SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-K
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number 1-4040
SEARS ROEBUCK ACCEPTANCE CORP.
(Exact name of registrant as specified in its charter)
Delaware 51-0080535
(State of Incorporation) (I.R.S. Employer Identification No.)
3711 Kennett Pike, Greenville, Delaware 19807
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 302/888-3114
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements for the past
90 days. Yes X . No .
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
As of February 28, 1995, the Registrant had 350,000 shares of capital stock
outstanding, all of which was held by Sears, Roebuck and Co.
Registrant meets the conditions set forth in General Instruction (J)(1)(a)
and (b) of Form 10-K and is therefore filing this report with a reduced
disclosure format.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
None<PAGE>
PART I
Item 1. Business.
Sears Roebuck Acceptance Corp. ("SRAC") is a wholly-owned
subsidiary of Sears, Roebuck and Co. ("Sears"). 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 uses the funds
obtained from SRAC for general funding purposes.
In 1994, SRAC borrowed $845 million of intermediate-term loans
having original maturities between two and five years. In March 1995, SRAC
filed a registration statement with the Securities and Exchange Commission
for the registration of 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.
In January 1995, Moody's Investors Service raised its ratings on
SRAC's Commercial Paper (to P-1 from P-2). Other ratings for SRAC's
commercial paper are F-1 from Fitch Investors Service, Duff-1 from Duff and
Phelps Credit Rating Co. and A-2 from Standard & Poor's.
In 1994, SRAC took steps to bring its liquidity support and
capital resources into alignment with projected funding requirements.
SRAC's credit facilities, which totalled $4.2 billion at the end of 1993,
were replaced with a syndicated credit agreement totalling $4.5 billion, a
syndicated minority bank credit agreement totalling $32 million and
$600 million of uniform credit agreements with individual banks.
SRAC continues to be a very strongly capitalized company, with
an equity position of $1.2 billion. The company's debt-to-equity ratio was
5.0:1 at the end of 1994 compared to 2.6:1 at the end of 1993.
Pursuant to the syndicated credit agreements between SRAC and
various banks (detailed below in Item 8 "Notes to Financial Statements,
note 5"), the agreement between SRAC and Sears concerning SRAC's investment
in Sears notes may not be amended, waived, terminated or modified (except
that SRAC's fixed charge coverage ratio may be reduced to 1.15) without the
approval of such banks.
From time to time, SRAC acts as placement agent for Sears Credit
Corp. A, Sears Credit Corp. B, Sears Credit Corp. I and Sears Credit Corp.
II (collectively "SCC"), which are wholly-owned subsidiaries of Sears that
issue asset-backed commercial paper ("ABCP"). The ABCP is secured by
investor certificates acquired by SCC, which represent undivided interests
in a trust. The trust holds receivables arising in selected accounts under
Sears open-end credit plans, all payments received on the receivables
including related finance charges, and deposits in certain accounts of the
trust.
At February 28, 1995, SRAC had 11 employees.
Item 2. Properties.
None.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
There is no established public trading market for SRAC's common
stock. As of February 28, 1995, Sears owned all outstanding shares of
SRAC's common stock. The Board of Directors of SRAC declared a
$1.7 billion dividend on December 20, 1993 to Sears, payable on
December 30, 1993. The Board also approved payment to Sears on
December 30, 1993 of $330.2 million out of capital in excess of par value;
such payment is characterized as a dividend under the Delaware General
Corporation Law. Payments for these transactions were effected by reducing
SRAC's investment in the notes of Sears by approximately $2.0 billion.
SRAC does not intend to pay any cash or other dividends on its common stock
in the foreseeable future.
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Financial Condition
SRAC's investment in Sears notes increased to over $6.8 billion
at year-end 1994, from $3.4 billion at the end of 1993, due to increased
funding requirements by Sears. In response to Sears increased funding
requirements, total commercial paper outstandings increased from
$2.5 billion at the beginning of the year to $4.9 billion at the close of
1994. SRAC also borrowed $845 million under 15 privately-placed variable
rate intermediate-term loans with original maturities from two to five
years. At the end of 1994, SRAC maintained a very strong equity position
of $1.2 billion, with a debt-to-equity ratio of 5.0:1.
SRAC had investments in highly liquid short-term securities of
$100.7 million at the end of 1994, as part of its liability management
program. In 1994, SRAC took steps to bring its liquidity support into
alignment with projected funding requirements. SRAC's credit facilities,
which totalled $4.2 billion at the end of 1993, were replaced with a
syndicated credit agreement totalling $4.5 billion, a syndicated minority
bank credit agreement for $32 million and $600 million in uniform credit
agreements with individual banks.
In March 1995, SRAC filed a registration statement with the
Securities and Exchange Commission for the registration of debt securities.
Results of Operations
Under an agreement with Sears, SRAC is presently guaranteed a
rate on the notes of Sears providing a ratio of earnings to fixed charges
of at least 1.25 times. SRAC's total revenues of $282.7 million declined
$54.8 million, or 16%, compared to $337.5 million in 1993, primarily due to
a decrease in the average Customer Receivable Balances purchased from Sears
during 1994. In 1994, SRAC's average cost of short-term funds increased
90 basis points to 4.57% from 3.67% in 1993. Average outstanding short-
term debt of $3,739.7 million declined $581 million compared to
$4,320.7 million in 1993. The 13% decrease in average outstanding debt
during 1994, resulted in a $17.6 million, or 7%, decrease in interest and
related expenses to $218.5 million in 1994 from $236.1 million in 1993. In
1994, SRAC purchased receivables from Sears with recourse, thereby not
requiring a loss provision, compared to the receivables purchased in 1993
without recourse which required a loss provision of $33.8 million. As a
result, total expenses decreased $56.3 million, or 20%, to $220.4 million
from $276.7 million in 1993 and SRAC's 1994 net income increased
$.7 million, or 2%, to $40.2 million from net income of $39.5 million in
1993. In 1993, SRAC's net income decreased 63% from $108.1 million in
1992, primarily due to a reduction in the Sears notes during 1993.
