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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
<TABLE>
<C> <S>
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[FEE REQUIRED]
For the fiscal year ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [No Fee Required]
</TABLE>
For the transition period from to
Commission File Number 1-4618
SUNAMERICA INC.
<TABLE>
<S> <C>
INCORPORATED IN MARYLAND 86-0176061
IRS EMPLOYER
IDENTIFICATION NO.
</TABLE>
1 SunAmerica Center, Los Angeles, California 90067-6022
Registrant's telephone number, including area code (310) 772-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
<S> <C>
Common Stock (par value $1.00 per share) New York Stock Exchange
Pacific Stock Exchange
9 1/4% Preferred Stock, Series B New York Stock Exchange
$2.78 Depositary Shares representing Series D
Mandatory Conversion Premium Dividend Preferred Stock New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of voting stock held by non-affiliates of the
Company on October 31, 1994 was $1,137,638,000.
The number of shares outstanding of each of the registrant's classes of
common stock on October 31, 1994 was as follows:
<TABLE>
<S> <C>
Common Stock (par value $1.00 per share) 28,980,173 shares
Nontransferable Class B Stock
(par value $1.00 per share) 6,826,439 shares
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
(INCORPORATED INTO PART III)
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL DESCRIPTION
SunAmerica Inc. (the "Company") is a diversified financial services company
serving the preretirement savings market. Together, the SunAmerica life
insurance companies rank among the largest U.S. issuers of individual annuities.
Complementing these annuity operations are the Company's asset management
operations; its two 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. At
September 30, 1994, the Company held $23.37 billion of assets, consisting of
$14.66 billion of assets owned by the Company; $2.17 billion of assets managed
in mutual funds and private accounts; and $6.54 billion under custody in
retirement trust accounts.
The Company believes that demographic trends have produced strong consumer
demand for long-term, investment-oriented products. According to U.S. Census
Bureau projections, the number of individuals ages 45 to 64 will grow from 47
million to 61 million during the 1990s, making this age group the
fastest-growing segment of the U.S. population. Between 1983 and 1993, annual
industry sales of annuities increased from $31 billion to $156 billion, while
annual industry sales of mutual funds, excluding money market and other
short-term funds, rose from $40 billion to $512 billion.
Focusing its operations on this expanding market, the Company specializes in
the sale of tax-deferred long-term savings products and investments through its
life insurance, asset management, retirement trust and broker-dealer
subsidiaries. The Company markets fixed annuities and fee-generating variable
annuities, mutual funds and trust services, and guaranteed investment contracts
("GICs"). Its 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.
SunAmerica employs approximately 1,000 people. It is incorporated in
Maryland and maintains its principal executive offices at 1 SunAmerica Center,
Los Angeles, California 90067-6022, telephone (310) 772-6000. As used herein,
the "Company" or "SunAmerica" refers to SunAmerica Inc. and, unless the context
requires otherwise, its subsidiaries.
In recent years, SunAmerica has strategically expanded its operations, both
through internal growth and through the acquisition of blocks of fixed and
variable annuity reserves, distribution networks and complementary fee-based
financial services businesses. In June 1994, the Company's subsidiary, Resources
Trust Company ("Resources Trust"), agreed to acquire the account servicing
rights to approximately 43,000 individual retirement plan accounts, representing
approximately $1 billion in plan assets, from New England Securities
Corporation, the broker-dealer subsidiary of New England Mutual Life Insurance
Company. This acquisition closed October 1, 1994 and has increased plan assets
administered by Resources Trust to more than $8.0 billion. On November 30, 1994,
the Company acquired substantially all of the assets of Imperial Premium
Finance, Inc. ("Imperial"), the fourth largest insurance premium finance company
in the United States, based on 1993 premiums financed of approximately $1.5
billion. Imperial provides short-term installment loans for businesses to fund
their commercial property and casualty insurance premiums. These loans are
secured by the unearned premium associated with the underlying insurance policy.
Currently, Imperial sells most of the short-term loans it originates in its
premium finance operations and earns fee income by servicing the sold loans. At
September 30, 1994, Imperial had $132.7 million of assets and for the year then
ended earned net income of $4.2 million.
As consumer demand for investment-oriented products has grown, the Company
has increased its fee income significantly in recent years by emphasizing the
marketing of variable annuities, mutual
1
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funds and trust services, and through the receipt of broker-dealer net retained
commissions. Its fee generating businesses entail no portfolio credit risk and
require significantly less capital support than its fixed-rate business.
For the year ended September 30, 1994, the Company's net investment income
(including net realized investment losses) and fee income by primary product
line or service are as follows:
NET INVESTMENT AND FEE INCOME
<TABLE>
<CAPTION>
AMOUNT PERCENT PRIMARY PRODUCT OR SERVICE
--------------- ----------- ---------------------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
Net investment income (including net
realized investment losses)................ $ 273,330 64.5% Fixed-rate products
--------------- -----
Fee income:
Variable annuity fees..................... 79,483 18.7 Variable annuities
Asset management fees..................... 31,302 7.4 Mutual funds/private management
accounts
Net retained commissions.................. 28,009 6.6 Broker-dealer sales
Trust fees................................ 11,942 2.8 Self-directed retirement accounts
--------------- -----
Total fee income.......................... 150,736 35.5
--------------- -----
Total....................................... $ 424,066 100.0%
--------------- -----
--------------- -----
</TABLE>
For financial information on the Company's business segments, see Part IV --
"Notes to Consolidated Financial Statements -- Note 10 -- Business Segments."
LIFE INSURANCE COMPANIES
The Company's life insurance group includes 104-year-old Sun Life Insurance
Company of America ("Sun Life of America"), acquired in 1971; Anchor National
Life Insurance Company ("Anchor"), acquired in 1986; and First SunAmerica Life
Insurance Company ("First SunAmerica"), acquired in 1987. Collectively, these
companies had $12.98 billion of assets at September 30, 1994 and served all 50
states and the District of Columbia. Based on the latest available statutory
industry data, the Company believes that its life insurance group ranks among
the largest issuers of fixed and variable annuities in the nation, as measured
by 1993 individual annuity premiums and deposits, and that Sun Life of America,
Anchor and First SunAmerica collectively rank among the top 2% of all U.S. life
insurance companies, as measured by 1993 total assets. Anchor ranks among the
largest issuers of variable annuities in America, according to the latest
published industry data.
The Company's life insurance group issues a portfolio of fixed and variable
annuities, as well as other products that cater to the market for tax-deferred,
long-term savings products. Sun Life of America is an Arizona-chartered company
licensed in 48 states and the District of Columbia. Anchor, founded in 1965, is
a California-chartered company licensed in 49 states and the District of
Columbia. Sun Life of America and Anchor each have a "AA" (Excellent)
claims-paying ability rating from Standard & Poor's Corporation ("S&P"), a "AA"
(Very High) rating from Duff & Phelps, Inc. ("Duff & Phelps") and an "A2"
(Excellent) rating from Moody's Investors Service ("Moody's"). They also have an
"A" (Excellent) rating from industry analyst A.M. Best Company. Sun Life of
America focuses on the sale of single premium fixed-rate annuities and GICs. Sun
Life of America had $6.66 billion of assets at September 30, 1994. Anchor
specializes in the sale of flexible premium variable annuities. At September 30,
1994, it had $6.60 billion of assets. First SunAmerica is a New York-chartered
company that markets its products only in the state of New York. It has an "A"
(Excellent) rating from A.M. Best Company. At September 30, 1994, it had $114.1
million of assets.
Benefitting from continued strong demographic growth of the preretirement
savings market, industry sales of tax-deferred savings products have
represented, for a number of years, a significantly
2
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larger source of new premiums for the U.S. life insurance industry than have
traditional life insurance products. Recognizing the growth potential of this
market, the Company focuses its life insurance operations exclusively on the
sale of annuities and GICs.
Because of its focus on annuity products, which generally have more
contractholder transactions than traditional life insurance products, the
Company utilizes sophisticated, computer-driven, transaction-oriented systems
that employ optical disk imaging and artificial intelligence, in lieu of paper-
intensive life insurance processing procedures. The Company believes its service
support and its associated cost structure to be among the most competitive in
the industry.
The Company currently markets its fixed and variable annuities through the
following distribution channels: (i) independent registered representatives of
SunAmerica Securities, Inc. and Royal Alliance Associates, Inc. ("Royal
Alliance"); (ii) approximately 400 other securities firms and several financial
institutions; and (iii) independent general insurance agents who specialize in
selling annuities and other single premium products. Approximately 21,000
independent sales representatives nationally are licensed to sell the Company's
annuity products. In addition, in June 1994, the Company signed separate,
exclusive agreements with First Interstate Bancorp ("First Interstate") and The
Chase Manhattan Bank, N.A. ("Chase") to develop variable annuity products whose
underlying funds will be managed by the respective institutions. Each
institution will have the right to make these private label variable annuities
available through its retail branch network and distribution channels. First
Interstate currently has over 1,000 bank branches in 13 western states. Chase
currently has approximately 350 bank branches in New York, Connecticut, Maryland
and Florida and its new variable annuity product will also be available through
a number of the broker-dealer and financial planning organizations that
currently offer other investment products managed by Chase.
FIXED ANNUITIES AND GICS
Sun Life of America and First SunAmerica offer single premium and flexible
premium deferred annuities that provide one-, three-, five-, seven-, or ten-year
fixed interest rate guarantees. Although the Company's contracts remain in force
an average of seven to ten years, a majority (approximately 69% at September 30,
1994) reprice annually at discretionary rates determined by the Company. In
repricing, the Company takes into account yield characteristics of its
investment portfolio, annuity surrender assumptions and competitive industry
pricing. Its fixed-rate products offer many of the same features as conventional
certificates of deposit from financial institutions, giving investors a choice
of interest period and yield as well as additional advantages particularly
applicable to retirement planning, such as tax-deferred accumulation and
flexible payout options. The average new single premium fixed annuity contract
sold by the Company amounted to approximately $37,000 in 1994.
The Company augments its retail annuity sales effort with the marketing of
institutional products. At September 30, 1994, the Company had $2.78 billion of
primarily fixed-rate, fixed-maturity GIC obligations. Of these, approximately
41% were sold to state and local governmental authorities, 33% were sold to
pension plans and 26% were sold to asset management firms.
The Company designs its fixed-rate products and conducts its investment
operations in order to closely match the duration of the assets in its
investment portfolio to its annuity and GIC obligations. The Company seeks to
achieve a predictable spread between what it earns on its assets and what it
pays on its liabilities by investing principally in fixed maturities. The
Company's fixed-rate products incorporate surrender charges, two-tiered interest
rate structures or other limitations on when contracts can be surrendered for
cash to encourage persistency and discourage withdrawals. Approximately 78% of
the Company's fixed annuity and GIC reserves had surrender penalties or other
restrictions at September 30, 1994.
VARIABLE ANNUITIES
The variable annuity products of Anchor and First SunAmerica offer investors
a broad spectrum of fund alternatives, as well as fixed-rate account options.
Anchor also offers investors a choice of investment managers, a product feature
that First SunAmerica expects to offer in the 1995 fiscal year.
3
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These companies earn fee income through the sale, administration and management
of the variable account options of their variable annuity products. They also
earn investment income on monies allocated to the fixed-rate account options of
these products. Variable annuities offer retirement planning features and
surrender charges similar to those offered by fixed annuities, but differ in
that the annuity holder's rate of return is generally dependent upon the
investment performance of the particular equity, fixed-income, money market or
asset allocation fund selected by the contractholder. Because the investment
risk is borne by the customer in all but the fixed-rate account options, these
products require significantly less capital support than fixed annuities. The
average new variable annuity contract sold by the Company amounted to
approximately $33,000 in 1994.
INVESTMENT OPERATIONS
The Company believes that its fixed-rate liabilities should be backed by a
portfolio principally composed of fixed maturities that generate predictable
rates of return. The Company does not have a specific target rate of return.
Instead, its rates of return vary over time depending on the current interest
rate environment, the slope of the yield curve, the spread at which fixed
maturities are priced over the yield curve and general competitive conditions
within the industry. The Company manages most of its investments internally. Its
portfolio strategy is designed to achieve adequate risk-adjusted returns
consistent with its investment objectives of effective asset-liability matching,
liquidity and safety.
As part of its asset-liability matching discipline, the Company conducts
detailed computer simulations that model its fixed-maturity assets and
liabilities under commonly used stress-test interest rate scenarios. Based on
the results of these computer simulations, the investment portfolio has been
constructed with a view to maintaining a desired investment spread between the
yield on portfolio assets and the rate paid on its reserves under a variety of
possible future interest rate scenarios. In addition, the Company has designed
its portfolio to limit the market discount from book value on the aggregate
portfolio that might result from a sharp rise in interest rates. The cash flow
obtained from mortgage-backed securities ("MBSs") helps to maintain the
anticipated spread, while providing desired liquidity.
For the years ended September 30, 1994, 1993 and 1992, the Company's yield
on average invested assets was 8.50%, 9.00% and 9.78%, respectively, before net
realized investment losses, and it realized net investment spreads of 3.30%,
3.15% and 2.81%, respectively, on average invested assets. At September 30,
1994, the weighted average life of the Company's investments was approximately
four-and-one-half years and the portfolio had a duration of approximately
three-and-three-fourths years. Weighted average life is defined as the average
time to receipt of all principal, incorporating the effects of scheduled
amortization and expected prepayments, weighted by book value. Duration is a
common measure for the price sensitivity of a fixed-income security or portfolio
to changes in interest rates. It is the weighted average time to receipt of all
expected cash flows, both principal and interest, including the effects of
scheduled amortization and expected prepayments, in which the weight attached to
each year of receipt is the proportion of the present value of cash to be
received during that year to the total present value of the portfolio.
The Company's general investment philosophy is to hold fixed maturity assets
for long-term investment. Thus, it does not have a trading portfolio. Effective
September 30, 1993, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" and, accordingly, began to carry the portion of its portfolio of
bonds, notes and redeemable preferred stocks that is available for sale (the
"Available for Sale Portfolio") at estimated fair value. The remaining portion
of its portfolio of bonds, notes and redeemable preferred stocks is held for
investment and continues to be carried at amortized cost.
The table on the following page summarizes the Company's investment
portfolio at September 30, 1994.
4
<PAGE>
SUMMARY OF INVESTMENTS
<TABLE>
<CAPTION>
AMORTIED PERCENT OF
COST PORTFOLIO
-------------- -----------
<S> <C> <C>
(IN THOUSANDS)
Fixed maturities:
Cash and short-term investments...................................................... $ 569,382 5.9%
U.S. government securities........................................................... 498,477 5.2
Mortgage-backed securities........................................................... 3,751,783 39.1
Other bonds, notes and redeemable preferred stocks................................... 2,413,652 25.1
Mortgage loans....................................................................... 1,426,924 14.9
-------------- -----
Total................................................................................ 8,660,218 90.2
Real estate............................................................................ 107,053 1.1
Equity securities...................................................................... 49,336 0.5
Other invested assets.................................................................. 780,501 8.2
-------------- -----
Total investments...................................................................... $ 9,597,108 100.0%
-------------- -----
-------------- -----
</TABLE>
At September 30, 1994, approximately $6.65 billion or 99.6% (at amortized
cost) of bonds, notes and redeemable preferred stocks, including those held for
investment and the Available for Sale Portfolio (the "Bond Portfolio"), was
rated by S&P, Moody's or under comparable statutory rating guidelines
established by the National Association of Insurance Commissioners ("NAIC") and
implemented by either the NAIC or the Company. At September 30, 1994,
approximately $5.66 billion (at amortized cost) was rated investment grade by
one or both of these agencies or under the NAIC guidelines, including $4.20
billion of U.S. government/agency securities and MBSs.
At September 30, 1994, the Bond Portfolio included $988.2 million (fair
value, $946.4 million) of bonds not rated investment grade by S&P, Moody's or
the NAIC. Based on their September 30, 1994 amortized cost, these bonds
accounted for 6.6% of the Company's total assets and 10.3% of invested assets.
For a detailed discussion concerning non-investment grade bonds, including the
risks inherent in such investments, see Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Financial Condition
and Liquidity."
Senior secured loans ("Secured Loans") are included in the Bond Portfolio
and their amortized cost aggregated $719.0 million at September 30, 1994.
Secured Loans are primarily originated by money center or investment banks or
are originated directly by the Company. Secured Loans are senior to subordinated
debt and equity, and virtually all are secured by assets of the issuer. At
September 30, 1994, Secured Loans consisted of loans to 92 borrowers spanning 26
industries, with no industry concentration constituting more than 8% of these
assets. For more information regarding Secured Loans, see Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Financial Condition and Liquidity."
Mortgage loans aggregated $1.43 billion at September 30, 1994 and consisted
of 666 first mortgage loans with an average loan balance of approximately $2.1
million, collateralized by properties located in 26 states. Approximately 51% of
the portfolio was multifamily residential, 21% was retail, 8% was office, 7% was
industrial and 13% was other types. At September 30, 1994, approximately 33% of
the portfolio was secured by properties located in California and no more than
12% of the portfolio was secured by properties in any other single state. At
September 30, 1994, there were no construction, takeout, farm or land loans and
there were 22 loans with outstanding balances of $10 million or more, which
loans aggregated approximately 25% of the portfolio. At the time of their
origination or purchase by the Company, virtually all mortgage loans had
loan-to-value ratios of 75% or less. At September 30, 1994, approximately 21% of
the mortgage loan portfolio consisted of loans with balloon payments due before
October 1, 1997. At September 30, 1994, loans delinquent by more than 90 days
totaled $45.9 million and constituted 3.2% of total mortgages. Loans foreclosed
upon and transferred
5
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to real estate in the balance sheet during fiscal 1994 totaled $6.0 million
(0.4% of total mortgages). For more information regarding mortgage loans, see
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Financial Condition and Liquidity."
At September 30, 1994, the amortized cost of all investments in default as
to the payment of principal or interest totaled $56.2 million, constituting 0.6%
of total invested assets at amortized cost and their fair value was equal to
their amortized cost.
MUTUAL FUNDS AND INVESTMENT SERVICES
Through its registered investment advisor, SunAmerica Asset Management Corp.
("SunAmerica Asset Management"), and its related mutual fund distributor, the
Company earns fee income by distributing and managing a diversified family of
mutual funds and by providing professional management of individual, corporate
and pension plan portfolios. SunAmerica's mutual funds offer investors an array
of equity, fixed-income, money market and tax-exempt portfolios. Founded in 1983
and acquired by the Company in January 1990, SunAmerica Asset Management managed
approximately $3.63 billion of assets at September 30, 1994, including
approximately $2.12 billion of mutual fund assets; $47.9 million of assets for
investment companies, individuals, pension and profit sharing plans, and
corporate and trust accounts; and $1.46 billion of the Company's variable
annuity assets.
The SunAmerica mutual funds are distributed nationally through a network of
more than 300 financial institutions and unaffiliated broker-dealers, as well as
by the Company's broker-dealer subsidiaries.
RETIREMENT TRUST SERVICES
Through Resources Trust, acquired in January 1990, the Company earns fee
income by providing administrative and custodial services for approximately
152,000 self-directed retirement accounts. Self-directed retirement accounts
include individual retirement accounts (IRAs), Keoghs, 401(k) plans, and pension
and profit sharing plans with combined account assets at September 30, 1994 of
approximately $6.54 billion. In September 1994, Resources Trust also began
making available its new "Complete 401(k)," a product that combines the
administrative and custodial services of Resources Trust with the variable
annuity products of the Company.
Resources Trust also earns investment income on customer cash balances that
are interest-bearing and insured by the Federal Deposit Insurance Corporation.
Resources Trust's services are sold nationally through approximately 12,000
registered representatives affiliated with 1,000 broker-dealers, including the
Company's broker-dealer subsidiaries.
BROKER-DEALERS
The Company also owns two broker-dealers: SunAmerica Securities, Inc., which
commenced business in 1989; and Royal Alliance, acquired by the Company in
January 1990. As a result of the Company's ongoing active recruitment of
independent registered representatives, the Company has increased its network of
representatives from approximately 3,600 at September 30, 1993 to approximately
4,300 at September 30, 1994. The Company believes that, through ownership of
these firms, it has the largest network of independent registered
representatives in the nation, based on industry data.
REGULATION
The Company's insurance subsidiaries are subject to regulation and
supervision by the states in which they are authorized to transact business.
State insurance laws establish supervisory agencies with broad administrative
and supervisory powers related to granting and revoking licenses to transact
business, regulating marketing and other trade practices, operating guaranty
associations, licensing agents, approving policy forms, regulating certain
premium rates, regulating insurance holding company systems, establishing
reserve requirements, prescribing the form and content of required financial
statements and reports, performing financial and other examinations, determining
6
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the reasonableness and adequacy of statutory capital and surplus, regulating the
type and amount of investments permitted, limiting the amount of dividends that
can be paid without first obtaining regulatory approval and other related
matters.
In recent years, the insurance regulatory framework has been placed under
increased scrutiny by various states, the federal government and the NAIC.
Various states have considered or enacted legislation that changes, and in many
cases increases, the states' authority to regulate insurance companies.
Legislation has been introduced from time to time in Congress that could result
in the federal government assuming some role in the regulation of insurance
companies. The NAIC has recently approved and recommended to the states for
adoption and implementation several regulatory initiatives designed to reduce
the risk of insurance company insolvencies. These initiatives include new
investment reserve requirements, risk-based capital standards and restrictions
on an insurance company's ability to pay dividends to its stockholders. A
committee is also currently developing model laws to govern insurance company
investments for adoption by the NAIC. Current proposals are still being debated
and the Company is monitoring developments in this area and the effects any
change would have on the Company.
