accrual of OID, the yield
and maturity of the Note are redetermined by treating the Note as having been
retired and reissued on the date of the change in circumstances for an amount
equal to the Note's adjusted issue price on that date.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. A United States
Holder may elect to include in gross income all interest that accrues on a
Note using the constant-yield method described above under the heading
"Original Issue Discount--General," with the modifications described below.
For purposes of this election, interest includes stated interest, OID, de
minimis original issue discount, market discount, de minimis market discount
and unstated interest, as adjusted by any amortizable bond premium (described
below under "Notes Purchased at a Premium") or acquisition premium. A United
States Holder's tax basis in a Note is increased by each accrual of the
amounts treated as OID under the constant yield election described in this
paragraph.
In applying the constant-yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal its cost to the
electing United States Holder immediately after its acquisition thereby, the
issue date of the Note will be the date of its acquisition by the electing
United States Holder, and no payments on the Note will be treated as payments
of qualified stated interest. This election will generally apply only to the
Note with respect to which it is made and may not be revoked without the
consent of the Service. If this election is made with respect to a Note with
amortizable bond premium, then the electing United States Holder will be
deemed to have elected to apply amortizable bond premium against interest with
respect to all debt instruments with amortizable bond premium (other than debt
instruments the interest on which is excludible from gross income) held by the
electing United States Holder as of the beginning of the taxable year in which
the Note with respect to which the election is made is acquired or thereafter
acquired. The deemed election with respect to amortizable bond premium may not
be revoked without the consent of the Service.
If the election to apply the constant-yield method to all interest on a Note
is made with respect to a Market Discount Note, the electing United States
Holder will be treated as having made the election discussed above under
"Original Issue Discount--Market Discount" to include market discount in
income currently over the life of all debt instruments held or thereafter
acquired by such United States Holder.
VARIABLE RATE NOTES. A "Variable Rate Note" is a Note that: (i) has an issue
price that does not exceed the total noncontingent principal payments by more
than an amount equal to the lesser of (1) the product of (x) the total
noncontingent principal payments, (y) the number of complete years to maturity
(or weighted average maturity in the case of Amortizing Notes) from the issue
date and (z) .015, and (2) 15 percent of the total noncontingent principal
payments, and (ii) provides for stated interest (compounded or paid at least
annually) at the current value of (1) one or more "qualified floating rates,"
(2) a single fixed rate and one or more qualified floating rates, (3) a single
"objective rate" or (4) a single fixed rate and a single objective rate that
is a "qualified inverse floating rate." A "current value" of a qualified
floating rate or objective rate is the value of the rate on any day that is no
earlier than 3 months prior to the first day on which that value is in effect
and no later than 1 year following that first day. Finally, a Variable Rate
Note must not provide for any contingent principal payments, except as
otherwise provided in this paragraph.
A variable rate is a "qualified floating rate" if (i) variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Note is denominated or (ii) it is equal to the product of such a rate and
either (a) a fixed multiple that is greater than 0.65 but not more than 1.35,
or (b) a fixed multiple greater than or equal to 0.65 but not more than 1.35,
increased or decreased by a fixed rate. If a Note provides for two or more
qualified floating rates that (i) are within 0.25 percent of each other on the
issue date or (ii) can reasonably be expected to have approximately the same
values throughout the term of the Note, the qualified floating rates together
constitute a single qualified floating rate. A rate is not a qualified
floating rate, however, if the rate is subject to certain restrictions
(including caps, floors, governors, or other similar restrictions) unless such
restrictions are fixed throughout the term of the Note or are not reasonably
expected to significantly affect the yield on the Note.
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An "objective rate" is a rate, other than a qualified floating rate, that is
determined using a single, fixed formula and that is based on objective
financial or economic information that is not within the control of or unique
to the circumstances of the issuer or a related party. A variable rate is not
an objective rate, however, if it is reasonably expected that the average
value of the rate during the first half of the Note's term will be either
significantly less than or significantly greater than the average value of the
rate during the final half of the Note's term. An objective rate is a
"qualified inverse floating rate" if (i) the rate is equal to a fixed rate
minus a qualified floating rate, and (ii) the variations in the rate can
reasonably be expected to inversely reflect contemporaneous variations in the
cost of newly borrowed funds.
