This Prospectus dated May 23, 1995 and
Prospectus Supplement dated June 16,
1995, filed pursuant to Rule 424(b)(2),
related to Registration Statement
No. 33-58139.
PROSPECTUS SUPPLEMENT
(To Prospectus Dated May 23, 1995)
U.S. $2,000,000,000
Sears Roebuck Acceptance Corp.
Medium-Term Notes Series I
Due at least 9 Months from Date of Issue
Sears Roebuck Acceptance Corp. (``SRAC'') may offer from time to time up to
U.S. $2,000,000,000 aggregate initial offering price or its equivalent in
foreign currencies (based on the applicable exchange rate at the time of
offering), of its Medium-Term Notes Series I due at least 9 months from the
date of issue, as selected by the purchaser and agreed to by SRAC. The
Notes may be denominated in U.S. dollars or in such foreign currencies as
may be designated by SRAC at the time of offering. The specific currencies,
interest rates (including whether fixed or floating) and maturity dates of
the Notes will be set forth in Pricing Supplements to this Prospectus
Supplement.
Purchasers of the Notes are required to pay for them in the currency
specified in the Pricing Supplement by delivery of the requisite amount of
the Specified Currency to an Agent, unless other arrangements have been
made. Principal of and interest on the Notes are generally payable by SRAC
in the Specified Currency. See ``Important Currency Exchange Information''
and ``Description of Notes.''
Except as described herein, interest on Fixed Rate Notes will be payable
May 15 and November 15 of each year (or on either of such dates or on such
other dates as specified therein and in the applicable Pricing Supplement)
and at maturity. Interest on Floating Rate Notes will be payable on the
dates specified therein and in the applicable Pricing Supplement.
The Notes will not be redeemable prior to their Stated Maturity unless
either a Redemption Commencement Date or one or more Redemption Dates are
specified in the applicable Pricing Supplement. See ``Description of
Notes-General.'' If a Redemption Commencement Date is so specified, the
Notes will be redeemable at the option of SRAC on or after such date as
described herein. If one or more Redemption Dates is so specified, the
Notes will be redeemable on such Redemption Dates at the option of SRAC or
repayable at the option of the Holders thereof, or both, and at such
Redemption Prices, in each case as specified in the applicable Pricing
Supplement.
The Notes will be issued only in a minimum denomination of U.S. $1,000 or
the approximate equivalent thereof in the Specified Currency and (except as
otherwise specified in the applicable Pricing Supplement) will initially be
Book-Entry Notes represented by one or more Global Notes registered in the
name of the Depository's nominee as described herein. An interest in a
Global Note will be shown on, and transfers thereof will be effected only
through, records maintained by the Depository and its participants. Notes
will be issued in fully registered, certificated form to owners of
beneficial interests therein or their nominees, rather than to the
Depository's nominee, only as specified in the applicable Pricing
Supplement, or under the limited circumstances described herein. See
``Description of Notes-General'' and ``Description of Notes-Book-Entry
Notes.''
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE
PROSPECTUS OR ANY SUPPLEMENT THERETO. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Initial
Public
Offering Agents' Proceeds to
Price(1) Commissions(2)(3) SRAC(1)(2)(3)(4)
Per Note 100% .125%-.750% 99.250%-99.875%
Total(5)
$2,000,000,000 $2,500,000-$15,000,000 $1,985,000,000-$1,997,500,000
(1) Unless otherwise indicated in the applicable Pricing Supplement, the
Notes will be issued at 100% of their principal amount.
(2) SRAC will pay to Goldman, Sachs & Co., Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated or Salomon Brothers Inc (the ``Agents'') a commission of from
.125% to .750%, depending on maturity, of the principal amount of any Note
sold through such Agent provided, however, that commissions with respect to
Notes maturing in more than 30 years will be negotiated and set forth in
the applicable Pricing Supplement. SRAC has agreed to indemnify each Agent
against certain liabilities, including liabilities under the Securities Act
of 1933.
(3) In addition, it is anticipated that SRAC will offer Notes directly to
certain institutional investors in jurisdictions in which SRAC and its
employees may be registered or qualified to do so or in transactions in
which they are exempt from such registration or qualification. For sales
made directly by SRAC, no commissions will be payable and the proceeds to
SRAC will be the initial public offering price.
(4) Before deducting estimated expenses of $1,100,000 payable by SRAC,
including $50,000 of estimated expenses of the Agents to be reimbursed by
SRAC.
(5) Or the equivalent thereof in foreign currencies or currency units.
Goldman, Sachs & Co.
Merrill Lynch & Co.
Morgan Stanley & Co.
Incorporated
Salomon Brothers Inc
Sears Roebuck Acceptance Corp.
June 16, 1995
The Agents have agreed to use their reasonable efforts to solicit offers to
purchase Notes from time to time on behalf of SRAC. Notes may be sold to
each of the Agents, as principal, at discounts equal to the commissions
applicable to Agency sales of Notes or, if so indicated in the applicable
Pricing Supplement, at negotiated discounts, for resale in negotiated
transactions, at fixed public offering prices or at varying prices related
to prevailing prices determined at the time of resale. The Agents may act
as agents for sales of Notes, or may offer the Notes they have purchased as
principals, to or through dealers, and such dealers may receive
compensation from the Agents. SRAC reserves the right to sell the Notes
directly on its own behalf, and it is anticipated that SRAC will offer the
Notes directly to certain institutional investors. SRAC also reserves the
right to withdraw, cancel or modify the offering contemplated hereby
without notice. No termination date for the offering of the Notes has been
established. SRAC or the soliciting Agent may reject any order. See ``Plan
of Distribution.''
No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained or
incorporated by reference in this Prospectus Supplement, any accompanying
Pricing Supplement and the accompanying Prospectus and, if given or made,
such information or representation must not be relied upon as having been
authorized. Neither this Prospectus Supplement, any accompanying Pricing
Supplement nor the accompanying Prospectus constitutes an offer to sell or
the solicitation of an offer to buy any securities other than the
registered securities to which it relates or an offer to sell or the
solicitation of an offer to buy such securities in any jurisdiction to any
person to whom it is unlawful to make such offer or solicitation in such
jurisdiction. Neither the delivery of this Prospectus Supplement, any
accompanying Pricing Supplement or the accompanying Prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of SRAC since the date hereof or
that the information is correct as of any time subsequent to its date.
TABLE OF CONTENTS
Page
Prospectus Supplement
Currency Exchange and Other Information S-3
Description of Notes S-3
Foreign Currency Risks S-14
United States Tax Considerations S-14
Plan of Distribution S-20
Prospectus
Available Information 3
Reports to Holders of Debt Securities 3
Incorporation of Certain Documents by Reference 3
Sears Roebuck Acceptance Corp. 4
Use of Proceeds 4
Summary Financial Information 5
Ratio of Earnings to Fixed Charges 6
Description of Debt Securities 6
Plan of Distribution 9
Legal Opinion 10
Experts 10
CURRENCY EXCHANGE AND OTHER INFORMATION
Purchasers are required to pay for the Medium-Term Notes Series I (the
``Notes'') in the currency specified in the applicable Pricing Supplement
(the ``Specified Currency''). Currently, there are limited facilities in
the United States for conversion of U.S. dollars into foreign currencies,
and vice versa. However, since December 31, 1989, the Federal Reserve Board
no longer objects to the establishment by U.S. banks of non-U.S. dollar
denominated checking or savings account facilities in the United States.
Principal and interest payments in respect of the Notes will be made in the
Specified Currency unless such Specified Currency is unavailable due to
circumstances beyond the control of SRAC. See ``Foreign Currency Risks''
and ``Description of Notes.''
References herein to ``U.S. dollars'' or ``U.S. $'' or ``$'' are to the
currency of the United States of America.
DESCRIPTION OF NOTES
The following description, which sets forth the particular terms of the
Notes offered hereby (referred to in the Prospectus as the ``Offered Debt
Securities'') except to the extent otherwise specified in the applicable
Pricing Supplement, supplements the description of the general terms and
provisions of Debt Securities set forth in the Prospectus, to which
description reference is hereby made. The applicable Pricing Supplement may
specify different or additional terms.
General
The Notes are to be issued under an Indenture (the ``Indenture''), dated as
of May 15, 1995, between SRAC and The Chase Manhattan Bank, N.A.
The authorized denominations of Notes denominated in U.S. dollars will be
U.S. $1,000 and any larger amount in integral multiples of $1,000. The
authorized denominations of Notes denominated in a Specified Currency other
than U.S. dollars will be the equivalent, as determined by the Market
Exchange Rate (as defined below) on the Business Day (as defined below)
immediately preceding the date on which SRAC accepts an offer to purchase
such Notes, of U.S. $1,000 (rounded to an integral multiple of 1,000 units
of such Specified Currency) and any larger amount. The Market Exchange Rate
on a given date for a given Specified Currency is the noon buying rate in
New York City for cable transfers for such Specified Currency as certified
for customs purposes by the Federal Reserve Bank of New York.
The Notes mature at least nine months from the date of issue, as selected
by the purchaser and agreed to by SRAC. The Notes will constitute a single
series of Debt Securities under the Indenture, which is unlimited in
aggregate principal amount. The aggregate amount of Notes that may be
offered hereunder will be reduced by the aggregate initial public offering
price of any other Debt Securities issued by SRAC pursuant to the
Registration Statement that includes this Prospectus Supplement and the
accompanying Prospectus.
The Notes are issuable in registered form only, without coupons, as
Book-Entry Notes initially represented by one or more global notes (each a
``Global Note'') registered in the name of Cede & Co. (``Cede''), as the
nominee of The Depository Trust Company (``DTC,'' and, together with any
successor depository selected by SRAC, the ``Depository''), except that
Notes in fully registered, certificated form (``Certificated Notes'') will
be issued to, and registered in the names of, owners of beneficial
interests therein or their nominees if so specified in the applicable
Pricing Supplement or under the limited circumstances described under
``Book-Entry Notes.'' All Book-Entry Notes having the same terms,
including, but not limited to, Interest Payment Dates, interest rate,
Maturity Date, and redemption or repayment provisions may be represented by
a single Global Note. A beneficial interest in a Global Note will be shown
on, and transfers thereof will be effected only through, records maintained
by the Depository and its participants. Payments of principal and interest
on Book-Entry Notes will be made by the Trustee to the Depository. See
``Book-Entry Notes.''
Unless previously redeemed or repaid, a Note will mature on the date
(``Maturity Date'') that is specified on the face thereof and in the
applicable Pricing Supplement.
The Notes will be unsecured obligations of SRAC and will be identical
except for currency denomination, interest rate, Interest Payment Dates,
Maturity Date, issue date and applicable redemption or repayment
provisions. The Notes will not be subject to any sinking fund and, unless a
Redemption Commencement Date or one or more Redemption Dates are specified
in the applicable Pricing Supplement, will not be redeemable or repayable
prior to their Maturity Date. If a Redemption Commencement Date is 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 to be redeemed) (``Redemption Price'')
and the redemption period or periods during which such Redemption Price
shall apply. In addition, if a Redemption Commencement Date is so
specified, any such Note shall be redeemable in whole or in part at the
option of SRAC (whether or not any other Note is concurrently redeemed) on
any Business Day 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
redemption date. If one or more Redemption Dates are specified in a Pricing
Supplement with respect to any Note, such Pricing Supplement also will
specify one or more Redemption Prices, the Redemption Date or Dates for
which such Redemption Prices shall apply, and the notice period during
which the option to redeem or to be repaid may be exercised, the methods by
which a notice of redemption or repayment may be delivered and whether the
option to redeem or to be repaid may be exercised by SRAC, the Holders of
such Notes or both. Redemption or repayment of Global Notes (and notice
thereof) shall be made in accordance with applicable procedures of the
Depository.
