<PAGE> 1
PROSPECTUS SUPPLEMENT
(To Prospectus issued September 17, 1998)
$250,000,000
Sears Roebuck Acceptance Corp.
6.95% NOTES DUE OCTOBER 23, 2038
------------------------
Interest payable on January 23, April 23, July 23 and October 23
------------------------
SEARS ROEBUCK ACCEPTANCE CORP. ("SRAC") MAY REDEEM ANY OF THE NOTES ON ANY
SCHEDULED INTEREST PAYMENT DATE BEGINNING ON OCTOBER 23, 2003, AT 100% OF THEIR
PRINCIPAL AMOUNT PLUS ACCRUED INTEREST. IN ADDITION, SRAC MAY REDEEM ALL OF THE
NOTES FOR TAX REASONS AS DESCRIBED UNDER "DESCRIPTION OF NOTES -- REDEMPTION FOR
TAX REASONS."
SRAC WILL APPLY TO LIST THE NOTES ON THE NEW YORK STOCK EXCHANGE.
------------------------
PRICE 100% AND ACCRUED INTEREST, IF ANY
------------------------
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS
PRICE TO PUBLIC AND COMMISSIONS PROCEEDS TO SRAC
--------------- ---------------------- ----------------
<S> <C> <C> <C>
Per Note.......................... 100.00% 3.15% 96.85%
Total............................. $250,000,000 $7,875,000 $242,125,000
</TABLE>
------------------------
These securities have not been approved by the Securities and Exchange
Commission or any State Securities Commission, nor have these organizations
determined if this Prospectus Supplement or the Prospectus is accurate and
complete. Any representation to the contrary is a criminal offense.
SRAC has granted the Underwriters an option to purchase up to an additional
$25,000,000 aggregate principal amount of Notes, solely to cover
over-allotments.
The Underwriters expect to deliver the Notes in book-entry form only
through the facilities of The Depository Trust Company on or about October 23,
1998.
------------------------
MORGAN STANLEY DEAN WITTER
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
October 16, 1998
<PAGE> 2
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Interim Financial Information............................... S-3
Financial Changes........................................... S-3
Description of Notes........................................ S-4
Optional Redemption....................................... S-4
Redemption for Tax Reasons................................ S-4
United States Tax Considerations............................ S-5
Definition of a United States Holder...................... S-5
Payments of Interest...................................... S-6
Sale, Redemption or other Disposition of a Note........... S-6
Backup Withholding........................................ S-6
Book-Entry Registration..................................... S-6
The Depository Trust Company.............................. S-7
Book-Entry Format......................................... S-7
Certificated Notes........................................ S-7
Underwriting................................................ S-8
Conditions................................................ S-9
Terms..................................................... S-9
Listing................................................... S-9
Additional Notes.......................................... S-9
Stabilization............................................. S-10
Indemnification........................................... S-10
Closing................................................... S-10
Expenses.................................................. S-10
Legal Opinions.............................................. S-10
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
General Terms............................................. 6
Certain Restrictions...................................... 8
Defaults.................................................. 8
Modifications or Amendment of the Indenture............... 9
Defeasance................................................ 9
Termination of Certain Obligations..................... 9
Discharge of the Indenture............................. 11
Regarding the Trustee..................................... 11
Plan of Distribution........................................ 11
Legal Opinion............................................... 12
Experts..................................................... 12
</TABLE>
<PAGE> 3
INTERIM FINANCIAL INFORMATION
The following table contains summary financial information regarding SRAC
for the 26-week periods ended July 4, 1998, and June 28, 1997. The summary
information has not been audited, but, in the opinion of SRAC's management, this
information includes all the adjustments that are necessary to fairly present
the operating results and financial position of SRAC. The data for the 26-week
period ended July 4, 1998, is not necessarily indicative of the expected
year-end data. You should read this summary information in conjunction with
SRAC's financial statements that are incorporated by reference in the
prospectus.
<TABLE>
<CAPTION>
26 WEEKS ENDED
(UNAUDITED)
-----------------------------
JULY 4, 1998 JUNE 28, 1997
------------ -------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Operating Results
Total revenues.............................................. $ 610 $ 433
Interest expenses and amortization of debt
discount/premium.......................................... 484 345
Total expenses.............................................. 486 346
Income taxes................................................ 43 31
Net income.................................................. 81 56
Financial Position
Assets
Notes of Sears............................................ $16,576 $12,910
Receivable balances purchased from Sears.................. 90 82
Total assets.............................................. 16,881 13,105
Liabilities
Commercial paper.......................................... 3,304 3,298
Agreements with bank trust departments.................... -- 69
Intermediate-term loans................................... -- 715
Medium-term notes......................................... 6,436 5,302
Discrete underwritten debt................................ 4,542 1,902
Total liabilities......................................... 14,438 11,362
Stockholder's Equity
Capital stock (including capital in excess of par
value)................................................. 935 385
Retained income........................................... 1,508 1,358
Total stockholder's equity................................ 2,443 1,743
Other Pertinent Data
Contractual credit facilities (period end).................. 5,040 5,000
</TABLE>
FINANCIAL CHANGES
This discussion compares SRAC's financial results for the 26-week period
ended July 4, 1998 (the "current period") with its results for the 26-week
period ended June 28, 1997 (the "prior period").
SRAC generated revenues of $610 million during the current period. This is
an increase of 41% from the $433 million in revenues it generated during the
prior period. SRAC attributes the increase in revenue to a $4.4 billion increase
in SRAC's average earning assets in the current period over the prior period.
Average earning assets increased in response to Sears funding requirements.
SRAC incurred $484 million in interest and related expenses during the
current period. This is an increase of 40% from the $345 million it incurred
during the prior period. SRAC attributes most of this increase in interest and
related expenses to increases in its average long-term debt. SRAC's average
long-term debt of $10.3 billion in the current period reflects an increase of
43% over its average long-term debt of $7.2 billion in the prior period. SRAC's
average short-term borrowings also increased in the current period to $4.5
billion, compared to $3.9 billion during the prior period.
S-3
<PAGE> 4
During the current period, SRAC's cost of short-term funds averaged 5.60%, while
it averaged 5.48% during the prior period.