The financial information appearing in this annual report on
Form 10-K is presented in historical dollars which do not reflect the
decline in purchasing power that results from inflation. As is the case
for most financial companies, substantially all of SRAC's assets and
liabilities are monetary in nature. Interest rates on SRAC's combined
investment in Sears notes (set to provide a fixed charge coverage of at
least 1.25 times) and customer receivable balances help insulate SRAC from
the effects of inflation-based interest rate increases.
Item 8. Financial Statements and Supplementary Data.
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF INCOME
Year Ended December 31,
millions 1994 1993 1992
------- ------- -------
Revenues
--------
Earnings on notes of Sears $257.9 $209.1 $508.4
Earnings on receivable balances
purchased from Sears (Note 3) 6.2 105.4 125.3
Earnings on invested cash 18.4 22.6 61.9
Other revenues 0.2 0.4 0.9
------- ------- -------
Total revenues 282.7 337.5 696.5
Expenses
--------
Interest and amortization of
debt discount and expense 218.5 236.1 482.8
Provision for credit losses -- 33.8 44.9
Operating expenses 1.9 6.8 4.6
------- ------- -------
Total expenses 220.4 276.7 532.3
------- ------- -------
Income before income taxes 62.3 60.8 164.2
Income taxes (Note 2) 22.1 21.3 56.1
------- ------- -------
Net Income $40.2 $39.5 $108.1
------- ------- -------
Ratio of earnings to fixed charges 1.29 1.26 1.34
See notes to financial statements.
<PAGE>
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF FINANCIAL POSITION
December 31,
millions 1994 1993
--------- ---------
Assets
------
Notes of Sears $6,842.5 $3,403.9
Customer receivable balances
purchased from Sears (Note 3) 81.5 88.0
Cash and invested cash 102.1 650.7
Other assets 5.1 3.2
--------- ---------
Total assets $7,031.2 $4,145.8
--------- ---------
Liabilities
-----------
Commercial paper (net of unamortized
discount of $22.3 and $5.1) $4,912.9 $2,475.0
Agreements with bank trust departments 87.4 139.8
Zero coupon note - 379.8
Intermediate-term loans 845.0 -
Accrued interest and other liabilities 8.2 10.7
Deferred federal income taxes - 3.0
--------- ---------
Total liabilities 5,853.5 3,008.3
--------- ---------
Stockholder's Equity
--------------------
Capital stock, par value $100 per share
500,000 shares authorized
350,000 shares issued and outstanding 35.0 35.0
Capital in excess of par value - -
Retained income 1,142.7 1,102.5
--------- ---------
Total stockholder's equity 1,177.7 1,137.5
--------- ---------
Total liabilities and
stockholder's equity $7,031.2 $4,145.8
--------- ---------
See notes to financial statements.
<PAGE>
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF STOCKHOLDER'S EQUITY
Year Ended December 31,
millions 1994 1993 1992
-------- -------- --------
Capital stock $35.0 $35.0 $35.0
-------- -------- --------
Capital in excess of par value
Beginning of year - $330.2 $330.2
Return of capital paid to Sears* - (330.2) -
-------- -------- --------
End of year $- $- $330.2
-------- -------- --------
Retained income
Beginning of year $1,102.5 $2,763.0 $2,654.9
Net income 40.2 39.5 108.1
Dividend paid to Sears - (1,700.0) -
-------- -------- --------
End of year $1,142.7 $1,102.5 $2,763.0
-------- -------- --------
Total stockholder's equity $1,177.7 $1,137.5 $3,128.2
-------- -------- --------
* characterized as a dividend under Delaware General Corporation Law.
See notes to financial statements.
<PAGE>
SEARS ROEBUCK ACCEPTANCE CORP.
STATEMENTS OF CASH FLOWS Year Ended December 31,
millions 1994 1993 1992
-------- -------- --------
Cash Flows From Operating Activities
------------------------------------
Net income $40.2 $39.5 $108.1
Adjustments to reconcile net income to net
cash provided by operating activities
Earnings amortization on Retail Customer
Receivable Balances discount - (125.9) (149.2)
Provision for credit losses - 33.8 44.9
Depreciation, amortization and
other noncash items 20.9 58.7 55.3
Decrease in deferred federal income taxes (3.0) (7.1) (5.9)
Increase in other assets (2.6) (2.5) (1.0)
Decrease in other liabilities (2.5) (20.9) (5.4)
-------- -------- --------
Net cash provided by (used in)
operating activities 53.0 (24.4) 46.8
Cash Flows From Investing Activities
------------------------------------
(Increase) decrease in notes of Sears (3,438.6) 5,059.5 1,720.9
Decrease in receivable
balances purchased from Sears 6.5 967.5 183.7
-------- -------- --------
Net cash (used in) provided by
investing activities (3,432.1) 6,027.0 1,904.6
Cash Flows From Financing Activities
------------------------------------
Increase (decrease) in commercial paper,
primarily 90 days or less 2,437.9 (6,040.3) (1,690.5)
Decrease in agreements with bank
trust departments (52.4) (258.1) (112.2)
Payments for redemption of zero coupon
and variable interest notes (400.0) - (604.0)
Proceeds from issuance of
intermediate-term loans 845.0 - -
-------- -------- --------
Net cash provided by (used in)
financing activities 2,830.5 (6,298.4) (2,406.7)
-------- -------- --------
Net decrease in cash and invested cash (548.6) (295.8) (455.3)
Cash and invested cash, beginning of year 650.7 946.5 1,401.8
-------- -------- --------
Cash and invested cash, end of year $102.1 $650.7 $946.5
-------- -------- --------
Supplemental Disclosure of Cash Flow Information
Cash paid during the year
Interest $231.1 $200.5 $444.1
Income taxes 21.7 37.1 61.0
See notes to financial statements.<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Sears Roebuck Acceptance Corp. ("SRAC"), a wholly-owned subsidiary of
Sears, Roebuck and Co. ("Sears"), is principally engaged in the business of
acquiring short-term notes of Sears and purchasing outstanding customer
receivable balances from Sears, using proceeds from its short-term
borrowing programs (primarily the direct placement of commercial paper) and
intermediate-term loans.