Notes will be sold in individual issues of Notes having such interest rate
or interest rate formula, Maturity Date and date of original issuance as
shall be selected by the initial purchasers and agreed to by SRAC. Each
Note will bear interest at a fixed rate or at a rate determined by
reference to one or more of the Commercial Paper Rate, the Prime Rate,
LIBOR, the Treasury Rate, the CD Rate, the CMT Rate or the Federal Funds
Rate, or such other interest rate formula as is set forth in the applicable
Pricing Supplement, as adjusted by the Spread or Spread Multiplier, if any,
applicable to such Note (as such terms are defined below). See
``Description of Notes-Interest Rate.''
The term ``Business Day'' as used herein means each Monday, Tuesday,
Wednesday, Thursday and Friday which is (a) not a legal holiday for banking
institutions in any of the City of Wilmington, Delaware, the City of
Chicago, the City of New York or the city in which the principal corporate
trust office of the Trustee is located, and (b) with respect to Notes
denominated in a Specified Currency other than U.S. dollars, any such day
that is not a legal holiday for banking institutions in the principal
financial center of the country of the Specified Currency (which in the
case of European Currency Units will be Brussels), and (c) with respect to
LIBOR Notes, any day specified in (a) above on which dealings in deposits
in U.S. dollars are transacted in the London interbank market.
Interest Rate
Each Note will bear interest from and including its date of issue or from
and including 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 in accordance with the terms
thereof. Interest will be payable on each Interest Payment Date and at
maturity as specified below under ``Payment of Principal and Interest''.
Each Note will bear interest at either (a) a fixed rate (a ``Fixed Rate
Note'') or (b) a variable rate (a ``Floating Rate Note'') determined by
reference to the specified Interest Rate Basis (as defined below), which
will be adjusted by adding or subtracting any applicable Spread or
multiplying by any applicable Spread Multiplier. A Floating Rate Note may
also have either or both of the following: (a) a maximum numerical interest
rate limitation, or ceiling, on the rate of interest which may accrue
during any interest period (a ``Maximum Rate''); and (b) a minimum
numerical interest rate limitation, or floor, on the rate of interest which
may accrue during any interest period (a ``Minimum Rate''). The ``Spread''
is the number of basis points, if any, specified in the applicable Pricing
Supplement as being applicable to the interest rate for such Floating Rate
Note and the ``Spread Multiplier'' is the percentage, if any, specified in
the applicable Pricing Supplement as being applicable to the interest rate
for such Floating Rate Note. ``Market Day'' means (a) with respect to any
Note (other than any LIBOR Note), any day which is not a legal holiday for
banking institutions in The City of New York, and (b) with respect to any
LIBOR Note, any such day on which dealings in deposits in U.S. dollars are
transacted in the London interbank market. ``Index Maturity'' means, with
respect to a Floating Rate Note, the period to maturity of the instrument
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 Chase Manhattan Bank, N.A. will be the
calculation agent (the ``Calculation Agent'') with respect to 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 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: (a) the Commercial Paper Rate, in which case
such Floating Rate Note will be a Commercial Paper Rate Note; (b) the Prime
Rate, in which case such Floating Rate Note will be a Prime Rate Note; (c)
LIBOR, in which case such Floating Rate Note will be a LIBOR Note; (d) the
Treasury Rate, in which case such Floating Rate Note will be a Treasury
Rate Note; (e) the CD Rate, in which case such Floating Rate Note will be a
CD Rate Note; (f) the CMT Rate, in which case such Floating Rate Note will
be a CMT Rate Note; (g) the Federal Funds Rate, in which case such Floating
Rate Note will be a Federal Funds Rate Note; or (h) such other interest
rate formula as is set forth in such Pricing Supplement. 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, the Spread Multiplier, the Maximum Rate, the Minimum Rate, the
Interest Payment Dates, the Regular Record Dates, the Interest
Determination Dates (including the date as of which the Initial Interest
Rate is set (the ``Initial Interest Determination Date'')) and the Interest
Reset Dates with respect to such Note.
The initial rate of interest (the ``Initial Interest Rate'') on each
Floating Rate Note will be set on the Initial Interest Determination Date
and reset daily (except in the case of Treasury Rate Notes), weekly,
monthly, quarterly, semi-annually or annually (each an ``Interest Reset
Date''), as specified in the applicable Pricing Supplement. Except for the
Initial Interest Determination Date, the Interest Reset Date will be, in
the case of Floating Rate Notes which reset daily, each Market Day; in the
case of Floating Rate Notes (other than Treasury Rate Notes) which reset
weekly, the Wednesday of each week; in the case of Treasury Rate Notes
which reset weekly, the Tuesday of each week; in the case of Floating Rate
Notes which reset monthly, the third Wednesday of each month; in the case
of Floating Rate Notes which reset quarterly, the third Wednesday of
February, May, August and November; in the case of Floating Rate Notes
which reset semi-annually, the third Wednesday of two months of each year
as specified in the applicable Pricing Supplement; and in the case of
Floating Rate Notes which reset annually, the third Wednesday of one month
of each year 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 with respect to 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 with respect to such Floating Rate Note,
except that in the case of 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.
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 Interest Determination Date''),
for a LIBOR Note (the ``LIBOR Interest Determination Date''), for a CD Rate
Note (the ``CD Interest Determination Date''), for a CMT Rate Note (the
``CMT Interest Determination Date'') and for a Federal Funds Rate Note (the
``Federal Funds Interest Determination Date'') will be the second Market
Day preceding such Interest Reset Date, except in the case of the Initial
Interest Determination 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,
except in the case of the Initial Interest Determination Date. 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, except in the case of the Initial Interest Determination Date. 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, except in the case of the Initial
Interest Determination Date.
All percentages resulting from any calculations referred to in this
Prospectus Supplement will be rounded upwards, if necessary, to the next
higher one hundred-thousandth of a percentage point (e.g., 9.876541% (or
.09876541) 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).
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 which will become effective on the next Interest Reset
Date with respect to such Floating Rate Note. The Calculation Agent's
determination of any interest rate will be final and binding in the absence
of manifest error.
The ``Calculation Date,'' if applicable, pertaining to any Interest
Determination Date will be the earlier of (i) the tenth day after such
Interest Determination Date, or, if such day is not a Business Day, the
next succeeding Business Day, except in the case of the Initial Interest
Determination Date, for which the Calculation Date will be the Initial
Interest Determination Date as specified in the applicable Pricing
Supplement or (ii) the Business Day immediately preceding the applicable
Interest Payment Date or the date of maturity, redemption or repayment.
Interest rates will be determined by the Calculation Agent as follows:
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 or
Spread Multiplier, if any), and will be payable on the dates, specified on
the face of the Commercial Paper Rate Note and in the applicable Pricing
Supplement.
``Commercial Paper Rate'' means, with respect to 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.'' In the event
that such rate is not published prior to 9:00 A.M., New York City time, on
the relevant Calculation Date, then the Commercial Paper Rate with respect
to 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. 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 with
respect to 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
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 statistical rating agency;
provided, however, that if fewer than three dealers selected as aforesaid
by the Calculation Agent are quoting as mentioned in this sentence, the
Commercial Paper Rate with respect to such Interest Reset Date will be the
Commercial Paper Rate in effect on such Commercial Paper Interest
Determination Date.
``Money Market Yield'' means the rate for which is quoted on a bank
discount basis, a yield (expressed as a percentage) calculated in
accordance with the following formula:
D X 360
Money Market Yield = {divided by} X 100
360 - (D X M)
where ``D'' refers to the per annum rate for a security, quoted on a bank
discount basis and expressed as a decimal; and ``M'' refers to the number
of days in the period for which accrued interest is being calculated.
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any),
and will be payable on the dates, specified on the face of the Prime Rate
Note and in the applicable Pricing Supplement.
``Prime Rate'' means, with respect to any Interest Reset Date, the rate set
forth for the relevant Prime Interest Determination Date in H.15(519) under
the heading ``Bank Prime Loan''. In the event that such rate is not
published prior to 9:00 A.M., New York City time, on the relevant
Calculation Date, then the Prime Rate with respect to 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
``NYMF'' on the Reuter Monitor Money Rates Service (or such other page as
may replace the NYMF page on that service for the purpose of displaying
prime rates or base lending rates of major United States banks) (``Reuters
Screen NYMF Page'') as such bank's prime rate or base lending rate as in
effect for such Prime Interest Determination Date as quoted on the Reuters
Screen NYMF Page on such Prime Interest Determination Date. If fewer than
four such rates appear on the Reuters Screen NYMF Page on such Prime
Interest Determination Date, the Prime Rate with respect to 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 Interest
Determination Date by three major banks in The City of New York selected by
the Calculation Agent; provided, however, that if fewer than three banks
selected as aforesaid by the Calculation Agent are quoting as mentioned in
this sentence, the Prime Rate with respect to such Interest Reset Date will
be the Prime Rate in effect on such Prime Interest Determination Date.
LIBOR Notes
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread 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.
``LIBOR'' with respect to any Interest Reset Date will be determined by the
Calculation Agent in accordance with the following provisions:
(i) On the relevant LIBOR Interest Determination Date, LIBOR will be the
rate for deposits in U.S. dollars having the specified Index Maturity,
commencing on the second Market Day immediately following such LIBOR
Interest Determination Date (or, in the case of the Initial Interest
Determination Date, on such Initial Interest Determination Date), that
appears on the display designated as page ``3750'' on the Dow Jones
Telerate Service (or such other page as may replace 3750 on that service
for the purposes of displaying London interbank offer rates of major banks)
(``Telerate Page 3750'') as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date. If such rate does not appear on Telerate Page
3750, LIBOR with respect to such Interest Reset Date will be determined as
described in (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which no such
rate appears on the Telerate Page 3750 as described in (i) above, LIBOR
will be determined on the basis of the rates at approximately 11:00 A.M.,
London time, on such LIBOR Interest Determination Date at which deposits in
U.S. dollars having the specified Index Maturity are offered to prime banks
in the London interbank market by four major banks in the London interbank
market selected by the Calculation Agent commencing on the second Market
Day immediately following such LIBOR Interest Determination Date (or, in
the case of the Initial Interest Determination Date, on such Initial
Interest Determination Date), and in a principal amount equal to an amount
of not less than U.S. $1,000,000 that in the Calculation Agent's judgment
is representative for a single transaction in such market at such time (a
``Representative Amount''). The Calculation Agent will request the
principal London office of each of such banks to provide a quotation of its
rate. If at least two such quotations are provided, LIBOR with respect to
such Interest Reset Date will be the arithmetic mean of such quotations. If
fewer than two quotations are provided, LIBOR with respect to such Interest
Reset Date will be the arithmetic mean of the rates quoted at approximately
11:00 A.M., New York City time, on such LIBOR Interest Determination Date
by three major banks in The City of New York, selected by the Calculation
Agent, for loans in U.S. dollars to leading European banks having the
specified Index Maturity commencing on the Interest Reset Date and in a
Representative Amount; provided, however, that if fewer than three banks
selected as aforesaid by the Calculation Agent are quoting as mentioned in
this sentence, LIBOR with respect to such Interest Reset Date 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 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.
``Treasury Rate'' means, with respect to 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 9:00 A.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. In the event that the results of such auction
of 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.''
In the event such rate is not so published by 3:00 P.M., New York City
time, on the relevant Calculation Date the Treasury Rate with respect to
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 aforesaid by the Calculation Agent are quoting as mentioned in
this sentence, the Treasury Rate with respect to 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 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.
``CD Rate'' means, with respect to any Interest Reset Date, the rate for
the relevant CD Interest Determination Date for negotiable certificates of
deposit having the specified Index Maturity as published in H.15(519) under
the heading ``CDs (Secondary Market).'' In the event that such rate is not
published prior to 9:00 A.M., New York City time, on the relevant
Calculation Date, then the CD Rate with respect to such Interest Reset Date
shall be the rate on such CD 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 with
respect to 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 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 certificates of deposit of major United
States money market banks 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 aforesaid by the
Calculation Agent are quoting as mentioned in this sentence, the CD Rate
with respect to such Interest Reset Date will be the CD Rate in effect on
such CD Interest Determination Date.
