<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 333-14201-01
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THIS PROSPECTUS SUPPLEMENT AND THE +
+PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN +
+OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN +
+WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO +
+REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 1, 1996
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 31, 1996)
[LOGO]SUNAMERICA
10,000,000 PREFERRED SECURITIES
SUNAMERICA CAPITAL TRUST III
% TRUST ORIGINATED PREFERRED SECURITIES SM ("TOPRS SM")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
SUNAMERICA INC.
----------
The % Trust Originated Preferred Securities (the "Preferred Securities")
offered hereby represent preferred undivided beneficial interests in the assets
of SunAmerica Capital Trust III, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"). SunAmerica Inc., a Maryland
corporation ("SunAmerica"), will directly or indirectly own all the common
securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities") representing common undivided beneficial
interests in the assets of the Trust. The Trust exists for the sole purpose of
issuing the Preferred Securities and Common Securities and investing the
proceeds thereof in an equivalent amount of % Junior Subordinated Debentures
due 2045 (the "Junior Subordinated Debentures") of SunAmerica.
(continued on next page)
----------
SEE "RISK FACTORS" BEGINNING ON PAGE S-8 FOR CERTAIN INFORMATION RELEVANT TO
AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE JUNIOR
SUBORDINATED DEBENTURES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES.
Application will be made to list the Preferred Securities on the New York
Stock Exchange, Inc. (the "NYSE"). Trading of the Preferred Securities on the
NYSE is expected to commence within a 30-day period after the date of this
Prospectus Supplement. See "Underwriting."
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SUNAMERICA
OFFERING PRICE(1) COMMISSION(2) CAPITAL TRUST III(3)(4)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security.. $25.00 (3) $25.00
- --------------------------------------------------------------------------------
Total(5)................ $ (3) $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued distributions, if any, from November , 1996.
(2) SunAmerica has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debentures,
SunAmerica has agreed to pay to the Underwriters as compensation
("Underwriters' Compensation") for their arranging the investment therein
of such proceeds, $ per Preferred Security (or $ in the aggregate);
provided, that such compensation for sales of 10,000 or more Preferred
Securities to a single purchaser will be $ per Preferred Security.
Therefore, to the extent of such sales, the actual amount of Underwriters'
Compensation will be less than the aggregate amount specified in the
preceding sentence. See "Underwriting."
(4) Expenses of the offering which are payable by SunAmerica are estimated to
be $ .
(5) The Trust and SunAmerica have granted to the Underwriters an option for 30
days to purchase up to an additional 1,500,000 Preferred Securities at the
offering price per Preferred Security, solely to cover overallotments.
SunAmerica will pay Underwriters' Compensation in the amounts per Preferred
Security set forth in Note 3 with respect to such additional Preferred
Securities. If such option is exercised in full, the total Initial Public
Offering Price, Underwriters' Compensation and Proceeds to SunAmerica
Capital Trust III will be $ , $ and $ , respectively.
----------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Preferred Securities will be made only in book-
entry form through the facilities of The Depository Trust Company on or about
November , 1996.
----------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
----------
The date of this Prospectus Supplement is November , 1996.
SM"TRUST ORIGINATED PREFERRED SECURITIES" AND "TOPRS" ARE SERVICE MARKS OF
MERRILL LYNCH & CO., INC.
<PAGE>
(continued from previous page)
The Preferred Securities and the Common Securities will rank pari passu with
each other and will have equivalent terms; provided that (i) if an Event of
Default (as defined herein) under the Declaration (as defined herein) occurs
and is continuing, the holders of Preferred Securities will have a priority
over holders of the Common Securities with respect to payments in respect of
distributions and payments upon liquidation, redemption or otherwise and (ii)
holders of Common Securities have the exclusive right (subject to the terms of
the Declaration) to appoint, replace or remove Trustees (as defined in the
accompanying Prospectus) and to increase or decrease the number of Trustees,
subject to the right of holders of Preferred Securities to appoint a Special
Regular Trustee (as defined in the accompanying Prospectus) upon the occurrence
of certain events described herein.
Holders of the Preferred Securities will be entitled to receive cumulative
cash distributions at an annual rate of % of the liquidation amount of $25 per
Preferred Security, accruing from the date of original issuance of the
Preferred Securities and payable quarterly in arrears on the 30th day of March,
June, September and December of each year, commencing on December 30, 1996
("distributions"). Cash distributions in arrears for more than one quarter will
bear interest thereon at the rate per annum of % of the stated liquidation
amount of $25 per Preferred Security (to the extent permitted by applicable
law), compounded quarterly. The term "distributions" as used herein includes
such cash distributions and any such interest payable unless otherwise stated.
The distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and the interest and
other payment dates on the Junior Subordinated Debentures deposited in the
Trust as trust assets. As a result, if principal or interest is not paid on the
Junior Subordinated Debentures, including as a result of SunAmerica's election
to extend the interest payment period on the Junior Subordinated Debentures as
described below, the Trust will not make payments on the Trust Securities. The
Junior Subordinated Debentures provide that, so long as SunAmerica is not in
default in the payment of interest on the Junior Subordinated Debentures,
SunAmerica shall have the right to defer payments of interest on the Junior
Subordinated Debentures by extending the interest payment period from time to
time for a period not exceeding 20 consecutive quarterly interest periods
(each, an "Extension Period"). No interest shall be due and payable during an
Extension Period and, as a consequence, distributions on the Trust Securities
will also be deferred, but at the end of such Extension Period SunAmerica shall
pay all interest then accrued and unpaid on the Junior Subordinated Debentures,
together with interest thereon at the rate specified for the Junior
Subordinated Debentures to the extent permitted by applicable law, compounded
quarterly ("Compounded Interest"). All references herein to interest shall
include Compounded Interest unless otherwise stated. During any Extension
Period, holders of Preferred Securities will be required to include deferred
interest income in their gross income for United States federal income tax
purposes in advance of receipt of the cash interest payments attributable to
such deferred income. There could be multiple Extension Periods of varying
lengths (up to nine Extension Periods of 20 consecutive quarterly interest
periods each or more numerous shorter Extension Periods) throughout the term of
the Junior Subordinated Debentures. During any such Extension Period,
SunAmerica may not declare or pay dividends on, or redeem, purchase, acquire or
make a distribution or liquidation payment with respect to, any of its common
stock or preferred stock; provided that (i) SunAmerica will be permitted to pay
accrued dividends (and cash in lieu of fractional shares) upon the conversion
of any of its Series E Mandatory Conversion Premium Dividend Preferred Stock
(the "Series E Preferred Stock") or upon the conversion of any other series of
preferred stock of SunAmerica as may be outstanding from time to time, in each
case in accordance with the terms of such stock, and (ii) the foregoing will
not apply to any stock dividends paid by SunAmerica. See "Risk Factors--Option
to Extend Interest Payment Period; Tax Impact of Extension"; "Description of
the Junior Subordinated Debentures--Interest" and "--Option to Extend Interest
Payment Period."
The payment of distributions out of moneys held by the Property Trustee (as
defined in the accompanying Prospectus) and payments on liquidation of the
Trust and the redemption of Preferred Securities, as set forth below, are
guaranteed by SunAmerica on a subordinated basis as and to the extent described
herein (the "Preferred Securities Guarantee"). See "Description of the
Preferred Securities
S-2
<PAGE>
(continued from previous page)
Guarantees" in the accompanying Prospectus. The Preferred Securities Guarantee
is a full and unconditional guarantee from the time of issuance of the
Preferred Securities, but the Preferred Securities Guarantee covers
distributions and other payments on the Preferred Securities only if and to the
extent that SunAmerica has made a payment to the Property Trustee of interest
or principal on the Junior Subordinated Debentures deposited in the Trust as
trust assets. The obligations of SunAmerica under the Preferred Securities
Guarantee are subordinate and junior in right of payment to all other
liabilities of SunAmerica, including the Junior Subordinated Debentures and any
other Junior Subordinated Debt Securities (as defined in the accompanying
Prospectus), and senior to all capital stock now or hereafter issued by
SunAmerica and to any guarantee now or hereafter entered into by SunAmerica in
respect of its capital stock. The obligations of SunAmerica under the Junior
Subordinated Debentures are subordinate and junior in right of payment to all
present and future Senior Indebtedness (as defined in the accompanying
Prospectus) of SunAmerica, which aggregated $573.3 million at June 30, 1996 on
an unconsolidated basis.
The Junior Subordinated Debentures are redeemable by SunAmerica (in whole or
in part) from time to time, on or after , 2001 or under certain
circumstances upon the occurrence of a Tax Event (as defined herein). If
SunAmerica redeems Junior Subordinated Debentures, the Trust must redeem
Preferred Securities and Common Securities on a pro rata basis, having an
aggregate liquidation amount equal to the aggregate principal amount of the
Junior Subordinated Debentures so redeemed at $25 per Trust Security plus
accrued and unpaid distributions thereon (the "Redemption Price") to the date
of redemption. See "Description of the Preferred Securities--Mandatory
Redemption." The Preferred Securities will be redeemed upon maturity or earlier
redemption of the Junior Subordinated Debentures. The Junior Subordinated
Debentures mature on September 30, 2045, provided that SunAmerica shall have
the right to shorten the maturity of the Junior Subordinated Debentures, to a
date not earlier than , 2001, upon the occurrence of a Tax Event which
relates to the deductibility of interest payable by SunAmerica on the Junior
Subordinated Debentures.
In addition, SunAmerica will have the right at any time to cause the Trust to
be dissolved and cause the Junior Subordinated Debentures to be distributed to
the holders of the Preferred Securities on a pro rata basis, in lieu of any
cash distribution. If the Junior Subordinated Debentures are distributed to the
holders of the Preferred Securities, SunAmerica will use its best efforts to
have the Junior Subordinated Debentures listed on the New York Stock Exchange
or on such other exchange as the Preferred Securities are then listed. See
"Description of the Preferred Securities--Redemption or Distribution" and
"Description of the Junior Subordinated Debentures."
In the event of the voluntary or involuntary dissolution, winding up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive, for each Preferred Security, a liquidation amount of $25
plus accrued and unpaid distributions thereon (including interest thereon) to
the date of payment, unless in connection with such dissolution, the Junior
Subordinated Debentures are distributed to the holders of the Preferred
Securities. See "Description of the Preferred Securities--Liquidation
Distribution Upon Dissolution."
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
S-3
<PAGE>
SUNAMERICA SELECTED CONSOLIDATED FINANCIAL DATA
Reference is made to SunAmerica's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995 (the "Form 10-K"), which is incorporated by
reference herein and which contains SunAmerica's audited consolidated
financial statements, including the consolidated income statement for
SunAmerica's three fiscal years in the period ended September 30, 1995,
consolidated balance sheets as of September 30, 1994 and 1995, and the related
notes. Selected unaudited financial information as of and for the nine months
ended June 30, 1995 and 1996 should be read in conjunction with the audited
consolidated financial statements and related notes contained in the Form 10-K
and the unaudited consolidated financial statements contained in SunAmerica's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, which
report is also incorporated by reference herein. Such unaudited information
reflects, in the opinion of management, all adjustments, consisting of only
normal accruals, necessary for a consistent presentation with the audited
financial information. Results of operations for the nine months ended June
30, 1996 may not necessarily be indicative of the results to be expected for
the full fiscal year. Per share amounts and dividends have been restated to
reflect a three-for-two stock split paid in the form of a stock dividend on
November 10, 1995 and a two-for-one stock split paid in the form of a stock
dividend on August 30, 1996.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED JUNE 30,
----------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net investment income... $ 162,412 $ 219,384 $ 263,791 $ 294,454 $ 365,555 $ 259,529 $342,953
Net realized investment
losses................. (46,060) (56,364) (21,287) (21,124) (33,012) (24,550) (14,814)
Fee income.............. 92,689 112,831 134,305 150,736 179,288 130,030 161,812
General and
administrative
expenses............... (120,475) (133,058) (135,790) (132,743) (166,540) (118,582) (148,632)
Provision for future
guaranty fund
assessments............ -- -- (22,000) -- -- -- --
Amortization of deferred
acquisition costs...... (40,088) (48,375) (51,860) (66,925) (80,829) (59,197) (67,597)
Other income, net....... 24,903 16,673 16,852 15,603 15,144 12,423 15,762
--------- --------- --------- --------- --------- --------- --------
Pretax income........... 73,381 111,091 184,011 240,001 279,606 199,653 289,484
Income tax expense...... (25,900) (34,300) (57,000) (74,700) (85,400) (58,900) (86,800)
--------- --------- --------- --------- --------- --------- --------
Income before cumulative
effect of change in
accounting for income
taxes.................. 47,481 76,791 127,011 165,301 194,206 140,753 202,684
Cumulative effect of
change in accounting
for income taxes....... -- -- -- (33,500) -- -- --
--------- --------- --------- --------- --------- --------- --------
Net income.............. $ 47,481 $ 76,791 $ 127,011 $ 131,801 $ 194,206 $ 140,753 $202,684
========= ========= ========= ========= ========= ========= ========
EARNINGS PER SHARE:
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME
TAXES.................. $ 0.44 $ 0.60 $ 0.92 $ 1.19 $ 1.42 $ 1.02 $ 1.44
Cumulative effect of
change in accounting
for income taxes....... -- -- -- (0.27) -- -- --
--------- --------- --------- --------- --------- --------- --------
Net income.............. $ 0.44 $ 0.60 $ 0.92 $ 0.92 $ 1.42 $ 1.02 $ 1.44
========= ========= ========= ========= ========= ========= ========
CASH DIVIDENDS PER SHARE
PAID TO COMMON
SHAREHOLDERS:
Nontransferable Class B
Stock(1)............... $ 0.060 $ 0.060 $ 0.084 $ 0.120 $ 0.180 $ 0.135 $ 0.203
========= ========= ========= ========= ========= ========= ========
Common Stock............ $ 0.067 $ 0.067 $ 0.093 $ 0.134 $ 0.200 $ 0.150 $ 0.225
========= ========= ========= ========= ========= ========= ========
</TABLE>
- --------
(1) Holders of Nontransferable Class B Stock are entitled to receive cash
dividends equal to 90% of any cash dividends paid to holders of the Common
Stock. For a description of the rights of holders of Nontransferable Class
B Stock, see "Description of Capital Stock--Common Stock and Class B
Stock" in the accompanying Prospectus.
S-4
<PAGE>
SUNAMERICA SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT JUNE 30,
----------------------------------------------------------- -----------------------
1991 1992 1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Investments............. $ 7,596,275 $ 9,428,266 $10,364,952 $ 9,280,390 $10,808,959 $10,472,755 $16,152,767
Variable annuity
assets................. 2,746,685 3,293,343 4,194,970 4,513,093 5,263,006 4,893,894 6,083,369
Deferred acquisition
costs.................. 392,278 436,209 475,917 581,874 526,415 523,620 781,612
Other assets............ 279,007 245,833 231,582 280,868 245,787 305,279 382,359
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets............ $11,014,245 $13,403,651 $15,267,421 $14,656,225 $16,844,167 $16,195,548 $23,400,107
=========== =========== =========== =========== =========== =========== ===========
Reserves for fixed
annuity contracts...... $ 5,359,757 $ 5,143,339 $ 4,934,871 $ 4,519,623 $ 4,862,250 $ 4,887,635 $ 9,622,137
Reserves for guaranteed
investment contracts... 1,598,963 2,023,048 2,216,104 2,783,522 3,607,192 3,276,686 4,102,787
Trust deposits.......... -- 367,458 378,986 442,320 426,595 430,868 423,790
Variable annuity
liabilities............ 2,746,685 3,293,343 4,194,970 4,513,093 5,263,006 4,893,894 6,083,369
Other payables and
accrued liabilities.... 344,789 1,372,010 1,828,153 860,763 747,733 879,437 798,974
Long-term notes and
debentures............. -- 225,000 380,560 472,835 524,835 472,835 573,335
Collateralized mortgage
obligations and reverse
repurchase agreements.. 299,343 182,784 112,032 28,662 -- -- --
Other senior
indebtedness........... 38,035 25,919 15,119 -- -- -- --
Subordinated notes...... 117,985 -- -- -- -- -- --
Deferred income taxes... 58,779 40,682 96,599 74,319 146,847 136,585 31,879
SunAmerica-obligated
mandatorily redeemable
preferred securities of
subsidiary grantor
trusts(1).............. -- -- -- -- 52,631 52,631 237,631
Shareholders' equity.... 449,909 730,068 1,110,027 961,088 1,213,078 1,164,977 1,526,205
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total liabilities and
shareholders' equity... $11,014,245 $13,403,651 $15,267,421 $14,656,225 $16,844,167 $16,195,548 $23,400,107
=========== =========== =========== =========== =========== =========== ===========
Book value per share.... $ 4.08 $ 4.85 $ 7.55 $ 6.30 $ 8.89 $ 8.31 $ 10.58
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
- --------
(1) Represents SunAmerica-obligated mandatorily redeemable preferred
securities, at September 30, 1995, of SunAmerica Capital Trust I, the sole
asset of which is $54.26 million principal amount of 9.95% Junior
Subordinated Debentures due 2044 of SunAmerica and, at June 30, 1996, of
(1) SunAmerica Capital Trust I and (2) SunAmerica Capital Trust II, the
sole asset of which is $191.22 million principal amount of 8.35% Junior
Subordinated Debentures due 2044 of SunAmerica.
S-5
<PAGE>
THE FOLLOWING INFORMATION CONCERNING SUNAMERICA, SUNAMERICA CAPITAL TRUST
III, THE PREFERRED SECURITIES, THE PREFERRED SECURITIES GUARANTEE AND THE
JUNIOR SUBORDINATED DEBENTURES IS IN ADDITION TO, AND SHOULD BE READ IN
CONJUNCTION WITH, THE INFORMATION CONTAINED IN THE ACCOMPANYING PROSPECTUS.
CAPITALIZED TERMS USED IN THIS PROSPECTUS SUPPLEMENT HAVE THE SAME MEANINGS AS
IN THE ACCOMPANYING PROSPECTUS.
SUNAMERICA
SunAmerica is a diversified financial services company specializing in
retirement savings products and services. At June 30, 1996, SunAmerica held
$36.17 billion of assets throughout its businesses, including $23.40 billion of
assets on its balance sheet, $2.12 billion of assets managed in mutual funds
and private accounts and $10.65 billion of assets under custody in retirement
trust accounts. Together, SunAmerica's life insurance companies rank among the
largest U.S. issuers of annuities. Complementing these annuity operations are
SunAmerica's asset management operations; its three broker-dealers, which
SunAmerica believes, based on industry data, represent the largest network of
independent registered representatives in the nation; and its trust company,
which provides administrative and custodial services to qualified retirement
plans. Through these subsidiaries, SunAmerica specializes in the sale of tax-
deferred long-term savings products and investments to the expanding
preretirement savings market. SunAmerica markets fixed annuities and fee-
generating variable annuities, mutual funds and trust services, as well as
guaranteed investment contracts. SunAmerica's products are distributed through
a broad spectrum of financial services distribution channels, including
independent registered representatives of SunAmerica's broker-dealer
subsidiaries and unaffiliated broker-dealers, independent general insurance
agents and financial institutions.
Since the beginning of fiscal 1996, SunAmerica has made several acquisitions
that have added a total of $4.7 billion in annuity reserves and enhanced its
position in the financial institution and qualified teachers markets. On
December 29, 1995, SunAmerica purchased CalFarm Life Insurance Company, which
on such date had approximately $650 million in annuity reserves. On February
29, 1996, SunAmerica acquired Ford Life Insurance Company, which had annuity
reserves of approximately $3.1 billion on such date and on April 1, 1996
purchased approximately $960 million in annuity reserves from The Central
National Life Insurance Company of Omaha. On January 2, 1996, SunAmerica
purchased Houston-based broker-dealer Advantage Capital Corp., further
strengthening its distribution network. This acquisition added more than 1,000
representatives to SunAmerica's broker-dealer network, bringing its number of
independent registered representatives to more than 6,600.
RECENT DEVELOPMENTS
RECENT FINANCIAL RESULTS
For its fiscal year ended September 30, 1996, SunAmerica reported preliminary
unaudited net income of $274.4 million or $1.95 per share, up 37% on a per
share basis from $194.2 million or $1.42 per share in fiscal 1995.
Net investment income for the fiscal year ended September 30, 1996 increased
35% to $492.8 million from $365.6 million in fiscal 1995 and fee income
increased 22% to $220.4 million from $180.4 million in the prior year. These
increases were partially offset by a 28% increase in general and administrative
expenses and a 26% increase in amortization of deferred acquisition costs.
S-6
<PAGE>
PROPOSED COMMON STOCK DIVIDEND INCREASE
In August 1996, the Board of Directors of SunAmerica stated their intent to
approve a quarterly dividend increase from $.075 per share (which reflects the
August 1996 two-for-one stock split) to $.10 per share at their next regularly
scheduled Board meeting in November. The declaration and payment of dividends
is subject to the discretion of the Board of Directors, based on the Board's
determination of the financial condition, results of operations and cash
requirements of SunAmerica.
RECENT ISSUANCES OF SECURITIES
On October 31, 1996, SunAmerica entered into an underwriting agreement for
the public offering of 10,000,000 Premium Equity Redemption Cumulative Security
Units, 8.5% PERCS Units (the "PERCS Units"), together with an overallotment
option for an additional 1,500,000 PERCS Units. Each PERCS Unit has a stated
amount of $37.50 (the "Stated Amount") and consists of (a) a stock purchase
contract ("Purchase Contract") under which (i) subject to certain termination
events, the holder will purchase from SunAmerica on October 31, 1999 (the
"Final Settlement Date") or any earlier acceleration date for an amount in U.S.
dollars equal to the Stated Amount, (x) initially one share of common stock of
SunAmerica, subject to adjustment under certain circumstances, if such purchase
occurs on the Final Settlement Date or any earlier mandatory acceleration date
or (y) such lesser number of shares of common stock as may be payable if such
purchase occurs on an acceleration date established by SunAmerica, and (ii)
SunAmerica will pay contract fees to the holder at a rate of 1.0% per annum of
the Stated Amount, and (b) 7.5% United States Treasury Notes due October 31,
1999 ("Treasury Notes") having a principal amount equal to the Stated Amount
and maturing on the Final Settlement Date. The net proceeds from the sale of
the PERCS Units will be used by the underwriters of such offering to purchase
at the direction of SunAmerica, for the benefit of the holders of the PERCS
Units, the underlying Treasury Notes, which will be transferred to holders of
the PERCS Units pursuant to the terms of the PERCS Units, and SunAmerica will
receive no proceeds from such sale. The Treasury Notes will be pledged to a
collateral agent for SunAmerica to secure the holders' obligations to purchase
common stock under the Purchase Contracts. The closing of the sale of the PERCS
Units is expected to occur on or about November 6, 1996.
Also, on October 31, 1996, SunAmerica entered into an underwriting agreement
for the public offering of $375,000,000 principal amount of 6.20% Notes due
October 31, 1999 (the "6.20% Notes"). The closing of the sale of the 6.20%
Notes is expected to occur on or about November 6, 1996.
SUNAMERICA CAPITAL TRUST III
SunAmerica Capital Trust III is a statutory business trust formed on
September 6, 1995 under the Delaware Business Trust Act (the "Business Trust
Act") pursuant to a declaration of trust among the Trustees and SunAmerica and
the filing of a certificate of trust with the Secretary of State of the State
of Delaware. Such declaration will be amended and restated in its entirety (as
so amended and restated, the "Declaration") substantially in the form filed as
an exhibit to the Registration Statement of which this Prospectus Supplement
and the accompanying Prospectus form a part, as of the date the Preferred
Securities are initially issued. The Declaration is qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon issuance of
the Preferred Securities, the holders thereof will own all of the issued and
outstanding Preferred Securities. SunAmerica will acquire Common Securities in
an amount equal to at least 3% of the total capital of the Trust and will own,
directly or indirectly, all of the issued and outstanding Common Securities.
The Trust exists solely for the purpose of (a) issuing its Preferred
Securities, (b) issuing its Common Securities to SunAmerica, (c) investing the
gross proceeds from the sale of the Trust Securities in the Junior Subordinated
Debentures and (d) engaging in such other activities as are necessary,
convenient or incidental thereto. The rights of the holders of the Trust
Securities, including economic rights, rights to information and voting rights,
are as set forth in the Declaration, the Business Trust Act and the Trust
Indenture Act. The Declaration does not permit the incurrence by the Trust of
any indebtedness for borrowed money or the making of any investment other than
in the Junior Subordinated Debentures. In the Declaration, SunAmerica has
agreed to pay for all debts and obligations (other than with respect to the
Trust Securities) and all costs and expenses of the Trust, including the fees
and expenses of the Trustees and any income taxes, duties and other
governmental charges, and all costs and expenses with respect thereto, to which
the Trust may become subject, except for United States withholding taxes.
S-7
<PAGE>
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following matters:
RANKING OF SUBORDINATED OBLIGATIONS UNDER PREFERRED SECURITIES GUARANTEE AND
JUNIOR SUBORDINATED DEBENTURES; DEPENDENCE ON SUNAMERICA
The obligations of SunAmerica under the Junior Subordinated Debentures are
unsecured obligations of SunAmerica and will be subordinate and junior in right
of payment to Senior Indebtedness of SunAmerica but senior to its capital
stock. At June 30, 1996, Senior Indebtedness of SunAmerica (on an
unconsolidated basis) aggregated approximately $573.3 million. SunAmerica's
obligations under the Preferred Securities Guarantee are unsecured and will
rank (i) subordinate and junior in right of payment to all other liabilities of
SunAmerica, including the Junior Subordinated Debentures, except those made
pari passu or subordinate by their terms, and (ii) senior to all capital stock
now or hereafter issued by SunAmerica and to any guarantee now or hereafter
entered into by SunAmerica in respect of its capital stock. Because SunAmerica
is a holding company, the Junior Subordinated Debentures (and SunAmerica's
obligations under the Preferred Securities Guarantee) are also effectively
subordinated to all existing and future liabilities, including trade payables,
of SunAmerica's subsidiaries, except to the extent that SunAmerica is a
creditor of the subsidiaries recognized as such. Claims on SunAmerica's
subsidiaries by creditors other than SunAmerica include substantial claims for
policy benefits, as well as other liabilities incurred in the ordinary course
of business. At June 30, 1996, SunAmerica's subsidiaries had outstanding
approximately $14.6 billion of liabilities (excluding variable annuity
liabilities, with respect to which assets are segregated in separate accounts).
In addition, since many of SunAmerica's subsidiaries are insurance companies
subject to regulatory control by various state insurance departments, the
ability of such subsidiaries to pay dividends or make loans or advances to
SunAmerica without prior regulatory approval is limited by applicable laws and
regulations. There are no terms in the Preferred Securities, the Junior
Subordinated Debentures or the Preferred Securities Guarantee that limit
SunAmerica's ability to incur additional indebtedness, including indebtedness
that ranks senior to or pari passu with the Junior Subordinated Debentures and
the Preferred Securities Guarantee, or the ability of its subsidiaries to incur
additional indebtedness. See "Description of the Preferred Securities
Guarantees--Status of the Preferred Securities Guarantees" and "Description of
the Junior Subordinated Debt Securities--Subordination" in the accompanying
Prospectus.
The Trust's ability to make distributions and other payments on the Preferred
Securities is solely dependent upon SunAmerica making interest and other
payments on the Junior Subordinated Debentures deposited as trust assets as and
when required. If SunAmerica were not to make distributions or other payments
on the Junior Subordinated Debentures for any reason, including as a result of
SunAmerica's election to defer the payment of interest on the Junior
Subordinated Debentures by extending the interest period on the Junior
Subordinated Debentures, the Trust will not make payments on the Trust
Securities. In such an event, holders of the Preferred Securities would not be
able to rely on the Preferred Securities Guarantee since distributions and
other payments on the Preferred Securities are subject to such Guarantee only
if and to the extent that SunAmerica has made a payment to the Property Trustee
of interest or principal on the Junior Subordinated Debentures deposited in the
Trust as trust assets. Instead, holders of Preferred Securities would rely on
the enforcement by the Property Trustee of its rights as registered holder of
the Junior Subordinated Debentures against SunAmerica pursuant to the terms of
the Indenture (as defined herein) and may vote to appoint a Special Regular
Trustee. However, if the Trust's failure to make distributions on the Preferred
Securities is a consequence of SunAmerica's exercise of its right to extend the
interest payment period for the Junior Subordinated Debentures, the Property
Trustee will have no right to enforce the payment of distributions on the
Preferred Securities until an Event of Default under the Declaration shall have
occurred. SunAmerica's obligations under the Preferred Securities Guarantee are
subordinate and junior in right of payment to all other liabilities of
SunAmerica, including the Junior
S-8
<PAGE>
Subordinated Debentures, except those made pari passu (that is, equal in
priority) or subordinate by their terms to the Preferred Securities Guarantee,
and senior to its capital stock or to any guarantee of SunAmerica in respect of
its capital stock.
The Declaration provides that SunAmerica shall pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs and
expenses of the Trust, including any taxes and all costs and expenses with
respect thereto, to which the Trust may become subject, except for United
States withholding taxes. No assurance can be given that SunAmerica will have
sufficient resources to enable it to pay such debts, obligations, costs and
expenses on behalf of the Trust.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX IMPACT OF EXTENSION
So long as SunAmerica shall not be in default in the payment of interest on
the Junior Subordinated Debentures, SunAmerica has the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures
by extending the interest payment period from time to time on the Junior
Subordinated Debentures for an Extension Period not exceeding 20 consecutive
quarterly interest periods, during which no interest shall be due and payable.
In such an event, quarterly distributions on the Preferred Securities would not
be made (but would continue to accrue with interest thereon at the rate of %
per annum to the extent permitted by applicable law, compounded quarterly) by
the Trust during any such Extension Period. If SunAmerica exercises the right
to extend an interest payment period, SunAmerica may not during such Extension
Period declare or pay dividends on, or redeem, purchase, acquire or make a
distribution or liquidation payment with respect to, any of its common stock or
preferred stock; provided that (i) SunAmerica will be permitted to pay accrued
dividends (and cash in lieu of fractional shares) upon the conversion of any of
its Series E Preferred Stock or upon the conversion of any other series of
preferred stock of SunAmerica as may be outstanding from time to time, in each
case in accordance with the terms of such stock and (ii) the foregoing will not
apply to stock dividends paid by SunAmerica. SunAmerica has outstanding
4,000,000 $3.10 Depositary Shares (the "Series E Depositary Shares"), each
representing one-fiftieth of a share of Series E Preferred Stock. Dividends
accrue on each Series E Depositary Share at the rate of $3.10 per year. On
November 1, 1998, unless previously redeemed, each of the outstanding Series E
Depositary Shares will convert into one share of SunAmerica's common stock and
the right to receive an amount in cash equal to all accrued and unpaid
dividends. As of the date of this Prospectus Supplement, SunAmerica had no
other convertible preferred stock outstanding.
Prior to the termination of any Extension Period, SunAmerica may further
extend such Extension Period; provided that such Extension Period together with
all such previous and further extensions thereof may not exceed 20 consecutive
quarterly interest periods. Upon the termination of any Extension Period and
the payment of all amounts then due, SunAmerica may commence a new Extension
Period, subject to the above requirements. SunAmerica may also prepay at any
time all or any portion of the interest accrued during an Extension Period.