SunAmerica Asset Management is registered with the Securities and Exchange
Commission (the "Commission") as a registered investment adviser under the
Investment Advisers Act of 1940. The mutual funds that it markets are subject to
regulation under the Investment Company Act of 1940. SunAmerica Asset Management
and the mutual funds are subject to regulation and examination by the
Commission. In addition, variable annuities and the related separate accounts of
the Company's life insurance subsidiaries are subject to regulation by the
Commission under the Securities Act of 1933 and the Investment Company Act of
1940.
Resources Trust is subject to regulation by the Colorado State Banking Board
and the Federal Deposit Insurance Corporation.
The Company's broker-dealer subsidiaries are subject to regulation and
supervision by the states in which they transact business, as well as by the
National Association of Securities Dealers, Inc. (the "NASD"). The NASD has
broad administrative and supervisory powers relative to all aspects of business
and may examine the subsidiaries' business and accounts at any time.
COMPETITION
The businesses conducted by the Company's subsidiaries are highly
competitive.
The Company's life insurance subsidiaries compete with other life insurers,
and also compete for customers' funds with a variety of investment products
offered by financial services companies other than life insurance companies,
such as banks, investment advisers, mutual fund companies and other financial
institutions. Within the U.S. life insurance industry, there are at least 125
companies that individually collect in excess of $150 million of annuity
premiums annually. Certain of these companies and other life insurers with which
the Company competes are significantly larger and have available to them much
greater financial and other resources. The Company believes the primary
competitive factors among life insurance companies for investment-oriented life
insurance products, such as annuities, include product flexibility, the
portfolio managers featured in the product, the number and quality of investment
options offered, the availability of distribution networks, service rendered to
an insured after a policy is issued, and the commissions paid. Other factors
affecting the business include pricing of the product and the benefits
(including before-tax and after-tax investment returns) and guarantees provided.
Competitors of SunAmerica Asset Management include a large number of mutual
fund organizations, both independent and affiliated with other financial
services companies, including banks and insurance companies. Competition in
mutual fund sales is based on investment performance, service to clients, and
product design.
7
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The Company's broker-dealers face competition from regional firms and large,
national full service and discount brokerage firms.
Resources Trust competes for retirement plan assets against other trust
companies, brokerage firms, mutual funds, banks and insurance companies.
ITEM 2. PROPERTIES
The Company's executive offices and the principal offices of its life
insurance subsidiaries are in leased premises at 1 SunAmerica Center, Los
Angeles, California. The Company's life insurance subsidiaries also lease office
space in Atlanta, Georgia; Houston, Texas; and New York, New York. The Company's
broker-dealers lease space in Phoenix, Arizona and New York, New York. The
Company's asset management subsidiary leases offices in New York, New York, and
the retirement trust services subsidiary occupies leased premises in Englewood,
Colorado.
The Company believes that such properties, including the equipment located
therein, are suitable and adequate to meet the requirements of its businesses.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various kinds of litigation common to its
businesses. These cases are in various stages of development and, based on
reports of counsel, management believes that provisions made for potential
losses are adequate and any further liabilities and costs will not have a
material adverse impact upon the Company's financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted during the fourth quarter 1994 to a vote of
security-holders, through the solicitation of proxies or otherwise.
8
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EXECUTIVE OFFICERS OF THE COMPANY
The following sets forth certain information regarding the executive
officers of SunAmerica Inc. as of November 30, 1994:
<TABLE>
<CAPTION>
YEAR
ASSUMED OTHER POSITIONS AND OTHER
PRESENT POSITION AT PRESENT BUSINESS EXPERIENCE WITHIN
NAME AGE NOVEMBER 30, 1994 POSITION THE LAST FIVE YEARS FROM-TO
- ------------------ --- ------------------------- -------- -------------------------- ------------
<S> <C> <C> <C> <C> <C>
Eli Broad 61 Chairman and Chief 1976 (Cofounded Company in
Executive Officer 1957)
President 1986
Jay S. Wintrob 37 Executive Vice President 1991 Senior Vice President 1989-1991
(Joined Company in 1987)
James R. Belardi 37 Senior Vice President 1992 Vice President and 1989-1992
and Treasurer Treasurer
(Joined Company in 1986)
Jana Waring Greer 42 Senior Vice President 1991 Vice President 1981-1991
(Joined Company in 1974)
Gary W. Krat 47 Senior Vice President 1992 Chairman, Royal Alliance 1991-Present
Associates, Inc.
Chief Executive Officer, 1990-Present
Royal Alliance Associates,
Inc. 1986-1990
President, Integrated
Resources Equity Corp.
Clark P. Manning, 36 Senior Vice President 1994 Senior Vice President and 1993-Present
Jr. Chief Actuary 1991-1992
SunAmerica Life Companies
Consulting Actuary, 1992-1993
Milliman & Robertson Inc. 1988-1991
Scott L. Robinson 48 Senior Vice President 1991 Vice President and 1986-1991
and Controller Controller
(Joined Company in 1978)
Darlene Chandler 42 Vice President 1988 (Joined Company in 1976)
Lorin M. Fife 41 Vice President and 1994 Vice President and 1989-1994
General Counsel -- Associate General Counsel
Regulatory Affairs (Joined Company in 1989)
Michael L. Fowler 40 Vice President 1988 (Joined Company in 1988)
Susan L. Harris 37 Vice President, General 1994 Vice President, Associate 1989-1994
Counsel -- Corporate General Counsel and
Affairs, and Secretary Secretary
(Joined Company in 1985)
Scott H. Richland 32 Vice President and 1994 Assistant Treasurer 1993-1994
Assistant Treasurer Director, SunAmerica 1990-1993
Investments
Director, Corporate 1989-1990
Development, Act III
Communications
James W. Rowan 32 Vice President 1993 Assistant to the Chairman 1992
Senior Vice President, 1990-1992
Security Pacific Corp.
</TABLE>
9
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
The Company's Common Stock is principally traded on the New York Stock
Exchange. The Company's Common Stock is also listed on the Pacific Stock
Exchange and traded on the Boston, Midwest, Philadelphia and Cincinnati Stock
Exchanges. There is no trading market for the Nontransferable Class B Stock.
High and low sales prices for the Company's Common Stock for each quarter
during the fiscal years ended September 30, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
-------------------- --------------------
HIGH LOW HIGH LOW
------- ------- ------- -------
<S> <C> <C> <C> <C>
First quarter........................... $46 1/2 $ 33 $27 3/4 $21 5/8
Second quarter.......................... 43 5/8 33 1/2 39 1/2 25 1/2
Third quarter........................... 44 1/4 34 1/4 35 3/4 27 1/4
Fourth quarter.......................... 46 1/4 40 1/4 45 27 3/8
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
HOLDERS
As of October 31, 1994, the approximate number of holders of record of each
class of common equity of the Company was as follows:
<TABLE>
<CAPTION>
NUMBER
OF HOLDERS
TITLE OF CLASS OF RECORD
- ------------------------------------------------------------------------------------------------------ ----------
<S> <C>
Common Stock (par value $1.00 per share).............................................................. 2,320
Nontransferable Class B Stock (par value $1.00 per share)............................................. 14
----------
----------
</TABLE>
DIVIDENDS
Dividends paid on the Company's Common Stock and Nontransferable Class B
Stock for each quarter during the fiscal years ended September 30, 1994 and 1993
are as follows:
<TABLE>
<CAPTION>
1994 1993
--------------------------- ---------------------------
COMMON NON-TRANSFERABLE COMMON NON-TRANSFERABLE
STOCK CLASS B STOCK STOCK CLASS B STOCK
--------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
First quarter........................................... $.100 $.090 $.070 $.063
Second quarter.......................................... .100 .090 .070 .063
Third quarter........................................... .100 .090 .070 .063
Fourth quarter.......................................... .100 .090 .070 .063
--------- ---------------- --------- ----------------
Total................................................... $.400 $.360 $.280 $.252
--------- ---------------- --------- ----------------
--------- ---------------- --------- ----------------
</TABLE>
10
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of the Company and its
subsidiaries should be read in conjunction with the consolidated financial
statements and notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations, both of which are included
elsewhere herein.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------------
1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net investment income.............................. $ 294,454 $ 263,791 $ 219,384 $ 162,412 $ 132,947
Net realized investment losses..................... (21,124) (21,287) (56,364) (46,060) (29,319)
Fee income......................................... 150,736 134,305 112,831 92,689 72,327
General and administrative expenses................ (132,743) (135,790) (133,058) (120,475) (112,860)
Provision for future guaranty fund assessments..... -- (22,000) -- -- --
Amortization of deferred acquisition costs......... (66,925) (51,860) (48,375) (40,088) (27,872)
Other income and expenses, net..................... 15,603 16,852 16,673 24,903 25,644
------------ ------------ ------------ ------------ ------------
Pretax income...................................... 240,001 184,011 111,091 73,381 60,867
Income tax expense................................. (74,700) (57,000) (34,300) (25,900) (22,100)
------------ ------------ ------------ ------------ ------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES....................... 165,301 127,011 76,791 47,481 38,767
Cumulative effect of change in accounting for
income taxes...................................... (33,500) -- -- -- --
------------ ------------ ------------ ------------ ------------
NET INCOME......................................... $ 131,801 $ 127,011 $ 76,791 $ 47,481 $ 38,767
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
EARNINGS PER SHARE:
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES..................... $ 3.58 $ 2.75 $ 1.80 $ 1.32 $ 1.02
Cumulative effect of change in accounting for
income taxes.................................... (.81) -- -- -- --
------------ ------------ ------------ ------------ ------------
NET INCOME....................................... $ 2.77 $ 2.75 $ 1.80 $ 1.32 $ 1.02
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
CASH DIVIDENDS PER SHARE PAID TO COMMON
SHAREHOLDERS:
Nontransferable Class B Stock.................... $ 0.360 $ 0.252 $ 0.180 $ 0.180 $ 0.180
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Common Stock..................................... $ 0.400 $ 0.280 $ 0.200 $ 0.200 $ 0.200
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Ratio of earnings to combined fixed charges and
preferred stock dividends (excluding interest on
fixed annuities, guaranteed investment contracts
and trust deposits) (1)........................... 2.8 2.8 2.7 2.3 2.0
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Ratio of earnings to combined fixed charges and
preferred stock dividends (including interest on
fixed annuities, guaranteed investment contracts
and trust deposits) (2)........................... 1.4 1.3 1.2 1.1 1.1
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
<FN>
- ------------------------
Footnotes to Item 6 -- "Selected Consolidated Financial Data" appear on the
following page.
</TABLE>
11
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
------------------------------------------------------------------------------
1994 1993 1992 1991 1990
-------------- -------------- -------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Investments.................... $ 9,280,390 $ 10,364,952 $ 9,428,266 $ 7,596,275 $ 7,275,401
Variable annuity assets........ 4,513,093 4,194,970 3,293,343 2,746,685 2,145,196
Deferred acquisition costs..... 581,874 475,917 436,209 392,278 356,088
Other assets................... 280,868 231,582 245,833 279,007 301,906
-------------- -------------- -------------- -------------- --------------
TOTAL ASSETS................... $ 14,656,225 $ 15,267,421 $ 13,403,651 $ 11,014,245 $ 10,078,591
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
Reserves for fixed annuity
contracts..................... $ 4,519,623 $ 4,934,871 $ 5,143,339 $ 5,359,757 $ 5,523,320
Reserves for guaranteed
investment contracts.......... 2,783,522 2,216,104 2,023,048 1,598,963 1,294,338
Trust deposits................. 442,320 378,986 367,458 -- --
Variable annuity liabilities... 4,513,093 4,194,970 3,293,343 2,746,685 2,145,196
Other payables and accrued
liabilities................... 860,763 1,828,153 1,372,010 344,789 159,416
Long-term notes and
debentures.................... 472,835 380,560 225,000 -- --
Collateralized mortgage
obligations and reverse
repurchase agreements......... 28,662 112,032 182,784 299,343 368,907
Other senior indebtedness...... -- 15,119 25,919 38,035 43,503
Subordinated notes............. -- -- -- 117,985 119,485
Deferred income taxes.......... 74,319 96,599 40,682 58,779 40,353
Shareholders' equity........... 961,088 1,110,027 730,068 449,909 384,073
-------------- -------------- -------------- -------------- --------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY.......... $ 14,656,225 $ 15,267,421 $ 13,403,651 $ 11,014,245 $ 10,078,591
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
<FN>
- ------------------------
(1) In computing the ratio of earnings to combined fixed charges and preferred
stock dividends (excluding interest on fixed annuities, guaranteed
investment contracts and trust deposits), combined fixed charges and
preferred stock dividends consist of interest expense on senior and
subordinated indebtedness and dividends on Preferred Stock on a tax
equivalent basis. Earnings are computed by adding interest incurred on
senior and subordinated indebtedness to pretax income.
(2) In computing the ratio of earnings to combined fixed charges and preferred
stock dividends (including interest on fixed annuities, guaranteed
investment contracts 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 and dividends on Preferred Stock 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 to pretax income.
</TABLE>
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of financial condition
and results of operations of SunAmerica Inc. (the "Company") for the three years
in the period ended September 30, 1994.
RESULTS OF OPERATIONS
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME
TAXES totaled $165.3 million or $3.58 per common share in 1994, compared with
$127.0 million or $2.75 per common share in 1993 and $76.8 million or $1.80 per
common share in 1992. The cumulative effect of the change in accounting for
income taxes resulting from the implementation of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," amounted to a
nonrecurring non-cash charge of $33.5 million or $.81 per common share in 1994.
Accordingly, net income amounted to $131.8 million or $2.77 per common share in
1994.
PRETAX INCOME totaled $240.0 million in 1994, $184.0 million in 1993 and
$111.1 million in 1992. The $56.0 million improvement in 1994 primarily resulted
from increased net investment income and fee income, partially offset by
additional amortization of deferred acquisition costs. In addition, 1993 results
include a $22.0 million provision for future guaranty fund assessments. The
$72.9 million improvement in 1993 over 1992 primarily resulted from increased
net investment income, decreased net realized investment losses and increased
fee income, all of which were partially offset by the provision for future
guaranty fund assessments.
NET INVESTMENT INCOME, which is the spread between the income earned on
invested assets and the interest paid on fixed annuities and other
interest-bearing liabilities, increased to $294.5 million in 1994 from $263.8
million in 1993 and $219.4 million in 1992. These amounts represent net
investment spreads of 3.30% on average invested assets (computed on a daily
basis) of $8.92 billion in 1994, 3.15% on average invested assets of $8.38
billion in 1993 and 2.81% on average invested assets of $7.80 billion in 1992.
These improvements in net investment income primarily resulted from reductions
in interest rates paid on all interest-bearing liabilities and increases in the
excess of average invested assets over average interest-bearing liabilities,
partially offset by declines in investment yield. The excess of average invested
assets over average interest-bearing liabilities amounted to $647.1 million in
1994, $456.0 million in 1993 and $115.4 million in 1992.
Total interest expense aggregated $463.7 million in 1994, $490.6 million in
1993 and $543.6 million in 1992. The average rate paid on all interest-bearing
liabilities fell to 5.60% (5.43% on fixed annuities) in 1994 from 6.19% (6.11%
on fixed annuities) in 1993 and 7.07% (6.92% on fixed annuities) in 1992. These
declines in rates were primarily due to a decline in prevailing interest rates
that began during the latter half of fiscal 1992 and continued into the first
half of fiscal 1994. This was reflected in a corresponding decline in the
average crediting rate on annuity contracts, the majority of which reprice
annually as interest rate guarantees are renewed. Interest-bearing liabilities
averaged $8.27 billion during 1994, compared with $7.92 billion during 1993 and
$7.69 billion during 1992.
Investment income totaled $758.2 million in 1994, $754.4 million in 1993 and
$763.0 million in 1992. Investment income has been relatively stable over the
three year period as increases in earnings from average invested assets have
been offset by declines in investment yield. The yield on average invested
assets declined to 8.50% in 1994 from 9.00% in 1993 and 9.78% in 1992. These
yields are computed without subtracting net realized investment losses. If net
realized investment losses were included in the computation, the yields would be
8.26% in 1994, 8.75% in 1993 and 9.06% in 1992.
These declines in yield resulted primarily from sales of higher-yielding
securities and the reinvestment of sales proceeds in lower-yielding securities.
The Company has principally made such sales to obtain certain mortgage-backed
securities ("MBSs") that the market demands for the formation of collateralized
mortgage obligations ("CMOs"). Ownership of these MBSs has permitted the Company
to engage in dollar roll transactions ("Dollar Rolls"). The Company has also
sold securities to take
13
<PAGE>
advantage of changes in relative value between its portfolio sectors, and to
more closely match assets and liabilities (see "Asset-Liability Matching"). In
addition, investment yield has declined as the net cash provided by the
Company's operating and financing activities, as well as the cash flows from
redemptions and maturities of securities in the Company's investment portfolio,
have been invested in lower-yielding securities due to the lower interest rate
environment prevailing during 1993 and the first half of 1994.
The Company has enhanced investment yield since 1992 through Dollar Rolls,
whereby the proceeds from sales of MBSs are invested in short-term securities
pending the contractual repurchase of substantially the same securities at
discounted prices in the forward market. The Company has been able to engage in
Dollar Rolls due to the market demand for MBSs for formation of CMOs, which was
particularly high in 1993. The Company recorded $15.6 million of enhanced yield
on a weighted average volume of $1.05 billion of such transactions during 1994,
compared with $21.0 million of enhanced yield on a weighted average volume of
$1.01 billion during 1993 and $5.4 million of enhanced yield on a weighted
average volume of $383.2 million during 1992. The decline in enhanced yield
relative to the volume of Dollar Rolls in 1994 is primarily due to a narrowing
of market spreads on such transactions.
In addition, the Company has enhanced investment yield since 1992 through
total return corporate bond swap agreements (the "Total Return Agreements"). The
Company recorded income of $1.3 million on the Total Return Agreements during
1994, compared with $14.6 million recorded during 1993 and $12.3 million
recorded during 1992. The reduction in income recorded on the Total Return
Agreements during 1994 resulted primarily from declines in the market value of
the underlying assets as a result of an increase in prevailing interest rates.
The Company has also entered into certain interest rate swap agreements (the
"Swap Agreements"). (See "Asset-Liability Matching" for additional discussion of
Total Return Agreements and Swap Agreements.)
GROWTH IN AVERAGE INVESTED ASSETS since 1992 primarily reflects $424.1
million of aggregate net proceeds from the issuances of long-term notes and
debentures and the Company's Preferred Stock. In addition, the growth reflects
sales of the Company's fixed-rate products, consisting of fixed annuities
(including fixed accounts of variable annuity products) and guaranteed
investment contracts ("GICs"). Fixed annuity premiums aggregated $230.0 million
in 1994, $223.8 million in 1993 and $243.7 million in 1992. These premiums
include premiums for the fixed accounts of variable annuities totaling $140.6
million, $63.9 million, and $86.0 million, respectively. Total fixed annuity
premiums increased during 1994 primarily due to rising demand for fixed-rate
investment options as prevailing interest rates increased during the latter half
of fiscal 1994. These premiums declined during 1993 principally due to the
Company's de-emphasis of fixed-rate products given the then prevailing low
interest rate environment. GIC premiums totaled $1.04 billion in 1994, $691.6
million in 1993 and $930.0 million in 1992. Changes in GIC sales reflect the
variable demand for such products from state and local governmental authorities,
pension plans and asset management firms. In addition, the increase in GIC sales
in 1994 reflects the success of the Company's efforts to increase its GIC client
base, particularly among asset management firms.
The GICs issued by the Company and Sun Life Insurance Company of America
("Sun Life of America") typically guarantee the payment of principal and
interest at a fixed rate for a fixed term of one to ten years. In the case of
GICs sold to pension plans, certain withdrawals may be made at book value in the
event of circumstances specified in the plan document, such as employee
retirement, death, disability, hardship withdrawal or employee termination. Sun
Life of America imposes surrender penalties in the event of other withdrawals
prior to maturity. Contracts purchased by state and local governmental
authorities may also permit scheduled book value withdrawals subject to the
terms of the underlying indenture. Contracts purchased by asset management firms
either prohibit withdrawals or permit withdrawals with notice ranging from 7 to
270 days. In pricing GICs, the Company analyzes cash flow information and prices
accordingly so that it is compensated for possible withdrawals prior to maturity
(see "Financial Condition and Liquidity").
14
<PAGE>
NET REALIZED INVESTMENT LOSSES totaled $21.1 million in 1994, $21.3 million
in 1993 and $56.4 million in 1992, and include impairment writedowns of $55.9
million in 1994, $114.3 million in 1993 and $119.7 million in 1992. Therefore,
net gains from sales of investments totaled $34.8 million in 1994, $93.0 million
in 1993 and $63.3 million in 1992.
Net gains in 1994 include $22.6 million of net gains on $17.6 million of
sales of common stocks made primarily to maximize total return and $27.0 million
of net losses on $3.25 billion of sales of bonds. These bond sales include
approximately $1.43 billion of sales of MBSs made primarily to acquire other
MBSs that were then used in Dollar Rolls. In addition, bond sales include $625.3
million of sales of high-yield investments and $569.9 million of sales of
certain CMOs and asset-backed securities, which were primarily made to maximize
total return. The Company also realized $35.1 million of net gains on sales of
$105.9 million of certain limited partnership interests.