Under the letter agreement between SRAC and Sears, the interest rate on the
Sears notes is presently calculated so that SRAC maintains an earnings to
fixed charge ratio of at least 1.25 times.
Cash and invested cash is defined to include all highly liquid investments
with maturities of three months or less. In 1993 a $2.0 billion dividend
and return of capital paid to Sears was effected through a reduction in
SRAC's investment in Sears notes, a noncash transaction.
Customer receivables purchased from Sears are either purchased at a
discount and then amortized using the interest method, or purchased at par
and are interest-bearing.
The zero coupon note issued to Sears Overseas Finance N.V. ("SOFNV"), a
wholly-owned international finance subsidiary of Sears, was amortized using
the interest method. Other debt discount and issue expenses are amortized
on a straight-line basis over the terms of the related obligation.
The results of operations of SRAC are included in the consolidated federal
income tax return of Sears. Tax liabilities and benefits are allocated as
generated by SRAC, whether or not such benefits would be currently
available on a separate return basis.
Effective January 1, 1992, SRAC adopted Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions," and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." The adoption of the standards did not have a
material impact on the financial statements of SRAC, and will have no
effect on the future cash flows of the Company.
<PAGE>
2. FEDERAL INCOME TAXES
Year Ended December 31,
millions 1994 1993 1992
------- ------- -------
Current $25.5 $28.4 $62.0
Deferred (3.4) (7.1) (5.9)
------- ------- -------
Financial statement income tax provision $22.1 $21.3 $56.1
------- ------- -------
Effective income tax rates 35% 35% 34%
3. CUSTOMER RECEIVABLE BALANCES
SRAC has purchased two types of customer receivable balances ("CRB") from
Sears, merchant ("MCRB") and retail ("RCRB"). MCRB are purchased with
recourse at par, with SRAC earning interest on the receivables. RCRB
(excluding related finance charges) were purchased without recourse and at
a discount (which included an allowance for uncollectible accounts).
MCRB are made up of credit accounts Sears has established with merchants
and contractors for bulk purchases from Sears. The MCRB's are
predominately paid within 30 days. RCRB were made up of accounts under
Sears open-end credit plans related to the purchase of goods and services
at Sears. In administering sold receivables, Sears utilizes procedures
with respect to collections, charge-offs and other matters identical to
those employed in administering account balances which had not been
purchased by SRAC. The MCRB purchased were negotiated between related
parties; accordingly, the fair value of this instrument is not provided.
In December 1993, SRAC sold to Sears the entire outstanding RCRB at net
book value of $847.6 million. SRAC received the collections and accepted
the net charge-offs (collectively referred to as liquidations) related to
the RCRB and paid Sears a fee for administering the accounts. The
administrative fee paid to Sears in 1993 was $20.5 million.
Each month, SRAC purchases the balance increases in the MCRB accounts
attributable to additional credit sales and receives the collections
related to the previously purchased balances. Sears will pay interest to
SRAC on the balances in these accounts at a rate equivalent to the prime
rate.
<PAGE>
4. BORROWINGS
SRAC obtains funds through the direct placement of commercial paper (issued
in maturities of one to 270 days) and borrowings under agreements with bank
trust departments and private institutions (intermediate-term loans).
Selected details of SRAC's borrowings are shown below. Weighted interest
rates are based on the actual number of days in the year and borrowings net
of unamortized discount.
The short-term and/or variable interest rate nature of substantially all of
SRAC's financial instruments (both assets and liabilities) causes their
carrying value to approximate fair value. The terms of the loan agreement
with SOFNV was negotiated between related parties; accordingly, the fair
value of this instrument is not provided.