If interest on a Note is stated at a fixed rate for an initial period of one
year or less followed by a variable rate that is either a qualified floating
rate or an objective rate for a subsequent period and (i) the fixed rate and
the qualified floating rate or objective rate have values on the issue date of
the Note that do not differ by more than 0.25 percent or (ii) the value of the
qualified floating rate or objective rate is intended to approximate the fixed
rate, the fixed rate and the qualified floating rate or the objective rate
constitute a single qualified floating rate or objective rate. Under these
rules, it is expected that Commercial Paper Rate Notes, Prime Rate Notes,
LIBOR Notes, Treasury Rate Notes, CD Rate Notes, CMT Rate Notes and Federal
Funds Rate Notes will generally be treated as Variable Rate Notes.
In general, if a Variable Rate Note provides for stated interest at a single
qualified floating rate or an objective rate and the interest is generally
unconditionally payable in cash or property (other than debt instruments of
SCI) at least annually, all stated interest on the Note is qualified stated
interest and the amount of OID, if any, is determined as described in
"Original Issue Discount--General" by using, in the case of a qualified
floating rate or qualified inverse floating rate, the value as of the issue
date of the qualified floating rate or qualified inverse floating rate, or, in
the case of any other objective rate (other than a qualified inverse floating
rate), a fixed rate that reflects the yield reasonably expected for the Note.
If a Variable Rate Note does not provide for stated interest at a single
qualified floating rate or an objective rate and also does not provide for
interest payable at a fixed rate (other than at a single fixed rate for an
initial period), the amount of interest and OID accruals on the Note are
generally determined by (i) determining a fixed rate substitute for each
variable rate provided under the Variable Rate Note (generally, the value of
each variable rate as of the issue date or, in the case of an objective rate
that is not a qualified inverse floating rate, a rate that reflects the
reasonably expected yield on the Note), (ii) constructing the equivalent fixed
rate debt instrument (using the fixed rate substitutes described above), (iii)
determining the amount of qualified stated interest and OID with respect to
the equivalent fixed rate debt instrument, and (iv) making the appropriate
adjustments for actual variable rates during the applicable accrual period.
If a Variable Rate Note provides for stated interest either at one or more
qualified floating rates or at a qualified inverse floating rate, and in
addition provides for stated interest at a single fixed rate (other than at a
single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Note is treated, for purposes of the first
three steps of the determination, as if it provided for a qualified floating
rate (or a qualified inverse floating rate, as the case may be) rather than
the fixed rate. The qualified floating rate (or qualified inverse floating
rate) replacing the fixed rate must be such that the fair market value of the
Variable Rate Note as of the issue date would be approximately the same as the
fair market value of an otherwise identical debt instrument that provides for
the qualified floating rate (or qualified inverse floating rate) rather than
the fixed rate.
SHORT-TERM NOTES. In general, an individual or other cash basis United
States Holder of a short-term Note is not required to accrue "acquisition
discount" (as defined below for the purposes of this paragraph) for United
States federal income tax purposes unless it elects to do so (but may be
required to include any stated interest in income as the interest is
received). Accrual basis United States Holders and certain other United States
Holders, including banks, regulated investment companies, dealers in
securities, common trust funds, United States Holders who hold Notes as part
of certain identified hedging transactions, certain pass-through entities and
cash basis United States Holders who so elect, are required to accrue
acquisition discount on short-term Notes on either a straight-line basis or,
at the election of the United States Holder, under the constant-yield method
(based
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on daily compounding). In the case of a United States Holder not required and
not electing to include acquisition discount in income currently, any gain
realized on the sale or retirement of the short-term Note will be ordinary
income to the extent of the acquisition discount accrued on a straight-line
basis (unless an election is made to accrue the acquisition discount under the
constant-yield method) through the date of sale or retirement. United States
Holders who are not required and do not elect to accrue acquisition discount
on short-term Notes will be required to defer deductions for net direct
interest expense related to short-term Notes in an amount not exceeding the
deferred income until the deferred income is realized.
For purposes of determining the amount of acquisition discount subject to
these rules, no interest on a short-term Note is treated as qualified stated
interest; thus, all interest is included in acquisition discount and no de
minimis rule applies.
FOREIGN CURRENCY ORIGINAL ISSUE DISCOUNT NOTES. OID for any accrual period
on an Original Issue Discount Note that is denominated in, or determined by
reference to, a foreign currency will be determined in the foreign currency
and then translated into U.S. dollars in the same manner as stated interest
accrued by an accrual basis United States Holder, as described under "Payments
of Interest." Upon receipt of an amount attributable to OID (whether in
connection with a payment of interest or the sale or retirement of a Note), a
United States Holder may recognize ordinary income or loss.