SRAC's net income of $81 million for the current period is a 45% increase
over its net income of $56 million for the prior period. SRAC's ratio of
earnings to fixed charges for the current period was 1.26 compared to 1.25 for
the prior period.
DESCRIPTION OF NOTES
The following description supplements the "Description of Debt Securities"
in the prospectus.
SRAC will issue the Notes under the indenture dated as of May 15, 1995,
between SRAC and The Chase Manhattan Bank. SRAC has filed a copy of the
indenture with the Securities and Exchange Commission; the indenture is
incorporated into this prospectus supplement and the prospectus by reference.
The Notes will mature on October 23, 2038. SRAC may not issue more than
$275,000,000 of the Notes, which will constitute a single series of debt
securities under the indenture. SRAC will issue the Notes in fully registered
book-entry form only, without coupons, in denominations of $25 and integral
multiples of $25. Each Note will bear interest at the rate of 6.95% per year.
SRAC will pay the interest quarterly on January 23, April 23, July 23, and
October 23 of each year, commencing January 23, 1999, to the registered holder
of the Note at the close of business on the date fifteen days before the
interest payment date. As long as the Notes are held through the facilities of
DTC, solely in book-entry form, the only registered holder of the Notes will be
DTC's nominee, Cede & Co.
If an interest payment date or the maturity date of the Notes is not a
business day, SRAC will pay interest or principal on the next business day.
However, interest on the payment will not accrue for the period from the
original interest payment date (or maturity date) to the date SRAC makes the
payment. SRAC will calculate the interest based on a 360-day year of twelve
30-day months.
SRAC will pay interest on the Notes to DTC by wire transfer on the interest
payment dates. SRAC will pay the principal of the Notes to DTC by wire transfer
if DTC presents and surrenders the Notes on or before the redemption or maturity
date of the Notes. If you hold a Note in fully certificated form, SRAC will pay
the interest and principal on your Note to you by check unless you have given
proper wire transfer instructions to the trustee.
OPTIONAL REDEMPTION
SRAC may not redeem the Notes before October 23, 2003, except for tax
reasons as described below under "Redemption for Tax Reasons." After October 23,
2003, SRAC may redeem the Notes, in whole or in part, on any scheduled interest
payment date by paying you 100% of the principal amount of the portion of your
Note that SRAC is redeeming, plus any interest that has accrued, but that SRAC
has not previously paid you, up to the date that SRAC redeems your Note. SRAC
must give you at least 30, but not more than 60, days' notice that it will
redeem your Note.
REDEMPTION FOR TAX REASONS
SRAC may elect to redeem your Notes if, on or after October 23, 1998, a
change in the U.S. tax laws results in a substantial likelihood that SRAC will
not be able to deduct the full amount of interest accrued on the Notes for
United States federal income tax purposes. If SRAC redeems the Notes for tax
reasons, it will follow the redemption procedures described above under
"Optional Redemption."
The Notes describe a change in tax laws broadly and permit SRAC to redeem
because of:
- any actual or proposed change in or amendment to the laws of the United
States, or regulations or rulings promulgated under those laws;
- any change in the way those laws, rulings or regulations are interpreted,
applied or enforced;
S-4
<PAGE> 5
- any action taken by a taxing authority that applies to SRAC;
- any court decision; or
- any technical advice memorandum, letter ruling or administrative
pronouncement issued by the United States Internal Revenue Service, based
on a fact pattern substantially similar to SRAC's.
UNITED STATES TAX CONSIDERATIONS
The following summary of the principal United States federal income tax
consequences of purchasing, owning and disposing of a Note applies to you only
if:
- you are a United States holder (as defined below), and
- you are an initial holder of the Note that acquires the Note for a price
equal to the initial issue price of the Note.
This summary is based upon the opinion of Baker & McKenzie, SRAC's special
United States federal income tax counsel. For purposes of this summary, with
respect to book-entry Notes, the term "holder" refers to you if you acquire a
beneficial ownership interest in those Notes through DTC's book entry system,
and with respect to certificated Notes, the term "holder" refers to you if those
Notes are registered in your name or the name of your nominee. This summary
deals only with Notes held as capital assets and does not deal with special tax
situations such as:
- dealers in securities or currencies or traders in securities that elect
to mark to market those securities;
- United States holders (as defined below) whose functional currency is not
the United States dollar; or
- persons holding Notes as part of a larger integrated financial
transaction.
This summary is based on United States federal income tax law, including
the United States Internal Revenue Code of 1986, as amended (the "Code") as of
the date of this prospectus supplement. Subsequent developments in United States
federal income tax law, which may be applied retroactively, could have a
material effect on the United States federal income tax consequences of
purchasing, owning and disposing of Notes as set forth in this summary. Before
you purchase Notes, you should consult your own tax advisor about how the United
States federal income tax law or any other laws, including the laws of any other
taxing jurisdiction, will apply to your particular situation.
In the opinion of Baker & McKenzie, SRAC may properly characterize all
Notes as indebtedness of SRAC for all United States federal income tax purposes.
SRAC intends to characterize the Notes as debt. SRAC's characterization of the
Notes will be binding on you, unless you disclose a different characterization
on your federal income tax return. The United States Internal Revenue Service
will not be bound by SRAC's or your characterization of the Notes.
DEFINITION OF A UNITED STATES HOLDER
A United States holder is a holder of a Note who is, or which is, a United
States person. A United States person is:
- a citizen or resident of the United States or the areas subject to its
jurisdiction, including the Commonwealth of Puerto Rico (the "United
States");
- a corporation or partnership organized under the laws of the United
States or of any state (unless, in the case of a partnership, future
Treasury regulations otherwise provide);
- an estate, the income of which is subject to United States federal income
taxation regardless of the source of that income; or
S-5
<PAGE> 6
- a trust, if a United States court is able to exercise primary supervision
over the trust's administration and one or more United States persons has
the authority to control all of the trust's substantial decisions.
PAYMENTS OF INTEREST
Your interest on your Note will be taxed as ordinary interest income. In
addition:
- if you use the cash method of accounting for tax purposes, you will be
taxed on the interest on your Note at the time it is paid to you; and
- if you use the accrual method of accounting for tax purposes, you will be
taxed on the interest on your Note at the time it accrues.
