THIS PROSPECTUS AND PROSPECTUS
SUPPLEMENT, DATED NOVEMBER 19, 1996
FILED PURSUANT TO RULE 424(b)(5),
RELATES TO RESGISTRATION STATEMENT
NO. 33-64215.
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 19, 1996
$300,000,000
Sears Roebuck Acceptance Corp.
6.70% Notes due November 15, 2006
Interest on the Notes is payable on May 15 and November 15 of each year,
commencing May 15, 1997. The Notes are not redeemable prior to maturity. The
Notes will be issued only in registered form in denominations of $1,000 and
integral multiples thereof. See ''Description of 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 OR THE PROSPECTUS
TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Initial Public Underwriting Proceeds to
Offering Price (1) Discount (2) Company (1)(3)
Per Note 100.0% 0.625% 99.375%
Total $300,000,000 $1,875,000 $298,125,000
(1) Plus accrued interest, if any, from November 25, 1996.
(2) The Company has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933.
(3) Before deduction of expenses payable by the Company, estimated to
be $137,500.
The Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
Notes will be ready for delivery in New York, New York, on or about November
25, 1996, against payment therefor in immediately available funds.
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P . Morgan & Co.
Morgan Stanley & Co.
Incorporated
Salomon Brothers Inc
The date of this Prospectus Supplement is November 19, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
RECENT FINANCIAL INFORMATION
The following table sets forth certain summary financial information of
Sears Roebuck Acceptance Corp. (the ''Company'') for the three- and nine-month
periods ended September 28, 1996 and September 30, 1995. The summary
information is unaudited, but in the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary to present fairly the
results of operations of the Company have been included. The operating results
for the three- and nine-month periods ended September 28, 1996 are not
necessarily indicative of results to be expected for the full year. The
summary information should be read in conjunction with the financial
statements incorporated in the Prospectus by reference.
Three Months Ended Nine Months Ended
(Unaudited) (Unaudited)
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
(dollars in millions) (dollars in millions)
Operating Results
Total revenues $176.6 $131.5 $485.7 $362.0
Expenses
Interest and
related expenses 139.5 103.6 384.7 287.1
expenses
Total expenses 139.9 104.2 385.9 288.9
Income taxes 12.8 9.6 34.9 25.6
Net income 23.9 17.7 64.9 47.5
Financial Position
Assets
Notes of Sears $11,677.3 $7,981.5
Customer receivables balances
purchased from Sears 95.5 85.5
Total assets 12,199.7 8,311.7
Liabilities
Commercial paper 4,660.2 4,974.7
Agreements with bank
trust departments 70.6 185.2
Intermediate-term loans 945.0 895.0
Medium-term notes 3,772.7 515.0
Discrete underwritten debt 998.2 498.9
Total liabilities 10,539.9 7,086.5
Sears investment in the Company
Capital stock (including capital
in excess of par value) 385.1 35.0
Retained income 1,274.7 1,190.2
Other Pertinent Data
Contractual Credit Facilities
(quarter-end) 5,040 5,712
During the third quarter of 1996, the Company's revenues increased 34.3% to
$176.6 million from $131.5 million in the comparable 1995 period. For the
first nine months of 1996, revenues were up 34.2% to $485.7 million from
$362.0 million for the comparable 1995 period. The increase in revenue is
attributable to the Company's higher average earning assets due to Sears,
Roebuck and Co.'s (''Sears'') continued refinancing of its maturing borrowings
and funding of its business growth. The Company's average assets were $2.9
billion higher in the third quarter and $3.0 billion higher in the first nine
months of 1996 when compared to the same period in 1995.
The Company's interest and related expenses increased 34.7% to $139.5
million from $103.6 million and 34.0% to $384.7 million from $287.1 million
for the third quarter and first nine months of 1996, respectively, as compared
to the comparable 1995 periods. The Company's cost of short-term funds
<PAGE>
averaged 5.51% in the third quarter and 5.50% in the first nine months of 1996
compared to 6.00% and 6.13% for the same periods in 1995. The Company's
short-term borrowings averaged $4.3 billion and $4.6 billion for the third
quarter and first nine months of 1996 compared to the 1995 levels of $5.2
billion and $5.0 billion. Decreases in interest expense from short-term
borrowings were offset by interest related to increased long-term debt levels.
The Company's long-term debt averaged $5.0 billion and $4.1 billion in the
third quarter and first nine months of 1996, compared with $1.3 billion and
$0.9 billion in the third quarter and first nine months of 1995.