Consequently, there could be multiple Extension Periods of varying lengths (up
to nine Extension Periods of 20 consecutive quarterly interest periods each or
more numerous shorter Extension Periods) throughout the term of the Junior
Subordinated Debentures. See "Description of the Preferred Securities--
Distributions" and "Description of the Junior Subordinated Debentures--Option
to Extend Interest Payment Period."
Because SunAmerica believes that the likelihood of its exercising its option
to defer payments of interest is remote, the Junior Subordinated Debentures
will be treated under new Treasury regulations as issued without "original
issue discount" for United States federal income tax purposes. As a result,
holders of Preferred Securities will include interest in taxable income under
their own methods of accounting (e.g., cash or accrual). Under the new
regulations, however, if SunAmerica exercises its right to defer payments of
interest, the Junior Subordinated Debentures will become original issue
discount instruments and holders of Preferred Securities will be required to
include their pro rata share of original issue discount in gross income as it
accrues for United States federal income tax purposes in advance of the receipt
of cash. See "Taxation--Interest Income and Original Issue Discount."
S-9
<PAGE>
If SunAmerica exercises its right to defer payments of interest, the
Preferred Securities may trade at a price that does not fully reflect the value
of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. Holders who dispose of Preferred Securities between
record dates for payments of distributions thereon will be required to include
accrued but unpaid interest on the Junior Subordinated Debentures through the
date of disposition in taxable income as ordinary income, and to add such
amount to their adjusted tax basis in their pro rata share of the underlying
Junior Subordinated Debentures deemed disposed of. Accordingly, such holders
will recognize a capital loss to the extent the selling price (which may not
fully reflect the value of accrued but unpaid interest) is less than the
holders' adjusted tax basis (which will include accrued but unpaid interest).
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes. See
"Taxation--Interest Income and Original Issue Discount" and "--Disposition of
the Preferred Securities."
LISTING OF PREFERRED SECURITIES; TRADING PRICES
The Preferred Securities constitute a new issue of securities with no
established trading market. While SunAmerica will make an application to list
the Preferred Securities on the NYSE, there can be no assurance that such
application will be approved or that an active market for the Preferred
Securities will develop or be sustained in the future on such exchange.
Although the Underwriters have indicated to SunAmerica and the Trust that they
intend to make a market in the Preferred Securities as permitted by applicable
laws and regulations prior to the commencement of trading on the NYSE, they are
not obligated to do so and may discontinue any such market-making at any time
without notice. Accordingly, no assurance can be given as to the liquidity of,
or trading markets for, the Preferred Securities.
REDEMPTION OR DISTRIBUTION
If, at any time, a Tax Event shall occur or be continuing, under certain
circumstances, SunAmerica shall have the right to redeem the Junior
Subordinated Debentures, in whole or in part, in which event the Trust will
redeem Preferred Securities and Common Securities on a Pro Rata Basis (as
defined under "The SunAmerica Trusts" in the accompanying Prospectus) to the
same extent as the Junior Subordinated Debentures are redeemed.
SunAmerica will have the right at any time to cause the Trust to be dissolved
with the result that, in the manner described in "Description of the Preferred
Securities--Liquidation Distribution Upon Dissolution", Junior Subordinated
Debentures having an aggregate principal amount equal to the aggregate stated
liquidation amount of, and bearing accrued and unpaid distributions on, the
Preferred Securities and Common Securities would be distributed on a Pro Rata
Basis to the holders of the Preferred Securities and Common Securities in
liquidation of the Trust. Under current United States federal income tax law
and interpretation and assuming, as expected, that the Trust is treated as a
grantor trust, a distribution of the Junior Subordinated Debentures would not
be a taxable event to holders of the Preferred Securities. See "Taxation--
Distribution of Junior Subordinated Debentures to Holders of Preferred
Securities." Should there be a change in law, a change in legal interpretation,
a Tax Event or other circumstances, however, the distribution could be a
taxable event to the holders of the Preferred Securities.
There can be no assurance as to the market prices for Preferred Securities or
the Junior Subordinated Debentures which may be distributed in exchange for
Preferred Securities if a dissolution and liquidation of the Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase, or
the Junior Subordinated Debentures that the investor may receive on dissolution
and liquidation of the Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby. Because
holders of Preferred Securities may receive Junior Subordinated Debentures upon
the election by SunAmerica to dissolve the Trust, prospective purchasers of
Preferred Securities are also making an investment decision with regard to the
Junior Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein and in the
accompanying Prospectus. See "Description
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<PAGE>
of the Preferred Securities--Redemption or Distribution" and "Description of
the Junior Subordinated Debentures--General." Notwithstanding the foregoing,
SunAmerica shall have the right to shorten the maturity of the Junior
Subordinated Debentures, to a date not earlier than , 2001, upon occurrence
of a Tax Event which relates to the deductibility of interest payable by
SunAmerica on the Junior Subordinated Debentures. See "Description of the
Junior Subordinated Debentures--General."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and, subject
to the rights of holders of Preferred Securities to appoint a Special Regular
Trustee upon the occurrence of an Appointment Event (as defined herein), will
not be able to appoint, remove or replace, or to increase or decrease the
number of, Trustees, which rights are vested exclusively in the Common
Securities.
POTENTIAL MARKET VOLATILITY DURING EXTENSION PERIOD
As described above, SunAmerica has the right to extend an interest payment
period on the Junior Subordinated Debentures from time to time for a period not
exceeding 20 consecutive quarterly interest periods. If SunAmerica determines
to extend an interest payment period, or if SunAmerica thereafter extends an
Extension Period or prepays interest accrued during an Extension Period as
described above, the market price of the Preferred Securities is likely to be
affected. In addition, as a result of such rights, the market price of the
Preferred Securities (which represent an undivided interest in Junior
Subordinated Debentures) may be more volatile than other securities on which
original issue discount accrues that do not have such rights. A holder that
disposes of its Preferred Securities during an Extension Period, therefore, may
not receive the same return on its investment as a holder that continues to
hold its Preferred Securities. See "Description of the Junior Subordinated
Debentures--Option to Extend Interest Payment Period."
S-11
<PAGE>
CAPITALIZATION OF SUNAMERICA
The following table sets forth the unaudited consolidated capitalization of
SunAmerica at June 30, 1996, and as adjusted to reflect (i) the sale of the
Preferred Securities (assuming no exercise of the Underwriters' overallotment
option) and (ii) the public offering of $375,000,000 principal amount of 6.20%
Notes due October 31, 1999. See "Use of Proceeds." The table should be read in
conjunction with SunAmerica's consolidated financial statements and notes
thereto included in the documents incorporated by reference herein. See
"Incorporation of Certain Documents by Reference" in the accompanying
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Indebtedness (interest rates are as of June 30,
1996):
Medium-term notes due 1998 through 2025 (5
3/8% to 7 3/8%) ............................ $ 248,335 $ 248,335
8.125% debentures due April 28, 2023......... 100,000 100,000
9.95% debentures due February 1, 2012........ 100,000 100,000
9% notes due January 15, 1999................ 125,000 125,000
6.20% notes due October 31, 1999............. -- 375,000
---------- ----------
Total indebtedness............................. 573,335 948,335
---------- ----------
SunAmerica-obligated mandatorily redeemable
preferred securities of
subsidiary grantor trusts..................... 237,631(/1/) 487,631(/2/)
---------- ----------
Shareholders' equity:
Preferred Stock.............................. 384,549 384,549
Nontransferable Class B Stock................ 10,848 10,848
Common Stock................................. 108,493 108,493
Additional paid-in capital................... 298,621 298,621
Retained earnings............................ 812,363 812,363
Net unrealized losses on debt and equity se-
curities available for sale................. (88,669) (88,669)
---------- ----------
Total shareholders' equity................... 1,526,205 1,526,205
---------- ----------
Total capitalization........................... $2,337,171 $2,962,171
========== ==========
</TABLE>
- --------
(1) Represents SunAmerica-obligated mandatorily redeemable preferred securities
of (1) SunAmerica Capital Trust I, the sole asset of which is $54.26
million principal amount of 9.95% Junior Subordinated Debentures due 2044
of SunAmerica and (2) SunAmerica Capital Trust II, the sole asset of which
is $191.22 million principal amount of 8.35% Junior Subordinated Debentures
due 2044 of SunAmerica.
(2) As described in this Prospectus Supplement, the sole asset of the Trust
will be the Junior Subordinated Debentures.
On October 31, 1996, SunAmerica entered into an underwriting agreement for
the public offering of 10,000,000 PERCS Units, together with an overallotment
option for an additional 1,500,000 PERCS Units. See "Recent Developments--
Recent Issuances of Securities."
S-12
<PAGE>
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with SunAmerica's
financial statements, with the Preferred Securities accounted for as minority
interests and captioned in the consolidated balance sheet as "SunAmerica-
obligated mandatorily redeemable preferred securities of grantor trusts whose
sole assets are junior subordinated debentures of SunAmerica."
USE OF PROCEEDS
The proceeds of the sale of the Preferred Securities will be invested by the
Trust in Junior Subordinated Debentures of SunAmerica. The net proceeds from
the sale of the Junior Subordinated Debentures are expected to be used for
general corporate purposes, including the repayment or redemption of
outstanding debt or preferred stock, the possible acquisition of financial
services businesses or assets thereof, investments in portfolio assets and
working capital needs. SunAmerica routinely reviews opportunities to acquire
financial services businesses or the assets thereof. SunAmerica currently has
no commitments or understandings to acquire any specific businesses or other
material assets. SunAmerica is considering the acquisition of approximately
$4.5 billion of fixed annuity assets for a total consideration of between $200
million and $300 million. SunAmerica has been advised that other persons have
submitted acquisition proposals. Discussions with the seller are ongoing
regarding the acquisition and possible terms, but there can be no assurance
that SunAmerica will be successful in pursuing this or any other acquisition
opportunity.
On October 31, 1996, SunAmerica entered into an underwriting agreement for
the public offering of $375,000,000 principal amount of 6.20% Notes due October
31, 1999. The net proceeds from the sale of the 6.20% Notes ($373.4 million
before deducting expenses) will be used for general corporate purposes as
described above. The closing of the sale of the 6.20% Notes is expected to
occur on or about November 6, 1996.
S-13
<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration which is qualified under the Trust Indenture Act. The Property
Trustee, The Bank of New York, but not the other Trustees of the Trust, will
act as the indenture trustee for purposes of the Trust Indenture Act. The terms
of the Preferred Securities and the Declaration include those stated in the
Declaration and those made part of the Declaration by the Trust Indenture Act
or the Business Trust Act. The following summarizes the material terms and
provisions of the Preferred Securities and is qualified in its entirety by
reference to the Declaration, which has been filed as an exhibit to the
Registration Statement of which this Prospectus Supplement forms a part, the
Business Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Trust to issue the Preferred Securities, which
represent preferred undivided beneficial interests in the assets of the Trust,
and the Common Securities, which represent common undivided beneficial
interests in the assets of the Trust. All of the Common Securities will be
owned, directly or indirectly, by SunAmerica. The Common Securities and the
Preferred Securities rank pari passu with each other and will have equivalent
terms except that (i) if an Event of Default under the Declaration occurs and
is continuing, the rights of the holders of the Common Securities to payment in
respect of periodic distributions and payments upon liquidation, redemption or
otherwise are subordinated to the rights of the holders of the Preferred
Securities and (ii) holders of Common Securities have the exclusive right
(subject to the terms of the Declaration) to appoint, remove or replace
Trustees and to increase or decrease the number of Trustees, subject to the
right of holders of Preferred Securities to appoint a Special Regular Trustee
upon the occurrence of an Appointment Event. The Declaration does not permit
the issuance by the Trust of any securities or other evidences of beneficial
ownership of, or beneficial interests in, the Trust other than the Preferred
Securities and the Common Securities, the incurrence of any indebtedness for
borrowed money by the Trust or the making of any investment other than in the
Junior Subordinated Debentures. Pursuant to the Declaration, the Property
Trustee will own and hold the Junior Subordinated Debentures as trust assets
for the benefit of the holders of the Preferred Securities and the Common
Securities. The payment of distributions out of moneys held by the Property
Trustee and payments on redemption of the Preferred Securities or liquidation
of the Trust are guaranteed by SunAmerica on a subordinated basis as and to the
extent described under "Description of the Preferred Securities Guarantees" in
the accompanying Prospectus. The Property Trustee will hold the Preferred
Securities Guarantee for the benefit of holders of the Preferred Securities.
The Preferred Securities Guarantee is a full and unconditional guarantee from
the time of issuance of the Preferred Securities, but the Preferred Securities
Guarantee covers distributions and other payments on the Preferred Securities
only if and to the extent that SunAmerica has made a payment to the Property
Trustee of interest or principal on the Junior Subordinated Debentures
deposited in the Trust as trust assets. See "Voting Rights" below.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of % of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will bear interest thereon
at the rate per annum of % of the stated liquidation amount of $25 per
Preferred Security (to the extent permitted by law), compounded quarterly. The
term "distributions" as used herein includes any such interest payable unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months and for any
period shorter than a full quarterly period for which distributions are
computed, the amount of the distribution payable will be computed on the basis
of the actual number of days elapsed in such a 30-day month.
Distributions on the Preferred Securities will be cumulative, will accrue
from the original date of issuance and, except as otherwise described below,
will be payable quarterly in arrears, on March 30, June 30, September 30 and
December 30 of each year, commencing on December 30, 1996, but only if, and to
the extent that, interest payments are made in respect of Junior Subordinated
Debentures held by the Property Trustee.
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<PAGE>
So long as SunAmerica shall not be in default in the payment of interest on
the Junior Subordinated Debentures, SunAmerica has the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures
by extending the interest payment period from time to time on the Junior
Subordinated Debentures for a period not exceeding 20 consecutive quarterly
interest periods and, as a consequence, quarterly distributions on the
Preferred Securities would not be made (but would continue to accrue with
interest thereon at the rate of % per annum to the extent permitted by
applicable law, compounded quarterly) by the Trust during any such Extension
Period. If SunAmerica exercises the right to extend an interest payment period,
SunAmerica may not declare or pay dividends on, or redeem, purchase, acquire or
make a distribution or liquidation payment with respect to, any of its common
stock or preferred stock during such Extension Period; provided that (i)
SunAmerica will be permitted to pay accrued dividends (and cash in lieu of
fractional shares) upon the conversion of any of its Series E Preferred Stock
or upon the conversion of any other series of preferred stock of SunAmerica as
may be outstanding from time to time, in each case in accordance with the terms
of such stock, and (ii) the foregoing will not apply to any stock dividend by
SunAmerica. Prior to the termination of any such Extension Period, SunAmerica
may further extend such Extension Period; provided that such Extension Period
together with all such previous and further extensions thereof may not exceed
20 consecutive quarterly interest periods. Upon the termination of any
Extension Period and the payment of all amounts then due, SunAmerica may
commence a new Extension Period, subject to the above requirements. SunAmerica
may also prepay at any time all or any portion of the interest accrued during
an Extension Period. Consequently, there could be multiple Extension Periods of
varying lengths (up to nine Extension Periods of 20 consecutive quarterly
interest periods each or more numerous shorter Extension Periods) throughout
the term of the Junior Subordinated Debentures. See "Risk Factors--Option to
Extend Interest Payment Period; Tax Impact of Extension"; "Description of the
Junior Subordinated Debentures--Interest" and "--Option to Extend Interest
Payment Period." Payments of accrued distributions will be payable to holders
of Preferred Securities as they appear on the books and records of the Trust on
the first record date after the end of an Extension Period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Property Trustee has cash on hand in the Property
Account to permit such payment. The funds available for distribution to the
holders of the Preferred Securities will be limited to payments received by the
Property Trustee in respect of the Junior Subordinated Debentures that are
deposited in the Trust as trust assets. See "Description of the Junior
Subordinated Debentures." If SunAmerica does not make interest payments on the
Junior Subordinated Debentures, the Property Trustee will not make
distributions on the Preferred Securities. Under the Declaration, if and to the
extent SunAmerica does make interest payments on the Junior Subordinated
Debentures deposited in the Trust as trust assets, the Property Trustee is
obligated to make distributions on the Trust Securities on a Pro Rata Basis.
The payment of distributions on the Preferred Securities is guaranteed by
SunAmerica on a subordinated basis as and to the extent set forth under
"Description of the Preferred Securities Guarantees" in the accompanying
Prospectus. The Preferred Securities Guarantee is a full and unconditional
guarantee from the time of issuance of the Preferred Securities but the
Preferred Securities Guarantee covers distributions and other payments on the
Preferred Securities only if and to the extent that SunAmerica has made a
payment to the Property Trustee of interest or principal on the Junior
Subordinated Debentures deposited in the Trust as trust assets.
Distributions on the Preferred Securities will be made to the holders thereof
as they appear on the books and records of the Trust on the relevant record
dates, which, as long as the Preferred Securities remain in book-entry form,
will be one Business Day (as defined herein) prior to the relevant Distribution
payment date. Distributions payable on any Preferred Securities that are not
punctually paid on any Distribution payment date as a result of SunAmerica
having failed to make the corresponding interest payment on the Junior
Subordinated Debentures will forthwith cease to be payable to the person in
whose name such Preferred Security is registered on the relevant record date,
and such defaulted Distribution will instead be payable to the person in whose
name such Preferred Security is registered on the special record date
established by the Regular Trustees, which record date shall correspond to the
special record date or other specified date determined in accordance with the
Indenture; provided, however, that Distributions shall not
S-15
<PAGE>
be considered payable on any Distribution payment date falling within an
Extension Period unless SunAmerica has elected to make a full or partial
payment of interest accrued on the Junior Subordinated Debentures on such
Distribution payment date. Distributions on the Preferred Securities will be
paid through the Property Trustee who will hold amounts received in respect of
the Junior Subordinated Debentures in the Property Account for the benefit of
the holders of the Preferred and Common Securities. Subject to any applicable
laws and regulations and the provisions of the Declaration, each such payment
will be made as described under "Book-Entry Only Issuance--The Depository Trust
Company" below. In the event that the Preferred Securities do not continue to
remain in book-entry only form, the Regular Trustees shall have the right to
select relevant record dates, which shall be more than one Business Day prior
to the relevant payment dates. The Declaration provides that the payment dates
or record dates for the Preferred Securities shall be the same as the payment
dates and record dates for the Junior Subordinated Debentures. All
distributions paid with respect to the Trust Securities shall be paid on a Pro
Rata Basis to the holders thereof entitled thereto. If any date on which
distributions are to be made on the Preferred Securities is not a Business Day,
then payment of the distribution to be made on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date. "Business Day" shall mean any day other than Saturday,
Sunday or any other day on which banking institutions in New York, New York are
permitted or required by any applicable law to close.
REDEMPTION OR DISTRIBUTION
If, at any time, a Tax Event shall occur or be continuing, SunAmerica shall
have the right, upon not less than 30 nor more than 60 days' notice, to redeem
the Junior Subordinated Debentures, in whole or in part, for cash within 90
days following the occurrence of such Tax Event. Promptly following such
redemption, Preferred Securities and Common Securities with an aggregate
liquidation amount equal to the aggregate principal amount of the Junior
Subordinated Debentures so redeemed will be redeemed by the Trust at the
Redemption Price on a Pro Rata Basis. The Common Securities will be redeemed on
a Pro Rata Basis with the Preferred Securities, except that if an Event of
Default under the Declaration has occurred and is continuing, the Preferred
Securities will have a priority over the Common Securities with respect to
payment of the Redemption Price.
"Tax Event" means that the Regular Trustees shall have obtained an opinion of
nationally recognized independent tax counsel experienced in such matters (a
"Tax Event Opinion") to the effect that on or after the date of this Prospectus
Supplement as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, (b) any amendment to, or change in, an interpretation or application
of any such laws or regulations by any legislative body, court, governmental
agency or regulatory authority (including the enactment of any legislation and
the publication of any judicial decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated, issued or
effective or which interpretation or pronouncement is issued or announced or
which action is taken, in each case on or after the date of this Prospectus
Supplement, there is more than an insubstantial risk that (i) the Trust is, or
will be within 90 days of the date thereof, subject to United States federal
income tax with respect to income accrued or received on the Junior
Subordinated Debentures, (ii) the Trust is, or will be within 90 days of the
date thereof, subject to more than a de minimis amount of other taxes, duties
or other governmental charges or (iii) interest payable by SunAmerica on the
Junior Subordinated Debentures is not, or within 90 days of the date thereof
will not be, deductible by SunAmerica for United States federal income tax
purposes.
SunAmerica will have the right at any time to cause the Trust to be dissolved
with the result that, after satisfaction of creditors of the Trust, Junior
Subordinated Debentures with an aggregate principal amount equal to the
aggregate stated liquidation amount of the Preferred Securities and the Common
Securities would
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be distributed on a Pro Rata Basis to the holders of the Preferred Securities
and the Common Securities in liquidation of such holders' interests in the
Trust, within 90 days following notice given to the holders of the Preferred
Securities.
On the date fixed for any distribution of Junior Subordinate Debentures, upon
dissolution of the Trust, (i) the Preferred Securities and the Common
Securities will no longer be deemed to be outstanding, (ii) the depositary or
its nominee, as the record holder of the Preferred Securities, will receive a
registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution, and (iii) any
certificates representing Preferred Securities not held by the depositary or
its nominee will be deemed to represent Junior Subordinated Debentures having
an aggregate principal amount equal to the aggregate stated liquidation amount
of, with an interest rate identical to the distribution rate of, and accrued
and unpaid interest equal to accrued and unpaid distributions on, such
Preferred Securities, until such certificates are presented to SunAmerica or
its agent for transfer or reissuance.
There can be no assurance as to the market price for the Junior Subordinated
Debentures which may be distributed in exchange for Preferred Securities if a
dissolution and liquidation of the Trust were to occur. Accordingly, the Junior
Subordinated Debentures which the investor may subsequently receive on
dissolution and liquidation of the Trust may trade at a discount to the price
of the Preferred Securities exchanged. If the Junior Subordinated Debentures
are distributed to the holders of Preferred Securities upon the dissolution of
the Trust, SunAmerica will use its best efforts to list the Junior Subordinated
Debentures on the NYSE or on such other exchange on which the Preferred
Securities are then listed.
Notwithstanding the foregoing, SunAmerica shall have the right to shorten the
maturity of the Junior Subordinated Debentures, to a date not earlier than ,
2001, upon occurrence of a Tax Event which relates to the deductibility of
interest payable by SunAmerica on the Junior Subordinated Debentures. See
"Description of the Junior Subordinated Debentures--General."
MANDATORY REDEMPTION
Upon the repayment of the Junior Subordinated Debentures, whether at
maturity, upon redemption or otherwise, the proceeds from such repayment or
payment will be promptly applied to redeem Preferred Securities and Common
Securities having an aggregate liquidation amount equal to the Junior
Subordinated Debentures so repaid, upon not less than 30 nor more than 60 days'
notice, at the Redemption Price. The Common Securities will be entitled to be
redeemed on a Pro Rata Basis with the Preferred Securities, except that if an
Event of Default under the Declaration has occurred and is continuing, the
Preferred Securities will have a priority over the Common Securities with
respect to payment of the Redemption Price. Subject to the foregoing, if fewer
than all outstanding Preferred Securities and Common Securities are to be
redeemed, the Preferred Securities and Common Securities will be redeemed on a
Pro Rata Basis. In the event fewer than all outstanding Preferred Securities
are to be redeemed, Preferred Securities registered in the name of and held by
DTC or its nominee will be redeemed as described under "Book-Entry-Only;
Delivery and Form" below.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all the outstanding Preferred Securities
unless all accrued and unpaid distributions have been paid on all Preferred
Securities for all quarterly distribution periods terminating on or prior to
the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable) then by 12:00 noon, New York City time, on
the redemption date and provided that SunAmerica has paid to the Property
Trustee a sufficient amount of cash in connection with the related redemption
or maturity of the Junior Subordinated Debentures, the Trust will irrevocably
deposit with the depositary funds sufficient to pay the applicable Redemption
Price and will give the depositary irrevocable instructions and authority to
pay the Redemption Price to the holders of the Preferred Securities. See "Book-
Entry Only Issuance--The Depository Trust Company." If notice of redemption
shall have been given and funds
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deposited as required, then, immediately prior to the close of business on the
date of such deposit, distributions will cease to accrue on the Preferred
Securities called for redemption, such Preferred Securities shall no longer be
deemed to be outstanding and all rights of holders of such Preferred Securities
so called for redemption will cease, except the right of the holders of such
Preferred Securities to receive the Redemption Price, but without interest on
such Redemption Price. Neither the Trustees nor the Trust shall be required to
register or cause to be registered the transfer of any Preferred Securities
which have been so called for redemption. If any date fixed for redemption of
Preferred Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date fixed for redemption. If
SunAmerica fails to repay Junior Subordinated Debentures on maturity or on the
date fixed for this redemption or if payment of the Redemption Price in respect
of Preferred Securities is improperly withheld or refused and not paid by the
Property Trustee or by SunAmerica pursuant to the Preferred Securities
Guarantee described under "Description of the Preferred Securities Guarantees"
in the accompanying Prospectus, distributions on such Preferred Securities will
continue to accrue, from the original redemption date of the Preferred
Securities to the date of payment, in which case the actual payment date will
be considered the date fixed for redemption for purposes of calculating the
Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed as described below
under "Book-Entry Only Issuance--The Depository Trust Company."
If a partial redemption of the Preferred Securities would result in the
delisting of the Preferred Securities by any national securities exchange or
other organization on which the Preferred Securities are then listed,
SunAmerica pursuant to the Indenture will only redeem the Junior Subordinated
Debentures in whole and, as a result, the Trust may only redeem the Preferred
Securities in whole.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), SunAmerica or any of its subsidiaries
may at any time and from time to time purchase outstanding Preferred Securities
by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution, liquidation,
winding-up or termination of the Trust, the holders of the Preferred Securities
and Common Securities at the date of dissolution, winding-up or termination of
the Trust will be entitled to receive on a Pro Rata Basis solely out of the
assets of the Trust, after satisfaction of liabilities of creditors (to the
extent not satisfied by SunAmerica as provided in the Declaration), an amount
equal to the aggregate of the stated liquidation amount of $25 per Trust
Security plus accrued and unpaid distributions thereon to the date of payment
(such amount being the "Liquidation Distribution"), unless, in connection with
such dissolution, liquidation, winding-up or termination, Junior Subordinated
Debentures in an aggregate principal amount equal to the aggregate stated
liquidation amount of such Trust Securities and bearing accrued and unpaid
interest in an amount equal to the accrued and unpaid distributions on such
Trust Securities, shall be distributed on a Pro Rata Basis to the holders of
the Preferred Securities and Common Securities in exchange therefor.
If, upon any such dissolution, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities and the Common Securities shall be paid on a
Pro Rata Basis. The holders of the Common Securities will be entitled to
receive distributions upon any such dissolution on a Pro Rata Basis with the
holders of the Preferred Securities, except that if an Event of Default under
the Declaration has occurred and is continuing, the Preferred Securities shall
have a priority over the Common Securities with respect to payment of the
Liquidation Distribution.
Pursuant to the Declaration, the Trust shall terminate: (i) on the maturity
date of the Junior Subordinated Debentures which is September 30, 2045,
provided that SunAmerica shall have the right to
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shorten the maturity of the Junior Subordinated Debentures, to a date not
earlier than , 2001, upon the occurrence of a Tax Event which relates to
the deductibility of interest payable by SunAmerica on the Junior Subordinated
Debentures, (ii) upon the filing of a certificate of dissolution or its
equivalent with respect to the Trust, (iii) when all of the Trust Securities
shall have been called for redemption and the amounts necessary for redemption
thereof shall have been paid to the holders of Trust Securities in accordance
with the terms of the Trust Securities, or (iv) when all of the Junior
Subordinated Debentures shall have been distributed to the holders of Trust
Securities in exchange for all of the Trust Securities in accordance with the
terms of the Trust Securities.
NO MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be replaced
by, or convey, transfer or lease its properties and assets to, any corporation
or other entity.
DECLARATION EVENTS OF DEFAULT
An Indenture Event of Default (as defined in the accompanying Prospectus)
will constitute an event of default under the Declaration with respect to the
Trust Securities (an "Event of Default"); provided that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any such Event of Default with respect to the Common Securities until all
Events of Default with respect to the Preferred Securities have been cured or
waived. Until all such Events of Default with respect to the Preferred
Securities have been so cured or waived, the Property Trustee will be deemed to
be acting solely on behalf of the holders of the Preferred Securities, and only
the holders of the Preferred Securities will have the right to direct the
Property Trustee with respect to certain matters under the Declaration and
consequently under the Indenture. In the event that any Event of Default with
respect to the Preferred Securities is waived by the holders of the Preferred
Securities as provided in the Declaration, the holders of Common Securities
pursuant to the Declaration have agreed that such waiver also constitutes a
waiver of such Event of Default with respect to the Common Securities for all
purposes under the Declaration without any further act, vote or consent of the
holders of the Common Securities. See "Voting Rights" below.
Upon the occurrence of an Event of Default, the Property Trustee as the
holder of all of the Junior Subordinated Debentures will have the right under
the Indenture to declare the principal of and interest on the Junior
Subordinated Debentures to be immediately due and payable. In addition, the
Property Trustee will have the power to exercise all rights, powers and
privileges under the Indenture. See "Description of the Junior Subordinated
Debentures".
VOTING RIGHTS
Except as provided below, under "Modification and Amendment of the
Declaration" and "Description of the Preferred Securities Guarantee--Amendments
and Assignment" in the accompanying Prospectus and as otherwise required by the
Business Trust Act, the Trust Indenture Act and the Declaration, the holders of
the Preferred Securities will have no voting rights.
If (i) the Trust fails to make distributions in full on the Preferred
Securities for 6 consecutive quarterly distribution periods, or (ii) an Event
of Default under the Declaration occurs and is continuing (each, an
"Appointment Event"), then the holders of the Preferred Securities, acting as a
single class, will be entitled, by the vote of holders of Preferred Securities,
representing a majority in aggregate liquidation amount of the outstanding
Preferred Securities, to appoint a Special Regular Trustee (who need not be an
officer or an employee of or otherwise affiliated with SunAmerica) who shall
have the same rights, powers and privileges under the Declaration as the
Regular Trustees. Any holder of Preferred Securities (other than SunAmerica or
any of its affiliates) shall have the right to nominate any person to be
appointed as Special Regular Trustee. For purposes of determining whether the
Trust has failed to pay distributions in full for 6 consecutive quarterly
distribution periods, distributions shall be deemed to remain in arrears,
notwithstanding any payments in respect thereof, until full cumulative
distributions have been or contemporaneously are paid with respect to all
quarterly distribution periods terminating on or prior to the date of payment
of such cumulative distributions. Not later than 30 days after such right to
appoint a Special Regular Trustee arises, the Regular
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Trustees will convene a meeting for the purpose of appointing a Special Regular
Trustee. If the Regular Trustees fail to convene such meeting within such 30-
day period, the holders of Preferred Securities representing 10% in liquidation
amount of the outstanding Preferred Securities will be entitled to convene such
meeting. The provisions of the Declaration relating to the convening and
conduct of the meetings of the holders will apply with respect to any such
meeting. If, at any such meeting, holders of less than a majority in aggregate
liquidation amount of Preferred Securities entitled to vote for the appointment
of a Special Regular Trustee vote for such appointment, no Special Regular
Trustee shall be appointed. Any Special Regular Trustee may be removed without
cause at any time by holders of Preferred Securities representing a majority in
liquidation amount of the Preferred Securities and holders of Preferred
Securities representing 10% in liquidation amount of the Preferred Securities
shall be entitled to convene a meeting for such purpose. Any Special Regular
Trustee appointed shall cease to be a Special Regular Trustee if the
Appointment Event pursuant to which the Special Regular Trustee was appointed
and all other Appointment Events have been cured and cease to be continuing.