SALE, REDEMPTION OR OTHER DISPOSITION OF A NOTE
Your tax basis in a Note will be its U.S. dollar cost. You will recognize
capital gain or loss when you sell or otherwise dispose of your Note, or SRAC
redeems your Note, equal to the difference between:
- the amount realized on the sale or redemption or other disposition; and
- your tax basis in the Note.
Your gain or loss will be long-term capital gain or loss if at the time of the
sale, payment or other disposition, you have held the Note for more than one
year.
BACKUP WITHHOLDING
If you do not provide a correct taxpayer identification number and other
information, or do not comply with certain other requirements or otherwise fail
to establish an exemption (such as your status as a corporation, bank,
securities clearing organization or other financial institution that holds
customers' securities in the ordinary course of its trade or business), SRAC,
its paying agent or a broker, as the case may be, will be required to withhold
from payments to you a tax equal to 31% of each payment. This "backup"
withholding tax applies to certain payments of principal and interest on a Note
and to the proceeds from the sale or disposition of a Note before maturity. In
addition to the potential application of backup withholding tax, SRAC, its
paying agent or a broker, as the case may be, will be subject to certain
information reporting requirements with respect to certain payments of principal
and interest on a Note and to the proceeds from the sale or disposition of a
Note before maturity.
If you provide the United States Internal Revenue Service with the
information it requires, you will receive a refund or a credit against your
United States federal income tax liability for any amounts withheld from your
payments under the backup withholding rules.
BOOK-ENTRY REGISTRATION
SRAC has obtained the information in this section concerning The Depository
Trust Company ("DTC") and DTC's book-entry system from sources that it believes
to be reliable, but SRAC takes no responsibility for the accuracy of this
information.
SRAC will initially issue the Notes in registered form only, without
coupons, as book-entry Notes represented by one or more global Notes registered
in the name Cede & Co., as the nominee for DTC. Unless and until SRAC issues
Notes in fully certificated form under the limited circumstances described
below:
- you will not be entitled to receive a certificate representing your
interest in the Notes;
- all references in this prospectus supplement or in the prospectus to
actions by holders will refer to actions taken by DTC upon instructions
from its Direct Participants (as defined below); and
S-6
<PAGE> 7
- all references in this prospectus supplement or the prospectus to
payments to holders will refer to payments to DTC or Cede & Co., as the
registered holder of the Notes, for distribution to you in accordance
with DTC procedures.
THE DEPOSITORY TRUST COMPANY
DTC is:
- a limited-purpose trust company organized under the New York Banking Law;
- a "banking organization" under the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" under the New York Uniform Commercial Code; and
- a "clearing agency" registered under the provision of Section 17A of the
Securities Exchange Act of 1934.
DTC holds securities that its Direct Participants deposit with DTC. DTC
also facilitates the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Direct Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
"Direct Participants" of DTC include securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations.
"Indirect Participants," such as securities brokers and dealers, banks and trust
companies, can also access the DTC system if they maintain a custodial
relationship with a Direct Participant. If you are not a Direct Participant or
an Indirect Participant and you wish to purchase, sell or otherwise transfer
ownership of, or other interests in, Notes, you must do so through a Direct
Participant or an Indirect Participant. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. The
Securities and Exchange Commission has on file a set of the rules applicable to
DTC and its Direct Participants.
BOOK-ENTRY FORMAT
Under the book-entry format, the trustee will pay interest or principal to
Cede & Co., as nominee of DTC. DTC will forward the payment to the Direct
Participants, who will then forward the payment to the Indirect Participants or
to you as the beneficial owner. You may experience some delay in receiving your
payments under this system.
DTC is required to make book-entry transfers on behalf of its Direct
Participants and is required to receive and transmit payments of principal,
premium, if any, and interest on the Notes. Any Direct Participant or Indirect
Participant with which you have an account is similarly required to make book-
entry transfers and to receive and transmit payments with respect to the Notes
on your behalf.
The trustee will not recognize you as a holder under the indenture, and you
can only exercise the rights of a holder indirectly through DTC and its Direct
Participants. DTC has advised SRAC that it will only take action regarding a
Note if one or more of the Direct Participants to whom the Note is credited
direct DTC to take such action. DTC can only act on behalf of its Direct
Participants. Your ability to pledge Notes to non-Direct Participants, and to
take other actions, may be limited because you will not possess a physical
certificate that represents your Notes.
CERTIFICATED NOTES
SRAC will re-issue Notes to you or your nominees, in fully certificated
form, rather than to DTC or its nominees, only if:
- SRAC advises the trustee in writing that DTC is no longer willing or able
to discharge its responsibilities properly, and the trustee or SRAC is
unable to locate a qualified successor, or
- SRAC, at its option, elects to terminate the book-entry system through
DTC.
S-7
<PAGE> 8
If either of the two above events occur, DTC is required to notify all
Direct Participants that Notes in fully certificated form are available through
DTC. DTC will then surrender the global note representing the Notes along with
instructions for re-registration. The trustee will re-issue the Notes in fully
certificated form and will recognize the registered holders of the certificated
Notes as holders under the indenture.