CMT Rate Notes
CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread 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.
``CMT Rate'' means, with respect to any Interest Reset Date, the rate for
the relevant CMT Interest Determination Date displayed on the Designated
CMT Telerate Page (as defined below) 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 (as defined below) for (i) if the Designated CMT Telerate Page is
7055, the rate on such CMT Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week, or the month, as
applicable, ended immediately preceding the week in which the related CMT
Interest Determination Date occurs. If such rate is no longer displayed on
the relevant page, or if not displayed by 3:00 P.M., New York City time, on
the relevant Calculation Date, then the CMT Rate for such CMT 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 if not published by 3:00 P.M., New
York City time, on the relevant Calculation Date, then the CMT Rate for
such CMT Interest Determination 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 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 published by 3:00 P.M., New York City time, on the
relevant Calculation Date, then the CMT Rate for the CMT 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 the CMT 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 Agents or their 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 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.
If the Calculation Agent cannot obtain three such Treasury Note quotations,
the CMT Rate for 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 the CMT 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 $100 million. If three or four (and not five) of
such Reference Dealers are quoting as described above, than 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 selected by
the Calculation Agent are quoting as described herein, the CMT Rate will be
the CMT Rate in effect on such CMT 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 quotes for the Treasury Note with the
shorter remaining term to maturity will be used.
``Designated CMT Telerate Page'' means the display on the Dow Jones
Telerate Service on the page designated in the applicable Pricing
Supplement (or any other page as may replace such page on that 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 Rate Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread 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.
``Federal Funds Rate'' means, with respect to 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)''. In the event that such rate is not published prior to 9:00
A.M., New York City time, on the relevant Calculation Date, then the
Federal Funds Rate with respect to 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 with respect to 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 as aforesaid by the Calculation Agent are quoting as
mentioned in this sentence, the Federal Funds Rate with respect to such
Interest Reset Date will be the Federal Funds Rate in effect on such
Federal Funds Interest Determination Date.
Payment of Principal and Interest
The principal of, premium, if any, and interest on the Notes is payable by
SRAC in the Specified Currency. Interest payable on any Interest Payment
Date (other than Defaulted Interest) shall be payable to the person who is
the registered Holder at the close of business on the immediately preceding
Regular Record Date. Cede will initially be the registered Holder of Global
Notes. See ``Book-Entry Notes.'' The ``Regular Record Date'' with respect
to any Floating Rate Note shall be the date 15 calendar days prior to each
Interest Payment Date, whether or not such date shall be a Business Day,
and the ``Regular Record Date'' with respect to any Fixed Rate Note shall
be the May 1 and November 1 next preceding any May 15 or November 15
Interest Payment Date and the date 15 calendar days prior to any other
Interest Payment Date, whether or not such date shall be a Business Day.
Interest payable upon redemption or repayment or at maturity (other than a
redemption, repayment or maturity occurring on an Interest Payment Date)
will be paid to the same person to whom the principal amount is payable.
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
Interest Payment Date following the next succeeding Regular Record Date to
the registered owner on such next succeeding Regular Record Date.
Except as provided below, interest will be payable: in the case of Fixed
Rate Notes, on May 15 and November 15 of each year (or on either of such
dates or on such other dates as specified in the applicable Pricing
Supplement); in the case of Floating Rate Notes which reset daily, weekly
or monthly, on the third Wednesday of each month or on the third Wednesday
of February, May, August and November of each year (as indicated in the
applicable Pricing Supplement); in the case of Floating Rate Notes which
reset quarterly, on the third Wednesday of February, May, August and
November of each year; in the case of Floating Rate Notes which reset
semi-annually, on the third Wednesday of the two months of each year
specified in the applicable Pricing Supplement; and in the case of Floating
Rate Notes which reset annually, on the third Wednesday of the month
specified in the applicable Pricing Supplement (each an ``Interest Payment
Date''); and, in each case, at maturity.
If any Interest Payment Date for any Fixed Rate Note falls on a day that is
not a Business Day, the interest payment shall be made on the next day that
is a Business Day, and no interest on such payment shall accrue for the
period from and after the Interest Payment Date.
If an Interest Payment Date with respect to any Floating Rate Note would
otherwise fall on a day that is not a Business Day with respect to such
Note, such Interest Payment Date will be the next succeeding Business Day
(or, in the case of a LIBOR Note, if such day falls in the next calendar
month, the next preceding Business Day).
If the Maturity Date of any Note falls on a day that is not a Business Day,
the payment of interest and principal may be made on the next succeeding
Business Day with the same force and effect as if made on the Maturity
Date, and no interest on such payment shall accrue for the period from and
after the Maturity Date.
Payments of interest on any Fixed Rate Note or Floating Rate Note with
respect to any Interest Payment Date or Maturity Date (or date of
redemption or repayment) will include interest accrued to but excluding
such Interest Payment Date or Maturity Date (or date of redemption or
repayment); provided, however, that if the Interest Reset Dates with
respect to any Floating Rate Note are daily or weekly, interest payable on
such Floating Rate Note on any Interest Payment Date, other than interest
payable on the date on which principal on any such Floating Rate Note is
payable, will include interest accrued to but excluding the day following
the next preceding Regular Record Date.
With respect to a Floating Rate Note, accrued interest from the date of
issue or from 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 calculated for each day from the date of issue, or from the
last date to which interest has been paid, to 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, in the case of
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,
in the case of Treasury Rate Notes and CMT Rate Notes. The applicable
interest rate on any Interest Reset Date will be the interest rate as reset
on such date. The applicable interest rate on any other day will be the
interest rate from the immediately preceding Interest Reset Date (or, if
none, the Initial Interest Rate). Interest on Fixed Rate Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
Payment of principal and interest will be made by wire transfer to any
Holder of $10,000,000 or more in aggregate principal amount of Certificated
Notes having the same Interest Payment Date, and payments of principal will
be made by wire transfer to any Holder of $10,000,000 or more in aggregate
principal amount of Certificated Notes having the same Maturity Date or
date of redemption or repayment, if the Holder thereof shall have
designated in writing to the Trustee an account with a bank located in the
country issuing the Specified Currency or such other country as shall be
satisfactory to SRAC and the Trustee. If any payment of interest is to be
made by wire transfer, such information must be received by the Trustee at
its corporate trust office in the City of New York on or prior to the
Regular Record Date for an Interest Payment Date. The Trustee will, subject
to applicable laws and regulations and until it receives notice to the
contrary, make such payment to such Holder by wire transfer to the
designated account. If a payment of interest is not made by wire transfer
for any reason, payment will be made by check. Checks for payment of
interest on an Interest Payment Date will be mailed to the Holder at the
address of such Holder appearing on the Security Register on the applicable
Regular Record Date. See ``Payment Currency'' and ``Important Currency
Exchange Information.''
To receive payment upon redemption, repayment or at maturity of a U.S.
dollar denominated Certificated Note, a Holder must make presentation and
surrender of such Note on or before the redemption or repayment date or
Maturity Date, as applicable. Payment will be by check unless proper wire
transfer instructions are on file with the Trustee or are received at
presentment. To receive payment upon redemption, repayment or at maturity
of a Note denominated in a Foreign Currency, a Holder must make
presentation and surrender not less than two Business Days prior to the
redemption or repayment date or Maturity Date, as applicable. Upon
presentation and surrender of a Note denominated in a Foreign Currency at
any time after the date two Business Days prior to the redemption or
repayment date or Maturity Date, as applicable, SRAC will pay the principal
and interest due upon redemption, repayment or at maturity (unless the
redemption date or Maturity Date is an Interest Payment Date) two Business
Days after such presentation and surrender.
SRAC will pay any administrative costs imposed by banks in connection with
sending payments by wire transfer, but any tax, assessment or governmental
charge imposed upon payments will be borne by the Holders of the Notes in
respect of which payments are made.
For further information concerning payments of principal and interest on
Book-Entry Notes, see ``Book-Entry Notes.''
Payment Currency
If the principal of or interest on any Note is payable in a Specified
Currency other than U.S. dollars and such Specified Currency is not
available due to the imposition of exchange controls or other circumstances
beyond its control, SRAC 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 Market Exchange Rate. Any payment made under
such circumstances in U.S. dollars where the required payment is in a
Specified Currency other than U.S. dollars will not constitute a default
under the Indenture.
Indexed Notes
The Notes may be issued, from time to time, as Notes of which the principal
amount payable on a date at least nine months from the date of original
issue or on which the amount of interest payable on an Interest Payment
Date will be determined by reference to currencies, currency units,
commodity prices, financial or non-financial indices or other factors (the
``Indexed Notes''), as indicated in the applicable Pricing Supplement.
Holders of Indexed Notes may receive a principal amount at maturity that is
greater than or less than the face amount of such Notes depending upon the
fluctuation of the relative value, rate or price of the specified index.
Specific information pertaining to the method for determining the principal
amount payable at maturity or amount of interest payable, a historical
comparison of the relative value, rate or price of the specified index and
the face amount of the Indexed Note and certain additional United State
federal income tax considerations will be described in the applicable
Pricing Supplement.
Book-Entry Notes
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that SRAC believes to be reliable, but SRAC
takes no responsibility for the accuracy thereof.
Book-Entry Notes will initially be represented by one or more Global Notes
registered in the name of the nominee of DTC except as set forth below.
Book-Entry Notes will be available for purchase in minimum denominations of
$1,000 and any larger amount in integral multiples of $1,000 in book-entry
form. SRAC has been informed by DTC that DTC's nominee will be Cede.
Accordingly, Cede is expected to be the Holder of the Global Notes. Unless
and until Certificated Notes are issued under the limited circumstances
described herein, no person acquiring an interest in the Book-Entry Notes
(a ``Book-Entry Note Owner'') will be entitled to receive a certificate
representing such person's interest in the Book-Entry Notes, all references
herein or in the Prospectus to actions by Holders shall refer to actions
taken by DTC upon instructions from its Participants (as defined below),
and all references herein or in the Prospectus to payments to Holders shall
refer to payments to DTC or Cede, as the registered Holder of the Global
Notes, for distribution to Book-Entry Note Owners in accordance with DTC
procedures.
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. DTC holds securities that its
participants (``Participants'') deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need
for physical movement of securities certificates. Direct Participants
include securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations and certain other organizations. DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly (``Indirect
Participants''). The Rules applicable to DTC and its Participants are on
file with the Securities and Exchange Commission.
Book-Entry Note Owners that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Book-Entry Notes may do so only through Participants and
Indirect Participants. In addition, Book-Entry Note Owners will receive all
payments of principal, premium, if any, and interest from the Trustee
through Participants and, if applicable, Indirect Participants. Under a
book-entry format, Book-Entry Note Owners may experience some delay in
their receipt of payments, since such payments will be forwarded by the
Trustee to Cede, as nominee for DTC. DTC will forward such payments to its
Participants which thereafter will forward them to Indirect Participants or
Book-Entry Note Owners. It is anticipated that the only ``Holder'' will be
Cede, as nominee of DTC. Book-Entry Note Owners will not be recognized by
the Trustee as Holders, as such term is used in the Indenture, and
Book-Entry Note Owners will only be permitted to exercise the rights of
Holders indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the ``Rules''), DTC is required to make book-entry
transfers among Participants on whose behalf it acts with respect to the
Book-Entry Notes and is required to receive and transmit payments of
principal, premium, if any, and interest on the Book-Entry Notes.