December 31,
millions 1994 1993
-------- --------
Commercial paper outstanding $4,935.2 $2,480.1
Less: Unamortized discount 22.3 5.1
-------- --------
Commercial paper outstanding (net) 4,912.9 2,475.0
Agreements with bank trust departments 87.4 139.8
Intermediate-term loans 845.0 -
Zero coupon, $400 million face value loan
agreement with SOFNV due May 26, 1994 - 379.8
-------- --------
Total borrowings $5,845.3 $2,994.6
-------- --------
Commercial Paper and Agreements with Bank Trust Departments
Average and Maximum Balances During the Year
1994 1993
------------------- -------------------
Maximum Maximum
millions Average (month-end) Average (month-end)
------------------- -------------------
Commercial paper $3,615.3 $4,912.9 $3,812.1 $ 7,271.1
Agreements with bank trust dept. 124.4 142.2 401.8 499.1
------------------- -------------------
Weighted Interest Rates 1994 1993
------------------- -------------------
millions Average Year-End Average Year-End
------------------- -------------------
Commercial paper 4.58% 5.82% 3.64% 3.51%
Agreements with bank trust dept. 4.38% 6.06% 3.38% 3.30%
------------------- -------------------
Under the terms of a 1986 agreement, Sears agreed to make all payments
required to be made by SRAC to SOFNV in accordance with certain loan
agreements between SRAC and SOFNV. SRAC remains liable to SOFNV for such
loan agreements, which total $302 million as of December 31, 1994.
SRAC's intermediate-term loans were as follows at December 31, 1994:
Term (millions)
-------------------------------------------------------------------
Two year loans expiring in 1996 $200
Three year loans expiring in 1997 320
Five year loans expiring in 1999 325
-------------------------------------------------------------------
Total loans $845
===================================================================
The rates on most of these variable rate intermediate-term loans are set
periodically at Libor plus a set basis point spread. The average rate on
the intermediate-term loans in 1994 was 5.41%.
5. CREDIT FACILITIES AS OF DECEMBER 31, 1994
Contractual Credit Facilities:
Expiration Date (millions)
--------------------------------------------------------------------
June 1999 $4,500
September 1995 200
October 1995 32
December 1995 400
-------------------------------------------------------------------
Total credit facilities $5,132
===================================================================
Commitment fees are paid on the unused portions of the above credit
facilities. The annualized fees at December 31, 1994 on these lines were
$6.1 million.
6. LETTER OF CREDIT COMMITMENTS
SRAC issues letters of credit at Sears request to facilitate Sears purchase
of goods from foreign suppliers. At December 31, 1994, letters of credit
totaling $119.0 million were outstanding. SRAC has no liabilities with
respect to this program other than the obligation to pay drafts under the
letters of credit which, if not reimbursed by Sears on the day of the
disbursement, are automatically converted into demand borrowings by Sears
from SRAC. To date, all SRAC disbursements have been reimbursed on a same-
day basis.
SRAC issues standby letters of credit on behalf of its affiliate, Western
Auto Supply Company ("Western Auto"), which are used by Western Auto to
secure its obligation to repurchase any defaulted accounts receivable sold
to a financial institution. At December 31, 1994, a $49.0 million standby
letter of credit was outstanding.
<PAGE>
7. QUARTERLY FINANCIAL DATA (UNAUDITED)
For the quarter ended March 31, June 30, September 30, December 31,
1994 1993 1994 1993 1994 1993 1994 1993
------------- ------------ ------------- ------------
Operating Results (millions)
Combined earnings from
Sears notes and CRB $47.6 $123.7 $53.9 $73.6 $72.3 $63.4 $90.3 $87.6
Total Revenues 51.1 133.2 57.1 79.0 76.3 67.0 98.2 92.1
Interest & related
expenses 40.3 96.7 45.2 54.7 55.0 44.9 78.0 39.8
Total expenses 41.1 107.7 45.7 65.0 55.8 55.7 77.8 48.3
Income before
income taxes 10.0 25.5 11.4 14.0 20.5 11.3 20.4 10.0
Net income 6.4 16.8 7.3 9.3 13.1 6.6 13.4 6.8
Ratio of earnings to
fixed charges 1.25 1.26 1.25 1.26 1.37 1.25 1.26 1.25
Averages (billions)
Earning assets* $4.5 $11.3 $4.8 $7.4 $5.4 $6.2 $6.7 $6.6
Short-term debt 3.0 7.8 3.2 3.9 4.0 2.7 4.7 3.0
Cost of
short-term debt 3.45% 3.98% 4.11% 3.57% 4.68% 3.31% 5.45% 3.33%
* Notes and receivable balances of Sears and invested cash.
Certain reclassifications have been made to the quarterly data from the
classification used in reporting such data in Form 10-Q, which primarily relate
to the presentation of the provision for credit losses.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
Not applicable.
Item 11. Executive Compensation.
Not applicable.
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
Not applicable.
Item 13. Certain Relationships and Related Transactions.
Not applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as a part of this report:
1. An "Index to Financial Statements" has been filed as a
part of this report on page S-1 hereof.
2. No financial statement schedules are included herein
because they are not required or because the
information is contained in the financial statements
and notes thereto, as noted in the "Index to Financial
Statements" filed as part of this report.
3. An "Exhibit Index" has been filed as part of this
report beginning on page E-1 hereof.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the
fourth quarter of 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SEARS ROEBUCK ACCEPTANCE CORP.
(Registrant)
By Stephen D. Carp*
Vice President, Finance
and Assistant Secretary
March 27, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the date indicated.
Signature Title Date
Keith E. Trost Director and President )
(Principal Executive )
Officer) )
)
)
Stephen D. Carp* Vice President, Finance ) March 27, 1995
and Assistant Secretary )
(Principal Financial and )
Accounting Officer) )
)
)
James A. Blanda* Director )
)
)
James D. Constantine* Director )
)
)
Alan J. Lacy* Director )
)
)
Alice M. Peterson* Director )
)
)
Larry R. Raymond* Director )
)
)
George F. Slook* Director )
*By \s\ Stephen D. Carp Individually and as Attorney-in-Fact
SEARS ROEBUCK ACCEPTANCE CORP.