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
dated September 23, 1997, and the Pricing Agreement dated the date hereof, SRAC
has agreed to sell to each of the Underwriters named below, and each of the
Underwriters has severally agreed to purchase from SRAC, the respective
principal amounts of Notes set forth opposite its name in the table below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
NAME NOTES
- ---- ------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... $ 37,295,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......... 37,295,000
PaineWebber Incorporated.................................... 37,295,000
Prudential Securities Incorporated.......................... 37,295,000
Salomon Smith Barney Inc. .................................. 37,295,000
ABN AMRO Incorporated ...................................... 1,650,000
Bear, Stearns & Co. Inc. ................................... 1,650,000
BT Alex. Brown Incorporated................................. 1,650,000
CIBC Oppenheimer Corp. ..................................... 1,650,000
Credit Suisse First Boston Corporation...................... 1,650,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 1,650,000
A.G. Edwards & Sons, Inc. .................................. 1,650,000
First Chicago Capital Markets, Inc. ........................ 1,650,000
Goldman, Sachs & Co. ....................................... 1,650,000
Lehman Brothers Inc. ....................................... 1,650,000
McDonald & Company Securities, Inc. ........................ 1,650,000
NatCity Investments, Inc. .................................. 1,650,000
NationsBanc Montgomery Securities LLC....................... 1,650,000
Roney Capital Markets, A Division of First Chicago Capital
Markets, Inc. ............................................ 1,650,000
Schroder & Co. Inc. ........................................ 1,650,000
SG Cowen Securities Corporation............................. 1,650,000
Warburg Dillon Read LLC..................................... 1,650,000
Wheat First Securities, Inc. ............................... 1,650,000
Advest, Inc. ............................................... 825,000
Artemis Capital Group, Inc. ................................ 825,000
Robert W. Baird & Co. Incorporated.......................... 825,000
William Blair & Company, L.L.C. ............................ 825,000
Blaylock & Partners, L.P. .................................. 825,000
J.C. Bradford & Co. ........................................ 825,000
Craigie Incorporated........................................ 825,000
Crowell, Weedon & Co........................................ 825,000
D.A. Davidson & Co. Incorporated............................ 825,000
Dain Rauscher Wessels....................................... 825,000
Davenport & Company LLC..................................... 825,000
Equitable Securities Corporation............................ 825,000
EVEREN Securities, Inc. .................................... 825,000
Fahnestock & Co. Inc. ...................................... 825,000
Ferris, Baker Watts, Incorporated........................... 825,000
</TABLE>
S-8
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
NAME NOTES
- ---- ------------
<S> <C>
Fidelity Capital Markets, A Division of National Financial
Services Corp. ........................................... $ 825,000
Fifth Third/The Ohio Company................................ 825,000
First Albany Corporation.................................... 825,000
First of Michigan Corporation............................... 825,000
Gibraltar Securities Co. ................................... 825,000
J.J.B. Hilliard, W.L. Lyons, Inc. .......................... 825,000
Interstate/Johnson Lane Corporation......................... 825,000
Janney Montgomery Scott Inc. ............................... 825,000
Kirkpatrick, Pettis, Smith, Polian Inc. .................... 825,000
Legg Mason Wood Walker, Incorporated........................ 825,000
Mesirow Financial, Inc. .................................... 825,000
Morgan Keegan & Company, Inc. .............................. 825,000
Olde Discount Corporation................................... 825,000
Ormes Capital Markets, Inc. ................................ 825,000
Piper Jaffray Inc. ......................................... 825,000
Raymond James & Associates, Inc. ........................... 825,000
Redwood Securities Group, Inc. ............................. 825,000
The Robinson-Humphrey Company, LLC.......................... 825,000
Scott & Stringfellow, Inc. ................................. 825,000
Muriel Siebert & Co., Inc. ................................. 825,000
Southwest Securities, Inc. ................................. 825,000
Sterne, Agee & Leach, Inc. ................................. 825,000
Stifel, Nicolaus & Company, Incorporated.................... 825,000
TD Securities (USA) Inc. ................................... 825,000
Tucker Anthony Incorporated................................. 825,000
Wedbush Morgan Securities................................... 825,000
------------
Total............................................. $250,000,000
============
</TABLE>
CONDITIONS. The Underwriting Agreement obligates the Underwriters to pay
for and accept delivery of the Notes if their counsel approves certain legal
matters and certain other conditions are satisfied. The Underwriters are
committed to take and pay for all of the Notes if they take any of them.
TERMS. The Underwriters have advised SRAC that they will offer part of the
Notes directly to the public at the public offering price set forth on the cover
page of this prospectus supplement and will offer part of the Notes to certain
dealers at a price that represents a concession not in excess of $.50 for each
$25.00 principal amount of Notes. The Underwriters may allow, and those dealers
may reallow, a concession not in excess of $.40 for each $25.00 principal amount
of Notes to other underwriters or to certain other dealers. The Underwriters may
vary the price and other selling terms of the Notes from time to time after the
initial offering of the Notes.
LISTING. SRAC will apply to list the Notes on the New York Stock Exchange.
ADDITIONAL NOTES. SRAC has granted the Underwriters an option, exercisable
until October 20, 1998, to purchase up to an additional $25,000,000 aggregate
principal amount of Notes at the public offering price set forth on the cover
page of this prospectus supplement. The Underwriters may exercise the option
solely for the purpose of covering over-allotments, if any, made in connection
with the offering of the Notes. To the extent the option is exercised, each
Underwriter will become obligated to purchase approximately the same percentage
of the additional Notes as the Underwriter purchased in the original offering.
S-9
<PAGE> 10
STABILIZATION. In order to facilitate the offering of the Notes, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Notes. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Notes for their
own account. In addition, to cover over-allotments or to stabilize the price of
the Notes, the Underwriters may bid for, and purchase, Notes on the open market.
Finally, the underwriting syndicate may reclaim selling concessions allowed to
an underwriter or a dealer for distributing the Notes in the offering, if the
syndicate repurchases previously distributed Notes in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Notes above
independent market levels. The Underwriters are not required to engage in these
activities and may end any of these activities at any time.
INDEMNIFICATION. SRAC has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the Underwriters may be required to make
with respect to these liabilities.
CLOSING. The Underwriters and SRAC have agreed that the closing of the
sales of the Notes to the Underwriters will occur on or about October 23, 1998
(five business days after the date of this prospectus supplement).
EXPENSES. SRAC estimates that its expenses in connection with the offering
and sale of the Notes will be approximately $125,000.
LEGAL OPINIONS
Nancy K. Bellis, an Assistant General Counsel of Sears, is passing upon the
legality of the Notes for SRAC. Cleary, Gottlieb, Steen & Hamilton is passing
upon the legality of the Notes for the Underwriters. Cleary, Gottlieb, Steen &
Hamilton performs legal services for Sears from time to time.
S-10
<PAGE> 11
SEARS ROEBUCK ACCEPTANCE CORP.
