-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NG7ZP0+n3ZoxYXwjmo1QPny8M+WImN4uUTGSh6hzWDHQieRrGFtBTuq1iGdityuI DyJYuAzL8GVB7nF09jWXUw== 0000950137-99-001121.txt : 19990426 0000950137-99-001121.hdr.sgml : 19990426 ACCESSION NUMBER: 0000950137-99-001121 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19990423 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEARS ROEBUCK ACCEPTANCE CORP CENTRAL INDEX KEY: 0000088255 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [6153] IRS NUMBER: 510080535 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: SEC FILE NUMBER: 333-62847 FILM NUMBER: 99599917 BUSINESS ADDRESS: STREET 1: 3711 KENNETT PIKE CITY: GREENVILLE STATE: DE ZIP: 19807 BUSINESS PHONE: 3028883112 424B3 1 PROSPECTUS 1 SEARS ROEBUCK ACCEPTANCE CORP. DEBT SECURITIES ------------------------------ Sears Roebuck Acceptance Corp. ("SRAC") may from time to time sell up to $6,642,200,000 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. ------------------------------ April 23, 1999 2 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
PAGE ---- Available Information....................................... 3 Reports to Holders of Debt Securities....................... 3 Incorporation of Certain Documents by Reference............. 3 Sears Roebuck Acceptance Corp............................... 4 Use of Proceeds............................................. 4 Summary Financial Information............................... 5 Ratio of Earnings to Fixed Charges.......................... 6 Description of Debt Securities.............................. 6 Plan of Distribution........................................ 11 Legal Opinion............................................... 11 Experts..................................................... 12
2 3 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. 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 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 Annual Reports on Form 10-K for the year ended January 2, 1999, filed by SRAC and Sears; - the Current Reports on Form 8-K for January 21, February 9, February 18, February 19, March 11, and April 23, 1999 filed by Sears; 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 on or 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 4 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 April 14, 1999, SRAC had nine 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 5 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.
1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- (U.S. DOLLARS IN MILLIONS) Operating Results Total revenues................................ $ 1,234 $ 960 $ 689 $ 510 $ 283 Interest expense and amortization of debt discount/premium............................ 979 763 546 405 219 Total expenses................................ 983 767 548 407 221 Income taxes.................................. 88 68 49 36 22 Net income.................................... $ 163 $ 125 $ 92 $ 67 $ 40 Financial Position Assets Notes of Sears.............................. $17,990 $16,561 $11,609 $8,397 $6,843 Receivable balances purchased from Sears.... 90 89 76 81 82 Total assets................................ $18,247 $16,716 $12,004 $8,635 $7,031 Liabilities Commercial paper............................ $ 4,243 $ 5,249 $ 3,324 $4,451 $4,913 Agreements with bank trust departments...... -- -- 82 137 87 Intermediate-term loans..................... -- 50 715 895 845 Medium-term notes........................... 5,976 6,033 4,834 1,384 -- Discrete underwritten debt.................. 5,084 3,099 1,298 499 -- Total liabilities........................... $15,472 $14,554 $10,317 $7,390 $5,854 Stockholder's Equity Capital stock (including capital in excess of par value)............................ $ 1,185 $ 735 $ 385 $ 35 $ 35 Retained income............................. 1,590 1,427 1,302 1,210 1,143 Total stockholder's equity.................. 2,775 2,162 1,687 1,245 1,178 Debt as percentage of equity.................. 552% 667% 608% 592% 496% Other Pertinent Data Commercial paper Average daily outstandings.................. $ 4,514 $ 3,952 $ 4,388 $4,963 $3,615 Agreements with bank trust departments Average daily outstandings.................. -- 55 98 154 124 Contractual credit facilities (year-end)...... 6,100 5,540 5,000 5,720 5,132
5 6 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:
JANUARY 2, JANUARY 3, DECEMBER 28, DECEMBER 30, DECEMBER 31, 1999 1998 1996 1995 1994 ---------- ---------- ------------ ------------ ------------ SRAC(1)......................... 1.26 1.25 1.26 1.26 1.29 Sears(2)........................ 2.16 2.34 2.40 2.15 2.06
- --------------- (1) Calculated as follows: earnings = net income + fixed charges + income taxes --------------------------------------------------------------------------- fixed charges = interest expense + amortization of debt discount and expense (2) Calculated as follows: earnings = income from continuing operations (excluding undistributed net income of uncon- solidated subsidiaries) + fixed charges (excluding capitalized interest) + income taxes --------------------------------------------------------------------------- fixed charges = interest expense + 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. 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 6 7 - 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. 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) 7 8 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; - 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; 8 9 - 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 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); 9 10 - 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. 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 10 11 - 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. 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, Steven M. Cook, Vice President -- Law, will pass upon the legality of the debt securities for SRAC. 11 12 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 -----END PRIVACY-ENHANCED MESSAGE-----