Notwithstanding the appointment of any such Special Regular Trustee, SunAmerica
shall retain all rights under the Indenture, including the right to extend the
interest payment period as provided under "Description of the Junior
Subordinated Debentures--Option to Extend Interest Payment Period". If such an
extension occurs, there will be no Indenture Event of Default for failure to
make any scheduled interest payment during the Extension Period on the date
originally scheduled.
Subject to the requirements of the second to last sentence of this paragraph,
the holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right (a) on behalf of all holders of Preferred Securities,
to waive any past default that is waivable under the Declaration and (b) to
direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under the Declaration, including the right to direct
the Property Trustee, as the holder of the Junior Subordinated Debentures, to
(i) direct the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee (as defined herein), or executing any
trust or power conferred on the Indenture Trustee with respect to the Junior
Subordinated Debentures, (ii) waive any past default that is waivable under
Section 6.06 of the Indenture, or (iii) exercise any right to rescind or annul
a declaration that the principal of all the Junior Subordinated Debentures
shall be due and payable; provided that where a consent under the Indenture
would require the consent of (1) holders of Junior Subordinated Debentures
representing a specified percentage greater than a majority in principal amount
of the Junior Subordinated Debentures or (2) each holder of Junior Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of, in the case of clause (1) above, holders
of Preferred Securities representing such specified percentage of the aggregate
liquidation amount of the Preferred Securities or, in the case of clause (2)
above, each holder of Preferred Securities affected thereby. The Property
Trustee shall not revoke any action previously authorized or approved by a vote
of the holders of Preferred Securities. The Property Trustee shall notify all
holders of record of Preferred Securities of any notice of default received
from the Indenture Trustee with respect to the Junior Subordinated Debentures.
Other than with respect to directing the time, method and place of conducting
any proceeding for any remedy available to the Property Trustee or the
Indenture Trustee as set forth above, the Property Trustee shall be under no
obligation to take any of the foregoing actions at the direction of the holders
of the Preferred Securities unless the Property Trustee shall have obtained an
opinion of nationally recognized independent tax counsel recognized as expert
in such matters to the effect that the Trust will not be classified for United
States federal income tax purposes as an association taxable as a corporation
or a partnership on account of such action and will be treated as a grantor
trust for United States federal income tax purposes following such action. If
the Property Trustee fails to enforce its rights under the Declaration
(including, without limitation, its rights, powers and privileges as a holder
of the Junior Subordinated Debentures under the Indenture), any holder of
Preferred Securities may institute a legal proceeding directly against
SunAmerica to enforce the Property Trustee's rights under the Declaration,
without first instituting a legal proceeding against the Property Trustee or
any other Person.
A waiver of an Indenture Event of Default by the Property Trustee at the
direction of holders of the Preferred Securities will constitute a waiver of
the corresponding Event of Default under the Declaration in respect of the
Trust Securities.
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In the event the consent of the Property Trustee as the holder of the Junior
Subordinated Debentures is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, the Property Trustee shall request the direction of
the holders of the Trust Securities with respect to such amendment,
modification or termination and shall vote with respect to such amendment,
modification or termination as directed by a majority in liquidation amount of
the Trust Securities voting together as a single class; provided, however, that
where any such amendment, modification or termination under the Indenture would
require the consent of holders of Junior Subordinated Debentures representing a
specified percentage greater than a majority in principal amount of the Junior
Subordinated Debentures, the Property Trustee may only give such consent at the
direction of the holders of Trust Securities representing such specified
percentage of the aggregate liquidation amount of the Trust Securities; and,
provided, further, that the Property Trustee shall be under no obligation to
take any such action in accordance with the directions of the holders of the
Trust Securities unless the Property Trustee has obtained an opinion of
nationally recognized independent tax counsel recognized as expert in such
matters to the effect that the Trust will not be classified for United States
federal income tax purposes as an association taxable as a corporation or a
partnership on account of such action and will be treated as a grantor trust
for United States federal income tax purposes following such action.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be taken,
to be mailed to each holder of record of Preferred Securities. Each such notice
will include a statement setting forth (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such holders are entitled to
vote or of such matter upon which written consent is sought and (iii)
instructions for the delivery of proxies or consents.
No vote or consent of the holders of Preferred Securities will be required
for the Trust to redeem and cancel Preferred Securities or distribute Junior
Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities at such time that are owned by SunAmerica or by any entity directly
or indirectly controlling or controlled by or under direct or indirect common
control with SunAmerica shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
The procedures by which persons owning Preferred Securities registered in the
name of and held by The Depository Trust Company or its nominee may exercise
their voting rights are described under "Book-Entry Only Issuance--The
Depository Trust Company" below.
Subject to the right of holders of Preferred Securities to appoint a Special
Regular Trustee upon the occurrence of an Appointment Event, holders of the
Preferred Securities will have no rights to increase or decrease the number of
Trustees or to appoint, remove or replace a Trustee, which rights are vested
exclusively in the holders of the Common Securities.
MODIFICATION AND AMENDMENT OF THE DECLARATION
The Declaration may be modified and amended on approval of a majority of the
Regular Trustees, provided, that, (i) if any proposed modification or amendment
provides for, or the Regular Trustees otherwise propose to effect, (A) any
action that would adversely affect the powers, preferences or special rights of
the Trust Securities, whether by way of amendment to the Declaration or
otherwise, or (B) the dissolution, winding-up or termination of the Trust other
than pursuant to the terms of the Declaration, then the holders of the
outstanding Trust Securities as a class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of at least 66 2/3% in liquidation amount of the Trust
Securities, provided that if any amendment or proposal referred to in clause
(i) above
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would adversely affect only the Preferred Securities or the Common Securities,
then only the affected class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of 66 2/3% in liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, (i) no amendment or modification may be made
to the Declaration unless the Regular Trustees shall have obtained (A) either a
ruling from the Internal Revenue Service or a written unqualified opinion of
nationally recognized independent tax counsel experienced in such matters to
the effect that such amendment will not cause the Trust to be classified for
United States federal income tax purposes as an association taxable as a
corporation or a partnership and to the effect that the Trust will continue to
be treated as a grantor trust for purposes of United States federal income
taxation and (B) a written unqualified opinion of nationally recognized
independent counsel experienced in such matters to the effect that such
amendment will not cause the Trust to be an "investment company" which is
required to be registered under the Investment Company Act of 1940, as amended
(the "1940 Act"); (ii) certain specified provisions of the Declaration may not
be amended without the consent of all of the holders of the Trust Securities,
(iii) no amendment which adversely affects the rights, powers and privileges of
the Property Trustee shall be made without the consent of the Property Trustee,
(iv) Article IV of the Declaration relating to the obligation of SunAmerica to
purchase the Common Securities and to pay certain obligations and expenses of
the Trust as described under "The SunAmerica Trust" in the accompanying
Prospectus may not be amended without the consent of SunAmerica, (v) the rights
of holders of Common Securities under Article V of the Declaration to increase
or decrease the number of, and to appoint, replace or remove, Trustees (other
than a Special Regular Trustee) shall not be amended without the consent of
each holder of Common Securities and (vi) the rights of holders of Preferred
Securities under the Declaration to appoint or remove a Special Regular Trustee
shall not be amended without the consent of each holder of Preferred
Securities.
The Declaration further provides that it may be amended without the consent
of the holders of the Trust Securities to (i) cure any ambiguity, (ii) correct
or supplement any provision in the Declaration that may be defective or
inconsistent with any other provision of the Declaration, (iii) to add to the
covenants, restrictions or obligations of SunAmerica, and (iv) to conform to
changes in, or a change in interpretation or application of certain 1940 Act
requirements by the Commission, which amendment does not adversely affect the
rights, preferences or privileges of the holders.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as fully
registered securities registered in the name of DTC or its nominee. One or more
fully-registered global Preferred Securities certificates (each a "Preferred
Securities Global Certificate"), representing the total aggregate number of
Preferred Securities, will be issued and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in a global Preferred Security.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the NYSE, the American
Stock Exchange, Inc., and the National Association
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of Securities Dealers, Inc. Access to the DTC system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules applicable
to DTC and its Participants are on file with the Securities and Exchange
Commission.
Upon issuance of a Preferred Securities Global Certificate, DTC will credit
on its book-entry registration and transfer system the number of Preferred
Securities represented by such Preferred Securities Global Certificate to the
accounts of institutions that have accounts with DTC. Ownership of beneficial
interests in a Preferred Securities Global Certificate will be limited to
Participants or persons that may hold interests through Participants. The
ownership interest of each actual purchaser of each Preferred Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect Participants
through which the Beneficial Owners purchased Preferred Securities. Transfers
of ownership interests in the Preferred Securities are to be accomplished by
entries made on the books of Participants acting on behalf of Beneficial
Owners.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers. So long as DTC, or its
nominee, is the owner of a Preferred Securities Global Certificate, DTC or such
nominee, as the case may be, will be considered the sole owner and holder of
record of the Preferred Securities represented by such Preferred Securities
Global Certificate for all purposes.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce the amount of interest
of each Direct Participant in the Preferred Securities in accordance with its
procedures.
Although voting with respect to the Preferred Securities is limited, in those
instances in which a vote is required, neither DTC nor Cede & Co. itself will
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus proxy).
Distribution payments on the Preferred Securities represented by a Preferred
Series Global Certificate will be made by the Property Trustee to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payments on such payment
date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices and will be the responsibility of
such Participants and not of DTC, the Trust or SunAmerica, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of distributions to DTC is the responsibility of the Trust,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
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DTC may discontinue providing its services as securities depository with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, if a successor securities depository is
not obtained, Preferred Security certificates will be required to be printed
and delivered. Additionally, the Trust may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor depository). In that
event, certificates for the Preferred Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Trust and SunAmerica believe to be
reliable. Neither the Trust nor SunAmerica has any responsibility for the
performance by DTC or its Participants of their respective obligations as
described hereunder or under the rules and procedures governing their
respective operations.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
In the event the Preferred Securities do not remain in book-entry only form,
the following provisions will apply:
Payment of distributions and payments on redemption of the Preferred
Securities will be payable, the transfer of the Preferred Securities will be
registrable, and Preferred Securities will be exchangeable for Preferred
Securities of other denominations of a like aggregate liquidation amount, at
the principal corporate trust office of the Property Trustee in The City of New
York; provided that payment of distributions may be made at the option of the
Regular Trustees on behalf of the Trust by check mailed to the address of the
persons entitled thereto and that the payment on redemption of any Preferred
Security will be made only upon surrender of such Preferred Security to the
Property Trustee.
The Bank of New York or one of its affiliates will act as registrar and
transfer agent for the Preferred Securities. The Bank of New York will also act
as paying agent and, with the consent of the Regular Trustees, may designate
additional paying agents.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or SunAmerica may require) in respect of any tax or
other governmental charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to a default with respect to the Trust
Securities, undertakes to perform only such duties as are specifically set
forth in the Declaration and, after default, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provision, the Property Trustee is under no obligation
to exercise any of the powers vested in it by the Declaration at the request of
any holder of Preferred Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The Property Trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its
duties if the Property Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
SunAmerica and certain of its affiliates maintain a deposit account and
banking relationship with the Property Trustee.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
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MISCELLANEOUS
The Regular Trustees are authorized and directed to take such action as they
deem reasonable in order that the Trust will not be deemed to be an "investment
company" required to be registered under the 1940 Act or that the Trust will
not be classified for United States federal income tax purposes as an
association taxable as a corporation or a partnership and will be treated as a
grantor trust for United States federal income tax purposes. In this
connection, the Regular Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust or the Declaration,
that the Regular Trustees determine in their discretion to be reasonable and
necessary or desirable for such purposes, as long as such action does not
adversely affect the interests of holders of the Trust Securities.
SunAmerica and the Regular Trustees on behalf of the Trust will be required
to provide to the Property Trustee annually a certificate as to whether or not
SunAmerica and the Trust, respectively, are in compliance with all the
conditions and covenants under the Declaration.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the Junior Subordinated Debentures in
which the Trust will invest the proceeds from the issuance and sale of the
Trust Securities and which will be deposited in the Trust as trust assets. The
terms of the Junior Subordinated Debentures include those stated in the
Indenture dated March 15, 1995 (as amended by a Supplemental Indenture dated as
of October 28, 1996 (as so amended, the "Base Indenture")) between SunAmerica
and The First National Bank of Chicago, as trustee (the "Indenture Trustee"),
as supplemented by the Third Supplemental Indenture dated as of November ,
1996 between SunAmerica and the Indenture Trustee (as so supplemented, the
"Indenture"), forms of which have been filed as exhibits to the Registration
Statement of which this Prospectus Supplement forms a part, and those made part
of the Indenture by the Trust Indenture Act. This description supplements the
description of the general terms and provisions of the Subordinated Debt
Securities set forth in the accompanying Prospectus under the caption
"Description of the Junior Subordinated Debt Securities." The following
description is qualified in its entirety by reference to the Indenture and the
Trust Indenture Act. Whenever particular provisions or defined terms in the
Indenture are referred to herein, such provisions or defined terms are
incorporated by reference herein. Section and Article references used herein
are references to provisions of the Indenture.
The Indenture does not limit the aggregate principal amount of indebtedness
which may be issued thereunder and provides that junior subordinated debentures
may be issued thereunder from time to time in one or more series (collectively,
together with the Junior Subordinated Debentures, the "Subordinated
Debentures"). As of the date of this Prospectus Supplement, $245.5 million
principal amount of indebtedness was outstanding under the Base Indenture. The
Junior Subordinated Debentures constitute a separate series under the
Indenture.
GENERAL
The Junior Subordinated Debentures are unsecured, subordinated obligations of
SunAmerica, limited in aggregate principal amount to $258.9 million ($296.4
million if the Underwriters' overallotment option is exercised in full), which
amount is equal to the sum of (i) the stated liquidation amount of the
Preferred Securities issued by the Trust and (ii) the proceeds received by the
Trust upon issuance of the Common Securities to SunAmerica (which proceeds will
be used to purchase an equal principal amount of Junior Subordinated
Debentures).
The entire principal amount of the Junior Subordinated Debentures will become
due and payable, together with any accrued and unpaid interest thereon, on
September 30, 2045, provided that SunAmerica shall have the right to shorten
the maturity of the Junior Subordinated Debentures, to a date not earlier than
, 2001, upon the occurrence of a Tax Event which relates to the
deductibility of interest payable by
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SunAmerica on the Junior Subordinated Debentures. The Junior Subordinated
Debentures are not subject to any sinking fund. SunAmerica will have the right
at any time to cause the Trust to be dissolved with the result that, after
satisfaction of creditors of the Trust, Junior Subordinated Debentures with an
aggregate principal amount equal to the aggregate stated liquidation amount of
the Preferred Securities and the Common Securities would be distributed on a
Pro Rata Basis to the holders of the Preferred Securities and the Common
Securities in liquidation of such holders' interests in the Trust, within 90
days following notice given to the holders of the Preferred Securities.
If Junior Subordinated Debentures are distributed to holders of Preferred
Securities in dissolution of the Trust, such Junior Subordinated Debentures
will initially be issued as a Global Security (as defined below). As described
herein, under certain limited circumstances, Junior Subordinated Debentures may
be issued in certificated form in exchange for a Global Security. See "Book-
Entry and Settlement" below. In the event that Junior Subordinated Debentures
are issued in certificated form, such Junior Subordinated Debentures will be in
denominations of $25 and integral multiples thereof and may be transferred or
exchanged at the offices described below. Payments on Junior Subordinated
Debentures issued as a Global Security will be made to DTC, a successor
depositary or, in the event that no depositary is used, to a paying agent for
the Junior Subordinated Debentures.
In the event that Junior Subordinated Debentures are issued in certificated
form, payments of principal and interest will be payable, the transfer of the
Junior Subordinated Debentures will be registrable, and Junior Subordinated
Debentures will be exchangeable for Junior Subordinated Debentures of other
denominations of a like aggregate principal amount, at the corporate trust
office of the Indenture Trustee in The City of New York; provided that payment
of interest may be made at the option of SunAmerica by check mailed to the
address of the persons entitled thereto and that the payment of principal with
respect to any Junior Subordinated Debenture will be made only upon surrender
of such Junior Subordinated Debenture to the Indenture Trustee.
If the Junior Subordinated Debentures are distributed to the holders of
Preferred Securities upon the dissolution of the Trust, SunAmerica will use its
best efforts to list the Junior Subordinated Debentures on the NYSE or on such
other exchange on which the Preferred Securities are then listed.
OPTIONAL REDEMPTION
Except as provided below, the Junior Subordinated Debentures may not be
redeemed prior to , 2001. SunAmerica shall have the right to redeem the
Junior Subordinated Debentures, in whole or in part, from time to time, on or
after , 2001, upon not less than 30 nor more than 60 days' notice, at a
redemption price equal to 100% of the principal amount to be redeemed, plus any
accrued and unpaid interest, to the redemption date, including interest accrued
during an Extension Period. SunAmerica will also have the right to redeem the
Junior Subordinated Debentures at any time upon the occurrence of a Tax Event
if certain conditions are met as described under "Description of the Preferred
Securities--Redemption or Distribution".
If SunAmerica gives a notice of redemption in respect of Junior Subordinated
Debentures (which notice will be irrevocable) then, by 12:00 noon, New York
City time, on the redemption date, SunAmerica will deposit irrevocably with the
Indenture Trustee funds sufficient to pay the applicable redemption price and
will give irrevocable instructions and authority to pay such redemption price
to the holders of the Junior Subordinated Debentures. If notice of redemption
shall have been given and funds deposited as required, then upon the date of
such deposit, interest will cease to accrue on the Junior Subordinated
Debentures called for redemption, such Junior Subordinated Debentures will no
longer be deemed to be outstanding and all rights of holders of such Junior
Subordinated Debentures so called for redemption will cease, except the right
of the holders of such Junior Subordinated Debentures to receive the applicable
redemption price, but without interest on such redemption price. If any date
fixed for redemption of Junior Subordinated Debentures is not a Business Day,
then payment of the redemption price payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date
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fixed for redemption. If payment of the redemption price in respect of Junior
Subordinated Debentures is improperly withheld or refused and not paid by
SunAmerica, interest on such Junior Subordinated Debentures will continue to
accrue, from the original redemption date to the date of payment, in which case
the actual payment date will be considered the date fixed for redemption for
purposes of calculating the applicable redemption price. If fewer than all of
the Junior Subordinated Debentures are to be redeemed, the Junior Subordinated
Debentures to be redeemed shall be selected by lot or pro rata or in some other
equitable manner determined by the Indenture Trustee.
In the event of any redemption in part, SunAmerica shall not be required to
(i) issue, register the transfer of or exchange any Junior Subordinated
Debentures during a period beginning at the opening of business 15 days before
any selection for redemption of Junior Subordinated Debentures and ending at
the close of business on the earliest date on which the relevant notice of
redemption is deemed to have been given to all holders of Junior Subordinated
Debentures to be redeemed and (ii) register the transfer of or exchange any
Junior Subordinated Debentures so selected for redemption, in whole or in part,
except the unredeemed portion of any Junior Subordinated Debentures being
redeemed in part. (Section 2.05).
INTEREST
The Junior Subordinated Debentures will bear interest at the rate of % per
annum from the original date of issuance. Interest will be payable quarterly in
arrears on March 30, June 30, September 30 and December 30 of each year (each,
an "Interest Payment Date"), commencing on December 30, 1996, to the person in
whose name such Junior Subordinated Debenture is registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. In the event (i) the Preferred Securities shall not
continue to remain in book-entry only form or (ii) if following distribution of
the Junior Subordinated Debentures to holders of Trust Securities upon
dissolution of the Trust as described under "Description of the Preferred
Securities", the Junior Subordinated Debentures shall not continue to remain in
book-entry only form, SunAmerica shall have the right to select record dates
which shall be more than one Business Day prior to each Interest Payment Date.
Interest payable on any Junior Subordinated Debenture that is not punctually
paid or duly provided for on any interest payment date will forthwith cease to
be payable to the person in whose name such Junior Subordinated Debenture is
registered on the relevant record date, and such defaulted interest will
instead be payable to the person in whose name such Junior Subordinated
Debenture is registered on the special record date or other specified date
determined in accordance with the Indenture; provided, however, that interest
shall not be considered payable by SunAmerica on any interest payment date
falling within an Extension Period unless SunAmerica has elected to make a full
or partial payment of interest accrued on the Junior Subordinated Debentures on
such interest payment date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months and for any period shorter than a
full quarterly period for which interest is computed, the amount of interest
payable will be computed on the basis of the actual number of days lapsed in
such a 30-day month. If any date on which interest is payable on the Junior
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as SunAmerica shall not be in default in the payment of interest on
the Junior Subordinated Debentures, SunAmerica shall have the right to extend
the interest payment period from time to time for a period not exceeding 20
consecutive quarterly interest periods. SunAmerica has no current intention of
exercising its right to extend an interest payment period. No interest shall be
due and payable during an Extension Period, except at the end thereof. During
any Extension Period, SunAmerica shall not declare or
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pay any dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its common stock or preferred stock
or make any guarantee payments with respect thereto; provided that (i)
SunAmerica will be permitted to pay accrued dividends (and cash in lieu of
fractional shares) upon the conversion of any of its Series E Preferred Stock
or upon conversion of any other series of preferred stock of SunAmerica as may
be outstanding from time to time, in each case in accordance with the terms of
such stock and (ii) the foregoing will not apply to stock dividends paid by
SunAmerica. Prior to the termination of any such Extension Period, SunAmerica
may further extend the interest payment period; provided that such Extension
Period together with all such previous and further extensions thereof may not
exceed 20 consecutive quarterly interest periods. On the interest payment date
occurring at the end of each Extension Period, SunAmerica shall pay to the
holders of Junior Subordinated Debentures of record on the record date for such
interest payment date (regardless of who the holders of record may have been on
other dates during the Extension Period) all accrued and unpaid interest on the
Junior Subordinated Debentures, together with interest thereon at the rate
specified for the Junior Subordinated Debentures to the extent permitted by
applicable law, compounded quarterly ("Compounded Interest"). Upon the
termination of any Extension Period and the payment of all amounts then due,
SunAmerica may commence a new Extension Period, subject to the above
requirements. SunAmerica may also prepay at any time all or any portion of the
interest accrued during an Extension Period. Consequently, there could be
multiple Extension Periods of varying lengths (up to nine Extension Periods of
20 consecutive quarterly interest periods each or more numerous shorter
Extension Periods) throughout the term of the Junior Subordinated Debentures.
The failure by SunAmerica to make interest payments during an Extension Period
would not constitute a default or an event of default under the Indenture or
SunAmerica's currently outstanding indebtedness.
If the Property Trustee shall be the sole holder of the Junior Subordinated
Debentures, SunAmerica shall give the Property Trustee notice of its selection
of such Extension Period one Business Day prior to the earlier of (i) the date
the distributions on the Preferred Securities are payable or (ii) the date the
Trust is required to give notice to the NYSE or other applicable self-
regulatory organization or to holders of the Preferred Securities of the record
date or the date such distribution is payable. The Trust shall give notice of
SunAmerica's selection of such Extension Period to the holders of the Preferred
Securities.
If Junior Subordinated Debentures have been distributed to holders of Trust
Securities, SunAmerica shall give the holders of the Junior Subordinated
Debentures notice of its selection of such Extension Period ten Business Days
prior to the earlier of (i) the next succeeding Interest Payment Date or (ii)
the date SunAmerica is required to give notice to the NYSE (if the Junior
Subordinated Debentures are then listed thereon) or other applicable self-
regulatory organization or to holders of the Junior Subordinated Debentures of
the record or payment date of such related interest payment.
COMPOUNDED INTEREST
Payments of Compounded Interest on the Junior Subordinated Debentures held by
the Trust will make funds available to pay any interest on distributions in
arrears in respect of the Preferred Securities pursuant to the terms thereof.
BOOK-ENTRY AND SETTLEMENT
If any Junior Subordinated Debentures are distributed to holders of Preferred
Securities (see "Description of the Preferred Securities"), such Junior
Subordinated Debentures will be issued in the form of one or more global
certificates (each a "Global Security") registered in the name of the
depositary or its nominee. Except under the limited circumstances described
below, Junior Subordinated Debentures represented by the Global Security will
not be exchangeable for, and will not otherwise be issuable as, Junior
Subordinated Debentures in definitive form. The Global Securities described
above may not be transferred except by the depositary to a nominee of the
depositary or by a nominee of the depositary to the depositary or another
nominee of the depositary or to a successor depositary or its nominee.
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The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debentures in definitive form and will not be considered the
holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Junior Subordinated Debentures
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the depositary or its nominee or to a
successor depositary or its nominee. Accordingly, each Beneficial Owner must
rely on the procedures of the depositary or if such person is not a
Participant, on the procedures of the Participant through which such person
owns its interest to exercise any rights of a holder under the Indenture. If
Junior Subordinated Debentures are distributed to holders of Preferred
Securities, DTC will act as securities depositary for the Junior Subordinated
Debentures.
For a description of DTC and DTC's book-entry system, see "Description of the
Preferred Securities--Book-Entry Only Issuance--The Depository Trust Company."
As of the date of this Prospectus Supplement, the description herein of DTC's
book-entry system and DTC's practices as they relate to purchases, transfers,
notices and payments with respect to the Preferred Securities apply in all
material respects to any debt obligations represented by one or more Global
Securities held by DTC. SunAmerica may appoint a successor to DTC or any
successor depositary in the event DTC or such successor depositary is unable or
unwilling to continue as a depository for the Global Securities.
None of SunAmerica, the Indenture Trustee, any paying agent and any other
agent of SunAmerica or the Indenture Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Global Security for such Junior
Subordinated Debentures or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
A Global Security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than the depositary or its nominee
only if (i) the depositary notifies SunAmerica that it is unwilling or unable
to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, (ii) the depositary, at any time, ceases
to be a clearing agency registered under the Exchange Act at which time the
depositary is required to be so registered to act as such depositary and no
successor depositary shall have been appointed, (iii) SunAmerica, in its sole
discretion, determines that such Global Security shall be so exchangeable or
(iv) there shall have occurred an Indenture Event of Default with respect to
such Junior Subordinated Debentures. Any Global Security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for Junior
Subordinated Debentures registered in such names as the depositary shall
direct. It is expected that such instructions will be based upon directions
received by the depositary from its Participants with respect to ownership of
beneficial interests in such Global Security.
RELATIONSHIP BETWEEN THE PREFERRED SECURITIES, THE JUNIOR
SUBORDINATED DEBENTURES AND THE PREFERRED SECURITIES GUARANTEE
As set forth in the Declaration, the Trust exists for the sole purpose of (a)
issuing the Trust Securities evidencing undivided beneficial interests in the
assets of the Trust, and investing the proceeds from such issuance and sale in
the Junior Subordinated Debentures and (b) engaging in such other activities as
are necessary and incidental thereto.
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and other payments due on the Preferred Securities primarily
because (i) the aggregate principal amount of Junior Subordinated Debentures
held as
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trust assets will be equal to the sum of the aggregate stated liquidation
amount of the Preferred Securities and the proceeds received by the Trust upon
issuance of the Common Securities to SunAmerica; (ii) the interest rate and
interest and other payment dates on the Junior Subordinated Debentures will
match the distribution rate and distribution and other payment dates for the
Preferred Securities; (iii) the Declaration provides that SunAmerica shall pay
for all debts and obligations (other than with respect to the Trust Securities)
and all costs and expenses of the Trust, including any taxes and all costs and
expenses with respect thereto, to which the Trust may become subject, except
for United States withholding taxes; and (iv) the Declaration further provides
that the Trustees shall not cause or permit the Trust, among other things, to
engage in any activity that is not consistent with the limited purposes of the
Trust. With respect to clause (iii) above, however, no assurance can be given
that SunAmerica will have sufficient resources to enable it to pay such debts,
obligations, costs and expenses on behalf of the Trust.
Payments of distributions and other payments due on the Preferred Securities
are guaranteed by SunAmerica on a subordinated basis as and to the extent set
forth under "Description of the Preferred Securities Guarantees" in the
accompanying Prospectus. If SunAmerica does not make interest or other payments
on the Junior Subordinated Debentures, the Trust will not make distributions or
other payments on the Preferred Securities. Under the Declaration, if and to
the extent SunAmerica does make interest or other payments on the Junior
Subordinated Debentures, the Property Trustee is obligated to make
distributions or other payments on the Preferred Securities. The Preferred
Securities Guarantee is a full and unconditional guarantee from the time of
issuance of the Preferred Securities, but the Preferred Securities Guarantee
covers distributions and other payments on the Preferred Securities only if and
to the extent that SunAmerica has made a payment to the Property Trustee of
interest or principal on the Junior Subordinated Debentures deposited in the
Trust as trust assets.
If an Appointment Event occurs, the Declaration provides that the holders of
the Preferred Securities may appoint a Special Regular Trustee who will have
the same rights, powers and privileges under the Declaration as the Regular
Trustees. The Property Trustee will have the power to exercise all rights,
powers and privileges under the Indenture with respect to the Junior
Subordinated Debentures, including its rights as the holder of the Junior
Subordinated Debentures to enforce SunAmerica's obligations under the Junior
Subordinated Debentures upon the occurrence of an Indenture Event of Default,
and will also have the right to enforce the Preferred Securities Guarantee on
behalf of the holders of the Preferred Securities. In addition, the holders of
at least a majority in liquidation amount of the Preferred Securities will have
the right to direct the Property Trustee with respect to certain matters under
the Declaration and the Preferred Securities Guarantee. If the Property Trustee
fails to enforce its rights under the Indenture or fails to enforce the
Preferred Securities Guarantee, any holder of Preferred Securities may
institute a legal proceeding against SunAmerica to enforce such rights or the
Preferred Securities Guarantee, as the case may be. See "Description of the
Preferred Securities" and "Description of the Preferred Securities Guarantees"
in the accompanying Prospectus.
SunAmerica's obligations under the Declaration, the Preferred Securities
Guarantee, the Indenture and the Junior Subordinated Debentures in the
aggregate provide a full and unconditional guarantee on a subordinated basis by
SunAmerica of payments due on the Preferred Securities.
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TAXATION
In the opinion of Davis Polk & Wardwell, counsel to SunAmerica and the Trust,
the following are the material United States federal income tax consequences of
the ownership and disposition of Preferred Securities. Unless otherwise stated,
this summary deals only with Preferred Securities held as capital assets by
holders who acquire the Preferred Securities upon original issuance at the
initial public offering price set forth on the cover of this Prospectus
Supplement ("Initial Holders"). It does not deal with special classes of
holders, such as dealers in securities or currencies, life insurance companies,
persons holding Preferred Securities as a hedge against or which are hedged
against currency risks or as part of a straddle, or persons whose functional
currency is not the United States dollar. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations thereunder
and administrative and judicial interpretations thereof as of the date hereof,
all of which are subject to change (possibly on a retroactive basis).
INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF PREFERRED
SECURITIES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF
ANY STATE, LOCAL OR OTHER TAX LAWS.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Davis Polk &
Wardwell, counsel to SunAmerica and the Trust, will render its opinion
generally to the effect that, under then current law and assuming full
compliance with the terms of the Declaration, the Trust will be classified for
United States federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. Accordingly, each holder of Preferred
Securities (a "Securityholder") will be considered the owner of a pro rata
portion of the Junior Subordinated Debentures held by the Trust. Accordingly,
each Securityholder will be required to include in gross income his pro rata
share of income accrued on the Junior Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
SunAmerica believes that the likelihood of it exercising its option to defer
payments of interest is "remote" because exercising that option would prevent
SunAmerica from declaring dividends on its common stock. Thus, in the opinion
of tax counsel to SunAmerica, based on regulations issued by the U.S. Treasury
Department on June 14, 1996, the Junior Subordinated Debentures will not be
issued with Original Issue Discount ("OID") and each Securityholder will be
required to include interest in taxable income under its own method of
accounting (e.g., cash or accrual) instead of under the daily economic accrual
rules for OID instruments.
Under the new regulations, however, if SunAmerica exercises its right to
defer payments of interest, the Junior Subordinated Debentures will become OID
instruments, and all Securityholders (including those Securityholders that
otherwise report income based on the cash method of accounting) will be
required to accrue interest on a daily basis during the extended interest
period even though SunAmerica will not pay the interest in cash until the end
of the extended interest period. A Securityholder who disposes of the Preferred
Securities during an extended interest period may suffer a loss because the
market value of the Preferred Securities will likely fall if SunAmerica
exercises its option to defer payments of interest on the Junior Subordinated
Debentures. Furthermore, the market value of the Preferred Securities may not
reflect the accumulated distributions that will be paid at the end of the
extended interest period, and a Securityholder who sells the Preferred
Securities during the extended interest period will not receive from SunAmeria
any cash related to the interest income the Securityholder accrued and included
in its taxable income under the OID rules (because that cash will be paid to
the holder of record at the end of the extended interest period).
If the Junior Subordinated Debentures become OID instruments (i.e., if
SunAmerica ever exercises its right to defer payments of interest), the
Debentures will be taxed as OID instruments for as long as they
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remain outstanding. Thus, even after the end of the extended interest period,
all Securityholders will be required to continue accruing interest on the
Junior Subordinated Debentures on a daily basis, regardless of their method of
accounting. Under the OID rules, a Securityholder would accrue an amount of
interest income each year that approximates the stated interest payments called
for under the terms of the Junior Subordinated Debentures, and actual cash
payments of interest on the Junior Subordinated Debentures would not be
reported separately as taxable income.
The new regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to tax counsel's interpretation.
Corporate holders of the Preferred Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Preferred Securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF PREFERRED
SECURITIES
Under current law, a distribution by the Trust of the Junior Subordinated
Debentures as described under the caption "Description of the Preferred
Securities--Redemption or Distribution", will be non-taxable and will result in
the Securityholder receiving directly his pro rata share of the Junior
Subordinated Debentures previously held indirectly through the Trust, with a
holding period and tax basis equal to the holding period and adjusted tax basis
such Securityholder was considered to have had in his pro rata share of the
underlying Junior Subordinated Debentures prior to such distribution.
SHORTENING OF MATURITY OF JUNIOR SUBORDINATED DEBENTURES
Under current law, because the Junior Subordinated Debentures constitute
indebtedness for Federal income tax purposes, SunAmerica's exercise of its
right to shorten the maturity of the Junior Subordinated Debentures as
described under the caption "Description of the Junior Subordinated
Debentures--General" will be nontaxable to Securityholders. However, if the
Junior Subordinated Debentures were treated as equity for purposes of Federal
income taxation before the maturity is shortened (e.g., under a change in law)
because of the original term of the Junior Subordinated Debentures, then
SunAmerica's exercise of its right to shorten the maturity of the Junior
Subordinated Debentures could be a taxable event to Securityholders.
MARKET DISCOUNT AND BOND PREMIUM
Securityholders other than Initial Holders may be considered to have acquired
their pro rata interest in the Junior Subordinated Debentures with market
discount, acquisition premium or amortizable bond premium. Such holders are
advised to consult their tax advisors as to the income tax consequences of the
acquisition, ownership and disposition of the Preferred Securities.
DISPOSITION OF THE PREFERRED SECURITIES
Upon a sale, exchange or other disposition of the Preferred Securities
(including a distribution of cash in redemption of a Securityholder's Preferred
Securities upon redemption or repayment of the underlying Junior Subordinated
Debentures, but excluding the distribution of Junior Subordinated Debentures),
a Securityholder will be considered to have disposed of all or part of his pro
rata share of the Junior Subordinated Debentures, and will recognize gain or
loss equal to the difference between the amount realized (which, for this
purpose, will exclude amounts attributable to accrued interest not previously
included in income as interest or OID) and the Securityholder's adjusted tax
basis in his pro rata share of the underlying Junior Subordinated Debentures
deemed disposed of. Gain or loss will be capital gain or loss (except to the
extent of any accrued market discount or accrued interest with respect to such
Securityholder's pro rata share of the Junior Subordinated Debentures not
previously included in income). See "Market Discount and Bond Premium" above.
Such gain or loss will be long-term capital gain or loss if the Preferred
Securities have been held for more than one year.
S-32
<PAGE>
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership or a non-resident fiduciary of a foreign estate or trust.
Under present United States Federal income tax law:
(i) payments by the Trust or any of its paying agents to any holder of a
Preferred Security who or which is a United States Alien Holder will not be
subject to United States federal withholding tax, provided that (a) the
beneficial owner of the Preferred Security does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of SunAmerica entitled to vote, (b) the beneficial owner
of the Preferred Security is not a controlled foreign corporation that is
related to SunAmerica through stock ownership, and (c) either (A) the
beneficial owner of the Preferred Security certifies to the Trust or its
agent, under penalties of perjury, that it is not a United States holder
and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution") and holds the Preferred Security certifies to the Trust or
its agent under penalties of perjury that such statement has been received
from the beneficial owner by it or by a Financial Institution between it
and the beneficial owner and furnishes the Trust or its agent with a copy
thereof; and
(ii) A United States Alien Holder of a Preferred Security will not be
subject to United States federal withholding tax on any gain realized upon
the sale or other disposition of a Preferred Security.
INFORMATION REPORTING TO HOLDERS
The Trust will report the interest and original issue discount (if any) that
accrued during the year with respect to the Junior Subordinated Debentures, and
any gross proceeds received by the Trust from the retirement or redemption of
the Junior Subordinated Debentures, annually to the holders of record of the
Preferred Securities and the Internal Revenue Service. The Trust currently
intends to deliver such reports to holders of record prior to January 31
following each calendar year. It is anticipated that persons who hold Preferred
Securities as nominees for beneficial holders will report the required tax
information to beneficial holders on Form 1099.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of Preferred Securities may be
subject to a "backup" withholding tax of 31% unless the holder complies with
certain identification requirements. Any withheld amounts will generally be
allowed as a credit against the holder's federal income tax, provided the
required information is timely filed with the Internal Revenue Service.
S-33
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), SunAmerica and the Trust have agreed that the
Trust will sell to each of the Underwriters named below, and each of the
Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, Dean
Witter Reynolds Inc., PaineWebber Incorporated, Prudential Securities
Incorporated and Smith Barney Inc. are acting as representatives (the
"Representatives"), has severally agreed to purchase the number of Preferred
Securities set forth opposite its name below. In the Underwriting Agreement,
the several Underwriters have agreed, subject to the terms and conditions set
forth therein, to purchase all the Preferred Securities offered hereby if any
of the Preferred Securities are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................
Dean Witter Reynolds Inc. .......................................
PaineWebber Incorporated.........................................
Prudential Securities Incorporated...............................
Smith Barney Inc. ...............................................
----------
Total....................................................... 10,000,000
==========
</TABLE>
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement, and in part to certain securities dealers at
such price less a concession of $ per Preferred Security, provided that such
concession for sales of 10,000 or more Preferred Securities to any single
purchaser will be $ per Preferred Security. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per Preferred
Security to certain brokers and dealers. After the Preferred Securities are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Preferred Securities
will be used to purchase the Junior Subordinated Debentures of SunAmerica, the
Underwriting Agreement provides that SunAmerica will agree to pay as
compensation ("Underwriters' Compensation") for the Underwriters' arranging the
investment therein of such proceeds, an amount in New York Clearing House (next
day) funds of $ per Preferred Security or $ in the aggregate ($ in the
aggregate if the Underwriters' overallotment option is exercised in full) for
the accounts of the several Underwriters, provided that such compensation for
sales of 10,000 or more Preferred Securities to any single purchaser will be
$ per Preferred Security. Therefore, to the extent of such sales, the actual
amount of Underwriters' Compensation will be less than the aggregate amount
specified in the preceding sentence.
Pursuant to the Underwriting Agreement, the Trust and SunAmerica have granted
to the Underwriters an option for 30 days to purchase up to an additional
1,500,000 Preferred Securities at the offering price per Preferred Security set
forth on the cover page hereof, solely to cover overallotments. SunAmerica will
pay Underwriters' Compensation in the amounts per Preferred Security set forth
above with respect to such additional Preferred Securities. To the extent such
option is exercised, each Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
Preferred Securities as the number set forth next to such Underwriter's name in
the preceding table bears to the total number of Preferred Securities offered
by the Underwriters hereby.
S-34
<PAGE>
During a period of 30 days from the date of this Prospectus Supplement,
neither the Trust nor SunAmerica will, without the prior written consent of the
Underwriters, directly or indirectly, sell, offer to sell, grant any option for
the sale of, or otherwise dispose of, any Preferred Securities, any security
convertible into or exchangeable into or exercisable for Preferred Securities
or any equity securities substantially similar to the Preferred Securities
(except for any series of Junior Subordinated Debentures and the Preferred
Securities offered hereby).
Application will be made to list the Preferred Securities on the NYSE. If so
approved, trading of the Preferred Securities on the NYSE is expected to
commence within a 30-day period after the initial delivery of the Preferred
Securities. The Representatives have advised the Trust that they intend to make
a market in the Preferred Securities prior to the commencement of trading on
the NYSE. The Representatives will have no obligation to make a market in the
Preferred Securities, however, and may cease market making activities, if
commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the NYSE, the Underwriters will undertake to sell lots of 100 or
more Preferred Securities to a minimum of 400 beneficial holders.
SunAmerica has agreed to indemnify the Underwriters against, or contribute to
payments that the Underwriters may be required to make in respect of, certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, SunAmerica and its subsidiaries in the
ordinary course of business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon for the Trust by Richards, Layton & Finger,
Wilmington, Delaware, special Delaware counsel to the Trust. The validity of
the Preferred Securities Guarantee and the Junior Subordinated Debentures will
be passed upon for the Trust and SunAmerica by Davis Polk & Wardwell, New York,
New York, special counsel to SunAmerica and the Trust. Certain legal matters
will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher &
Flom LLP, Los Angeles, California. Davis Polk & Wardwell and Skadden, Arps,
Slate, Meagher & Flom LLP will rely as to matters of Maryland law on Piper &
Marbury L.L.P., Baltimore, Maryland. Certain legal matters in connection with
the Preferred Securities, the Preferred Securities Guarantee and the Junior
Subordinated Debentures will be passed upon for the Trust and SunAmerica by
Susan L. Harris, Vice President and General Counsel--Corporate Affairs of
SunAmerica. Ms. Harris holds options, granted under SunAmerica's Employee Stock
Plan, to purchase in the aggregate less than 1% of SunAmerica's common stock.
David W. Ferguson, a partner of Davis Polk & Wardwell, is a director of First
SunAmerica Life Insurance Company, a subsidiary of SunAmerica. Skadden, Arps,
Slate, Meagher & Flom LLP from time to time provides services to SunAmerica and
its subsidiaries.
S-35
<PAGE>
PROSPECTUS
$1,750,000,000
[LOGO] SUNAMERICA
SUNAMERICA INC.
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
---------------
SUNAMERICA CAPITAL TRUST III
SUNAMERICA CAPITAL TRUST IV
SUNAMERICA CAPITAL TRUST V
SUNAMERICA CAPITAL TRUST VI
PREFERRED SECURITIES
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
SUNAMERICA INC.
---------------
SunAmerica Inc. (the "Company") may offer and sell from time to time (i) its
unsecured senior debt securities ("Senior Debt Securities"), unsecured
subordinated debt securities ("Subordinated Debt Securities") or unsecured
junior subordinated debt securities ("Junior Subordinated Debt Securities"),
consisting of debentures, notes or other evidences of indebtedness, (ii)
shares of its preferred stock, without par value (the "Preferred Stock"),
which may be represented by depositary shares as described herein, (iii)
shares of its common stock, par value $1.00 per share (the "Common Stock"),
(iv) warrants to purchase any of the foregoing Debt Securities, Preferred
Stock and Common Stock (the "Warrants"), (v) stock purchase contracts ("Stock
Purchase Contracts") to purchase Common Stock or (vi) stock purchase units
("Stock Purchase Units"), each representing ownership of a Stock Purchase
Contract and any of (x) Senior Debt Securities, Subordinated Debt Securities
or Junior Subordinated Debt Securities, (y) debt obligations of third parties,
including U.S. Treasury Securities, or (z) Preferred Securities (as defined
below) of a SunAmerica Trust (as defined below), securing the holder's
obligation to purchase Common Stock under the Stock Purchase Contract. Such
securities may be offered in one or more separate classes or series, in
amounts, at prices and on terms to be determined by market conditions at the
time of sale and to be set forth in a supplement or supplements to this
Prospectus (a "Prospectus Supplement"). Such securities may be sold for U.S.
dollars, foreign denominated currency or currency units; amounts payable with
respect to any such securities may likewise be payable in U.S. dollars,
foreign denominated currency or currency units--in each case as the Company
specifically designates.
SunAmerica Capital Trust III, SunAmerica Capital Trust IV, SunAmerica
Capital Trust V and SunAmerica Capital Trust VI (each, a "SunAmerica Trust"),
each a statutory business trust formed under the laws of the State of
Delaware, may offer and sell, from time to time, preferred securities
representing undivided beneficial interests in the assets of the respective
SunAmerica Trust ("Preferred Securities"). The payment of periodic cash
distributions ("distributions") with respect to Preferred Securities of each
of the SunAmerica Trusts out of monies held by the Property Trustee (as
defined herein) of each of the SunAmerica Trusts and payments on liquidation
of each SunAmerica Trust and on redemption of Preferred Securities of such
SunAmerica Trust, will be guaranteed by the Company as and to the extent
described herein (each, a "Preferred Securities Guarantee"). See "Description
of the Preferred Securities Guarantees." The Company's obligation under each
Preferred Securities Guarantee is an unsecured obligation of the Company and
will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, including the Senior Debt Securities, the
Subordinated Debt Securities and the Senior Junior Subordinated Debt
Securities, except those made pari passu or subordinate by their terms, and
(ii) senior to all capital stock now or hereafter issued by the Company and to
any guarantee now or hereafter entered into by the Company in respect of any
of its capital stock. Junior Subordinated Debt Securities may be issued and
sold from time to time in one or more series by the Company to a SunAmerica
Trust, or a trustee of such SunAmerica Trust, in connection with the
investment of the proceeds from the offering of Preferred Securities and
Common Securities (as defined herein) of such SunAmerica Trust. The Junior
Subordinated Debt Securities purchased by a SunAmerica Trust may be
subsequently distributed pro rata to holders of Preferred Securities and
Common Securities in connection with the dissolution of such SunAmerica Trust
upon the occurrence of certain events as may be described in an accompanying
Prospectus Supplement.
(Continued on next page)
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is October 31, 1996.
<PAGE>
(Continued from previous page)
Specific terms of the particular Senior Debt Securities, Subordinated Debt
Securities, Junior Subordinated Debt Securities, Preferred Stock, Common
Stock, Warrants, Stock Purchase Contracts, Stock Purchase Units, Preferred
Securities and the related Preferred Securities Guarantee, in respect of which
this Prospectus is being delivered (the "Offered Securities") will be set
forth in an accompanying Prospectus Supplement or Supplements, together with
the terms of the offering of the Offered Securities, the initial price thereof
and the net proceeds from the sale thereof. The Prospectus Supplement will set
forth with regard to the particular Offered Securities, certain terms thereof,
including, where applicable, (i) in the case of Senior Debt Securities,
Subordinated Debt Securities and Junior Subordinated Debt Securities, the
ranking as senior, subordinated or junior subordinated Debt Securities, the
specific designation, aggregate principal amount, purchase price, maturity,
interest rate (which may be fixed or variable), if any, the time and method of
calculating interest payments, if any, the right of the Company, if any, to
defer payments of interest on the Junior Subordinated Debt Securities and the
maximum length of such deferred period, time of payment of interest, if any,
listing, if any, on a securities exchange, authorized denomination, any
exchangeability, conversion, redemption, prepayment or sinking fund
provisions, the currency or currencies or currency unit or units in which
principal, premium, if any, or interest, if any, is payable, public offering
price and any other specific terms of the Debt Securities; (ii) in the case of
Preferred Stock, the specific designation, number of shares, purchase price
and the rights, preferences and privileges thereof and any qualifications or
restrictions thereon (including dividends, liquidation value, voting rights,
terms for the redemption, conversion or exchange thereof and any other
specific terms of the Preferred Stock), listing, if any, on a securities
exchange and whether the Company has elected to offer the Preferred Stock in
the form of depositary shares; (iii) in the case of Common Stock, the number
of shares offered, the initial offering price, market price and dividend
information; (iv) in the case of Warrants, the specific designation, the
number, purchase price and terms thereof, any listing of the Warrants or the
underlying securities on a securities exchange or any other terms in
connection with the offering, sale and exercise of the Warrants, as well as
the terms on which and the securities for which such Warrants may be
exercised; (v) in the case of Stock Purchase Contracts, the designation and
number of shares of Common Stock issuable thereunder, the purchase price of
the Common Stock, the date or dates on which the Common Stock is required to
be purchased by the holders of the Stock Purchase Contracts, any periodic
payments required to be made by the Company to the holders of the Stock
Purchase Contracts or vice versa, and the terms of the offering and sale
thereof; (vi) in the case of Stock Purchase Units, the specific terms of the
Stock Purchase Contracts and any Debt Securities or debt obligations of third
parties or Preferred Securities of a SunAmerica Trust securing the holders'
obligation to purchase the Common Stock under the Stock Purchase Contracts,
the ability of a holder of such Stock Purchase Units to settle early the
underlying Stock Purchase Contract by delivering cash in exchange for the
underlying collateral and, if applicable, whether the Company will issue to
such holder a Prepaid Stock Purchase Contract as a result of such early
settlement and the specific terms of the Prepaid Stock Purchase Contract and
the terms of the offering and sale of such Stock Purchase Units; and (vii) in
the case of Preferred Securities of a SunAmerica Trust, the specific
designation, number of securities, liquidation amount per security, initial
public offering price, and any listing on a securities exchange, distribution
rate (or method of calculation thereof), dates on which distributions shall be
payable and dates from which distributions shall accrue, voting rights, if
any, terms for any conversion or exchange into other securities, any
redemption or sinking fund provisions, any other rights, preferences,
privileges, limitations or restrictions relating to the Preferred Securities
and the terms upon which the proceeds of the sale of the Preferred Securities
shall be used to purchase a specific series of Junior Subordinated Debt
Securities of the Company.
The Offered Securities may be offered in amounts, at prices and on terms to
be determined at the time of offering; provided, however, that the aggregate
offering price to the public of the Offered Securities will be limited to
$1,750,000,000. Any Prospectus Supplement relating to any Offered Securities
will contain information concerning certain United States federal income tax
considerations, if applicable, to the Offered Securities.
----------------
The Company and/or each SunAmerica Trust may sell the Offered Securities
directly, through agents designated from time to time or through underwriters
or dealers. See "Plan of Distribution" below. If any agents of the Company
and/or any SunAmerica Trust or any underwriters or dealers are involved in the
sale of the Offered Securities, the names of such agents, underwriters or
dealers and any applicable commissions and discounts will be set forth in the
related Prospectus Supplement. The managing underwriter or underwriters with
respect to each series sold to or through underwriters will be named in the
accompanying Prospectus Supplement. See "Plan of Distribution" for possible
indemnification arrangements for dealers, underwriters and agents.
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed by the Company with the Commission can be inspected
and copied at the Commission's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549, or at the public reference facilities of the
regional offices in Chicago and New York. The addresses of these regional
offices are as follows: 500 West Madison Street, Chicago, Illinois 60661, and
7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material also can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington D.C. 20549, upon payment of
the fees prescribed by the rules and regulations of the Commission. Reports,
proxy statements, and other information concerning the Company may also be
inspected at the offices of the New York Stock Exchange, Inc. at 20 Broad
Street, New York, New York 10005 and at the offices of the Pacific Stock
Exchange at 301 Pine Street, San Francisco, California 94104. The Company's
Common Stock is listed on both exchanges. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.
The Company and the SunAmerica Trusts have filed with the Commission a
Registration Statement on Form S-3 under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered by this
Prospectus. This Prospectus does not contain all the information set forth in
the Registration Statement and exhibits thereto. In addition, certain
documents filed by the Company with the Commission have been incorporated in
this Prospectus by reference. See "Incorporation of Certain Documents by
Reference." Statements contained herein concerning the provisions of any
document do not purport to be complete and, in each instance, are qualified in
all respects by reference to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is subject to and qualified in its entirety by such reference. For
further information with respect to the Company, the SunAmerica Trusts and the
securities offered hereby, reference is made to the Registration Statement,
including the exhibits thereto, and the documents incorporated herein by
reference.
No separate financial statements of any of the SunAmerica Trusts have been
included or incorporated by reference herein. The Company and the SunAmerica
Trusts do not consider that such financial statements would be material to
holders of the Preferred Securities because (i) all of the voting securities
of each SunAmerica Trust will be owned, directly or indirectly, by the
Company, a reporting company under the 1934 Act, (ii) each of the SunAmerica
Trusts is a special purpose entity, has no operating history, has no
independent operations and is not engaged in, and does not propose to engage
in, any activity other than issuing Trust Securities (as defined herein)
representing undivided beneficial interests in the assets of such SunAmerica
Trust and investing the proceeds thereof in Junior Subordinated Debt
Securities issued by the Company and (iii) SunAmerica's obligations described
herein and in any accompanying Prospectus Supplement under the Declaration (as
defined herein) of a SunAmerica Trust, the Preferred Securities Guarantee with
respect to the Preferred Securities issued by such SunAmerica Trust, the
Junior Subordinated Debt Securities purchased by such SunAmerica Trust and the
related Junior Subordinated Debt Indenture (as defined herein), taken
together, constitute a full and unconditional guarantee of payments due on the
Preferred Securities of such SunAmerica Trust. See "The SunAmerica Trusts",
"Description of the Preferred Securities," "Description of the Preferred
Securities Guarantees" and "Description of the Junior Subordinated Debt
Securities." The SunAmerica Trusts are statutory business trusts formed under
the laws of the State of Delaware. The Company, as of the date of this
Prospectus, owns all of the beneficial interests in each SunAmerica Trust.
Each holder of Preferred Securities of a SunAmerica Trust will be furnished
annually with unaudited financial statements of such SunAmerica Trust as soon
as available after the end of the SunAmerica Trust's fiscal year.
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in the Prospectus the following
documents previously filed by the Company with the Commission pursuant to the
1934 Act:
1. Annual Report on Form 10-K for the fiscal year ended September 30,
1995.
2. Quarterly Reports on Form 10-Q for the quarters ended December 31,
1995, March 31, 1996 and June 30, 1996.
3. Current Reports on Form 8-K filed on October 6, 1995, October 19,
1995, October 31, 1995, November 9, 1995, December 12, 1995 (as amended by
Amendment No. 1 on Form 8-K/A filed December 14, 1995 and Amendment No. 2
on Form 8-K/A filed May 7, 1996), January 29, 1996, March 15, 1996 (as
amended by Amendment No. 1 on Form 8-K/A filed May 7, 1996), April 24,
1996, April 29, 1996 and July 25, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the securities offered hereby shall be
deemed to be incorporated by reference in the Prospectus and to be part hereof
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner to whom this Prospectus is delivered, upon the written or
oral request of such person, a copy of any and all of the information that has
been incorporated by reference in the Prospectus (not including exhibits to
the information that is incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that this
Prospectus incorporates). Requests for such documents shall be directed to
SunAmerica Inc., 1 SunAmerica Center, Los Angeles, California 90067-6022,
Attention: Vice President, Investor Relations (telephone (310) 772-6000).
FOR NORTH CAROLINA INVESTORS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS SUCH
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SUNAMERICA TRUST OR ANY UNDERWRITER, DEALER OR
AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO
WHICH IT RELATES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY OR ANY SUNAMERICA TRUST SINCE
THE DATE HEREOF.
----------------
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$," "dollars" or
"U.S.$").
4
<PAGE>
THE COMPANY
The Company is a diversified financial services company specializing in
retirement savings products and services. At June 30, 1996, the Company held
$36.17 billion of assets throughout its businesses, including $23.40 billion
of assets on its balance sheet, $2.12 billion of assets managed in mutual
funds and private accounts and $10.65 billion of assets under custody in
retirement trust accounts. Together, the Company's life insurance companies
rank among the largest U.S. issuers of annuities. Complementing these annuity
operations are the Company's asset management operations; its three broker-
dealers, which the Company believes, based on industry data, represent the
largest network of independent registered representatives in the nation; and
its trust company, which provides administrative and custodial services to
qualified retirement plans. Through these subsidiaries, the Company
specializes in the sale of tax-deferred long-term savings products and
investments to the expanding preretirement savings market. The Company markets
fixed annuities and fee-generating variable annuities, mutual funds and trust
services, as well as guaranteed investment contracts. The Company's products
are distributed through a broad spectrum of financial services distribution
channels, including independent registered representatives of the Company's
broker-dealer subsidiaries and unaffiliated broker-dealers, independent
general insurance agents and financial institutions.
The principal executive offices of the Company are located at 1 SunAmerica
Center, Los Angeles, California 90067-6022, telephone number (310) 772-6000.
THE SUNAMERICA TRUSTS
Each of SunAmerica Capital Trust III, SunAmerica Capital Trust IV,
SunAmerica Capital Trust V and SunAmerica Capital Trust VI is a statutory
business trust formed, in the case of SunAmerica Capital Trust III and IV, on
September 6, 1995 and, in the case of SunAmerica Capital Trust V and VI, on
October 23, 1996 under the Delaware Business Trust Act (the "Business Trust
Act") pursuant to a separate declaration of trust among the Trustees (as
defined below) of such SunAmerica Trust and the Company and the filing of a
certificate of trust with the Secretary of State of the State of Delaware.
Such declaration will be amended and restated in its entirety (as so amended
and restated, the "Declaration") substantially in the form filed as an exhibit
to the Registration Statement of which this Prospectus forms a part, as of the
date the Preferred Securities of such SunAmerica Trust are initially issued.
Each Declaration is qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). Upon issuance of any Preferred Securities
by a SunAmerica Trust, the holders thereof will own all of the issued and
outstanding Preferred Securities of such SunAmerica Trust. The Company will
acquire securities representing common undivided beneficial interests in the
assets of each SunAmerica Trust (the "Common Securities" and, together with
the Preferred Securities, the "Trust Securities") in an amount equal to at
least 3% of the total capital of such SunAmerica Trust and will own, directly
or indirectly, all of the issued and outstanding Common Securities of each
SunAmerica Trust. The Preferred Securities and the Common Securities of a
SunAmerica Trust will rank pari passu with each other and will have equivalent
terms; provided that (i) if a Declaration Event of Default (as defined below)
under the Declaration of a SunAmerica Trust occurs and is continuing, the
holders of Preferred Securities of such SunAmerica Trust will have a priority
over holders of the Common Securities of such SunAmerica Trust with respect to
payments in respect of distributions and payments upon liquidation, redemption
and maturity and (ii) holders of Common Securities of such SunAmerica Trust
have the exclusive right (subject to the terms of the Declaration) to appoint,
remove or replace the Trustees and to increase or decrease the number of
Trustees, subject to the right of holders of Preferred Securities to appoint
one additional Regular Trustee (as defined below) of such SunAmerica Trust (a
"Special Regular Trustee") in certain limited circumstances set forth in the
Prospectus Supplement. Each SunAmerica Trust exists for the purpose of (a)
issuing its Preferred Securities, (b) issuing its Common Securities to the
Company, (c) investing the gross proceeds from the sale of the Trust
Securities in Junior Subordinated Debt Securities of the Company and (d)
engaging in such other activities as are necessary, convenient or incidental
thereto. The rights of the holders of the Trust Securities, including economic
rights, rights to information and voting rights, are set forth in the
applicable Declaration, the Business Trust Act and the Trust Indenture Act.
5
<PAGE>
The number of trustees (the "Trustees") of each SunAmerica Trust shall
initially be five. Three of such Trustees (the "Regular Trustees") are
individuals who are employees or officers of the Company. The fourth such
trustee is The Bank of New York, which is unaffiliated with the Company and
which will serve as the property trustee (the "Property Trustee") and act as
the indenture trustee for purposes of the Trust Indenture Act. The fifth such
trustee is an affiliate of The Bank of New York that has its principal place
of business in the State of Delaware (the "Delaware Trustee"). Pursuant to
each Declaration, legal title to the Junior Subordinated Debt Securities
purchased by a SunAmerica Trust will be held by the Property Trustee for the
benefit of the holders of the Trust Securities of such SunAmerica Trust and
the Property Trustee will have the power to exercise all rights, powers and
privileges under the Junior Subordinated Debt Indenture (as defined herein)
with respect to the Junior Subordinated Debt Securities. In addition, the
Property Trustee will maintain exclusive control of a segregated non-interest
bearing bank account (the "Property Account") to hold all payments in respect
of the Junior Subordinated Debt Securities purchased by a SunAmerica Trust for
the benefit of the holders of the Trust Securities of such SunAmerica Trust.
The Property Trustee will promptly make distributions to the holders of the
Trust Securities out of funds from the Property Account. The Preferred
Securities Guarantees are separately qualified under the Trust Indenture Act
and will be held by The Bank of New York, acting in its capacity as indenture
trustee with respect thereto, for the benefit of the holders of the applicable
Preferred Securities. As used in this Prospectus and any accompanying
Prospectus Supplement, the term "Property Trustee" with respect to a
SunAmerica Trust refers to The Bank of New York acting either in its capacity
as a Trustee under the Declaration and the holder of legal title to the Junior
Subordinated Debt Securities purchased by that Trust or in its capacity as
indenture trustee under, and the holder of, the applicable Preferred
Securities Guarantee, as the context may require. Subject to the right of
holders of Preferred Securities to appoint a Special Regular Trustee as
described above, the Company as the direct or indirect owner of all of the
Common Securities of each SunAmerica Trust, will have the exclusive right
(subject to the terms of the related Declaration) to appoint, remove or
replace Trustees and to increase or decrease the number of Trustees, provided
that the number of Trustees shall be at least three, a majority of which shall
be Regular Trustees. A Special Regular Trustee need not be an employee or
officer of, or otherwise affiliated with, the Company. The term of a
SunAmerica Trust will be set forth in the Prospectus Supplement, but may
terminate earlier as provided in such Declaration.