DEBT SECURITIES
------------------------------
Sears Roebuck Acceptance Corp. ("SRAC") may from time to time sell up to
$7,252,200,000 aggregate initial offering price of its debt securities. These
debt securities may consist of debentures, notes or other types of unsecured
debt. The supplement accompanying this prospectus includes the specific terms of
these debt securities.
------------------------------
These securities have not been approved by the Securities and Exchange
Commission or any state securities commission nor have these organizations
determined that this prospectus is accurate or complete. Any representation to
the contrary is a criminal offense.
------------------------------
September 17, 1998
<PAGE> 12
SRAC HAS NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT TO
THIS PROSPECTUS. YOU MUST NOT RELY UPON ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT AS IF SRAC HAD AUTHORIZED IT. THIS PROSPECTUS AND THE
ACCOMPANYING SUPPLEMENT TO THIS PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH THEY RELATE, NOR DO THIS PROSPECTUS AND THE ACCOMPANYING
SUPPLEMENT TO THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE
INFORMATION CONTAINED IN THIS PROSPECTUS AND THE SUPPLEMENT TO THIS PROSPECTUS
IS ACCURATE AS OF THE DATES ON THEIR COVERS. WHEN SRAC DELIVERS THIS PROSPECTUS
OR A SUPPLEMENT OR MAKES A SALE PURSUANT TO THIS PROSPECTUS, SRAC IS NOT
IMPLYING THAT THE INFORMATION IS CURRENT AS OF THE DATE OF THE DELIVERY OR SALE.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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........................................ 11
Legal Opinion............................................... 12
Experts..................................................... 12
</TABLE>
2
<PAGE> 13
AVAILABLE INFORMATION
SRAC and Sears, Roebuck and Co. ("Sears"), SRAC's parent, are required to
file reports and other information with the Securities and Exchange Commission
(the "Commission"). Sears also files proxy statements with the Commission. You
can inspect and copy these reports, proxy statements and other information at
the public reference facilities of the Commission, in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; 7 World Trade Center, Suite 1300, New
York, New York 10048; and Suite 1400, Citicorp Center, 500 W. Madison Street,
Chicago, Illinois 60661-2511. You can also obtain copies of these materials from
the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
(http://www.sec.gov). You can inspect reports and other information concerning
SRAC and Sears at the office of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005. You can also inspect reports, proxy statements
and other information concerning Sears at the offices of 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.
SRAC and Sears have filed a registration statement and related exhibits
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). The registration statement contains additional information
about SRAC, Sears and the debt securities. You may inspect the registration
statement and exhibits without charge at the office of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and you may obtain copies from the
Commission at prescribed rates.
REPORTS TO HOLDERS OF DEBT SECURITIES
SRAC will send its annual reports to the holders of its debt securities.
These annual reports will include financial information that independent public
accountants have audited and reported on, as well as other information about
SRAC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
SRAC and Sears incorporate and make part of this prospectus by reference
the following documents, filed by SRAC and Sears with the Commission pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"):
- the Annual Reports on Form 10-K for the year ended January 3, 1998, filed
by SRAC and Sears;
- the Quarterly Reports on Form 10-Q for the quarters ended April 4, 1998
and July 4, 1998, filed by SRAC and Sears;
- the Current Reports on Form 8-K for January 22 and February 18, 1998,
filed by Sears and for January 8, February 23 and March 13, 1998, filed
by SRAC; and
- 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 after the date of
this prospectus and before SRAC stops offering 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).
To receive a free copy of any of the documents incorporated by reference in
this prospectus (other than exhibits, unless they are specifically incorporated
by reference in the documents), call or write Sears Roebuck Acceptance Corp.,
3711 Kennett Pike, Greenville, Delaware 19807, Attention: Vice President,
Finance (302/888-3100).
3
<PAGE> 14
SEARS ROEBUCK ACCEPTANCE CORP.
SRAC is a wholly owned subsidiary of Sears that was incorporated under the
laws of Delaware in 1956. Its general offices are located at 3711 Kennett Pike,
Greenville, Delaware 19807 (302/888-3100). It raises funds primarily by issuing
commercial paper, medium-term notes and discrete underwritten debt and by
borrowing under intermediate-term loan agreements. It uses the proceeds from its
borrowings to acquire short-term notes of Sears and, on occasion, to purchase
outstanding receivable balances from Sears. Sears, a multi-line retailer that
conducts domestic and international merchandising and credit operations, uses
the funds it obtains from SRAC for general funding purposes. SRAC, and not
Sears, will be solely responsible for repaying the debt securities.
SRAC generates income primarily from the earnings on its investment in the
notes and receivable balances of Sears. Sears presently calculates the interest
rate on its notes so that SRAC maintains an earnings to fixed charges ratio of
at least 1.25. The yield on SRAC's investment in Sears notes is related to
SRAC's borrowing costs. As a result, movements in interest rates and changes in
Sears borrowing requirements cause SRAC's earnings to fluctuate. The indenture
relating to SRAC's debt securities requires SRAC to maintain a ratio of earnings
to fixed charges of not less than 1.10 for any fiscal quarter (determined in
accordance with Item 503(d) of Regulation S-K promulgated by the Commission) and
to cause Sears to maintain ownership of all of SRAC's voting stock as long as
any of SRAC's debt securities are outstanding. Sears has agreed to pay SRAC the
amounts that are necessary for SRAC to maintain an earnings to fixed charges
ratio of at least 1.10 and has agreed to maintain ownership of all of SRAC's
voting stock as long as any of SRAC's debt securities are outstanding. See
"Description of Debt Securities--Certain Restrictions."
As of August 1, 1998, SRAC had eight employees.
USE OF PROCEEDS
SRAC will add the net proceeds it receives from the sale of its debt
securities to its general funds and initially will use the proceeds to reduce
its short-term debt. As indicated in this prospectus under the heading "Sears
Roebuck Acceptance Corp.," SRAC's principal business is purchasing short-term
notes of Sears. Additionally, SRAC occasionally purchases receivable balances
from Sears domestic credit operations. SRAC expects to incur additional debt,
but has not yet determined how much or the terms of this debt. SRAC will make
these determinations from time to time based on economic conditions and certain
capital requirements of Sears. SRAC anticipates that Sears and its subsidiaries
will continue their practice of short-term borrowing and will occasionally incur
additional long-term debt and engage in securitization programs in which Sears
and its subsidiaries sell interests in pools of credit card receivables in
public or private transactions. Sears also occasionally may issue equity
securities.