INDEX TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
PAGE
STATEMENTS OF INCOME 5
STATEMENTS OF FINANCIAL POSITION 6
STATEMENTS OF STOCKHOLDER'S EQUITY 7
STATEMENTS OF CASH FLOWS 8
NOTES TO FINANCIAL STATEMENTS 9-13
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS S-2
S-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholder and Board of Directors
of Sears Roebuck Acceptance Corp.:
We have audited the accompanying Statements of Financial Position of Sears
Roebuck Acceptance Corp. (a wholly-owned subsidiary of Sears, Roebuck and
Co.) as of December 31, 1994 and 1993, and the related Statements of
Income, Stockholder's Equity, and Cash Flows for each of the three years in
the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Sears Roebuck Acceptance Corp. as of
December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
January 26, 1995
S-2
<PAGE>
EXHIBIT INDEX
3(a) Certificate of Incorporation of the Registrant,
as in effect at November 13, 1987 [Incorporated
by reference to Exhibit 28(c) to the Registrant's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1987*].
3(b) By-laws of the Registrant, as in effect at March 24,
1995.**
4(a)(1) Form of Series A-B Note [Incorporated by reference to
Exhibit 4(a)(1) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1982*].
4(a)(2) Form of letter agreement relating to Series A-B
Note [Incorporated by reference to Exhibit 4(a)(2) to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1982*].
4(b) $4,500,000,000 Credit Agreement dated as of June 7, 1994
among SRAC, the Banks listed therein and Morgan
Guaranty Trust Company of New York, as Agent [Incorporated
by reference on Form 8-K of the Registrant for
June 7, 1994*]
4(c) Form of Sears Roebuck Acceptance Corp.
Investment Note Agreement. [Incorporated by
reference to Exhibit 4(c) to Annual Report on
Form 10-K of the Registrant for the year
ended December 31, 1992*]
4(d) The Registrant hereby agrees to furnish the
Commission, upon request, with each instrument
defining the rights of holders of long-term debt
of the Registrant with respect to which the total
amount of securities authorized does not exceed
10% of the total assets of the Registrant.
10(a) Letter Agreement dated as of October 17, 1991
between Sears Roebuck Acceptance Corp. and
Sears, Roebuck and Co. [Incorporated by
reference to Exhibit 10 to the Registrant's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1991*].
________________________________
* SEC File No. 1-4040.
** Filed herewith.
E-1 EXHIBIT INDEX (cont'd)
10(b) Letter Agreement dated as of September 2, 1986
between Sears Roebuck Acceptance Corp. and Sears,
Roebuck and Co. [Incorporated by reference to
Exhibit 10 to the Registrant's Current Report on
Form 8-K dated September 2, 1986*].
10(c)(1) Agreement to Issue Letters of Credit dated December
3, 1985 between Sears, Roebuck and Co. and
Sears Roebuck Acceptance Corp. [Incorporated by
reference to Exhibit 10(i)(1) to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1987*].
10(c)(2) Letter Agreement dated March 11, 1986 amending
Agreement to issue Letters of Credit dated
December 3, 1985 [Incorporated by reference to
Exhibit 10(i)(2) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1987*].
10(c)(3) Letter Agreement dated November 26, 1986 amending
Agreement to Issue Letters of Credit dated December
3, 1985 [Incorporated by reference to Exhibit
10(i)(3) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1987*].
12 Calculation of ratio of earnings to fixed charges.**
24 Power of attorney.**
________________________________
* SEC File No. 1-4040.
** Filed herewith.
E-2
Exhibit 12
SEARS ROEBUCK ACCEPTANCE CORP.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended December 31, 1994 1993 1992
(dollars in millions)
INCOME BEFORE INCOME TAXES $ 62.3 $ 60.8 $ 164.2
PLUS FIXED CHARGES:
Interest 190.5 177.6 427.6
Amortization of debt
discount and expense 28.0 58.5 55.2
------- ------- -------
TOTAL FIXED CHARGES 218.5 236.1 482.8
------- ------- -------
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES $ 280.8 $ 296.9 $ 647.0
======= ======= =======
RATIO OF EARNINGS TO FIXED
CHARGES 1.29 1.26 1.34
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a
director or officer, or both, of SEARS ROEBUCK ACCEPTANCE CORP., a Delaware
corporation (the "Corporation"), does hereby constitute and appoint JAMES
A. BLANDA, RICHARD F. KOTZ, KEITH E. TROST, GEORGE F. SLOOK, STEPHEN D.
CARP and NANCY HOUGHTON-LYNCH, with full power to each of them to act
alone, as the true and lawful attorneys and agents of the undersigned, with
full power of substitution and resubstitution to each of said attorneys, to
execute, file and deliver any and all instruments and to do any and all
acts and things which said to attorneys and agents, or any of them, deem
advisable to enable the Corporation to comply with the Securities Exchange
Act of 1934, as amended, and any requirements of the Securities and
Exchange Commission in respect thereto, relating to annual reports on Form
10-K, including specifically, but without limitation of the general
authority hereby granted, the power and authority to sign his name in the
name and on behalf of the Corporation or as director or officer, or both,
of the Corporation, as indicated below opposite his signature, to annual
reports on Form 10-K or any amendment or papers supplemental thereto; and
each of the undersigned does hereby fully ratify and confirm all that said
attorneys and agents, or any of them, or the substitute of any of them,
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed these presents,
as of this 24th day of March, 1995.