The duties and obligations of the Trustees of a SunAmerica Trust shall be
governed by the Declaration of such SunAmerica Trust. Under its Declaration,
each SunAmerica Trust shall not, and the Trustees shall cause such SunAmerica
Trust not to, engage in any activity other than in connection with the
purposes of such SunAmerica Trust or other than as required or authorized by
the related Declaration. In particular, each SunAmerica Trust shall not and
the Trustees shall not (a) invest any proceeds received by such SunAmerica
Trust from holding the Junior Subordinated Debt Securities purchased by such
SunAmerica Trust but shall promptly distribute from the Property Account all
such proceeds to holders of Trust Securities pursuant to the terms of the
related Declaration and of the Trust Securities; (b) acquire any assets other
than as expressly provided in the related Declaration; (c) possess Trust
property for other than a Trust purpose; (d) make any loans, other than loans
represented by the Junior Subordinated Debt Securities; (e) possess any power
or otherwise act in such a way as to vary the assets of such SunAmerica Trust
or the terms of its Trust Securities in any way whatsoever; (f) issue any
securities or other evidences of beneficial ownership of, or beneficial
interests in, such SunAmerica Trust other than its Trust Securities; (g) incur
any indebtedness for borrowed money or (h)(i) direct the time, method and
place of exercising any trust or power conferred upon the Junior Subordinated
Debt Indenture Trustee (as defined under "Description of the Junior
Subordinated Debt Securities") with respect to the Junior Subordinated Debt
Securities deposited in that SunAmerica Trust as trust assets or upon the
Property Trustee of that SunAmerica Trust with respect to its Preferred
Securities, (ii) waive any past default that is waivable under the Junior
Subordinated Debt Indenture or the Declaration, (iii) exercise any right to
rescind or annul any declaration that the principal of all of the Junior
Subordinated Debt Securities deposited in that SunAmerica Trust as trust
assets shall be due and payable or (iv) consent to any amendment, modification
or termination of the Junior Subordinated Debt Indenture or such Junior
Subordinated Debt Securities or the Declaration, in each case where such
consent shall be required, unless in the case of this clause (h) the Property
Trustee shall have received an unqualified opinion of nationally recognized
independent tax counsel recognized as expert in such matters to the effect
that such action will not cause such SunAmerica Trust to be classified for
6
<PAGE>
United States federal income tax purposes as an association taxable as a
corporation or a partnership and that such SunAmerica Trust will continue to
be classified as a grantor trust for United States federal income tax
purposes.
The books and records of each SunAmerica Trust will be maintained at the
principal office of such SunAmerica Trust and will be open for inspection by a
holder of Preferred Securities of such SunAmerica Trust or its representative
for any purpose reasonably related to its interest in such SunAmerica Trust
during normal business hours. Each holder of Preferred Securities will be
furnished annually with unaudited financial statements of the applicable
SunAmerica Trust as soon as available after the end of such SunAmerica Trust's
fiscal year.
Except as provided below or under the Business Trust Act and the Trust
Indenture Act, holders of Preferred Securities will have no voting rights. In
certain circumstances described in a Prospectus Supplement, holders of
Preferred Securities of a SunAmerica Trust shall have the right to vote, as a
single class, for the appointment of a Special Regular Trustee who need not be
an employee or officer of or otherwise affiliated with the Company. The
Special Regular Trustee shall have the same rights, powers and privileges
under the Declaration as the Regular Trustees.
The Property Trustee, for the benefit of the holders of the Trust Securities
of a SunAmerica Trust, is authorized under each Declaration to exercise all
rights under the Junior Subordinated Debt Indenture with respect to the Junior
Subordinated Debt Securities deposited in such SunAmerica Trust as trust
assets, including its rights as the holder of such Junior Subordinated Debt
Securities to enforce the Company's obligations under such Junior Subordinated
Debt Securities upon the occurrence of a Junior Subordinated Debt Indenture
Event of Default (as defined under "Description of the Junior Subordinated
Debt Securities"). The Property Trustee shall also be authorized to enforce
the rights of holders of Preferred Securities of a SunAmerica Trust under the
Preferred Securities Guarantee. If any SunAmerica Trust's failure to make
distributions on the Preferred Securities of a SunAmerica Trust is a
consequence of the Company's exercise of any right under the terms of the
Junior Subordinated Debt Securities deposited in such SunAmerica Trust as
trust assets to extend the interest payment period for such Junior
Subordinated Debt Securities, the Property Trustee will have no right to
enforce the payment of distributions on such Preferred Securities until a
Declaration Event of Default shall have occurred. Holders of at least a
majority in liquidation amount of the Preferred Securities held by a
SunAmerica Trust will have the right to direct the Property Trustee for that
SunAmerica Trust with respect to certain matters under the Declaration for
that SunAmerica Trust and the related Preferred Securities Guarantee. If the
Property Trustee fails to enforce its rights under the Indenture or fails to
enforce the Preferred Securities Guarantee, any holder of Preferred Securities
may institute a legal proceeding against the Company to enforce such rights or
the Preferred Securities Guarantee, as the case may be.
Pursuant to each Declaration, distributions on the Preferred Securities of a
SunAmerica Trust must be paid on the dates payable to the extent that the
Property Trustee for that SunAmerica Trust has cash on hand in the applicable
Property Account to permit such payment. The funds available for distribution
to the holders of the Preferred Securities of a SunAmerica Trust will be
limited to payments received by the Property Trustee in respect of the Junior
Subordinated Debt Securities that are deposited in the SunAmerica Trust as
trust assets. If the Company does not make interest payments on the Junior
Subordinated Debt Securities deposited in a SunAmerica Trust as trust assets,
the Property Trustee will not make distributions on the Preferred Securities
of such SunAmerica Trust. Under the Declaration, if and to the extent the
Company does make interest payments on the Junior Subordinated Debt Securities
deposited in a SunAmerica Trust as trust assets, the Property Trustee is
obligated to make distributions on the Trust Securities of such SunAmerica
Trust on a Pro Rata Basis (as defined below). The payment of distributions on
the Preferred Securities of a SunAmerica Trust is guaranteed by SunAmerica on
a subordinated basis as and to the extent set forth under "Description of the
Preferred Securities Guarantee." A Preferred Securities Guarantee is a full
and unconditional guarantee from the time of issuance of the applicable
Preferred Securities but the Preferred Securities Guarantee covers
distributions and other payments on the applicable Preferred Securities only
if and to the extent that the Company has made a payment to the Property
Trustee of interest or principal on the Junior Subordinated Debt Securities
deposited in the SunAmerica Trust as trust assets. As used in this Prospectus,
the term "Pro Rata Basis" shall mean pro rata to each holder of
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<PAGE>
Trust Securities of a SunAmerica Trust according to the aggregate liquidation
amount of the Trust Securities of such SunAmerica Trust held by the relevant
holder in relation to the aggregate liquidation amount of all Trust Securities
of such SunAmerica Trust outstanding unless, in relation to a payment, a
Declaration Event of Default under the Declaration has occurred and is
continuing, in which case any funds available to make such payment shall be
paid first to each holder of the Preferred Securities of such SunAmerica Trust
pro rata according to the aggregate liquidation amount of the Preferred
Securities held by the relevant holder in relation to the aggregate
liquidation amount of all the Preferred Securities of such SunAmerica Trust
outstanding, and only after satisfaction of all amounts owed to the holders of
such Preferred Securities, to each holder of Common Securities of such
SunAmerica Trust pro rata according to the aggregate liquidation amount of
such Common Securities held by the relevant holder in relation to the
aggregate liquidation amount of all Common Securities of such SunAmerica Trust
outstanding.
If a Junior Subordinated Debt Indenture Event of Default occurs and is
continuing with respect to Junior Subordinated Debt Securities deposited in a
SunAmerica Trust as trust assets, an Event of Default under the Declaration (a
"Declaration Event of Default") of such SunAmerica Trust will occur and be
continuing with respect to any outstanding Trust Securities of such SunAmerica
Trust. In such event, each Declaration provides that the holders of Common
Securities of such SunAmerica Trust will be deemed to have waived any such
Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Preferred Securities of such
SunAmerica Trust have been cured or waived. Until all such Declaration Events
of Default with respect to the Preferred Securities of such SunAmerica Trust
have been so cured or waived, the Property Trustee will be deemed to be acting
solely on behalf of the holders of the Preferred Securities of such SunAmerica
Trust and only the holders of such Preferred Securities will have the right to
direct the Property Trustee with respect to certain matters under such
Declaration and consequently under the Indenture. In the event that any
Declaration Event of Default with respect to the Preferred Securities of such
SunAmerica Trust is waived by the holders of the Preferred Securities of such
SunAmerica Trust as provided in the Declaration, the holders of Common
Securities pursuant to such Declaration have agreed that such waiver also
constitutes a waiver of such Declaration Event of Default with respect to the
Common Securities for all purposes under the Declaration without any further
act, vote or consent of the holders of the Common Securities.
Each Declaration provides that the Trustees of such SunAmerica Trust may
treat the person in whose name a certificate representing its Preferred
Securities is registered on the books and records of such SunAmerica Trust as
the sole holder thereof and of the Preferred Securities represented thereby
for purposes of receiving distributions and for all other purposes and,
accordingly, shall not be bound to recognize any equitable or other claim to
or interest in such certificate or in the Preferred Securities represented
thereby on the part of any person, whether or not such SunAmerica Trust shall
have actual or other notice thereof. Preferred Securities will be issued in
fully registered form. Unless otherwise specified in a Prospectus Supplement,
Preferred Securities will be represented by a global certificate registered on
the books and records of such SunAmerica Trust in the name of a depositary
(the "Preferred Securities Depositary") named in an accompanying Prospectus
Supplement or its nominee. Under each Declaration:
(i) such SunAmerica Trust and the Trustees thereof shall be entitled to
deal with the Preferred Securities Depositary (or any successor depositary)
for all purposes, including the payment of distributions and receiving
approvals, votes or consents under the related Declaration, and except as
set forth in the related Declaration with respect to the Property Trustee,
shall have no obligation to persons owning a beneficial interest in
Preferred Securities ("Preferred Security Beneficial Owners") registered in
the name of and held by the Preferred Securities Depositary or its nominee;
and
(ii) the rights of Preferred Security Beneficial Owners shall be
exercised only through the Preferred Securities Depositary (or any
successor depositary) and shall be limited to those established by law and
agreements between such Preferred Security Beneficial Owners and the
Preferred Securities Depositary and/or its participants. With respect to
Preferred Securities registered in the name of and held by the Preferred
Securities Depositary or its nominee, all notices and other communications
required under each Declaration shall be given to, and all distributions on
such Preferred Securities shall be given or made to, the Preferred
Securities Depositary (or its successor).
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<PAGE>
The specific terms of the depositary arrangement with respect to the Preferred
Securities will be disclosed in the applicable Prospectus Supplement.
In each Declaration, the Company has agreed to pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs
and expenses of the applicable SunAmerica Trust, including the fees and
expenses of its Trustees and any taxes and all costs and expenses with respect
thereto, to which such SunAmerica Trust may become subject, except for United
States withholding taxes. The foregoing obligations of the Company under each
Declaration are for the benefit of, and shall be enforceable by, any person to
whom any such debts, obligations, costs, expenses and taxes are owed (a
"Creditor") whether or not such Creditor has received notice thereof. Any such
Creditor may enforce such obligations of the Company directly against the
Company and the Company has irrevocably waived any right or remedy to require
that any such Creditor take any action against any SunAmerica Trust or any
other person before proceeding against the Company. The Company has agreed in
each Declaration to execute such additional agreements as may be necessary or
desirable in order to give full effect to the foregoing.
The foregoing description summarizes the material terms of the Declaration
and is qualified in its entirety by reference to the form of Declaration which
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
The business address of each SunAmerica Trust is c/o SunAmerica Inc., 1
SunAmerica Center, Los Angeles, California 90067-6022, telephone number (310)
772-6000.
USE OF PROCEEDS
Each SunAmerica Trust will use all proceeds received from the sale of its
Trust Securities to purchase Junior Subordinated Debt Securities of the
Company. Unless otherwise set forth in a Prospectus Supplement with respect to
the proceeds from the sale of the particular Offered Securities to which such
Prospectus Supplement relates, the net proceeds from the sale of the Offered
Securities are expected to be used by the Company for general corporate
purposes, including repayment or redemption of outstanding debt or preferred
stock, the possible acquisition of financial services businesses or assets
thereof, investments in portfolio assets and working capital needs. The
Company routinely reviews opportunities to acquire financial services
businesses or assets thereof.
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CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the consolidated ratios of earnings to fixed
charges and earnings to combined fixed charges and preferred stock dividends
for the Company for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED SEPTEMBER 30, JUNE 30,
----------------------------- -----------
1991 1992 1993 1994 1995 1995 1996
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges
(excluding interest incurred on
reserves and trust deposits)(1)... 2.7x 4.0x 6.1x 5.8x 5.8x 5.8x 5.2x
Ratio of earnings to fixed charges
(including interest incurred on
reserves and trust deposits)(2)... 1.1x 1.2x 1.4x 1.5x 1.5x 1.5x 1.5x
Ratio of earnings to combined fixed
charges and preferred stock
dividends (excluding interest
incurred on reserves and trust
deposits)(3)...................... 2.3x 2.7x 2.8x 2.8x 3.4x 3.3x 3.6x
Ratio of earnings to combined fixed
charges and preferred stock
dividends (including interest
incurred on reserves and trust
deposits)(4)...................... 1.1x 1.2x 1.3x 1.4x 1.4x 1.4x 1.5x
</TABLE>
- --------
(1) In computing the ratio of earnings to fixed charges (excluding interest
incurred on reserves and trust deposits), fixed charges consist of
interest expense on senior and subordinated indebtedness and dividends on
the preferred securities of subsidiary grantor trusts. Earnings are
computed by adding interest incurred on senior and subordinated
indebtedness and dividends paid on the preferred securities of subsidiary
grantor trusts to pretax income.
(2) In computing the ratio of earnings to fixed charges (including interest
incurred on reserves and trust deposits), fixed charges consist of
interest expense on senior and subordinated indebtedness, fixed annuity
contracts, guaranteed investment contracts and trust deposits, and
dividends on the preferred securities of subsidiary grantor trusts.
Earnings are computed by adding interest incurred on senior and
subordinated indebtedness, fixed annuity contracts, guaranteed investment
contracts and trust deposits, and dividends paid on the preferred
securities of subsidiary grantor trusts to pretax income.
(3) In computing the ratio of earnings to combined fixed charges and preferred
stock dividends (excluding interest incurred on reserves and trust
deposits), combined fixed charges and preferred stock dividends consist of
interest expense on senior and subordinated indebtedness, dividends on the
preferred securities of subsidiary grantor trusts and dividends on
preferred stock of the Company on a tax equivalent basis. Earnings are
computed by adding interest incurred on senior and subordinated
indebtedness and dividends paid on the preferred securities of subsidiary
grantor trusts to pretax income.
(4) In computing the ratio of earnings to combined fixed charges and preferred
stock dividends (including interest incurred on reserves and trust
deposits), combined fixed charges and preferred stock dividends consist of
interest expense on senior and subordinated indebtedness, fixed annuity
contracts, guaranteed investment contracts and trust deposits, dividends
on the preferred securities of subsidiary grantor trusts, and dividends on
preferred stock of the Company on a tax equivalent basis. Earnings are
computed by adding interest incurred on senior and subordinated
indebtedness, fixed annuity contracts, guaranteed investment contracts and
trust deposits and dividends paid on the preferred securities of
subsidiary grantor trusts to pretax income.
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DESCRIPTION OF THE SENIOR DEBT SECURITIES
AND SUBORDINATED DEBT SECURITIES
The Company's unsecured Senior Debt Securities and Subordinated Debt
Securities (collectively, for purposes of this Section only, the "Debt
Securities"), consisting of notes, debentures or other evidences of
indebtedness, may be issued from time to time in one or more series, in the
case of Senior Debt Securities, under a Senior Indenture dated as of April 15,
1993, as amended by Supplemental Indentures dated as of June 28, 1993 and
October 28, 1996 (as so amended, the "Senior Debt Indenture") between the
Company and The First National Bank of Chicago, as Trustee, and in the case of
Subordinated Debt Securities, under a Subordinated Indenture dated as of
October 28, 1996 (the "Subordinated Debt Indenture") between the Company and
The First National Bank of Chicago, as Trustee. The Senior Debt Indenture and
the Subordinated Debt Indenture are sometimes hereinafter referred to
individually as an "Indenture" and collectively as the "Indentures." The First
National Bank of Chicago, in its capacity as trustee under either or both of
the Indentures, is referred to hereinafter as the "Trustee." The Indentures
are included as exhibits to the Registration Statement of which this
Prospectus is a part. The following description summarizes the material terms
of the Indentures and the Debt Securities and is qualified in its entirety by
reference to the detailed provisions of the applicable Indenture, which
contains the full text of such provisions, including the definition of certain
terms used herein, and other information regarding the Debt Securities.
Numerical references in parentheses below are to sections in the applicable
Indenture. Wherever particular sections or defined terms of the applicable
Indenture are referred to, such sections or defined terms are incorporated
herein by reference as part of the statement made, and the statement is
qualified in its entirety by such reference. The Indentures are substantially
identical except for provisions relating to subordination and the Company's
negative pledge and restrictions on certain dispositions. Any Debt Securities
offered by this Prospectus and the accompanying Prospectus Supplement are
referred to herein as the "Offered Debt Securities."
The Company's Junior Subordinated Debt Securities and the Junior
Subordinated Debt Indenture are separately described in this Prospectus under
the caption "Description of the Junior Subordinated Debt Securities."
GENERAL
Neither of the Indentures limits the amount of additional indebtedness the
Company or any of its subsidiaries may incur. The Debt Securities will be
unsecured senior or subordinated obligations of the Company. Since the Company
is a holding company, the Company's rights and the rights of its creditors,
including the holders of Debt Securities, to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization will be subject
to the prior claims of the subsidiary's creditors, except to the extent that
the Company may itself be a creditor with recognized claims against the
subsidiary. Claims on the Company's subsidiaries by creditors other than the
Company include substantial claims for policy benefits and debt obligations,
as well as other liabilities incurred in the ordinary course of business. In
addition, since many of the Company's subsidiaries are insurance companies
subject to regulatory control by various state insurance departments, the
ability of such subsidiaries to pay dividends or make loans or advances to the
Company without prior regulatory approval is limited by applicable laws and
regulations.
The Indentures do not limit the aggregate principal amount of indebtedness
that may be issued and provide that Debt Securities may be issued from time to
time in one or more series and may be denominated and payable in foreign
currencies or units based on or related to foreign currencies, including
European Currency Units. Special United States federal income tax
considerations applicable to any Debt Securities so denominated are described
in the relevant Prospectus Supplement.
Reference is made to the applicable Prospectus Supplement which will
accompany this Prospectus for the following terms of and information relating
to the Offered Debt Securities offered thereby (to the extent such terms are
applicable to such Debt Securities): (i) classification as senior or
subordinated Debt Securities, the specific designation, aggregate principal
amount, purchase price and denomination; (ii) currency or units based
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<PAGE>
on or relating to currencies in which the Offered Debt Securities are
denominated and/or in which principal, premium, if any, and/or any interest
will or may be payable; (iii) any date of maturity; (iv) interest rate or
rates (or the method by which such rate will be determined), if any; (v) the
dates on which any such interest will be payable; (vi) the place or places
where the principal of, premium, if any, and interest, if any, on the Offered
Debt Securities will be payable; (vii) any redemption, repayment or sinking
fund provisions; (viii) whether such Offered Debt Securities are convertible
into Common Stock of the Company; (ix) whether the Offered Debt Securities
will be issuable in registered form ("Registered Debt Securities") or bearer
form ("Bearer Debt Securities") or both and, if Bearer Debt Securities are
issuable, any restrictions applicable to the place of payment of any principal
of, premium, if any, and interest on such Bearer Debt Securities, to the
exchange of one form for another and to the offer, sale and delivery of such
Bearer Debt Securities (except that under current United States federal income
tax law, Registered Debt Securities will not be exchangeable into Bearer Debt
Securities); (x) any applicable United States federal income tax consequences,
including whether and under what circumstances the Company will pay additional
amounts on Offered Debt Securities held by a person who is not a U.S. person
(as hereinafter defined) in respect of any tax, assessment or governmental
charge withheld or deducted and, if so, whether the Company will have the
option to redeem such Debt Securities rather than pay such additional amounts;
(xi) the proposed listing, if any, of the Offered Debt Securities on any
securities exchange; and (xii) any other specific terms of the Offered Debt
Securities, including any modifications of or additions to the events of
default or covenants provided for with respect to such Debt Securities, and
any terms which may be required by or advisable under applicable laws or
regulations not inconsistent with the applicable Indenture.
Debt Securities may be presented for exchange and Registered Debt Securities
may be presented for transfer in the manner, at the places and subject to the
restrictions set forth in the Debt Securities and the Prospectus Supplement.
Such services will be provided without charge, other than any tax or other
governmental charge payable in connection therewith, but subject to the
limitations provided in the applicable Indenture. Debt Securities in bearer
form and the coupons, if any, appertaining thereto will be transferable by
delivery.
Debt Securities will bear interest at a fixed rate or a floating rate. Debt
Securities bearing no interest or interest at a rate that at the time of
issuance is below the prevailing market rate will be sold at a discount below
their stated principal amount. Special United States federal income tax
considerations applicable to any such discounted Debt Securities or to certain
Debt Securities issued at par which are treated as having been issued at a
discount for United States federal income tax purposes are described in the
relevant Prospectus Supplement.
Debt Securities may be issued, from time to time, with the principal amount
payable on any principal payment date, or the amount of interest payable on
any interest payment date, to be determined by reference to one or more
currency exchange rates, commodity prices, equity indices or other factors.
Holders of such Debt Securities may receive a principal amount on any
principal payment date, or a payment of interest on any interest payment date,
that is greater than or less than the amount of principal or interest
otherwise payable on such dates, depending upon the value on such dates of the
applicable currency, commodity, equity index or other factors. Information as
to the methods for determining the amount of principal or interest payable on
any date, the currencies, commodities, equity indices or other factors to
which the amount payable on such date is linked and certain additional tax
considerations will be set forth in the applicable Prospectus Supplement.
GLOBAL DEBT SECURITIES
The registered Debt Securities of a series may be issued in the form of one
or more fully registered global Securities (a "Registered Global Security")
that will be deposited with a depositary (a "Depositary") or with a nominee
for a Depositary identified in the Prospectus Supplement relating to such
series and registered in the name of the Depositary or a nominee thereof. In
such case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding registered Debt Securities of the series to be
represented by such Registered Global Security or Securities. Unless and until
it is exchanged in whole for Debt Securities in definitive registered form, a
12
<PAGE>
Registered Global Security may not be transferred except as a whole by the
Depositary for such Registered Security to a nominee of such Depositary or by
a nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor of such
Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Registered Global
Security will be described in the Prospectus Supplement relating to such
series. The Company anticipates that the following provisions will apply to
all depositary arrangements.
Ownership of beneficial interests in a Registered Global Security will be
limited to persons that have accounts with the Depositary for such Registered
Global Security ("participants") or persons that may hold interests through
participants. Upon the issuance of a Registered Global Security, the
Depositary for such Registered Global Security will credit, on its book-entry
registration and transfer system, the participants' accounts with the
respective principal amounts of the Debt Securities represented by such
Registered Global Security beneficially owned by such participants. The
accounts to be credited shall be designated by any dealers, underwriters or
agents participating in the distribution of such Debt Securities. Ownership of
beneficial interests in such Registered Global Security will be shown on, and
the transfer of such ownership interests will be effected only through,
records maintained by the Depositary for such Registered Global Security (with
respect to interests of participants) and on the records of participants (with
respect to interests of persons holding through participants). The laws of
some states may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to own, transfer or pledge beneficial interests in
Registered Global Securities.
So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder
of the Debt Securities represented by such Registered Global Security for all
purposes under the applicable Indenture. Except as set forth below, owners of
beneficial interests in a Registered Global Security will not be entitled to
have the Debt Securities represented by such Registered Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of such Debt Securities in definitive form and will not be considered
the owners or holders thereof under the applicable Indenture. Accordingly,
each person owning a beneficial interest in a Registered Global Security must
rely on the procedures of the Depositary for such Registered Global Security
and, if such person is not a participant, on the procedures of the participant
through which such person owns its interest, to exercise any rights of a
holder under the applicable Indenture. The Company understands that under
existing industry practices, if the Company requests any action of holders or
if an owner of a beneficial interest in a Registered Global Security desires
to give or take any action which a holder is entitled to give or take under
the applicable Indenture, the Depositary for such Registered Global Security
would authorize the participants holding the relevant beneficial interests to
give or take such action, and such participants would authorize beneficial
owners owning through such participants to give or take such action or would
otherwise act upon the instructions of beneficial owners holding through them.
Payments of principal and premium, if any, and interest, if any, of Debt
Securities represented by a Registered Global Security registered in the name
of a Depositary or its nominee will be made to such Depositary or its nominee,
as the case may be, as the registered owners of such Registered Global
Security. None of the Company, the Trustee or any other agent of the Company
or agent of the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in such Registered Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depositary for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium or interest in respect of such Registered Global Security, will
immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in such Registered
Global Security as shown on the records of such Depositary.
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The Company also expects that payments by participants to owners of beneficial
interests in such Registered Global Security held through such participants
will be governed by standing customer instructions and customary practices, as
is now the case with the securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility of
such participants.
If the Depositary for any Debt Securities represented by a Registered Global
Security is at any time unwilling or unable to continue as Depositary or
ceases to be a clearing agency registered under the 1934 Act, and a successor
Depositary registered as a clearing agency under the 1934 Act is not appointed
by the Company within 90 days, the Company will issue such Debt Securities in
definitive form in exchange for such Registered Global Security. In addition,
the Company may at any time and in its sole discretion determine not to have
any of the Debt Securities of a series represented by one or more Registered
Global Securities and, in such event, will issue Debt Securities of such
series in a definitive form in exchange for all of the Registered Global
Security or Securities representing such Debt Securities. Any Debt Securities
issued in definitive form in exchange for a Registered Global Security will be
registered in such name or names as the Depositary shall instruct the Trustee.
It is expected that such instructions will be based upon directions received
by the Depositary from participants with respect to ownership of beneficial
interests in such Registered Global Security.
Bearer Debt Securities of a series may also be issued in the form of one or
more global Securities (a "Bearer Global Security") that will be deposited
with a common depositary for Euro-clear and CEDEL, or with a nominee for such
depositary identified in the Prospectus Supplement relating to such series.
The specific terms and procedures, including the specific terms of the
depositary arrangement and any specific procedures for the issuance of Debt
Securities in definitive form in exchange for a Bearer Global Security, with
respect to any portion of a series of Debt Securities to be represented by a
Bearer Global Security will be described in the Prospectus Supplement relating
to such series.
SENIOR DEBT SECURITIES
Payment of the principal of, premium, if any, and interest on Debt
Securities issued under the Senior Debt Indenture will rank pari passu with
all other unsecured and unsubordinated debt of the Company.
SUBORDINATED DEBT SECURITIES
Payment of the principal of, premium, if any, and interest on Debt
Securities issued under the Subordinated Debt Indenture will be subordinate
and junior in right of payment, to the extent and in the manner set forth in
the Subordinated Debt Indenture, to all "Senior Indebtedness" of the Company.
The Subordinated Debt Indenture defines "Senior Indebtedness" as the principal
of and premium, if any, and interest on (a) all indebtedness of the Company,
whether outstanding on the date of the Subordinated Debt Indenture or
thereafter created, (i) for money borrowed by the Company, (ii) for money
borrowed by, or obligations of, others and either assumed or guaranteed,
directly or indirectly, by the Company, (iii) in respect of letters of credit
and acceptances issued or made by banks, or (iv) constituting purchase money
indebtedness, or indebtedness secured by property included in the property,
plant and equipment accounts of the Company at the time of the acquisition of
such property by the Company, for the payment of which the Company is directly
liable, and (b) all deferrals, renewals, extensions and refundings of, and
amendments, modifications and supplements to, any such indebtedness. As used
in the preceding sentence the term "purchase money indebtedness" means
indebtedness evidenced by a note, debenture, bond or other instrument (whether
or not secured by any lien or other security interest) issued or assumed as
all or a part of the consideration for the acquisition of property, whether by
purchase, merger, consolidation or otherwise, unless by its terms such
indebtedness is subordinate to other indebtedness of the Company.
Notwithstanding anything to the contrary in the Subordinated Debt Indenture or
the Subordinated Debt Securities, Senior Indebtedness shall not include, (i)
any indebtedness of the Company which, by its terms or the terms of the
instrument creating or evidencing it, is subordinate in right of payment to or
pari passu with the Subordinated Debt Securities or (ii) any indebtedness of
the Company to a subsidiary of the Company. (Subordinated Debt Indenture,
Section 1.1) The Subordinated Debt Indenture does not contain any limitation
on the amount of Senior Indebtedness that can be incurred by the Company.
Indebtedness issued or to
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be issued pursuant to the Junior Subordinated Debt Indenture between the
Company and The First National Bank of Chicago, as Trustee, providing for the
issuance of Junior Subordinated Debt Securities of the Company, is subordinate
in right of payment to the Subordinated Debt Securities. As of the date of
this Prospectus, two series of Junior Subordinated Debt Securities having an
aggregate principal amount of approximately $245.5 million are outstanding
under the Junior Subordinated Debt Indenture.
In the event (a) of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
respect of the Company or its property, or (b) that Subordinated Debt
Securities of any series are declared due and payable before their expressed
maturity because of the occurrence of an Event of Default pursuant to Section
5.1 of the Subordinated Debt Indenture (under circumstances other than as set
forth in clause (a) above), then the holders of all Senior Indebtedness shall
first be entitled to receive payment of the full amount due thereon in money
or money's worth, before the holders of any of such Subordinated Debt
Securities or coupons appertaining thereto are entitled to receive a payment
on account of the principal of, premium, if any, or interest on the
indebtedness evidenced by such Subordinated Debt Securities or of such coupons
appertaining thereto. In the event and during the continuation of any default
in payment of any Senior Indebtedness or if any Event of Default shall exist
under any Senior Indebtedness, as "Event of Default" is defined therein or in
the agreement under which the same is outstanding, no payment of the principal
or interest on the Subordinated Debt Securities or coupons shall be made.
(Subordinated Debt Indenture, Article 13) If this Prospectus is being
delivered in connection with a series of Subordinated Debt Securities, the
accompanying Prospectus Supplement will set forth the approximate amount of
Senior Indebtedness outstanding as of the end of the most recent fiscal
quarter.