4
<PAGE> 15
SUMMARY FINANCIAL INFORMATION
The following table sets forth certain summary financial information of
SRAC for the last five fiscal years. You should read this summary information in
conjunction with SRAC's financial statements and the notes to the financial
statements that are incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Operating Results
Total revenues................................. $ 960 $ 689 $ 510 $ 283 $ 338
Interest and related expenses.................. 763 546 405 219 236
Total expenses................................. 767 548 407 221 277
Income taxes................................... 68 49 36 22 21
Net income..................................... 125 92 67 40 40
Financial Position
Assets
Notes of Sears............................... $16,561 $11,609 $8,397 $6,843 $3,404
Receivable balances purchased from Sears..... 89 76 81 82 88
Total assets................................. 16,716 12,004 8,635 7,031 4,146
Liabilities
Commercial paper............................. $ 5,249 $ 3,324 $4,451 $4,913 $2,475
Agreements with bank trust departments....... -- 82 137 87 140
Intermediate-term loans...................... 50 715 895 845 --
Medium-term notes............................ 6,033 4,834 1,384 -- --
Discrete underwritten debt................... 3,099 1,298 499 -- --
Loan agreements with Sears Overseas Finance,
N.V. ..................................... -- -- -- -- 380
Total liabilities............................ 14,554 10,317 7,390 5,854 3,008
Sears investment in SRAC
Capital stock (including capital in excess of
par value)................................ $ 735 $ 385 $ 35 $ 35 $ 35
Retained income.............................. 1,427 1,302 1,210 1,143 1,103
Debt as percentage of equity................... 667% 608% 592% 496% 263%
Other Pertinent Data
Commercial paper
Average daily outstandings................... $ 3,952 $ 4,388 $4,963 $3,615 $3,812
Agreements with bank trust departments
Average daily outstandings................... 55 98 154 124 402
Contractual credit facilities (year-end)....... 5,540 5,000 5,720 5,132 4,200
</TABLE>
5
<PAGE> 16
RATIO OF EARNINGS TO FIXED CHARGES
Sears presently calculates the interest rate on SRAC's investment in Sears
notes to provide SRAC with earnings sufficient to cover its fixed charges at
least 1.25 times. The ratios of earnings to fixed charges for SRAC and Sears for
the years ended on the dates set forth in the following table were as follows:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28, DECEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1996 1995 1994 1993
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SRAC(1)....................... 1.25 1.26 1.26 1.29 1.26
Sears(2)...................... 2.34 2.40 2.15 2.06 1.66
</TABLE>
The ratios of earnings to fixed charges for SRAC and Sears for the 26 weeks
ended July 4, 1998 were as follows:
<TABLE>
<CAPTION>
26 WEEKS ENDED
JULY 4, 1998
--------------
<S> <C>
SRAC(1)...................... 1.26
Sears(2)..................... 1.95
</TABLE>
- ---------------
(1) Calculated as follows:
earnings = net income + fixed charges + income taxes
---------------------------------------------------------------------------
fixed charges = interest costs + amortization of debt discount and expense
(2) Calculated as follows:
earnings = income from continuing operations (excluding undistributed net
income of unconsolidated subsidiaries) + fixed charges (excluding
capitalized interest) + income taxes
---------------------------------------------------------------------------
fixed charges = interest costs + the portion of operating lease rentals
which Sears estimates represents the interest element in such rentals
DESCRIPTION OF DEBT SECURITIES
This prospectus describes certain general terms and provisions of SRAC's
unsecured debt securities. When SRAC offers to sell a particular series of debt
securities, it will describe the specific terms of the series in a supplement to
this prospectus. SRAC will also indicate in the supplement whether the general
terms and provisions described in this prospectus apply to a particular series
of debt securities.
SRAC has entered into an indenture with The Chase Manhattan Bank, as
trustee, and will issue its debt securities under that indenture or under
another indenture into which it may enter with another eligible trustee. SRAC
will identify the trustee and the particular indenture under which it is issuing
its debt securities in the supplement to this prospectus.
The following sections summarize certain provisions of SRAC's debt
securities and indenture. This summary is qualified by and subject to the actual
provisions of the indenture under which SRAC is issuing its debt securities.
SRAC has filed the indenture with the Commission and is incorporating it by
reference in this prospectus. Where this summary refers to particular provisions
of the indenture, the provisions are incorporated by reference.
GENERAL TERMS
The debt securities will be unsecured obligations of SRAC.
SRAC can issue an unlimited amount of debt securities under the indenture,
and can issue them from time to time in one or more series.
6
<PAGE> 17
If any of the following terms apply to a particular series of debt
securities that SRAC offers to sell, the supplement to this prospectus will
describe the applicable terms:
- the title
- any limit on the aggregate principal amount
- the maturity date or dates
- the issue price
- the interest rate or rates (which may be fixed or variable)
- the date from which interest will accrue
- the interest payment dates (including the first interest payment date)
- the record dates for the interest payment dates
- any optional or mandatory redemption, conversion and exchange provisions
and whether you have or SRAC has the right to use these provisions
- any subordination provisions
- any sinking fund provisions
- the amount payable upon acceleration of the maturity date, if the amount
is not the principal amount of the debt securities
- the terms of any warrants attached to the debt securities
- the currencies that you may use to purchase the debt securities and that
SRAC may use to pay principal, any premium and interest
- any index SRAC will use to determine the amount of principal, premium and
interest payments
- whether SRAC will issue the debt securities as one or more global
securities to be held for investors by a depository and, if so, the name
of the depository
- the places where the principal, any premium and interest will be payable,
if those places are not set forth in the indenture
- any other terms that are consistent with the indenture that may modify or
delete any provision of the indenture to the extent the provision applies
to such series
SRAC will pay principal, any premium and any interest at the office of the
paying agent it maintains for such purposes in the Borough of Manhattan of The
City of New York. You may transfer debt securities (other than debt securities
represented by global securities) at the same office. SRAC may also designate
other locations for payments and transfers in the city in which its principal
executive offices are located or the city in which the principal corporate trust
office of the trustee is located. Unless SRAC specifies otherwise in the
supplement to this prospectus, the locations for payment and transfer initially
will include the principal corporate trust office of the trustee in the Borough
of Manhattan of The City of New York and SRAC's principal executive offices in
Greenville, Delaware.