NAME TITLE
/s/ Keith E. Trost Director and President
(Principal Executive Officer)
/s/ Stephen D. Carp Vice President, Finance
and Assistant Secretary
(Principal Financial
and Accounting Officer)
/s/ James A. Blanda Director
/s/ James D. Constantine Director
/s/ Alan J. Lacy Director
/s/ Alice M. Peterson Director
/s/ Larry R. Raymond Director
/s/ George F. Slook Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 102,100,000
<SECURITIES> 0
<RECEIVABLES> 6,924,000,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,031,200,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,031,200,000
<CURRENT-LIABILITIES> 5,008,500,000
<BONDS> 0
<COMMON> 35,000,000
0
0
<OTHER-SE> 1,142,700,000
<TOTAL-LIABILITY-AND-EQUITY> 7,031,200,000
<SALES> 0
<TOTAL-REVENUES> 282,700,000
<CGS> 0
<TOTAL-COSTS> 220,400,000
<OTHER-EXPENSES> 1,900,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 218,500,000
<INCOME-PRETAX> 62,300,000
<INCOME-TAX> 22,100,000
<INCOME-CONTINUING> 40,200,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,200,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
ANNEX A
Effective March 24, 1995
SEARS ROEBUCK
ACCEPTANCE CORP.
BY-LAWS
ARTICLE I
OFFICES
Section 1. The corporation may have offices at such places
within the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders shall be held
at the office of the corporation in Wilmington, Delaware, or at
such other place within or without the State of Delaware and the
United States of America as shall be designated in the notice of
the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings of Stockholders for the election
of Directors and for transaction of such other business as may
properly be brought before the meeting shall be held on the
second Monday of May in each year if not a legal holiday, and if
a legal holiday, then on the next secular day following at 10:00
A.M., or at such time and on such other date as the Board of
Directors shall each year fix.
Section 3. Special Meetings of the Stockholders, for any
purpose or purposes, may be called to be held at any time by a
majority of the members of the Board of Directors then in office,
or at the request in writing, addressed to the President or the
Secretary, of stockholders owning a majority in amount of the
entire capital stock of the corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 4. Written notice of the time and place of each
Annual Meeting of Stockholders, and of the time, place and
purpose or purposes of each Special Meeting of Stockholders,
shall be given by the Secretary, either personally or by mail, to
each stockholder entitled to vote at such meeting, not less than
ten nor more than sixty days before the date of such meeting,
except when otherwise required by law. If mailed, the notice
shall be addressed to each stockholder entitled to vote at such
meeting at his address.
Section 5. Business transacted at all Special Meetings
shall be confined to the objects stated in the call.
Section 6. The holders of a majority of the total number of
outstanding shares of the stock of the corporation entitled to
vote, present in person or represented by proxy, shall constitute
a quorum at all meetings of the stockholders for the transaction
of business. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders
entitled to vote, present in person or represented by proxy,
shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a
quorum shall be present or represented. At any adjourned meeting
at which a quorum is present or represented, any business may be
transacted that might have been transacted at the meeting as
originally convened.
Section 7. If a quorum is present at any meeting of
stockholders, the vote of the holders of a majority of the stock
then outstanding and entitled to vote present in person or
represented by proxy shall be sufficient for the transaction of
any business, unless otherwise provided by law.
Section 8. At each meeting of the stockholders, each
stockholder having the right to vote shall be entitled to vote in
person, or by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than
three years prior to said meeting, unless said instrument
provides for a longer period. At all elections of directors of
the corporation, each stockholder shall be entitled to as many
votes as shall equal the number of votes which (except for such
provision as to cumulative voting) he would be entitled to cast
for the election of directors with respect to his shares of stock
multiplied by the number of directors to be elected, and he may
cast all of such votes for a single director or may distribute
them among the number to be voted for, or for any two or more of
them as he may see fit.
Section 9. Whenever the vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with
any corporate action by any provisions of the statutes or of the
certificate of incorporation or of these By-Laws, the meeting and
vote of stockholders may be dispensed with, if all the
stockholders who would have been entitled to vote upon the action
if such meeting were held, shall consent in writing to such
corporate action being taken.
ARTICLE III
DIRECTORS
Section 1. The business, property and officers of the
Company shall be managed and controlled by a Board of Directors.
The number of directors of the Company shall be fixed and may
from time to time be increased or decreased by the Board of
Directors or the stockholders but in no event shall the number of
directors be less than five or more than twelve. The directors
shall be elected at the Annual Meeting of the Stockholders,
except as provided in Section 2 of this Article, and each
director elected shall hold office until his successor shall be
elected and shall qualify. Directors may be removed at any time
by the vote of the holders of a majority of the stock then
outstanding and entitled to vote. Directors need not be
stockholders.
Section 2. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office,
though less than a quorum, or by the stockholders, and the
directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall
qualify, unless sooner displaced.
Section 3. Any director may resign at any time by giving
written notice to the President or to the Secretary of the
Company. Such resignation shall take effect at the date of
receipt of such notice or at any later time specified therein;
and, unless otherwise specified therein, the acceptance of such
resignation by the Board of Directors shall not be necessary to
make it effective.
MEETINGS OF THE BOARD
Section 4. The Board of Directors may hold its meetings,
both regular and special, either within or without the State of Delaware, as
the Board of Directors may from time to time determine.
Section 5. A meeting of the Board of Directors to be known
as the annual meeting of the Board of Directors shall be held
following the meeting of the stockholder at which such Board of
Directors is elected, at the same place as the annual meeting of
the stockholder is held or as shall otherwise be fixed by the
Board of Directors, for the purpose of electing the officers of
the Corporation and the standing committees of the Board of
Directors, and of transacting such other business as may properly
come before the meeting. It shall not be necessary to give
notice of this meeting.