Net gains in 1993 include $69.1 million of net gains realized on $4.82
billion of sales of bonds. These bond sales include approximately $2.95 billion
of sales of MBSs made primarily to acquire other MBSs that were then used in
Dollar Rolls. In addition, bond sales include $759.6 million of sales of
high-yield investments and $338.5 million of sales of securitized residential
whole loans made primarily to maximize total return. Bond sales in 1993 also
include sales of $68.6 million of certain interest-only strips ("IOs") and
$251.0 million of sales of senior secured loans ("Secured Loans") that were made
primarily to improve the overall credit quality of the portfolio. Net gains in
1993 also include $21.5 million of net gains realized on the sales of $104.4
million of certain limited partnership interests.
Net gains in 1992 include $52.9 million of net gains realized on $5.26
billion of sales of bonds. These bond sales include approximately $3.45 billion
of sales of MBSs made primarily to acquire other MBSs for use in Dollar Rolls
and $838.8 million of high-yield investments made primarily to improve the
overall credit quality of the portfolio. In addition, bond sales in 1992 include
$520.8 million of sales of Secured Loans that also were made primarily to
improve the overall credit quality of the portfolio. Net gains in 1992 also
include $9.5 million of net gains realized on the sales of $35.4 million of
certain limited partnership interests.
Impairment writedowns in 1994 include $35.0 million applied to real estate.
During 1994, the Company decided to hold for sale all properties owned in
Arizona, thereby changing its previous intention to hold such real estate for
future development. Accordingly, the Company reappraised its Arizona properties
and reduced their carrying values to estimated fair values. Impairment
writedowns in 1994 also include $13.2 million of additional provisions applied
to defaulted bonds and $2.5 million of reserves for mortgage loan losses
resulting from the January 17, 1994 Los Angeles earthquake.
Impairment writedowns in 1993 include $11.8 million of provisions applied to
mortgage loans that were restructured during 1993 and reduced to the aggregate
appraised value of the underlying real estate, and $11.1 million of provisions
applied to the Company's investment in a real estate-related separate account of
Anchor National Life Insurance Company ("Anchor"), which separate account was
liquidated through sales of underlying assets to affiliated and nonaffiliated
parties during 1993. Impairment writedowns in 1993 also include $88.2 million of
additional provisions applied to bonds. These bond writedowns include $25.0
million applied to certain IOs. IOs, a type of MBS used as an asset-liability
matching tool to hedge against rising interest rates, are investment grade
securities that give the holder the right to receive only the interest payments
on a pool of underlying mortgage loans. As would be anticipated in a lower
interest rate environment, the amortized cost of these IOs became impaired as a
result of increased prepayments of the underlying loans. At September 30, 1994,
the amortized cost, which is net of impairment writedowns, of the IOs held by
the Company was $22.7 million and their fair value was $18.1 million.
Impairment writedowns in 1992 include $37.9 million of provisions applied to
bonds in response to increased defaults and $26.1 million of provisions applied
to the Company's investment in the
15
<PAGE>
aforementioned real estate-related separate account of Anchor. In addition, 1992
impairment writedowns include $26.3 million of provisions applied to Arizona
real estate to reduce the carrying values of such properties to their estimated
net realizable values based upon appraisals which reflected an intention to hold
the properties for future development.
VARIABLE ANNUITY FEES are based on the market value of assets supporting
variable annuity contracts in separate accounts. Such fees totaled $79.5 million
in 1994, $67.5 million in 1993 and $57.7 million in 1992. Variable annuity fees
have increased over the last three years principally due to asset growth from
the receipt of variable annuity premiums and, during 1993, from increased market
values. Variable annuity assets averaged $4.43 billion during 1994, $3.65
billion during 1993 and $3.05 billion during 1992. Variable annuity premiums,
which exclude premiums allocated to the fixed accounts of variable annuity
products, totaled $759.3 million in 1994, $796.9 million in 1993 and $590.2
million in 1992. Total variable annuity product sales, which include premiums
allocated to the fixed accounts of variable annuities, aggregated $900.0 million
in 1994, $860.8 million in 1993 and $676.1 million in 1992 (see "Growth in
Average Invested Assets"). Though total variable annuity product sales rose
modestly in 1994, variable annuity premiums declined, principally due to a
rising demand for fixed-rate investment options, including the fixed accounts of
variable annuities, as prevailing interest rates increased during the latter
half of fiscal 1994. The Company has encountered increased competition in the
variable annuity marketplace in 1994 and anticipates that the market will remain
highly competitive for the foreseeable future.
ASSET MANAGEMENT FEES, which include investment advisory fees and 12b-1
distribution fees, are based on the market value of assets managed in mutual
funds and private accounts by SunAmerica Asset Management Corp. Such fees
totaled $31.3 million on average assets managed of $2.39 billion in 1994, $32.3
million on average assets managed of $2.46 billion in 1993 and $25.3 million on
average assets managed of $2.15 billion in 1992. Asset management fees decreased
in 1994 primarily due to a decline in the market value of assets managed and
increased redemptions, both a reflection of adverse market conditions for
fixed-income and equity securities which can be attributed, in part, to rising
interest rates during the latter half of fiscal 1994. Mutual fund sales in 1994
also were affected by these adverse market conditions. Sales of mutual funds,
excluding sales of money market funds, totaled $342.6 million in 1994, compared
with $532.4 million in 1993 and $827.6 million in 1992. The decline in mutual
fund sales during 1993 resulted primarily from the Company's strategic decision
to diversify its mutual fund product sales, and to reduce the percentage of
sales derived from back-end loaded products.
NET RETAINED COMMISSIONS are primarily derived from commissions on the sales
of nonproprietary investment products by the Company's broker-dealer
subsidiaries, after deducting the substantial portion of such commissions that
is passed on to registered representatives. Net retained commissions totaled
$28.0 million in 1994, $23.7 million in 1993 and $18.9 million in 1992. Sales of
nonproprietary products (mainly mutual funds and general securities) totaled
$6.30 billion in 1994, $5.87 billion in 1993 and $4.70 billion in 1992. The
increases in net retained commissions are not proportionate to the related
changes in sales, primarily due to changes in sales mix.
TRUST FEES are earned by Resources Trust Company for providing
administrative and custodial services primarily for individual retirement
accounts, as well as for other qualified pension plans. Trust fees totaled $11.9
million in 1994, $10.9 million in 1993 and $11.0 million in 1992.
SURRENDER CHARGES on fixed and variable annuities totaled $10.7 million in
1994, compared with $9.8 million in 1993 and $14.3 million in 1992. Surrender
charges generally are assessed on annuity withdrawals at declining rates during
the first seven years of the contract. Withdrawal payments, which include
surrenders and lump-sum annuity benefits, totaled $1.13 billion in 1994, $824.5
million in 1993 and $901.1 million in 1992. These payments represent 13.2%,
10.0% and 11.6%, respectively, of average fixed and variable annuity reserves.
Withdrawals include variable annuity payments from the separate accounts
totaling $461.5 million in 1994, $314.6 million in 1993 and $306.6 million in
1992. Variable annuity surrenders have increased during 1994 primarily due to
surrenders on a closed
16
<PAGE>
block of business, policies coming off surrender charge restrictions and
increased competition in the marketplace. In addition, fixed annuity surrenders
have increased in 1994, due to policies coming off surrender charge
restrictions. Management anticipates that withdrawal rates will be reasonably
stable for the foreseeable future and the Company's investment portfolio has
been structured to provide sufficient liquidity for anticipated withdrawals.
PROVISION FOR FUTURE GUARANTY FUND ASSESSMENTS totaled $22.0 million in
1993. No such provision was recorded in 1994 or 1992. Guaranty associations of
the states in which the Company sells annuities assess insurance companies to
pay policyholder claims relating to insurer insolvencies. This provision
represents management's best estimate, based upon available industry data, of
the Company's ultimate exposure to future assessments anticipated as a result of
certain large insurance company failures that occurred during the past few
years. Currently, management estimates that the remaining assessments will be
primarily paid over the next four years.
GENERAL AND ADMINISTRATIVE EXPENSES totaled $132.7 million in 1994, compared
with $135.8 million in 1993 and $133.1 million in 1992, and represent 0.9%, 1.0%
and 1.1% of average total assets for fiscal years 1994, 1993 and 1992,
respectively. General and administrative expenses remain closely controlled
through a company-wide cost containment program.
AMORTIZATION OF DEFERRED ACQUISITION COSTS increased during the three-year
period primarily due to additional fixed and variable annuity and mutual fund
sales and the subsequent amortization of related deferred commissions and other
acquisition costs. Amortization of all deferred acquisition costs totaled $66.9
million in 1994, $51.9 million in 1993 and $48.4 million in 1992.
INCOME TAX EXPENSE totaled $74.7 million in 1994, $57.0 million in 1993 and
$34.3 million in 1992, representing effective tax rates of 31% in all three
fiscal years. These tax rates reflect the favorable impact of certain affordable
housing tax credits.
FINANCIAL CONDITION AND LIQUIDITY
SHAREHOLDERS' EQUITY decreased by $148.9 million to $961.1 million at
September 30, 1994 from $1.11 billion at September 30, 1993, primarily as a
result of $250.9 million of change in net unrealized losses on debt and equity
securities available for sale charged directly to shareholders' equity. Book
value per common share amounted to $18.90 at September 30, 1994, compared with
$22.64 at September 30, 1993 and $14.54 at September 30, 1992. Excluding net
unrealized gains and losses on debt and equity securities available for sale,
book value per common share amounted to $22.58 at September 30, 1994, $20.16 at
September 30, 1993 and $14.32 at September 30, 1992.
TOTAL ASSETS decreased by $611.2 million to $14.66 billion at September 30,
1994 from $15.27 billion at September 30, 1993, principally due to a decrease in
invested assets, partially offset by an increase in the separate account for
variable annuities, which increased by $318.1 million during 1994.
INVESTED ASSETS at year-end totaled $9.28 billion in 1994, compared with
$10.36 billion in 1993. The Company managed most of these investments
internally. Invested assets declined by $1.08 billion during 1994, primarily as
a result of a reduction in dollar-roll positions, as indicated by the $943.2
million decline in amounts payable to brokers for purchases of securities.
Invested assets also declined as a consequence of the change in net unrealized
losses on debt and equity securities available for sale charged directly to
shareholders' equity.
The Company's general investment philosophy is to hold fixed maturity assets
for long-term investment. Thus, it does not have a trading portfolio. Effective
September 30, 1993, the Company adopted Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" and, accordingly, began to carry the portion of its portfolio of
bonds, notes and redeemable preferred stocks that is available for sale (the
"Available for Sale Portfolio") at estimated fair value. The remaining portion
of its portfolio of bonds, notes and redeemable preferred stocks is held for
investment and continues to be carried at amortized cost.
17
<PAGE>
BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS, including those held for
investment and the Available for Sale Portfolio (the "Bond Portfolio"), at
September 30, 1994, had an aggregate amortized cost that exceeded its fair value
by $321.0 million (including net unrealized losses of $329.0 million on the
Available for Sale Portfolio). The fair value of the Bond Portfolio was $167.2
million above its amortized cost at September 30, 1993 (including net unrealized
gains of $91.9 million on the Available for Sale Portfolio). The unrealized
losses on the Bond Portfolio at September 30, 1994 principally resulted from
increases in prevailing interest rates since September 30, 1993 and the
corresponding effect on the Bond Portfolio.
Approximately $6.65 billion or 99.6% of the Bond Portfolio (at amortized
cost) at September 30, 1994 was rated by Standard and Poor's Corporation
("S&P"), Moody's Investors Service ("Moody's") or under comparable statutory
rating guidelines established by the National Association of Insurance
Commissioners ("NAIC") and implemented by either the NAIC or the Company. At
September 30, 1994, approximately $5.66 billion (at amortized cost) was rated
investment grade by one or both of these agencies or under the NAIC guidelines,
including $4.20 billion of U.S. government/agency securities and MBSs.
At September 30, 1994, the Bond Portfolio included $988.2 million (fair
value, $946.4 million) of bonds not rated investment grade by S&P, Moody's or
the NAIC. Based on their September 30, 1994 amortized cost, these bonds
accounted for 6.6% of the Company's total assets and 10.3% of invested assets.
In addition to its direct investment in non-investment grade bonds, the Company
has entered into Total Return Agreements with an aggregate notional principal
amount of $158.5 million at September 30, 1994 (see "Asset-Liability Matching").
Non-investment grade securities generally provide higher yields and involve
greater risks than investment grade securities because their issuers typically
are more highly leveraged and more vulnerable to adverse economic conditions
than investment grade issuers. In addition, the trading market for these
securities is usually more limited than for investment grade securities. The
Company intends that its holdings of such securities not exceed current levels,
but its policies may change from time to time, including in connection with any
possible acquisition. The Company had no material concentrations of
non-investment grade securities at September 30, 1994.
The table on the following page summarizes the Company's rated bonds by
rating classification as of September 30, 1994.
18
<PAGE>
SUMMARY OF RATED BONDS
(In thousands)
<TABLE>
<CAPTION>
ISSUES NOT RATED BY S&P/MOODY'S TOTAL
ISSUES RATED BY S&P/MOODY'S BY NAIC CATEGORY ------------------------------------
- ----------------------------------------- ----------------------------------------- PERCENT OF
S&P/(MOODY'S) AMORTIZED ESTIMATED NAIC AMORTIZED ESTIMATED AMORTIZED INVESTED ESTIMATED
CATEGORY (1) COST FAIR VALUE CATEGORY (2) COST FAIR VALUE COST ASSETS (3) FAIR VALUE
- ----------------- ---------- ---------- ----------------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AAA+ to A-
(Aaa to A3) $2,990,108 $2,813,760 1 $1,316,944 $1,254,503 $4,307,052 44.88% $4,068,263
BBB+ to BBB-
(Baa1 to Baa3) 452,624 424,168 2 901,170 877,895 1,353,794 14.11 1,302,063
BB+ to BB-
(Ba1 to Ba3) 116,282 111,011 3 276,931 281,140 393,213 4.10 392,151
B+ to B-
(B1 to B3) 325,737 305,139 4 177,994 162,787 503,731 5.25 467,926
CCC+ to C
(Caa to C) 10,506 9,797 5 42,125 41,500 52,631 0.55 51,297
D -- -- 6 38,577 35,058 38,577 0.40 35,058
---------- ---------- ---------- ---------- ---------- ----------
Total rated
issues $3,895,257 $3,663,875 $2,753,741 $2,652,883 $6,648,998 $6,316,758
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
<FN>
- ------------------------------
(1) S&P rates debt securities in eleven rating categories, from AAA (the
highest) to D (in payment default). A plus (+) or minus (-) indicates the
debt's relative standing within the rating category. A security rated BBB-
or higher is considered investment grade. Moody's rates debt securities in
nine rating categories, from Aaa (the highest) to C (extremely poor
prospects of attaining real investment standing). The number 1, 2 or 3
(with 1 the highest and 3 the lowest) indicates the debt's relative
standing within the rating category. A security rated Baa3 or higher is
considered investment grade. Issues are categorized based on the higher of
the S&P or Moody's rating if rated by both agencies.
(2) Bonds and short-term promissory instruments are divided into six quality
categories for NAIC rating purposes, ranging from 1 (highest) to 5 (lowest)
for nondefaulted bonds plus one category, 6, for bonds in or near default.
These six categories correspond with the S&P/Moody's rating groups listed
above, with categories 1 and 2 considered investment grade. A substantial
portion of the assets in the NAIC categories were rated by the Company
based on its implementation of NAIC rating guidelines.
(3) At amortized cost.
</TABLE>
SENIOR SECURED LOANS are included in the Bond Portfolio and their amortized
cost aggregated $719.0 million at September 30, 1994. Secured Loans are
primarily originated by money center or investment banks or are originated
directly by the Company. Secured Loans are senior to subordinated debt and
equity, and virtually all are secured by assets of the issuer. At September 30,
1994, Secured Loans consisted of loans to 92 borrowers spanning 26 industries,
with no industry concentration constituting more than 8% of these assets.
While the trading market for Secured Loans is more limited than for publicly
traded corporate debt issues, management believes that participation in these
transactions has enabled the Company to improve its investment yield. The
majority of the Company's Secured Loans are not rated by S&P or Moody's.
However, 92% of the Secured Loans (at amortized cost) are rated in NAIC
categories 1 and 2. Although, as a result of restrictive financial covenants,
Secured Loans involve greater risk of technical default than do publicly traded
investment grade securities, management believes that generally the risk of loss
upon default for its Secured Loans is mitigated by their three-year average
lives, financial covenants and senior secured positions.
MORTGAGE LOANS aggregated $1.43 billion at September 30, 1994 and consisted
of 666 first mortgage loans with an average loan balance of approximately $2.1
million, collateralized by properties located in 26 states. Approximately 51% of
the portfolio was multifamily residential, 21% was retail, 8% was office, 7% was
industrial and 13% was other types. At September 30, 1994, approximately 33% of
the portfolio was secured by properties located in California and no more than
12% of the portfolio
19
<PAGE>
was secured by properties in any other single state. At September 30, 1994,
there were no construction, takeout, farm or land loans and there were 22 loans
with outstanding balances of $10 million or more, which loans aggregated
approximately 25% of the portfolio. At the time of their origination or purchase
by the Company, virtually all mortgage loans had loan-to-value ratios of 75% or
less. At September 30, 1994, approximately 21% of the mortgage loan portfolio
consisted of loans with balloon payments due before October 1, 1997. At
September 30, 1994, loans delinquent by more than 90 days totaled $45.9 million
and constituted 3.2% of total mortgages. Loans foreclosed upon and transferred
to real estate in the balance sheet during fiscal 1994 totaled $6.0 million
(0.4% of total mortgages).
Approximately 44% of the mortgage loans in the portfolio at September 30,
1994 were seasoned loans underwritten to the Company's standards and purchased
at or near par from the Resolution Trust Corporation and other financial
institutions, many of which were downsizing their portfolios. Such loans
generally have higher average interest rates than loans that could be originated
today. The balance of the mortgage loan portfolio has been originated by the
Company under strict underwriting standards. Commercial mortgage loans on
properties such as offices, hotels and shopping centers generally represent a
higher level of risk for the industry than have mortgage loans secured by
multifamily residences. This greater risk is due to several factors, including
the larger size of such loans, and the effects of general economic conditions on
these commercial properties. However, due to the seasoned nature of the
Company's mortgage loans, its emphasis on multifamily loans and its strict
underwriting standards, the Company believes that it has reduced the risk
attributable to its mortgage loan portfolio while maintaining attractive yields.
At September 30, 1994, mortgage loans having an aggregate carrying value of
$74.7 million had been restructured. Of this amount, $0.6 million was
restructured during 1994 and $24.2 million was restructured during 1993.
ASSET-LIABILITY MATCHING is utilized by the Company to minimize the risks of
interest rate fluctuations and disintermediation. The Company believes that its
fixed-rate liabilities should be backed by a portfolio principally composed of
fixed maturities that generate predictable rates of return. The Company does not
have a specific target rate of return. Instead, its rates of return vary over
time depending on the current interest rate environment, the slope of the yield
curve, the spread at which fixed maturities are priced over the yield curve and
general competitive conditions within the industry. Its portfolio strategy is
designed to achieve adequate risk-adjusted returns consistent with its
investment objectives of effective asset-liability matching, liquidity and
safety.
The Company designs its fixed-rate products and conducts its investment
operations in order to closely match the duration of the assets in its
investment portfolio to its annuity and GIC obligations. The Company seeks to
achieve a predictable spread between what it earns on its assets and what it
pays on its liabilities by investing principally in fixed maturities. The
Company's fixed-rate products incorporate surrender charges, two-tiered interest
rate structures or other limitations on when contracts can be surrendered for
cash to encourage persistency and discourage withdrawals. Approximately 78% of
the Company's fixed annuity and GIC reserves had surrender penalties or other
restrictions at September 30, 1994.
As part of its asset-liability matching discipline, the Company conducts
detailed computer simulations that model its fixed-maturity assets and
liabilities under commonly used stress-test interest rate scenarios. Based on
the results of these computer simulations, the investment portfolio has been
constructed with a view to maintaining a desired investment spread between the
yield on portfolio assets and the rate paid on its reserves under a variety of
possible future interest rate scenarios. In addition, the Company has designed
its portfolio to limit the market discount from book value on the aggregate
portfolio that might result from a sharp rise in interest rates. The cash flow
obtained from MBSs helps to maintain the anticipated spread, while providing
desired liquidity. At September 30, 1994, the weighted average life of the
Company's investments was approximately four-and-one-half years and the
portfolio had a duration of approximately three-and-three-fourths years.
20
<PAGE>
As a component of investment strategy, the Company utilizes Swap Agreements
to match assets more closely to liabilities. Swap Agreements are agreements to
exchange with a counterparty interest rate payments of differing character (for
example, fixed-rate payments exchanged for variable-rate payments) based on an
underlying principal balance (notional principal) to hedge against interest rate
changes. The Company generally utilizes Swap Agreements to create a hedge that
effectively converts floating-rate assets into fixed-rate assets. At September
30, 1994, the Company had 25 outstanding Swap Agreements with an aggregate
notional principal amount of $1.23 billion. These agreements mature in various
years through 1998 and have an average remaining maturity of 27 months.