Participants and Indirect Participants with which Book-Entry Note Owners
have accounts with respect to the Book-Entry Notes similarly are required
to make book-entry transfers and receive and transmit such payments on
behalf of their respective Book-Entry Note Owners.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Book-Entry Note Owner to pledge Book-Entry Notes to persons or entities
that do not participate in the DTC system, or otherwise take actions in
respect of such Book-Entry Notes, may be limited due to the lack of a
physical certificate for such Book-Entry Notes.
DTC has advised SRAC that it will take any action permitted to be taken by
a Holder under the Indenture only at the direction of one or more
Participants to whose account with DTC the Book-Entry Notes are credited.
Certificated Notes will be issued to Book-Entry Note Owners or their
nominees, rather than to DTC or its nominees only if (i) SRAC advises the
Trustee in writing that DTC is no longer willing or able to discharge
properly its responsibilities as Depository with respect to the Book-Entry
Notes, and the Trustee or SRAC is unable to locate a qualified successor,
or (ii) SRAC, at its option, elects to terminate the book-entry system
through DTC.
Upon the occurrence of either of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Certificated Notes. Upon surrender by DTC of a
Global Note representing the Book-Entry Notes and instructions for
re-registration, the Trustee will issue the Book-Entry Notes in the form of
Certificated Notes, and thereafter the Trustee will recognize the
registered holders of such Certificated Notes as Holders under the
Indenture.
Modification or Amendment of the Indenture
For the purpose of determining whether the consent of Holders of the
requisite percentage of principal amount of Notes to a modification or
alteration of the Indenture has been obtained, the principal amount of
Notes denominated in a Foreign Currency will be the amount in U.S. dollars
based upon the Market Exchange Rate for such Foreign Currency on the latest
date for which such rate was established on or before the date for
determining the Holders entitled to perform such act. (Section 2.11). See
``Description of Debt Securities-Modification or Amendment of the
Indenture'' in the Prospectus.
FOREIGN CURRENCY RISKS
Exchange Rates and Exchange Controls. An investment in securities
denominated in foreign currencies entails significant risks that are not
associated with investments denominated in U.S. dollars. Such risks
(``Foreign Currency Risks'') include, without limitation, the possibility
of significant changes in rates of exchange between the U.S. dollar and the
various foreign currencies and the possibility of the imposition or
modification of foreign exchange controls by either the U.S. or foreign
governments. Foreign Currency Risks generally depend on economic and
political events over which SRAC has no control. In recent years, rates of
exchange between the U.S. dollar and certain foreign currencies have been
highly volatile and such volatility may be expected in the future.
Fluctuations in any particular exchange rate that have occurred in the past
are not necessarily indicative, however, of fluctuations in the rate that
may occur during the term of any Note. On a U.S. dollar basis, depreciation
of the currency specified in a Note against the U.S. dollar would result in
a decrease in the effective yield of such Note below its coupon rate and in
certain circumstances could result in a loss to the investor.
FACTORS PRODUCING FOREIGN CURRENCY RISKS, INCLUDING RATES OF EXCHANGE,
CHANGE CONTINUOUSLY. THIS PROSPECTUS SUPPLEMENT CONTAINS A SUMMARY OF
CERTAIN RISKS OF AN INVESTMENT IN THE NOTES THAT RESULT FROM THE NOTES
BEING DENOMINATED IN A FOREIGN CURRENCY. PROSPECTIVE INVESTORS SHOULD
CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY
AN INVESTMENT IN THE NOTES. THE NOTES, WHEN DENOMINATED IN OTHER THAN U.S.
DOLLARS, ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and SRAC 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 of and
interest on the Notes. Such persons should consult their own financial and
legal advisors with regard to such matters.
Governing Law and Judgments. The Notes will be governed by and construed in
accordance with the laws of the State of Delaware. If an action based on
the Notes resulted in a judgment against SRAC in a court in the United
States, it is likely that the court would grant judgment relating to the
Notes only in U.S. dollars. It is not clear, however, whether, in granting
such judgment, the rate of conversion into U.S. dollars would be that in
effect on the date of default, the date the judgment was rendered, or some
other date.
Exchange Controls, Etc. Governments have imposed from time to time and may
in the future impose exchange controls which could affect exchange rates as
well as the availability of a Specified Currency at the time of payment of
principal of or interest on a Note. Even if there were no actual exchange
controls, it is possible that the Specified Currency for any particular
Note would not be available at the time of such payments. In that event,
SRAC will make required payments in U.S. dollars on the basis of the Market
Exchange Rate on the date of such payment, or if such rate of exchange is
not then available, on the basis of the last available Market Exchange
Rate. See ``Description of Notes-Payment Currency.''
With respect to any Note denominated in other than U.S. dollars, the
Pricing Supplement will include information with respect to the applicable
Specified Currency (which supplement shall include information with respect
to applicable current foreign exchange controls, if any). The information
therein concerning rates of exchange 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 TAX CONSIDERATIONS
The following summary of the principal United States federal income tax
consequences of the ownership of Notes is based upon the opinion, set forth
in full below, of Baker & McKenzie, special United States tax counsel to
SRAC. For purposes of this discussion of United States Tax Considerations,
with respect to Book-Entry Notes, the term ``Holder'' refers only to
Book-Entry Note Owners, and with respect to Certificated Notes, the term
``Holder'' refers to the registered Holder. The discussion deals only with
Notes held as capital assets and does not deal with special tax situations,
such as dealers in securities or currencies, Holders whose functional
currency is not the United States dollar, or persons holding Notes as a
hedge against currency risks or as part of a larger integrated financial
transaction. Persons considering the purchase of Notes should consult their
own tax advisors concerning the application of United States federal income
tax laws to their particular situations and any consequences arising under
the laws of any other taxing jurisdiction.
Notes may be issued under the Indenture providing for payments of principal
in amounts to be determined by reference to an index. Notes may also be
issued under the Indenture with a term of 12 months or less at issue prices
of less than their stated redemption price at maturity, giving rise to
original issue discount for federal income tax purposes. Notes may also be
issued under the Indenture with original issue discount which are
denominated in more than one currency. Federal income tax consequences and
other special considerations applicable to any such Notes will be described
in the Pricing Supplement relating thereto. Certain Notes bearing original
issue discount and certain Floating Rate Notes, in either case with a
maturity date more than five years from the issue date, may constitute
``high yield original issue discount obligations'' for federal income tax
purposes. The United States federal income and estate tax consequences for
Holders of Notes constituting high yield original issue discount
obligations will be discussed in the Pricing Supplements relating to any
such Notes.
In the opinion of Baker & McKenzie, all Notes issued under the Indenture
will be properly characterized as indebtedness of SRAC, and SRAC will so
characterize all such Notes for all United States federal income tax
purposes. This characterization by SRAC will be binding on every Holder of
a Note, unless the Holder discloses its inconsistent characterization on
such Holder's federal income tax return. The Internal Revenue Service will
not be bound by the characterization of the Notes by SRAC and the Holders.
United States Holders
As used herein, ``United States Holder'' means a Holder of a Note who is,
or which is, a United States Person. A ``United States Person'' is (i) a
citizen or resident of the United States of America (including the States
and the District of Columbia), its territories, possessions and other areas
subject to its jurisdiction, including the Commonwealth of Puerto Rico (the
``United States''), (ii) a corporation or partnership created or organized
in the United States or under the laws of the United States or of any State
and (iii) an estate or trust the income of which is subject to United
States federal income taxation regardless of its source.
Payments of Interest and Original Issue Discount. Stated interest on a Note
(whether in a foreign currency or U.S. dollars) will be taxable to a United
States Holder as ordinary interest income at the time it accrues or is paid
in accordance with the United States Holder's method of accounting for tax
purposes, subject to the discussion in the succeeding paragraphs.
If Notes are issued at a discount from their stated redemption price at
maturity equal to or more than one-fourth of one percent of the stated
redemption price at maturity multiplied by the number of full years to
maturity, such Notes will be original issue discount obligations
(``Original Issue Discount Notes''). The difference between the issue price
and the stated redemption price at maturity of each such Original Issue
Discount Note will constitute original issue discount (``Original Issue
Discount''). The stated redemption price at maturity will include all
payments other than interest based on a fixed rate or, unless otherwise
stated in a Pricing Supplement, a floating rate, payable unconditionally at
intervals of one year or less during the entire term of the Original Issue
Discount Notes (``Stated Interest'').
Each initial Holder of an Original Issue Discount Note will be required to
include in gross income, in each taxable year during which the Original
Issue Discount Note is held, a portion of the Original Issue Discount
calculated on a yield to maturity basis in addition to Stated Interest, if
any, paid on such Note, regardless of the United States Holder's method of
accounting for tax purposes. A United States Holder should be aware that,
because of the above original issue discount rules, such Holder will be
required to include increasingly greater amounts of Original Issue Discount
in gross income in each successive accrual period in advance of the receipt
of the cash attributable to such Original Issue Discount income.
A United States Holder of an Original Issue Discount Note must include in
gross income the sum of the daily portions of Original Issue Discount with
respect to an Original Issue Discount Note for each day during the taxable
year such Holder holds such Note. The daily portion is determined by
allocating to each day of the accrual period a ratable portion of an amount
equal to the excess of (i) the Adjusted Issue Price (as defined below) of
the Original Issue Discount Note at the beginning of the accrual period
multiplied by the yield to maturity of such Note (determined by compounding
at the close of each accrual period and adjusted for the length of the
accrual period) over (ii) the amount payable as Stated Interest, if any, on
such Note during such accrual period. United States Holders may accrue
Original Issue Discount using accrual periods of any length, and such
accrual periods may vary in length over the term of the Original Issue
Discount Note, provided that each accrual period must be no longer than one
year and each scheduled payment of principal or interest must occur either
on the final day of an accrual period or on the first day of any accrual
period.
The Adjusted Issue Price of an Original Issue Discount Note at the start of
any accrual period is the issue price of the Original Issue Discount Note
increased by the amount of Original Issue Discount accrued during all prior
accrual periods. A United States Holder of an Original Issue Discount Note
must include in income accrued Original Issue Discount regardless of
whether such Holder uses a cash receipts and disbursements method of tax
accounting or an accrual basis of tax accounting.
The face of each Original Issue Discount Note will set forth the issue
date, issue price, yield to maturity, amount of Original Issue Discount and
any other information required by Treasury regulations. SRAC will furnish
to the Internal Revenue Service the amount of Original Issue Discount, the
issue date and any additional information required by Treasury regulations.
Holders, including subsequent Holders, will be required to determine for
themselves the reportable amount of Original Issue Discount income for a
year.
For a Holder who uses a cash receipts and disbursements basis of tax
accounting, if a receipt of payment of stated interest is denominated in a
foreign currency, the amount of interest income will be the U.S. dollar
value of the foreign currency payment amount translated at the spot rate on
the payment date, regardless of whether the payment is in fact converted to
U.S. dollars. For a Holder who uses an accrual basis of tax accounting, if
an accrual of interest is denominated in a foreign currency, the amount of
interest income will be the U.S. dollar value of the amount of interest
accrued in foreign currency translated at the appropriate accrual
translation rate. The ``appropriate accrual translation rate'' is the
average spot rate in effect during such accrual period or, at the Holder's
election, the spot rate on the last day of such accrual period (or on the
day of receipt of such interest if such day is within five days of the end
of the applicable accrual period). If the latter translation convention is
elected, such convention will apply with respect to all other debt
instruments held by the Holder during or after the taxable year for which
the election is made. Upon receipt of the interest payment in foreign
currency or upon disposition of the Note, a Holder will recognize currency
gain or loss with respect to the accrued interest equal to the difference
between the Holder's accrued foreign currency interest income translated at
the appropriate accrual translation rate and the U.S. dollar value of the
foreign currency payment translated at the spot rate on the payment date,
regardless of whether the payment is in fact converted to U.S. dollars.
