<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 31, 1996)
10,000,000 Units
[LOGO] SUMAMERICA
8 1/2% PERCS(R) UNITS
(Premium Equity Redemption Cumulative Security Units--PERCS(R) Units)
----------------
The securities offered hereby are 10,000,000 Premium Equity Redemption
Cumulative Security Units, 8 1/2% PERCS Units (the "Securities") of
SunAmerica Inc., a Maryland corporation (the "Company"). Each Security has
a Stated Amount of $37 1/2. Aggregate payments ("PERCS Payments") of 8
1/2% of the Stated Amount per annum will be made or accrue on each
Security semi-annually in arrears on April 30 and October 31 of each
year, commencing April 30, 1997, until the Final Settlement Date of
October 31, 1999. PERCS Payments will consist of interest on
Treasury Notes payable by the United States Government at the
rate of 7 1/2% per annum and unsecured, unsubordinated contract
fees ("Contract Fees") payable by the Company at the rate of
1% per annum, subject to the Company's option to defer
payment of Contract Fees. Each Security will consist of (a)
a stock purchase contract ("Purchase Contract") under
which (i) the holder will purchase from the Company on
the Final Settlement Date or an earlier Acceleration
Date (defined herein), for an amount equal to the
Stated Amount, initially one share of Common Stock
of the Company, subject to adjustment under
certain circumstances, if such purchase occurs
on the Final Settlement Date or Mandatory
Acceleration Date (defined herein), or such
lesser number of shares of Common Stock as
may be payable as described below if such
purchase occurs on a Company Acceleration
Date (defined herein) and (ii) the
Company will pay the holder the
Contract Fees described herein, and
(b) 7 1/2% United States Treasury
Notes having a principal amount equal
to the Stated Amount and maturing on
the Final Settlement Date.
(continued on next page)
----------------
PRIOR TO THE OFFERING MADE HEREBY THERE HAS BEEN NO PUBLIC MARKET FOR
THE SECURITIES. THE SECURITIES HAVE BEEN APPROVED FOR LISTING ON
THE NEW YORK STOCK EXCHANGE ("NYSE"), SUBJECT TO OFFICIAL
NOTICE OF ISSUANCE, UNDER THE SYMBOL "SIP". ON
OCTOBER 31, 1996, THE LAST CLOSING PRICE OF
THE COMMON STOCK ON THE NYSE
COMPOSITE TAPE WAS $37 1/2 PER
SHARE.
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-12 OF THIS PROSPECTUS SUPPLEMENT FOR
CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE SECURITIES,
INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH
PAYMENTS OF CONTRACT FEES ON THE SECURITIES MAY BE DEFERRED.
----------------
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.
----------------
PRICE $37 1/2 A SECURITY
----------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PURCHASE PRICE OF PROCEEDS (DEFICIT) TO
PUBLIC COMMISSIONS(1) TREASURY NOTES THE COMPANY(2)
-------- -------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Per Security............ $37.500 $1.030 $39.135 $(2.665)
Total(3)................ $375,000,000 $10,300,000 $391,347,656 $(26,647,656)
</TABLE>
- --------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriters."
(2) Before deducting expenses payable by the Company estimated at
$2,000,000. Does not include proceeds per Security and total proceeds of
up to $37.500 and $375,000,000, respectively ($37.500 and $431,250,000,
respectively, if the Underwriters' over-allotment option is exercised in
full), receivable by the Company upon settlement of Purchase Contracts.
(3) The Company has granted to the Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
1,500,000 additional Securities at the price to public less underwriting
discounts and commissions for the purpose of covering over-allotments,
if any. If the Underwriters exercise such option in full, the total
price to public, underwriting discounts and commissions and proceeds
(deficit) to the Company will be $431,250,000, $11,859,375 and
$(30,659,180), respectively. See "Underwriters."
----------------
The Securities are offered, subject to prior sale, when, as and if accepted
by the Underwriters named herein, and subject to approval of certain legal
matters by Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
Underwriters. It is expected that delivery of the Securities offered hereby
will be made only in book-entry form through the facilities of The Depositary
Trust Company on or about November 6, 1996 against payment therefor in
immediately available funds.
----------------
MORGAN STANLEY & CO.
Incorporated
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
October 31, 1996
<PAGE>
(continued from previous page)
The Treasury Notes will be pledged to the Collateral Agent (defined herein)
to secure the holders' obligations to purchase Common Stock under the Purchase
Contracts. Unless a holder of Securities elects to pay cash to settle the
underlying Purchase Contracts, an Acceleration (defined herein) occurs or
certain termination events occur, as described herein, principal of the
Treasury Notes underlying such Securities, when paid at maturity, will
automatically be applied to satisfy in full the holder's obligation to
purchase Common Stock under the Purchase Contracts. For so long as a Purchase
Contract remains in effect, such Purchase Contract and the Treasury Notes
securing it will not be separable and may be transferred only as an integrated
Security. A holder of Securities will have the right to remove the Treasury
Notes underlying such Securities by paying the Stated Amount to settle the
Purchase Contract and, under certain circumstances described herein, will
receive a Prepaid Security (defined herein) as a result of such settlement.
See "Description of the Purchase Contracts--Acceleration of the Securities--
General Provisions Applicable to Acceleration" and "--Holder's Early
Settlement of Securities."
At any time or from time to time prior to the Final Settlement Date, the
Company may accelerate (a "Company Acceleration") the outstanding Securities,
in whole or in part. On the effective date of any such acceleration (a
"Company Acceleration Date"), the Company will have the obligation to deliver
an amount per Security initially equal to $59.289, declining by $.008060 on
each day following the date of issue to $51.108 on August 31, 1999, and equal
to $50.625 thereafter (the "Company Acceleration Price"), payable in shares of
Common Stock having an aggregate Current Market Price (defined herein) equal
to the applicable Company Acceleration Price. In addition, holders will also
receive an amount in cash equal to all accrued and unpaid PERCS Payments. The
Company may only accelerate the Securities if the Current Market Price of a
share of Common Stock on the Notice Date (defined herein) is equal to or
exceeds the Company Acceleration Price applicable to such Notice Date.
Automatic acceleration ("Mandatory Acceleration") of the outstanding
Securities will also occur upon certain mergers or consolidations of the
Company. In the event of any Acceleration, the Purchase Contract Agent
(defined herein), on behalf of the holders of Securities that have been
accelerated, will sell on the second Business Day (defined herein) preceding
the Acceleration Date the Treasury Notes underlying such holders' Securities
and automatically apply the proceeds of such sales (excluding accrued
interest) to satisfy in full such holders' obligations to purchase Common
Stock under the Purchase Contracts on the Acceleration Date. Any proceeds from
such sales in excess of the Stated Amount will be returned to such holders. In
the event that the proceeds (excluding accrued interest) from the sale of such
Treasury Notes is less than the Stated Amount, such proceeds nevertheless will
satisfy in full the holders' obligations to purchase Common Stock under the
Purchase Contracts on the Acceleration Date.
The opportunity for equity appreciation afforded by an investment in the
Securities is limited because the Company may, at its option, accelerate the
Securities at any time prior to the Final Settlement Date at the Company
Acceleration Price. Although not obligated to do so, the Company may be
expected to accelerate the Securities prior to the Final Settlement Date if
the market price of the Common Stock exceeds the Company Acceleration Price,
in which event owners of Securities will receive less than one share of Common
Stock for each Security. Because the price of the Common Stock is subject to
market fluctuations, the value of the Common Stock received by an owner of
Securities upon settlement of the Securities may be more or less than the
amount paid for the Securities offered hereby. Holders of Securities have no
voting rights and no right to Common Stock prior to the Final Settlement Date
or an earlier Acceleration Date.
The Securities will be represented by global certificates registered in the
name of The Depositary Trust Company ("DTC") or its nominee. Beneficial
interest in the securities will be shown on and transfers thereof will be
effected only through records maintained by participants in DTC. Except as
described herein, Securities in certificated form will not be issued in
exchange for global certificates. See "Description of Purchase Contracts--
Book-Entry System."
S-2
<PAGE>
NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED, OR INCORPORATED 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 REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN
THE REGISTERED SECURITIES TO WHICH THEY RELATE IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PROSPECTUS SUPPLEMENT ----
<S> <C>
Prospectus Supplement Summary....... S-4
Risk Factors........................ S-12
Use of Proceeds..................... S-14
Common Stock Price Ranges and
Dividends.......................... S-15
Capitalization...................... S-16
Selected Consolidated Financial
Data............................... S-17
Description of the Securities....... S-19
Description of the Purchase
Contracts.......................... S-21
Certain Provisions of the Purchase
Contract Agreement and the Pledge
Agreement.......................... S-29
Description of Prepaid Securities... S-32
Certain United States Federal Income
Tax Considerations................. S-35
United States State and Local Tax
Considerations..................... S-37
Underwriters........................ S-38
Legal Matters....................... S-39
</TABLE>
<TABLE>
<CAPTION>
PAGE
PROSPECTUS ----
<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 the Stock Purchase
Contracts and Stock Purchase Units. 39
Plan of Distribution................ 39
Legal Matters....................... 40
Experts............................. 40
ERISA Matters....................... 41
</TABLE>
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES
OFFERED HEREBY, THE COMMON STOCK, THE SERIES E DEPOSITARY SHARES (AS DEFINED
IN THE ACCOMPANYING PROSPECTUS) OF THE COMPANY, OR THE MERRILL LYNCH & CO.
INC. 7 1/4% STRYPES DUE JUNE 15, 1999 (THE "STRYPES") PAYABLE WITH SHARES OF
COMMON STOCK, AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED WITH RESPECT TO THE SECURITIES
OFFERED HEREBY, THE SERIES E DEPOSITARY SHARES AND THE STRYPES ON THE NEW YORK
STOCK EXCHANGE OR OTHERWISE AND WITH RESPECT TO THE COMMON STOCK ON THE NEW
YORK STOCK EXCHANGE, THE PACIFIC STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-3
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
appearing elsewhere in this Prospectus Supplement, in the accompanying
Prospectus and in the documents incorporated herein by reference. Certain terms
used in this summary are defined elsewhere in this Prospectus Supplement.
Unless otherwise indicated, all information in this Prospectus Supplement
assumes that the Underwriters' over-allotment option is not exercised.
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.
Since the beginning of fiscal 1996, the Company 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, the Company purchased CalFarm Life Insurance Company, which
on such date had approximately $650 million in annuity reserves. On February
29, 1996, the Company 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, the Company
purchased Houston-based broker-dealer Advantage Capital Corp., further
strengthening its distribution network. This acquisition added more than 1,000
representatives to the Company's broker-dealer network, bringing its number of
independent registered representatives to more than 6,600. The principal
executive offices of the Company are located at 1 SunAmerica Center, Los
Angeles, California, 90067-6022, telephone number (310) 772-6000.
RECENT DEVELOPMENTS
RECENT FINANCIAL RESULTS
For its fiscal year ended September 30, 1996, the Company 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.
PROPOSED COMMON STOCK DIVIDEND INCREASE
In August 1996, the Board of Directors of the Company 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 the Company.
S-4
<PAGE>
THE OFFERING
Securities.................. 10,000,000 Premium Equity Redemption Cumulative
Security Units, 8 1/2% PERCS Units.
Stated Amount............... $37.500 per Security.
PERCS Payments.............. 8 1/2% of the Stated Amount per annum, payable
or accruing semi-annually in arrears. These
payments will consist of interest on the
Treasury Notes (defined below) payable by the
United States Government at the rate of 7 1/2%
of the Stated Amount per annum and unsecured,
unsubordinated contract fees ("Contract Fees")
payable or accruing semi-annually by the
Company at the rate of 1% of the Stated Amount
per annum, subject to the Company's option to
defer Contract Fees. Amounts payable on the
first Payment Date (defined below) will be
adjusted as described under "Description of the
Securities--General."
Payment Dates............... April 30 and October 31 of each year,
commencing April 30, 1997, through and
including the Final Settlement Date referred to
below (each, a "Payment Date").
Right to Defer Contract
Fees........................ The Company may, at its option, defer the
payment of Contract Fees on the Purchase
Contracts in whole or in part until no later
than the Final Settlement Date (or an earlier
Company Acceleration Date (defined below) or
Mandatory Acceleration Date (defined herein)
(collectively, an "Acceleration Date")).
However, deferred installments of Contract Fees
will bear additional Contract Fees at the rate
of 1% per annum (compounding on each succeeding
Payment Date) until paid (such deferred
installments of Contract Fees together with the
additional Contract Fees are referred to herein
as the "Deferred Contract Fees"). See "Risk
Factors--Right to Defer Contract Fees" and
"Description of the Purchase Contracts--
Contract Fees."
Final Settlement Date....... October 31, 1999 (the "Final Settlement Date").
On the Final Settlement Date, the Stated Amount
per Security will automatically be applied to
the purchase of initially one share of Common
Stock, par value $1.00 per share ("Common
Stock"), of the Company, subject to adjustment
under certain circumstances (the "Settlement
Rate").
Components of the The Securities will be issued under a Purchase
Securities.................. Contract Agreement to be dated as of November
6, 1996 (the "Purchase Contract Agreement"),
between the Company and The Bank of New York,
as agent for the holders of the Securities
(together with any successor thereto in such
capacity, the "Purchase Contract Agent").
Each Security offered hereby (each, a
"Security" and collectively, the "Securities")
will consist of (a) a stock purchase contract
("Purchase Contract") under which (i) the
holder will purchase from the Company on the
Final Settlement Date or an
S-5
<PAGE>
earlier Acceleration Date, for an amount in
U.S. dollars equal to the Stated Amount,
initially one share of Common Stock, subject to
adjustment under certain circumstances, if such
purchase occurs on the Final Settlement Date or
Mandatory Acceleration Date (defined herein),
or such lesser number of shares of Common Stock
as may be payable as described below if such
purchase occurs on a Company Acceleration Date
(defined below), and (ii) the Company will pay
Contract Fees to the holder, and (b) 7 1/2%
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 aggregate fair market value of the Treasury
Notes (excluding accrued interest) at the time
of purchase may exceed their aggregate
principal amount, in which case the Company
shall, for the benefit of the Securityholders,
provide the amount of such excess as additional
purchase price for the Treasury Notes (such
amount, the "Initial Premium Payment"). Holders
will not directly receive any cash as a result
of any Initial Premium Payment.