The Company also seeks to provide liquidity, while enhancing its spread
income, by using reverse repurchase agreements ("Reverse Repos"), Dollar Rolls,
Total Return Agreements and by investing in MBSs. Reverse Repos involve a sale
of securities and an agreement to repurchase the same securities at a later date
at an agreed upon price and are generally over-collateralized. Dollar Rolls are
similar to Reverse Repos except that the repurchase involves securities that are
only substantially the same as the securities sold and the arrangement is not
collateralized, nor is it governed by a repurchase agreement. Total Return
Agreements effectively exchange a fixed rate of interest on the notional amount
for the coupon income plus or minus the increase or decrease in the market value
of specified non-investment grade corporate bonds. MBSs are generally investment
grade securities collateralized by large pools of mortgage loans. MBSs generally
pay principal and interest monthly. The amount of principal and interest
payments may fluctuate as a result of prepayments of the underlying mortgage
loans.
There are risks associated with some of the techniques the Company uses to
enhance its spread income and match its assets and liabilities. The primary risk
associated with Dollar Rolls, Reverse Repos and Swap Agreements is the risk
associated with counterparty nonperformance. In addition, Swap Agreements also
have interest rate risk. However, the Company's Swap Agreements hedge
variable-rate assets, and interest rate fluctuations that adversely affect the
net cash received or paid under the terms of the Swap Agreement would be offset
by increased interest income earned on the variable-rate assets. The primary
risks associated with Total Return Agreements are the risk of potential loss due
to bond market fluctuation and counterparty risk. The Company believes, however,
that the counterparties to its Dollar Rolls, Reverse Repos, Swap Agreements and
Total Return Agreements are financially responsible and that the counterparty
risk associated with those transactions is minimal. Counterparty risk associated
with Dollar Rolls is further mitigated by the Company's participation in an MBS
trading clearinghouse. The sell and buy transactions that are submitted to this
clearinghouse are marked to market on a daily basis and each participant is
required to over-collateralize its net loss position by 30% with either cash,
letters of credit or government securities. The primary risk associated with
MBSs is that a changing interest rate environment might cause prepayment of the
underlying obligations at speeds slower or faster than anticipated at the time
of their purchase.
INVESTED ASSETS EVALUATION routinely includes a review by the Company of its
portfolio of debt securities. Management identifies monthly those investments
that require additional monitoring and carefully reviews the carrying value of
such investments at least quarterly to determine whether specific investments
should be placed on a nonaccrual basis and to determine declines in value that
may be other than temporary. In making these reviews for bonds, management
principally considers the adequacy of collateral (if any), compliance with
contractual covenants, the borrower's recent financial performance, news reports
and other externally generated information concerning the creditor's affairs. In
the case of publicly traded bonds, management also considers market value
quotations, if available. For mortgage loans, management generally considers
information concerning the mortgaged property and, among other things, factors
impacting the current and expected payment status of the loan and, if available,
the current fair value of the underlying collateral.
The carrying values of bonds that are determined to have declines in value
that are other than temporary are reduced to net realizable value and no further
accruals of interest are made. The valuation allowances on mortgage loans are
based on losses expected by management to be realized on
21
<PAGE>
transfers of mortgage loans to real estate, on the disposition and settlement of
mortgage loans and on mortgage loans that management believes may not be
collectible in full. Accrual of interest is suspended when principal and
interest payments on mortgage loans are past due more than 90 days.
DEFAULTED INVESTMENTS, comprising all investments (at amortized cost, net of
impairment writedowns) that are in default as to the payment of principal or
interest, totaled $56.2 million at September 30, 1994, including $10.3 million
of unsecured loans and $45.9 million of mortgage loans. At September 30, 1994,
defaulted investments constituted 0.6% of total invested assets at amortized
cost and their fair value was equal to their amortized cost. At September 30,
1993, defaulted investments totaled $60.8 million, including $40.7 million of
unsecured loans and $20.1 million of mortgage loans. At September 30, 1993,
defaulted investments constituted 0.6% of total invested assets at amortized
cost and their fair value totaled $56.3 million.
SOURCES OF LIQUIDITY are readily available to the Company in the form of
existing cash and short-term investments, Reverse Repo capacity on invested
assets and, if required, proceeds from invested asset sales. At September 30,
1994, approximately $1.57 billion of the Company's Bond Portfolio had an
aggregate unrealized gain of $46.0 million, while approximately $5.10 billion
had an aggregate unrealized loss of $367.0 million. In addition, the Company's
investment portfolio also currently provides approximately $101.4 million of
monthly cash flow from scheduled principal and interest payments.
Management is aware that prevailing market interest rates may shift
significantly and has strategies in place to manage either an increase or
decrease in prevailing rates. In a rising interest rate environment, the
Company's average cost of funds would increase over time as it prices its new
and renewing annuities to maintain a generally competitive market rate.
Management would seek to place new funds in investments that were matched in
duration to, and higher yielding than, the liabilities assumed. The Company
believes that liquidity to fund withdrawals would be available through incoming
cash flow, the sale of short-term or floating-rate instruments or Reverse Repos
on the Company's substantial MBS segment of the Bond Portfolio, thereby avoiding
the sale of fixed-rate assets in an unfavorable bond market.
In a declining rate environment, the Company's cost of funds would decrease
over time, reflecting lower interest crediting rates on its fixed annuities and
GICs. Should increased liquidity be required for withdrawals, the Company
believes that a significant portion of its investments could be sold without
adverse consequences in light of the general strengthening that would be
expected in the bond market.
On a parent company stand-alone basis, SunAmerica Inc. (the "Parent"), at
September 30, 1994, had invested assets with an amortized cost of $972.0 million
(fair value, $941.8 million) and outstanding indebtedness of $472.8 million,
comprising all of the Company's consolidated senior indebtedness. Additionally,
as of September 30, 1994, the Parent had three GICs purchased by local
government authorities that aggregated $265.4 million. The GIC agreements
provided liquidity to the Company at a lower cost than other sources of
liquidity with similar maturities. The Parent's annual debt service with respect
to these debt and GIC obligations totals $75.2 million for fiscal 1995, $70.3
million for fiscal 1996, $70.2 million for fiscal 1997, $89.9 million for fiscal
1998, $198.9 million for fiscal 1999 and $909.1 million, in the aggregate,
thereafter.
In addition to the Parent's stand-alone sources of liquidity, at September
30, 1994 there was approximately $57.9 million of dividends available to the
Parent from its regulated life insurance subsidiaries. The Parent received
dividends of $43.0 million in December 1993, $30.0 million in December 1992 and
$25.0 million in December 1991 from Sun Life of America. The Parent also
received dividends of $2.4 million in fiscal 1994, $4.7 million in fiscal 1993,
$17.1 million in fiscal 1992 and $43.2 million in fiscal 1991 from its other
directly-owned subsidiaries.
22
<PAGE>
The Parent; Sun Life of America; SunAmerica Financial, Inc.; and SunAmerica
Asset Management Corp. have sold certain of their interests in various limited
partnerships that make tax-advantaged affordable housing investments. As part of
the sales transactions, the Parent has guaranteed a minimum defined yield and
funding of certain defined operating deficits in return for a fee. A portion of
the fees received has been deferred to absorb any required payments with respect
to these guarantees. Based on an evaluation of the underlying housing projects,
it is management's belief that such deferrals are ample for this purpose.
Accordingly, management does not anticipate any material future losses with
respect to these guarantees.
Anchor has undertaken to dispose of $84.5 million (its statutory carrying
value) of certain of its real estate located in the Phoenix, Arizona
metropolitan area during the next one to three years, either to affiliated or
nonaffiliated parties, and the Parent has guaranteed that Anchor will receive
its statutory carrying value of these assets. The Parent has pledged certain
marketable securities having an amortized cost of $40.3 million at September 30,
1994 to secure this guarantee. This real estate has a consolidated carrying
value of approximately $45.5 million at September 30, 1994.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements begin on page F-3. Reference
is made to the Index to Financial Statements on page F-1 herein.
Additional financial statement schedules are included on pages S-3 through
S-8 herein. Reference is made to the Index to Financial Statement Schedules on
page S-1 herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The Notice of 1995 Annual Meeting of Shareholders and Proxy Statement,
which, when filed pursuant to Regulation 14A under the Securities Exchange Act
of 1934, will be incorporated by reference in this Annual Report on Form 10-K
pursuant to General Instruction G(3) of Form 10-K, provides the information
required under Part III (Items 10, 11, 12 and 13) except for the information
regarding the executive officers of the Company, which is included in Part I on
page 9, and the information regarding indebtedness of management, which is
included in Schedule II on Page S-3 herein.
23
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Reference is made to the indexes set forth on page F-1 and S-1 of this
report.
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------ ---------------------------------------------------------------------------------------------------------
<C> <S>
3(a) Restated Charter, dated October 2, 1991, is incorporated herein by reference to Exhibit 3(a) to the
Company's Form 8, dated and filed October 4, 1991, amending the Company's Annual Report on Form 10-K for
the year ended September 30, 1990.
3(b) Articles Supplementary, dated June 24, 1992, which define the rights of the holders of the Company's
9 1/4% Preferred Stock, Series B, are incorporated herein by reference to Exhibit 3(c) to the Company's
1992 Annual Report on Form 10-K, filed November 30, 1992.
3(c) Amendment to the Company's Restated Articles of Incorporation, dated February 1, 1993, is incorporated
herein by reference to Exhibit 1 to the Company's Form 8-K, filed February 3, 1993.
3(d) Articles Supplementary, dated March 9, 1993, which define the rights of the holders of the Company's
Series D Mandatory Conversion Premium Dividend Preferred Stock, are incorporated herein by reference to
Exhibit 3(e) to the Company's Registration Statement No. 33-66048 on Form S-4, filed July 22, 1993.
3(e) Articles Supplementary, dated August 31, 1993, which define the rights of the holders of the Company's
Adjustable Rate Cumulative Preferred Stock, Series C, are incorporated herein by reference to Exhibit
3(f) to the Company's 1993 Annual Report on Form 10-K, filed December 16, 1993.
3(f) Articles of Merger, dated July 30, 1993, between the Company and SunAmerica Corporation are incorporated
herein by reference to Exhibit 3(g) to the Company's 1993 Annual Report on Form 10-K, filed December 16,
1993.
3(g) Bylaws, as revised on October 23, 1987, are incorporated herein by reference to Exhibit 3(b) to the
Company's 1987 Annual Report on Form 10-K, filed February 26, 1988.
4(a) Restated Charter. See Exhibit 3(a).
4(b) Bylaws, as revised on October 23, 1987. See Exhibit 3(g).
4(c) Articles Supplementary, dated June 24, 1992. See Exhibit 3(b).
4(d) Articles Supplementary, dated March 9, 1993. See Exhibit 3(d).
4(e) Articles Supplementary, dated August 31, 1993. See Exhibit 3(e).
4(f) Senior Indenture, dated as of December 15, 1991, between the Company and Bank of America NT & SA
(formerly Security Pacific National Bank), as Trustee, defining the rights of the holders of the
Company's 9% Notes due January 15, 1995 and 9.95% Debentures due February 1, 2012, is incorporated
herein by reference to Exhibit No. 4.1 to the Company's Registration Statement No. 33-44084 on Form S-3,
filed November 20, 1991.
4(g) Senior Debt Indenture, dated as of April 15, 1993, between the Company and the First National Bank of
Chicago, as Trustee, defining the rights of the holders of the Company's 8 1/8% Debentures due April 28,
2023 and certain other debt securities of the Company, is incorporated herein by reference to Exhibit
4(h) to the Company's Annual Report on Form 10-K, filed December 16, 1993.
4(h) Tri-Party Agreement, dated as of July 1, 1993, among The First National Bank of Chicago, Bank of America,
NT & SA and the Company, appointing The First National Bank of Chicago as Successor Trustee to Bank of
America NT & SA for the Company's 9% Notes due January 15, 1995 and 9.95% Debentures due February 1,
2012, is incorporated herein by reference to Exhibit 4(i) to the Company's Annual Report on Form 10-K,
filed December 16, 1993.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------ ---------------------------------------------------------------------------------------------------------
10(a) Employment Agreement, dated July 30, 1992, between the Company and Gary W. Krat, is incorporated herein
by reference to Exhibit 10(e) to the Company's 1992 Annual Report on Form 10-K, filed November 30, 1992.
<C> <S>
10(b) Employment Agreement, dated July 14, 1992, between the Company and Michael L. Fowler, is incorporated
herein by reference to Exhibit 10(f) to the Company's 1992 Annual Report on Form 10-K, filed November
30, 1992.
10(c) 1988 Employee Stock Plan, is incorporated herein by reference to Exhibit B to the Company's and Kaufman
and Broad Home Corporation's Notice of and Joint Proxy Statement for Special Meeting of Shareholders
held on February 21, 1989, filed January 24, 1989.
10(d) Amended and Restated 1978 Employee Stock Option Program, is incorporated herein by reference to Appendix
A to the Company's Notice of 1987 Annual Meeting of Shareholder's and Proxy Statement, filed March 24,
1987.
10(e) Executive Deferred Compensation Plan is incorporated herein by reference to Exhibit 10(l) to the
Company's 1985 Annual Report on Form 10-K, filed February 27, 1986.
10(f) 1987 Restricted Stock Plan is incorporated herein by reference to Appendix A to the Company's Notice of
1988 Annual Meeting of Shareholders and Proxy Statement, filed March 22, 1988.
10(g) SunAmerica Profit Sharing and Retirement Plan, is incorporated herein by reference to Exhibit 10(l) to
the Company's 1989 Annual Report on Form 10-K, filed December 20, 1989.
10(h) Executive Deferred Compensation Plan, dated as of October 1, 1989.
10(i) SunAmerica Supplemental Deferral Plan is incorporated herein by reference to Exhibit 10(m) to the
Company's 1989 Annual Report on Form 10-K, filed December 20, 1989.
10(j) Long-Term Performance-Based Incentive Plan is incorporated herein by reference to Appendix A to the
Company's Notice of 1994 Annual Meeting of Shareholders and Proxy Statement, filed December 21, 1993.
10(k) $90,000,000 Credit Agreement, dated as of February 1, 1993, among the Company, SunAmerica Corporation and
SunAmerica Financial, Inc., as Borrowers, and Citibank, N.A., as Agent for the banks named therein.
10(l) $60,000,000 Credit Agreement, dated as of February 1, 1993, among the Company, SunAmerica Corporation and
SunAmerica Financial, Inc., as Borrowers, and Citibank, N.A., as Agent for the banks named therein.
10(m) First Amendment to Credit Agreement, dated as of January 30, 1994, among the Company, SunAmerica
Financial, Inc. and Citibank, N.A., amending the Credit Agreement of February 1, 1993.
10(n) First Amendment to Credit Agreement, dated as of January 30, 1994, among the Company, SunAmerica
Financial, Inc. and Citibank, N.A., amending the Credit Agreement of February 1, 1993.
10(o) Executive Compensation Plans and Arrangements.
12 Statement re Computations of Ratios.
21 Subsidiaries of the Company.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
</TABLE>
REPORTS ON FORM 8-K
On July 20, 1994, the Company filed a current report on Form 8-K that
announced its third quarter 1994 earnings. On November 14, 1994, the Company
filed a current report on Form 8-K that announced its fourth quarter 1994
earnings.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SUNAMERICA INC.
Date: November 30, 1994 By: SCOTT L. ROBINSON
----------------------------- --------------------------------
Scott L. Robinson
SENIOR VICE PRESIDENT AND
CONTROLLER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
- --------------------------------- ------------------------- ------------------
Chairman, President and
ELI BROAD Chief Executive Officer
- --------------------------------- (Principal Executive November 30, 1994
Eli Broad Officer)
JAMES R. BELARDI Senior Vice President and
- --------------------------------- Treasurer (Principal November 30, 1994
James R. Belardi Financial Officer)
SCOTT L. ROBINSON Senior Vice President and
- --------------------------------- Controller (Principal November 30, 1994
Scott L. Robinson Accounting Officer)
RONALD J. ARNAULT
- --------------------------------- Director November 30, 1994
Ronald J. Arnault
KAREN HASTIE-WILLIAMS
- --------------------------------- Director November 30, 1994
Karen Hastie-Williams
DAVID O. MAXWELL
- --------------------------------- Director November 30, 1994
David O. Maxwell
BARRY MUNITZ
- --------------------------------- Director November 30, 1994
Barry Munitz
LESTER POLLACK
- --------------------------------- Director November 30, 1994
Lester Pollack
RICHARD D. ROHR
- --------------------------------- Director November 30, 1994
Richard D. Rohr
SANFORD C. SIGOLOFF
- --------------------------------- Director November 30, 1994
Sanford C. Sigoloff
HAROLD M. WILLIAMS
- --------------------------------- Director November 30, 1994
Harold M. Williams
26
<PAGE>
SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE(S)
--------------------
<S> <C>
Report of Independent Accountants........................................................... F-2
Consolidated Balance Sheet as of September 30, 1994 and 1993................................ F-3
Consolidated Income Statement for the years ended
September 30, 1994, 1993 and 1992.......................................................... F-4
Consolidated Statement of Cash Flows for the years ended
September 30, 1994, 1993 and 1992.......................................................... F-5 through F-6
Notes to Consolidated Financial Statements.................................................. F-7 through F-23
</TABLE>
Separate financial statements of subsidiaries not consolidated and 50% or
less owned persons accounted for by the equity method have been omitted because
they do not individually constitute a significant subsidiary.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of SunAmerica Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated income statement and statement of cash flows present fairly, in all
material respects, the financial position of SunAmerica Inc. and its
subsidiaries at September 30, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1994, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 7, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," in fiscal 1994.
Price Waterhouse LLP
Los Angeles, California
November 9, 1994
F-2
<PAGE>
SUNAMERICA INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1994 1993
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Cash and short-term investments................................................ $ 569,382 $ 1,797,796
Bonds, notes and redeemable preferred stocks:
Available for sale, at fair value (amortized cost: 1994, $5,599,780,000;
1993, $4,659,741,000)....................................................... 5,270,738 4,751,665
Held for investment, at amortized cost (fair value: 1994, $1,072,222,000;
1993, $1,701,362,000)....................................................... 1,064,132 1,626,109
Mortgage loans................................................................. 1,426,924 1,286,436
Common stocks, at fair value (cost: 1994, $49,336,000; 1993, $21,009,000)...... 61,660 57,610
Kaufman and Broad Home Corporation warrants, at fair value (cost:
$1,188,000)................................................................... -- 26,538
Real estate.................................................................... 107,053 143,857
Other invested assets.......................................................... 780,501 674,941
-------------- --------------
Total investments.............................................................. 9,280,390 10,364,952
Variable annuity assets.......................................................... 4,513,093 4,194,970
Accrued investment income........................................................ 105,686 105,895
Deferred acquisition costs....................................................... 581,874 475,917
Other assets..................................................................... 175,182 125,687
-------------- --------------
TOTAL ASSETS..................................................................... $ 14,656,225 $ 15,267,421
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Reserves, payables and accrued liabilities:
Reserves for fixed annuity contracts........................................... $ 4,519,623 $ 4,934,871
Reserves for guaranteed investment contracts................................... 2,783,522 2,216,104
Trust deposits................................................................. 442,320 378,986
Payable to brokers for purchases of securities................................. 643,734 1,586,923
Income taxes currently payable................................................. 4,600 9,280
Other liabilities.............................................................. 212,429 231,950
-------------- --------------
Total reserves, payables and accrued liabilities............................... 8,606,228 9,358,114
-------------- --------------
Variable annuity liabilities..................................................... 4,513,093 4,194,970
-------------- --------------
Senior indebtedness:
Long-term notes and debentures................................................. 472,835 380,560
Bank notes..................................................................... -- 15,119
Collateralized mortgage obligations............................................ 28,662 112,032
-------------- --------------
Total senior indebtedness...................................................... 501,497 507,711
-------------- --------------
Deferred income taxes............................................................ 74,319 96,599
-------------- --------------
Shareholders' equity:
Preferred Stock................................................................ 374,273 452,273
Nontransferable Class B Stock.................................................. 6,826 6,828
Common Stock................................................................... 28,977 26,335
Additional paid-in capital..................................................... 188,667 110,120
Retained earnings.............................................................. 512,571 413,770
Net unrealized gains (losses) on debt and equity securities available for
sale.......................................................................... (150,226) 100,701
-------------- --------------
Total shareholders' equity..................................................... 961,088 1,110,027
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY....................................... $ 14,656,225 $ 15,267,421
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES
F-3
<PAGE>
SUNAMERICA INC.