Section 6. Regular meetings of the Board of Directors may
be held without notice at such time and place as shall from time
to time be determined by the board.
Section 7. Special meetings of the Board of Directors may
be called by the President or Secretary on the written request of
two directors. Written notice of special meetings of the Board
of Directors shall be given to each director at least two days
before the date of the meeting.
Section 8. At all meetings of the Board of Directors, the
presence of a majority of all directors in office at the time
shall constitute a quorum for the transaction of business and the
action of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of
Directors. If a quorum is not present at any meeting of the
Board of Directors, a majority of the directors present may
adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 9. Any action that may be taken at a meeting of the
Board of Directors or of any committee thereof, may be taken as
follows: (i) without a meeting if all members of the Board or of
a committee of the Board, as the case may be, consent thereto in
writing; or (ii) by means of a telephone conference or similar
communications equipment by which all persons participating in
the meeting can hear each other -- provided a majority of such
members consent in writing to the recording of such
communications in the corporate records -- in which case such
participation shall constitute presence in person at a meeting.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing
and delivered personally or mailed to the directors or
stockholders at their addresses appearing on the books of the
corporation. Notice by mail shall be deemed to be given at the
time when the same shall be mailed. Notice to directors may also
be given by telegram.
Section 2. Whenever any notice is required to be given
under the provisions of the statutes or of the certificate of
incorporation, or of these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. Officers. The officers of the corporation shall
be elected by the Board of Directors at the annual meeting and
shall consist of a President, a Vice President, Finance, one or
more additional Vice Presidents, a Secretary, and one or more
Assistant Secretaries. Any number of offices may be held by the
same person, unless the Certificate of Incorporation or these By-
Laws otherwise provide. The Board of Directors may appoint such
other officers or agents as it shall deem necessary, who shall
hold their offices for such terms and shall exercise such powers
and perform such duties as shall be determined from time to time
by the Board.
Section 2. The Board of Directors, at its first meeting
after each annual meeting of stockholders, shall choose the
officers of the Corporation.
Section 3. The Board of Directors may appoint such other
officers and agents as it shall deem necessary, who shall hold
their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by
the board.
Section 4. The officers of the corporation shall hold
office until their successors are chosen and qualify in their
stead. Any officer elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a
majority of the whole Board of Directors. If the office of any
officer becomes vacant for any reason, the vacancy shall be
filled by the Board of Directors.
PRESIDENT
Section 5. The President shall be elected from among the
directors and shall be the chief executive officer of the
corporation. He shall preside at meetings of the Board of
Directors. He shall have general and active management of the
business of the corporation, and shall see that all orders and
resolutions of the Board of Directors are carried into effect.
Section 6. He shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation,
except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some
other officer or agent of the corporation.
VICE PRESIDENTS
Section 7. The Vice Presidents shall perform such duties
as the Board of Directors shall prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 8. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and
record all votes and the minutes of all proceedings in a book to
be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be
given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall keep in
safe custody the seal of the corporation and, when authorized by
the Board of Directors, affix the same to any instrument
requiring it and, when so affixed, it shall be attested by his
signature or by the signature of an Assistant Secretary.
Section 9. The Assistant Secretaries in order of their
seniority shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and
shall perform such other duties as the Board of Directors shall
prescribe.
THE VICE PRESIDENT, FINANCE
Section 10. The Vice President, Finance shall have the
custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books
belonging to the corporation and shall deposit all moneys and
other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the
Board of Directors.
Section 11. He shall disburse the funds of the corporation
as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the
President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his
transactions as Vice President, Finance and of the financial
condition of the corporation.
Section 12. If required by the Board of Directors, he shall
give the corporation a bond (which shall be renewed every six
years) in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration
to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his
control belonging to the corporation.
Section 13. He shall have general charge, control and
supervision over the accounting and auditing affairs of the
corporation. He shall have the responsibility for the
preparation and maintenance of the books of account (but shall
not have access to make direct entries to these books) and of the
accounting records and papers of the corporation; shall have
responsibility for the custody and safekeeping of all permanent
records and papers of the corporation; shall supervise the
preparation of all financial statements and reports on the
operation and condition of the business; shall have
responsibility for the establishment of financial procedures,
records, and forms used by the corporation; shall have
responsibility for the filing of all financial and tax reports
and returns required by law; shall render to the President, Vice
President, or the Board of Directors, whenever they may require,
an account of his transactions as Vice President, Finance; and in
general shall have such other powers and perform such other
duties as are incident to the office of a treasurer and a
controller and as from time to time may be prescribed by the
Board of Directors or the President.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall
be entitled to have a certificate, signed by, or in the name of
the corporation by, the President or a Vice President and the
Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by him in the corporation.
If the corporation shall be authorized to issue more than one
class of stock, the designations, preferences and relative,
participating, optional or other special rights of each class and
the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the
corporation shall issue to represent such class of stock.
Section 2. Where a certificate is signed (1) by a transfer
agent or an assistant transfer agent or (2) by a transfer clerk
acting on behalf of the corporation and a registrar, the
signature of any such President, Vice President, Secretary or
Assistant Secretary may be facsimile. In case any officer or
officers who have signed, or whose facsimile signature or
signatures have been used on any such certificate or certificates
shall cease to be such officer or officers of the corporation,
whether because of death, resignation or otherwise, before such
certificate or certificates have been delivered by the
corporation, such certificate or certificates may nevertheless be
adopted by the corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates
or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation.