CONVERSION RIGHTS
The terms and conditions, if any, on which Offered Debt Securities are
convertible into Common Stock of the Company will be set forth in the
Prospectus Supplement relating thereto. Such terms will include the conversion
price, the conversion period, provisions as to whether conversion will be at
the option of the holder or the Company, the events requiring an adjustment of
the conversion price and provisions affecting conversion in the event of the
redemption of the convertible Offered Debt Securities; and such terms may
include provisions under which the number of shares of Common Stock to be
received by the holders of the Offered Debt Securities would be calculated
according to the market price of the Common Stock as of a time stated in the
Prospectus Supplement.
CERTAIN COVENANTS OF THE COMPANY
Limitations on Liens. The Senior Debt Indenture provides that the Company
and its Restricted Subsidiaries (as defined below) may not issue, assume,
incur or guarantee any indebtedness for borrowed money secured by a mortgage,
pledge, lien or other encumbrance (except for certain liens specifically
permitted by the Senior Debt Indenture), directly or indirectly, upon any
shares of the Voting Stock (as defined in the Senior Debt Indenture) of a
Restricted Subsidiary which shares are owned by the Company or its Restricted
Subsidiaries without effectively providing that the Debt Securities issued
under the Senior Debt Indenture (and if the Company so elects, any other
indebtedness of the Company ranking on a parity with such Debt Securities)
shall be secured equally and ratably with, or prior to, any such secured
indebtedness so long as such indebtedness remains outstanding. The foregoing
restrictions, however, do not apply to liens upon any shares of Voting Stock
of any corporation existing at the time such corporation becomes a Restricted
Subsidiary and extensions, renewals or replacements thereof. (Senior Debt
Indenture, Section 3.9)
The term "Restricted Subsidiary" means (a) so long as they are Subsidiaries
of the Company, SunAmerica Life Insurance Company and Anchor National Life
Insurance Company; (b) any other present or future Insurance Subsidiary the
Consolidated Total Assets (as defined in the Senior Debt Indenture) of which
constitute 20% or more of the Consolidated Total Assets of the Company; and
(c) any Subsidiary which is a successor, by merger or otherwise, to
substantially all of the business or properties of any Insurance Subsidiary
referred to or described in the foregoing clauses (a) or (b). The term
"Subsidiary" means any corporation or other entity more than 50%
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of the outstanding shares of Voting Stock of which is at the time of
determination owned or controlled, directly or indirectly, by the Company. The
term "Insurance Subsidiary" means a Subsidiary registered in the state of its
domicile under the insurance laws of such state and qualified to sell
insurance products. (Senior Debt Indenture, Section 1.1)
Consolidation, Merger and Sale of Assets. Each Indenture provides that the
Company shall not consolidate or merge with or into, or transfer or lease its
assets substantially as an entirety to any person unless the Company shall be
the continuing corporation, or the successor corporation or person to which
such assets are transferred or leased shall be organized under the laws of the
United States or any state thereof or the District of Columbia and shall
expressly assume the Company's obligations on the Debt Securities and under
such Indenture, and after giving effect to such transaction no Event of
Default (as defined in such Indenture) shall have occurred and be continuing,
and certain other conditions are met. (Senior and Subordinated Debt
Indentures, Section 9.1)
This covenant would not apply to any recapitalization transaction, a change
of control of the Company or a highly leveraged transaction unless such
transactions or change of control were structured to include a merger or
consolidation or transfer or lease of the Company's assets substantially as an
entirety. Except as may be described in a Prospectus Supplement applicable to
a particular series of Debt Securities, there are no covenants or other
provisions in the Indentures providing for a put or increased interest or that
would otherwise afford holders of Debt Securities additional protection in the
event of a recapitalization transaction, a change of control of the Company or
a highly leveraged transaction.
Restrictions on Certain Dispositions. The Senior Debt Indenture provides
that as long as any of the Senior Debt Securities remain outstanding, the
Company will not, and will not permit any Restricted Subsidiary to, issue,
sell, assign, transfer or otherwise dispose of, directly or indirectly, any of
the Voting Stock of any Restricted Subsidiary, unless (a) the issuance, sale,
assignment, transfer or other disposition is required to comply with the order
of a court or regulatory authority of competent jurisdiction, other than an
order issued at the request of the Company or of one of its Restricted
Subsidiaries; (b) the shares of Voting Stock issued, sold, assigned,
transferred or otherwise disposed of constitute directors' qualifying shares;
(c) all of the Voting Stock of a Restricted Subsidiary then owned by the
Company or by its Restricted Subsidiaries is disposed of, in a single
transaction or in a series of related transactions, for a consideration
consisting of cash or other property the fair market value of which (as
determined in good faith by the Board of Directors) is at least equal to the
Fair Value (as defined below) of such Voting Stock; or (d) after giving effect
to the issuance, sale, assignment, transfer or other disposition, the Company
and its Restricted Subsidiaries would own directly or indirectly at least 80%
of the issued and outstanding Voting Stock of such Restricted Subsidiary and
such issuance, sale, assignment, transfer or other disposition is made for a
consideration consisting of cash or other property which is at least equal to
the Fair Value of such Voting Stock. (Senior Debt Indenture, Section 9.3) The
term "Fair Value" when used with respect to any Voting Stock means the fair
value as determined in good faith by the Board of Directors of the Company.
(Senior Debt Indenture, Section 1.1) The Senior Debt Indenture does not
restrict the transfer of assets from a Restricted Subsidiary to any other
person, including the Company or another subsidiary of the Company.
EVENTS OF DEFAULT
An Event of Default is defined under each Indenture with respect to Debt
Securities of any series issued under such Indenture as being: (a) default in
payment of all or any part of the principal of the Debt Securities of such
series when due, either at maturity (or upon any redemption), by declaration
or otherwise; (b) default for 30 days in payment of any interest on any Debt
Securities of such series; (c) default in payment of any sinking fund
installment when due; (d) default for 60 days after written notice as provided
in such Indenture in the observance or performance of any other covenant or
agreement in the Debt Securities of such series or such Indenture other than a
covenant included in such Indenture solely for the benefit of a series of Debt
Securities other than such series; (e) certain events of bankruptcy,
insolvency or reorganization; or (f) an Event of Default with respect to any
other indebtedness for borrowed money (other than non-recourse obligations) of
the Company
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or any of its Restricted Subsidiaries, in an aggregate principal amount
exceeding $10,000,000, if such Event of Default shall result in the
acceleration of such other indebtedness under the terms of the instrument
under which such indebtedness is issued or secured, so long as such
acceleration is not cured, waived, rescinded or annulled, or such indebtedness
is not discharged, within 10 days after written notice thereof as provided in
such Indenture; provided that if any such acceleration shall cease or be
cured, waived, rescinded or annulled, then the Event of Default by reason
thereof shall be deemed likewise to have been thereupon cured. (Senior and
Subordinated Debt Indentures, Section 5.1)
Each Indenture provides that (a) if an Event of Default due to the default
in payment of principal of, premium, if any, or interest on, any series of
Debt Securities issued under such Indenture or due to the default in the
performance or breach of any other covenant or agreement of the Company
applicable to the Debt Securities of such series but not applicable to all
outstanding Debt Securities issued under such Indenture shall have occurred
and be continuing, either the Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of each affected series (treated as
one class) issued under such Indenture and then outstanding may then declare
the principal of all Debt Securities of each such affected series and interest
accrued thereon to be due and payable immediately; and (b) if any Event of
Default due to a default in the performance of any other of the covenant or
agreements in such Indenture applicable to all outstanding Debt Securities
issued thereunder and then outstanding or due to certain events of bankruptcy,
insolvency and reorganization of the Company shall have occurred and be
continuing, either the Trustee or the holders of not less than 25% in
principal amount of all Debt Securities issued under such Indenture and then
outstanding (treated as one class) may declare the principal of all such Debt
Securities and interest accrued thereon to be due and payable immediately, but
upon certain conditions such declarations may be annulled and past defaults
may be waived (except a continuing default in payment of principal of (or
premium, if any) or interest on such Debt Securities) by the holders of a
majority in principal amount of the Debt Securities of all such affected
series then outstanding. (Senior and Subordinated Debt Indentures, Sections
5.1 and 5.10)
Each Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during a default to act with the required standard of
care, to be indemnified by the holders of Debt Securities issued under such
Indenture requesting the Trustee to exercise any right or power under such
Indenture before proceeding to exercise any such right or power at the request
of such holders. (Senior and Subordinated Debt Indentures, Section 6.2)
Subject to such provisions in each Indenture for the indemnification of the
Trustee and certain other limitations, the holders of a majority in principal
amount of the outstanding Debt Securities of each affected series (treated as
one class) issued under such Indenture may direct the time, method and place
of conducting any proceedings for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee. (Senior and
Subordinated Debt Indentures, Section 5.9)
Each Indenture provides that no holder of Debt Securities issued under such
Indenture may institute any action against the Company under such Indenture
(except actions for payment of overdue principal, premium, if any, or
interest) unless such holder previously shall have given to the Trustee
written notice of default and continuance thereof and unless the holders of
not less than 25% in principal amount of the Debt Securities of each affected
series (treated as one class) issued under such Indenture and then outstanding
shall have requested the Trustee to institute such action and shall have
offered the Trustee reasonable indemnity, the Trustee shall not have
instituted such action within 60 days of such request and the Trustee shall
not have received direction inconsistent with such written request by the
holders of a majority in principal amount of the Debt Securities of each
affected series (treated as one class) issued under such Indenture and then
outstanding. (Senior and Subordinated Debt Indentures, Sections 5.6 and 5.9)
Each Indenture contains a covenant that the Company will file annually with
the Trustee a certificate of no default or a certificate specifying any
default that exists. (Senior and Subordinated Debt Indentures, Section 3.5)
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company can discharge or defease its obligations under each Indenture as
set forth below. (Senior and Subordinated Debt Indentures, Section 10.1)
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Under terms satisfactory to the Trustee, the Company may discharge certain
obligations to holders of any series of Debt Securities issued under such
Indentures which have not already been delivered to the Trustee for
cancellation and which have either become due and payable or are by their
terms due and payable within one year (or scheduled for redemption within one
year) by irrevocably depositing with the Trustee cash or, in the case of Debt
Securities payable only in U.S. dollars, U.S. Government Obligations (as
defined in such Indenture), as trust funds in an amount certified to be
sufficient to pay when due, whether at maturity, upon redemption or otherwise,
the principal of, premium, if any, and interest on such Debt Securities.
The Company may also discharge any and all of its obligations to holders of
any series of Debt Securities issued under an Indenture at any time
("defeasance"), but may not thereby avoid its duty to register the transfer or
exchange of such series of Debt Securities, to replace any temporary,
mutilated, destroyed, lost or stolen series of Debt Securities or to maintain
an office or agency in respect of such series of Debt Securities. Under terms
satisfactory to the Trustee, the Company may instead be released with respect
to any outstanding series of Debt Securities issued under the relevant
Indenture from the obligations imposed by certain provisions of such Indenture
including Sections 3.9, 9.1 and 9.3, in the case of the Senior Debt Indenture,
and Section 9.1, in the case of the Subordinated Debt Indenture (which contain
the covenants described above limiting liens, consolidations, mergers,
transfers and leases and certain dispositions) and omit to comply with such
Sections without creating an Event of Default ("covenant defeasance").
Defeasance or covenant defeasance may be effected only if, among other things:
(i) the Company irrevocably deposits with the Trustee cash or, in the case of
Debt Securities payable only in U.S. dollars, U.S. Government Obligations, as
trust funds in an amount certified to be sufficient to pay at maturity (or
upon redemption) the principal of, premium, if any, and interest on all
outstanding Debt Securities of such series issued under such Indenture; (ii)
the Company delivers to the Trustee an opinion of counsel to the effect that
the holders of such series of Debt Securities will not recognize income, gain
or loss for United States federal income tax purposes as a result of such
defeasance or covenant defeasance and that defeasance or covenant defeasance
will not otherwise alter such holders' United States federal income tax
treatment of principal, premium and interest payments on such series of Debt
Securities (in the case of a defeasance, such opinion must be based on a
ruling of the Internal Revenue Service or a change in United States federal
income tax law occurring after the date of such Indenture, since such a result
would not occur under current tax law); and (iii) in the case of the
Subordinated Debt Indenture no event or condition shall exist that, pursuant
to certain provisions described under "Subordinated Debt" above, would prevent
the Company from making payments of principal of, premium, if any, and
interest on the Subordinated Debt Securities at the date of the irrevocable
deposit referred to above.
MODIFICATION OF THE INDENTURES
Each Indenture provides that the Company and the Trustee may enter into
supplemental indentures without the consent of the holders of Debt Securities
to: (a) secure any Debt Securities, (b) evidence the assumption by a successor
corporation of the obligations of the Company, (c) add covenants for the
protection of the holders of Debt Securities, (d) cure any ambiguity or
correct any inconsistency in such Indenture, provided that such cure or
correction does not adversely affect the holders of such Debt Securities, (e)
establish the forms or terms of Debt Securities of any series and (f) evidence
the acceptance of appointment by a successor trustee. (Senior and Subordinated
Debt Indentures, Section 8.1)
Each Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of Debt Securities of all series issued under such
Indenture then outstanding and affected (voting as one class), to add any
provisions to, or change in any manner or eliminate any of the provisions of,
such Indenture or modify in any manner the rights of the holders of the Debt
Securities of each series so affected; provided that the Company and the
Trustee may not, without the consent of the holder of each outstanding Debt
Security affected thereby, (a) extend the stated maturity of the principal of
any Debt Security, or reduce the principal amount thereof or reduce the rate
or extend the time of payment of interest thereon, or reduce any amount
payable on redemption thereof or change the currency in which the principal
thereof (including any amount in respect of original issue discount), premium,
if any, or
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interest thereon is payable or reduce the amount of any original issue Debt
Security that is payable upon acceleration or provable in bankruptcy or alter
certain provisions of such Indenture relating to the Debt Securities issued
thereunder not denominated in U.S. dollars or impair the right to institute
suit for the enforcement of any payment on any Debt Security when due or (b)
reduce the aforesaid percentage in principal amount of Debt Securities of any
series issued under such Indenture, the consent of the holders of which is
required for any such modification. (Senior and Subordinated Debt Indentures,
Section 8.2)
The Subordinated Debt Indenture may not be amended to alter the
subordination of any outstanding Subordinated Debt Securities without the
consent of each holder of Senior Indebtedness then outstanding that would be
adversely affected thereby. (Subordinated Debt Indenture, Section 8.6)
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York. (Senior and Subordinated
Debt Indentures, Section 11.8)
CONCERNING THE TRUSTEE
The First National Bank of Chicago is one of a number of banks with which
the Company and its subsidiaries maintain ordinary banking and trust
relationships and is also the Trustee under the Junior Subordinated Debt
Indenture.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
The Company's unsecured Junior Subordinated Debt Securities, consisting of
notes, debentures or other evidences of indebtedness, may be issued from time
to time in one or more series under an Indenture dated March 15, 1995, as
amended by a Supplemental Indenture dated as of October 28, 1996 (as so
amended, the "Junior Subordinated Debt Indenture") between the Company and The
First National Bank of Chicago, as trustee (the "Junior Subordinated Debt
Indenture Trustee"). The Junior Subordinated Debt Indenture has been filed as
an exhibit to the Registration Statement of which this Prospectus forms a
part. The following description summarizes the material terms of the Junior
Subordinated Debt Indenture and the Junior Subordinated Debt Securities, and
is qualified in its entirety by reference to the detailed provisions of the
Junior Subordinated Debt Indenture, which contains the full text of such
provisions, including the definition of certain terms used herein, and other
information regarding the Junior Subordinated Debt Securities. Numerical
references in parentheses below are to sections in the Junior Subordinated
Debt Indenture. Whenever particular sections or defined terms in the Junior
Subordinated Debt Indenture are referred to, such sections or defined terms
are incorporated herein by reference as part of the statement made, and the
statement is qualified in its entirety by such reference.
GENERAL
The Junior Subordinated Debt Securities will be unsecured, junior
subordinated obligations of the Company. The Junior Subordinated Debt
Indenture does not limit the amount of additional indebtedness the Company or
any of its subsidiaries may incur. Since the Company is a holding company, the
Company's rights and the rights of its creditors, including the holders of
Junior Subordinated Debt Securities, to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization will be subject
to the prior claims of the subsidiary's creditors, except to the extent that
the Company may itself be a creditor with recognized claims against the
subsidiary. Claims on the Company's subsidiaries by creditors other than the
Company include substantial claims for policy benefits and debt obligations,
as well as other liabilities incurred in the ordinary course of business. In
addition, since many of the Company's subsidiaries are insurance companies
subject to regulatory control by various state insurance departments, the
ability of such subsidiaries to pay dividends or make loans or advances to the
Company without prior regulatory approval is limited by applicable laws and
regulations.
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The Junior Subordinated Debt Indenture does not limit the aggregate
principal amount of indebtedness which may be issued thereunder and provides
that Junior Subordinated Debt Securities may be issued thereunder from time to
time in one or more series. The Junior Subordinated Debt Securities are
issuable in one or more series pursuant to an indenture supplemental to the
Junior Subordinated Debt Indenture. As of the date of this Prospectus, two
series of Junior Subordinated Debt Securities having an aggregate principal
amount of approximately $245.5 million are outstanding.
In the event Junior Subordinated Debt Securities are issued to a SunAmerica
Trust or a Trustee of such Trust in connection with the issuance of Trust
Securities by such SunAmerica Trust, such Junior Subordinated Debt Securities
subsequently may be distributed pro rata to the holders of such Trust
Securities in connection with the dissolution of such SunAmerica Trust upon
the occurrence of certain events described in the Prospectus Supplement
relating to such Trust Securities. Only one series of Junior Subordinated Debt
Securities will be issued to a SunAmerica Trust or a Trustee of such Trust in
connection with the issuance of Trust Securities by such SunAmerica Trust.
Reference is made to the applicable Prospectus Supplement which will
accompany this Prospectus for the following terms of the series of Junior
Subordinated Debt Securities being offered thereby (to the extent such terms
are applicable to the Junior Subordinated Debt Securities): (i) the specific
designation of such Junior Subordinated Debt Securities, aggregate principal
amount and purchase price; (ii) any limit on the aggregate principal amount of
such Junior Subordinated Debt Securities; (iii) the date or dates on which the
principal of such Junior Subordinated Debt Securities is payable and the
right, if any, to extend such date or dates; (iv) the rate or rates at which
such Junior Subordinated Debt Securities will bear interest or the method of
calculating such rate or rates; (v) the date or dates from which such interest
shall accrue, the interest payment dates on which such interest will be
payable or the manner of determination of such interest payment dates and the
record dates for the determination of holders to whom interest is payable on
any such interest payment dates; (vi) the right, if any, to extend the
interest payment periods and the duration of such extension; (vii) the period
or periods within which, the price or prices at which, and the terms and
conditions upon which, such Junior Subordinated Debt Securities may be
redeemed, in whole or in part, at the option of the Company; (viii) the right
and/or obligation, if any, of the Company to redeem or purchase such Junior
Subordinated Debt Securities pursuant to any sinking fund or analogous
provisions or at the option of the holder thereof and the period or periods
for which, the price or prices at which, and the terms and conditions upon
which, such Junior Subordinated Debt Securities shall be redeemed or
purchased, in whole or part, pursuant to such right and/or obligation; (ix)
any applicable United States federal income tax consequences, including
whether and under what circumstances the Company will pay additional amounts
on the Junior Subordinated Debt Securities held by a person who is not a U.S.
person in respect of any tax, assessment or governmental charge withheld or
deducted and, if so, whether the Company will have the option to redeem such
Junior Subordinated Debt Securities rather than pay such additional amounts;
(x) the form of such Junior Subordinated Debt Securities; (xi) if other than
denominations of $25 or any integral multiple thereof, the denominations in
which such Junior Subordinated Debt Securities shall be issuable;
(xii) whether such Junior Subordinated Debt Securities are convertible into
Common Stock of the Company; (xiii) any and all other terms with respect to
such series, including any modification of or additions to the events of
default or covenants provided for with respect to the Junior Subordinated Debt
Securities, and any terms which may be required by or advisable under
applicable laws or regulations not inconsistent with the Junior Subordinated
Debt Indenture; and (xiv) whether such Junior Subordinated Debt Securities are
issuable as a global security, and in such case, the identity of the
depositary.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Junior Subordinated Debentures will be issued in United States dollars in
fully registered form without coupons in denominations of $25 or integral
multiples thereof. Junior Subordinated Debt Securities may be presented for
exchange and Junior Subordinated Debt Securities in registered form may be
presented for transfer in the manner, at the places and subject to the
restrictions set forth in the Junior Subordinated Debt Securities and the
Prospectus Supplement. Such services will be provided without charge, other
than any tax or other governmental charge payable in connection therewith, but
subject to the limitations provided in the Junior Subordinated Debt Indenture.
Junior
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Subordinated Debt Securities in bearer form and the coupons, if any,
appertaining thereto will be transferable by delivery.
Junior Subordinated Debt Securities may bear interest at a fixed rate or a
floating rate. Junior Subordinated Debt Securities bearing no interest or
interest at a rate that at the time of issuance is below the prevailing market
rate will be sold at a discount below their stated principal amount. Special
United States federal income tax considerations applicable to any such
discounted Junior Subordinated Debt Securities or to certain Junior
Subordinated Debt Securities issued at par which are treated as having been
issued at a discount for United States federal income tax purposes are
described in the relevant Prospectus Supplement.
CERTAIN COVENANTS OF THE COMPANY APPLICABLE TO THE JUNIOR SUBORDINATED DEBT
SECURITIES
If Junior Subordinated Debt Securities are issued to a SunAmerica Trust in
connection with the issuance of Trust Securities by such SunAmerica Trust, the
Company will covenant in the Junior Subordinated Debt Indenture that, so long
as the Preferred Securities issued by the applicable SunAmerica Trust remain
outstanding, the Company will not (a) declare or pay any dividends on, or
redeem, purchase, acquire or make a distribution or liquidation payment with
respect to, any of its common stock or preferred stock or make any guarantee
payment with respect thereto if at such time (i) the Company shall be in
default with respect to its Guarantee Payments (as defined under "Description
of the Preferred Securities Guarantees") or other payment obligations under
the related Preferred Securities Guarantee, (ii) there shall have occurred any
Junior Subordinated Debt Indenture Event of Default with respect to the Junior
Subordinated Debt Securities or (iii) the Company shall have given notice of
its election to defer payments of interest on such Junior Subordinated Debt
Securities by extending the interest payment period as provided in the terms
of such Junior Subordinated Debt Securities and such period, or any extension
thereof, is continuing; provided that (x) the Company will be permitted to pay
accrued dividends (and cash in lieu of fractional shares) upon the conversion
of any of its Series E Preferred Shares (as defined under "Description of
Capital Stock-Series E Preferred Shares") or upon the conversion of any other
Preferred Stock of the Company as may be outstanding from time to time, in
each case in accordance with the terms of such stock and (y) the foregoing
will not apply to any stock dividends paid by the Company. In addition, if
Junior Subordinated Debt Securities are issued to a SunAmerica Trust in
connection with the issuance of Trust Securities by such SunAmerica Trust, for
so long as the Preferred Securities issued by the applicable SunAmerica Trust
remain outstanding, the Company has agreed (i) to remain the sole direct or
indirect owner of all of the outstanding Common Securities issued by the
applicable SunAmerica Trust and shall not cause or permit the Common
Securities to be transferred except to the extent permitted by the related
Declaration; provided that any permitted successor of the Company under the
Junior Subordinated Debt Indenture may succeed to the Company's ownership of
the Common Securities issued by the applicable SunAmerica Trust, (ii) to
comply fully with all of its obligations and agreements contained in the
related Declaration and (iii) not to take any action which would cause the
applicable SunAmerica Trust to cease to be treated as a grantor trust for
United States federal income tax purposes except in connection with a
distribution of Junior Subordinated Debt Securities.
SUBORDINATION
The Junior Subordinated Debt Indenture provides that the Junior Subordinated
Debt Securities are subordinate and junior in right of payment to all Senior
Indebtedness (as defined in the Junior Subordinated Debt Indenture) of the
Company. In the event (a) of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
respect of the Company or its property or any proceeding for voluntary
liquidation, dissolution or other winding up of the Company, or (b) that
Junior Subordinated Debt Securities of any series are declared due and payable
before their expressed maturity because of the occurrence of a Junior
Subordinated Debt Indenture Event of Default pursuant to Section 6.01 of the
Junior Subordinated Debt Indenture (under circumstances other than as set
forth in clause (a) above), then the holders of all Senior Indebtedness shall
first be entitled to receive payment of the full amount due thereon in money,
before the holders of any of the Junior Subordinated Debt Securities are
entitled to receive payment on account
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of the principal of, premium, if any, or interest on the indebtedness
evidenced by such Junior Subordinated Debt Securities. In the event and during
the continuation of any default in payment of any Senior Indebtedness or if
any event of default shall exist under any Senior Indebtedness, as "event of
default" is defined therein or in the agreement under which the same is
outstanding, no payment of the principal or, premium, if any, or interest on
the Junior Subordinated Debt Securities shall be made. (Section 14.02 and
14.03). If this Prospectus is being delivered in connection with a series of
Junior Subordinated Debt Securities, the accompanying Prospectus Supplement
will set forth the approximate amount of Senior Indebtedness outstanding as of
the end of the most recent fiscal quarter.
The Junior Subordinated Debt Indenture defines "Senior Indebtedness" as the
principal of and premium, if any, and interest on (a) all indebtedness of the
Company, whether outstanding on the date of the Junior Subordinated Debt
Indenture or thereafter created, (i) for money borrowed by the Company
(including, without limitation, indebtedness issued or to be issued pursuant
to the Subordinated Debt Indenture), (ii) for money borrowed by, or
obligations of, others and either assumed or guaranteed, directly or
indirectly, by the Company, (iii) in respect of letters of credit and
acceptances issued or made by banks, or (iv) constituting purchase money
indebtedness, or indebtedness secured by property included in the property,
plant and equipment accounts of the Company at the time of the acquisition of
such property by the Company for the payment of which the Company is directly
liable and (b) all deferrals, renewals, extensions and refundings of, and
amendments, modifications and supplements to, any such indebtedness. As used
in the preceding sentence the term "purchase money indebtedness" means
indebtedness evidenced by a note, debenture, bond or other instrument (whether
or not secured by any lien or other security interest) issued or assumed as
all or a part of the consideration for the acquisition of property, whether by
purchase, merger, consolidation or otherwise, unless by its terms such
indebtedness is subordinate to other indebtedness of the Company.
Notwithstanding anything to the contrary in the Junior Subordinated Debt
Indenture or the Junior Subordinated Debt Securities, Senior Indebtedness
shall not include (i) any indebtedness of the Company which, by its terms or
the terms of the instrument creating or evidencing it, is subordinate in right
of payment to or pari passu with the Junior Subordinated Debt Securities, as
the case may be, and in particular, the Junior Subordinated Debt Securities
shall rank pari passu with respect to all other debt securities and guarantees
in respect thereof issued to any other trusts, partnerships or other entity
affiliated with the Company which is a financing vehicle of the Company in
connection with the issuance of preferred securities by such financing
vehicle, or (ii) any indebtedness of the Company to a subsidiary of the
Company. (Section 1.01). The Junior Subordinated Debt Indenture does not
contain any limitation on the amount of Senior Indebtedness that can be
incurred by the Company.
CONVERSION RIGHTS
The terms and conditions, if any, on which Junior Subordinated Debt
Securities are convertible into Common Stock of the Company will be set forth
in the Prospectus Supplement relating thereto. Such terms will include the
conversion price, the conversion period, provisions as to whether conversion
will be at the option of the holder or the Company, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of the convertible Junior Subordinated Debt
Securities; and such terms may include provisions under which the number of
shares of Common Stock to be received by the holders of the Junior
Subordinated Debt Securities would be calculated according to the market price
of the Common Stock as of a time stated in the Prospectus Supplement.
JUNIOR SUBORDINATED DEBT INDENTURE EVENTS OF DEFAULT
The Junior Subordinated Debt Indenture provides that any one or more of the
following described events, which has occurred and is continuing, constitutes
a "Junior Subordinated Debt Indenture Event of Default" with respect to each
series of Junior Subordinated Debt Securities: (a) failure for 30 days to pay
interest on the Junior Subordinated Debt Securities of such series when due;
provided that a valid extension of the interest payment period by the Company
shall not constitute a default in the payment of interest for this purpose; or
(b) failure to pay principal of or premium, if any, on the Junior Subordinated
Debt Securities of such series when due whether
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at maturity, upon redemption, by declaration or otherwise; or (c) failure to
observe or perform any other covenant contained in the Indenture with respect
to such series for 90 days after written notice to the Company from the
Indenture Trustee or the holders of at least 25% in principal amount of the
outstanding Junior Subordinated Debt Securities of such series; or (d) certain
events in bankruptcy, insolvency or reorganization of the Company. (Section
6.01).
In each and every such case, unless the principal of all the Junior
Subordinated Debt Securities of that series shall have already become due and
payable, either the Junior Subordinated Debt Indenture Trustee or the holders
of not less than 25% in aggregate principal amount of the Junior Subordinated
Debt Securities of that series then outstanding, by notice in writing to the
Company (and to the Junior Subordinated Debt Indenture Trustee if given by
such holders), may declare the principal of all the Junior Subordinated Debt
Securities of that series to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable.
(Section 6.01).
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of that series have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Junior Subordinated Debt Indenture Trustee. (Section 6.06).
The Junior Subordinated Debt Indenture Trustee or the holders of not less than
25% in aggregate outstanding principal amount of the Junior Subordinated Debt
Securities of that series may declare the principal due and payable
immediately upon a Junior Subordinated Debt Indenture Event of Default with
respect to such series, but the holders of a majority in aggregate outstanding
principal amount of Junior Subordinated Debt Securities of such series may
annul such declaration and waive the default if the default has been cured and
a sum sufficient to pay all matured installments of interest and principal
otherwise than by acceleration and any premium has been deposited with the
Junior Subordinated Debt Indenture Trustee. (Sections 6.01 and 6.06).
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of that series may, on behalf of the
holders of all the Junior Subordinated Debt Securities of that series, waive
any past default, except a default in the payment of principal, premium, if
any, or interest on the Junior Subordinated Debt Securities of that series as
and when the same shall become due by the terms of such Junior Subordinated
Debt Securities otherwise than by acceleration (unless such default has been
cured and a sum sufficient to pay all matured installments of interest and
principal and any premium has been deposited with the Junior Subordinated Debt
Indenture Trustee) or a call for redemption of Junior Subordinated Debt
Securities. (Section 6.06). The Company is required to file annually with the
Junior Subordinated Debt Indenture Trustee a certificate as to whether or not
the Company is in compliance with all the conditions and covenants under the
Indenture.
If the Junior Subordinated Debt Securities are issued to a SunAmerica Trust
in connection with the issuance of Trust Securities of such SunAmerica Trust,
then under the applicable Declaration a Junior Subordinated Debt Indenture
Event of Default with respect to such series of Junior Subordinated Debt
Securities will constitute a Declaration Event of Default.