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------
1994 1993 1992
------------ ------------ ------------
(IN THOUSANDS,
EXCEPT PER COMMON SHARE AMOUNTS)
<S> <C> <C> <C>
Investment income....................................................... $ 758,150 $ 754,369 $ 763,013
------------ ------------ ------------
Interest expense on:
Fixed annuity contracts............................................... (254,464) (308,910) (362,094)
Guaranteed investment contracts....................................... (150,424) (136,984) (140,114)
Trust deposits........................................................ (8,516) (8,438) (4,256)
Senior indebtedness................................................... (50,292) (36,246) (33,224)
Subordinated notes.................................................... -- -- (3,941)
------------ ------------ ------------
Total interest expense................................................ (463,696) (490,578) (543,629)
------------ ------------ ------------
NET INVESTMENT INCOME................................................... 294,454 263,791 219,384
------------ ------------ ------------
NET REALIZED INVESTMENT LOSSES.......................................... (21,124) (21,287) (56,364)
------------ ------------ ------------
Fee income:
Variable annuity fees................................................. 79,483 67,461 57,666
Asset management fees................................................. 31,302 32,293 25,269
Net retained commissions.............................................. 28,009 23,658 18,855
Trust fees............................................................ 11,942 10,893 11,041
------------ ------------ ------------
TOTAL FEE INCOME........................................................ 150,736 134,305 112,831
------------ ------------ ------------
Other income and expenses:
Surrender charges..................................................... 10,716 9,766 14,291
General and administrative expenses................................... (132,743) (135,790) (133,058)
Provision for future guaranty fund assessments........................ -- (22,000) --
Amortization of deferred acquisition costs............................ (66,925) (51,860) (48,375)
Other, net............................................................ 4,887 7,086 2,382
------------ ------------ ------------
TOTAL OTHER INCOME AND EXPENSES......................................... (184,065) (192,798) (164,760)
------------ ------------ ------------
PRETAX INCOME........................................................... 240,001 184,011 111,091
Income tax expense...................................................... (74,700) (57,000) (34,300)
------------ ------------ ------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME
TAXES.................................................................. 165,301 127,011 76,791
Cumulative effect of change in accounting for income taxes.............. (33,500) -- --
------------ ------------ ------------
NET INCOME.............................................................. $ 131,801 $ 127,011 $ 76,791
------------ ------------ ------------
------------ ------------ ------------
PER COMMON SHARE:
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME
TAXES................................................................ $ 3.58 $ 2.75 $ 1.80
Cumulative effect of change in accounting for income taxes............ (.81) -- --
------------ ------------ ------------
NET INCOME............................................................ $ 2.77 $ 2.75 $ 1.80
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES
F-4
<PAGE>
SUNAMERICA INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------
1994 1993 1992
--------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................... $ 131,801 $ 127,011 $ 76,791
Adjustments to reconcile net income to net cash provided by
operating activities:
Interest credited to:
Fixed annuity contracts.................................... 254,464 308,910 362,094
Guaranteed investment contracts............................ 150,424 136,984 140,114
Trust deposits............................................. 8,516 8,438 4,256
Net realized investment losses............................... 21,124 21,287 56,364
Accretion of net discounts on investments.................... (2,949) (22,289) (33,419)
Provision for deferred income taxes.......................... 78,285 8,433 (16,568)
Cumulative effect of change in accounting for income taxes... 33,500 -- --
Change in:
Deferred acquisition costs................................... (20,357) (39,708) (43,931)
Other assets................................................. 365 8,140 34,472
Income taxes currently payable............................... (61,211) (1,817) 9,754
Other liabilities............................................ (18,964) 74,165 (4,366)
Other, net..................................................... 4,330 27,317 6,291
--------------- -------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES........................ 579,328 656,871 591,852
--------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of:
Bonds, notes and redeemable preferred stocks available for
sale........................................................ (6,657,431) (5,332,008) --
Other bonds, notes and redeemable preferred stocks........... (81,975) (561,372) (5,566,690)
Mortgage loans............................................... (333,384) (199,106) (193,335)
Other investments, excluding short-term investments.......... (549,450) (342,194) (575,608)
Sales of:
Bonds, notes and redeemable preferred stocks available for
sale........................................................ 4,300,252 4,185,951 --
Other bonds, notes and redeemable preferred stocks........... 17,027 211,348 4,743,827
Kaufman and Broad Home Corporation warrants.................. 28,618 -- 38,770
Other investments, excluding short-term investments.......... 204,024 337,075 305,477
Redemptions and maturities of:
Bonds, notes and redeemable preferred stocks available for
sale........................................................ 1,007,680 865,201 --
Other bonds, notes and redeemable preferred stocks........... 456,252 260,692 791,883
Mortgage loans............................................... 157,304 173,327 140,055
Other investments, excluding short-term investments.......... 313,307 13,851 184,133
--------------- -------------- --------------
NET CASH USED BY INVESTING ACTIVITIES............................ (1,137,776) (387,235) (131,488)
--------------- -------------- --------------
</TABLE>
F-5
<PAGE>
SUNAMERICA INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------
1994 1993 1992
------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of cash dividends to shareholders........ $ (50,830) $ (38,760) $ (18,945)
Premium receipts on:
Fixed annuity contracts......................... 230,037 223,827 243,715
Guaranteed investment contracts................. 1,038,699 691,639 930,016
Receipts of trust deposits........................ 319,318 217,058 436,720
Withdrawal payments on:
Fixed annuity contracts......................... (724,547) (561,291) (644,516)
Guaranteed investment contracts................. (621,706) (635,567) (646,045)
Trust deposits.................................. (264,500) (213,966) (73,518)
Claims and annuity payments on fixed annuity
contracts........................................ (176,136) (179,792) (177,459)
Net proceeds from issuances of long-term notes and
debentures....................................... 91,711 153,433 222,828
Repayments of collateralized mortgage
obligations...................................... (83,370) (70,752) (48,984)
Net decrease in other senior indebtedness......... (15,119) (10,800) (79,691)
Redemption of senior subordinated fixed rate
notes............................................ -- -- (119,886)
Net proceeds from issuances of Preferred Stock.... -- 178,983 210,734
Net borrowings (repayments) of other short-term
financings....................................... (413,523) 262,782 599,581
Other, net........................................ -- -- (15,616)
------------ ----------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES.... (669,966) 16,794 818,934
------------ ----------- -----------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM
INVESTMENTS........................................ (1,228,414) 286,430 1,279,298
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF
PERIOD............................................. 1,797,796 1,511,366 232,068
------------ ----------- -----------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD.... $ 569,382 $ 1,797,796 $ 1,511,366
------------ ----------- -----------
------------ ----------- -----------
Supplemental cash flow information:
Interest paid on indebtedness..................... $ 56,169 $ 42,154 $ 38,344
------------ ----------- -----------
------------ ----------- -----------
Income taxes paid, net of refunds received........ $ 57,626 $ 34,971 $ 36,379
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES
F-6
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of SunAmerica Inc. (the "Company") and all significant subsidiaries,
including Sun Life Insurance Company of America ("Sun Life of America"); Anchor
National Life Insurance Company ("Anchor"); First SunAmerica Life Insurance
Company; SunAmerica Asset Management Corp.; Royal Alliance Associates, Inc.;
Resources Trust Company and SunAmerica Securities, Inc. All significant
intercompany transactions have been eliminated. Certain items have been
reclassified to conform to the current year's presentation.
INVESTMENTS. Cash and short-term investments primarily include cash,
commercial paper, money market investments, repurchase agreements and short-term
bank participations. All such investments are carried at cost plus accrued
interest, which approximates fair value, have maturities of twelve months or
less and are considered cash equivalents for purposes of reporting cash flows.
Bonds, notes and redeemable preferred stocks available for sale and common
stocks, including the Kaufman and Broad Home Corporation warrants (the "KBH
Warrants") are carried at aggregate fair value and changes in unrealized gains
or losses, net of tax, are credited or charged directly to shareholders' equity.
It is management's intent, and the Company has the ability, to hold the
remainder of bonds, notes and redeemable preferred stocks until maturity, and
therefore, these investments are carried at amortized cost. Bonds, notes and
redeemable preferred stocks, whether available for sale or held for investment,
are reduced to estimated net realizable value when necessary for declines in
value considered to be other than temporary. Estimates of net realizable value
are subjective and actual realization will be dependant upon future events.
Mortgage loans are carried at amortized unpaid balances, net of provisions for
estimated losses. Real estate is carried at the lower of cost or fair value.
Other invested assets include $593,854,000 of investments in limited
partnerships, of which approximately half are accounted for by using the equity
method of accounting and the remainder are accounted for by using the cost
method. Realized gains and losses on the sale of investments are recognized in
operations at the date of sale and are determined using the specific cost
identification method. Premiums and discounts on investments are amortized to
investment income using the interest method over the contractual lives of the
investments.
INTEREST RATE SWAP AGREEMENTS. The net differential to be paid or received
on interest rate swap agreements ("Swap Agreements") entered into to reduce the
impact of changes in interest rates is recognized over the lives of the
agreements, and such differential is classified as Investment Income in the
income statement. All outstanding Swap Agreements are designated as hedges, and,
therefore, are not marked to market.
TOTAL RETURN CORPORATE BOND SWAP AGREEMENTS. Total return corporate bond
swap agreements ("Total Return Agreements") have been entered into for
investment purposes, and, accordingly, are marked to market with the related
gain or loss classified as Investment Income in the income statement.
DEFERRED ACQUISITION COSTS. Policy acquisition costs are deferred and
amortized, with interest, over the estimated lives of the contracts in relation
to the present value of estimated gross profits, which are composed of net
interest income, net realized investment gains and losses, surrender charges and
direct administrative expenses. Costs incurred to sell mutual funds are also
deferred and amortized over the estimated lives of the funds obtained. Deferred
acquisition costs consist of commissions and other costs that vary with, and are
primarily related to, the production or acquisition of new business.
As debt and equity securities available for sale are carried at aggregate
fair value, an adjustment is made to deferred acquisition costs equal to the
change in amortization that would have been
F-7
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recorded if such securities had been sold at their stated aggregate fair value
and the proceeds reinvested at current yields. The change in this adjustment,
net of tax, is included with the change in net unrealized gains or losses on
debt and equity securities available for sale that is credited or charged
directly to shareholders' equity. At September 30, 1994, Deferred Acquisition
Costs have been increased by $85,600,000 for this adjustment.
VARIABLE ANNUITY ASSETS AND LIABILITIES. The assets and liabilities
resulting from the receipt of variable annuity premiums are segregated in
separate accounts. The Company receives administrative fees for managing the
funds and other fees for assuming mortality and certain expense risks. Such fees
are included in Variable Annuity Fees in the income statement.
GOODWILL. Goodwill, amounting to $27,932,000 at September 30, 1994, is
amortized by using the straight-line method over a period averaging 25 years and
is included in Other Assets in the balance sheet.
CONTRACTHOLDER RESERVES. Contractholder reserves for fixed annuity
contracts and guaranteed investment contracts are accounted for as
investment-type contracts in accordance with Statement of Financial Accounting
Standards No. 97, "Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale of
Investments," and are recorded at accumulated value (premiums received, plus
accrued interest, less withdrawals and assessed fees).
INCOME PER COMMON SHARE. The calculation of net income per common share is
based on the weighted average number of shares of Common Stock and
Nontransferable Class B Stock (collectively referred to as "Common Stock")
outstanding during each year after deduction for preferred stock dividend
requirements other than for those paid on convertible issues. The calculation of
the weighted average number of shares of Common Stock outstanding includes the
effect of common stock equivalents arising from the October 1991 and March 1993
issuances of convertible preferred stock (see Note 6 -- Shareholders' Equity)
and the Company's various employee stock option programs. Weighted average
shares outstanding totaled 41,610,000 in 1994, 40,255,000 in 1993 and 38,342,000
in 1992. Preferred stock dividend requirements other than for those paid on
convertible issues totaled $16,420,000 in 1994, $16,474,000 in 1993 and
$7,879,000 in 1992.
F-8
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- INVESTMENTS
The amortized cost and estimated fair value of bonds, notes and redeemable
preferred stocks available for sale and held for investment by major category
follow:
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
COST VALUE
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
AT SEPTEMBER 30, 1994:
AVAILABLE FOR SALE:
Securities of the United States Government........................................ $ 419,489 $ 414,592
Mortgage-backed securities........................................................ 3,528,761 3,268,199
Securities of public utilities.................................................... 21,126 20,302
Corporate bonds and notes......................................................... 1,450,882 1,384,622
Redeemable preferred stocks....................................................... 24,489 26,202
Other debt securities............................................................. 155,033 156,821
------------- -------------
Total available for sale.......................................................... $ 5,599,780 $ 5,270,738
------------- -------------
------------- -------------
HELD FOR INVESTMENT:
Securities of the United States Government........................................ $ 78,988 $ 75,322
Mortgage-backed securities........................................................ 223,022 221,622
Securities of public utilities.................................................... 14,485 14,420
Corporate bonds and notes......................................................... 717,286 730,507
Other debt securities............................................................. 30,351 30,351
------------- -------------
Total held for investment......................................................... $ 1,064,132 $ 1,072,222
------------- -------------
------------- -------------
AT SEPTEMBER 30, 1993:
AVAILABLE FOR SALE:
Securities of the United States Government........................................ $ 58,200 $ 59,457
Mortgage-backed securities........................................................ 3,234,615 3,279,085
Securities of public utilities.................................................... 29,093 30,408
Corporate bonds and notes......................................................... 1,114,168 1,152,099
Redeemable preferred stocks....................................................... 18,995 25,946
Other debt securities............................................................. 204,670 204,670
------------- -------------
Total available for sale.......................................................... $ 4,659,741 $ 4,751,665
------------- -------------
------------- -------------
HELD FOR INVESTMENT:
Securities of the United States Government........................................ $ 334,492 $ 361,177
Mortgage-backed securities........................................................ 318,710 305,571
Corporate bonds and notes......................................................... 942,756 1,004,463
Other debt securities............................................................. 30,151 30,151
------------- -------------
Total held for investment......................................................... $ 1,626,109 $ 1,701,362
------------- -------------
------------- -------------
</TABLE>
F-9
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- INVESTMENTS (CONTINUED)
The amortized cost and estimated fair value of bonds, notes and redeemable
preferred stocks available for sale and held for investment by contractual
maturity follow:
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
COST VALUE
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
AT SEPTEMBER 30, 1994:
AVAILABLE FOR SALE:
Due in one year or less........................................................... $ 36,483 $ 32,863
Due after one year through five years............................................. 706,648 697,805
Due after five years through ten years............................................ 884,668 837,871
Due after ten years............................................................... 443,220 434,000
Mortgage-backed securities........................................................ 3,528,761 3,268,199
------------- -------------
Total available for sale.......................................................... $ 5,599,780 $ 5,270,738
------------- -------------
------------- -------------
HELD FOR INVESTMENT:
Due in one year or less........................................................... $ 103,983 $ 104,221
Due after one year through five years............................................. 271,660 271,086
Due after five years through ten years............................................ 278,178 285,306
Due after ten years............................................................... 187,289 189,987
Mortgage-backed securities........................................................ 223,022 221,622
------------- -------------
Total held for investment......................................................... $ 1,064,132 $ 1,072,222
------------- -------------
------------- -------------
</TABLE>
F-10
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- INVESTMENTS (CONTINUED)
Gross unrealized gains and losses on bonds, notes and redeemable preferred
stocks available for sale and held for investment by major category follow:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
GAINS LOSSES
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
AT SEPTEMBER 30, 1994:
AVAILABLE FOR SALE:
Securities of the United States Government........................................... $ 3,142 $ (8,039)
Mortgage-backed securities........................................................... 13,171 (273,733)
Securities of public utilities....................................................... 28 (852)
Corporate bonds and notes............................................................ 6,579 (72,839)
Redeemable preferred stocks.......................................................... 1,854 (141)
Other debt securities................................................................ 2,129 (341)
----------- ------------
Total available for sale............................................................. $ 26,903 $ (355,945)
----------- ------------
----------- ------------
HELD FOR INVESTMENT:
Securities of the United States Government........................................... $ 196 $ (3,862)
Mortgage-backed securities........................................................... 2,070 (3,470)
Securities of public utilities....................................................... -- (65)
Corporate bonds and notes............................................................ 16,858 (3,637)
----------- ------------
Total held for investment............................................................ $ 19,124 $ (11,034)
----------- ------------
----------- ------------
AT SEPTEMBER 30, 1993:
AVAILABLE FOR SALE:
Securities of the United States Government........................................... $ 1,257 $ --
Mortgage-backed securities........................................................... 59,638 (15,168)
Securities of public utilities....................................................... 1,315 --
Corporate bonds and notes............................................................ 43,884 (5,953)
Redeemable preferred stocks.......................................................... 6,951 --
----------- ------------
Total available for sale............................................................. $ 113,045 $ (21,121)
----------- ------------
----------- ------------
HELD FOR INVESTMENT:
Securities of the United States Government........................................... $ 26,685 $ --
Mortgage-backed securities........................................................... 2,351 (15,490)
Corporate bonds and notes............................................................ 70,133 (8,426)
----------- ------------
Total held for investment............................................................ $ 99,169 $ (23,916)
----------- ------------
----------- ------------
</TABLE>
At September 30, 1994, gross unrealized gains on equity securities
aggregated $22,619,000 and gross unrealized losses aggregated $10,295,000. At
September 30, 1993, gross unrealized gains on equity securities aggregated
$65,274,000 (including $25,350,000 on the KBH Warrants) and gross unrealized
losses aggregated $3,323,000.
During 1994, the Company sold the remaining KBH Warrants to purchase
2,377,000 shares of the special common stock of Kaufman and Broad Home
Corporation (the "KBH Special Common Stock") for net sales proceeds of
$28,618,000, and recorded a gain of $17,830,000, net of a provision for income
taxes of $9,600,000. During 1992, the Company sold KBH Warrants to purchase
5,123,000 shares of KBH Special Common Stock for net sales proceeds of
$57,470,000, and recorded a gain of $36,208,000, net of a provision for income
taxes of $18,700,000. In accordance with the method used to account for
F-11
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- INVESTMENTS (CONTINUED)
the 1989 distribution of substantially all of the common stock of Kaufman and
Broad Home Corporation then owned by the Company to holders of the Company's
Common Stock, the Company credited these net gains directly to Retained
Earnings. Therefore, there was no impact on net income as a result of these
sales.
Gross realized investment gains and losses on sales of all types of
investments are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------
1994 1993 1992
---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS:
Available for sale:
Realized gains....................................................... $ 44,124 $ 117,488 $ --
Realized losses...................................................... (69,317) (34,377) --
Other:
Realized gains....................................................... 10,571 11,031 180,601
Realized losses...................................................... (10,008) (24,994) (127,725)
EQUITIES:
Realized gains......................................................... 23,120 20,177 1,087
Realized losses........................................................ (496) (4,232) (1,311)
OTHER INVESTMENTS:
Realized gains......................................................... 41,720 30,456 12,862
Realized losses........................................................ (4,950) (22,592) (2,148)
IMPAIRMENT WRITEDOWNS.................................................... (55,888) (114,244) (119,730)
---------- ------------ ------------
Total net realized investment losses..................................... $ (21,124) $ (21,287) $ (56,364)
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
The sources and related amounts of investment income are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------
1994 1993 1992
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term investments..................................................... $ 30,900 $ 33,593 $ 16,970
Bonds, notes and redeemable preferred stocks............................... 518,215 515,995 529,070
Mortgage loans............................................................. 132,297 132,069 145,059
Common stocks.............................................................. 61 35 132
Real estate................................................................ 865 (314) (1,690)
Equity-method limited partnerships......................................... 37,205 21,579 28,659
Cost-method limited partnerships........................................... 20,948 22,683 15,943
Other invested assets...................................................... 17,659 28,729 28,870
----------- ----------- -----------
Total investment income.................................................... $ 758,150 $ 754,369 $ 763,013
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Expenses incurred to manage the investment portfolio amounted to $16,751,000
for the year ended September 30, 1994; $16,443,000 for the year ended September
30, 1993 and $16,344,000 for the year ended September 30, 1992; and are included
in General and Administrative Expenses in the income statement.
At September 30, 1994 and 1993, Other Invested Assets include $593,854,000
and $501,328,000, respectively, of investments in limited partnerships. The
Company's limited partnership interests primarily include (i) partnerships that
have purchased mortgage loans or other real estate-related
F-12
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- INVESTMENTS (CONTINUED)
assets from the Resolution Trust Corporation or other financial institutions,
(ii) partnerships that invest largely in equity securities, and (iii)
partnerships that make tax-advantaged investments in affordable housing.
Investments in unconsolidated limited partnerships accounted for by using
the equity method of accounting totaled $268,102,000 at September 30, 1994. At
that date, total combined assets of these partnerships were $447,182,000
(including $442,322,000 of investments) and total combined liabilities were
$172,451,000 (including $143,476,000 of nonrecourse notes payable to banks). For
the year then ended, total combined revenues and expenses of such partnerships
were $131,975,000 and $85,813,000, respectively, resulting in $46,162,000 of
total combined pretax income.
Investments in unconsolidated limited partnerships accounted for by using
the equity method of accounting totaled $321,584,000 at September 30, 1993. At
that date, total combined assets of these partnerships were $497,067,000
(including $480,517,000 of investments) and total combined liabilities were
$173,104,000 (including $158,595,000 of nonrecourse notes payable to banks). For
the year then ended, total combined revenues and expenses of such partnerships
were $94,213,000 and $71,431,000, respectively, resulting in $22,782,000 of
total combined pretax income.
At September 30, 1994, no investment exceeded 10% of the Company's
consolidated shareholders' equity.
At September 30, 1994, mortgage loans were collateralized by properties
located in 26 states, with loans totaling approximately 33% of the aggregate
carrying value of the portfolio secured by properties located in California.
At September 30, 1994, bonds, notes and redeemable preferred stocks included
$988,152,000 (at amortized cost, with fair value of $946,432,000) of investments
not rated investment grade by either Standard & Poor's Corporation, Moody's
Investors Service or under National Association of Insurance Commissioners'
guidelines. The Company had no material concentrations of non-investment grade
assets at September 30, 1994.