In the case of Original Issue Discount Notes, Treasury regulations provide
similar rules for both cash basis and accrual basis United States Holders
for calculating currency gain or loss with respect to accrued Original
Issue Discount. Original Issue Discount will accrue in the currency in
which the Note is denominated and will be translated into U.S. dollars at
the appropriate accrual translation rate. Upon receipt of the accrued
Original Issue Discount or the disposition of the Note, such a Holder will
recognize currency gain or loss with respect to the accrued Original Issue
Discount equal to the difference between the Holder's accrued Original
Issue Discount income translated at the appropriate accrual translation
rate and the U.S. dollar value of the foreign currency payment translated
at the spot rate on the payment date or the date of disposition.
Currency gain or loss recognized by a Holder upon receipt of a foreign
currency payment will be treated as ordinary income or loss. In accordance
with current Treasury regulations, currency gain or loss will not be
treated as interest income or expense.
If a United States Holder acquires a Note (including an Original Issue
Discount Note) other than upon original issue for an amount less than the
principal amount or, in the case of an Original Issue Discount Note, less
than the Revised Issue Price (defined as the sum of the issue price of the
Note and the aggregate amount of Original Issue Discount includible in
gross income for all periods prior to the acquisition without regard to
acquisition premium) of such Original Issue Discount Note on the date of
acquisition, the Note may be considered to be a ``market discount bond.''
As a result, a portion of the gain on the sale or redemption of the Note
(see ``United States Tax Considerations-United States Holders-Purchase,
Sale and Redemption of Notes'') equal to the amount of market discount
accrued with respect to the Note while it was held by the United States
Holder will be treated as interest income. In addition, interest on
indebtedness incurred or continued to purchase or carry a Note that is a
market discount bond, to the extent that it exceeds in any year the
interest (including Original Issue Discount) on the Note includible in the
United States Holder's income for that year, may not be fully deductible in
that year. The foregoing market discount rules will not apply if the United
States Holder elects to include in income in each taxable year the portion
of the market discount attributable to that year (accrued on either a
straight line or constant interest rate basis) with respect to all market
discount bonds acquired during or after the taxable year in which such
election is made. In the case of a Note denominated in a foreign currency,
the amount of market discount will be determined in units of foreign
currency in which the Note is denominated. Unless the Holder elects to
include in income in each taxable year such market discount, the resultant
market discount is required to be translated at the spot rate on the date
of sale or redemption of the Note. No part of such market discount is
treated as currency gain or loss. If the Holder elects to include in income
in each taxable year such market discount, the accrued market discount
currently includible in income will be translated at the average spot rate
for the accrual period. Currency gain or loss with respect to accrued
market discount currently includible in income will be determined in a
manner similar to that for accrued Original Issue Discount as discussed
above.
If a United States Holder acquires a Note other than upon original issue
for an amount more than the redemption price, a Holder may elect to
amortize such bond premium on a yield to maturity basis. In the case of a
Note denominated in a foreign currency, the amount of bond premium will be
determined in units of the foreign currency in which the Note is
denominated. If a Holder elects to amortize such bond premium, the amount
of accrued bond premium in units of foreign currency in each taxable year
will reduce interest income in units of foreign currency for such taxable
year. Currency gain or loss will be taken into account with respect to
accrued bond premium in each taxable year by treating the portion of
premium amortized with respect to any period as a return of principal (see
``United States Tax Considerations-United States Holders-Purchase, Sale and
Redemption of Notes'').
If a United States Holder acquires an Original Issue Discount Note other
than upon original issue for an amount more than the Revised Issue Price of
such Note on the date of acquisition, but less than the redemption price of
such Note, such a Holder will be required to reduce each daily portion of
accrued Original Issue Discount by an allocable portion of such acquisition
premium. The allocable portion of such acquisition premium will be equal to
the daily portion of accrued Original Issue Discount multiplied by a
fraction (i) the numerator of which is the excess of the cost of the
Original Issue Discount Note incurred by such Holder over the Revised Issue
Price of such Note on the date of acquisition and (ii) the denominator of
which is the excess of the stated redemption price of the Original Issue
Discount Note at maturity over the Revised Issue Price of such Note on the
date of acquisition. In the case of an Original Issue Discount Note
denominated in a foreign currency, the amount of acquisition premium will
be determined in units of foreign currency in which the Note is
denominated. The amount of the allocable portion of acquisition premium in
units of foreign currency in each taxable year will reduce accrued Original
Issue Discount in units of foreign currency for such taxable year. Currency
gain or loss will be taken into account with respect to accrued acquisition
premium in each taxable year by treating the portion of acquisition premium
amortized with respect to any period as a return of principal (see ``United
States Tax Considerations-United State Holders-Purchase, Sale and
Redemption of Notes'').
A Holder may elect to include in gross income its entire return on a Note
(i.e., the excess of all remaining payments to be received on the Note over
the amount paid for such Note by the Holder) based on the compounding of
interest at a constant rate. This election for a Note with amortizable bond
premium or market discount results in a deemed election to apply the same
accrual principles to all of the Holder's debt instruments with amortizable
bond premium or market discount. This election may be revoked only with the
consent of the IRS.
Purchase, Sale and Redemption of Notes. A United States Holder's tax basis
in a Note will be its U.S. dollar cost. Such Holder's original tax basis in
a Note will be increased by (i) the net amount of accrued Original Issue
Discount included in income and (ii) the amount of accrued market discount
included in income. Such Holder's tax basis in a Note will be decreased by
(i) the amount of accrued bond premium and (ii) payments other than Stated
Interest received by the Holder with respect to a Note. Although the issue
has not yet been directly addressed by Treasury regulations, in the case of
a Note denominated in a foreign currency, such Holder's original tax basis
likely will be increased by (i) the net amount of accrued Original Issue
Discount income in units of foreign currency translated at the appropriate
accrual translation rate in effect during such accrual period and (ii) the
amount of accrued market discount included in income in units of foreign
currency translated at the average spot rate in effect during such accrual
period. Such Holder's tax basis likely will be decreased by (i) payments
treated as receipts of accrued bond premium in units of foreign currency
translated at the spot rate on the date of acquisition; (ii) payments
treated as receipts of accrued Original Issue Discount translated at the
appropriate accrual translation rates, or accrued market discount
translated at the average spot rate, for the relevant accrual period; and
(iii) payments treated as receipts of principal translated at the spot rate
on the date of acquisition. In accordance with current Treasury
regulations, payments in units of foreign currency received on a Note by
such a Holder will be treated first as a receipt of Stated Interest, second
as a receipt of Original Issue Discount to the extent accrued, and finally
as a receipt of principal.
Subject to the discussion below and the discussion of Notes which are
market discount bonds (see ``United States Tax Considerations-United States
Holders-Payments of Interest and Original Issue Discount''), upon the sale
or redemption of a Note, a United States Holder will recognize capital gain
or loss equal to the difference between the amount realized on the sale or
redemption of the Note and the tax basis of the Note. The amount realized
on a sale or redemption of a Note denominated in a foreign currency will be
equal to the sale proceeds or redemption price in units of foreign currency
translated at the spot rate on the date of sale or redemption. Except to
the extent described in the next paragraph or described in ``United States
Tax Considerations-United States Holders-Payments of Interest and Original
Issue Discount'', gain or loss will be long-term capital gain or loss if at
the time of the sale or redemption the Note has been held for more than one
year.
Except to the extent described in the discussion of market discount bonds
(see ``United States Tax Considerations-United States Holders-Payments of
Interest and Original Issue Discount''), the portion of the gain or loss
recognized by a United States Holder on the sale or redemption of a Note
that is attributable to changes in exchange rates will be treated as
ordinary income or loss. If a United States Holder acquires a Note
denominated in a foreign currency on or after the date of original issue,
such Holder's currency gain or loss with respect to principal will be
calculated by multiplying the principal amount in units of foreign currency
by the change in spot rates between the date such Holder acquired the Note
and the date it was sold or redeemed. For purposes of computing currency
gain or loss, the principal amount of a Note will be a Holder's purchase
price for the Note in units of foreign currency. The sum of any currency
gain or loss with respect to the principal of and accrued but unpaid
interest (including accrued but unpaid Original Issue Discount, if any) on
a Note will be realized only to the extent of the total gain or loss
realized on the sale or redemption.
Exchange of Foreign Currency. Foreign currency received as interest on a
Note or on the sale or redemption of a Note will have a tax basis equal to
its U.S. dollar value (translated at the spot rate) at the time such
interest is received or at the time of sale or redemption of the Note.
Foreign currency purchased will generally have a tax basis equal to the
U.S. dollar cost of acquisition. Any gain or loss recognized on a sale or
other disposition of the foreign currency (including its use to purchase
Notes or its exchange for U.S. dollars) will be ordinary income or loss.
Foreign Holders
U.S. Withholding Tax. Under United States federal income tax laws now in
effect, and subject to the discussion of backup withholding which follows,
payments by SRAC or any paying agent thereof (in its capacity as such) of
principal of and interest (including payments of Original Issue Discount,
if any) on (and premium, if any, on) a Note to a Holder who is not a United
States Person will not be subject to United States federal withholding tax,
provided in the case of interest (including payments of Original Issue
Discount, if any) that (i) such Holder does not actually or constructively
own 10 percent or more of the total combined voting power of all classes of
stock of SRAC entitled to vote; (ii) such Holder is not a controlled
foreign corporation for United States tax purposes with respect to which
SRAC is a ``related person'' as defined in the Code; and (iii) (A) the
beneficial owner of the Note provides a signed written statement to SRAC or
its agent, under penalties of perjury, that certifies that it is not a
United States Person and provides its name and address, (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 on behalf of the beneficial
owner provides an intermediary certificate to SRAC or its agent under
penalties of perjury that such a 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, or (C) a
securities clearing organization that is the last intermediary in the chain
before SRAC or its agent (a ``qualified clearing organization'')
electronically provides an intermediary certificate to SRAC or its agent
under penalties of perjury that such a statement has been received from the
beneficial owner by it or by an intermediary that is a member of the
qualified clearing organization and agrees to furnish (or to cause the
relevant member intermediary to furnish) promptly upon the request of SRAC
or the Internal Revenue Service such statement. A statement described in
this paragraph is effective only with respect to interest payments made to
the certifying Holder after the issuance of the statement in the calendar
year of its issuance and the two immediately succeeding calendar years.
U.S. Income Tax. Except for the possible imposition of United States
withholding tax (see ``United States Tax Considerations-Foreign
Holders-U.S. Withholding Tax'') and backup withholding tax (see ``United
States Tax Considerations-Backup Withholding''), payments of principal of
and interest (including accrued Original Issue Discount, if any) on (and
premium, if any, on) a Note to a Holder who is not a United States Person
will not be subject to United States federal income tax, and gains from the
sale, redemption or other disposition of a Note will not be subject to
United States federal income tax, provided that:
(a) The Holder (or the fiduciary, settlor, or beneficiary of, or a
person holding a power over, such Holder, if such Holder is an estate
or trust; or a partner of such Holder, if such Holder is a
partnership) shall not be or have been engaged in a trade or business,
or be or have been present in, or have or have had a permanent
establishment in the United States;
(b) There shall not have been a present or former connection between
such Holder (or between the fiduciary, settlor, or beneficiary of, or
a person holding a power over, such Holder, if such Holder is an
estate or trust; or a partner of such Holder, if such Holder is a
partnership) and the United States, including, without limitation,
such Holder's status as a citizen or former citizen thereof or
resident or former resident thereof; and
(c) The Holder (or the fiduciary, settlor, or beneficiary of, or a
person holding a power over, such Holder, if such Holder is an estate
or trust; or a partner of such Holder, if such Holder is a
partnership) is not and has not been, for United States tax purposes,
(i) a personal holding company, (ii) a corporation that accumulates
earnings to avoid United States federal income tax, or (iii) a person
treated as making an election the effect of which is to make payments
of principal of and interest (including accrued Original Issue
Discount, if any) on (and premium, if any, on) Notes subject to United
States federal income tax.