The Treasury Notes will be pledged with The
First National Bank of Chicago, as collateral
agent for the Company (together with any
successor thereto in such capacity, the
"Collateral Agent"), to secure the holders'
obligations to purchase Common Stock under the
Purchase Contracts. Unless an Acceleration
(defined below) occurs, or the Purchase
Contracts are terminated upon a Bankruptcy
Event or a Sale of Assets (each defined herein)
or an Early Settlement (defined below) has
occurred, the principal of the Treasury Notes
underlying such Securities, when paid at
maturity, will automatically be applied to
satisfy in full the holders' obligations to
purchase Common Stock under the Purchase
Contracts on the Final Settlement Date. For so
long as a Purchase Contract remains in effect,
such Purchase Contract and the Treasury Notes
securing it will not be separable and may be
transferred only as an integrated Security.
Holders of Securities have no voting rights and
no right to Common Stock prior to the Final
Settlement Date or an earlier Acceleration
Date.
Acceleration of
Securities.................. Company Acceleration. At any time or from time
to time prior to the Final Settlement Date, the
Company may accelerate (a "Company
Acceleration") the outstanding Securities, in
whole or in part. On the effective date of any
such acceleration (a "Company Acceleration
Date"), the Company will have the obligation to
deliver an amount per Security initially equal
to $59.289, declining by $.008060 on each day
following the date of issue (computed on the
basis of a 360-day year of twelve 30-day
months) to $51.108 on August 31, 1999, and
equal to $50.625 thereafter (the "Company
Acceleration Price"), payable
S-6
<PAGE>
in shares of Common Stock having an aggregate
Current Market Price (defined herein) equal to
such Company Acceleration Price. In addition,
holders will also receive an amount in cash
equal to accrued and unpaid PERCS Payments
payable with respect to such Securities to and
including the Company Acceleration Date. The
Company may only accelerate the Securities at
its option if the Current Market Price of a
share of Common Stock on the second Business
Day prior to the Notice Date (defined herein)
is equal to or exceeds the Company Acceleration
Price applicable to such Notice Date. See
"Description of the Purchase Contracts--
Acceleration of the Securities--Company
Acceleration."
The opportunity for equity appreciation
afforded by an investment in the Securities is
limited because of the Company's right to
accelerate the Securities at any time prior to
the Final Settlement Date. Although not
obligated to do so, the Company may be expected
to accelerate the Securities prior to the Final
Settlement Date (or any earlier Mandatory
Acceleration Date) if the market price for the
Common Stock exceeds the Company Acceleration
Price for five consecutive Business Days
(defined herein). If the Company elects to
accelerate the Securities, in whole or in part,
the equity appreciation, exclusive of accrued
and unpaid PERCS Payments payable with respect
to the Securities, realized on an investment in
the Securities will, for any owner of
Securities accelerated by the Company, be
limited to the excess, if any, of (i) the value
of the Common Stock received in payment of such
Company Acceleration Price (such Company
Acceleration Price being initially $59.289 and
declining thereafter to $50.625 as indicated
above), over (ii) the price paid by such owner
for such Securities (the initial price being
the Price to Public for each Security shown on
the cover page of this Prospectus Supplement
and the price thereafter being subject to
market fluctuations). Because the number of
shares of Common Stock to be delivered to
holders of Securities in payment of such
Company Acceleration Price will be determined
on the basis of the market price of the Common
Stock prior to the Notice Date, the value of
the shares of Common Stock on the date of
delivery thereof to such holders may be more or
less than the Company Acceleration Price on a
Company Acceleration Date. A recent closing
sale price of the Common Stock on the NYSE is
set forth on the cover page of this Prospectus
Supplement.
Mandatory Acceleration. In addition,
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, each outstanding Security
will automatically be accelerated (a "Mandatory
Acceleration" and, together with a Company
Acceleration, an "Acceleration"). On the
Mandatory Acceleration Date, the Company will
have the
S-7
<PAGE>
obligation to deliver initially one share of
Common Stock, subject to the adjustments
described herein. In addition, holders have the
right to receive (i) an amount in cash equal to
the accrued and unpaid PERCS Payments payable
with respect to such Security to but excluding
the Mandatory Acceleration Date plus (ii) an
amount in cash initially equal to $8.66,
declining by $.008060 on each day following the
date of issue of the Securities (computed on
the basis of a 360-day year of twelve 30-day
months) to $.483 on August 31, 1999, and equal
to zero thereafter, determined with reference
to such Mandatory Acceleration Date, unless
sooner accelerated by the Company as described
above. At the option of the Company, it may
deliver on such Mandatory Acceleration Date, in
lieu of some or all of the cash consideration
described in clause (ii) of the preceding
sentence, shares of Common Stock. The number of
shares of Common Stock to be delivered in lieu
of any cash consideration described in such
clause (ii) will be determined by dividing the
amount of such consideration that the Company
has elected to deliver in Common Stock by the
Current Market Price of the Common Stock
determined as of the second Business Day
immediately preceding the Notice Date. Because
the price of the Common Stock is subject to
market fluctuations, the value of the Common
Stock received by an owner of Securities upon
Mandatory Acceleration of the Securities may be
more or less than the amount paid for the
Securities offered hereby. See "Description of
the Purchase Contracts--Acceleration of the
Securities--Mandatory Acceleration."
Sale of Treasury Notes. Unless a holder elects,
as described below, to pay in U.S. dollars the
Stated Amount in immediately available funds
not later than 5:00 p.m., New York City time on
the third Business Day immediately preceding
the Acceleration Date, the Purchase Contract
Agent on behalf of such holder pursuant to the
Purchase Contract Agreement (defined below)
will sell on the second Business Day
immediately preceding the Acceleration Date the
Treasury Notes underlying such holder's
Securities and automatically apply on the
Acceleration Date, out of the proceeds of such
sale, an amount equal to the Stated Amount to
satisfy in full such holder's obligation to
purchase the Common Stock under the Purchase
Contract on the Acceleration Date. Any excess
proceeds (in respect of premium on the sale of
the Treasury Notes) will be paid to such
holder. In the event that the proceeds from the
sale of such Treasury Notes (exclusive of
accrued interest on the Treasury Notes) is less
than the Stated Amount, such proceeds
nevertheless will satisfy in full the holder's
obligation to purchase the Common Stock under
the Purchase Contract on the Acceleration Date.
Amounts in respect of accrued interest on the
Treasury Notes will be paid to the holder as a
component of the accrued PERCS Payments paid on
the Acceleration Date. See "Description of the
Purchase Contracts--Acceleration of the
Securities--General Provisions Applicable to
Acceleration."
S-8
<PAGE>
Holders' Right to Receive Treasury Notes Upon
Acceleration. In the event of an Acceleration
of Securities, holders of Securities so
accelerated may elect to pay to the Company
through the Purchase Contract Agent by no later
than 5:00 p.m., New York City time on the third
Business Day immediately preceding the
Acceleration Date in immediately available
funds an amount in U.S. dollars equal to the
Stated Amount per Security so accelerated, in
which event each such electing holder will
receive the Treasury Notes securing such
holder's obligation to purchase the Common
Stock under the Purchase Contract within three
Business Days of the receipt of such amount.
Because any Treasury Notes received by such
holder will include accrued interest, the
Company will pay on the Acceleration Date only
accrued Contract Fees to holders of Securities
who elect to settle in cash after a notice of
Acceleration with respect to such Securities
has been given. HOLDERS MAY MAKE THE ELECTION
REFERRED TO IN THIS PARAGRAPH ONLY IN INTEGRAL
MULTIPLES OF 400 SECURITIES. See "Description
of the Purchase Contracts--Acceleration of the
Securities--General Provisions Applicable to
Acceleration."
Termination................. The Purchase Contracts (including the right to
receive Contract Fees or Deferred Contract Fees
and the obligation to purchase Common Stock)
will automatically terminate upon certain
events of bankruptcy, insolvency or
reorganization with respect to the Company
(each, a "Bankruptcy Event") or upon a sale,
assignment, transfer, lease or conveyance of
all or substantially all of the properties and
assets of the Company to any person which
results in a voluntary liquidation, dissolution
or winding up of the Company (a "Sale of
Assets"). Upon such termination, the Collateral
Agent will release the Treasury Notes held by
it to the Purchase Contract Agent for
distribution to the holders, although there may
be a delay before such release and distribution
in the case of a Bankruptcy Event. In the case
of a Sale of Assets, holders will be entitled
to receive in cash unpaid Contract Fees and
Deferred Contract Fees, if any, through the
date of Board of Director approval of such Sale
of Assets, payable on the tenth Business Day
following the date of such approval. In the
case of a Bankruptcy Event, holders will not be
entitled to receive accrued and unpaid Contract
Fees and Deferred Contract Fees, if any.
Relationship to Common
Stock....................... The aggregate of the Contract Fees and interest
payments on the Treasury Notes will be paid or
accrued at a rate per annum that is greater
than the current dividend yield on the Common
Stock. However, the opportunity for equity
appreciation afforded by an investment in the
Securities is less than that afforded by a
direct investment in the Common Stock.
S-9
<PAGE>
Voting Rights............... The Securities will not entitle holders to any
rights with respect to the Common Stock,
including voting rights. See "Risk Factors--No
Shareholder Rights."
Listing of the Securities... The Securities have been approved for listing
on the New York Stock Exchange, subject to
official notice of issuance, under the symbol
"SIP."
NYSE Symbol of Common
Stock....................... SAI.
Holder's Early Settlement... A holder of Securities may settle (an "Early
Settlement") the underlying Purchase Contracts
prior to the Final Settlement Date or earlier
Notice Date with respect to an Acceleration
Date in the manner described herein, upon the
notice described herein to the Purchase
Contract Agent. Upon such early settlement, (a)
the holder will pay to the Company through the
Purchase Contract Agent in immediately
available funds a U.S. dollar amount equal to
the Stated Amount per Security and deliver the
Securities to the Purchase Contract Agent, (b)
the Treasury Notes underlying such Securities
will, within three Business Days of the Early
Settlement Date (defined herein), be
transferred to the holder free and clear of the
Company's security interest therein, and (c)
the Company will, within three Business Days of
the Early Settlement Date, deliver newly issued
securities ("Prepaid Securities") to the holder
under the Prepaid Securities Indenture (defined
herein). After any notice of Acceleration is
given with respect to a holder's Securities,
the holder's right to elect Early Settlement
with respect to such Securities will terminate
but the holders will continue to have the right
to the return of the underlying Treasury Notes
as described above under "Acceleration of
Securities--Holders' Right to Receive Treasury
Notes Upon Acceleration." HOLDERS MAY MAKE THE
ELECTION REFERRED TO IN THIS PARAGRAPH ONLY IN
INTEGRAL MULTIPLES OF 400 SECURITIES. See
"Description of the Purchase Contracts--
Acceleration of the Securities--General
Provisions Applicable to Acceleration" and "--
Holder's Early Settlement of Securities."
Prepaid Securities.......... The Prepaid Securities will be issued under the
Prepaid Securities Indenture to holders
electing Early Settlement. All outstanding
Prepaid Securities will entitle the holders
thereof to receive Common Stock on the Final
Settlement Date or an earlier Acceleration
Date, and amounts in respect of Contract Fees
and Deferred Contract Fees, in the same amounts
and at the same times as the outstanding
Securities. No Treasury Notes will underlie the
Prepaid Securities; accordingly, unlike the
Securities, the Prepaid Securities will not
entitle the holders thereof to receive any
amounts in respect of interest on the Treasury
Notes nor, in the event of any Acceleration,
any amounts in respect of premium (if any) on
the sale by the Purchase Contract Agent of the
Treasury Notes. The Prepaid
S-10
<PAGE>
Securities will be accelerated upon the
occurrence of a Bankruptcy Event but, unlike
holders of Securities, who will receive their
underlying Treasury Notes in such events,
holders of Prepaid Securities will have only a
claim against the Company for delivery of
Common Stock (which claim may have the status
of a general unsecured claim or an equity
claim) and a general unsecured claim for
amounts in respect of accrued Contract Fees,
including Deferred Contract Fees, if any. Upon
a Sale of Assets, each Prepaid Security will
automatically convert into the right to receive
in cash the Stated Amount plus accrued Contract
Fees and Deferred Contract Fees, if any,
through the date of Board of Director approval
of such Sale of Assets, payable on the tenth
Business Day following such date of approval.
Like the Securities, the Prepaid Securities
will not entitle the holders thereof to any
rights with respect to the Common Stock,
including voting rights. The Company does not
plan to list the Prepaid Securities on any
securities exchange, and there can be no
assurance as to whether a trading market will
develop for Prepaid Securities. See
"Description of Prepaid Securities."
United States Federal
Income Tax
Considerations............. Holders of Securities will include interest on
the Treasury Notes in income when received or
accrued, in accordance with the holder's method
of accounting. The Company intends to report
the Contract Fees (and Initial Premium Payment
and Deferred Contract Fees, if any) as income
to holders, but holders should consult their
tax advisors concerning the possibility that
the Contract Fees (and Initial Premium Payment
and Deferred Contract Fees, if any) may be
treated as a reduction in the holders' basis in
the Securities rather than included in income
on a current basis. Holders will not recognize
gain or loss with respect to the receipt of
Common Stock upon settlement of the Purchase
Contract. Holders may recognize gain or loss
upon sale of the Treasury Notes in the event of
an Acceleration. See "Certain United States
Federal Income Tax Considerations."
Use of Proceeds............. The net proceeds from the sale of the
Securities offered hereby will be used by the
Underwriters to purchase, at the direction of
the Company for the benefit of the holders, the
underlying Treasury Notes, which are being
transferred to holders pursuant to the terms of
the Securities, and the Company will receive no
proceeds from such sale. Amounts received by
the Company upon settlement of Purchase
Contracts, whether on the Final Settlement
Date, an earlier Acceleration Date or an Early
Settlement Date, 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. The Company routinely
reviews opportunities to acquire financial
services businesses or the assets thereof. See
"Use of Proceeds."