At September 30, 1994, the amortized cost (and fair value) of investments in
default as to the payment of principal or interest was $56,222,000, consisting
of $10,271,000 of unsecured non-investment grade bonds and $45,951,000 of
mortgage loans.
The Company has entered into various Swap Agreements with major brokerage
firms and money center banks to reduce the impact of changes in interest rates
on certain floating-rate investments. At September 30, 1994, the Company had 25
outstanding Swap Agreements with an aggregate notional principal amount of
$1,228,746,000. The Swap Agreements effectively convert certain variable-rate
corporate bonds and notes and variable-rate mortgage loans into fixed-rate
instruments. These Swap Agreements mature in various years through 1998 and have
an average remaining maturity of approximately 27 months. The Company is exposed
to potential credit loss in the event of nonperformance by the investment
grade-rated counterparties only with respect to the net differential payments.
However, nonperformance is not anticipated and, therefore, no collateral is held
or pledged. Related net interest receivable of $10,675,000 and $21,664,000 at
September 30, 1994 and 1993, respectively, is included in Accrued Investment
Income in the balance sheet.
For investment purposes, the Company also has entered into various Total
Return Agreements with an aggregate notional principal amount of $158,492,000
(the "Notional Amount") at September 30, 1994. The Total Return Agreements
effectively exchange a fixed rate of interest (the "Payment Amount") on the
Notional Amount for the coupon income plus or minus the increase or decrease in
the market value (the "Total Return") of specified non-investment grade
corporate bonds
F-13
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- INVESTMENTS (CONTINUED)
(the "Bonds"). The Total Return Agreements mature in November 1994; however, the
Company intends to enter into other similar agreements. The Company is exposed
to potential loss due to bond market fluctuations equal to the Payment Amount
plus any reduction in the aggregate market value of the Bonds below the Notional
Amount. The Company is also exposed to potential credit loss in the event of
nonperformance by the investment grade-rated counterparty with respect to any
increase in the aggregate market value of the Bonds above the Notional Amount.
However, nonperformance is not anticipated and, therefore, no collateral is held
or pledged. Related income of $1,306,000, $14,574,000 and $12,330,000 for the
years ended September 30, 1994, 1993 and 1992, respectively, is included in
Investment Income in the income statement.
Mortgage-backed securities with an amortized cost of $172,788,000 at
September 30, 1994 are pledged to secure outstanding collateralized mortgage
obligations (see Note 4 -- Indebtedness).
NOTE 3 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value disclosures are limited to the reasonable
estimates of the fair value of only the Company's financial instruments. The
disclosures do not address the value of the Company's recognized and
unrecognized nonfinancial assets (including its other invested assets, equity
investments and real estate investments) and liabilities or the value of
anticipated future business. The Company does not plan to sell most of its
assets or settle most of its liabilities at these estimated fair values.
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. Selling expenses and potential taxes
are not included. The estimated fair value amounts were determined using
available market information, current pricing information and various valuation
methodologies. If quoted market prices were not readily available for a
financial instrument, management determined an estimated fair value.
Accordingly, the estimates may not be indicative of the amounts the financial
instruments could be exchanged for in a current or future market transaction.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND SHORT-TERM INVESTMENTS: Carrying value is considered to be a
reasonable estimate of fair value.
BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS: Fair value is based
principally on independent pricing services, broker quotes and other
independent information. Fair values include the market value, determined
from independent broker quotes, of Swap Agreements that hedge certain
variable-rate bonds and notes.
MORTGAGE LOANS: Fair values are primarily determined by discounting
future cash flows to the present at current market rates, using expected
prepayment rates. Fair values include the market value, determined from
independent broker quotes, of Swap Agreements that hedge certain
variable-rate mortgage loans.
VARIABLE ANNUITY ASSETS: Variable annuity assets are carried at the
market value of the underlying securities.
RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts and
single premium life contracts are assigned fair value equal to current net
surrender value. Annuitized contracts are valued based on the present value
of future cash flows at current pricing rates.
F-14
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
RESERVES FOR GUARANTEED INVESTMENT CONTRACTS: Fair value is based on
the present value of future cash flows at current pricing rates.
TRUST DEPOSITS: Trust deposits are carried at the fair value of
deposits payable upon demand.
PAYABLE TO BROKERS FOR PURCHASES OF SECURITIES: Such obligations
represent net transactions of a short-term nature for which the carrying
value is considered a reasonable estimate of fair value.
VARIABLE ANNUITY LIABILITIES: Fair value of contracts in the
accumulation phase are based on net surrender values. Fair values of
contracts in the payout phase are based on the present value of future cash
flows at assumed investment rates.
LONG-TERM NOTES AND DEBENTURES: Fair value is estimated based on the
quoted market prices for the same or similar issues and is net of the
estimated fair market value of a hedging Swap Agreement.
BANK NOTES AND COLLATERALIZED MORTGAGE OBLIGATIONS: Such obligations
are variable-rate obligations for which the fair value approximates the
carrying value.
The estimated fair values of the Company's financial instruments at
September 30, 1994 and 1993, compared with their respective carrying values are
as follows:
<TABLE>
<CAPTION>
CARRYING VALUE FAIR VALUE
-------------- -------------
(IN THOUSANDS)
<S> <C> <C>
1994:
ASSETS:
Cash and short-term investments................................................. $ 569,382 $ 569,382
Bonds, notes and redeemable preferred stocks.................................... 6,334,870 6,342,960
Mortgage loans.................................................................. 1,426,924 1,404,562
Variable annuity assets......................................................... 4,513,093 4,513,093
LIABILITIES:
Reserves for fixed annuity contracts............................................ 4,519,623 4,415,386
Reserves for guaranteed investment contracts.................................... 2,783,522 2,480,086
Trust deposits.................................................................. 442,320 442,320
Payable to brokers for purchases of securities.................................. 643,734 643,734
Variable annuity liabilities.................................................... 4,513,093 4,361,220
Long-term notes and debentures.................................................. 472,835 458,692
Collateralized mortgage obligations............................................. 28,662 28,662
-------------- -------------
-------------- -------------
1993:
ASSETS:
Cash and short-term investments................................................. $1,797,796 $ 1,797,796
Bonds, notes and redeemable preferred stocks.................................... 6,377,774 6,453,027
Mortgage loans.................................................................. 1,286,436 1,355,773
Variable annuity assets......................................................... 4,194,970 4,194,970
LIABILITIES:
Reserves for fixed annuity contracts............................................ 4,932,750 4,815,529
Reserves for guaranteed investment contracts.................................... 2,216,104 2,454,677
Trust deposits.................................................................. 378,986 378,986
Payable to brokers for purchases of securities.................................. 1,586,923 1,586,923
Variable annuity liabilities.................................................... 4,194,970 4,053,182
Long-term notes and debentures.................................................. 380,560 432,025
Bank notes and collateralized mortgage obligations.............................. 127,151 127,151
-------------- -------------
-------------- -------------
</TABLE>
F-15
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 -- INDEBTEDNESS
Indebtedness consists of the following (interest rates are as of September
30):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1994 1993
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
LONG-TERM NOTES AND DEBENTURES:
Medium-term notes due 1998 through 2005 (5 3/8% to 6 3/4% in 1994 and 6% to 6 3/4% in
1993)................................................................................ $ 147,835 $ 55,560
8 1/8% 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
----------- -----------
Total long-term notes and debentures.................................................. 472,835 380,560
----------- -----------
BANK NOTES:
Borrowings under a term loan agreement repaid in 1994 (4 1/4% in 1993)................ -- 15,119
----------- -----------
Total bank notes...................................................................... -- 15,119
----------- -----------
COLLATERALIZED MORTGAGE OBLIGATIONS redeemable in 1995 (5 5/8% in 1994 and 4% in
1993).................................................................................. 28,662 112,032
----------- -----------
Total indebtedness...................................................................... $ 501,497 $ 507,711
----------- -----------
----------- -----------
</TABLE>
At September 30, 1994, the Company had approximately $52,165,000 of
securities available under shelf registration statements that could be issued as
medium-term notes or other forms of debt securities.
Short-term borrowings, which include short-term bank notes, reverse
repurchase agreements and borrowings under a commercial paper program, averaged
$224,169,000 at a weighted average interest rate of 4 1/8% during 1994 and
$97,914,000 at a weighted average interest rate of 3 3/8% during 1993. The
highest level of short-term borrowings at any month-end was $395,745,000 at
4 1/2% during 1994 and $192,932,000 at 3 1/4% during 1993. There were no
short-term borrowings outstanding at September 30, 1994.
Principal payments on long-term borrowings are due as follows: 1995,
$28,662,000; 1998, $20,000,000; 1999, $17,775,000; and thereafter, $435,060,000.
NOTE 5 -- CONTINGENT LIABILITIES
The Company is involved in various kinds of litigation common to its
businesses. These cases are in various stages of development and, based on
reports of counsel, management believes that provisions made for potential
losses are adequate and any further liabilities and costs will not have a
material adverse impact upon the Company's financial position or results of
operations.
In 1989, the Company sold, through a 100% coinsurance transaction, Sun Life
of America's General Agency Division. With respect to the coinsurance
transaction, Sun Life of America could become liable for in-force amounts ceded
if the coinsurer were to become unable to meet the obligations assumed under the
coinsurance agreement. In-force amounts ceded approximate $1,463,846,000 at
September 30, 1994. As part of the transaction, assets substantially equal to
the policyholder reserves assumed by the coinsurer are held in trust to secure
the obligations of the coinsurer.
F-16
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- SHAREHOLDERS' EQUITY
On January 29, 1993, the Company's shareholders approved an increase in the
number of authorized shares of the Company's Preferred Stock to 20,000,000
shares from 7,000,000 shares. On March 10, 1993, the Company issued 5,002,500
$2.78 Depositary Shares (the "Series D Depositary Shares"), each representing
one-fiftieth of a share of Series D Mandatory Conversion Premium Dividend
Preferred Stock, with a liquidation preference of $37 per share. On March 1,
1996, each of the outstanding Series D Depositary Shares will convert into one
share of Common Stock and the Company may redeem these shares prior to such
date, in whole or in part, at a price per share initially equal to $57.45,
declining by $.007003 on each day following the date of issue to $50.37 on
January 1, 1996, and equal to $49.95 thereafter. The call price is payable in
shares of Common Stock having an aggregate current market price equal to such
call price, plus an amount in cash equal to all accrued and unpaid dividends.
In 1992, the Company issued 5,620,000 shares of 9 1/4% Preferred Stock,
Series B (the "Series B Preferred Shares"), with a liquidation preference of
$25.00 per share. On or after June 15, 1997, the Company may redeem the Series B
Preferred Shares, in whole or in part, at a price per share of $25.00, plus
accrued and unpaid dividends.
On October 21, 1991, the Company issued 6,000,000 $1.11 Depositary Shares
(the "Series A Depositary Shares"), each representing ownership of one-fifth of
a share of Series A Mandatory Conversion Premium Dividend Preferred Stock, with
a liquidation preference of $13 per share. On August 16, 1994, the Company
redeemed all of the Series A Depositary Shares for a call price equal to $17.55
per share plus accrued and unpaid dividends of approximately $.096 per share.
The call price was paid with 2,476,000 shares of Common Stock of the Company.
On January 21, 1986, the Company's subsidiary, SunAmerica Corporation,
issued 750,000 shares of Adjustable Rate Cumulative Preferred Stock, Series A,
with a liquidation preference of $100 per share. On August 31, 1993, as part of
the merger of SunAmerica Corporation into the Company, the Company canceled all
of the 486,800 outstanding shares and converted each of them into one share of
SunAmerica Adjustable Rate Cumulative Preferred Stock, Series C (the "Series C
Preferred Shares"), with a liquidation preference of $100 per share. The Series
C Preferred Shares are redeemable at the option of the Company. The quarterly
dividend rate is 50 basis points below the higher of three defined treasury rate
indexes. However, the dividend rate may not be less than 7% per annum nor
greater than 13 1/2% per annum. On September 1, 1994, the dividend rate was
7.1%.
All preferred shares of the Company rank on a parity with each other and
rank senior to Common Stock and Nontransferable Class B Stock of the Company as
to payment of dividends and distribution of assets upon dissolution, liquidation
or winding up of the Company.
The Company is authorized to issue 50,000,000 shares of its $1.00 par value
Common Stock and is authorized to repurchase 4,000,000 shares of such stock. At
September 30, 1994, 28,977,000 shares are outstanding; at September 30, 1993,
26,335,000 shares are outstanding; and at September 30, 1992, 25,179,000 shares
are outstanding.
The Company is authorized to issue 15,000,000 shares of its $1.00 par value
Nontransferable Class B Stock. Holders of this stock have rights identical to
those of the Company's common stockholders except that they have ten votes per
share and are entitled to only 90% of any cash dividend paid on the Common
Stock. This stock is convertible at any time into shares of Common Stock. At
September 30, 1994, 6,826,000 shares are outstanding; at September 30, 1993,
6,828,000 shares are outstanding; and at September 30, 1992, 6,834,000 shares
are outstanding.
F-17
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- SHAREHOLDERS' EQUITY (CONTINUED)
Changes in shareholders' equity are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------
1994 1993 1992
------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
PREFERRED STOCK:
Beginning balance......................................................... $ 452,273 $ 267,180 $ 64,900
Redemption of 6,000,000 Series A Depositary Shares........................ (78,000) -- --
Issuance of 5,002,500 Series D Depositary Shares.......................... -- 185,093 --
Issuance of 5,620,000 Series B Preferred Shares........................... -- -- 140,500
Issuance of 6,000,000 Series A Depositary Shares.......................... -- -- 78,000
Repurchase of 162,200 Series C Preferred Shares........................... -- -- (16,220)
------------ ----------- -----------
Ending balance............................................................ $ 374,273 $ 452,273 $ 267,180
------------ ----------- -----------
------------ ----------- -----------
NONTRANSFERABLE CLASS B STOCK:
Beginning balance......................................................... $ 6,828 $ 6,834 $ 6,835
Conversion of 2,000; 6,500; and 700 shares to Common Stock................ (2) (6) (1)
------------ ----------- -----------
Ending balance............................................................ $ 6,826 $ 6,828 $ 6,834
------------ ----------- -----------
------------ ----------- -----------
COMMON STOCK:
Beginning balance......................................................... $ 26,335 $ 25,179 $ 24,619
Issuance of 2,476,000 shares to redeem the Series A Depositary Shares..... 2,476 -- --
Conversion of Nontransferable Class B Stock to 2,000; 6,500; and 700
shares................................................................... 2 6 1
Stock options and other employee benefit plans............................ 164 1,150 559
------------ ----------- -----------
Ending balance............................................................ $ 28,977 $ 26,335 $ 25,179
------------ ----------- -----------
------------ ----------- -----------
ADDITIONAL PAID-IN CAPITAL:
Beginning balance......................................................... $ 110,120 $ 97,295 $ 100,079
Excess of redemption value of 6,000,000 Series A Depositary Shares over
par value of 2,476,000 shares of Common Stock issued..................... 75,524 -- --
Cost of issuance of 5,002,500 Series D Depositary Shares.................. -- (6,110) --
Cost of issuance of 5,620,000 Series B Preferred Shares................... -- -- (4,826)
Cost of issuance of 6,000,000 Series A Depositary Shares.................. -- -- (2,940)
Excess of redemption value of the repurchase of 162,200 Series C Preferred
Shares over cost......................................................... -- -- 1,054
Stock options and other employee benefit plans............................ 3,023 18,935 3,928
------------ ----------- -----------
Ending balance............................................................ $ 188,667 $ 110,120 $ 97,295
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
F-18
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- SHAREHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------
1994 1993 1992
------------ ----------- -----------
(IN THOUSANDS)
RETAINED EARNINGS:
<S> <C> <C> <C>
Beginning balance......................................................... $ 413,770 $ 325,227 $ 230,708
Net income................................................................ 131,801 127,011 76,791
Dividends on:
Preferred Stock......................................................... (37,556) (29,456) (12,258)
Nontransferable Class B Stock........................................... (2,458) (1,721) (1,230)
Common Stock............................................................ (10,816) (7,291) (4,992)
Gain on sale of KBH Warrants, net of income taxes of $9,600,000 and
$18,700,000.............................................................. 17,830 -- 36,208
------------ ----------- -----------
Ending balance............................................................ $ 512,571 $ 413,770 $ 325,227
------------ ----------- -----------
------------ ----------- -----------
NET UNREALIZED INVESTMENT GAINS (LOSSES):
Beginning balance......................................................... $ 100,701 $ 8,353 $ 22,768
Change in net unrealized gains (losses) on debt securities available for
sale..................................................................... (420,966) 91,924 --
Change in net unrealized losses on equity securities available for sale... (49,627) 47,830 (21,912)
Adjustment to deferred acquisition costs.................................. 85,600 -- --
Tax effects of net changes................................................ 134,066 (47,406) 7,497
------------ ----------- -----------
Ending balance............................................................ $ (150,226) $ 100,701 $ 8,353
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
Dividends that the Company may receive from its life insurance subsidiaries
in any year without prior approval of the California, Arizona or New York
insurance commissioners are limited by statute. At September 30, 1994,
restricted net assets of these consolidated life insurance subsidiaries totaled
approximately $699,520,000, of which approximately $57,864,000 is available for
dividends for the remainder of calendar year 1994.
The combined statutory equity of the Company's three life insurance
subsidiaries totaled $679,559,000 at September 30, 1994; $578,643,000 at
December 31, 1993 and $430,901,000 at December 31, 1992. The combined statutory
net income of these subsidiaries totaled $121,001,000 for the nine months ended
September 30, 1994; $192,466,000 for the year ended December 31, 1993; and
$45,634,000 for the year ended December 31, 1992.
F-19
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- INCOME TAXES
The components of the provisions for income taxes on pretax income consist
of the following:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
---------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
1994:
Currently payable............................................................. $ (4,840) $ 1,255 $ (3,585)
Deferred...................................................................... 80,029 (1,744) 78,285
---------- --------- ----------
Total income tax expense...................................................... $ 75,189 $ (489) $ 74,700
---------- --------- ----------
---------- --------- ----------
1993:
Currently payable............................................................. $ 44,049 $ 4,518 $ 48,567
Deferred...................................................................... 9,462 (1,029) 8,433
---------- --------- ----------
Total income tax expense...................................................... $ 53,511 $ 3,489 $ 57,000
---------- --------- ----------
---------- --------- ----------
1992:
Currently payable............................................................. $ 47,227 $ 3,641 $ 50,868
Deferred...................................................................... (19,516) 2,948 (16,568)
---------- --------- ----------
Total income tax expense...................................................... $ 27,711 $ 6,589 $ 34,300
---------- --------- ----------
---------- --------- ----------
</TABLE>
Income taxes computed at the United States federal income tax rate of 35%
for 1994, 34.75% for 1993 and 34% for 1992 and income taxes provided differ as
follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------
1994 1993 1992
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Amount computed at statutory rate.............................................. $ 84,000 $ 63,944 $ 37,771
Increases (decreases) resulting from:
Affordable housing tax credits............................................... (9,619) (7,484) (6,722)
State income taxes, net of federal tax benefit............................... (317) 1,589 4,348
Other, net................................................................... 636 (1,049) (1,097)
--------- --------- ---------
Total income tax expense....................................................... $ 74,700 $ 57,000 $ 34,300
--------- --------- ---------
--------- --------- ---------
</TABLE>
Effective October 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Accordingly, the cumulative effect of this change in accounting for income taxes
was recorded during the quarter ended December 31, 1993 to increase the
liability for Deferred Income Taxes by $33,500,000. Also in accordance with the
new pronouncement, the Company reclassified deferred tax liabilities associated
with unrealized gains on certain debt and equity securities credited directly to
shareholders' equity, which liabilities previously had been netted against the
carrying values of the related securities, to the liability for Deferred Income
Taxes, increasing that liability by $53,174,000 at September 30, 1993. Also as
part of this accounting change, the Company reclassified $2,121,000 of certain
deferred tax benefits to the liability for Deferred Income Taxes at September
30, 1993 that were previously netted against Reserves for Fixed Annuity
Contracts.
F-20
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax reporting purposes. The significant
components of the liability for Deferred Income Taxes are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Investments...................................................................... $ 102,175 $ 39,734
Deferred acquisition costs....................................................... 159,471 149,598
State income taxes............................................................... 3,978 3,854
Deferred income.................................................................. 3,327 4,714
Net unrealized gains on certain debt and equity securities....................... -- 53,174
------------- -------------
Total deferred tax liabilities................................................... 268,951 251,074
------------- -------------
DEFERRED TAX ASSETS:
Contractholder reserves.......................................................... (97,944) (94,211)
Guaranty fund assessments........................................................ (5,144) (7,700)
Deferred expenses................................................................ (10,653) (19,064)
Net unrealized losses on certain debt and equity securities...................... (80,891) --
------------- -------------
Total deferred tax assets........................................................ (194,632 ) (120,975 )
------------- -------------
Net deferred tax liability (pro forma at September 30, 1993)....................... 74,319 130,099
Cumulative effect of change in accounting for income taxes recorded in the first
quarter of 1994................................................................... -- (33,500 )
------------- -------------
Deferred income taxes, per balance sheet........................................... $ 74,319 $ 96,599
------------- -------------
------------- -------------
</TABLE>
NOTE 8 -- EMPLOYEE BENEFIT PLANS
Benefits are provided to most employees of the Company under a deferred
profit sharing plan. The aggregate cost of this plan was $1,529,000 in 1994,
$2,509,000 in 1993 and $1,581,000 in 1992.