SRAC will pay interest on its debt securities by checks mailed to you at
your registered address, unless you make other arrangements or the debt
securities are represented by a global security. (Sections 2.5, 3.1, 3.2) If the
debt securities are represented by global securities, SRAC will provide
information about payment of principal, any premium and interest and about
transfers of beneficial interests in the global securities in the supplement to
this prospectus.
7
<PAGE> 18
If SRAC has indicated in the supplement to this prospectus that it will pay
principal, any premium and interest in a currency other than U.S. dollars and
that currency is unavailable for payment due to circumstances beyond SRAC's
control, SRAC will pay the principal, any premium and interest in U.S. dollars.
The exchange rate will be the most recent noon buying rate in New York City for
cable transfers in the unavailable currency, as certified for customs purposes
by the Federal Reserve Bank of New York. However, if the unavailable currency is
the European Currency Unit, the exchange rate will be the most recent rate
determined by the Council of European Communities. (Section 2.12)
SRAC will issue its debt securities only in fully registered form, without
coupons, in denominations of $1,000 or an integral multiple of $1,000, unless
SRAC indicates otherwise in the supplement to this prospectus. (Section 2.2)
You will not have to pay a service charge to register a transfer or
exchange of debt securities. However, SRAC may require you to pay an amount
sufficient to cover any tax or other governmental charge in connection with the
transfer or exchange. (Section 2.5)
SRAC may issue debt securities at a discounted price with provisions that
permit it to pay less than the principal amount if the holders of the debt
securities accelerate the maturity date as a result of a continuing default. If
SRAC chooses to issue these discounted debt securities, it will describe the
federal income tax consequences and other special considerations in the
supplement to this prospectus.
CERTAIN RESTRICTIONS
The indenture provides that SRAC will maintain a ratio of earnings to fixed
charges in every fiscal quarter of at least 1.10 and that it will cause Sears to
maintain ownership of all of SRAC's voting stock. SRAC determines its ratio of
earnings to fixed charges in accordance with Item 503(d) of Regulation S-K
promulgated by the Commission, as in effect on the date of the indenture. SRAC
has letter agreements with Sears pursuant to which Sears has agreed, for the
benefit of the holders of SRAC's debt securities, that
- Sears will pay SRAC amounts which, when added to SRAC's other earnings,
will be sufficient for SRAC to maintain the fixed charge coverage ratio
required by the indenture and
- Sears will maintain ownership of SRAC's voting stock as long as SRAC is
required to cause Sears to do so.
The indenture provides that SRAC will cause Sears to observe and perform in
all material respects all covenants or agreements of Sears contained in the
letter agreements and will not amend, waive, terminate or otherwise modify any
provision of the letter agreements. (Section 3.6)
DEFAULTS
If any of the following occur in connection with any series of SRAC's debt
securities, SRAC will be in default under those debt securities:
- if SRAC fails to pay the principal amount and any premium on the series
when due and payable;
- if SRAC fails for 30 days after any interest payment date to pay any
interest that has become due (unless it deposits the entire amount due
with the trustee or with a paying agent within 30 days after the due
date);
- if SRAC fails to perform any of its other covenants under the indenture
that apply to that series of debt securities and does not cure that
failure for 60 days after it receives written notice that it has failed
to perform from holders of a majority of the principal amount of the
particular series of debt securities or the trustee;
8
<PAGE> 19
- if SRAC's creditors or creditors of Sears, including holders of SRAC's
debt securities from a different series, accelerate the maturity date of
$100,000,000 or more in principal amount of SRAC debt or Sears debt, and
those creditors do not rescind or annul the acceleration within 30 days
after SRAC receives written notice from holders of a majority of the
principal amount of the particular series of debt securities or the
trustee, unless the maturity date was accelerated as a result of
compliance with applicable laws, court orders or governmental decrees;
- if SRAC takes certain actions in connection with a bankruptcy, insolvency
or reorganization; or
- if SRAC does or fails to do something that the supplement to this
prospectus identifies as an event of default.
Unless the supplement to this prospectus specifies otherwise, if SRAC
defaults on a particular series of debt securities and the default is
continuing, the holders of a majority of the principal amount of the outstanding
debt securities of that series may accelerate the maturity date of those debt
securities. To accelerate the maturity date, those holders must declare that the
principal amount of the debt securities of that series is immediately due and
payable. In certain circumstances, holders of a majority of the principal amount
of outstanding debt securities of the series may annul the acceleration of the
maturity date. (Section 6.1)
Before instituting a proceeding to enforce the indenture or to obtain a
remedy provided for by the indenture:
- holders of debt securities must notify the trustee of a default in
writing;
- holders of a majority of the principal amount of outstanding debt
securities of the particular series must request in writing that the
trustee institute the proceeding;
- holders of a majority of the principal amount of outstanding debt
securities of the particular series must offer reasonable indemnity to
the trustee if the trustee institutes the proceeding; and
- the trustee must neglect or refuse to institute the proceeding within a
reasonable time.