If a Holder who is not a United States Person is engaged in a trade or
business in the United States and interest (including accrued Original
Issue Discount, if any), gain or income in respect of a Note of such Holder
is effectively connected with the conduct of such trade or business, the
Holder, although exempt from the withholding tax discussed in the preceding
paragraphs, may be subject to United States income tax on such interest
(including accrued Original Issue Discount, if any), gain or income at the
statutory rates provided for United States Persons after deduction of
deductible expenses allocable to such effectively connected interest, gain
or income. In addition, if such a Holder is a foreign corporation, it may
be subject to a branch profits tax equal to 30% of its effectively
connected earnings and profits for the taxable year, as adjusted for
certain items, unless a lower rate applies under a United States income tax
treaty with the Holder's country of residence. For this purpose, interest
(including accrued Original Issue Discount, if any), gain or income in
respect of a Note will be included in earnings and profits subject to the
branch tax if the interest (including accrued Original Issue Discount, if
any), gain or income is effectively connected with the conduct of the
United States trade or business of the Holder.
U.S. Estate Tax. A Note held by an individual who at the time of death is
not a citizen or resident of the United States will generally not be
subject to United States federal estate tax if the individual does not
actually or constructively own 10% or more of the total combined voting
power of all classes of stock of SRAC and interest (including accrued
Original Issue Discount, if any) on the Note is not effectively connected
with a United States trade or business of the individual.
Backup Withholding
A 31% ``backup'' withholding tax and information reporting requirements
apply to certain payments of principal of and interest (including payments
of Original Issue Discount, if any) on (and premium, if any, on) an
obligation, and to proceeds of the sale of an obligation before maturity,
to certain noncorporate United States Holders, if such Holders fail to
provide correct taxpayer identification numbers and other information or
fail to comply with certain other requirements. SRAC, its paying agent, or
a broker, as the case may be, will be required to withhold from any payment
that is subject to backup withholding, a tax equal to 31% of such payment
unless the Holder furnishes its taxpayer identification number in the
manner prescribed in applicable Treasury regulations and certain other
conditions are met.
In the case of payments of principal of and interest (including payments of
Original Issue Discount, if any) on (and premium, if any, on) Notes by SRAC
or paying agents of SRAC to Holders who are not United States Persons,
temporary Treasury regulations provide that backup withholding and
information reporting will not apply if the Holder has provided the
required certification of its non-United States status under penalties of
perjury or has otherwise established an exemption (provided that neither
SRAC nor its paying agent has actual knowledge that the Holder is a United
States Person or the conditions of any other exemption are not in fact
satisfied). In addition, if payment is collected by a foreign office of a
custodian, nominee or other agent acting on behalf of an owner of a Note,
such custodian, nominee or other agent will not be required to apply backup
withholding to its payments to such owner. However, in such case if the
custodian, nominee or other agent is a United States Person, a controlled
foreign corporation for United States federal income tax purposes, or a
foreign person 50% or more of whose gross income is from a United States
trade or business for a specified three-year period, such custodian,
nominee or other agent will be subject to certain information reporting
requirements with respect to such payment unless such custodian, nominee or
other agent has evidence in its records that the Holder is not a United
States Person and no actual knowledge that such evidence is false or the
Holder otherwise establishes an exemption or is an exempt recipient. An
exempt recipient includes a bank, corporation or Financial Institution.
Under current regulations, payments of the proceeds of the sale of a Note
by a Holder who is not a United States Person to or through a foreign
office of a broker will not be subject to backup withholding. Payments by
foreign offices of a broker that is a United States Person, a controlled
foreign corporation for United States federal income tax purposes or a
foreign person 50% or more of whose gross income is from a United States
trade or business for a specified three-year period are currently subject
to certain information reporting requirements, unless the payee is an
exempt recipient or the broker has evidence in its records that the payee
is not a United States Person and no actual knowledge that such evidence is
false. Payments of the proceeds of a sale to or through the United States
office of a broker will be subject to information reporting and backup
withholding unless the payee certifies under penalty of perjury that he is
not a United States Person and provides his name and address or the payee
otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules from a payment to a
Holder will be 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 United States Internal Revenue Service.
The foregoing is based on the Internal Revenue Code of 1986, as amended,
regulations, rulings, administrative pronouncements and judicial decisions
as of the date hereof. Subsequent developments in these areas could have a
material effect on this opinion.
PLAN OF DISTRIBUTION
The Notes are offered on a continuing basis by SRAC through the Agents,
each of which has agreed to use its reasonable efforts to solicit purchases
of the Notes. It is also anticipated that SRAC will offer Notes directly to
brokers or dealers, investment companies (or separate accounts), insurance
companies, banks, savings and loan associations, trust companies or similar
institutions, and trusts for which a bank, savings and loan association,
trust company or investment adviser is the trustee or authorized to make
investment decisions. SRAC will pay each Agent a commission ranging from
.125% to .750% of the principal amount of Notes sold through such firm as
Agent, depending on maturity. Commissions with respect to Notes with a
stated maturity greater than 30 years will be negotiated between SRAC and
the Agent at time of purchase and set forth in the applicable Pricing
Supplement. SRAC has also agreed to reimburse the Agents for certain of
their expenses.
SRAC may also sell the Notes to any Agent, as principal, at negotiated
discounts for resale to investors or other purchasers. SRAC reserves the
right to sell Notes directly on its own behalf in those jurisdictions where
it and its employees may be registered or qualified to do so or in
transactions in which they are exempt from such registration or
qualification. No commission will be payable on any sales made directly by
SRAC.
Each Agent may act as an agent for sales of Notes, or may offer the Notes
they have purchased as principal, to or through dealers and, unless
otherwise specified in the applicable Pricing Supplement, such dealers may
receive compensation in the form of discounts, concessions or commissions
from the Agents not in excess of 66 2/3% of the discount or commission
received by the Agent from SRAC.
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 an 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, at a fixed public offering price or at varying prices related
to prevailing prices determined at the time of sale or may be resold to or
through certain dealers as described above. After an initial public
offering of Notes purchased by an Agent as principal which are to be resold
to investors and other purchasers on a fixed public offering price basis,
the offering and other selling terms may be varied by such Agent. The
applicable Pricing Supplement may set forth further information with
respect to distribution of the Notes.
SRAC will have the sole right to accept offers to purchase Notes and may
reject any proposed purchase of Notes. Each Agent will have the right, in
its discretion reasonably exercised, to reject any offer received by it.
Payment of the purchase price of Notes will be required to be made in
immediately available funds.
Each Agent may be deemed to be an ``underwriter'' within the meaning of the
Securities Act of 1933, as amended (the ``Securities Act''). SRAC has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Securities Act.
The Notes are a new issue of securities with no established trading market.
The Agents have informed SRAC that they intend to make a market in the
Notes, but are under no obligation to do so and such market making may be
discontinued at any time. No assurance can be given as to the liquidity of
a trading market for the Notes.
Sears Roebuck Acceptance Corp.
Debt Securities
Sears Roebuck Acceptance Corp. (``SRAC'') from time to time may offer up to
$3,000,000,000 aggregate initial offering price of its debt securities
consisting of debentures, notes and/or other unsecured evidences of
indebtedness (the ``Debt Securities''). If so provided in the accompanying
Prospectus Supplement, the Debt Securities of any series may be represented
in whole or in part by one or more Global Securities (``Global
Securities'') registered in the name of a depository's nominee and, if so
represented, beneficial interests in such Global Securities will be shown
on, and transfers thereof will be effected only through, records maintained
by the depository and its participants. The Debt Securities may be offered
as separate series in amounts, at prices and on terms to be set forth in
supplements to this Prospectus. It is anticipated that SRAC will sell Debt
Securities directly to institutional investors and may sell Debt Securities
to or through underwriters, and also may sell Debt Securities directly to
other purchasers or through agents. See ``Plan of Distribution.'' The
accompanying Prospectus Supplement or Prospectus Supplements (the
``Prospectus Supplement'') sets forth the names of any underwriters or
agents involved in the sale of the Debt Securities in respect of which this
Prospectus is being delivered, the principal amounts, if any, to be
purchased by underwriters and the compensation, if any, of such
underwriters or agents.
The terms of the Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, denominations, maturity, premium,
if any, rate (which may be fixed or variable) and time of payment of
interest, if any, terms for redemption at the option of SRAC or the Holder,
terms for sinking fund payments, the initial public offering price, the
names of, and the principal amounts, if any, to be purchased by
underwriters and the compensation of such underwriters, deferred pricing
arrangements, if any, and the other terms in connection with the offering
and sale of the Debt Securities in respect of which this Prospectus is
being delivered, are set forth in the accompanying Prospectus Supplement.
As used herein, Debt Securities shall include securities denominated in
U.S. dollars or, at the option of SRAC if so specified in the applicable
Prospectus Supplement, in any other currency or in composite currencies or
in amounts determined by reference to an index.
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.
May 23, 1995
No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained or
incorporated by reference in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the registered
securities to which it relates or an offer to sell or the solicitation of
an offer to buy such securities in any jurisdiction to any person to whom
it is unlawful to make such offer or solicitation in such jurisdiction.
Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information is correct as of any time subsequent to its date.
TABLE OF CONTENTS
Page
Available Information 3
Reports to Holders of Debt Securities 3
Incorporation of Certain Documents by Reference 3
Sears Roebuck Acceptance Corp. 4
Use of Proceeds 4
Summary Financial Information 5
Ratio of Earnings to Fixed Charges 6
Description of Debt Securities 6
Plan of Distribution 9
Legal Opinion 10
Experts 10
AVAILABLE INFORMATION
SRAC and Sears, Roebuck and Co. (``Sears''), SRAC's parent, are subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the ``Exchange Act'') and in accordance therewith file reports and
other information with the Securities and Exchange Commission (the
``Commission''). Sears also files proxy statements with the Commission.
Such reports, proxy statements and other information can be inspected and
copied at the public reference facilities of the Commission in Room 1024,
450 Fifth Street N.W., Washington, D.C. 20549; 7 World Trade Center, 13th
Floor, New York, New York 10048; and Suite 1400, Northwestern Atrium
Center, 500 W. Madison Street, Chicago, Illinois 60606; and copies of such
materials can be obtained from the public reference section of the
Commission at 450 Fifth Street N.W., Washington, D.C. 20549, at prescribed
rates. Reports, proxy statements and other information concerning Sears can
also be inspected at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005, the Chicago Stock Exchange
Incorporated, 440 South LaSalle Street, Chicago, Illinois 60605, and the
Pacific Stock Exchange, Inc., 301 Pine Street, San Francisco, California
94104.
Additional information regarding SRAC, Sears and the Debt Securities is
contained in the Registration Statement and the exhibits relating thereto,
filed with the Commission under the Securities Act of 1933, as amended (the
``Act''). For further information pertaining to SRAC, Sears and the Debt
Securities, reference is made to the Registration Statement, and the
exhibits thereto, which may be inspected without charge at the office of
the Commission at 450 Fifth Street N.W., Washington, D.C. 20549, and copies
thereof may be obtained from the Commission at prescribed rates.
REPORTS TO HOLDERS OF DEBT SECURITIES
Holders of Debt Securities will receive annual reports containing
information, including financial information that has been audited and
reported on by independent public accountants, about SRAC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Reports on Form 10-K for the year ended December 31, 1994 and
the Quarterly Reports on Form 10-Q for the quarterly period ended March 31
and April 1, 1995, respectively, filed by SRAC and Sears, and the Current
Reports on Form 8-K for January 17, February 7, April 20, April 25 and May
15, 1995 filed by Sears, with the Commission pursuant to Section 13 of the
Exchange Act, and the proxy statement dated February 21, 1995 relating to a
Special Meeting of Shareholders, held on March 31, 1995 to consider and
vote on a proposal that provides for the distribution to the holders of
Sears common shares of all of the common stock of The Allstate Corporation
that are owned by Sears, filed by Sears with the Commission pursuant to
Section 14 of the Exchange Act, are incorporated in and made a part of this
Prospectus by reference.