Under the Company's 1988 Employee Stock Plan (the "1988 Plan"), options to
purchase 1,687,567 shares at prices ranging from $3.88 to $45.06 are outstanding
and 1,331,567 shares are reserved at September 30, 1994 for future grants.
F-21
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for the years ended September 30, 1994 and 1993
follow:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER COMMON SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
1994:
Net investment income.......................................... $ 70,714 $ 70,736 $ 74,241 $ 78,763
Net realized investment losses................................. (5,367) (5,887) (5,312) (4,558)
Fee income..................................................... 37,627 37,837 37,640 37,632
General and administrative expenses............................ (33,457) (32,500) (32,198) (34,588)
Amortization of deferred acquisition costs..................... (15,243) (16,090) (17,241) (18,351)
Other income and expenses...................................... 2,990 3,711 4,033 4,869
---------- ---------- ---------- ----------
Pretax income.................................................. 57,264 57,807 61,163 63,767
Income tax expense............................................. (17,700) (17,800) (19,100) (20,100)
---------- ---------- ---------- ----------
Income before cumulative effect of change in accounting for
income taxes.................................................. 39,564 40,007 42,063 43,667
Cumulative effect of change in accounting for income taxes..... (33,500) -- -- --
---------- ---------- ---------- ----------
Net income..................................................... $ 6,064 $ 40,007 $ 42,063 $ 43,667
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Per common share:
Income before cumulative change in accounting for income
taxes....................................................... $ .85 $ .86 $ .91 $ .95
Cumulative effect of change in accounting for income taxes... (.80) -- -- --
---------- ---------- ---------- ----------
Net income................................................... $ .05 $ .86 $ .91 $ .95
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
1993:
Net investment income.......................................... $ 50,057 $ 59,635 $ 69,699 $ 84,400
Net realized investment losses................................. (3,748) (5,325) (4,468) (7,746)
Fee income..................................................... 31,305 32,538 34,476 35,986
General and administrative expenses............................ (29,754) (33,690) (34,506) (37,840)
Provision for future guaranty fund assessments................. -- (1,000) (3,070) (17,930)
Amortization of deferred acquisition costs..................... (12,674) (12,861) (13,027) (13,298)
Other income and expenses...................................... 4,219 2,412 2,331 7,890
---------- ---------- ---------- ----------
Pretax income.................................................. 39,405 41,709 51,435 51,462
Income tax expense............................................. (11,400) (12,100) (17,600) (15,900)
---------- ---------- ---------- ----------
Net income..................................................... $ 28,005 $ 29,609 $ 33,835 $ 35,562
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Per common share............................................... $ .63 $ .66 $ .70 $ .75
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
F-22
<PAGE>
SUNAMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 -- BUSINESS SEGMENTS
The Company has four business segments: annuity operations, asset
management, retirement trust services and broker-dealer operations.
Respectively, these include the sale of fixed and variable annuities and
guaranteed investment contracts; the management and marketing of mutual funds;
custodial and administrative services for self-directed retirement plans; and
the sale of securities and financial services products. Summarized data for the
years ended September 30, 1994, 1993 and 1992 follow:
<TABLE>
<CAPTION>
TOTAL
DEPRECIATION
AND
TOTAL AMORTIZATION PRETAX TOTAL
REVENUES EXPENSE INCOME ASSETS
----------- ------------ ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1994:
Annuity operations....................................... $ 790,211 $ 55,724 $ 211,419 $ 14,034,879
Asset management......................................... 32,803 19,330 7,916 102,192
Retirement trust services................................ 36,412 838 10,210 478,805
Broker-dealer operations................................. 28,336 853 10,456 40,349
----------- ------------ ----------- --------------
Total.................................................... $ 887,762 $ 76,745 $ 240,001 $ 14,656,225
----------- ------------ ----------- --------------
----------- ------------ ----------- --------------
1993:
Annuity operations....................................... $ 775,072 $ 53,688 $ 150,109 $ 14,693,701
Asset management......................................... 33,826 8,853 14,806 98,137
Retirement trust services................................ 33,562 806 10,213 433,889
Broker-dealer operations................................. 24,927 821 8,883 41,694
----------- ------------ ----------- --------------
Total.................................................... $ 867,387 $ 64,168 $ 184,011 $ 15,267,421
----------- ------------ ----------- --------------
----------- ------------ ----------- --------------
1992:
Annuity operations....................................... $ 752,622 $ 53,939 $ 93,492 $ 12,846,585
Asset management......................................... 26,926 5,141 10,194 94,534
Retirement trust services................................ 19,804 620 4,809 424,579
Broker-dealer operations................................. 20,128 867 2,596 37,953
----------- ------------ ----------- --------------
Total.................................................... $ 819,480 $ 60,567 $ 111,091 $ 13,403,651
----------- ------------ ----------- --------------
----------- ------------ ----------- --------------
</TABLE>
F-23
<PAGE>
SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE NUMBER IN
THIS ANNUAL
REPORT ON
FORM 10-K
-------------------
<S> <C>
Report of Independent Accountants on Financial Statement Schedules........................... S-2
Schedule II -- Amounts Receivable from Related Parties and Underwriters, Promoters, and
Employees Other than Related Parties........................................................ S-3
Schedule III -- Condensed Financial Information of Registrant................................ S-4 through S-7
Schedule VI -- Reinsurance................................................................... S-8
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.
S-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of SunAmerica Inc.
Our audits of the consolidated financial statements referred to in our
report dated November 9, 1994 appearing on page F-2 of this Annual Report on
Form 10-K of SunAmerica Inc. also included an audit of the Financial Statement
Schedules listed on page S-1 of this Form 10-K. In our opinion, these Financial
Statement Schedules present fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
As discussed in Note 7 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," in fiscal 1994.
Price Waterhouse LLP
Los Angeles, California
November 9, 1994
S-2
<PAGE>
SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES
OTHER THAN RELATED PARTIES
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------
NAME OF BORROWER 1994 1993 1992
- -------------------------------------------------------------------------- ----------- ----------- ------------
<S> <C> <C> <C>
Robert P. Saltzman
Beginning balance....................................................... $ -- $ -- $ 286,476
Borrowings.............................................................. -- -- 28,980
Collections............................................................. -- -- (315,456)
----------- ----------- ------------
Ending balance.......................................................... $ -- $ -- $ --
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
The receivable from Mr. Saltzman includes $250,732 pursuant to purchases of
shares under the Company's 1978 Employee Stock Option Plan, which provides for
interest at 1% above the prime rate and payment of principal and accrued
interest one year after the date of purchase, and was collateralized by the
shares purchased. This receivable also includes $35,744 pursuant to purchases of
shares under the Company's 1988 Employee Stock Option Plan, which also provides
for interest at 1% above the prime rate.
S-3
<PAGE>
SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
------------------ ------------------
<S> <C> <C>
ASSETS
Investment in and advances to subsidiaries................................ $ 839,092,000 $ 958,010,000
Other investments......................................................... 944,427,000 1,416,651,000
Other assets.............................................................. 113,762,000 37,274,000
------------------ ------------------
TOTAL ASSETS.............................................................. $ 1,897,281,000 $ 2,411,935,000
------------------ ------------------
------------------ ------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Reserves for guaranteed investment contracts............................ $ 265,354,000 $ 429,059,000
Notes payable........................................................... 472,835,000 395,679,000
Payable to brokers for purchases of securities.......................... 136,238,000 403,515,000
Other liabilities....................................................... 61,766,000 73,655,000
------------------ ------------------
Total liabilities....................................................... 936,193,000 1,301,908,000
Shareholders' equity...................................................... 961,088,000 1,110,027,000
------------------ ------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................ $ 1,897,281,000 $ 2,411,935,000
------------------ ------------------
------------------ ------------------
</TABLE>
CONDENSED INCOME STATEMENT
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------------------------------
1994 1993 1992
---------------- ---------------- ---------------
<S> <C> <C> <C>
Dividends received from subsidiary corporations.............. $ 45,400,000 $ 34,700,000 $ 42,121,000
Investment income............................................ 104,299,000 75,710,000 64,809,000
Net realized investment gains (losses)....................... 7,231,000 (6,989,000) (39,636,000)
Other income and (expenses).................................. 3,518,000 (444,000) 4,818,000
---------------- ---------------- ---------------
TOTAL INCOME................................................. 160,448,000 102,977,000 72,112,000
---------------- ---------------- ---------------
Interest expense on notes payable............................ (45,989,000) (28,846,000) (20,913,000)
Interest expense on guaranteed investment contracts.......... (25,624,000) (25,677,000) (15,119,000)
General and administrative expenses, net of reimbursement
from subsidiaries of $11,374,000 in 1994, $9,009,000 in 1993
and $7,652,000 in 1992...................................... 417,000 449,000 (199,000)
---------------- ---------------- ---------------
TOTAL EXPENSES............................................... (71,196,000) (54,074,000) (36,231,000)
---------------- ---------------- ---------------
PRETAX INCOME................................................ 89,252,000 48,903,000 35,881,000
Income tax expense........................................... (9,607,000) (3,150,000) (2,036,000)
---------------- ---------------- ---------------
INCOME BEFORE EQUITY IN UNDISTRIBUTED NET INCOME OF
UNCONSOLIDATED SUBSIDIARIES AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING FOR INCOME TAXES.............................. 79,645,000 45,753,000 33,845,000
Equity in undistributed net income of unconsolidated
subsidiaries................................................ 29,956,000 81,258,000 42,946,000
Cumulative effect of change in accounting for income taxes... 22,200,000 -- --
---------------- ---------------- ---------------
NET INCOME................................................... $ 131,801,000 $ 127,011,000 $ 76,791,000
---------------- ---------------- ---------------
---------------- ---------------- ---------------
</TABLE>
S-4
<PAGE>
SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------------
1994 1993 1992
---------------- ---------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $ 131,801,000 $ 127,011,000 $ 76,791,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in undistributed net income of unconsolidated
subsidiaries......................................... (29,956,000) (81,258,000) (42,946,000)
Net realized investment (gains) losses................ (7,231,000) 6,989,000 39,636,000
Cumulative effect of change in accounting for income
taxes................................................ (22,200,000) -- --
Other, net.............................................. (6,532,000) (6,902,000) (4,301,000)
---------------- ---------------- ----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................. 65,882,000 45,840,000 69,180,000
---------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of investments............................ (63,883,000) (246,956,000) (357,573,000)
Increase in investment in subsidiary corporations....... (45,539,000) -- (85,700,000)
---------------- ---------------- ----------------
NET CASH USED BY INVESTING ACTIVITIES..................... (109,422,000) (246,956,000) (443,273,000)
---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of cash dividends.............................. (50,830,000) (38,760,000) (18,945,000)
Proceeds from issuances of guaranteed investment
contracts.............................................. 110,000,000 158,372,000 202,391,000
Withdrawal payments on guaranteed investment
contracts.............................................. (299,330,000) -- --
Net proceeds from issuances of long-term notes and
debentures............................................. 91,711,000 153,433,000 222,828,000
Net decrease in senior indebtedness..................... (15,119,000) (10,800,000) (6,786,000)
Redemption of senior subordinated fixed rate notes...... -- -- (119,886,000)
Net proceeds from issuances of Preferred Stock.......... -- 178,983,000 210,734,000
Other, net.............................................. -- -- (15,616,000)
---------------- ---------------- ----------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES.......... (163,568,000) 441,228,000 474,720,000
---------------- ---------------- ----------------
NET (DECREASE) INCREASE IN CASH AND SHORT-TERM
INVESTMENTS.............................................. (207,108,000) 240,112,000 100,627,000
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD.... 356,751,000 116,639,000 16,012,000
---------------- ---------------- ----------------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD.......... $ 149,643,000 $ 356,751,000 $ 116,639,000
---------------- ---------------- ----------------
---------------- ---------------- ----------------
</TABLE>
S-5
<PAGE>
SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 -- INDEBTEDNESS
Notes payable consist of the following (interest rates are as of September
30):
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
---------------- ----------------
<S> <C> <C>
LONG-TERM NOTES AND DEBENTURES:
Medium-term notes due 1998 through 2005 (5 3/8% to 6 3/4% in 1994 and 6% to
6 3/4% in 1993).............................................................. $ 147,835,000 $ 55,560,000
8 1/8% debentures due April 28, 2023.......................................... 100,000,000 100,000,000
9.95% debentures due February 1, 2012......................................... 100,000,000 100,000,000
9% notes due January 15, 1999................................................. 125,000,000 125,000,000
---------------- ----------------
Total long-term notes and debentures.......................................... 472,835,000 380,560,000
---------------- ----------------
BANK NOTES:
Borrowings under a term loan agreement repaid in 1994 (4 1/4% in 1993)........ -- 15,119,000
---------------- ----------------
Total bank notes.............................................................. -- 15,119,000
---------------- ----------------
Total indebtedness............................................................ $ 472,835,000 $ 395,679,000
---------------- ----------------
---------------- ----------------
</TABLE>
Aggregate debt service payments are due as follows: 1995, $38,582,000; 1996,
$38,582,000; 1997, $38,582,000; 1998, $58,253,000; 1999, $174,033,000 and
$651,076,000 thereafter.
In addition, the Company is the issuer of the following guaranteed
investment contracts ("GICs") (interest rates are as of September 30):
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
---------------- ----------------
<S> <C> <C>
8 1/2% GIC due serially through 2002 (including interest credited of
$1,382,000 in 1994 and $1,400,000 in 1993)................................... $ 196,497,000 $ 199,055,000
8 3/8% GIC due serially through 2003 (including interest credited of $416,000
in 1994 and $495,000 in 1993)................................................ 59,986,000 71,405,000
7 3/8% GIC due in 2018 (including interest credited of $267,000 in 1994 and
$212,000 in 1993)............................................................ 8,871,000 8,584,000
Floating-rate GICs due in 1994 (including interest credited of $15,000 and
3 5/8% in 1993).............................................................. -- 150,015,000
---------------- ----------------
Total guaranteed investment contracts......................................... $ 265,354,000 $ 429,059,000
---------------- ----------------
---------------- ----------------
</TABLE>
Aggregate debt service payments are due as follows: 1995, $36,605,000; 1996,
$31,711,000; 1997, $31,657,000; 1998, $31,611,000; 1999, $24,820,000; and
$258,038,000 thereafter.
S-6
<PAGE>
SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- GUARANTEES
Certain subsidiaries of the Company have sold certain of their interests in
various limited partnerships that invest in tax-advantaged affordable housing
projects. The Company has guaranteed a minimum yield and funding of certain
defined operating deficits with respect to these sales in return for a fee.
Management does not anticipate any material liability with respect to these
guarantees.
During December 1992, a non-regulated subsidiary, ALIGP Corporation, sold
all of its net assets, composed primarily of an investment in Athena Loan
Investors, L.P., whose principal assets are senior secured loans ("Secured
Loans") and whose principal liabilities are notes payable to Sun Life Insurance
Company of America ("Sun Life of America") secured by such Secured Loans, to an
unaffiliated third party. The Company has guaranteed the full repayment of
principal and interest on a note payable in the amount of $62,700,000 incurred
by the buyer as part of the sale transaction. Based on an evaluation of the
projected cash flows, it is management's belief that adequate provision has been
made for any future losses with respect to this guarantee.
Anchor National Life Insurance Company ("Anchor") has undertaken to dispose
of $84,544,000 of certain of its real estate during the next one to three years,
either to affiliated or nonaffiliated parties, and the Company has guaranteed
that Anchor will receive its current carrying value for these assets. The
Company has pledged certain marketable securities having an amortized cost of
$40,338,000 at September 30, 1994 with respect to this guarantee.
In September 1994, the Company's subsidiaries, Sun Life of America and
Anchor, pooled certain performing mortgage loans with an aggregate principal
balance of approximately $64,000,000, creating mortgage-backed pass-through
certificates. The Company has provided limited guarantees in the aggregate
amount of approximately $22,000,000 for losses, if any, realized by Sun Life of
America and Anchor as holders of the certificates.
NOTE 3 -- CONTINGENCIES
The Company is involved in various kinds of litigation common to its
businesses. These cases are in various stages of development and, based on
reports of counsel, management believes that provisions made for potential
losses are adequate and any further liabilities and costs will not have a
material adverse impact upon the Company's financial position or results of
operations.
S-7
<PAGE>
SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VI -- REINSURANCE
AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
CEDED TO
GROSS AMOUNT OTHER COMPANIES NET AMOUNT
------------------ ------------------ ----------------
<S> <C> <C> <C>
1994:
Life insurance in force................................. $ 2,140,257,000 $ 1,822,112,000 $ 318,145,000
------------------ ------------------ ----------------
------------------ ------------------ ----------------
Premiums:
Annuities and other single premiums................... $ 230,037,000 $ -- $ 230,037,000
Annual life insurance premiums........................ 9,591,000 9,591,000 --
------------------ ------------------ ----------------
Total premiums........................................ $ 239,628,000 $ 9,591,000 $ 230,037,000
------------------ ------------------ ----------------
------------------ ------------------ ----------------
1993:
Life insurance in force................................. $ 2,459,830,000 $ 2,139,123,000 $ 320,707,000
------------------ ------------------ ----------------
------------------ ------------------ ----------------
Premiums:
Annuities and other single premiums................... $ 223,827,000 $ -- $ 223,827,000
Annual life insurance premiums........................ 14,144,000 14,144,000 --
------------------ ------------------ ----------------
Total premiums........................................ $ 237,971,000 $ 14,144,000 $ 223,827,000
------------------ ------------------ ----------------
------------------ ------------------ ----------------
1992:
Life insurance in force................................. $ 2,700,668,000 $ 2,372,244,000 $ 328,424,000
------------------ ------------------ ----------------
------------------ ------------------ ----------------
Premiums:
Annuities and other single premiums................... $ 243,715,000 $ -- $ 243,715,000
Annual life insurance premiums........................ 17,515,000 17,515,000 --
------------------ ------------------ ----------------
Total premiums........................................ $ 261,230,000 $ 17,515,000 $ 243,715,000
------------------ ------------------ ----------------
------------------ ------------------ ----------------
</TABLE>
S-8
<PAGE>
SUNAMERICA INC.
1994 FORM 10-K
[LOGO]
<PAGE>
1 SunAmerica Center
Los Angeles, California 90067-6022
(310) 772-6000
<PAGE>
SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
LIST OF EXHIBITS FILED
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10(h) Executive Deferred Compensation Plan, dated as of October 1, 1989.
10(k) $90,000,000 Credit Agreement dated, as of February 1, 1993, among the Company, SunAmerica
Corporation and SunAmerica Financial, Inc., as Borrowers, and Citibank, N.A., as Agent for the
bank named therein.
10(l) $60,000,000 Credit Agreement, dated as of February 1, 1993, among the Company, SunAmerica
Corporation and SunAmerica Financial, Inc., as Borrowers, and Citibank, N.A., as Agent for the
banks named therein.
10(m) First Amendment to Credit Agreement, dated as of January 30, 1994, among the Company,
SunAmerica Financial, Inc. and Citibank, N.A., amending the Credit Agreement of February 1,
1993.
10(n) First Amendment to Credit Agreement, dated as of January 30, 1994, among the Company and
SunAmerica Financial, Inc. and Citibank, N.A., amending the Credit Agreement of February 1,
1993.
10(o) List of Executive Compensation Plans and Arrangements.
12 Statement re Computations of Ratios.
21 Subsidiaries of the Company.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
</TABLE>
<PAGE>
EXHIBIT 10 (h)
BROAD INC.