MODIFICATION OF THE JUNIOR SUBORDINATED DEBT INDENTURE
The Junior Subordinated Debt Indenture contains provisions permitting the
Company and the Junior Subordinated Debt Indenture Trustee, with the consent
of the holders of not less than a majority in principal amount of the
outstanding Junior Subordinated Debt Securities of each series affected, to
modify the Junior Subordinated Debt Indenture or any supplemental indenture
affecting the rights of the holders of such Junior Subordinated Debt
Securities; provided that no such modification may, without the consent of the
holder of each outstanding Junior Subordinated Debt Security affected thereby,
(i) extend the fixed maturity of any Junior Subordinated Debt Securities of
any series, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon, or reduce any premium payable
upon the redemption thereof, without the consent of the holder of each Junior
Subordinated Debt Security so affected or (ii) reduce the percentage of Junior
Subordinated Debt Securities, the holders of which are required to consent to
any such modification,
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without the consent of the holders of each Junior Subordinated Debt Security
then outstanding and affected thereby. (Section 9.02).
BOOK-ENTRY AND SETTLEMENT
Unless otherwise specified in the applicable Prospectus Supplement, if the
Junior Subordinated Debt Securities of a series are issued in the form of one
or more fully registered global securities (each, a "Global Security"), the
descriptions contained under "Description of the Senior Debt Securities and
Subordinated Debt Securities-Global Debt Securities" will also be applicable
to such series of Junior Subordinated Securities. The Company anticipates that
the provisions described under such caption will also apply to all depositary
arrangements relating to Junior Subordinated Debt Securities. The specific
terms of the depositary arrangement with respect to any portion of a series of
Junior Subordinated Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement relating to such
series.
CONSOLIDATION, MERGER AND SALE
The Junior Subordinated Debt Indenture provides that the Company may not
consolidate with or merge into any other person or transfer or lease its
properties and assets substantially as an entirety to any person and may not
permit any person to merge into or consolidate with the Company unless (i)
either the Company will be the resulting or surviving entity or any successor
or purchaser is a corporation organized under the laws of the United States of
America, any State or the District of Columbia, and any such successor or
purchaser expressly assumes the Company's obligations under the Junior
Subordinated Debt Indenture and (ii) immediately after giving effect to the
transaction no Junior Subordinated Debt Indenture Event of Default shall have
occurred and be continuing.
DEFEASANCE AND DISCHARGE
Under the terms of the Junior Subordinated Debt Indenture, the Company will
be discharged from any and all obligations in respect of the Junior
Subordinated Debt Securities of a series (except in each case for certain
obligations to register the transfer or exchange of such Junior Subordinated
Debt Securities, replace stolen, lost or mutilated Junior Subordinated Debt
Securities of that series, maintain paying agencies and hold moneys for
payment in trust) if (i) the Company irrevocably deposits with the Junior
Subordinated Debt Indenture Trustee cash or U.S. Government Obligations, as
trust funds in an amount certified to be sufficient to pay at maturity (or
upon redemption) the principal of, premium, if any, and interest on all
outstanding Junior Subordinated Debt Securities of such series; (ii) the
Company delivers to the Junior Subordinated Debt Indenture Trustee an opinion
of counsel to the effect that the holders of the Junior Subordinated Debt
Securities of such series will not recognize income, gain or loss for United
States federal income tax purposes as a result of such defeasance and that
defeasance will not otherwise alter holders' United States federal income tax
treatment of principal, premium and interest payments on such Junior
Subordinated Debt Securities of such series (such opinion must be based on a
ruling of the Internal Revenue Service or a change in United States federal
income tax law occurring after the date of such Indenture, since such a result
would not occur under current tax law); and (iii) no event or condition shall
exist that, pursuant to the subordination provisions applicable to such
series, would prevent the Company from making payments of principal of,
premium, if any, and interest on the Junior Subordinated Debt Securities of
such series at the date of the irrevocable deposit referred to above. (Section
11.01).
GOVERNING LAW
The Junior Subordinated Debt Indenture and the Junior Subordinated Debt
Securities will be governed by, and construed in accordance with, the laws of
the State of New York. (Section 13.05).
INFORMATION CONCERNING THE JUNIOR SUBORDINATED DEBT INDENTURE TRUSTEE
The Junior Subordinated Debt Indenture Trustee, prior to default, undertakes
to perform only such duties as are specifically set forth in the Junior
Subordinated Debt Indenture and, after default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her
own affairs. (Section 7.01).
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Subject to such provision, the Junior Subordinated Debt Indenture Trustee is
under no obligation to exercise any of the powers vested in it by the Junior
Subordinated Debt Indenture at the request of any holder of Junior
Subordinated Debt Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities that might be incurred
thereby. (Section 7.02). The Junior Subordinated Debt Indenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Junior Subordinated Debt
Indenture Trustee reasonably believes that repayment or adequate indemnity is
not reasonably assured to it. (Section 7.01). The Junior Subordinated Debt
Indenture Trustee is one of a number of banks with which the Company and its
subsidiaries maintain ordinary banking and trust relationships and is also the
Trustee under the Senior Debt Indenture and the Subordinated Debt Indenture.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Junior Subordinated Debt Indenture to a direct or
indirect wholly-owned subsidiary of the Company; provided that, in the event
of any such assignment, the Company will remain jointly and severally liable
for all such obligations. Subject to the foregoing, the Junior Subordinated
Debt Indenture will be binding upon and inure to the benefit of the parties
thereto and their respective successors and assigns. The Junior Subordinated
Debt Indenture provides that it may not otherwise be assigned by the parties
thereto other than by the Company to a successor or purchaser pursuant to a
consolidation, merger or sale permitted by the Junior Subordinated Debt
Indenture. (Section 13.11).
DESCRIPTION OF CAPITAL STOCK
Under the Articles of Incorporation of the Company, as amended and restated
and including any Articles Supplementary (the "Articles of Incorporation"),
the Company has authority to issue 175,000,000 shares of Common Stock, par
value $1.00 per share ("Common Stock"), 25,000,000 shares of Nontransferable
Class B Stock, par value $1.00 per share (the "Nontransferable Class B
Stock"), 15,000,000 shares of Transferable Class B Stock, par value $1.00 per
share (the "Transferable Class B Stock," and, together with the
Nontransferable Class B Stock, the "Class B Stock") and 20,000,000 shares of
Preferred Stock, without par value ("Preferred Stock"). Preferred Stock may be
issued from time to time in one or more classes with such full, specific,
limited or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, and qualifications and
limitations or restrictions thereof, as shall be stated and expressed in the
Articles of Incorporation or any amendment thereof or in Articles
Supplementary approved by the Board of Directors of the Company for the
purpose of establishing any class of Preferred Stock. The dividend, voting,
conversion, exchange, repurchase and redemption rights, if applicable, the
liquidation preference, and other specific terms of each series of the
Preferred Stock will be set forth in the applicable Prospectus Supplement. At
September 30, 1996, there were outstanding (i) 108,604,194 shares of Common
Stock (and 31,149,786 shares of Common Stock reserved for issuance upon
conversion of the outstanding Series E Preferred Shares (as defined below) and
the outstanding Nontransferable Class B Stock and in connection with
outstanding employee stock options and 450,000 shares of Common Stock deferred
under the Long- Term Performance-Based Incentive Plan for the Chief Executive
Officer); (ii) 10,848,468 shares of Nontransferable Class B Stock (excluding
shares of such stock held by a wholly-owned subsidiary of the Company which
are not considered outstanding and are not entitled to vote at any general or
special meeting of stockholders); (iii) 3,514,765 shares of a series of
Preferred Stock designated the 9 1/4% Preferred Stock, Series B ("Series B
Preferred Shares"); (iv) 486,800 shares of a series of Preferred Stock
designated the Adjustable Rate Cumulative Preferred Stock, Series C which were
redeemed in full on October 4, 1996; and (v) 80,000 shares of a series of
Preferred Stock designated the Series E Mandatory Conversion Premium Dividend
Preferred Stock ("Series E Preferred Shares"), represented by 4,000,000
Depositary Shares ("Series E Depositary Shares") (each representing one-
fiftieth of a Series E Preferred Share). There are no shares of Transferable
Class B Stock outstanding. The Series B Preferred Shares and the Series E
Preferred Shares rank pari passu with each other and senior to the Common
Stock and Class B Stock. For further information regarding the Common Stock
and Class B Stock, see "Common Stock and
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Class B Stock" below. For a description of the series of Preferred Stock of
the Company currently outstanding, see "Series B Preferred Shares" and "Series
E Preferred Shares" below.
The Prospectus Supplement relating to an offering of Common Stock will
describe terms relevant thereto, including the number of shares offered, the
initial offering price, market price and dividend information.
The applicable Prospectus Supplement will describe the following terms of
any Preferred Stock in respect of which this Prospectus is being delivered (to
the extent applicable to such Preferred Stock): (i) the specific designation,
number of shares, seniority and purchase price; (ii) any liquidation
preference per share; (iii) any date of maturity; (iv) any redemption,
repayment or sinking fund provisions; (v) any dividend rate or rates and the
dates on which any such dividends will be payable (or the method by which such
rates or dates will be determined); (vi) any voting rights; (vii) if other
than the currency of the United States of America, the currency or currencies
including composite currencies in which such Preferred Stock is denominated
and/or in which payments will or may be payable; (viii) the method by which
amounts in respect of such Preferred Stock may be calculated and any
commodities, currencies or indices, or value, rate or price, relevant to such
calculation; (ix) whether the Preferred Stock is convertible or exchangeable
and, if so, the securities or rights into which such Preferred Stock is
convertible or exchangeable (which may include other Preferred Stock, Senior
Debt Securities, Subordinated Debt Securities, Junior Subordinated Debt
Securities, Common Stock or other securities or rights of the Company
(including rights to receive payment in cash or securities based on the value,
rate or price of one or more specified commodities, currencies or indices) or
securities of other issuers or a combination of the foregoing), and the terms
and conditions upon which such conversions or exchanges will be effected
including the initial conversion or exchange prices or rates, the conversion
or exchange period and any other related provisions; (x) the place or places
where dividends and other payments on the Preferred Stock will be payable; and
(xi) any additional voting, dividend, liquidation, redemption and other
rights, preferences, privileges, limitations and restrictions.
As described under "Description of Depositary Shares", the Company may, at
its option, elect to offer depositary shares ("Depositary Shares") evidenced
by depositary receipts ("Depositary Receipts"), each representing an interest
(to be specified in the Prospectus Supplement relating to the particular
series of the Preferred Stock) in a share of the particular series of the
Preferred Stock issued and deposited with a Preferred Stock Depositary (as
defined herein).
All shares of Preferred Stock offered hereby, or issuable upon conversion,
exchange or exercise of Offered Securities, will, when issued, be fully paid
and non-assessable.
The following are summaries of the material terms of the Common Stock, Class
B Stock, the Series B Preferred Shares and the Series E Preferred Shares. Each
summary is qualified by reference to the provisions of the Company's Articles
of Incorporation, the Articles Supplementary for the Series B Preferred Shares
and the Articles Supplementary for the Series E Preferred Shares, copies of
which have been filed as exhibits to Registrations Statement of which this
Prospectus is a part.
COMMON STOCK AND CLASS B STOCK
Dividends. Except as provided below, holders of Common Stock and Class B
Stock are entitled to receive dividends and other distributions in cash, stock
or property of the Company, when, as and if declared by the Board of Directors
out of assets or funds of the Company legally available therefor and shall
share equally on a per share basis in all such dividends and other
distributions (subject to the rights of holders of Preferred Stock). If a cash
dividend is paid on any of the Common Stock, the Nontransferable Class B Stock
or the Transferable Class B Stock, a cash dividend also will be paid on the
Common Stock, the Nontransferable Class B Stock and the Transferable Class B
Stock, as the case may be. The amount of the cash dividend paid on each share
of Class B Stock will be equal to 90% of the amount of the cash dividend paid
on each share of Common Stock. In addition if holders of Common Stock receive
shares of Common Stock in connection with stock dividends or
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stock splits, holders of Transferable Class B Stock will receive a
proportionate number of shares of Transferable Class B Stock and holders of
Nontransferable Class B Stock will receive a proportionate number of shares of
Nontransferable Class B Stock.
Voting Rights. At every meeting of shareholders, every holder of Common
Stock is entitled to one vote per share and every holder of Class B Stock is
entitled to 10 votes per share. All actions submitted to a vote of
shareholders are voted upon by holders of Common Stock and Class B Stock
voting together as a single class (subject to any voting rights which may be
granted to holders of Preferred Stock) and a majority of the votes cast by
such holders is required to approve any such action, except where other
provision is made by law.
In addition to any vote required by law, the holders of Common Stock and
Class B Stock each vote separately as a class (i) on any merger or
consolidation of the Company with or into any other corporation, or any sale,
lease, exchange or other disposition of all or substantially all of the
Company's assets to or with any other person or any dissolution of the Company
(unless the other party to such merger or other transaction is a majority-
owned subsidiary of the Company) and (ii) on any additional issuances of Class
B Stock other than in connection with stock splits and stock dividends and
exchanges of Nontransferable Class B Stock for Transferable Class B Stock. A
majority of votes cast by the Common Stock and Class B Stock, each voting
separately as a class, is required to approve any matters described above as
to which holders of such shares have a separate class vote, unless, in the
case of the events described in clause (i) above, a greater vote is required
by law. In addition to any vote required by law, the affirmative vote of the
holders of a majority of the shares of the Common Stock and the
Nontransferable Class B Stock, each voting separately as a class, is required
to approve any amendments to the Articles of Incorporation.
Liquidation Rights. In the event of any dissolution, liquidation or winding
up of the affairs of the company, whether voluntary or involuntary, the
holders of Common Stock and Class B Stock are entitled to share equally in the
assets available for distribution after payment of all liabilities and
provision for the liquidation preference of any shares of Preferred Stock then
outstanding.
Class B Stock Conversion Rights. Each share of Class B Stock is convertible
into one share of Common Stock at any time at the option of the holder. In
addition, any transfer of shares of Nontransferable Class B Stock not
permitted under the Articles of Incorporation will result in the conversion of
such shares into shares of Common Stock.
The Articles of Incorporation provide that if at any time the number of
outstanding shares of Nontransferable Class B Stock represents less than 5% of
the aggregate number of issued and outstanding shares of Common Stock and
Nontransferable Class B Stock, all of the outstanding shares of
Nontransferable Class B Stock will immediately convert into shares of Common
Stock.
Exchange of Nontransferable Class B Stock. The Nontransferable Class B Stock
is exchangeable in whole at the option of the Company at any time for
Transferable Class B Stock. Holders of Nontransferable Class B Stock will
receive one share of Transferable Class B Stock for each share of
Nontransferable Class B Stock held by them at the time of the exchange.
Miscellaneous. The holders of Common Stock and Class B Stock have no
preemptive rights, cumulative voting rights or subscriptions rights. Except as
described above, the Common Stock and Class B Stock have no conversion rights
and are not subject to redemption.
The transfer agent and registrar with respect to the Common Stock is The
Bank of New York.
All shares of Common Stock offered hereby, or issuable upon conversion,
exchange or exercise of Offered Securities, will, when issued, be fully paid
and non-assessable.
Mr. Eli Broad is the Chairman, Chief Executive Officer and President of the
Company. At September 30, 1996, Mr. Broad beneficially owned an aggregate of
19,568,610 shares of Common Stock and Nontransferable
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Class B Stock and controlled 60.4% of the total number of votes entitled to be
cast by holders of Common Stock and Class B Stock, voting together as a single
class, at a general meeting of shareholders. Of the shares beneficially owned
by Mr. Broad, 2,865,468 represent shares of Common Stock that Mr. Broad has
the right to purchase at prices ranging from $2.16 per share to $22.46 per
share pursuant to vested stock options. In addition, 1,012,500 represent
shares of Common Stock and 1,687,500 represent shares of Nontransferable Class
B Stock, in each case held by a trust formed by Mr. Broad of which his estate
is a beneficiary.
SERIES B PREFERRED SHARES
Dividends. Subject to the rights of holders of other classes of stock
ranking on a parity with or senior to the Series B Preferred Shares which may
from time to time be issued by the Company, the holders of Series B Preferred
Shares are entitled to receive, when, as and if the Board of Directors
declares a dividend on the Series B Preferred Shares, out of assets legally
available for dividends, cumulative preferential cash dividends from the issue
date of the Series B Preferred Shares (June 29, 1992), accruing at the rate
per Series B Preferred Share of $2.3125 per annum or $.5781 per quarter,
payable quarterly in arrears on the 15th day of each March, June, September
and December or, if any such date is not a business day, on the next
succeeding business day.
Dividends on the Series B Preferred Shares accrue whether or not the Company
has earnings, whether or not there are funds legally available for the payment
of such dividends and whether nor not such dividends are declared and will
accumulate to the extent they are not paid on the dividend payment date for
the quarter for which they accrue. Accumulated unpaid dividends do not bear
interest.
Liquidation Rights. Subject to the rights of holders of other classes of
stock ranking on a parity with or senior to Series B Preferred Shares, in the
event of any liquidation, dissolution or winding-up of the business of the
Company, whether voluntary or involuntary (any such event, a "Liquidation"),
the holders of the Series B Preferred Shares, after payment or provision for
payment of the debts and other liabilities of the Company, will be entitled to
receive for each Series B Preferred Share, an amount equal to the sum of
$25.00 and all accrued and unpaid dividends thereon, and no more. If, upon any
Liquidation, there are insufficient assets to permit full payment of holders
of Series B Preferred Shares and shares of any other class of outstanding
Preferred Stock, the holders of Series B Preferred Shares and such other
shares shall be paid ratably in proportion to the full distributable amounts
to which holders of Series B Preferred Shares and such other shares are
respectively entitled upon Liquidation.
Redemption. The Series B Preferred Shares are not redeemable prior to June
15, 1997. On and after such date, the Series B Preferred Shares are redeemable
in cash at the option of the Company, in whole or in part, from time to time,
at a redemption price of $25.00 per share plus accrued and unpaid dividends to
the date fixed for redemption.
The Series B Preferred Shares are not entitled to the benefits of any
sinking fund.
Voting Rights. The Series B Preferred Shares do not entitle holders thereof
to voting rights, except (i) the Company may not alter any of the provisions
of the Articles of Incorporation or the Articles Supplementary relating to the
Series B Preferred Shares which would materially and adversely affect any
right, preference or privilege of the Series B Preferred Shares without the
affirmative vote of the holders of at least two-thirds of the Series B
Preferred Shares outstanding at the time (voting separately as a class);
provided, however, that any such alteration that would authorize, create or
issue additional shares of Preferred Stock or any other shares of stock
(whether or not already authorized) ranking senior to, on a parity with or
junior to the Series B Preferred Shares as to dividends or on the distribution
of assets upon Liquidation shall be deemed not to materially and adversely
affect such rights, preferences or privileges, (ii) in the event dividends
payable on the Series B Preferred Shares shall be in arrears in an aggregate
amount equivalent to six full quarterly dividends (a "Series B Preferred Share
Dividend Default") or (iii) as required by law. In the event of a Series B
Preferred Share Dividend Default, the holders of the outstanding Series B
Preferred Shares will be entitled to elect together with holders of all other
outstanding classes of Preferred Stock ranking on a parity with the Series B
Preferred Shares and entitled to
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participate in such election, voting as a single class, two directors at a
special meeting called by the Board of Directors for such purpose. Such two
directors shall serve until the full dividends accumulated on all outstanding
Series B Preferred Shares and all other outstanding classes of Preferred Stock
ranking on a parity with the Series B Preferred Shares are paid.
SERIES E PREFERRED SHARES
Dividends. Subject to the rights of holders of other classes of stock
ranking on a parity with or senior to the Series E Preferred Shares which may
from time to time be issued by the Company, the holders of Series E Preferred
Shares are entitled to receive, when, as and if the Board of Directors
declares a dividend on the Series E Preferred Shares, out of assets legally
available for dividends, cumulative preferential cash dividends from the date
of issue of the Series E Preferred Shares (November 1, 1995), accruing at the
rate per Series E Preferred Share of $155 per annum or $38.75 per quarter
(equivalent to $3.10 per annum or $.775 per quarter for each Series E
Depositary Share), payable quarterly in arrears.
Dividends on the Series E Preferred Shares accrue whether or not the Company
has earnings, whether or not there are funds legally available for the payment
of such dividends and whether or not such dividends are declared and will
accumulate to the extent they are not paid on the dividend payment date for
the quarter for which they accrue. Accumulated unpaid dividends do not bear
interest.
Mandatory Conversion of Series E Preferred Shares. On November 1, 1998 (the
"Series E Mandatory Conversion Date"), each outstanding Series E Preferred
Share will convert automatically into shares of Common Stock at the Series E
Common Stock Equivalent Rate (as described below) in effect on the Series E
Mandatory Conversion Date and the right to receive an amount in cash (subject
to the Company's option to deliver Common Stock as described below) equal to
all accrued and unpaid dividends on such Series E Preferred Share to and
including the Series E Mandatory Conversion Date (the "Series E Mandatory
Conversion"), subject to the rights of the Company to call Series E Preferred
Shares prior to the Series E Mandatory Conversion Date (as described below).
At the option of the Company, it may deliver Common Stock in respect of all or
a portion of the amount of accrued and unpaid dividends in lieu of cash, the
number of shares of Common Stock to be delivered in respect of such accrued
and unpaid dividends to be determined by dividing the amount of accrued and
unpaid dividends that the Company has elected to pay in Common Stock by the
current market price (as defined) of the Common Stock determined on the second
trading day immediately preceding the Series E Mandatory Conversion Date. The
Series E Common Equivalent Rate is currently 150 shares of Common Stock for
each Series E Preferred Share (equivalent to 3 shares of Common Stock for each
Series E Depositary Share), subject to adjustment in the event of stock
dividends, distribution of assets or certain other events.
Immediately prior to the effectiveness of a merger or consolidation of, or
statutory share exchange involving, the Company that results in the conversion
or exchange of the Common Stock into, or the right to receive, other
securities or other property (any such merger, consolidation or exchange, a
"Merger or Consolidation"), each outstanding Series E Preferred Share will
convert automatically into (i) shares of Common Stock at the Series E Common
Equivalent Rate in effect on the effective date of the Merger or
Consolidation, plus (ii) the right to receive an amount in cash equal to the
accrued and unpaid dividends on such Series E Preferred Share to and including
such effective date, plus (iii) the right to receive an amount in cash
initially equal to $330 (equivalent to $6.60 for each Series E Depositary
Share), declining by $.305550 (equivalent to $.006111 for each Series E
Depositary Share) on each day following the date of issue of the Series E
Preferred Shares (November 1, 1995) to $18.35 (equivalent to $.367 for each
Series E Depositary Share) on September 1, 1998, and equal to zero thereafter,
determined with reference to such effective date, unless sooner redeemed. At
the option of the Company, it may deliver on such effective date, in lieu of
some or all of the cash consideration described in clauses (ii) and (iii) of
the preceding sentence, shares of Common Stock, the number of shares of Common
Stock to be delivered in lieu of any consideration described in such clauses
(ii) and (iii) to be determined by dividing the amount of cash consideration
that the Company had elected to pay in Common Stock by the current market
price (as defined) of the Common Stock on the second trading day preceding the
earlier of
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the commencement of the mailing of such election to the holders of Series E
Preferred Shares or the date such notice is first published in accordance with
the terms of the Series E Preferred Shares.
Series E Preferred Shares are not convertible into Common Stock at the
option of the holders thereof.
Right to Call Series E Preferred Shares. Except as provided below, at any
time or from time to time prior to the Series E Mandatory Conversation Date,
the Company has the right to call the outstanding Series E Preferred Shares
for redemption, in whole or in part, and to deliver to the holders thereof in
exchange for each such Series E Preferred Share a number of shares of Common
Stock equal to the Series E Call Price (as described below) on the redemption
date divided by the current market price (as defined) of the Common Stock on
the second trading day preceding the earlier of the commencement of the
mailing of notice of such redemption to holders of the Series E Preferred
Shares or the date such notice is published in accordance with the terms of
the Series E Preferred Shares (the "Series E Notice Date") plus an amount in
cash (subject to the Company's option to deliver Common Stock as described
below) equal to accrued and unpaid dividends to but excluding the date of
redemption. At the option of the Company, it may deliver Common Stock in
respect of all or a portion of the amount of accrued and unpaid dividends in
lieu of cash, the number of shares of Common Stock to be delivered in respect
of such accrued and unpaid dividends to be determined by dividing the amount
of accrued and unpaid dividends that the Company has elected to pay in Common
Stock by the current market price (as defined) of the Common Stock determined
on the second trading day immediately preceding the redemption date. The
Series E Call Price of each Series E Preferred Share is equal to fifty times
the sum of (i) an amount initially equal to $81.00, declining by $.006111 on
each day following the date of issue of the Series E Preferred Shares
(November 1, 1995) to $74.767 on September 1, 1998, and equal to $74.40
thereafter, and (ii) 50% of the excess, if any, of (a) the current market
price (as defined) of the Common Stock on the second trading day preceding the
Series E Notice Date relating to such redemption multiplied by one-fiftieth of
the Series E Common Equivalent Rate then in effect for the Common Stock, over
(b) $74.40.
Liquidation Rights. Subject to the rights of holders of other classes of
stock ranking on a parity with or senior to the Series E Preferred Shares, in
the event of any Liquidation, the holders of Series E Preferred Shares, after
payment or provisions for payment of the debts and other liabilities of the
Company, will be entitled to receive, for each Series E Preferred Share, an
amount equal to the sum of (i) $3,100 (equivalent to $62.00 for each Series E
Depositary Share) and (ii) all accrued and unpaid dividends thereon, and no
more. If, upon any such liquidation, there are insufficient assets to permit
full payment to holders of Series E Preferred Shares and shares of any class
of outstanding Preferred Stock, the holders of Series E Preferred Shares and
such other shares shall be paid ratably in proportion to the full
distributable amounts to which holders of Series E Preferred Shares and such
other shares are respectively entitled.
The Series E Preferred Shares are not entitled to the benefits of any
sinking fund.
Voting Rights. The Series E Preferred Shares do not entitle holders thereof
to voting rights, except (i) the Company may not alter any of the provisions
of the Articles of Incorporation or the Articles Supplementary relating to the
Series E Preferred Shares which would materially and adversely affect any
right, preference or privilege of the Series E Preferred Shares without the
affirmative vote of the holders of at least two-thirds of the shares of Series
E Preferred Shares outstanding at the time (voting separately as a class);
provided, however, that any such alteration that would authorize, create or
issue any additional shares of Preferred Stock or any other shares of stock
(whether or not already authorized) ranking senior to, on a parity with or
junior to the Series E Preferred Shares as to dividends or on the distribution
of assets upon Liquidation shall be deemed not to materially and adversely
affect such rights, preferences or privileges, (ii) in the event dividends
payable on the Series E Preferred Shares shall be in arrears in an aggregate
amount equivalent to six full quarterly dividends (a "Series E Preferred Share
Dividend Default") or (iii) as required by law. In the event of a Series E
Preferred Share Dividend Default, the holders of the outstanding Series E
Preferred Shares will be entitled to elect together with holders of all other
outstanding classes of Preferred Stock ranking on a parity with Series E
Preferred Shares and entitled to participate in such election, voting as a
single class, two directors at a special meeting called by
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the Board of Directors for such purpose. Such two directors shall serve until
the full dividends accumulated on all outstanding Series E Preferred Shares
and all other outstanding classes of Preferred Stock ranking on a parity with
the Series E Preferred Shares are paid.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of the Depositary
Shares and Depositary Receipts summarizes the material terms of the Deposit
Agreement and of the Depositary Shares and Depositary Receipts, and is
qualified in its entirety by reference to, the form of Deposit Agreement and
form of Depositary Receipts relating to each series of the Preferred Stock.
GENERAL
The Company may, at its option, elect to have shares of Preferred Stock be
represented by Depositary Shares. The shares of any series of the Preferred
Stock underlying the Depositary Shares will be deposited under a separate
deposit agreement (the "Deposit Agreement") between the Company and a bank or
trust company selected by the Company (the "Preferred Stock Depositary"). The
Prospectus Supplement relating to a series of Depositary Shares will set forth
the name and address of the Preferred Stock Depositary. Subject to the terms
of the Deposit Agreement, each owner of a Depositary Share will be entitled,
proportionately, to all the rights, preferences and privileges of the
Preferred Stock represented thereby (including dividend, voting, redemption,
conversion, exchange and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement, each of which will represent the applicable
interest in a number of shares of a particular series of the Preferred Stock
described in the applicable Prospectus Supplement.
A holder of Depositary Shares will be entitled to receive the shares of
Preferred Stock (but only in whole shares of Preferred Stock) underlying such
Depositary Shares. If the Depositary Receipts delivered by the holder evidence
a number of Depositary Shares in excess of the whole number of shares of
Preferred Stock to be withdrawn, the Depositary will deliver to such holder at
the same time a new Depositary Receipt evidencing such excess number of
Depositary Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions in respect to the Preferred Stock to the record holders of
Depositary Receipts in proportion, insofar as possible, to the number of
Depositary Shares owned by such holders.
In the event of a distribution other than in cash in respect to the
Preferred Stock, the Preferred Stock Depositary will distribute property
received by it to the record holders of Depositary Receipts in proportion,
insofar as possible, to the number of Depositary Shares owned by such holders,
unless the Preferred Stock Depositary determines that it is not feasible to
make such distribution, in which case the Preferred Stock Depositary may, with
the approval of the Company, adopt such method as it deems equitable and
practicable for the purpose of effecting such distribution, including sale (at
public or private sale) of such property and distribution of the net proceeds
from such sale to such holders.
The amount so distributed in any of the foregoing cases will be reduced by
any amount required to be withheld by the Company or the Preferred Stock
Depositary on account of taxes.
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CONVERSION AND EXCHANGE
If any Preferred Stock underlying the Depositary Shares is subject to
provisions relating to its conversion or exchange as set forth in the
Prospectus Supplement relating thereto, each record holder of Depositary
Shares will have the right or obligation to convert or exchange such
Depositary Shares pursuant to the terms thereof.
REDEMPTION OF DEPOSITARY SHARES
If Preferred Stock underlying the Depositary Shares is subject to
redemption, the Depositary Shares will be redeemed from the proceeds received
by the Preferred Stock Depositary resulting from the redemption, in whole or
in part, of the Preferred Stock held by the Preferred Stock Depositary. The
redemption price per Depositary Share will be equal to the aggregate
redemption price payable with respect to the number of shares of Preferred
Stock underlying the Depositary Shares. Whenever the Company redeems Preferred
Stock from the Preferred Stock Depositary, the Preferred Stock Depositary will
redeem as of the same redemption date a proportionate number of Depositary
Shares representing the shares of Preferred Stock that were redeemed. If less
than all the Depositary Shares are to be redeemed, the Depositary Shares to be
redeemed will be selected by lot or pro rata as may be determined by the
Company.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
redemption price upon such redemption. Any funds deposited by the Company with
the Preferred Stock Depositary for any Depositary Shares which the holders
thereof fail to redeem shall be returned to the Company after a period of two
years from the date such funds are so deposited.