All documents filed by SRAC or Sears with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the offering of the
Debt Securities (other than those portions of such documents described in
paragraphs (i), (k) and (l) of Item 402 of Regulation S-K promulgated by
the Commission) 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.
SRAC will provide without charge to each person to whom a copy of this
Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference (not
including exhibits to such documents unless such exhibits are specifically
incorporated by reference in such documents). Written or telephone requests
for such copies should be directed to Sears Roebuck Acceptance Corp., 3711
Kennett Pike, Greenville, Delaware 19807, Attention: Vice President,
Finance (302/888-3100).
SEARS ROEBUCK ACCEPTANCE CORP.
SRAC is a wholly-owned subsidiary of Sears and was incorporated in 1956
under the laws of Delaware. Its general offices are located at 3711 Kennett
Pike, Greenville Delaware 19807 (302/888-3100). SRAC raises funds primarily
from the direct placement of commercial paper with corporate and
institutional investors and through intermediate-term loans. SRAC uses
borrowing proceeds to acquire short-term notes of Sears and purchase
outstanding customer receivable balances from Sears. Sears, which is a
multi-line retailer that conducts Domestic and International merchandising
operations, uses the funds obtained from SRAC for general funding purposes.
SRAC, and not Sears, will be the sole obligor on the Debt Securities.
SRAC's income is derived primarily from the earnings on its investment in
the notes and receivable balances of Sears. The interest rate on Sears
notes is presently calculated so that SRAC maintains an earnings to fixed
charge ratio of at least 1.25 times. The yield on the investment in Sears
notes is related to SRAC's borrowing costs and, as a result, SRAC's
earnings fluctuate in response to movements in interest rates and changes
in Sears short-term borrowing requirements. Subject to the provisions of
the Indenture relating to the Debt Securities, SRAC will be required to
maintain a ratio of earnings to fixed charges of not less than 1.10 for any
fiscal quarter and cause Sears to maintain ownership of all voting stock of
SRAC as long as any Debt Securities are outstanding, and Sears has agreed
to pay SRAC such amounts as may be necessary for such purpose. See
``Description of Debt Securities.''
At April 30, 1995, SRAC had eleven employees.
USE OF PROCEEDS
The net proceeds to be received by SRAC from the sale of the Debt
Securities offered hereby will be added to its general funds and initially
used to reduce short-term indebtedness. As indicated under ``Sears Roebuck
Acceptance Corp.,'' SRAC's principal business is the purchase of short-term
notes of Sears; also, on occasion, SRAC purchases customer receivable
balances from Sears Merchandise Group's Domestic credit operations. SRAC
expects to incur additional indebtedness, but the amount and nature thereof
have not yet been determined and will depend on economic conditions and
certain capital requirements of Sears. It is anticipated that Sears and its
subsidiaries will continue their practice of short-term borrowing and will,
from time to time, incur additional long-term debt and engage in
securitization programs in which credit card receivables are sold in public
or private transactions. Sears also may, from time to time, issue equity
securities.
SUMMARY FINANCIAL INFORMATION
The following table sets forth certain summary financial information of
SRAC for the five years ended December 31, 1994. The summary information
should be read in conjunction with the financial statements of SRAC and the
notes thereto incorporated herein by reference.
1994 1993 1992 1991 1990
(dollars in millions)
Operating Results
Total revenues $282.7 $337.5 $696.5 $1,100.8 $1,347.4
Expenses
Interest and related
expenses 218.5 236.1 482.8 825.9 1,072.1
Total Expenses 220.4 276.7 532.3 894.1 1,077.2
Income taxes 22.1 21.3 56.1 70.3 91.8
Net income 40.2 39.5 108.1 136.4 178.4
Financial Position
Assets
Notes of Sears $6,842.5 $3,403.9 $10,493.6 $12,214.5 $14,578.2
Customer receivable
balances purchased
from Sears 81.5 88.0 963.4 1,042.8 -
Total assets 7,031.2 4,145.8 12,415.2 14,676.2 15,373.3
Liabilities
Debt payable within
one year
Commercial paper $4,912.9 $2,475.0 $8,515.3 $10,205.8 $10,331.0
Agreements with bank
trust departments 87.4 139.8 397.9 510.1 571.9
Debentures and notes 845.0 - - 204.0 925.0
Loan agreements with
SOFNV - 379.8 332.1 683.2 590.7
Total liabilities 5,853.5 3,008.3 9,287.0 11,656.1 12,489.6
Sears, Roebuck and Co.
investment in SRAC
Capital stock
(including capital
in excess of
par value) 35.0 35.0 365.2 365.2 365.2
Retained income 1,142.7 1,102.5 2,763.0 2,654.9 2,518.5
Debt as percentage of
equity 496% 263% 296% 384% 431%
Other Pertinent Data
Commercial paper
Average daily
outstandings 3,615 3,812 9,328 10,543 10,340
Agreements with bank
trust departments
Average daily
outstandings 124 402 747 643 848
Contractual Credit
Facilities (year-end) 5,132 4,200 10,812 11,801 10,775
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for SRAC for each of the years ended
December 31, 1994, 1993, 1992, 1991 and 1990 was 1.29, 1.26, 1.34, 1.25 and
1.25, respectively, and for the three-month period ended March 31, 1995 was
1.25. Earnings consist of net income plus fixed charges and income taxes.
Fixed charges consist of interest costs and amortization of debt discount
and expense; rental expense is insignificant with no effect on the
calculation. The interest rate paid by Sears to SRAC on its investment in
Sears notes is presently calculated to produce earnings sufficient to cover
SRAC's fixed charges at least 1.25 times.
The ratio of income to fixed charges for Sears and its consolidated
subsidiaries for each of the years ended December 31, 1994, 1993, 1991 and
1990 was 2.06, 1.66, 1.16 and 0.96, respectively, and for the three- and
twelve-month periods ended April 1, 1995 was 1.56 and 2.05, respectively.
For the year ended December 31, 1992, earnings did not cover fixed charges
by $2,869 million. In the computation of the ratio of income to fixed
charges for Sears and its consolidated subsidiaries, income consists of
income from continuing operations less undistributed net income of
unconsolidated subsidiaries plus fixed charges (excluding capitalized
interest) and federal and state income taxes. Fixed charges consist of
interest costs plus the portion of operating lease rentals which is
estimated to represent the interest element in such rentals.
DESCRIPTION OF DEBT SECURITIES
The following descriptions of the terms of the Debt Securities set forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt
Securities offered by any Prospectus Supplement (the ``Offered Debt
Securities'') and the extent, if any, to which such general provisions may
apply to the Debt Securities so offered will be described in the Prospectus
Supplement relating to such Offered Debt Securities.
The Debt Securities are to be issued under one of the Indentures (each, an
``Indenture'') referred to in the following sentence, a copy of the form of
which has been filed as an exhibit to the Registration Statement. SRAC may
enter into an Indenture with The Chase Manhattan Bank, N.A., as Trustee, or
with one or more other Trustees eligible to act as Trustee under an
Indenture pursuant to the Trust Indenture Act of 1939, as amended (each, a
``Trustee''). The particular Indenture under which any series of Debt
Securities is to be issued, and the identity of the Trustee under such
Indenture, will be identified in the Prospectus Supplement relating to such
series of Debt Securities. The following summaries of certain provisions of
the Debt Securities and the Indenture 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, including the definitions therein of certain
terms. Whenever particular provisions or defined terms in the Indenture are
referred to herein, such provisions or defined terms are incorporated by
reference.
General
The Debt Securities will be unsecured obligations of SRAC.
The Indenture does not limit the amount of Debt Securities that may be
issued thereunder and provides that Debt Securities may be issued
thereunder from time to time in one or more series.
Reference is made to the Prospectus Supplement relating to the particular
series of Offered Debt Securities offered thereby for the following terms
of the Offered Debt Securities: (i) the title of the Offered Debt
Securities; (ii) any limit on the aggregate principal amount of the Offered
Debt Securities; (iii) the date or dates on which the Offered Debt
Securities will mature; (iv) the price (expressed as a percentage of the
aggregate principal amount thereof) at which the Offered Debt Securities
will be issued; (v) the rate or rates (which may be fixed or variable) per
annum at which the Offered Debt Securities will bear interest, if any; (vi)
the date from which such interest, if any, on the Offered Debt Securities
will accrue, the dates on which such interest, if any, will be payable, the
date on which payment of such interest, if any, will commence and the
Regular Record Dates for such Interest Payment Dates, if any; (vii) the
date or dates, if any, after or on which and the price or prices at which
the Offered Debt Securities may, pursuant to any optional or mandatory
redemption, conversion or exchange provisions, be redeemed, converted or
exchanged at the option of SRAC or of the Holder thereof and the other
detailed terms and provisions of such optional or mandatory redemption;
(viii) any subordination provisions; (ix) the dates, if any, on which and
the price or prices at which the Offered Debt Securities will, pursuant to
any mandatory sinking fund provisions, or may, pursuant to any optional
sinking fund provisions, be redeemed by SRAC, and the other detailed terms
and provisions of such sinking fund; (x) if other than the principal amount
thereof, the amount of Offered Debt Securities which shall be payable upon
declaration of acceleration of the Maturity thereof; (xi) the terms of any
warrants attached to the Offered Debt Securities; (xii) the currency or
currencies, including European Currency Units or other composite
currencies, in which Offered Debt Securities may be purchased and in which
principal, premium, if any, and interest, if any, on the Offered Debt
Securities will be payable; (xiii) any index used to determine the amount
of payments of principal, premium, if any, and interest, if any, on the
Offered Debt Securities; (xiv) whether the Offered Debt Securities are
issuable in whole or in part as one or more Global Securities and, in such
case, the name of the Depository for such Global Security or Global
Securities; (xv) the place or places, if other than as set forth in the
Indenture, where the principal, premium, if any, and interest, if any, on
the Offered Debt Securities will be payable; and (xvi) any other terms
relating to the Offered Debt Securities not inconsistent with the Indenture
but which may modify or delete any provision of the Indenture insofar as it
applies to such series; provided that no term thereof shall be modified or
deleted if imposed under the Trust Indenture Act and that any modification
or deletion of the rights, duties or immunities of the Trustee shall have
been consented to in writing by the Trustee.
Principal, premium, if any, and interest, if any, will be payable, and the
Debt Securities (other than Debt Securities represented by Global
Securities) will be transferable, at the office or agency of SRAC
maintained for such purposes in the Borough of Manhattan of The City of New
York, and at such other places, if any, in the city in which the principal
executive offices of SRAC or the city in which the principal corporate
trust office of the Trustee are located, as SRAC may designate, which,
except as otherwise specified in the Prospectus Supplement relating to a
particular series of Offered Debt Securities, will initially include the
principal corporate trust office of the Trustee in the Borough of Manhattan
of The City of New York and the principal executive offices of SRAC in
Greenville, Delaware. Unless other arrangements are made, interest on the
Debt Securities (other than Debt Securities represented by Global
Securities) will be paid by checks mailed to the Holders at their
registered addresses. (Sections 1.1, 2.5, 3.1, 3.2) Information with
respect to payment of principal, premium, if any, and interest, if any, on,
and transfers of beneficial interests in, Debt Securities represented by
Global Securities will be set forth in the Prospectus Supplement relating
thereto.