S-11
<PAGE>
RISK FACTORS
Prospective purchasers of Securities should consider, in addition to the
other information contained or incorporated by reference in this Prospectus
Supplement or the accompanying Prospectus, the following characteristics of
the Securities.
INVESTMENT IN THE SECURITIES WILL BECOME INVESTMENT IN COMMON STOCK
Although holders of the Securities will be the beneficial owners of the
underlying Treasury Notes, principal of the Treasury Notes, when paid at
maturity or sold upon Acceleration, will automatically be applied to the
purchase of a specified number of shares of Common Stock on behalf of such
holders, unless holders elect Early Settlement of the Purchase Contracts or
unless the Purchase Contracts are terminated (upon the occurrence of a
Bankruptcy Event or a Sale of Assets). Thus, following the Final Settlement
Date or Acceleration Date, holders generally will own shares of Common Stock
rather than a beneficial interest in Treasury Notes. See "Description of the
Securities--General."
LIMITATIONS ON OPPORTUNITY FOR EQUITY APPRECIATION
The opportunity for equity appreciation afforded by an investment in the
Securities is limited because of the Company's right to accelerate the
Securities at any time prior to the Final Settlement Date. Although not
obligated to do so, the Company may be expected to accelerate the Securities
prior to the Final Settlement Date (or any earlier Mandatory Acceleration
Date) if the market price for the Common Stock exceeds the Company
Acceleration Price for five consecutive Business Days. If the Company elects
to accelerate the Securities, in whole or in part, the equity appreciation,
exclusive of accrued and unpaid PERCS Payments payable with respect to the
Securities, realized on an investment in the Securities will, for any owner of
Securities accelerated by the Company, be limited to the excess, if any, of
(i) the value of the Common Stock received in payment of such Company
Acceleration Price (such Company Acceleration Price being initially $59.289
and declining thereafter to $50.625), over (ii) the price paid by such owner
for such Securities (the initial price being the Price to Public for each
Security shown on the cover page of this Prospectus Supplement and the price
thereafter being subject to market fluctuations). Because the number of shares
of Common Stock to be delivered to holders of Securities in payment of such
Company Acceleration Price will be determined on the basis of the market price
of the Common Stock prior to the Notice Date, the value of the shares of
Common Stock on the date of delivery thereof to such holders may be more or
less than the Company Acceleration Price on a Company Acceleration Date. A
recent closing sale price of the Common Stock on the NYSE is set forth on the
cover page of this Prospectus Supplement.
FACTORS AFFECTING TRADING PRICES
The trading prices of the Securities in the secondary market will be
primarily affected by the trading prices of the Common Stock in the secondary
market. It is impossible to predict whether the price of Common Stock will
rise or fall. Trading prices of Common Stock will be influenced by the
Company's operating results and prospects and by economic, financial and other
factors and market conditions that can affect the capital markets generally,
including the level of, and fluctuations in, the trading prices of stocks
generally and sales of substantial amounts of Common Stock in the market
subsequent to the offering of the Securities or the perception that such sales
could occur.
NO SHAREHOLDER RIGHTS
The Securities will not entitle holders to any rights with respect to the
Common Stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions in respect thereof) unless and
until such time as the Company shall have delivered shares of Common Stock for
such Securities, whether on the Final Settlement Date or any earlier
Acceleration Date and unless the applicable record date, if any, for the
exercise of such rights occurs after such date.
DILUTION OF COMMON STOCK
The number of shares of Common Stock that holders of the Securities are
entitled to receive on the Final Settlement Date or an earlier Acceleration
Date is subject to adjustment for certain events arising from stock
S-12
<PAGE>
splits and combinations, stock dividends and certain other actions of the
Company that modify its capital structure. See "Description of the Purchase
Contracts--General." Such number of shares of Common Stock to be received by
such holders on the Final Settlement Date or an earlier Acceleration Date will
not be adjusted for other events, such as offerings of Common Stock for cash
or in connection with acquisitions. The Company is not restricted from issuing
additional Common Stock during the term of the Securities. Additional
issuances may materially and adversely affect the price of the Common Stock
and, because of the relationship of the number of shares to be received on the
Final Settlement Date or any Acceleration Date to the price of the Common
Stock, such other events may adversely affect the trading price of the
Securities.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
It is not possible to predict how the Securities will trade in the secondary
market or whether such market will be liquid or illiquid. The Securities are
novel securities and there is currently no secondary market for the
Securities. The Securities have been approved for listing on the NYSE, subject
to official notice of issuance. However, no assurance can be given that an
active trading market for the Securities will develop or that the listing of
the Securities will provide the holders of the Securities with liquidity of
investment.
TREASURY NOTES ENCUMBERED
Although holders of Securities will be the beneficial owners of the
underlying Treasury Notes, those Treasury Notes will be pledged with the
Collateral Agent to secure the obligations of the holders under the Purchase
Contracts. Thus, rights of the holders to their Treasury Notes will be subject
to the Company's security interest and no holder will be permitted to withdraw
Treasury Notes except in connection with an Early Settlement by such holder or
termination of the related Purchase Contracts or a holder's election to pay
the Stated Amount in cash upon an Acceleration. Additionally, upon the
automatic termination of the Purchase Contracts in the event that the Company
becomes the subject of a case under the United States Bankruptcy Code (the
"Bankruptcy Code"), the delivery of the Treasury Notes to holders of the
Securities may be delayed by the imposition of the automatic stay of Section
362 of the Bankruptcy Code. During the period of any such delay, the Treasury
Notes will continue to accrue interest, payable by the United States
Government, until their maturity.
RIGHT TO DEFER CONTRACT FEES
The Company may, at its option, defer in whole or in part the payment of
Contract Fees on the Purchase Contracts until no later than the Final
Settlement Date or an earlier Acceleration Date. However, deferred
installments of Contract Fees will bear additional Contract Fees at the rate
of 1.0% per annum (compounding on each succeeding Payment Date) until paid
(such deferred installments of Contract Fees together with the additional
Contract Fees are referred to herein as the "Deferred Contract Fees"). If the
Purchase Contracts are terminated upon the occurrence of a Bankruptcy Event,
the right to receive Contract Fees and Deferred Contract Fees will terminate.
In the event that the Company elects to defer the payment of Contract Fees
on the Purchase Contracts until the Final Settlement Date, a succeeding
Payment Date or any earlier Acceleration Date, each holder will receive on the
Final Settlement Date, succeeding Payment Date or such Acceleration Date, as
applicable, a cash payment equal to the aggregate amount of Deferred Contract
Fees payable on such holder's Securities. See "Description of the Purchase
Contracts--Contract Fees."
PURCHASE CONTRACT AGREEMENT NOT QUALIFIED UNDER TRUST INDENTURE ACT; LIMITED
OBLIGATIONS OF PURCHASE CONTRACT AGENT
The Purchase Contract Agreement will not be qualified as an indenture under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and
the Purchase Contract Agent will not be required to qualify as a trustee
thereunder. Accordingly, holders of the Securities will not have the benefits
of the protections of the Trust Indenture Act. Under the terms of the Purchase
Contract Agreement, the Purchase Contract Agent will
S-13
<PAGE>
have only limited obligations to the holders of the Securities. See "Certain
Provisions of the Purchase Contract Agreement and the Pledge Agreement--
Information Concerning the Purchase Contract Agent."
HOLDERS' EARLY SETTLEMENT; PREPAID SECURITIES
The Risk Factors summarized above also apply, except as modified by the
following, to the Prepaid Securities, which will be issued under an indenture
qualified under the Trust Indenture Act. The Prepaid Securities will be issued
to any holder who elects Early Settlement and thereby removes the Treasury
Notes underlying his Securities by settling the underlying Purchase Contract
in cash prior to the Final Settlement Date or any Notice Date with respect to
an Acceleration Date. A holder of a Prepaid Security will have the same right
to receive Common Stock on the Final Settlement Date or earlier Acceleration
Date, and amounts in respect of Contract Fees and Deferred Contract Fees, in
the same amounts and at the same times as the outstanding Securities. If such
holder purchased the original Security in the offering at the Price to Public
set forth on the cover page of this Prospectus, such holder will have made the
same investment (equal to the Stated Amount) in the Securities and in the
Prepaid Securities. However, the cash yield on the Securities (equal to the
PERCS Payments, which include both the Contract Fee payments and the cash
yield on the underlying Treasury Notes) will be substantially higher than the
cash yield on the corresponding Prepaid Securities (equal to only amounts in
respect of the Contract Fee payments). Further, while the Purchase Contracts
underlying the Securities will terminate upon a Bankruptcy Event or a Sale of
Assets, resulting in distribution of the underlying Treasury Notes to holders,
if a Bankruptcy Event occurs, a holder of a Prepaid Security will have only a
claim against the Company for delivery of Common Stock (which claim may have
the status of a general unsecured claim or an equity claim) and a general
unsecured claim for amounts in respect of Contract Fee and Deferred Contract
Fee payments, if any. Upon a Sale of Assets, each Prepaid Security will
automatically convert into the right to receive in cash the Stated Amount plus
all accrued Contract Fees and Deferred Contract Fees, if any, through the date
of Board of Director approval of such Sale of Assets, payable on the tenth
Business Day following such date of approval. The Company does not plan to
list the Prepaid Securities on any securities exchange, and there can be no
assurance as to whether a trading market will develop for Prepaid Securities.
See "Description of Purchase Contracts--Termination."
A holder might wish to elect Early Settlement if interest rates are at a
relatively low level and the Treasury Notes are trading at a substantial
premium to the Stated Amount, in which case the holder could receive the
premium in cash by selling the Treasury Notes. However, given that the holder
will thereafter receive only amounts equal to Contract Fee Payments, and no
amounts in respect of Treasury Note interest, on the Stated Amount, a holder
would only be likely to elect Early Settlement if his individual economic
circumstances warranted foregoing such additional Treasury Note interest.
USE OF PROCEEDS
The net proceeds from the sale of the Securities offered hereby will be used
by the Underwriters to purchase, at the direction of the Company for the
benefit of the holders, the underlying Treasury Notes, which are being
transferred to holders pursuant to the terms of the Securities, and the
Company will receive no proceeds from the sale of the Securities. The proceeds
to be received by the Company upon settlement of the Purchase Contracts,
whether on the Final Settlement Date, an earlier Acceleration Date or an Early
Settlement Date, 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. The Company
routinely reviews opportunities to acquire financial services businesses or
the assets thereof.
On October 31, 1996, the Company 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 net proceeds from the sale of the
6.20% Notes ($373.4 million before deducting expenses) will be used for
general corporate purposes as discussed above. The closing of the sale of the
6.20% Notes is expected to occur on or about November 6, 1996.
S-14
<PAGE>
The Company currently has no commitments or understandings to acquire any
specific business or other material assets. The Company is considering the
acquisition of approximately $4.5 billion of fixed annuity assets for a total
consideration of between $200 million to $300 million. The Company 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 the Company will be successful in pursuing this
or any other acquisition opportunity.
The Company is also currently marketing an offering of 10,000,000 Preferred
Securities (liquidation amount $25 per Preferred Security) of a SunAmerica
Capital Trust. See "The SunAmerica Trusts," "Description of Junior
Subordinated Debt Securities," "Description of Preferred Securities" and
"Description of the Preferred Securities Guarantees" in the accompanying
Prospectus. There can be no assurance that such offering will be consummated.
COMMON STOCK PRICE RANGES AND DIVIDENDS
The Common Stock sale prices (as quoted on the NYSE Composite Tape) and per
share dividend data for each full quarter during fiscal years ended September
30, 1995 and 1996 and for the first fiscal quarter of fiscal 1997 through
October 31, 1996 are set forth below. The payment of future dividends on the
Common Stock and the amounts thereof will depend on business conditions,
earnings and financial requirements of the Company and other relevant factors.
The sale prices and dividend amounts set forth below 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.
The Company's Common Stock trades under the symbol SAI.
<TABLE>
<CAPTION>
COMMON STOCK
PRICES DIVIDENDS PAID
------------------ -----------------------
COMMON NONTRANSFERABLE
FISCAL YEAR HIGH LOW STOCK CLASS B STOCK(1)
- ----------- ------ ------ ------ ----------------
<S> <C> <C> <C> <C>
1995
First Quarter................. $13 45/64 $11 1/2 $0.050 $0.045
Second Quarter................ 14 35/64 12 3/64 0.050 0.045
Third Quarter................. 17 7/8 14 1/4 0.050 0.045
Fourth Quarter................ 20 61/64 16 53/64 0.050 0.045
1996
First Quarter................. $24 5/8 $20 5/8 $0.075 $0.068
Second Quarter................ 28 3/16 22 9/16 0.075 0.068
Third Quarter................. 29 5/16 22 7/8 0.075 0.068
Fourth Quarter................ 36 1/4 26 7/8 0.075 0.068
1997
First Quarter (through October
31, 1996).................... $39 1/8 $36 1/4 -- --
</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-15
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company at June 30, 1996 and as adjusted to give effect to the issuance of
the 6.20% Notes. See "Use of Proceeds". The table should be read in
conjunction with the Company'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
---------- ----------
Company-obligated mandatorily redeemable preferred
securities of subsidiary grantor trusts(1)........... 237,631 237,631
---------- ----------
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 securities
available for sale................................. (88,669) (88,669)
---------- ----------
Total shareholders' equity.......................... 1,526,205 1,526,205
---------- ----------
Total capitalization.................................. $2,337,171 $2,712,171
========== ==========
</TABLE>
- --------
(1) Represents the Company-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 the Company 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 the Company.
S-16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
Reference is made to the Company'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 the Company's audited consolidated
financial statements, including the consolidated income statement for the
Company'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 the Company'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-17
<PAGE>
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
Company-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 the Company-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 the Company 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 the Company.