VOTING
Upon receipt of notice of any meeting at which the holders of any shares of
Preferred Stock underlying the Depositary Shares are entitled to vote, the
Preferred Stock Depositary will mail the information contained in such notice
to the record holders of the Depositary Receipts. Each record holder of such
Depositary Receipts on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the
Preferred Stock Depositary as to the exercise of the voting rights pertaining
to the number of shares of Preferred Stock underlying such holder's Depositary
Shares. The Preferred Stock Depositary will endeavor, insofar as practicable,
to vote the number of shares of Preferred Stock underlying such Depositary
Shares in accordance with such instructions, and the Company will agree to
take all reasonable action which may be deemed necessary by the Preferred
Stock Depositary in order to enable the Preferred Stock Depositary to do so.
The Preferred Stock Depositary will abstain from voting the Preferred Stock to
the extent it does not receive specific written instructions from holders of
Depositary Receipts representing such Preferred Stock.
RECORD DATE
Whenever (i) any cash dividend or other cash distribution shall become
payable, any distribution other than cash shall be made, or any rights,
preferences or privileges shall be offered with respect to the Preferred
Stock, or (ii) the Preferred Stock Depositary shall receive notice of any
meeting at which holders of Preferred Stock are entitled to vote or of which
holders of Preferred Stock are entitled to notice, or of the mandatory
conversion of or any election on the part of the Company to call for the
redemption of any Preferred Stock, the Preferred Stock Depositary shall in
each such instance fix a record date (which shall be the same as the record
date for the Preferred Stock) for the determination of the holders of
Depositary Receipts (x) who shall be entitled to receive such dividend,
distribution, rights, preferences or privileges or the net proceeds of the
sale thereof or (y) who shall be entitled to give instructions for the
exercise of voting rights at any such meeting or to receive notice of such
meeting or of such redemption or conversion, subject to the provisions of the
Deposit Agreement.
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AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt and any provision of the Deposit Agreement
may at any time be amended by agreement between the Company and the Preferred
Stock Depositary. However, any amendment which imposes or increases any fees,
taxes or other charges payable by the holders of Depositary Receipts (other
than taxes and other governmental charges, fees and other expenses payable by
such holders as stated under "Charges of Preferred Stock Depositary"), or
which otherwise prejudices any substantial existing right of holders of
Depositary Receipts, will not take effect as to outstanding Depositary
Receipts until the expiration of 90 days after notice of such amendment has
been mailed to the record holders of outstanding Depositary Receipts.
Whenever so directed by the Company, the Preferred Stock Depositary will
terminate the Deposit Agreement by mailing notice of such termination to the
record holders of all Depositary Receipts then outstanding at least 30 days
prior to the date fixed in such notice for such termination. The Preferred
Stock Depositary may likewise terminate the Deposit Agreement if at any time
45 days shall have expired after the Preferred Stock Depositary shall have
delivered to the Company a written notice of its election to resign and a
successor depositary shall not have been appointed and accepted its
appointment. If any Depositary Receipts remain outstanding after the date of
termination, the Preferred Stock Depositary thereafter will discontinue the
transfer of Depositary Receipts, will suspend the distribution of dividends to
the holders thereof, and will not give any further notices (other than notice
of such termination) or perform any further acts under the Deposit Agreement
except as provided below and except that the Preferred Stock Depositary will
continue (i) to collect dividends on the Preferred Stock and any other
distributions with respect thereto and (ii) to deliver the Preferred Stock
together with such dividends and distributions and the net proceeds of any
sales of rights, preferences, privileges or other property, without liability
for interest thereon, in exchange for Depositary Receipts surrendered. At any
time after the expiration of two years from the date of termination, the
Preferred Stock Depositary may sell the Preferred Stock then held by it at
public or private sales, at such place or places and upon such terms as it
deems proper and may thereafter hold the net proceeds of any such sale,
together with any money and other property then held by it, without liability
for interest thereon, for the pro rata benefit of the holders of Depositary
Receipts which have not been surrendered.
CHARGES OF PREFERRED STOCK DEPOSITARY
The Company will pay all charges of the Preferred Stock Depositary including
charges in connection with the initial deposit of the Preferred Stock, the
initial issuance of the Depositary Receipts, the distribution of information
to the holders of Depositary Receipts with respect to matters on which
Preferred Stock is entitled to vote, withdrawals of the Preferred Stock by the
holders of Depositary Receipts or redemption or conversion of the Preferred
Stock, except for taxes (including transfer taxes, if any) and other
governmental charges and such other charges as are expressly provided in the
Deposit Agreement to be at the expense of holders of Depositary Receipts or
persons depositing Preferred Stock.
MISCELLANEOUS
The Preferred Stock Depositary will make available for inspection by holders
of Depositary Receipts at its corporate office and its New York office, all
reports and communications from the Company which are delivered to the
Preferred Stock Depositary as the holder of Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented or delayed by law or any circumstance beyond its control in
performing its obligations under the Deposit Agreement. The obligations of the
Preferred Stock Depositary under the Deposit Agreement are limited to
performing its duties thereunder without negligence or bad faith. The
obligations of the Company under the Deposit Agreement are limited to
performing its duties thereunder in good faith. Neither the Company nor the
Preferred Stock Depositary is obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. The Company and the Preferred Stock
Depositary are entitled to rely upon advice of or information from counsel,
accountants or other persons believed to be competent and on documents
believed to be genuine.
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The Preferred Stock Depositary may resign at any time or be removed by the
Company, effective upon the acceptance by its successor of its appointment;
provided, that if a successor Preferred Stock Depositary has not been
appointed or accepted such appointment within 45 days after the Preferred
Stock Depositary has delivered a notice of election to resign to the Company,
the Preferred Stock Depositary may terminate the Deposit Agreement. See
"Amendment and Termination of Deposit Agreement" above.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants to purchase Senior Debt Securities,
Subordinated Debt Securities or Junior Subordinated Debt Securities, Preferred
Stock (or Depositary Shares representing Preferred Stock) or Common Stock
(collectively, the "Underlying Warrant Securities"), and such Warrants may be
issued independently or together with any such Underlying Warrant Securities
and may be attached to or separate from such Underlying Warrant Securities.
Each series of Warrants will be issued under a separate warrant agreement
(each a "Warrant Agreement") to be entered into between the Company and a
warrant agent ("Warrant Agent"). The Warrant Agent will act solely as an agent
of the Company in connection with the Warrants of such series and will not
assume any obligation or relationship of agency for or with holders or
beneficial owners of Warrants. The following sets forth certain general terms
and provisions of the Warrants offered hereby. Further terms of the Warrants
and the applicable Warrant Agreement are set forth in the applicable
Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of any Warrants
in respect of which this Prospectus is being delivered, including the
following: (i) the title of such Warrants; (ii) the aggregate number of such
Warrants; (iii) the price or prices at which such Warrants will be issued;
(iv) the currency or currencies, including composite currencies, in which the
price of such Warrants may be payable; (v) the designation and terms of the
Underlying Warrant Securities purchasable upon exercise of such Warrants; (vi)
the price at which and the currency or currencies, including composite
currencies, in which the Underlying Warrant Securities purchasable upon
exercise of such Warrants may be purchased; (vii) the date on which the right
to exercise such Warrants shall commence and the date on which such right
shall expire; (viii) whether such Warrants will be issued in registered form
or bearer form; (ix) if applicable, the minimum or maximum amount of such
Warrants which may be exercised at any one time; (x) if applicable, the
designation and terms of the Underlying Warrant Securities with which such
Warrants are issued and the number of such Warrants issued with each such
Underlying Warrant Security; (xi) if applicable, the date on and after which
such Warrants and the related Underlying Warrant Securities will be separately
transferable; (xii) information with respect to book-entry procedures, if any;
(xiii) if applicable, a discussion of certain United States federal income tax
considerations; and (xiv) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants.
DESCRIPTION OF THE PREFERRED SECURITIES
Each SunAmerica Trust may issue, from time to time, only one series of
Preferred Securities having terms described in the Prospectus Supplement
relating thereto. The Declaration of each SunAmerica Trust authorizes the
Regular Trustees of such SunAmerica Trust to issue on behalf of such
SunAmerica Trust one series of Preferred Securities. Each Declaration will be
qualified as an indenture under the Trust Indenture Act. The Preferred
Securities will have such terms, including distributions, redemption, voting,
liquidation rights and such other preferred, deferred or other special rights
or such restrictions as shall be set forth in the related Declaration or made
part of such Declaration by the Trust Indenture Act or the Business Trust Act.
Reference is made to any Prospectus Supplement relating to the Preferred
Securities of a SunAmerica Trust for specific terms, including (i) the
specific designation of such Preferred Securities, (ii) the number of
Preferred Securities issued by such SunAmerica Trust, (iii) the annual
distribution rate (or method of calculation thereof) for Preferred Securities
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issued by such SunAmerica Trust, the date or dates upon which such
distributions shall be payable and the record date or dates for the payment of
such distributions, (iv) whether distributions on Preferred Securities issued
by such SunAmerica Trust shall be cumulative, and, in the case of Preferred
Securities having such cumulative distribution rights, the date or dates or
method of determining the date or dates from which distributions on Preferred
Securities issued by such SunAmerica Trust shall be cumulative, (v) the amount
or amounts which shall be paid out of the assets of such SunAmerica Trust to
the holders of Preferred Securities of such SunAmerica Trust upon voluntary or
involuntary dissolution, winding-up or termination of such SunAmerica Trust,
(vi) the obligation or right, if any, of such SunAmerica Trust to purchase or
redeem Preferred Securities issued by such SunAmerica Trust and the price or
prices at which, the period or periods within which and the terms and
conditions upon which Preferred Securities issued by such SunAmerica Trust
shall or may be purchased or redeemed, in whole or in part, pursuant to such
obligation or right, (vii) the voting rights, if any, of Preferred Securities
issued by such SunAmerica Trust in addition to those required by law,
including the number of votes per Preferred Security and any requirement for
the approval by the holders of Preferred Securities, or of Preferred
Securities issued by one or more SunAmerica Trusts, or of both, as a condition
to specified actions or amendments to the Declaration of such SunAmerica
Trust, (viii) the terms and conditions, if any, upon which Preferred
Securities issued by such SunAmerica Trust may be converted into Common Stock
of the Company, including the conversion price per share and the
circumstances, if any, under which such conversion right will expire, (ix) the
terms and conditions, if any, upon which the Junior Subordinated Debt
Securities may be distributed to holders of Trust Preferred Securities, (x) if
applicable, any securities exchange upon which the Preferred Securities shall
be listed, and (xi) any other relevant rights, preferences, privileges,
limitations or restrictions of Preferred Securities issued by such SunAmerica
Trust consistent with the Declaration of such SunAmerica Trust or with
applicable law. All Preferred Securities offered hereby will be guaranteed by
the Company as and to the extent set forth below under "Description of the
Preferred Securities Guarantees." Certain United States federal income tax
considerations applicable to any offering of Preferred Securities will be
described in the Prospectus Supplement relating thereto.
In connection with the issuance of Preferred Securities, each SunAmerica
Trust will issue one series of Common Securities. The Declaration of each
SunAmerica Trust authorizes the Regular Trustees of such trust to issue on
behalf of such SunAmerica Trust one series of Common Securities having such
terms including distributions, redemption, voting, liquidation rights or such
restrictions as shall be set forth therein. The terms of the Common Securities
issued by a SunAmerica Trust will be substantially identical to the terms of
the Preferred Securities issued by such SunAmerica Trust and the Common
Securities will rank pari passu, and payments will be made thereon on a Pro
Rata Basis with the Preferred Securities except that if a Declaration Event of
Default occurs and is continuing, the rights of the holders of such Common
Securities to payments in respect of distributions and payments upon
liquidation, redemption and maturity will be subordinated to the rights of the
holders of such Preferred Securities. Except in certain limited circumstances,
the Common Securities issued by a SunAmerica Trust will also carry the right
to vote and to appoint, remove or replace any of the Trustees of that
SunAmerica Trust. All of the Common Securities of a SunAmerica Trust will be
directly or indirectly owned by the Company.
PROPOSED TAX LEGISLATION
On March 19, 1996, as a part of President Clinton's Fiscal 1997 Budget
Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") that, among other things, would (i) treat as equity for United
States federal income tax purposes certain debt instruments with a maximum
term of more than 20 years and (ii) disallow interest deductions on certain
convertible debt instruments or defer interest deductions on certain debt
instruments issued with original issue discount. The Proposed Legislation is
proposed to be effective for debt instruments issued on or after December 7,
1995.
On March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr.
and House Ways and Means Committee Chairman Bill Archer issued a joint
statement (the "Joint Statement") indicating their intent that the Proposed
Legislation, if adopted by either of the tax-writing committees of Congress,
would have an effective
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date that is no earlier than the date of "appropriate Congressional action."
However, there can be no assurances that the effective date guidance contained
in the Joint Statement will be incorporated in the Proposed Legislation, if
enacted, or that other legislation enacted after the date hereof will not
otherwise adversely affect the tax treatment of the Junior Subordinated Debt
Securities. In addition, there can be no assurances as to whether or in what
form the Proposed Legislation may be enacted into law or whether other
legislation will be enacted that otherwise adversely affects the tax treatment
of the Junior Subordinated Debt Securities and the Preferred Securities.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees that will be executed and delivered by the Company for
the benefit of the holders from time to time of Preferred Securities. Each
Preferred Security Guarantee will be separately qualified under the Trust
Indenture Act and will be held by the Bank of New York, acting in its capacity
as indenture trustee with respect thereto, for the benefit of holders of the
Preferred Securities of the applicable SunAmerica Trust. The terms of each
Preferred Securities Guarantee will be those set forth in such Preferred
Securities Guarantee and those made part of such Guarantee by the Trust
Indenture Act. This description summarizes the material terms of the Preferred
Securities Guarantees and is qualified in its entirety by reference to, the
form of Preferred Securities Guarantee, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the Trust
Indenture Act.
GENERAL
Pursuant to each Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree, to the extent set forth therein, to pay
in full, to the holders of the Preferred Securities issued by a SunAmerica
Trust, the Guarantee Payments (as defined below) (without duplication of
amounts theretofore paid by such SunAmerica Trust), to the extent not paid by
such SunAmerica Trust, regardless of any defense, right of set-off or
counterclaim that such SunAmerica Trust may have or assert. The following
payments or distributions with respect to Preferred Securities issued by a
SunAmerica Trust to the extent not paid or made by such SunAmerica Trust (the
"Guarantee Payments"), will be subject to the Preferred Securities Guarantee
(without duplication): (i) any accrued and unpaid distributions on such
Preferred Securities, and the redemption price, including all accrued and
unpaid distributions to the date of redemption, with respect to any Preferred
Securities called for redemption by such SunAmerica Trust but only if and to
the extent that in each case the Company has made a payment to the related
Property Trustee of interest or principal on the Junior Subordinated Debt
Securities deposited in such SunAmerica Trust as trust assets and (ii) upon a
voluntary or involuntary dissolution, winding-up or termination of such
SunAmerica Trust (other than in connection with the distribution of such
Junior Subordinated Debt Securities to the holders of Preferred Securities or
the redemption of all of the Preferred Securities upon the maturity or
redemption of such Junior Subordinated Debt Securities) the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid distributions
on such Preferred Securities to the date of payment, to the extent such
SunAmerica Trust has funds available therefor or (b) the amount of assets of
such SunAmerica Trust remaining available for distribution to holders of such
Preferred Securities in liquidation of such SunAmerica Trust. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Company to the holders of Preferred Securities or
by causing the applicable SunAmerica Trust to pay such amount to such holders.
The Preferred Securities Guarantee is a full and unconditional guarantee
from the time of issuance of the applicable Preferred Securities but the
Preferred Securities Guarantee covers distributions and other payments on such
Preferred Securities only if and to the extent that the Company has made a
payment to the Property Trustee of interest or principal on the Junior
Subordinated Debt Securities deposited in the applicable SunAmerica Trust as
trust assets. If the Company does not make interest or principal payments on
the Junior Subordinated Debt Securities deposited in the applicable SunAmerica
Trust as trust assets, the Property Trust will not make
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distributions of the Preferred Securities of such SunAmerica Trust and the
SunAmerica Trust will not have funds available therefor.
The Company's obligations under the Declaration for each Trust, the
Preferred Securities Guarantee issued with respect to Preferred Securities
issued by that Trust, the Junior Subordinated Debt Securities purchased by
that Trust and the Junior Subordinated Debt Indenture in the aggregate will
provide a full and unconditional guarantee on a subordinated basis by the
Company of payments due on the Preferred Securities issued by that Trust.
CERTAIN COVENANTS OF THE COMPANY
In each Preferred Securities Guarantee, the Company will covenant that, so
long as any Preferred Securities issued by the applicable SunAmerica Trust
remain outstanding, the Company will not (A) declare or pay any dividends on,
or redeem, purchase, acquire or make a distribution or liquidation payment
with respect to, any of its common stock or preferred stock or make any
guarantee payment with respect thereto, or (B) make any payment of interest,
premium (if any) or principal on any debt securities issued by the Company
which rank pari passu with or junior to the Junior Subordinated Debt
Securities, if at such time (i) the Company shall be in default with respect
to its Guarantee Payments or other payment obligations under the Preferred
Securities Guarantee, (ii) there shall have occurred any Declaration Event of
Default under the related Declaration or (iii) the Company shall have given
notice of its election to defer payments of interest on the Junior
Subordinated Debt Securities held by such SunAmerica Trust as trust assets by
extending the interest payment period as provided in the terms of the Junior
Subordinated Debt Securities and such period, or any extension thereof, is
continuing; provided that (a) the Company will be permitted to pay accrued
dividends (and cash in lieu of fractional shares) upon the conversion of any
of its Series E Preferred Shares or upon the conversion of any other Preferred
Stock of the Company as may be outstanding from time to time, in each case in
accordance with the terms of such stock and (b) the foregoing will not apply
to any stock dividends paid by the Company. In addition, so long as any
Preferred Securities remain outstanding, the Company has agreed (i) to remain
the sole direct or indirect owner of all of the outstanding Common Securities
issued by the applicable SunAmerica Trust and shall not cause or permit the
Common Securities to be transferred except to the extent permitted by the
related Declaration; provided that any permitted successor of the Company
under the Indenture may succeed to the Company's ownership of the Common
Securities issued by the applicable SunAmerica Trust and (ii) to use
reasonable efforts to cause such SunAmerica Trust to continue to be treated as
a grantor trust for United States federal income tax purposes except in
connection with a distribution of Junior Subordinated Debt Securities.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no consent will be
required), each Preferred Securities Guarantee may be amended only with the
prior approval of the holders of not less than 66 2/3% in liquidation amount
of the outstanding Preferred Securities issued by the applicable SunAmerica
Trust. The manner of obtaining any such approval of holders of such Preferred
Securities will be set forth in an accompanying Prospectus Supplement. All
guarantees and agreements contained in a Preferred Securities Guarantee shall
bind the successors, assignees, receivers, trustees and representatives of the
Company and shall inure to the benefit of the holders of the Preferred
Securities of the applicable SunAmerica Trust then outstanding. Except in
connection with a consolidation, merger or sale involving the Company that is
permitted under the Indenture, the Company may not assign its obligations
under any Preferred Securities Guarantee.
TERMINATION OF THE PREFERRED SECURITIES GUARANTEES
Each Preferred Securities Guarantee will terminate and be of no further
force and effect as to the Preferred Securities issued by the applicable
SunAmerica Trust upon full payment of the redemption price of all Preferred
Securities of such SunAmerica Trust, or upon distribution of the Junior
Subordinated Debt Securities to the holders of the Preferred Securities of
such SunAmerica Trust in exchange for all of the Preferred Securities
37
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issued by such SunAmerica Trust, or upon full payment of the amounts payable
upon liquidation of such SunAmerica Trust. Notwithstanding the foregoing, each
Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Preferred
Securities issued by the applicable SunAmerica Trust must restore payment of
any sums paid under such Preferred Securities or such Guarantee.
STATUS OF THE PREFERRED SECURITIES GUARANTEES
The Company's obligations under each Preferred Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, including the Junior Subordinated Debt Securities,
except those made pari passu or subordinate by their terms, and (ii) senior to
all capital stock now or hereafter issued by the Company and to any guarantee
now or hereafter entered into by the Company in respect of any of its capital
stock. The Company's obligations under each Preferred Securities Guarantee
will rank pari passu with each other Preferred Securities Guarantee. Because
the Company is a holding company, the Company's obligations under each
Preferred Securities Guarantee are also effectively subordinated to all
existing and future liabilities, including trade payables, of the Company's
subsidiaries, except to the extent that the Company is a creditor of the
subsidiaries recognized as such. Each Declaration provides that each holder of
Preferred Securities issued by the applicable SunAmerica Trust by acceptance
thereof agrees to the subordination provisions and other terms of the related
Preferred Securities Guarantee.
Each Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without first instituting a legal proceeding against any other
person or entity). Each Preferred Securities Guarantee will be deposited with
The Bank of New York, as indenture trustee, to be held for the benefit of the
holders of the Preferred Securities issued by the applicable SunAmerica Trust.
The Bank of New York shall enforce the Preferred Securities Guarantee on
behalf of the holders of the Preferred Securities issued by the applicable
SunAmerica Trust. The holders of not less than a majority in aggregate
liquidation amount of the Preferred Securities issued by the applicable
SunAmerica Trust have the right to direct the time, method and place of
conducting any proceeding for any remedy available in respect of the related
Preferred Securities Guarantee, including the giving of directions to The Bank
of New York. If The Bank of New York fails to enforce such Preferred
Securities Guarantee as above provided, any holder of Preferred Securities
issued by the applicable SunAmerica Trust may institute a legal proceeding
directly against the Company to enforce its rights under such Preferred
Securities Guarantee, without first instituting a legal proceeding against the
applicable SunAmerica Trust or any other person or entity.
MISCELLANEOUS
The Company will be required to provide annually to The Bank of New York a
statement as to the performance by the Company of certain of its obligations
under the Preferred Securities Guarantees and as to any default in such
performance. The Company is required to file annually with The Bank of New
York an officer's certificate as to the Company's compliance with all
conditions under Preferred Securities Guarantees.
The Bank of New York, prior to the occurrence of a default, undertakes to
perform only such duties as are specifically set forth in the applicable
Preferred Securities Guarantee and, after default with respect to a Preferred
Securities Guarantee, shall exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject to
such provision, The Bank of New York is under no obligation to exercise any of
the powers vested in it by a Preferred Securities Guarantee at the request of
any holder of Preferred Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby.
GOVERNING LAW
The Preferred Securities Guarantees will be governed by, and construed in
accordance with, the laws of the State of New York.
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DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, representing contracts
obligating holders to purchase from the Company, and the Company to sell to
the holders, a specified number of shares of Common Stock at a future date or
dates. The price per share of Common Stock may be fixed at the time the Stock
Purchase Contracts are issued or may be determined by reference to a specific
formula set forth in the Stock Purchase Contracts. The Stock Purchase
Contracts may be issued separately or as a part of units ("Stock Purchase
Units") consisting of a Stock Purchase Contract and either (x) Senior Debt
Securities, Subordinated Debt Securities or Junior Subordinated Debt
Securities, (y) debt obligations of third parties, including U.S. Treasury
securities, or (z) Preferred Securities of a SunAmerica Trust, securing the
holder's obligations to purchase the Common Stock under the Stock Purchase
Contracts. The Stock Purchase Contracts may require the Company to make
periodic payments to the holders of the Stock Purchase Units or vice versa,
and such payments may be unsecured or prefunded on some basis. The Stock
Purchase Contracts may require holders to secure their obligations thereunder
in a specified manner and in certain circumstances the Company may deliver
newly issued prepaid stock purchase contracts ("Prepaid Securities") upon
release to a holder of any collateral securing such holder's obligations under
the original Stock Purchase Contract.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units and, if applicable, Prepaid
Securities. The description in the Prospectus Supplement will not purport to
be complete and will be qualified in its entirety by reference to the Stock
Purchase Contracts, the collateral arrangements and depositary arrangements,
if applicable, relating to such Stock Purchase Contracts or Stock Purchase
Units and, if applicable, the Prepaid Securities and the document pursuant to
which such Prepaid Securities will be issued.
PLAN OF DISTRIBUTION
The Company and/or a SunAmerica Trust may sell the Securities directly or
through agents, underwriters or dealers.
Offers to purchase Offered Securities may be solicited by agents designated
by the Company and/or a SunAmerica Trust from time to time. Any such agent,
who may be deemed to be an underwriter as that term is defined in the
Securities Act, involved in the offer or sale of the Offered Securities in
respect of which this Prospectus is delivered will be named, and any
commissions payable by the Company and/or a SunAmerica Trust to such agent set
forth, in the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis
for the period of its appointment. The Company and/or a SunAmerica Trust may
also sell Offered Securities to an agent as principal. Agents may be entitled
to, under agreements which may be entered into with the Company and/or a
SunAmerica Trust, indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, and may be customers of,
engage in transactions with or perform services for the Company in the
ordinary course of business.
If any underwriters are utilized in the sale of Offered Securities in
respect of which this Prospectus is delivered, the Company and/or a SunAmerica
Trust will enter into an underwriting agreement with such underwriters and the
names of the underwriters and the terms of the transaction will be set forth
in the Prospectus Supplement, which will be used by the underwriters to make
resales of the Offered Securities in respect of which this Prospectus is
delivered to the public. Underwriters may offer and sell the Offered
Securities at a fixed price or prices, which may be changed, or from time to
time at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. The underwriters may be
entitled, under the relevant underwriting agreement, to indemnification by the
Company against certain liabilities, including liabilities under the
Securities Act, and may be customers of, engage in transactions with or
perform services for the Company in the ordinary course of business.
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If a dealer is utilized in the sale of the Offered Securities in respect of
which this Prospectus is delivered, the Company and/or a SunAmerica Trust will
sell such Offered Securities to the dealer, as principal. The dealer may then
resell such Offered Securities to the public at varying prices to be
determined by such dealer at the time of resale. Dealers may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act, and may be customers of, engage in
transactions with or perform services for the Company in the ordinary course
of business.
Offered Securities may also be offered and sold, if so indicated in the
Prospectus Supplement, in connection with a remarketing upon their purchase,
in accordance with a redemption or repayment pursuant to their terms, or
otherwise, by one or more firms ("marketing firms"), acting as principals for
their own accounts or as agents for the Company and/or a SunAmerica Trust. Any
remarketing firm will be identified and the terms of its agreement, if any,
with the Company and/or a SunAmerica Trust and its compensation will be
described in the Prospectus Supplement. Remarketing firms may be deemed to be
underwriters in connection with the Offered Securities remarketing thereby.
Remarketing firms may be entitled under agreements which may be entered into
with the Company and/or a SunAmerica Trust to indemnification by the Company
against certain liabilities, including liabilities under the Securities Act,
and may be customers of, engage in transactions with or perform services for
the Company in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company and/or a
SunAmerica Trust will authorize agents and underwriters or dealers to solicit
offers by certain purchasers to purchase Offered Securities from the Company
at the public offering price set forth in the Prospectus Supplement pursuant
to delayed delivery contracts providing for payment and delivery on a
specified date in the future. Such contracts will be subject to only those
conditions set forth in the Prospectus Supplement, and the Prospectus
Supplement will set forth the commission payable for solicitation of such
offers.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Offered Securities of SunAmerica will be passed upon for the
Company by Susan L. Harris, Senior Vice President and General Counsel--
Corporate Affairs of the Company, and by Davis Polk & Wardwell, New York, New
York, special counsel to the Company and the SunAmerica Trusts. Ms. Harris and
Davis Polk & Wardwell will rely as to matters of Maryland law on Piper &
Marbury L.L.P., Baltimore, Maryland. Unless otherwise indicated in a
Prospectus Supplement certain matters of Delaware law relating to the validity
of the Preferred Securities of a SunAmerica Trust will be passed upon for the
SunAmerica Trusts by Richards, Layton & Finger, Wilmington, Delaware, special
Delaware counsel to the SunAmerica Trusts. Ms. Harris holds stock, restricted
stock and options to purchase stock granted under the Company's employee stock
plans, which in the aggregate represent less than 1% of the Company's Common
Stock. David W. Ferguson, a partner of Davis Polk & Wardwell, is a director of
First SunAmerica Life Insurance Company, a subsidiary of the Company.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended September 30,
1995, have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
The financial statements of Ford Life Insurance Company as of and for the
years ended December 31, 1995, 1994 and 1993 incorporated by reference in this
Prospectus, have been so incorporated in reliance on the reports of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of said firm
as experts in auditing and accounting.
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ERISA MATTERS
The Company and certain affiliates of the Company, including SunAmerica Life
Insurance Company and Anchor National Life Insurance Company, may each be
considered a "party in interest" within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or a "disqualified person"
within the meaning of the Internal Revenue Code of 1986, as amended (the
"Code") with respect to many employee benefit plans. Prohibited transactions
within the meaning of ERISA or the Code may arise, for example, if the Offered
Securities are acquired by a pension or other employee benefit plan with
respect to which the Company or any of its affiliates is a service provider
(or otherwise is a "party in interest" or a "disqualified person"), unless
such Offered Securities are acquired pursuant to an exemption for transactions
effected on behalf of such plan by a "qualified professional asset manager" or
pursuant to any other available exemption. Any such pension or employee
benefit plan proposing to invest in the Offered Securities should consult with
its legal counsel.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR IN-
CORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY SUNAMERICA INC., SUNAMERICA CAPITAL TRUST
III OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF SUNAMERICA INC. OR SUNAMERICA
CAPITAL TRUST III SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SunAmerica Selected Consolidated Financial Data.......................... S-4
SunAmerica............................................................... S-6
Recent Developments...................................................... S-6
SunAmerica Capital Trust III............................................. S-7
Risk Factors............................................................. S-8
Capitalization of SunAmerica............................................. S-12
Accounting Treatment..................................................... S-13
Use of Proceeds.......................................................... S-13
Description of the Preferred Securities.................................. S-14
Description of the Junior Subordinated Debentures........................ S-25
Relationship Between the Preferred Securities, the Junior Subordinated
Debentures and the Preferred Securities Guarantee....................... S-29
Taxation................................................................. S-31
Underwriting............................................................. S-34
Legal Matters............................................................ S-35
PROSPECTUS
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... 3
Incorporation of Certain Documents by Reference.......................... 4
The Company.............................................................. 5
The SunAmerica Trusts.................................................... 5
Use of Proceeds.......................................................... 9
Consolidated Ratios of Earnings to Fixed Charges and Earnings to Combined
Fixed Charges and Preferred Stock Dividends............................. 10
Description of the Senior Debt Securities and Subordinated Debt
Securities.............................................................. 11
Description of the Junior Subordinated Debt Securities................... 19
Description of Capital Stock............................................. 25
Description of Depositary Shares......................................... 31
Description of Warrants.................................................. 34
Description of the Preferred Securities.................................. 34
Description of the Preferred Securities Guarantees....................... 36
Description of Stock Purchase Contracts and Stock Purchase Units......... 39
Plan of Distribution..................................................... 39
Legal Matters............................................................ 40
Experts.................................................................. 40
ERISA Matters............................................................ 41
</TABLE>
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10,000,000
PREFERRED SECURITIES
SUNAMERICA CAPITAL TRUST III
% TRUST ORIGINATED
PREFERRED SECURITIES SM ("TOPRS SM")
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
SUNAMERICA INC.
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PROSPECTUS SUPPLEMENT
-------------------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES
INCORPORATED
SMITH BARNEY INC.
NOVEMBER , 1996
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