In September 1996, in anticipation of future borrowings, the Company
received a capital infusion of $200 million from Sears. The capital infusion
provides additional strength to the Company's balance sheet and allows the
Company to issue additional debt given current covenant restrictions. During
1996 capital infusions totaled $350 million.
The Company's net income of $23.9 million and $64.9 million for the third
quarter and first nine months of 1996 reflects increases of 35.0% and 36.6%
from the comparable 1995 period amounts of $17.7 million and $47.5 million.
The Company's ratio of earnings to fixed charges for both the third quarter
and the first nine months of 1996 was 1.26 compared to 1.26 and 1.25 for the
comparable 1995 periods.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the Prospectus as the ''Offered Debt Securities'')
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 Notes are to be issued under an Indenture, dated as of May 15, 1995,
between the Company and The Chase Manhattan Bank, N.A., as Trustee.
The Notes will mature on November 15, 2006 and will be limited in aggregate
principal amount to $300,000,000. The Notes will be issued in fully registered
form only, in denominations of $1,000 and integral multiples thereof. Each
Note will bear interest at the rate per annum shown on the cover page of this
Prospectus Supplement from November 25, 1996, or from the most recent Interest
Payment Date to which interest has been paid or provided for, payable
semi-annually on May 15 and November 15 of each year, commencing May 15, 1997,
to the person in whose name the Note is registered at the close of business on
the May 1 or November 1, respectively, next preceding such Interest Payment
Date.
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
and Pricing Agreement dated the date hereof, the Underwriters named below have
severally agreed to purchase from the Company the respective principal amounts
of Notes set forth opposite their names in the table below:
<PAGE>
Underwriter Principal
Amount of Notes
Goldman, Sachs & Co. $ 60,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 60,000,000
J.P. Morgan Securities Inc. 60,000,000
Morgan Stanley & Co. Incorporated 60,000,000
Salomon Brothers Inc 60,000,000
Total $300,000,000
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Notes are subject to
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are committed to take and pay for all of the
Notes if any are taken.
The Company has been advised by the Underwriters that they propose to offer
part of the Notes directly to the public at the initial public offering price
and on the terms set forth on the cover page of this Prospectus Supplement and
part to certain dealers at a price that represents a concession not in excess
of .375% of the principal amount of the Notes. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of .250% of the principal
amount of the Notes to certain other dealers. After the initial offering of
the Notes, the offering price and other selling terms may be varied by the
Underwriters.
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriters that they
presently intend to make a market in the Notes as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the Notes and any such market-making may be discontinued at any time at the
sole discretion of the Underwriters. Accordingly, no assurance can be given as
to the liquidity of, or trading market for, the Notes.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may engage in the future in transactions with the Company and
its affiliates.
LEGAL OPINIONS
The legality of the Notes is being passed upon for the Company by Nancy K.
Bellis, Assistant General Counsel of Sears. The legality of the Notes is being
passed upon for the Underwriters by Wachtell, Lipton, Rosen & Katz. Wachtell,
Lipton, Rosen & Katz from time to time performs legal services for Sears.
Sears Roebuck Acceptance Corp.
Debt Securities
<PAGE>
Sears Roebuck Acceptance Corp. (''SRAC'') from time to time may offer up to
$2,356,300,000 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.
<PAGE>
November 19, 1996
<PAGE>
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 Information3Reports 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, Citicorp Center, 500 W. Madison Street,
Chicago, Illinois 60661; 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 and other information
concerning SRAC can also be inspected at the office of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005. Reports, proxy
statements and other information concerning Sears can also be inspected at the
offices of the New York Stock Exchange, Inc., 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
<PAGE>
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 30, 1995 filed
by SRAC and Sears, the Quarterly Reports on Form 10-Q for the quarters ended
March 30, June 29 and September 28, 1996 filed by SRAC and Sears, and the
Current Reports on Form 8-K for February 7, July 18 and October 16, 1996 filed
by Sears and for January 23, March 28, June 28, August 2 and August 22, 1996
filed by SRAC with the Commission pursuant to Section 13 of the Exchange Act,
are incorporated in and made 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, discrete underwritten debt and
medium-term notes. 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 charges
ratio of at least 1.25. The yield on the investment in Sears notes is related
to SRAC's borrowing costs and, as a result, SRAC's earnings fluctuate in
<PAGE>
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 (determined in accordance with Item 503(d) of Regulation S-K
promulgated by the Commission) 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 and to maintain such ownership.