S-18
<PAGE>
DESCRIPTION OF THE SECURITIES
The descriptions set forth below and under the captions "Description of the
Purchase Contracts" and "Certain Provisions of the Purchase Contract Agreement
and the Pledge Agreement," of certain terms of the Premium Equity Redemption
Cumulative Security Units, 8 1/2% PERCS Units (the "Securities") offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Securities set forth in
the accompanying Prospectus, to which reference is hereby made. The summaries
of certain provisions of documents described below and under the captions
"Description of the Purchase Contracts" and "Certain Provisions of the
Purchase Contract Agreement and the Pledge Agreement" do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of such documents (including the definitions therein
of certain terms), forms of which are on file with the Securities and Exchange
Commission. Wherever particular Sections of, or terms defined in, such
documents are referred to herein, such Sections or defined terms are
incorporated by reference herein. Capitalized terms not defined herein have
the meanings assigned to such terms in the accompanying Prospectus.
GENERAL
Each Security will have a Stated Amount of $37.500 and will be issued under
the Purchase Contract Agreement between the Company and the Purchase Contract
Agent. Each Security will consist of (a) a Purchase Contract under which (i)
the holder will purchase from the Company on the Final Settlement Date or
earlier Acceleration Date for an amount in U.S. dollars equal to the Stated
Amount, initially one share of Common Stock, subject to adjustment as
described herein, if such purchase occurs on the Final Settlement Date or
Mandatory Acceleration Date, or such lesser number of shares of Common Stock
if such purchase occurs on a Company Acceleration Date and (ii) the Company
will pay Contract Fees to the holder, and (b) Treasury Notes having a
principal amount equal to the Stated Amount and maturing on the Final
Settlement Date. The aggregate fair market value of the Treasury Notes at the
time of purchase may exceed their aggregate principal amount, in which case,
the Company shall, for the benefit of the Securityholders, provide the amount
of such excess as additional purchase price for the Treasury Notes (such
amount, the "Initial Premium Payment"). Holders will not directly receive any
cash as a result of any Initial Premium Payment. The Treasury Notes will be
pledged with the Collateral Agent to secure the holders' obligations to
purchase Common Stock under the Purchase Contracts. Unless (i) a holder of
Securities elects Early Settlement through the early delivery of cash in the
Stated Amount and the Securities to the Purchase Contract Agent in exchange
for the Treasury Notes and Prepaid Securities (see "Description of Prepaid
Securities"), (ii) an Acceleration occurs or (iii) the Purchase Contracts are
terminated (upon a Bankruptcy Event or a Sale of Assets), principal of the
Treasury Notes underlying such Securities, when paid at maturity, will
automatically be applied to satisfy in full the holder's obligation to
purchase Common Stock under the Purchase Contract. In the event of an
Acceleration, if the holder of Securities elects not to pay the Stated Amount
in cash as provided herein, the Treasury Notes underlying the Securities will
be sold by the Purchase Contract Agent as described herein and the proceeds
from such sale (exclusive of accrued interest and premium, if any) in an
amount equal to the Stated Amount will automatically be applied to satisfy in
full the holder's obligation to purchase Common Stock under the Purchase
Contract. For so long as a Purchase Contract remains in effect, such Purchase
Contract and the Treasury Notes securing it will not be separable and may be
transferred only as an integrated Security.
The semi-annual payments on the Securities set forth on the cover page of
this Prospectus Supplement will consist of interest on the Treasury Notes
payable by the United States Government at the rate of 7.5% of the Stated
Amount per annum and unsecured, unsubordinated Contract Fees payable semi-
annually on each Payment Date by the Company at the rate of 1.0% of the Stated
Amount per annum (the "PERCS Payments"). Semi-annual interest payments on the
Treasury Notes will be remitted by the Collateral Agent to the Purchase
Contract Agent for payment to holders of the Securities. The Contract Fees
payable on the first Payment Date will be adjusted so that the aggregate of
the Contract Fees and interest on Treasury Notes payable on such date will be
the equivalent of 8.5% of the Stated Amount per annum accruing from the date
of issue of the Securities.
The Company may, at its option, defer in whole or in part the payment of
Contract Fees on the Purchase Contracts until the Final Settlement Date, a
succeeding Payment Date or any earlier Acceleration Date. However,
S-19
<PAGE>
deferred installments of Contract Fees will bear additional Contract Fees at
the rate of 1.0% per annum (compounding on each succeeding Payment Date) until
paid. If the Purchase Contracts are terminated upon the occurrence of a
Bankruptcy Event, the right to receive Contract Fees and Deferred Contract
Fees will terminate. In the event of Early Settlement of the Purchase Contract
(see "Description of the Purchase Contracts--Holders' Early Settlement of
Securities"), accrued Contract Fees and Deferred Contract Fees will be carried
over to the Prepaid Securities. In the event that the Company elects to defer
the payment of Contract Fees on the Purchase Contracts until the Final
Settlement Date, a succeeding Payment Date or any earlier Acceleration Date,
each holder will receive on the Final Settlement Date, succeeding Payment Date
or Acceleration Date, as applicable, a cash payment equal to the aggregate
amount of Deferred Contract Fees payable to a holder of Securities. Except
with respect to the Final Settlement Date or any earlier Acceleration Date,
the Company may pay Deferred Contract Fees in whole or in part on any Payment
Date. See "Description of the Purchase Contracts--Contract Fees."
S-20
<PAGE>
DESCRIPTION OF THE PURCHASE CONTRACTS
GENERAL
On the Final Settlement Date, the Stated Amount will automatically be
applied pursuant to the terms of the Purchase Contract to purchase shares of
Common Stock of the Company at the Settlement Rate (as described below) in
effect on the Final Settlement Date.
Unless an event described below under "Termination" or "Acceleration of the
Securities" occurs or unless a holder exercises the rights described under
"Holder's Early Settlement of Securities," principal of the Treasury Notes
underlying such Securities, when paid at maturity, will automatically be
transferred to the Company to satisfy in full the holder's obligation to
purchase Common Stock under the Purchase Contracts on the Final Settlement
Date. Such Common Stock will then be issued and delivered to such holder or
such holder's designee, upon presentation and surrender of the certificate
evidencing such Securities (a "Security Certificate") and payment by the
holder of any transfer or similar taxes payable in connection with the
issuance of the stock to any person other than such holder.
Prior to the date on which shares of Common Stock are issued in settlement
of a Purchase Contract, the Common Stock underlying the related Security will
not be deemed to be outstanding for any purpose and the holder thereof will
not have any voting rights, rights to dividends or other distributions or
other rights or privileges of a stockholder by virtue of holding such
Security.
Each holder of Securities, by acceptance thereof, will under the terms of
the Purchase Contract Agreement and the Securities be deemed to have (a)
irrevocably agreed to be bound by the terms of the related Purchase Contracts
for so long as such holder remains a holder of such Securities and (b) newly
appointed the Purchase Contract Agent as such holder's attorney-in-fact to
enter into and perform the related Purchase Contracts on behalf of and in the
name of such holder.
The Settlement Rate is initially one share of Common Stock. The Settlement
Rate is subject to adjustment if the Company shall (i) pay a dividend or make
a distribution with respect to Common Stock in shares of such stock, (ii)
subdivide or split its outstanding shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares, (iv) issue
by reclassification of its shares of Common Stock any shares of common stock
of the Company, (v) issue certain rights or warrants to all holders of its
Common Stock, (vi) pay a dividend or make a distribution to all holders of its
Common Stock of evidences of its indebtedness or other assets (including
capital stock of the Company but excluding any cash dividends or distributions
and dividends referred to in clause (i) above), (vii) make a distribution
consisting of cash, excluding any quarterly cash dividend on the Common Stock
to the extent that the aggregate cash dividend per share of Common Stock in
any quarter does not exceed the greater of (x) the amount per share of Common
Stock of the next preceding quarterly cash dividend on the Common Stock to the
extent that such preceding quarterly dividend did not require an adjustment of
the conversion price pursuant to this clause (as adjusted to reflect
subdivisions or combinations of the Common Stock), and (y) 3.75% of the
average of the last reported sales price of the Common Stock during the ten
consecutive trading days immediately prior to the date of declaration of such
dividend, and excluding any dividend or distribution in connection with the
liquidation, dissolution or winding up of the Company (if an adjustment is
required to be made as set forth in this clause (vii) as a result of a
distribution (A) that is a quarterly dividend, such adjustment would be based
upon the amount by which such distribution exceeds the amount of the quarterly
cash dividend permitted to be excluded pursuant to this clause and (B) that is
not a quarterly dividend, such adjustment would be based upon the full amount
of the distribution); or (viii) make a payment in respect of a tender offer or
exchange offer by a person other than the Company or any subsidiary of the
Company in which, as of the closing date of the offer, the board of directors
of the Company is recommending acceptance of the offer (the adjustment
referred to in this clause (viii)(A) will only be made if the tender offer or
exchange offer is for an amount which increases the offeror's ownership of
Common Stock to more than 25% of the total shares of Common Stock outstanding
and if the cash and value of any other consideration included in such payment
per share of Common Stock exceeds the average of the daily closing prices of
the Common Stock on the NYSE on the trading day after the expiration of the
tender or exchange offer and the next two succeeding
S-21
<PAGE>
trading days and (B) will generally not be made, however, if, as of the
closing of the offer, the offering documents with respect to such offer
disclose a plan or an intention to cause the Company to engage in a
consolidation or merger of the Company or a sale of all or substantially all
of the assets of the Company). In addition, the Company will also be entitled
to make upward adjustments in the Settlement Rate, as it in its discretion
shall determine to be advisable, in order that any stock dividends,
subdivision of shares, distribution of rights to purchase stock or securities,
or distribution of securities convertible into or exchangeable for stock (or
any transaction which could be treated as any of the foregoing transactions
pursuant to Section 305 of the Internal Revenue Code of 1986, as amended)
hereafter made by the Company to its shareholders will not be taxable. All
adjustments to the Settlement Rate will be calculated to the nearest 1/100th
of a share of Common Stock (with 5/1000 of a share being rounded to the next
lower 1/100 of a share).
CONTRACT FEES
Contract Fees will be payable semi-annually on each Payment Date to the
persons in whose names the related Securities are registered at the close of
business on the Business Day (defined below) immediately preceding such
Payment Date (the "Record Date"). Contract Fees will be computed on the basis
of actual days elapsed in a year of 365 or 366 days, as the case may be. If a
Payment Date falls on a day that is not a Business Day, the Contract Fee may
be paid on the next succeeding Business Day with the same force and effect as
if made on such Payment Date, and no additional amounts will accrue as a
result of such delayed payment. "Business Day" means any day that is not a
Saturday, a Sunday or a day on which the New York Stock Exchange or banking
institutions or trust companies in The City of New York are authorized or
obligated by law or executive order to be closed. The Contract Fees payable on
the first Payment Date will be adjusted so that the aggregate of the Contract
Fees and interest on Treasury Notes payable on such date will be the
equivalent of 8.5% of the Stated Amount per annum accruing from the date of
issue of the Securities.
The Company may, at its option and upon prior written notice to the holders
of Securities and the Purchase Contract Agent, defer in whole or in part the
payment of Contract Fees on the Purchase Contracts until the Final Settlement
Date, a succeeding Payment Date or any earlier Acceleration Date. However,
deferred installments of Contract Fees will bear additional Contract Fees at
the rate of 1.0% per annum (compounding on each succeeding Payment Date) until
paid. If the Purchase Contracts are terminated upon the occurrence of a
Bankruptcy Event, the right to receive Contract Fees and Deferred Contract
Fees will terminate.
In the event that the Company elects to defer the payment of Contract Fees
on the Purchase Contracts until the Final Settlement Date, a succeeding
Payment Date or any earlier Acceleration Date, each holder will receive on the
Final Settlement Date, succeeding Payment Date or Acceleration Date, as
applicable, a cash payment equal to the aggregate amount of Deferred Contract
Fees payable to a holder of Securities. Except with respect to the Final
Settlement Date or any earlier Acceleration Date, the Company may pay Deferred
Contract Fees in whole or in part on any Payment Date.
In the event the Company exercises its option to defer the payment of
Contract Fees, then, until the Deferred Contract Fees have been paid in full,
the Company shall not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock (other than (i) purchases or acquisitions
of shares of Common Stock in connection with the satisfaction by the Company
of its obligations under any employee benefit plans now or hereafter in effect
or the satisfaction by the Company of its obligations pursuant to any contract
or security now or hereafter outstanding requiring the Company to purchase
shares of Common Stock, (ii) as a result of a reclassification of the
Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock, (iii) the purchase of fractional shares in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (iv) the
payment of accrued dividends (and cash in lieu of fractional shares) upon the
conversion of any shares of preferred stock of the Company as may be
outstanding from time to time, in accordance with the terms of such stock or
(v) dividends on its capital stock paid in shares of capital stock) or make
any guarantee payments with respect to the foregoing.
S-22
<PAGE>
ACCELERATION OF THE SECURITIES
Company Acceleration
At any time or from time to time prior to the Final Settlement Date, the
Company may elect to accelerate (a "Company Acceleration") the outstanding
Securities, in whole or in part. On the effective date of any such
acceleration (a "Company Acceleration Date"), the Company will have the
obligation to deliver a number of shares of Common Stock equal to the
applicable Company Acceleration Price divided by the Current Market Price on
the second Business Day prior to the Notice Date, plus an amount in cash equal
to accrued and unpaid PERCS Payments (except as provided in the second
paragraph under "General Provisions Applicable to Acceleration" below) payable
with respect to such Securities, to and including the Company Acceleration
Date. The Company Acceleration Price per Security is initially equal to
$59.289, declining by $.008060 on each day following the date of issue
(computed on the basis of a 360-day year of twelve 30 day months) to $51.108
on August 31, 1999, and equal to $50.625 thereafter. Notice of a Company
Acceleration shall be made not less than 30 nor more than 60 days prior to the
Company Acceleration Date. See "Notice to Holder of Securities."
Notwithstanding the foregoing, the Company may not exercise its right to
accelerate the Securities unless the Current Market Price of a share of Common
Stock on the second Business Day prior to the Notice Date is equal to or
exceeds the Company Acceleration Price applicable to such Notice Date.