TRANSFERS OF STOCK
Section 3. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction
upon its books.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of
incorporation, if any, may be declared by the Board of Directors
at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of
incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends
such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such
reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each
Annual Meeting and when called for by vote of the stockholders at
any Special Meeting of the Stockholders, a full and clear
statement of the business and condition of the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time
to time designate.
FISCAL YEAR
Section 5. The fiscal year of the Company shall begin on
the first day of January of each year and shall end on the 31st
day of December of the same year.
ARTICLE VIII
AMENDMENTS
Section 1. These By-Laws may be altered or repealed at any
regular meeting of the stockholders or of the Board of Directors
or at any Special Meeting of the Stockholders or of the Board of
Directors if notice of such alteration or repeal be contained in
the notice of such Special Meeting. No change of the time or
place of the meeting for the election of directors shall be made
within sixty days next before the day on which such meeting is to
be held, and in case of any change of such time or place, notice
thereof shall be given to each stockholder in person or by letter
mailed to his last known post office address at least twenty days
before the meeting is held.
ARTICLE IX
COMMITTEES
Section 1. The Board of Directors, at its annual meeting
shall, or any adjournment thereof, shall elect from among its
members, by the vote of a majority of its members, an Executive
Committee and an Audit Committee, which shall be the standing
committees of the corporation. The Board of Directors also shall
designate the chairman of each such committee.
The Board of Directors, by the vote of a majority of its
members, may remove the chairman or any member of any committee,
and may fill from among the directors vacancies in any committee
caused by the death, resignation, or removal of any person
elected thereto.
Each standing committee may determine its own rules of
procedure, consistent with these By-Laws. Meetings of any
standing committee may be called upon direction of the President,
or the chairman of the committee. Written or telegraphic notice
of each meeting, except meetings of the Executive Committee,
shall be given to each member of the committee, by personal
delivery, or by mail or telegram addressed to him at his usual
business address, at least three days (excluding Saturdays,
Sundays, and holidays) prior to the meeting in case of notice by
mail, and at least two days (excluding Saturdays, Sundays, and
holidays) prior to the meeting in case of notice by telegram or
by personal delivery. Notice of each meeting of the Executive
Committee shall be given to each member of that committee, by
personal delivery, or by telephone, or by mail or telegram
addressed to him at his usual business address, at least twenty-
four hours prior to the meeting in the case of notice by
telephone, telegram, or personal delivery, and at least two days
(excluding Saturdays, Sundays, and holidays) prior to the meeting
in case of notice by mail. All notices which are mailed shall be
deemed to have been given when deposited in the United States
mail, postage prepaid. Notice of meetings of any standing
committee may be waived by any member of the committee. At
meetings of each standing committee, the presence of a majority
of the members of such committee shall be necessary to constitute
a quorum for the transaction of business, and, if a quorum is
present at any meeting, the action taken by a majority of the
members present shall be the act of the committee. Each standing
committee shall keep a record of its acts and proceedings - and
all action shall be reported to the Board of Directors at the
next meeting of the Board of Directors following such action.
EXECUTIVE COMMITTEE
Section 2. The Executive Committee shall consist of not
less than three members, including the President, as from time to
time shall be prescribed by the Board of Directors and shall hold
office until their respective successors are elected.
The Executive Committee, unless otherwise provided by
resolution of the Board of Directors, shall have and may
exercise, during the time between meetings of the Board of
Directors, all the powers and perform all the duties of the Board
of Directors except that said Committee shall have no authority
as to the following matters: (i) the submission to shareholders
of any action that needs shareholders' authorization under the
Delaware General Business Corporation Act; (ii) the amendment or
repeal of these By-Laws or the adoption of new By-Laws; (iii) the
amendment or repeal of any resolution of the Board of Directors
which by its terms shall not be so amendable or repealable; (iv)
action in respect of dividends to shareholders; (v) election of
officers or the designation of members of committees of the Board
of Directors or the filling of vacancies in the Board of
Directors or in any committee of the Board of Directors; and (vi)
any action which the President shall by written instrument filed
with the Secretary designate as a matter which should be
considered by the Board of Directors. Action taken by the
Executive Committee shall be subject to revision or alteration by
the Board of Directors, provided that rights or acts of third
parties vested or taken in reliance on such action prior to any
such revision or alteration shall not be adversely affected by
such revision or alteration.
The secretary of the corporation or in his absence any
person as may be designated by the Chairman of the Executive
Committee, shall act as secretary of the Executive Committee and
keep the minutes of all meetings.
AUDIT COMMITTEE
Section 3. The Audit Committee shall consist of not less
than two directors who are not engaged in the day to day
operations of the corporation, as from time to time shall be
prescribed by the Board of Directors, who shall hold office until
their respective successors are elected.
The Audit Committee shall report to the Board of Directors
annually the independent public accountants that it recommends
the Board appoint to audit the books, records, and accounts of
the corporation and to perform such other duties as the Board of
Directors may from time to time prescribe. The Committee shall
review all recommendations made by the corporation's independent
public accountants to the Board of Directors with respect to the
accounting methods used, the system of internal control followed
by the corporation and in connection with non-audit services, and
shall advise the Board of Directors with respect thereto. The
Committee shall also have authority to examine into and make
recommendations to the Board of Directors with respect to the
scope of the audit conducted by the corporation's independent
public accountants and with respect to non-audit services.
The Audit Committee shall review the audit plans and results
of the Corporation's internal audit function and shall report to
the Board of Directors with respect thereto.