NOTES PURCHASED AT A PREMIUM
A United States Holder that purchases a Note for an amount in excess of its
principal amount may elect to treat such excess as "amortizable bond premium,"
in which case the amount required to be included in the United States Holder's
income each year with respect to interest on the Note will be reduced by the
amount of amortizable bond premium allocable (based on the Note's yield to
maturity) to such year. In the case of a Note that is denominated in, or
determined by reference to, a foreign currency, amortizable bond premium will
be computed in units of foreign currency, and amortizable bond premium will
reduce interest income in units of the foreign currency. At the time amortized
bond premium offsets interest income, exchange gain or loss (taxable as
ordinary income or loss) is realized measured by the difference between
exchange rates at that time and at the time of the acquisition of the Notes.
Any election to amortize bond premium shall apply to all bonds (other than
bonds the interest on which is excludible from gross income) held by the
United States Holder at the beginning of the first taxable year to which the
election applies or thereafter acquired by the United States Holder, and is
irrevocable without the consent of the Service. See also "Original Issue
Discount--Election to Treat All Interest as Original Issue Discount."
PURCHASE, SALE AND RETIREMENT OF THE NOTES
A United States Holder's tax basis in a Note will generally be its U.S.
dollar cost (as defined below), increased by the amount of any OID or market
discount included in the United States Holder's income with respect to the
Note and the amount, if any, of income attributable to de minimis original
issue discount and de minimis market discount included in the United States
Holder's income with respect to the Note, and reduced by (i) the amount of any
payments that are not qualified stated interest payments, and (ii) the amount
of any amortizable bond premium applied to reduce interest on the Note. The
U.S. dollar cost of a Note purchased with a foreign currency will generally be
the U.S. dollar value of the purchase price on the date of purchase or, in the
case of Notes traded on an established securities market, as defined in the
applicable Treasury Regulations, that are purchased by a cash basis United
States Holder (or an accrual basis United States Holder that so elects), on
the settlement date for the purchase.
A United States Holder will generally recognize gain or loss on the sale or
retirement of a Note equal to the difference between the amount realized on
the sale or retirement and the tax basis of the Note. The amount realized on a
sale or retirement for an amount in foreign currency will be the U.S. dollar
value of such amount on (i) the date payment is received in the case of a cash
basis United States Holder, (ii) the date of disposition in the case of an
accrual basis United States Holder or (iii) in the case of Notes traded on an
established securities market, as defined in the applicable Treasury
Regulations, sold by a cash basis United States Holder (or an accrual basis
United States Holder that so elects), on the settlement date for the sale.
Except to the extent
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described above under "Original Issue Discount--Short-Term Notes" or "Original
Issue Discount--Market Discount" or described in the next succeeding paragraph
or attributable to accrued but unpaid interest or with respect to certain
contingent payment obligations, gain or loss recognized on the sale or
retirement of a Note will be capital gain or loss and will be long-term
capital gain or loss if the Note was held for more than one year.
Gain or loss recognized by a United States Holder on the sale or retirement
of a Note that is attributable to changes in exchange rates will be treated as
ordinary income or loss. However, exchange gain or loss is taken into account
only to the extent of total gain or loss realized on the transaction.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
Foreign currency received as interest on a Note or on the sale or retirement
of a Note will have a tax basis equal to its U.S. dollar value at the time
such interest is received or at the time of such sale or retirement. Foreign
currency that is purchased will generally have a tax basis equal to the U.S.
dollar value of the foreign currency on the date of purchase. Any gain or loss
recognized on a sale or other disposition of a foreign currency (including its
use to purchase Notes or upon exchange for U.S. dollars) will be ordinary
income or loss.