For illustrative purposes only, the following chart shows (i) the number of
shares of Common Stock that a holder would receive for each Security on the
Final Settlement Date, assuming no adjustment of the Settlement Rate under the
Purchase Contracts by reason of the occurrence of any of the events described
under "Description of the Purchase Contracts--General" and (ii) the number of
shares of Common Stock that a holder would receive at various Current Market
Prices if a Company Acceleration occurred immediately prior to the Final
Settlement Date. Accordingly for purposes of the table the Company
Acceleration Price is assumed to be $50.625. There can be no assurance that
the Current Market Price of the Common Stock will be within the range set
forth below.
FINAL SETTLEMENT DATE 1 share(1)
CURRENT MARKET PRICE
<TABLE>
<S> <C>
$55........................ 0.920 shares(2)
$60........................ 0.844 shares(2)
$65........................ 0.779 shares(2)
$70........................ 0.723 shares(2)
$75........................ 0.675 shares(2)
</TABLE>
- --------
(1) Since the Current Market Price is not a relevant factor in determining the
number of shares of Common Stock issued on the Final Settlement Date, such
holder will receive Common Stock having a value equal to the market price
of the Common Stock on the Final Settlement Date.
(2) Since the number of shares issued per Security is determined by dividing
$50.625 (the assumed Company Acceleration Price) by the applicable Current
Market Price, the number of shares reflected in the table will always have
a value equal to such Company Acceleration Price. However, because the
number of shares of Common Stock to be delivered in payment of such
Company Acceleration Price will be determined on the basis of the market
price of the Common Stock prior to the Notice Date, the value of the
shares of Common Stock delivered to holders on the Company Acceleration
Date may be more or less than the Company Acceleration Price. See "Risk
Factors--Limitations on Opportunity for Equity Appreciation" and "Certain
Provisions Applicable to Acceleration."
Mandatory Acceleration
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 Security will automatically be
accelerated (a "Mandatory Acceleration") so
S-23
<PAGE>
that holders of the Security have the right to receive from the Company shares
of Common Stock at the Settlement Rate for the Securities in effect on the
Mandatory Acceleration Date, plus (i) an amount in cash equal to the accrued
and unpaid PERCS Payments (except as provided in the second paragraph under
"General Provisions Applicable to Acceleration" below) on such Securities to
but excluding the Mandatory Acceleration Date plus (ii) an amount in cash
initially equal to $8.664 declining by $.008060 on each day following the date
of issue of the securities computed on the basis of a 360-day year of twelve
30-day months to $.483 on August 31, 1999, and equal to zero thereafter,
determined with reference to the Mandatory Acceleration Date, unless sooner
accelerated by the Company. At the option of the Company, it may deliver on
the Mandatory Acceleration Date, in lieu of some or all of the cash
consideration described in clause (ii) 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 clause (ii) will be determined by dividing
the amount of cash consideration that the Company has elected to pay in Common
Stock by the Current Market Price of the Common Stock determined as of the
second Business Day immediately preceding the Notice Date. Because the Current
Market Price is determined as of a date different from the date of the
delivery of the Common Stock, the value of such Common Stock when delivered
may be more or less than its market value on the date of such determination.
The automatic acceleration of the Securities immediately prior to a Merger or
Consolidation is intended to ensure that the holders of the Securities will be
entitled to the benefits of ownership of Common Stock upon the occurrence of
such Merger or Consolidation and will participate in such Merger or
Consolidation together with the holders of Common Stock.
General Provisions Applicable to Acceleration
Unless a holder elects to pay the Stated Amount in immediately available
funds as described below with respect to the Securities of such holder to be
accelerated, the Purchase Contract Agent on behalf of such holder pursuant to
the Purchase Contract Agreement will sell on the second Business Day
immediately preceding the Acceleration Date the Treasury Notes underlying such
holder's Securities to be accelerated and automatically apply on the
Acceleration Date out of the proceeds of such sale an amount equal to the
Stated Amount to satisfy in full such holder's obligation to purchase the
Common Stock under the Purchase Contract on the Acceleration Date. Any excess
proceeds (in respect of premium on the sale of the Treasury Notes) will be
paid to such holder. In the event that the proceeds from the sale of such
Treasury Notes (exclusive of accrued interest on the Treasury which will be
paid to the holder as described below) is less than the Stated Amount, such
proceeds nevertheless will be considered to satisfy in full the holder's
obligation to purchase the Common Stock under the Purchase Contract on the
Acceleration Date. Amounts in respect of accrued interest on the Treasury
Notes will be paid to the holders as a component of the accrued PERCS Payment
payable on such Acceleration Date. If fewer than all outstanding Securities
are to be accelerated, the Securities to be accelerated shall be selected by
the Purchase Contract Agent by lot.
In the event of an Acceleration of Securities, holders of Securities so
accelerated may elect to pay to the Company through the Purchase Contract
Agent no later than 5:00 p.m. New York City time on the third Business Day
immediately preceding the Acceleration Date in immediately available funds an
amount in U.S. dollars equal to the Stated Amount per Security so accelerated,
in which event each such electing holder will receive the Treasury Notes
securing such holder's obligation to purchase the Common Stock under the
Purchase Contract within three Business Days of the receipt of such amount.
Because any Treasury Notes received by such holder will include accrued
interest, the Company will pay on the Acceleration Date only accrued Contract
Fees to holders who elect to settle in cash after a notice of Acceleration
with respect to such holder's Securities has been given. HOLDERS MAY MAKE THE
ELECTION REFERRED TO IN THIS PARAGRAPH ONLY IN INTEGRAL MULTIPLES OF 400
SECURITIES. If an electing holder fails to deliver the Stated Amount by such
close of business on the third Business Day preceding the Acceleration Date,
then the Treasury Notes will be sold as provided in the preceding paragraph.
The opportunity for equity appreciation afforded by an investment in the
Securities is limited because of the Company's right to accelerate the
Securities at any time prior to the Final Settlement Date. Although not
obligated to do so, the Company may be expected to accelerate the Securities
prior to the Final Settlement Date (or any earlier Mandatory Acceleration
Date) if the aggregate market price of the Common Stock exceeds such
S-24
<PAGE>
Company Acceleration Price for five consecutive Business Days. If the Company
elects to accelerate the Securities, in whole or in part, the equity
appreciation, exclusive of accrued and unpaid PERCS Payments payable with
respect to the Securities, realized on an investment in the Securities will,
for any owner of Securities accelerated by the Company, be limited to the
excess, if any, of (i) the value of the Common Stock received in payment of
such Company Acceleration Price (such Company Acceleration Price being
initially $59.289 and declining thereafter to $50.625), over (ii) the price
paid by such owner for such Securities (the initial price being the Price to
Public for each Security shown on the cover page of this Prospectus Supplement
and the price thereafter being subject to market fluctuations). Because the
number of shares of Common Stock to be delivered to holders of Securities in
payment of such Company Acceleration Price will be determined on the basis of
the market price of the Common Stock prior to the Notice Date, the value of
the shares of Common Stock on the date of delivery thereof to such holders may
be more or less than the Company Acceleration Price on the Company
Acceleration Date. A recent closing sale price of the Common Stock on the NYSE
is set forth on the cover page of this Prospectus Supplement.
Because the price of the Common Stock is subject to market fluctuations, the
value of the Common Stock received by a holder of Securities upon the Final
Settlement Date or upon the effectiveness of a Merger or Consolidation of the
Company may be more or less than the amount paid for the Securities upon
issuance, exclusive of any Common Stock paid for accrued and unpaid Contract
Fees payable with respect to the Securities.
Holders of Securities have no right to Common Stock prior to the Final
Settlement Date or Acceleration Date.
Certain Definitions
"Mandatory Acceleration Date" means the effective time on the date of any
Merger or Consolidation.
The "Notice Date" with respect to any notice given by the Company in
connection with an Acceleration of the Securities means the earlier of the
commencement of the mailing of such notice to the holders of Securities or the
date such notice is first published in accordance with "Notices to Holders of
Securities" below.
The "Current Market Price" per share of Common Stock on any date of
determination means the average of the daily closing prices on the NYSE for
the five consecutive trading days ending on and including such date of
determination; provided, however, that if the closing price of the Common
Stock on the NYSE on the trading day next following such five-day period (the
"next-day closing price") is less than 95% of said average closing price, then
the Current Market Price per share of Common Stock on such date of
determination will be the next-day closing price; and provided, further, that
if any adjustment of the Settlement Rate becomes effective as of any date
during the period beginning on the first day of such five-day period and
ending on the date on which Securities are to be accelerated, then the Current
Market Price as determined pursuant to the foregoing will be appropriately
adjusted to reflect such adjustment. Because the price of Common Stock is
subject to market fluctuations, it is possible that the next-day closing price
could be significantly less than such five-day average.
HOLDER'S EARLY SETTLEMENT OF SECURITIES
A holder of Securities may settle the underlying Purchase Contracts prior to
the Final Settlement Date ("Early Settlement") in the manner herein described.
So long as the Securities are evidenced by one or more global security
certificates deposited with the Depositary (as defined herein), procedures for
Early Settlement will also be governed by standing arrangements between the
Depositary and the Purchase Contract Agent. HOLDERS MAY SETTLE SECURITIES
EARLY ONLY IN INTEGRAL MULTIPLES OF 400 SECURITIES.
Upon Early Settlement of Purchase Contracts underlying any Securities, (a)
the holder will pay to the Company (in the form of a certified or cashier's
check payable to the order of the Company in immediately
S-25
<PAGE>
available funds) through the Purchase Contract Agent a U.S. dollar amount
equal to the Stated Amount per such Security and deliver such Securities to
the Purchase Contract Agent with the form of "Election to Settle Early" on the
reverse side of the certificate completed and executed as indicated, (b) the
Treasury Notes underlying such Securities will within three Business Days
following the Early Settlement Date (defined below) be transferred to the
holder free and clear of the Company's security interest therein and (c) the
Company will deliver Prepaid Securities with an equal aggregate Stated Amount
to the holder under the Prepaid Securities Indenture within such three
Business Day period. After any notice of Acceleration is given with respect to
a holder's Securities, the holder's right to elect Early Settlement with
respect to such Securities will terminate, but such holder will retain the
right to receive the underlying Treasury Notes in connection with an
Acceleration of Securities as described under "Acceleration of the
Securities--General Provisions Applicable to Acceleration."
Upon Early Settlement of Purchase Contracts in the manner described above,
presentation and surrender of the Security Certificate evidencing the related
Securities and cash equal to the Stated Amount per Security and payment of any
transfer or similar taxes payable by the holder in connection with the
issuance of the Prepaid Securities to any person other than the holder of such
Securities, the Company will cause the Prepaid Securities to be issued, and
the Treasury Notes securing such Purchase Contracts to be released from the
pledge under the Pledge Agreement described below and transferred, within
three Business Days following the Early Settlement Date, to the exchanging
holder or such holder's designee. If the Purchase Contract Agent receives the
Security Certificate, accompanied by the completed Election to Settle Early
and requisite check, from a holder of Securities by 5:00 p.m., New York City
time, on a Business Day, that day will be considered the Early Settlement
Date. If the Purchase Contract Agent receives the foregoing after 5:00 p.m.,
New York City time, on a Business Day or at any time on a day that is not a
Business Day, the next Business Day will be considered the Early Settlement
Date.
A holder might wish to elect Early Settlement if interest rates are at a
relatively low level and the Treasury Notes are trading at a substantial
premium to the Stated Amount, in which case the holder could receive the
premium in cash by selling the Treasury Notes. However, given that the Holder
will thereafter receive only amounts equal to Contract Fee Payments, and no
amounts in respect of Treasury Note interest, on the Stated Amount, a holder
would only be likely to elect Early Settlement if his individual economic
circumstances warranted foregoing such additional Treasury Note interest.
PREPAID SECURITIES
The Prepaid Securities will be issued under the Prepaid Securities Indenture
to holders electing Early Settlement. All outstanding Prepaid Securities will
entitle the holders thereof to receive Common Stock on the Final Settlement
Date or earlier Acceleration Date, and amounts in respect of Contract Fees and
Deferred Contract Fees, in the same amounts and at the same times as the
outstanding Securities. No Treasury Notes will underlie the Prepaid
Securities; accordingly, unlike the Securities, the Prepaid Securities will
not entitle the holders thereof to receive any amounts in respect of interest
on the Treasury Notes nor, in the event of an Acceleration, any amounts in
respect of premium (if any) on the sale by the Purchase Contract Agent of the
Treasury Notes. The Prepaid Securities will be accelerated upon a Bankruptcy
Event but, unlike holders of Securities, who will receive their underlying
Treasury Notes in such events, holders of Prepaid Securities will have only a
claim against the Company for delivery of Common Stock (which claim may have
the status of a general unsecured claim or an equity claim) and a general
unsecured claim for amounts in respect of accrued Contract Fees, including
Deferred Contract Fees, if any. Upon a Sale of Assets, each Prepaid Security
will automatically convert into the right to receive in cash an amount equal
to the sum of (i) the Stated Amount and (ii) all unpaid Contract Fees and
Deferred Contract Fees to the date of the Board of Directors approval of such
Sale of Assets, payable on the tenth Business Day following such date of
approval. Like the Securities, the Prepaid Securities will not entitle the
holders thereof to any rights with respect to the Common Stock, including
voting rights. The Company does not plan to list the Prepaid Securities on any
securities exchange, and there can be no assurance as to whether a trading
market will develop for Prepaid Securities. See "Risk Factors--Holder's Early
Settlement; Prepaid Securities" and "Description of Prepaid Securities."
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TERMINATION
The Purchase Contracts, and the rights and obligations of the Company and of
the holders of the Securities thereunder (including the right to receive any
Contract Fees or Deferred Contract Fees and the obligation to purchase Common
Stock), will automatically terminate upon (i) the occurrence of certain events
of bankruptcy, insolvency or reorganization with respect to the Company (each,
a "Bankruptcy Event") or (ii) a sale, assignment, transfer, lease or
conveyance of all or substantially all of the properties and assets of the
Company to any person which results in a voluntary liquidation, dissolution or
winding up of the Company (a "Sale of Assets"). Upon any such termination, the
Collateral Agent will release the Treasury Notes held by it to the Purchase
Contract Agent for distribution to the holders. In the case of a Bankruptcy
Event, however, such release and distribution may be subject to a delay as a
result of the automatic stay under the Bankruptcy Code, which delay would
continue until such automatic stay has been lifted. During the period of any
such delay, the Treasury Notes will continue to accrue interest for the
benefit of the holders, payable by the United States Government, until their
maturity. In the case of a Sale of Assets, holders will be entitled to receive
in cash unpaid Contract Fees and Deferred Contract Fees, if any, through the
date of Board of Director approval of such Sale of Assets, payable on the
tenth Business Day following the date of such approval. In the case of a
Bankruptcy Event, holders will not be entitled to receive accrued and unpaid
Contract Fees and Deferred Contract Fees, if any.