These requirements do not prevent a holder from enforcing the payment of
principal and interest on the debt securities held by such holder, on or after
the principal or interest due dates. (Section 6.7)
MODIFICATION OR AMENDMENT OF THE INDENTURE
SRAC may amend the indenture 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 amendment. However, SRAC may not make any amendment
without the consent of the holders of each affected debt security then
outstanding if that amendment will:
- permit SRAC to extend the time of payment of any payment on the debt
securities, or to reduce the payment, or
- reduce the percentage of holders of any series of debt securities whose
consent is required to amend the indenture. (Article XI)
DEFEASANCE
Termination of Certain Obligations
Unless SRAC provides otherwise in the supplement to this prospectus, SRAC
may terminate certain of its obligations under the indenture with respect to the
debt securities of any series by depositing with the trustee or a paying agent,
in trust, any combination of the following in an amount
9
<PAGE> 20
sufficient to pay the principal, any premium and each installment of interest on
the debt securities of such series on the dates such payments are due:
- money;
- securities backed by the full faith and credit of the United States of
America that the issuer cannot call or redeem (if the debt securities
with respect to which SRAC is terminating certain of its obligations are
denominated in U.S. dollars);
- certain depository receipts for any non-callable and non-redeemable
securities backed by the full faith and credit of the United States of
America, or for a specific payment of interest on or principal of any
such securities, issued by a bank or trust company as custodian (if the
debt securities with respect to which SRAC is terminating certain of its
obligations are denominated in U.S. dollars); or
- other securities that, when deposited in trust, alone or in combination
with other items in this list, will result in a nationally recognized
rating agency rating SRAC's debt securities in the highest generic
long-term debt rating category applicable to debt issued by an issuer
that has been released from its obligations to the same extent that SRAC
has been (if the debt securities with respect to which SRAC is
terminating certain of its obligations are denominated in a foreign
currency).
As a prerequisite to establishing the trust, in addition to certain other
requirements, SRAC must receive a ruling from the Internal Revenue Service or an
opinion of counsel who is not its employee. The ruling or opinion must state
that the holders of the debt securities with respect to which SRAC is
terminating certain of its obligations will not recognize income, gain or loss
for federal income tax purposes as a result of the deposit with the trustee and
termination of these obligations. The ruling or opinion must also state that
those holders will be subject to federal income tax on the same amount, in the
same manner and at the same times as would have been the case if SRAC had not
deposited money or securities with the trustee and terminated these obligations.
SRAC must also receive an opinion of counsel stating that, after 90 days, either
the trust deposit will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally or that the holders' rights would be adequately protected
despite the application of such laws to the trust funds.
Notwithstanding the deposit with the trustee or paying agent and compliance
with the additional requirements described above or in the indenture, SRAC's
obligations under the indenture to do the following with respect to a series
will remain in full force and effect until SRAC has paid the debt securities of
such series in full:
- pay principal, premium (if any) and interest;
- register the transfer or exchange of the debt securities;
- replace mutilated, destroyed, lost and stolen debt securities;
- maintain paying agencies; and
- hold monies for payment in trust. (Section 13.4)
If and when the Internal Revenue Service can provide a ruling, or counsel
can provide an opinion as described above, without reliance upon the
continuation of SRAC's obligations regarding the payment of principal, premium
(if any) and interest, then SRAC may discharge the indenture--including its
payment obligations--by delivering the ruling or opinion to the trustee and
satisfying the other conditions provided for in the indenture. (Section 13.4)
Under present ruling positions of the Internal Revenue Service, SRAC cannot
obtain such a ruling or opinion.
10
<PAGE> 21
Discharge of the Indenture
SRAC may also discharge the indenture, and all of its obligations under the
indenture, with respect to a particular series of debt securities--including its
payment obligations--if:
- all securities issued under the indenture have been canceled or delivered
to the trustee to be canceled; or
- all securities issued under the indenture that have not been canceled
- have become due and payable in accordance with their terms, or
- will become due and payable in accordance with their terms within
one year, or
- will be called for redemption within one year under arrangements
that satisfy the trustee.
To discharge the indenture in these circumstances, SRAC must deposit trust funds
with the trustee in an amount sufficient to pay all principal, interest and
premiums on the outstanding securities until they mature or are redeemed. SRAC
must also deliver a certificate of one of its officers and an opinion of
counsel, each stating that SRAC has complied with all conditions precedent to
the satisfaction and discharge of the indenture. (Section 13.1)
REGARDING THE TRUSTEE
The Chase Manhattan Bank, which is a trustee under the indenture, performs
other services for SRAC.
PLAN OF DISTRIBUTION
SRAC may sell its debt securities to or through underwriters, directly to
other purchasers or through agents. SRAC anticipates offering its debt
securities directly to brokers or dealers, investment companies, insurance
companies, banks, savings and loan associations and trust companies or similar
institutions, and to trusts for which a bank, savings and loan association,
trust company or investment adviser is the trustee or is authorized to make
investment decisions.
SRAC may distribute its debt securities from time to time in one or more
transactions:
- at a fixed price or prices, which may change
- at market prices prevailing at the time of sale
- at prices related to such prevailing market prices or
- at negotiated prices.
The supplement to this prospectus will describe the method of distribution
of any particular series of debt securities.
In connection with the sale of its debt securities, SRAC, or the purchasers
of debt securities for whom the underwriters may act as agents, may compensate
the underwriters in the form of discounts, concessions or commissions.
Underwriters may sell SRAC's debt securities to or through dealers and may
compensate the dealers in the form of discounts, concessions or commissions.
Dealers may also receive commissions from the purchasers of debt securities, for
whom they may act as agents. Pursuant to the Securities Act, the Commission may
deem underwriters, dealers and agents that participate in the distribution of
debt securities to be underwriters. The Commission also may deem any discounts,
commissions or concessions and any profit on the resale of debt securities to be
underwriting discounts and commissions under the Securities Act. The supplement
to this prospectus will identify any such underwriter or agent and will describe
any such compensation.
11
<PAGE> 22
SRAC may enter into agreements to indemnify underwriters, dealers and
agents that participate in the distribution of its debt securities against
certain liabilities, including liabilities under the Securities Act.
LEGAL OPINION
Unless otherwise specified in the supplement to this prospectus, Nancy K.
Bellis, an Assistant General Counsel of Sears, will pass upon the legality of
the debt securities for SRAC.
EXPERTS
Deloitte & Touche LLP, independent auditors, have audited the annual
financial statements that are incorporated by reference in this prospectus, as
stated in their reports that are also incorporated by reference in this
prospectus. SRAC and Sears have incorporated by reference their financial
statements in reliance upon the reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information contained in
the Quarterly Reports on Form 10-Q for Sears and SRAC, which are incorporated in
this prospectus 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 in this
prospectus, they did not audit and they did not express an opinion on such
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 Securities Act of
1933.
12
<PAGE> 23
SEARS ROEBUCK ACCEPTANCE CORP.