INDEXED NOTES, OTHER NOTES SUBJECT TO THE CONTINGENT PAYMENT RULES AND
AMORTIZING NOTES
The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules with respect to Notes that are not
subject to the rules governing Variable Rate Notes, payments on which are
determined by reference to any index, and with respect to other notes subject
to the contingent payment rules and any Amortizing Notes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder of a Note that is, for United States federal income tax purposes, (i) a
nonresident alien individual, (ii) a foreign corporation, (iii) a nonresident
alien fiduciary of a foreign estate, (iv) a trust that is not a "United States
Trust" or (v) a foreign partnership one or more members of which is, for
United States federal income tax purposes, a nonresident alien individual, a
foreign corporation or a nonresident alien fiduciary of a foreign estate or a
trust that is not a "United States Trust." A United States Trust is (a) for
taxable years beginning after December 31, 1996, or if the trustee of a trust
elects to apply the following definition to an earlier taxable year, any trust
if, and only if, (i) a court within the United States is able to exercise
primary supervision over the administration of the trust and (ii) one or more
U.S. trustees have the authority to control all substantial decisions of the
trust, and (b) for all other taxable years, any trust whose income is
includible in gross income for United States federal income tax purposes
regardless of its source. This discussion assumes that the Note is not subject
to the rules of Section 871(h)(4)(A) of the Code (relating to interest
payments that are determined by reference to the income, profits, changes in
the value of property or other attributes of the debtor or a related party).
Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below:
(i) payments of principal, premium (if any) and interest, including OID,
by SCI or any of its paying agents to any United States Alien Holder will
not be subject to United States federal withholding tax if, in the case of
interest or OID, (a) such holder does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of
SCI entitled to vote, (b) such holder is not, for federal income tax
purposes, a controlled foreign corporation that is related to SCI through
stock ownership, and (c) either (A) the beneficial owner of the Note
certifies to SCI or its agent, under penalties of perjury, that it is not a
United States Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Note certifies to SCI or its agent
under penalties of perjury that such statement has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payor with a copy thereof;
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(ii) a United States Alien Holder of a Note will not be subject to United
States federal withholding tax on any gain realized on the sale or exchange
of a Note unless (a) such gain is effectively connected with a trade or
business in the United States of the United States Alien Holder or (b) in
the case of a United States Alien Holder who is an individual, the United
States Alien Holder is present in the United States for 183 days or more in
the taxable year of such sale or exchange and either (A) such individual
has a "tax home" (as defined in Section 911(d)(3) of the Code) in the
United States or (B) the gain is attributable to an office or other fixed
place of business maintained by such individual in the United States; and
(iii) a Note held by an individual who at death is not a citizen or
resident of the United States will not be includible in the individual's
gross estate for purposes of the United States federal estate tax as a
result of the individual's death if (a) the individual did not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of SCI entitled to vote and (b) the income on the Note
would not have been effectively connected with a United States trade or
business of the individual at the individual's death.
Recently proposed Internal Revenue Service Treasury regulations (the
"Proposed Regulations") would provide alternative methods for satisfying the
certification requirement described in clause (i)(c) above. The Proposed
Regulations also would require, in the case of Notes held by a foreign
partnership, that (x) the certification described in clause (i)(c) above be
provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. The Proposed Regulations are proposed to be effective for
payments made after December 31, 1997. There can be no assurance that the
Proposed Regulations will be adopted or as to the provisions that they will
include if and when adopted in temporary or final form.
BACKUP WITHHOLDING AND INFORMATION REPORTING
UNITED STATES HOLDERS
In general, information reporting requirements will apply to payments of
principal, any premium and interest on a Note and the proceeds of the sale of
a Note before maturity within the United States to, and to the accrual of OID
on an Original Issue Discount Note with respect to, non-corporate United
States Holders, and "backup withholding" at a rate of 31% will apply to such
payments and to payments of OID if the United States Holder fails to provide
an accurate taxpayer identification number or is notified by the Service that
it has failed to report all interest and dividends required to be shown on its
federal income tax returns.
UNITED STATES ALIEN HOLDERS
Under current law, information reporting on Internal Revenue Service Form
1099 and backup withholding will not apply to payments of principal, premium
(if any) and interest (including OID) made by SCI or a paying agent to a
United States Alien Holder on a Note; provided, the certification described in
clause (i)(c) under "United States Alien Holders" above is received; and
provided further that the payor does not have actual knowledge that the holder
is a United States person. SCI or a paying agent, however, may report (on
Internal Revenue Service Form 1042S) payments of interest (including OID) on
Notes. See the discussion above with respect to the rules under the Proposed
Regulations.
Payments of the proceeds from the sale by a United States Alien Holder of a
Note made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for United States tax
purposes or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting (but not backup withholding) may apply to such
payments. Payments of the proceeds from the sale of a Note to or through the
United States office of a broker is subject to information reporting and
backup withholding unless the holder or beneficial owner certifies as to its
non-United States status or otherwise establishes an exemption from
information reporting and backup withholding.