TREASURY NOTES AND PLEDGE AGREEMENT; INTEREST ON TREASURY NOTES
The Treasury Notes underlying the Securities will be pledged to the
Collateral Agent, for the benefit of the Company, pursuant to a pledge
agreement, to be dated as of November 6, 1996 (the "Pledge Agreement"), to
secure the obligations of the holders to purchase Common Stock under the
Purchase Contracts. The rights of holders of Securities to the underlying
Treasury Notes will be subject to the Company's security interest therein
created by the Pledge Agreement; no holder of Securities will be permitted to
withdraw the Treasury Notes underlying such Securities from the pledge
arrangement except upon the termination, Acceleration or Early Settlement of
the related Purchase Contracts. Subject to such security interest, however,
holders of Securities will have full beneficial ownership of the underlying
Treasury Notes. The Company will have no interest in the Treasury Notes other
than its security interest.
The Collateral Agent will, upon receipt of interest payments on the Treasury
Notes, distribute such payments to the Purchase Contract Agent, who will in
turn distribute those payments to the persons in whose names the related
Securities are registered at the close of business on the Record Date
immediately preceding the Payment Date. See "Description of the Purchase
Contracts--Contract Fees."
FRACTIONAL SHARES
No fractional share of Common Stock will be issued upon the Final Settlement
Date or any Acceleration of the Securities. In lieu of any fractional share
otherwise issuable in respect of all Securities of any holder, such holder
shall be entitled to receive an amount in cash equal to the same fraction of
the Current Market Price of the Common Stock determined as of the second
Business Day immediately preceding the relevant Notice Date or Final
Settlement Date, as applicable.
NOTICES TO HOLDERS OF SECURITIES
The Company will provide notice of any Acceleration of the Securities
(including any potential acceleration upon the effectiveness of a Merger or
Consolidation) to holders of record of the Securities to be accelerated not
less than 30 nor more than 60 days prior to the date fixed for Acceleration;
provided that if the effectiveness of a Merger or Consolidation makes it
impracticable to provide at least 30 days notice, the Company shall provide
the notice as soon as practicable prior to the effectiveness. Such notice
shall specify, among other things, the Current Market Price to be used (if
necessary) to calculate the number of shares of Common Stock to be delivered,
and in the case of a Merger or Consolidation, whether the Company is
exercising any option to deliver shares of Common Stock in lieu of cash and,
in the case of a Company Acceleration, whether the Company is accelerating all
or less than all of the Securities, and if less than all, which Securities are
being accelerated. Such
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notice shall be provided by mailing notice thereof to the holders of
Securities to be accelerated and by publishing notice thereof in The Wall
Street Journal, The New York Times or another authorized newspaper. Each
holder of Securities to be accelerated shall be entitled to receive, following
the Acceleration Date, upon surrender of the certificates evidencing such
Securities to the Company at the place designated in such notice, certificates
for the shares of Common Stock and cash, if any, payable in respect of such
Acceleration.
THE TREASURY NOTES WILL BE OBLIGATIONS OF THE UNITED STATES GOVERNMENT AND
NOT OF THE COMPANY.
BOOK-ENTRY SYSTEM
The Depositary Trust Company (the "Depositary") will act as securities
depositary for the Securities. The Securities will be issued only as fully-
registered securities registered in the name of Cede & Co. (the Depositary's
nominee). One or more fully-registered global security certificates ("Global
Security Certificates"), representing the total aggregate number of
Securities, will be issued and will be deposited with the Depositary and will
bear a legend regarding the restrictions on exchanges and registration of
transfer thereof referred to below.
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 the Securities so long as such
Securities are represented by Global Security Certificates.
The Depositary 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 Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Depositary holds
securities that its participants ("Participants") deposit with the Depositary.
The Depositary 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"). The Depositary is owned by a number of its Direct
Participants and by the New York Stock Exchange, the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. Access to the
Depositary system is also available to others, such as securities brokers and
dealers, banks and trust companies that clear transactions through or maintain
a direct or indirect custodial relationship with a Direct Participant either
directly or indirectly ("Indirect Participants"). The rules applicable to the
Depositary and its Participants are on file with the Securities and Exchange
Commission.
No Securities represented by Global Security Certificates may be exchanged
in whole or in part for Securities registered, and no transfer of Global
Security Certificates in whole or in part may be registered, in the name of
any person other than the Depositary or any nominee of the Depositary unless
the Depositary has notified the Company that it is unwilling or unable to
continue as depositary for such Global Security Certificates or has ceased to
be qualified to act as such as required by the Purchase Contract Agreement or
there shall have occurred and be continuing a default by the Company in
respect of its obligations under one or more Purchase Contracts. All
Securities represented by one or more Global Security Certificates or any
portion thereof will be registered in such names as the Depositary may direct.
As long as the Depositary, or its nominee, is the registered owner of the
Global Security Certificates, such Depositary or such nominee, as the case may
be, will be considered the sole owner and holder of the Global Security
Certificates and all Securities represented thereby for all purposes under the
Securities and the Purchase Contract Agreement. Except in the limited
circumstances referred to above, owners of beneficial interests in Global
Security Certificates will not be entitled to have such Global Security
Certificates or the Securities represented thereby registered in their names,
will not receive or be entitled to receive the physical delivery of Security
Certificates in exchange therefor and will not be considered to be owners or
holders of such Global Security Certificates or any Securities represented
thereby for any purpose under the Securities or the Purchase
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Contract Agreement. All payments on the Securities represented by the Global
Security Certificates and all transfers and deliveries of Treasury Notes and
Common Stock with respect thereto will be made to the Depositary or its
nominee, as the case may be, as the holder thereof.
Ownership of beneficial interests in the Global Security Certificates will
be limited to Participants or persons that may hold beneficial interests
through institutions that have accounts with the Depositary or its nominee.
Ownership of beneficial interests in Global Security Certificates will be
shown only on, and the transfer of those ownership interests will be effected
only through, records maintained by the Depositary or its nominee (with
respect to Participants' interests) or any such Participant (with respect to
interests of persons held by such Participants on their behalf). Procedures
for settlement of Purchase Contracts on the Final Settlement Date, any
applicable Acceleration Date or upon Early Settlement will be governed by
arrangements among the Depositary, Participants and persons that may hold
beneficial interests through Participants designed to permit such settlement
without the physical movement of certificates. Payments, transfers,
deliveries, exchanges and other matters relating to beneficial interests in
Global Security Certificates may be subject to various policies and procedures
adopted by the Depositary from time to time. None of the Company, the Purchase
Contract Agent or any agent of the Company or the Purchase Contract Agent will
have any responsibility or liability for any aspect of the Depositary's or any
Participant's records relating to, or for payments made on account of,
beneficial interests in Global Security Certificates, or for maintaining,
supervising or reviewing any of the Depositary's records or any participants's
records relating to such beneficial ownership interests.
CERTAIN PROVISIONS OF THE PURCHASE CONTRACT
AGREEMENT AND THE PLEDGE AGREEMENT
PAYMENT OF INTEREST AND CONTRACT FEES; TRANSFER OF SECURITIES; DELIVERY OF
COMMON STOCK OF TREASURY NOTES
Interest on the Treasury Notes and Contract Fees will be payable, Purchase
Contracts (and documents related thereto) will be settled and transfers of the
Securities will be registrable at the office of the Purchase Contract Agent in
the Borough of Manhattan, The City of New York. In addition, in the event that
the Securities do not remain in book-entry form, payment of interest on the
Treasury Notes and Contract Fees may be made, at the option of the Company, by
check mailed to the address of the person entitled thereto as shown on the
Security Register.
Payments in respect of principal of the Treasury Notes on the Final
Settlement Date, and proceeds received upon the sale of Treasury Notes in
connection with an Acceleration, will be applied in satisfaction of the
obligations of the holders of the Securities under the Purchase Contracts and
shares of Common Stock will be delivered, or, if the Purchase Contracts have
terminated or a holder elects Early Settlement, Treasury Notes will be
delivered potentially after a delay (see "Description of the Purchase
Contracts--Termination" and "--Holders' Early Settlement of Securities"), in
each case upon presentation and surrender of the Security Certificates
evidencing the related Securities at the office of the Purchase Contract
Agent.
If a holder of outstanding Securities fails to present and surrender the
Security Certificate evidencing such Securities to the Purchase Contract Agent
on the Final Settlement Date or earlier Acceleration Date, the shares of
Common Stock issuable in settlement of the applicable Purchase Contract will
be registered in the name of the Purchase Contract Agent and, together with
any distributions thereon, shall be held by the Purchase Contract Agent as
agent for the benefit of such holder, until such Security Certificate is
presented and surrendered or the holder provides satisfactory evidence that
such certificate has been destroyed, lost or stolen, together with any
indemnity that may be required by the Purchase Contract Agent and the Company.
If the Purchase Contracts have terminated prior to the Final Settlement
Date, the Treasury Notes have been transferred to the Purchase Contract Agent
for distribution to the holders entitled thereto and a holder fails to present
and surrender the Security Certificate evidencing such holder's Securities to
the Purchase Contract Agent, the Treasury Notes delivered to the Purchase
Contract Agent and payments thereon shall be held by the Purchase
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Contract Agent as agent for the benefit of such holder, until such Security
Certificate is presented or the holder provides the evidence and indemnity
described above.
The Purchase Contract Agent will have no obligation to invest or to pay
interest on any amounts held by the Purchase Contract Agent pending
distribution as described above.
No service charge will be made for any registration of transfer or exchange
of the Securities, except for any tax or other governmental charge that may be
imposed in connection therewith.
MODIFICATION
The Purchase Contract Agreement and the Pledge Agreement will provide that
the Company may without the consent of the holders of the Securities: (a)
evidence the assumption by a successor corporation of the obligations of the
Company, (b) add covenants for the protection of the holders of the
Securities, (c) cure any ambiguity or correct any inconsistency in the
Purchase Contract Agreement and the Pledge Agreement, provided that such cure
or correction does not adversely affect the holders of such Securities, and
(d) evidence the acceptance of appointment by successor Purchase Contract
Agents and Collateral Agents.
The Purchase Contract Agreement and the Pledge Agreement will contain
provisions permitting the Company and the Purchase Contract Agent or
Collateral Agent, as the case may be, with the consent of the holders of not
less than 66 2/3% of the Securities at the time outstanding, to modify the
terms of the Purchase Contracts, the Purchase Contract Agreement and, to the
extent applicable, the Pledge Agreement, except that no such modification may,
without the consent of the holder of each outstanding Security affected
thereby, (a) change any Payment Date, (b) change the amount or type of
Treasury Notes underlying a Security, impair the right of the holder of any
Security to receive interest payments on the underlying Treasury Notes or
otherwise adversely affect the holder's rights in or to such Treasury Notes,
(c) change the place or currency of payment or reduce any Contract Fees or any
Deferred Contract Fees, (d) impair the right to institute suit for the
enforcement of any Purchase Contract, (e) reduce the amount of Common Stock
purchasable under any Purchase Contract, increase the price to purchase Common
Stock on settlement of any Purchase Contract or change the Company
Acceleration Price or change the Final Settlement or (f) reduce the above-
stated percentage of outstanding Securities, the consent of whose holders is
required for the modification or amendment of the provisions of the Purchase
Contracts, the Purchase Contract Agreement or the Pledge Agreement.
NO CONSENT TO ASSUMPTION
Each holder of Securities, by acceptance thereof, will under the terms of
the Purchase Contract Agreement and the Securities be deemed expressly to have
withheld any consent to the assumption (i.e., affirmance) of the Purchase
Contracts by the Company or its trustee in the event that the Company becomes
the subject of a case under the Bankruptcy Code.
TITLE
The Company, the Purchase Contract Agent and the Collateral Agent may treat
the registered owner of any Security as the absolute owner thereof for the
purpose of making payment and settling the Purchase Contracts and for all
other purposes.
REPLACEMENT OF SECURITY CERTIFICATES
Any mutilated Security Certificate will be replaced by the Company at the
expense of the holder upon surrender of such certificate to the Purchase
Contract Agent. Security Certificates that become destroyed, lost or stolen
will be replaced by the Company at the expense of the holder upon delivery to
the Company and the Purchase Contract Agent of evidence of the destruction,
loss or theft satisfactory to the Company and the Purchase Contract Agent. In
the case of a destroyed, lost or stolen Security Certificate, an indemnity
satisfactory to the Purchase Contract Agent and the Company may be required at
the expense of the holder of the Securities evidenced by such certificate
before replacement will be issued.
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<PAGE>
Notwithstanding the foregoing, the Company will not be obligated to issue
any Security on or after the Final Settlement Date, an earlier Acceleration
Date, an Early Settlement Date or after the Purchase Contracts have
terminated. The Purchase Contract Agreement will provide that, in lieu of the
delivery of a replacement Security Certificate following the Final Settlement
Date or an earlier Acceleration Date, the Purchase Contract Agent, upon
delivery of the evidence and indemnity described above, will deliver the
Common Stock issuable pursuant to the Purchase Contracts included in the
Securities evidenced by such certificate, or, if the Purchase Contracts have
terminated prior to the Final Settlement Date or an Early Settlement Date has
occurred, upon delivery of the evidence and indemnity described above,
transfer the Treasury Notes included in the Securities evidenced by such
certificate.
GOVERNING LAW
The Purchase Contract Agreement, the Pledge Agreement and the Purchase
Contracts will be governed by, and construed in accordance with, the laws of
the State of New York.