See ''Description of Debt Securities.''
At October 31, 1996, SRAC had ten 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 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.
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth certain summary financial information of
SRAC for the five fiscal years ended December 30, 1995. The summary
information should be read in conjunction with the financial statements of
SRAC and the notes thereto incorporated herein by reference.
1995 1994 1993 1992 1991
(dollars in millions)
Operating Results
Total revenues $ 510.3 $ 282.7 $ 337.5 $ 696.5 $1,100.8
Expenses
Interest and related
expenses 404.6 218.5 236.1 482.8 825.9
Total Expenses 407.0 220.4 276.7 532.3 894.1
Income taxes 36.2 22.1 21.3 56.1 70.3
Net income 67.1 40.2 39.5 108.1 136.4
Financial Position
Assets
Notes of Sears $8,396.4 $6,842.5 $3,403.9 $10,493.6 $12,214.5
Customer receivable
balances purchased
from Sears 81.2 81.5 88.0 963.4 1,042.8
Total assets 8,634.3 7,031.2 4,145.8 $12,415.2 14,676.2
Liabilities
Debt payable within
one year
Commercial paper $4,450.6 $4,912.9 $2,475.0 $ 8,515.3 $10,205.8
Agreements with bank
trust departments 137.0 87.4 139.8 397.9 510.1
Intermediate-term loans 895.0 845.0 - - 204.0
Medium-term notes 1,383.5 - - - -
Discrete underwritten
debt 498.9 - - - -
Loan agreements with SOFNV - - 379.8 332.1 683.2
Total liabilities 7,389.5 5,853.5 3,008.3 9,287.0 11,656.1
Sears, Roebuck and Co.
investment in SRAC
Capital stock (including
capital in excess of
par value) 35.0 35.0 35.0 365.2 365.2
Retained income 1,209.8 1,142.7 1,102.5 2,763.0 2,654.9
Debt as percentage of
equity 592% 496% 263% 296% 384%
Other Pertinent Data
Commercial paper
Average daily
outstanding $4,963 $3,615 $3,812 $9,328 $10,543
Agreements with bank trust
departments
Average daily outstandings 154 124 402 747 643
Contractual Credit Facilities
(year-end) 5,720 5,132 4,200 10,812 11,801
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for SRAC for each of the years ended
December 30, 1995, and December 31, 1994, 1993, 1992 and 1991 was 1.26, 1.29,
1.26, 1.34 and 1.25, respectively. 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 30, 1995, and December 31,
1994, 1993, and 1991 was 2.15, 2.06, 1.66, and 1.16, 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 has
entered into an Indenture with The Chase Manhattan Bank, N.A., as Trustee, and
may enter into Indentures 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,
<PAGE>
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
<PAGE>
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 letter agreements
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 ownership of SRAC, Sears will maintain such ownership.
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)
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
<PAGE>
(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)
<PAGE>
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 is a 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.
LEGAL OPINION
Unless otherwise specified in the accompanying Prospectus Supplement, the
legality of the Debt Securities is being passed upon for SRAC by Nancy K.
Bellis, Assistant General Counsel, of Sears.
EXPERTS
The annual financial statements incorporated by reference in this
prospectus and the financial statements from which the Summary Financial
Information included in this Prospectus have been derived, have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports
incorporated by reference herein, 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 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 Sears and SRAC and incorporated by reference herein,
<PAGE>
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.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus Supplement or
the Prospectus, and, if given or made, such information or representations
must not be relied upon as having been authorized. This Prospectus Supplement
and the Prospectus do not constitute an offer to sell or the solicitation of
an offer to buy any securities other than the securities described in this
Prospectus Supplement or an offer to sell or the solicitation of an offer to
buy such securities in any circumstances in which such offer or solicitation
is unlawful. Neither the delivery of this Prospectus Supplement or the
Prospectus nor any sale made hereunder or thereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein or therein is correct as of any time subsequent to its date.
TABLE OF CONTENTS
Prospectus Supplement Page
Recent Financial Information S-2
Description of Notes S-3
Underwriting S-4
Legal Opinions S-4
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
$300,000,000
Sears Roebuck
Acceptance Corp.
6.70% Notes due
November 15, 2006
PROSPECTUS SUPPLEMENT
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P. Morgan & Co.
Morgan Stanley & Co.
Incorporated
Salomon Brothers Inc