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Backup withholding tax is not an additional tax. Rather, any amounts
withheld from a payment to a holder under the backup withholding rules are
allowed as a refund or a credit against such holder's United States federal
income tax, provided that the required information is furnished to the
Service.
PLAN OF DISTRIBUTION
Under the terms of a Distribution Agreement dated as of November 19, 1996
(the "Distribution Agreement"), the Notes are being offered on a continuing
basis by SCI through the Agents, each of which has agreed to use its
reasonable efforts to solicit offers to purchase the Notes. Except as
otherwise agreed by SCI and an Agent with respect to a particular Note, SCI
will pay each Agent a commission ranging from .125% to .750% of the principal
amount of each Note, depending on its maturity, sold through such Agent.
Either SCI or an Agent will have the right, in its sole discretion, to accept
offers to purchase Notes and may reject any such offer in whole or in part.
SCI also may sell Notes to any Agent, acting as principal, at a discount or
concession to be agreed upon at the time of sale, for their own account or for
resale to one or more investors or other purchasers at a fixed offering price
or at varying prices related to prevailing market prices at the time of such
resale or otherwise, as determined by such Agent and specified in the
applicable Pricing Supplement. The Agents may offer the Notes they have
purchased as principal to other dealers. The Agents may sell Notes to any
dealer at a discount and, unless otherwise specified in the applicable Pricing
Supplement, such discount allowed to any dealer will not be in excess of the
discount to be received by such Agent from SCI. Unless otherwise indicated in
the applicable Pricing Supplement, any Note sold to an Agent as principal will
be purchased by such Agent at a price equal to 100% of the principal amount
thereof less a percentage equal to the commission applicable to any agency
sale of a Note of identical maturity, and may be resold by the Agent to
investors and other purchasers from time to time in one or more transactions,
including negotiated transactions as described above. After the initial public
offering of Notes to be resold to investors and other purchasers, the public
offering price (in the case of Notes to be resold at a fixed offering price),
concession and discount may be changed.
The Notes may also be sold by SCI directly to investors (other than broker-
dealers) in those jurisdictions in which SCI is permitted to do so. No
commission will be paid on Notes sold directly by SCI.
SCI may also accept (but not solicit) offers to purchase Notes from time to
time through one or more additional agents or dealers, acting either as agent
or principal, on substantially the same terms as those applicable to sales of
Notes to or through the Agents pursuant to the Distribution Agreement. Any
such additional agent shall, with respect to such Notes, be deemed to be
included in all references to an "Agent" or the "Agents" hereunder.
SCI reserves the right to withdraw, cancel or modify the offer made hereby
without notice.
Each purchaser of a Note will arrange for payment as instructed by the
applicable Agent. The Agents are required to deliver the proceeds of the Notes
to SCI in immediately available funds, to a bank designated by SCI in
accordance with the terms of the Distribution Agreement, on the date of
settlement.
An Agent may be deemed to be an "underwriter" within the meaning of the Act.
SCI has agreed to indemnify the Agents against and contribute toward certain
liabilities, including liabilities under the Act. SCI has also agreed to
reimburse the Agents for certain expenses.
SCI does not intend to apply for the listing of the Notes on a national
securities exchange, but has been advised by the Agents that the Agents intend
to make a market in the Notes, as permitted by applicable laws and regulation.
The Agents are not obligated to do so, however, and the Agents may discontinue
making a market at any time without notice. No assurance can be given as to
the liquidity of any trading market for the Notes.
S-31
<PAGE>
Concurrently with the offering of the Notes through the Agents as described
herein, SCI may issue other Debt Securities as described under "Description of
Debt Securities" in the accompanying Prospectus.
Certain of the Agents and their affiliates engage in transactions with and
perform services for SCI and/or its affiliates in the ordinary course of
business and have engaged, and may in the future engage, in commercial banking
and investment banking transactions with SCI.
VALIDITY OF NOTES
The validity of the Notes and certain other matters will be passed upon for
SCI by Mayer, Brown & Platt, Chicago, Illinois, and certain matters will be
passed upon for the Agents by Skadden, Arps, Slate, Meagher & Flom LLP, New
York, New York. The opinions of Mayer, Brown & Platt and Skadden, Arps, Slate,
Meagher & Flom LLP will be based upon, and subject to, certain assumptions as
to future actions required to be taken in connection with the issuance and
sale of the Notes and as to other events that may affect the validity of the
Notes but that cannot be ascertained on the date of such opinions.