INFORMATION CONCERNING THE PURCHASE CONTRACT AGENT
The Bank of New York will be the Purchase Contract Agent. The Purchase
Contract Agent will act as the agent for the holders of Securities from time
to time. The Purchase Contract Agreement will not obligate the Purchase
Contract Agent to exercise any discretionary actions in connection with a
default under the terms of the Securities or the Purchase Contract Agreement.
The Bank of New York is one of a number of banks with which the Company and
its subsidiaries maintain ordinary banking and trust relationships, is the
registrar and transfer agent for the Common Stock and is the trustee of
certain Delaware grantor trust subsidiaries of the Company.
The Purchase Contract will contain provisions limiting the liability of the
Purchase Contract Agent. The Purchase Contract Agreement will contain
provisions under which the Purchase Contract Agent may resign or be replaced.
Such resignations or replacement would be effective upon the appointment of a
successor.
INFORMATION CONCERNING THE COLLATERAL AGENT
The First National Bank of Chicago will be the Collateral Agent. The
Collateral Agent will act solely as the agent of the Company and will not
assume any obligation or relationship of agency or trust for or with any of
the holders of the Securities except for the obligations owed by a pledgee of
property to the owner thereof under the Pledge Agreement and applicable law.
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 Company's Senior Debt Indenture,
Subordinated Debt Indenture and Junior Subordinated Debt Indenture (each as
defined in the accompanying Prospectus).
The Pledge Agreement will contain provisions limiting the liability of the
Collateral Agent. The Pledge Agreement will contain provisions under which the
Collateral Agent may resign or be replaced. Such resignation or replacement
would be effective upon the appointment of a successor.
VOTING RIGHTS
The Securities will not entitle holders to any rights with respect to the
Common Stock, including voting rights.
LISTING OF THE SECURITIES
The Securities have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance, under the symbol "SIP."
However, no assurance can be given that such listing will be effected.
NYSE SYMBOL OF COMMON STOCK
The Common Stock of the Company is listed on the NYSE under the symbol
"SAI."
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DESCRIPTION OF PREPAID SECURITIES
The Company's Prepaid Premium Equity Redemption Cumulative Security Units
(the "Prepaid Securities") will be issued to a holder of Securities if such
holder elects to settle the underlying Purchase Contracts prior to the Final
Settlement Date (and prior to any Notice of Acceleration with respect to such
Securities) by paying an amount in U.S. dollars equal to the Stated Amount per
Security and delivering the Securities to the Purchase Contract Agent. See
"Description of the Purchase Contracts--Holders' Early Settlement of
Securities." The Prepaid Securities will be issued under an Indenture dated as
of November 1, 1996 (as supplemented by the First Supplemental Indenture
thereto relating to the Prepaid Securities described in this Prospectus
Supplement, the "Prepaid Securities Indenture") between the Company and The
Bank of New York, as trustee (in its capacity as trustee under the Prepaid
Securities Indenture, the "Trustee"). The Prepaid Securities Indenture is
included as an exhibit to the Registration Statement of which this Prospectus
Supplement is a part. The following description summarizes the material terms
of the Prepaid Securities Indenture and the Prepaid Securities and is
qualified in its entirety by reference to the detailed provisions of the
Prepaid Securities Indenture, which contains the full text of such provisions,
including the definition of certain terms used herein, and for other
information regarding the Prepaid Securities. Wherever particular sections or
defined terms of the Prepaid Securities 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 Prepaid Securities Indenture does not limit the amount of indebtedness
the Company or any of its subsidiaries may incur. The Prepaid Securities will
be unsecured, unsubordinated 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 Prepaid 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.
Prepaid Securities will only be issued in registered form, in denominations
equal to the Stated Amount and integral multiples thereof, and may be
presented for exchange or transfer without any service charge at the corporate
trust office of the Trustee in the City of New York, or at any other office or
agency maintained by the Company for such purpose.
The Prepaid Securities will be limited to up to $375,000,000 aggregate
Stated Amount (or $431,250,000 if the over-allotment option is exercised in
full) and will constitute a separate series of securities of the Company under
the Prepaid Securities Indenture.
Each Prepaid Security will bear amounts in respect of Contract Fees at the
rate of 1.0% per annum (which is the same rate as the rate for Contract Fees
payable on the Securities) payable semi-annually in arrears on the Payment
Dates, beginning with the most recent Payment Date with respect to the
Security for which such Prepaid Security is exchanged (unless the Record Date
for a subsequent Payment Date has occurred, in which case interest on such
Prepaid Security will bear interest from such subsequent Payment Date). Each
Prepaid Security will also carry the right to receive any amounts in respect
of Contract Fees and Deferred Contract Fees that have accrued but have not
been paid on the Securities at the time such Prepaid Security is issued, as
well as the right to receive interest on such Deferred Contract Fees at the
same rate as the rate at which Deferred Contract Fees on the Securities bear
Contract Fees. The Company does not intend to treat the Prepaid Securities as
indebtedness for United States federal income tax purposes.
The Prepaid Securities will mature on the Final Settlement Date. On such
date, each holder will receive initially one share of Common Stock of the
Company (subject to certain anti-dilution adjustments, which will be the same
as the anti-dilution adjustments applicable to the Securities described in
"Description of the Purchase
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Contracts--General") plus amounts in respect of accrued and unpaid Contract
Fees and Defined Contract Fees in cash.
The Company may, at its option, defer payments on the Prepaid Securities on
the same basis and on same terms that the Company may defer Contract Fees on
the Securities. The Company will covenant in the Prepaid Securities Indenture
that it will defer payments on the Prepaid Securities only if, and to the
extent that, it has also deferred Contract Fees on the Securities. See
"Description of the Purchase Contracts--Contract Fees".
RIGHT TO REDEEM THE PREPAID SECURITIES
At any time or from time to time prior to the Final Settlement Date, the
Company may redeem the outstanding Prepaid Securities, in whole or in part. On
the effective date of any such redemption, the Company will have the
obligation to deliver an amount of Common Stock per Prepaid Security
determined on the same basis as the calculation of the number of shares of
Common Stock deliverable in the event of a Company Acceleration of the
Securities as described under "Description of the Purchase Contracts--
Acceleration of the Securities", as well as the obligation to pay any accrued
amounts in respect of Contract Fees and Deferred Contract Fees in cash. The
Company will be permitted to accelerate the Securities in part without
effecting a proportionate concurrent redemption of the Prepaid Securities, but
will be required to redeem the Prepaid Securities in whole if it effects a
Company Acceleration of the Securities in whole.
MANDATORY CONVERSION
The Prepaid Securities are subject to mandatory conversion into Common Stock
on the same basis and on the same terms as the Securities are subject to
Mandatory Acceleration and the number of shares of Common Stock to be
delivered upon any such mandatory conversion will be determined on the same
basis as the Securities. See "Description of the Purchase Contracts--
Acceleration of the Securities."
REPAYMENT UPON SALE OF ASSETS
Upon a Sale of Assets, each Prepaid Security will automatically convert into
the right to receive in cash an amount equal to the sum of (i) the Stated
Amount and (ii) all accrued and unpaid amounts in respect of Contract Fees and
Deferred Contract Fees to the date of the Board of Directors' approval of such
Sale of Assets, payable on the tenth Business Day following such date of
approval.
BANKRUPTCY EVENTS OF DEFAULT
An Event of Default is defined under the Prepaid Securities Indenture as
being each of the events which would cause a termination of the Purchase
Contracts. See "Description of the Purchase Contracts--Termination." The
Prepaid Securities Indenture provides that if an Event of Default shall have
occurred and be continuing, the Company's obligations on the Prepaid
Securities will be accelerated. However, unlike holders of Securities, who
will receive the underlying Treasury Notes in such events, holders of Prepaid
Securities will have only a claim against the Company for delivery of Common
Stock and a general unsecured claim for amounts in respect of accrued Contract
Fees, including Deferred Contract Fees (if any). The foregoing would be
subject as to enforcement to the broad equity powers of a federal bankruptcy
court and to the determination by that court of the nature of the rights of
the holders of the Prepaid Securities, including whether such rights would
have the status of general unsecured claims or equity claims. There can be no
assurance that holders of Prepaid Securities would receive any value in
respect of their Prepaid Securities upon an Event of Default.
The Prepaid Securities Indenture does not provide for any right of
acceleration of the Prepaid Securities upon a default in the payment of
amounts in respect of Contract Fees and Deferred Contract Fees or in the
performance of any covenant or agreement in the Prepaid Securities or Prepaid
Securities Indenture. In the event of a default in the delivery of any Common
Stock then required to be issued or delivered or in payment of amounts in
respect of accrued and unpaid Contract Fees and Deferred Contract Fees (if
any) or the performance of any covenant or agreement in the Prepaid Securities
or Prepaid Securities Indenture, the Trustee may, subject to certain
limitations and conditions, seek to enforce the same or, in the case of the
failure of the Company to issue or deliver Common Stock, the payment of moneys
equal to the fair market value of the Common Stock which was to be delivered.
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The Prepaid Securities 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 Prepaid 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. Subject to such provisions in the
Prepaid Securities Indenture for the indemnification of the Trustee and
certain other limitations, the holders of a majority in face amount of the
outstanding Prepaid Securities 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.
The Prepaid Securities Indenture provides that no holder of Prepaid
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 face amount of the Prepaid Securities 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 face amount of the Prepaid Securities then
outstanding.
The Prepaid Securities 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.
MODIFICATION OF THE PREPAID SECURITIES INDENTURE
The Prepaid Securities Indenture provides that the Company and the Trustee
may enter into supplemental indentures without the consent of the holders of
Prepaid Securities to: (a) evidence the assumption by a successor corporation
of the obligations of the Company, (b) add covenants for the protection of the
holders of Prepaid Securities, (c) cure any ambiguity or correct any
inconsistency in the Prepaid Securities Indenture, provided that such cure or
correction does not adversely affect the holders of such Prepaid Securities,
and (d) evidence the acceptance of appointment by a successor trustee.
The Prepaid Securities Indenture also contains provisions permitting the
Company and the Trustee, with the consent of the holders of not less than 66
2/3% in face amount of Prepaid Securities then outstanding, to modify the
terms of the Prepaid Securities Indenture, except that no such modification
may, without the consent of the holder of each outstanding Prepaid Security
affected thereby, (a) change any Payment Date, (b) change the place or
currency of payment or reduce amounts in respect of any Contract Fees or
Deferred Contract Fees, (c) impair the right to institute suit for the
enforcement of any Prepaid Security, (d) reduce the amount of Common Stock
deliverable under the Prepaid Securities, change the Stated Amount or change
the Company Acceleration Price or change the Final Settlement Date or (e)
reduce the above-stated percentage of outstanding Prepaid Securities, the
consent of whose holders is required for the modification or amendment of the
provisions of the Prepaid Securities Indenture.
CONCERNING THE TRUSTEE
The Bank of New York is one of a number of banks with which the Company and
its subsidiaries maintain ordinary banking and trust relationships, is the
registrar and transfer agent for the Company's Common Stock and is the trustee
of several grantor trust subsidiaries of the Company.
VOTING RIGHTS
The Prepaid Securities will not entitle holders to any rights with respect
to the Common Stock, including voting rights.
NO LISTING OF THE PREPAID SECURITIES
The Company does not plan to list the Prepaid Securities on any securities
exchange and there can be no assurance as to whether a trading market will
develop for the Prepaid Securities.
S-34
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Davis Polk & Wardwell, tax counsel to the Company, the
following summary accurately describes the principal United States federal
income tax consequences of ownership and disposition of the Securities to
initial Holders purchasing Securities at the "Issue Price" (as defined below).
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), administrative pronouncements, judicial decisions and Treasury
Regulations to the date hereof, changes to any of which subsequent to the date
of this Prospectus Supplement may affect the tax consequences described
herein. This summary discusses only Securities held as capital assets within
the meaning of Section 1221 of the Code. It does not discuss all of the tax
consequences that may be relevant to a Holder in light of its particular
circumstances or to Holders subject to special rules, such as foreign persons,
certain financial institutions, insurance companies, dealers in securities,
persons holding the Securities as part of a hedging transaction, "straddle,"
conversion transaction, or other integrated transaction, or persons whose
functional currency (as defined in Code Section 985) is not the U.S. dollar.
Persons considering the purchase of Securities should consult their tax
advisors with regard to the application of the United States federal income
tax laws to their particular situations as well as any tax consequences
arising under the laws of any other taxing jurisdiction.
As used herein, the term "Holder" means an owner of a Security that is, for
United States federal income tax purposes, (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is
subject to United States federal income taxation regardless of its source. The
"Issue Price" means the price to the public per Security as indicated on the
cover hereof.
PERIODIC INCOME FROM TREASURY NOTES AND PURCHASE CONTRACT
A Holder will include interest (other than interest accrued prior to the
issuance date of the Securities) on the Treasury Notes in income when received
or accrued, in accordance with the Holder's method of accounting. For United
States federal income tax purposes, a Holder is deemed to receive interest
payments on the Treasury Notes when such payments are made to the Collateral
Agent, regardless of when such payments are distributed to the Holders. The
Treasury Notes, as purchased, may contain "market discount" or "bond premium"
(each as defined below), which will, under certain circumstances, affect the
Holders' income inclusions with respect to interest on the Treasury Notes (See
"--Gain or Loss upon Final Settlement").
Although the tax treatment of the Contract Fees, Initial Premium Payment,
and any Deferred Contract Fees is not entirely clear under current law, the
Company intends to file information returns on the basis, and the following
discussion assumes, that the Contract Fees and Deferred Contract Fees are
taxable income to a Holder when received or accrued, in accordance with the
Holder's method of accounting, and that the Initial Premium Payment is taxable
income to the Holder on the day the Treasury Notes are purchased although such
payment is used by the Underwriters to purchase the Treasury Notes on behalf
of the Holder and is not a direct cash payment to the Holder.