If the principal, premium, if any, and interest, if any, will be payable in
a currency other than U.S. dollars, including European Currency Units or
another composite currency, and such currency is not available for payment
due to the imposition of exchange controls or other circumstances beyond
the control of SRAC, SRAC shall satisfy its payment obligations in U.S.
dollars on the basis of the Market Exchange Rate for such currency on the
latest date for which such rate was established on or before the date on
which payment is due. (Section 2.12)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Debt Securities will be issued only in fully registered form, without
coupons, in denominations of $1,000 or any integral multiple thereof. No
service charge will be made for any registration of transfer or exchange of
the Offered Debt Securities, but SRAC may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith. (Sections 2.2, 2.5)
Debt Securities may be issued under the Indenture as Original Issue
Discount Securities to be offered and sold at a substantial discount below
their stated principal amount. Federal income tax consequences and other
special considerations applicable to any such Original Issue Discount
Securities will be described in the Prospectus Supplement relating thereto.
``Original Issue Discount Security'' means any security which provides for
an amount less than the principal amount thereof to be due and payable upon
the declaration of acceleration of the Maturity thereof upon the occurrence
of a default and the continuation thereof. (Sections 1.1, 6.1)
Certain Restrictions
The Indenture provides that SRAC will maintain a Fixed Charge Coverage
Ratio for any fiscal quarter of not less than 1.10 and that SRAC will cause
Sears to maintain ownership of all the voting stock of SRAC. ``Fixed Charge
Coverage Ratio'' means SRAC's ratio of earnings to fixed charges determined
in accordance with Item 503(d) of Regulation S-K promulgated by the
Commission, as in effect on the date of the Indenture. Pursuant to a letter
agreement between SRAC and Sears (the ``Fixed Charge Coverage and Ownership
Agreement''), Sears has agreed, for the benefit of holders of outstanding
Debt Securities, that, (i) as long as SRAC is so required to maintain such
Fixed Charge Coverage Ratio, Sears will pay SRAC such amounts which,
together with any other earnings available therefore, are sufficient for
SRAC to maintain such Fixed Charge Coverage Ratio and (ii) as long as SRAC
is so required to cause Sears to maintain such ownership, Sears will
maintain ownership of SRAC. The Indenture provides that SRAC (i) will cause
Sears to observe and perform in all material respects all covenants or
agreements of Sears contained in the Fixed Charge Coverage and Ownership
Agreement and (ii) will not amend, waive, terminate or otherwise modify any
provision of the Fixed Charge Coverage and Ownership Agreement. (Sections
1.1, 3.6) These restrictions would not necessarily prevent a highly
leveraged transaction involving SRAC or Sears. Except as may otherwise be
provided in the accompanying Prospectus Supplement, there are no other
provisions of the Debt Securities which are designed to afford protection
in the event of a highly leveraged transaction involving SRAC or Sears.
Defaults
The following are defaults with respect to any series of Debt Securities:
(a) failure to pay the principal amount (and premium, if any) on such
series when due and payable; (b) failure to pay any interest on such series
when due, continued for 30 days (unless the entire amount of such payment
is deposited by SRAC with the Trustee or with a paying agent prior to the
expiration of 30 days); (c) failure to perform any other covenant of SRAC
in the Indenture (other than a covenant included in the Indenture solely
for the benefit of any series of Debt Securities other than that series),
continued for 60 days after written notice; (d) acceleration of
$100,000,000 or more in principal amount of indebtedness for borrowed money
of SRAC (including acceleration with respect to Debt Securities other than
that series) or Sears under the terms of the instrument under which such
indebtedness is issued or secured (including the Indenture), if such
indebtedness shall not have been discharged or such acceleration is not
annulled within 30 days after written notice or prior to the time principal
owed on the outstanding Debt Securities of that series shall be declared
due and payable, except as a result of compliance with applicable laws,
orders or decrees; and (e) certain events of bankruptcy, insolvency, or
reorganization. In addition, a particular series of Debt Securities may
provide for additional events of default, as may be described in the
Prospectus Supplement. If a default shall occur and be continuing with
respect to any series of Debt Securities, the Trustee or the Holders of a
majority in principal amount of the outstanding Debt Securities of that
series may declare the principal amount of such series (or, if the Debt
Securities of that series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of that
series) due and payable immediately, which declaration may, in certain
instances, be annulled by the Holders of a majority of the principal amount
of outstanding Debt Securities of that series. In the case of such
declaration, there would become due and payable such principal amount plus
any accrued interest or other periodic payments. (Section 6.1)
No Holder of any Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless such Holder previously shall have given to the Trustee
written notice of a default and unless also the Holders of a majority of
the principal amount of outstanding Debt Securities of that series shall
have made written request upon the Trustee, offering reasonable indemnity,
to institute such proceeding as Trustee, and the Trustee shall have
neglected or refused to institute such proceeding within a reasonable time.
However, the right of any Holder of any Debt Security of that series to
enforce the payment of principal and interest on such Debt Security, on or
after the due dates expressed in such Debt Security, may not be impaired or
affected. (Section 6.7)
SRAC is required to furnish annually to the Trustee statements as to the
performance or fulfillment of its covenants, agreements or conditions in
the Indenture and as to the absence of default. (Section 3.4)
Modification or Amendment of the Indenture
Modifications and alterations of the Indenture may be made by SRAC with the
consent of the Holders of a majority of the aggregate principal amount of
the outstanding Debt Securities of each series affected by the modification
or alteration, provided that no such change shall be made without the
consent of the Holders of each Debt Security then outstanding affected
thereby which will (a) permit the extension of the time of payment of any
payment on any such Debt Security, or a reduction in any such payment or
(b) reduce the above-stated percentage of Holders of any series of Debt
Securities whose consent is required to modify or alter the Indenture.
(Article XI)
Defeasance
Unless otherwise provided for in the accompanying Prospectus Supplement,
SRAC may discharge the Indenture with respect to Debt Securities of any
series (except for certain obligations to register the transfer or exchange
of Debt Securities of such series, replace mutilated, destroyed, lost and
stolen Debt Securities of such series, maintain paying agencies and hold
moneys for payment in trust) upon the deposit with the Trustee or a paying
agent, in trust, of (1) money in an amount sufficient, or (2) U.S.
Government Obligations (if the Debt Securities are denominated in U.S.
dollars) or Eligible Obligations (if the Debt Securities are denominated in
a Foreign Currency) which through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an
amount sufficient, or (3) any combination thereof in an amount sufficient,
to pay the principal, premium, if any, and each installment of interest on
the Debt Securities of such series on the dates such payments are due in
accordance with the terms of the Indenture and such Debt Securities. Such a
trust may only be established if, among other things, SRAC has received a
ruling from the Internal Revenue Service or an opinion of recognized
counsel who is not an employee of SRAC, in either case to the effect that,
among other things, the Holders of the Debt Securities of such series will
not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance of the Indenture and will be subject
to federal income tax on the same amount and in the same manner and at the
same times, as would have been the case if such deposit and defeasance had
not occurred. Notwithstanding such deposit, the obligations of SRAC under
the Indenture to pay interest and principal shall remain in full force and
effect until the Debt Securities of such series have been paid in full.
(Section 13.4)
If and when a ruling from the Internal Revenue Service or an opinion of
recognized counsel can be provided without reliance upon the continuation
of SRAC's obligations regarding the payment of interest and principal, then
such obligations of SRAC shall cease upon delivery to the Trustee of such
ruling or opinion and compliance with the other conditions precedent
provided for in the Indenture. Under present ruling positions of the
Internal Revenue Service, such a ruling is not obtainable. (Section 13.4)
Regarding the Trustee
The Chase Manhattan Bank, N.A., which SRAC anticipates will be the Trustee
under an Indenture, performs other services for SRAC.
PLAN OF DISTRIBUTION
General. SRAC may sell Debt Securities to or through underwriters, and
also may sell Debt Securities directly to other purchasers or through
agents. It is anticipated that SRAC will offer Debt Securities directly to
brokers or dealers, investment companies, insurance companies, banks,
savings and loan associations, trust companies or similar institutions, and
trusts for which a bank, savings and loan association, trust company or
investment adviser is the trustee or authorized to make investment
decisions.
The distribution of the Debt Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The
Prospectus Supplement will describe the method of distribution of the
Offered Debt Securities.
In connection with the sale of Debt Securities, underwriters may receive
compensation from SRAC or from purchasers of Debt Securities for whom they
may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Debt 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. Underwriters, dealers and agents that
participate in the distribution of Debt Securities may be deemed to be
underwriters, and any discounts or commissions received by them and any
profit on the resale of Debt Securities by them may be deemed to be
underwriting discounts and commissions, under the Act. Any such underwriter
or agent will be identified, and any such compensation will be described,
in the Prospectus Supplement.
Under agreements which may be entered into by SRAC, underwriters, dealers
and agents who participate in the distribution of Debt Securities may be
entitled to indemnification by SRAC against certain liabilities, including
liabilities under the Act.
Delayed Delivery Arrangements. If so indicated in the Prospectus
Supplement, SRAC will authorize dealers or other persons acting as SRAC
agents to solicit offers by certain institutions to purchase Debt
Securities from SRAC pursuant to contracts providing for payment and
delivery on a future date. Institutions with which such contracts may be
made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and
others, but in all cases such institutions must be approved by SRAC. The
obligations of any purchaser under any such contract will not be subject to
any conditions except that (i) the purchase of the Offered Debt Securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject, and (ii) if the Offered
Debt Securities are also being sold to underwriters, SRAC shall have sold
to such underwriters the Offered Debt Securities not sold for delayed
delivery. The dealers and such other persons will not have any
responsibility in respect of the validity or performance of such contracts.
Deferred Pricing Arrangements. The Prospectus Supplement relating to an
issue of Debt Securities will disclose any deferred pricing arrangement
between SRAC and any entity acting as an underwriter which would permit
SRAC to determine its ultimate cost of funds pertaining to such Debt
Securities at a later date through certain transactions indexed to U.S.
Treasury securities. Any such arrangement would be made pursuant to a
deferred pricing agreement signed simultaneously with the pricing agreement
which supplements the underwriting agreement. The deferred pricing
agreement would contain the formula used to determine any post-closing
purchase price adjustments.
LEGAL OPINION
The legality of the Debt Securities is being passed upon for SRAC by Robert
J. Pence, Senior Counsel, Corporate Law Department, of Sears. At April 15,
1995, Mr. Pence owned 411 Sears common shares, including shares credited to
his account in The Savings and Profit Sharing Fund of Sears Employees as of
March 31, 1995, and had options granted under the Sears employees stock
plans relating to 1,980 shares.
EXPERTS
The financial statements and Summary Financial Information incorporated by
reference and included in this prospectus, respectively, have been audited
by Deloitte & Touche LLP, independent certified public accountants, as
stated in their reports incorporated by reference herein (which reports
express unqualified opinions and, with respect to Sears and consolidated
subsidiaries, includes an explanatory paragraph referring to Sears and
consolidated subsidiaries changing its method of accounting for
postretirement benefits in 1992), and with respect to the Summary Financial
Information has been included as Exhibit 99 to the Registration Statement.
Such financial statements and Summary Financial Information have been
incorporated by reference and included herein, respectively, in the
Registration Statement in reliance upon the reports of such firm and given
upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information which is
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their reports included in the
Quarterly Reports on Form 10-Q for the quarters ended March 31 and April 1,
1995 for SRAC and Sears, respectively and incorporated by reference herein,
they did not audit and they did not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports
on such information should be restricted in light of the limited nature of
the review procedures applied. Deloitte & Touche LLP are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
reports on the unaudited interim financial information because those
reports are not ``reports'' or a ``part'' of the registration statement
prepared or certified by an accountant within the meaning of Sections 7 and
11 of the Act.
Sears Roebuck
Acceptance Corp.
U.S. $2,000,000,000
Medium-Term Notes Series I
PROSPECTUS
SUPPLEMENT
Goldman, Sachs & Co.
Merrill Lynch & Co.
Morgan Stanley & Co.
Incorporated
Salomon Brothers Inc
Sears Roebuck Acceptance Corp.
June 16, 1995