S-32
<PAGE>
PROSPECTUS
LOGO
[LOGO OF SECURITY CAPITAL INDUSTRIAL TRUST APPEARS HERE]
$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 $77,988,613
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 OCTOBER 31, 1996.
<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. Such material can also be obtained from the
Commission's worldwide web site at http://www.sec.gov. SCI's outstanding
Common Shares, Series A Cumulative Redeemable Preferred Shares of Beneficial
Interest, par value $0.01 per share (the "Series A Preferred Shares"), and
Series B Cumulative Convertible Redeemable Preferred Shares of Beneficial
Interest, par value $0.01 per share (the "Series B Preferred Shares") are
listed on the New York Stock Exchange (the "NYSE") under the symbols "SCN",
"SCN-PRA" and "SCN-PRB", 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 (File No. 1-12846):
(a) SCI's Annual Report on Form 10-K for the fiscal year ended December
31, 1995, as amended by Form 10-K/A Amendment No. 1;
(b) SCI's Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1996 and June 30, 1996;
(c) SCI's Current Reports on Form 8-K filed January 16, 1996, February
16, 1996, May 16, 1996 and August 20, 1996;
(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 Series B Preferred Shares contained under the
caption "Description of Series B Preferred Shares" in SCI's prospectus
supplement dated February 14, 1996 to the prospectus dated December 28,
1995 forming a part of SCI's registration statement on Form S-3 (File No.
33-99548) 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;
(f) The description of the Common Shares contained in SCI's registration
statement on Form 8-A; and
(g) 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,
14100 East 35th Place, Aurora, Colorado 80011, telephone number: (303) 375-
9292.
2
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCI is the largest publicly held owner and operator of distribution
properties in the United States based on equity market capitalization. SCI is
a national operating company focused exclusively on meeting the distribution
space needs of national, regional and local industrial real estate users
through the SCI National Operating System(TM). SCI distinguishes itself from
its competition by being the only entity that combines all of the following:
1. A national operating strategy targeting 1,000 key users of distribution
space;
2. A disciplined investment strategy based on proprietary research that
targets high growth markets with sustainable demand for SCI's low finish
distribution space product;
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. Over 270 professionals in 28 offices which SCI 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.
Through its REIT Management Agreement with Security Capital Industrial
Incorporated (the "REIT Manager"), SCI has access to the services provided by
the REIT Manager and its specialized service affiliates, which provide SCI
with access to the same resources as a fully integrated operating company.
SCI, through the REIT Manager, has 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 distribution 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.
3
<PAGE>
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDENDS
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>
SIX MONTHS
ENDED
PERIOD ENDED DECEMBER 31, JUNE 30,
---------------------------- ------------
1991(A) 1992 1993 1994 1995 1995 1996
------- ----- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to combined fixed
charges
and Preferred Share dividends....... --(b) --(b) 11.3 3.3 1.7 1.8 1.5
</TABLE>
- --------
(a) For the period from June 14, 1991 (the date of SCI's inception) to
December 31, 1991.
(b) While SCI was researching markets and assembling its initial assets,
earnings were insufficient to cover combined fixed charges and preferred
share dividends for the periods ended December 31, 1991 and December 31,
1992 by $195,000 and $311,000, respectively.
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.
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
4
<PAGE>
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;
(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
5
<PAGE>
(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 and
Series B Preferred Shares restrict beneficial ownership of the Series A
Preferred Shares or the Series B Preferred Shares by a person, or persons
acting as a group, to 25% of the Series A Preferred Shares or the Series B
Preferred Shares, with limited exceptions. Similarly, the Articles
Supplementary for each other series of 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
6
<PAGE>
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).
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).
7
<PAGE>
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) 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
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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).
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
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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 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,
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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).
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
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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 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
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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 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
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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).
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
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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.
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
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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. 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
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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.
"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 October 28, 1996, 5,400,000
Series A Preferred Shares were issued and outstanding and held of record by
approximately 290 shareholders and 8,050,000 Series B Preferred Shares were
issued and outstanding and held of record by approximately 50 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 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
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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 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
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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 and the Series B
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
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
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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, par value $0.01 per share, 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 October
28, 1996, approximately 93,671,713 Common Shares were issued and outstanding
and held of record by approximately 1,100 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 Series B 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
Series B 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
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
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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 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
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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 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.
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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.
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
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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.
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.
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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 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
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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 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
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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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