Holders should consult their respective tax advisors concerning the
treatment of the Contract Fees, Deferred Contract Fees and Initial Premium
Payment, including the possibility that such payments may be treated as
reductions in the Holders' basis in the Purchase Contract, rather than
inclusions in income, upon receipt (or, in the case of Initial Premium
Payment, upon the purchase of the Treasury Notes), by analogy to the treatment
of purchase price rebates or option premiums. The Company does not intend to
deduct the Contract Fees, Deferred Contract Fees and the Initial Premium
Payment for United States federal income tax purposes.
DISPOSITION OF SECURITIES AND TAX BASIS IN SECURITIES
A Holder who sells or exchanges a Security before the maturity of the
Treasury Notes (other than upon an Acceleration) will generally recognize
capital gain or loss equal to the difference between the amount realized and
its tax basis in the Security. A Holder's tax basis in the Security will equal
the sum of its tax basis in the
S-35
<PAGE>
Treasury Notes, its tax basis in the Purchase Contract, and any accrued but
unpaid Contract Fees that have been previously included in income of the
Holder. Any gain or loss will be capital, except to the extent of any non-de
minimis market discount with respect to the Treasury Notes, which, if a Holder
does not elect to amortize such discount, would be treated as ordinary
interest income (see "--Gain or Loss upon Final Settlement"). Furthermore, if
a Holder sells a Security between Payment Dates, a portion of the proceeds of
the sale will be treated as a receipt of the interest accrued on the Treasury
Notes since the last Payment Date, rather than as an amount realized from the
sale of the Security.
A Holder's tax basis in the Treasury Notes will generally equal the Issue
Price, increased by the amount of any Initial Premium Payment. The Holder's
tax basis in the Purchase Contract will initially be zero, increased by the
amount of any constructive dividends previously included in such Holder's
income as a result of an adjustment of the Settlement Rate (see "--Adjustment
of Settlement Rate").
GAIN OR LOSS UPON FINAL SETTLEMENT
If the Holder's tax basis in the Treasury Notes equals the principal amount
payable at maturity of the Treasury Notes, the Holder will not realize gain or
loss upon repayment of the Treasury Notes at maturity. If the Holder's tax
basis in the Treasury Notes is less than the principal amount payable at
maturity of the Treasury Notes, the Holder will realize gain equal to the
difference upon such payment. This gain will be treated as ordinary interest
income (i.e., market discount) unless it is "de minimis," in which case it
will generally be treated as capital gain. The gain will be "de minimis" if it
is less than 1/4 of one percent of the principal amount payable at maturity of
the Treasury Notes multiplied by the number of complete years remaining to
maturity of the Treasury Notes at the time the Securities are issued. A Holder
may instead elect to accrue market discount in income on a current basis over
the remaining life of the Treasury Notes. An election to amortize market
discount may apply to other debt instruments acquired at a market discount by
the Holder and may be revoked only with the permission of the Internal Revenue
Service. A Holder should consult its tax advisor before making such an
election.
If the Holder's tax basis in the Treasury Notes is greater than the
principal amount payable at maturity of the Treasury Notes, the excess will be
"bond premium". A Holder may either recognize the bond premium as a capital
loss upon payment of the Treasury Notes at maturity or make an election to
amortize it over the term of the Treasury Notes. If the election is made, the
bond premium will generally reduce the Holder's interest income on the
Treasury Notes over the remaining term of the Treasury Notes and will reduce
the basis of the Treasury Notes by the amount of the amortization. An election
to amortize bond premium may apply to other debt instruments acquired at a
premium by the Holder and may be revoked only with the permission of the
Internal Revenue Service. A Holder should consult its tax advisor before
making such an election.
On the Final Settlement Date, the tax basis of the Common Stock acquired by
a Holder of a Security under the Purchase Contract will equal the sum of the
Stated Amount and the Holder's basis in the Purchase Contract.
COMPANY ACCELERATION AND MANDATORY ACCELERATION
If the Company exercises its option to accelerate the Purchase Contract or
upon a Mandatory Acceleration, a Holder may elect to pay the Stated Amount in
cash to the Purchase Contract Agent and receive back the Treasury Notes free
and clear of the Company's security interests in such Notes. In the
alternative, the Treasury Notes will be sold by the Purchase Contract Agent on
behalf of the Holder; the proceeds from the sale (net of accrued interest and
premium on the Treasury Notes, which will be paid to the Holder) will first be
used to fund the Holder's obligations to purchase Common Stock under the
accelerated Purchase Contract, and any remaining proceeds will be returned to
the Holder. If the Holder elects to pay the Stated Amount in cash, the Holder
will recognize no gain or loss, either with respect to the Treasury Notes or
with respect to the Purchase Contract, and the Holder's tax basis in the
Common Stock received will generally equal the sum of its basis in the
Purchase Contract and the Stated Amount.
S-36
<PAGE>
If the Treasury Notes are sold by the Collateral Agent for an amount equal
to or in excess of the Stated Amount, the Holder will recognize capital gain
with respect to the Treasury Notes in an amount equal to the excess, in any,
of the amount realized (net of accrued interest on the Treasury Notes, which
will be paid to the Holder) on the sale (i.e., the sum of the Stated Amount
and the premium returned to the Holder) over the Holder's tax basis in such
Treasury Notes (see "--Disposition of Securities and Tax Basis in
Securities"). The Holder's tax basis in the Common Stock received will
generally equal the sum of its tax basis in the Purchase Contract and the
Stated Amount. If the amount realized is less than the Stated Amount, the
Holder's tax basis in the Common Stock may equal the sum of its tax basis in
the Purchase Contract and the amount realized on the sale of the Treasury
Notes. Prospective Holders are urged to consult their respective tax advisors
with regard to such circumstances.
HOLDER'S EARLY SETTLEMENT OF THE PURCHASE CONTRACTS
Gain or Loss
Upon Early Settlement, a Holder will not recognize gain or loss with respect
to the Purchase Contract, nor will the Holder recognize gain or loss with
respect to the Treasury Notes. The Holder's tax basis in the Prepaid
Securities immediately after Early Settlement will equal the sum of the Stated
Amount, its tax basis in the Purchase Contract, and any accrued but unpaid
Contract Fees that have been included in income prior to Early Settlement.
Tax Treatment of the Prepaid Securities
The Holder will recognize ordinary income with respect to the fee payments
on the Prepaid Security, which equal the Contract Fees and Deferred Contract
Fees. The Company also intends to file information returns on the basis that
the fee payments on the Prepaid Securities are taxable as ordinary income to
Holder. The Company does not intend to treat the Prepaid Securities as
indebtedness for United States federal income tax purposes and, therefore,
does not intend to deduct the fee payments on the Prepaid Securities.
Holder will not recognize any gain or loss upon delivery of Common Stock and
will have the same tax basis in the Common Stock as the Holder has in the
Prepaid Securities prior to the conversion.
ADJUSTMENT OF SETTLEMENT RATE
Holders of Securities or Prepaid Securities might be treated as receiving a
constructive distribution from the Company if (i) the Settlement Rate
(initially one share of Common Stock per Security) is adjusted and as a result
of such adjustment, the proportionate interest of Holders of Securities or
Prepaid Securities in the assets or earnings and profits of the Company is
increased, and (ii) the adjustment is not made pursuant to a bona fide,
reasonable antidilution formula. An adjustment in the Settlement Rate would
not be considered made pursuant to such a formula if the adjustment were made
to compensate for certain taxable distributions with respect to Common Stock.
Thus, under certain circumstances, an increase in the Settlement Rate may be
taxable to Holders of Securities or Prepaid Securities as a dividend to the
extent of the current or accumulated earnings and profits of the Company. In
such cases, Holders of Securities or Prepaid Securities would be required to
include their allocable share of such constructive dividend in gross income
but would not receive any cash related thereto.
UNITED STATES STATE AND LOCAL TAX CONSIDERATIONS
Under federal law, interest on Treasury obligations is generally exempt from
state and local income taxes imposed on individual investors. This exemption
generally should apply to an individual Holder's share of interest on the
Treasury Notes to the extent that an individual's state of residence (or other
applicable state or local taxing jurisdiction) characterizes the Security for
its income tax purposes consistently with the Security's federal income tax
characterization. There can be no assurance, however, that an individual's
state of residence (or other applicable state or local taxing jurisdiction)
would so characterize the Security, and, in any event, the exemption would not
extend to gain on sale or other disposition of a Security. PROSPECTIVE
PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS CONCERNING STATE, LOCAL, FOREIGN
AND OTHER TAX CONSEQUENCE OF THE ACQUISITION AND HOLDING OF A SECURITY.
S-37
<PAGE>
UNDERWRITERS
Subject to the terms and conditions set forth on an Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the Company has agreed
to sell to each of the Underwriters named below, and each of the Underwriters,
for whom Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Goldman, Sachs & Co. and Smith Barney Inc. are acting as
representatives (the "Representatives"), has severally agreed to purchase the
number of 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 Securities offered hereby if
any of the Securities are purchased. In the event of a default by an
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the non-defaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Morgan Stanley & Co. Incorporated................................. 1,518,150
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................. 1,518,150
Goldman, Sachs & Co. ............................................. 1,518,150
Smith Barney Inc. ................................................ 1,518,150
Advest, Inc. ..................................................... 178,500
Sanford C. Bernstein & Co., Inc. ................................. 178,500
Dain Bosworth Incorporated........................................ 178,500
Dean Witter Reynolds Inc. ........................................ 357,100
Donaldson, Lufkin & Jenrette Securities Corporation............... 357,100
A.G. Edwards & Sons, Inc. ........................................ 357,100
EVEREN Securities, Inc. .......................................... 178,500
First Albany Corporation.......................................... 178,500
Interstate/Johnson Lane Corporation............................... 178,500
Janney Montgomery Scott Inc. ..................................... 178,500
Legg Mason Wood Walker, Incorporated.............................. 178,500
McDonald & Company Securities, Inc. .............................. 178,500
Morgan Keegan & Company, Inc. .................................... 178,500
Oppenheimer & Co., Inc. .......................................... 357,100
Piper Jaffray Inc. ............................................... 178,500
The Robinson-Humphrey Company, Inc. .............................. 178,500
Wedbush Morgan Securities......................................... 178,500
Wheat, First Securities, Inc. .................................... 178,500
----------
Total........................................................... 10,000,000
==========
</TABLE>
The Underwriters propose to offer the 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 not in excess of $.67 per Security. After the
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.
The Company has granted the Underwriters an option for 30 days after the
date of this Prospectus Supplement to purchase up to an additional 1,500,000
Securities to cover over-allotments, if any, at the initial public offering
price less the underwriting discount. If Purchase Contracts underlying any
such additional Securities are entered into, the Underwriters, at the
direction of the Company, would purchase and pledge under the Pledge Agreement
the Treasury Notes underlying such Securities and the Company or the
Underwriters, as appropriate, would pay a net amount equal to the proceeds
(deficit) to the Company in respect of such Securities
S-38
<PAGE>
as set forth on the cover page of this Prospectus Supplement. If the
Underwriters exercise their over-allotment option, each of the Underwriters
has severally agreed, subject to certain conditions, to effect the foregoing
transactions with respect to approximately the same percentage of such
Securities that the respective number of Securities set forth opposite its
name in the foregoing table bears to the Securities offered hereby. The price
of the Treasury Notes underlying Securities with respect to which an over-
allotment option is exercised may be different from that set forth on the
cover page of this Prospectus Supplement. Any such difference will be for the
account of the Underwriters and will not affect the amount of the proceeds
(deficit) to the Company in respect of such Securities as shown on the cover
page of this Prospectus Supplement. The Underwriters may enter into certain
hedge transactions for their own account to reduce or eliminate their risk in
this regard.
The Company has agreed that it will not, and will cause its subsidiaries not
to, without the prior written consent of the Representatives, directly or
indirectly, for a period of 60 days after the date of this Prospectus
Supplement, sell, offer to sell, grant any option for the sale of, or
otherwise dispose of, or enter into any agreement to sell, any Securities,
Purchase Contracts or Common Stock or any securities of the Company similar to
the Securities, Purchase Contracts or Common Stock or any securities of the
Company convertible into or exchangeable or exercisable for the Securities,
Purchase Contracts or Common Stock; provided, however, that such restrictions
shall not affect the ability of the Company or its subsidiaries to take any
such action (i) as a consequence of obligations under securities outstanding
prior to the date of this Prospectus Supplement, (ii) in connection with any
employee benefit or incentive plan of the Company or its subsidiaries, or
(iii) in connection with the offering of the Securities made hereby. Mr. Eli
Broad, Chairman, President and Chief Executive Officer of the Company, has
similarly agreed, subject to certain exceptions, not to sell, for a period of
60 days after the date of this Prospectus Supplement, any shares of Common
Stock or Class B stock owned by him without the prior written consent of the
Representatives.
The Securities have been approved for listing on The New York Stock
Exchange, subject to official notice of issuance, under the symbol "SIP."
However, there can be no assurance that an active trading market will develop
for the Securities or that the Securities will trade in the public market
subsequent to the offering at or above the initial public offering price.
The Company 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 and their respective affiliates engage in
transactions with, and, from time to time, have performed services for, the
Company and its subsidiaries in the ordinary course of business.
LEGAL MATTERS
The validity of the Purchase Contracts offered hereby will be passed upon
for the Company by Davis Polk & Wardwell, New York, New York. The validity of
the Common Stock issuable on settlement of the Purchase Contracts will be
passed upon for the Company by Piper & Marbury L.L.P., Baltimore, Maryland.
Certain other legal matters in connection with the offering will be passed
upon for the Company by Susan L. Harris, Senior Vice President and General
Counsel--Corporate Affairs, and by Davis Polk & Wardwell. Davis Polk &
Wardwell will also pass upon certain matters relating to federal income tax
considerations for the Company. Certain legal matters in connection with the
offering will be passed upon for the Underwriters by Skadden, Arps, Slate,
Meagher & Flom LLP, Los Angeles, California. Ms. Harris, Davis Polk & Wardwell
and Skadden, Arps, Slate, Meagher & Flom LLP will rely on Piper & Marbury
L.L.P. as to matters of Maryland law. 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. Skadden,
Arps, Slate, Meagher & Flom LLP from time to time provides services to the
Company and its subsidiaries.
S-39
<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
7
<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).
8
<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.
9
<PAGE>
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.
10
<PAGE>
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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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
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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
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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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