----------
EXECUTIVE DEFERRED COMPENSATION PLAN
------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. "Account" . . . . . . . . . . . . . . . . . . 1
1.02. "Act" . . . . . . . . . . . . . . . . . . . . 1
1.03. "Anniversary Date" . . . . . . . . . . . . . . 1
1.04. "Beneficiary" . . . . . . . . . . . . . . . . 1
1.05. "Benefit Agreement" . . . . . . . . . . . . . 2
1.06. "Board of Directors" . . . . . . . . . . . . . 2
1.07. "Change in Control" . . . . . . . . . . . . . 2
1.08. "Claims Coordinator" . . . . . . . . . . . . . 2
1.09. "Code" . . . . . . . . . . . . . . . . . . . . 2
1.10. "Committee" . . . . . . . . . . . . . . . . . 2
1.11. "Company" . . . . . . . . . . . . . . . . . . 3
1.12. "Covered Bonus" . . . . . . . . . . . . . . . 3
1.13. "Covered Salary" . . . . . . . . . . . . . . . 3
1.14. "Deferral" . . . . . . . . . . . . . . . . . . 3
1.15. "Deferral Period" . . . . . . . . . . . . . . 3
1.16. "Disability" . . . . . . . . . . . . . . . . . 3
1.17. "Disability Plan" . . . . . . . . . . . . . . 3
1.18. "Early Retirement Date" . . . . . . . . . . . 3
1.19. "Effective Date" . . . . . . . . . . . . . . . 4
1.20. "Employer" . . . . . . . . . . . . . . . . . . 4
1.21. "Executive" . . . . . . . . . . . . . . . . . 4
1.22. "Leave" . . . . . . . . . . . . . . . . . . . 4
1.23. "Minimum Annual Deferral" . . . . . . . . . . 4
1.24. "Normal Retirement Date" . . . . . . . . . . . 4
1.25. "Participant" . . . . . . . . . . . . . . . . 4
1.26. "Plan" . . . . . . . . . . . . . . . . . . . . 4
1.27. "Plan Interest Rate" . . . . . . . . . . . . . 4
1.28. "Plan Year" . . . . . . . . . . . . . . . . . 5
1.29. "Post-Retirement Death Benefit" . . . . . . . 5
1.30. "Pre-Retirement Death Benefit" . . . . . . . . 5
1.31. "Retirement Income Benefit" . . . . . . . . . 5
1.32. "Total Deferral" . . . . . . . . . . . . . . . 5
2. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . 6
2.01. Commencement of Deferral
Period . . . . . . . . . . . . . . . . . . . . 6
2.02. Deferrals . . . . . . . . . . . . . . . . . . 6
2.03. Election of Total Deferral . . . . . . . . . . 6
2.04. Annual Election . . . . . . . . . . . . . . . 6
2.05. Change in Circumstances . . . . . . . . . . . 7
(i)
<PAGE>
Section Page
- ------- ----
3. FUNDING OF BENEFITS . . . . . . . . . . . . . . . . . . . 8
3.01. Unfunded Plan . . . . . . . . . . . . . . . . 8
3.02. No Employer Matching Contributions . . . . . . 8
3.03. Interest . . . . . . . . . . . . . . . . . . . 8
4. CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . 9
4.01. Benefit Claims Procedure . . . . . . . . . . . 9
4.02. Appeals Procedure . . . . . . . . . . . . . . 9
5. RETIREMENT INCOME BENEFITS . . . . . . . . . . . . . . . 11
5.01. Normal Retirement Benefit . . . . . . . . . . 11
5.02. Early Retirement Benefit . . . . . . . . . . . 11
5.03. Deferred Retirement Benefit . . . . . . . . . 11
5.04. Termination Benefit . . . . . . . . . . . . . 12
5.05. Disability . . . . . . . . . . . . . . . . . . 12
5.06. Hardship Withdrawal Benefit . . . . . . . . . 13
5.07. Change in Control Benefit . . . . . . . . . . 13
6. PRE-RETIREMENT DEATH BENEFITS . . . . . . . . . . . . . . 14
6.01. Pre-Retirement Death Benefit . . . . . . . . . 14
7. POST-RETIREMENT DEATH BENEFITS . . . . . . . . . . . . . 15
7.01. Post-Retirement Death Benefit . . . . . . . . 15
8. VESTING OF BENEFITS . . . . . . . . . . . . . . . . . . . 16
8.01. Participant's Account . . . . . . . . . . . . 16
(ii)
<PAGE>
Section Page
- ------- ----
9. ADDITIONAL PROVISIONS AFFECTING BENEFITS . . . . . . . . 17
9.01. Benefit Agreement . . . . . . . . . . . . . . 17
9.02. Leave of Absence . . . . . . . . . . . . . . . 17
9.03. Alternative Forms of Benefit . . . . . . . . . 17
9.04. Withholding . . . . . . . . . . . . . . . . . 17
10. ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . 18
10.01. Duties and Powers . . . . . . . . . . . . . . 18
10.02. Conduct of Its Affairs . . . . . . . . . . . . 18
10.03. Allocation of Responsibilities . . . . . . . . 18
10.04. Expenses of the Committee . . . . . . . . . . 18
10.05. Bonding and Compensation . . . . . . . . . . . 18
10.06. Information to be Submitted
to the Committee . . . . . . . . . . . . . . . 18
10.07. Notices, Statements and
Reports . . . . . . . . . . . . . . . . . . . 19
10.08. Service of Process . . . . . . . . . . . . . . 19
10.09. Insurance . . . . . . . . . . . . . . . . . . 19
10.10. Indemnity . . . . . . . . . . . . . . . . . . 19
11. AMENDMENT, SUSPENSION, AND TERMINATION . . . . . . . . . 20
11.01. Right to Amend or Terminate . . . . . . . . . 20
11.02. Right to Suspend . . . . . . . . . . . . . . . 20
11.03. Non-ERISA Plan . . . . . . . . . . . . . . . . 20
11.04. Right to Accelerate . . . . . . . . . . . . . 20
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 21
12.01. Right to Continued Employment . . . . . . . . 21
12.02. Prohibition Against
Alienation . . . . . . . . . . . . . . . . . . 21
12.03. Savings Clause . . . . . . . . . . . . . . . . 21
12.04. Payment of Benefit of
Incompetent . . . . . . . . . . . . . . . . . 21
12.05. Spouse's Interest . . . . . . . . . . . . . . 21
12.06. Successors . . . . . . . . . . . . . . . . . . 21
12.07. Impact on Other Plans . . . . . . . . . . . . 22
12.08. Gender, Tense and Headings . . . . . . . . . . 22
(iii)
<PAGE>
Section Page
- ------- ----
13. CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . 23
13.01. Choice of Law . . . . . . . . . . . . . . . . 23
(iv)
<PAGE>
BROAD INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
BROAD INC., a California corporation (hereinafter referred to as the
"Company"), hereby adopts the following Executive Deferred Compensation Plan
(hereinafter referred to as the "Plan") effective as of October 1, 1989. The
purpose of the Plan is to provide supplemental retirement income for certain
Executives (hereinafter defined).
It is intended that this Plan provide benefits for "a select group of
management or highly compensated employees" within the meaning of Sections 201,
301 and 401 of the Act (hereinafter defined), and therefore to be exempt from
the provisions of Parts 2, 3 and 4 of Title I of the Act.
SECTION 1. DEFINITIONS
The following words and terms as used herein shall, unless the context
clearly requires a different meaning, have the respective meanings hereinafter
set forth. Except as otherwise expressly provided, the masculine gender
includes the feminine and the singular includes the plural.
1.01. "Account" means the record maintained by the Committee of each
Participant's Deferrals, credited interest and distributions under the Plan.
1.02. "Act" means the Employee Retirement Income Security Act of 1974
(ERISA), as amended from time to time.
1.03. "Anniversary Date" means any October 1 including or after the
Effective Date.
1.04. "Beneficiary" means the person, persons or entity designated in
writing by the Participant on forms provided by the Committee to receive
distribution of certain death benefits under the Plan in the event of the
Participant's death. A Participant may change the designated Beneficiary from
time to time by filing a new written designation with the Committee, and such
designation shall be effective upon receipt by the Committee. The designation
of a Beneficiary other than the Participant's spouse must be consented to in
writing by the spouse. If a Participant has not designated a Beneficiary, or if
a designated Beneficiary is not living or in existence at the time of a
Participant's death, any death benefits payable under the Plan shall be paid to
the
1
<PAGE>
Participant's spouse, if then living, and if the Participant's spouse is not
then living, to the Participant's estate.
1.05. "Benefit Agreement" means a benefit agreement described in
Section 9.01 relating to a Total Deferral commitment beginning in a specific
Plan Year.
1.06. "Board of Directors" means the Board of Directors of the Company,
as defined in Section 1.11.
1.07. "Change in Control" means, after the Effective Date, as defined
in Section 1.19,
(a) the acquisition by any person, entity or "group" (as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) as
beneficial owner, directly or indirectly, of securities of the Employer
representing 25% or more of the combined voting power of the Employer's then
outstanding securities;
(b) a change, as a result of or in connection with any cash
tender or exchange offer, merger or other business combination, sale of assets
or contested election, or any combination of the foregoing transactions, of a
majority of the Board of Directors as constituted immediately prior to the
occurrence of such event, unless the election of each director who was not a
director immediately prior to the occurrence of such event was approved by the
vote of at least two-thirds of the directors then in office who were directors
immediately prior to the occurrence of such event; or
(c) the approval, by the shareholders of the Company, of an
agreement providing for a transaction in which the Company will cease to be an
independent publicly-owned company or for the exchange of at least a majority of
the outstanding stock for cash or property or securities (other than common
stock of the Company) or for the sale or other disposition of all or
substantially all of the assets of the Company.
1.08. "Claims Coordinator" means the individual(s) designated by the
Committee to receive applications for benefits by participants or their
beneficiaries.
1.09. "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
1.10. "Committee" means the Personnel, Compensation and Stock Option
Committee of the Board of Directors or any successor thereof.
2
<PAGE>
1.11. "Company" means Broad Inc., a California corporation, its
successors and assigns.
1.12. "Covered Bonus" means the annual cash bonus payable in the
current Plan Year.
1.13. "Covered Salary" means annual base salary, excluding any bonus or
other form of remuneration, payable in the current Plan Year.
1.14. "Deferral" means the portion of a Participant's Covered Salary
and/or Covered Bonus that has been deferred in accordance with Section 2.04.
Deferral amounts are retained by the Employer as part of its general assets.
1.15. "Deferral Period" means, initially, the five-year period
beginning with the Effective Date and ending on September 30, 1994, and
thereafter, a five-year period beginning on any Anniversary Date, assuming all
prior deferrals have been satisfied.
1.16. "Disability" means the inability, caused by disease or bodily
injury and originating after his designation as a Participant, of an Executive
to do substantially all the material duties of his regular job, which condition
the Executive must suffer from continuously for a period of at least 6 months,
except that
(a) after such inability has continued for two years, such
Executive shall be considered to be suffering Disability only if he cannot work
for pay or profit at another job for which he is reasonably fitted by education,
training or experience; and
(b) such Executive shall be considered to be suffering
Disability only for those periods during which he is not working for pay or
profit.
Disability specifically does not include intentional self-inflicted
injury, war or any act incident to war, or service in the armed forces or any
auxiliary civilian force of any country at war.
1.17. "Disability Plan" means the insured long-term disability plan
maintained by the Employer which covers the Participants in the Plan, or any
successor disability plan.
1.18. "Early Retirement Date" means the first day of the month
coinciding with or next following the later of:
(a) Attainment of age 50;
3
<PAGE>
(b) Completion of all Total Deferred commitments under the Plan;
and
(c) Completion of ten (10) years of continuous employment with
the Employer (including employment with its predecessor, Kaufman and Broad,
Inc.).
1.19. "Effective Date" means October 1, 1989.
1.20. "Employer" means the Company, and those of its subsidiaries and
other corporations it controls that have been approved by the Board of Directors
for inclusion in the Plan.
1.21. "Executive" means a management or highly compensated employee of
the Employer who has been specifically designated by the Board of Directors or
the Committee as eligible to become a Plan Participant, such designation not
having been revoked.
1.22. "Leave" means any period during which an Executive who is
employed by the Employer immediately prior to the commencement thereof is absent
from the Employer pursuant to a leave of absence granted by the Employer.
1.23. "Minimum Annual Deferral" means the minimum amount of Deferral
that a Participant may make in any Plan Year under Section 2.04.
1.24. "Normal Retirement Date" means the first day of the month
coinciding with or next following the later of:
(a) Attainment of age 65; and
(b) Completion of all Total Deferral commitments under the Plan.
1.25. "Participant" means an Executive who has made a written election
to participate in the Plan in accordance with Section 2.01.
1.26. "Plan" means the BROAD INC. EXECUTIVE DEFERRED COMPENSATION PLAN,
as described herein and as hereafter amended.
1.27. "Plan Interest Rate" for a Plan Year means the average of the
Moody's Aaa Seasoned Corporate Bond Yield (which yield is published in Section
H.15(519) of the Federal Reserve Statistical Release) for the 12 months
preceding such Plan Year.
4
<PAGE>
1.28. "Plan Year" means the period beginning October 1 and ending
September 30 of each year.
1.29. "Post-Retirement Death Benefit" means the benefit payable to the
Beneficiary of a Participant who dies after the commencement of his Retirement
Income Benefit, as described in Section 7.01.
1.30. "Pre-Retirement Death Benefit" means the benefit payable to the
Beneficiary of a Participant who dies prior to the commencement of his
Retirement Income Benefit, as described in Section 6.01.
1.31. "Retirement Income Benefit" means the retirement benefit
described in Section 5.
1.32. "Total Deferral" means the total amount of Deferrals that a
Participant commits to make during the Deferral Period under Section 2.03 with
respect to a particular Benefit Agreement.
5
<PAGE>
SECTION 2. PARTICIPATION
2.01. COMMENCEMENT OF DEFERRAL PERIOD. An Executive shall become a
Participant hereunder upon execution by the Participant and the Committee of an
initial Benefit Agreement. A Participant (with the consent of the Committee)
who has satisfied all prior deferral commitments may enter into additional
Benefit Agreements for Deferral Periods commencing in subsequent Plan Years.
Each Benefit Agreement shall become effective on the next October 1 after
execution, and shall contain the items described in this Section and in Section
9.01. Subject to Section 2.02, the elections made in a Benefit Agreement shall
be irrevocable.
2.02. DEFERRALS. A Participant may continue to make the Deferrals
provided under Section 2.04 with respect to a specific Benefit Agreement until
his designation as an Executive is revoked by the Board of Directors (in which
event he shall be treated as a terminated Participant), he terminates employment
with the Employer, he receives a hardship withdrawal before completing a total
Deferral under his initial Benefit Agreement, or he has made the Total Deferral
described in Section 2.03.
2.03. ELECTION OF TOTAL DEFERRAL. The Participant shall elect the
Total Deferral that he will make during the Deferral Period in his Benefit
Agreement. Such Total Deferral shall be based on the Participant's selection of
one of the three options set forth below and shall be between the minimum and
maximum for such option (in $4,000 increments from the minimum) as follows:
<TABLE>
<CAPTION>
Minimum Maximum
------- -------
<S> <C> <C>
Option A $100,000 $200,000
Option B 40,000 80,000
Option C 20,000 40,000
</TABLE>
2.04. ANNUAL ELECTION. Participants may irrevocably elect in writing
with respect to each Benefit Agreement to make a Deferral for a Plan Year in the
Deferral Period in accordance with the following rules:
(a) Each Participant shall make a Deferral for the first Plan Year of
the respective Deferral Period equal to a minimum of 20% of his
Total Deferral. The source of such Deferral shall be the
Participant's Covered Bonus payable in such Plan Year and/or the
Participant's Covered Salary for such Plan Year, as indicated by
the Participant in his Benefit Agreement for such Deferral
Period.
6
<PAGE>
(b) Each Participant may elect to make an annual Deferral for a
subsequent Plan Year of the respective Deferral Period from his
Covered Bonus and/or his Covered Salary payable in such Plan
Year. Such election must be made on or before the September 30
preceding the Plan Year. If the Participant elects to make a
Deferral, the amount of the annual Deferral shall be at least
$20,000, $8,000 or $4,000 (the Minimum Annual Deferral under
Options A, B and C, respectively), and not more than the amount
needed to complete his Total Deferral.
(c) Deferrals for a Plan Year shall be credited to Participants'
Accounts as of the end of the month in which the Deferral is
withheld from the Participant's Covered Bonus or Covered Salary.
2.05. CHANGE IN CIRCUMSTANCES. A Participant who experiences an
unanticipated substantial change in his financial situation may request that the
Committee waive his obligation to make one or more Deferrals under the Plan.
The Committee shall establish a uniform set of rules, which shall be applied on
a consistent basis to all Participants, in determining whether to grant or deny
such requests. Among the factors the Committee shall consider are unanticipated
changes in the Participant's family structure and unforeseen medical,
educational and housing expenditures. No waiver shall apply to a Deferral
election with respect to a Plan Year which has already commenced. Once such a
waiver is granted, the Participant shall be treated as having satisfied those
Deferrals which were waived. A Participant for whom a waiver was granted will
not be precluded from entering into additional Benefit Agreements provided all
prior deferral commitments either were satisfied or waived. In addition, such a
Participant will not be precluded from making additional Deferrals during a
Deferral Period in which a prior year's Deferral was waived.
7
<PAGE>
SECTION 3. FUNDING OF BENEFITS
3.01. UNFUNDED PLAN. The Plan shall be unfunded. All benefits payable
under the Plan shall be paid from the Employer's general assets. The Employer
shall not be required to set aside or hold in trust any funds for the benefit of
a Participant or Beneficiary, who shall have the status of a general unsecured
creditor with respect to the Employer's obligation to make benefit payments
pursuant to the Plan. Any assets of the Employer available to pay Plan benefits
shall be subject to the claims of the Employer's general creditors and may be
used by the Employer in its sole discretion for any purpose.
3.02. NO EMPLOYER MATCHING CONTRIBUTIONS. No Employer matching
contributions shall be permitted under the Plan.
3.03. INTEREST. Except as otherwise provided, interest shall be
credited to each Participant's Account quarterly during each Plan Year based
upon the Plan Interest Rate in effect for such Plan Year for so long as there
remains an Account balance.
8
<PAGE>
SECTION 4. CLAIMS PROCEDURE
4.01. BENEFIT CLAIMS PROCEDURE. All applications for benefits under
the Plan shall be submitted to the Claims Coordinator at the Employer's
principal place of business. Applications for benefits must be in writing and
must be signed by the Participant or, in the case of a Pre-Retirement or Post-
Retirement Death Benefit, by the Beneficiary or legal representative of the
deceased Participant. The Claims Coordinator reserves the right to require that
the Participant furnish proof of his age prior to processing any application.
Each application shall be acted upon and approved or disapproved within ninety
(90) days following its receipt by the Claims Coordinator. In the event any
application for benefits is denied in whole or in part, the Claims Coordinator
shall notify the applicant in writing of such denial and of his right to a
review by the Committee and shall set forth, in a manner calculated to be
understood by the applicant, specific reasons for such denial, specific
references to pertinent Plan provisions on which the denial is based, a
description of any additional material or information necessary for the
applicant to perfect his application, an explanation of why such material or
information is necessary, and an explanation of the Plan's review procedure.
4.02. APPEALS PROCEDURE. Any person or his duly authorized
representative whose application for benefits is denied in whole or in part may
appeal such denial to the Committee for a review of the decision by submitting
to a Committee member within ninety (90) days after receiving written notice
from the Committee of the denial of his claim a written statement
(a) requesting a review by the Committee of his application for
benefits;
(b) setting forth all of the grounds upon which his request for
review is based and any facts in support thereof; and
(c) setting forth any issues or comments that the applicant
deems pertinent to his application.
The Committee shall regularly review appeals applications submitted to
it. The Committee shall act upon each application within sixty (60) days after
receipt of the applicant's request for review by the Committee.
The Committee shall make a full and fair review of each such
application and any written materials submitted by the
9
<PAGE>
applicant or the Employer in connection therewith and may require the Employer
or the applicant to submit such additional facts, documents, or other evidence
as the Committee in its sole discretion deems necessary or advisable in making
such a review. On the basis of its review, the Committee shall make an
independent determination of the applicant's eligibility for benefits under the
Plan. The decision of the Committee on any application for benefits shall be
final and conclusive upon all persons, if supported by substantial evidence in
the record.
In the event that the Committee denies an application in whole or in
part, the Committee shall give written notice of the Committee's decision to the
applicant setting forth, in a manner calculated to be understood by the
applicant, the specific reasons for such denial and specific references to the
pertinent Plan provisions on which the Committee's decision was based.
10
<PAGE>
SECTION 5. RETIREMENT INCOME BENEFITS
5.01. NORMAL RETIREMENT BENEFIT. Each Participant who retires on his
Normal Retirement Date shall be entitled to a Retirement Income Benefit
commencing at Normal Retirement Date consisting of equal monthly payments over
10 or 15 years, as selected by the Participant in his Benefit Agreement. The
amount of the monthly payments shall be calculated to pay out over the specified
period the entire balance in the Participant's Account as of his Normal
Retirement Date with interest credited quarterly on the declining balance at the
Plan Interest Rate. The Participant's Account shall continue to be credited
quarterly with interest at the Plan Interest Rate and charged with the monthly
payments to the Participant. Because the Plan Interest Rate changes annually,
the amount of the monthly payments to the Participant shall be adjusted on
January 1 of each year, commencing January 1, 1991, to reflect changes in the
Plan Interest Rate and other changes in the Participant's Account balance as of
the immediately preceding Anniversary Date.
5.02. EARLY RETIREMENT BENEFIT.
(a) A Participant who retires prior to his Normal Retirement
Date, but on or after his Early Retirement Date, shall be
entitled to a Retirement Income Benefit commencing on his
Normal Retirement Date, determined in accordance with
Section 5.01.
(b) In lieu of the Retirement Income Benefit described above, a
Participant who retires prior to his Normal Retirement Date,
but on or after his Early Retirement Date, may elect with
the consent of the Committee at any time prior to his Normal
Retirement Date to commence to receive on the first day of
the month following his early retirement a Retirement Income
Benefit determined in the manner set forth in Section 5.01,
based upon the balance in his Account as of such date.
5.03. DEFERRED RETIREMENT BENEFIT. A Participant who retires after his
Normal Retirement Date shall be entitled to a Retirement Income Benefit
commencing on the first day of the month following his actual retirement,
determined in accordance with Section 5.01, using the balance in his Account as
of his actual retirement date in lieu of the balance as of his Normal Retirement
Date.
11
<PAGE>
5.04. TERMINATION BENEFIT. A Participant who terminates employment
prior to his Early Retirement Date or who fails to make his Total Deferral
without receiving a waiver from the Committee in accordance with Section 2.05 by
the end of the Deferral Period shall be entitled to a termination benefit. The
termination benefit shall be a lump-sum payment made within 120 days after the
end of the Plan Year in which his employment terminates, equal to his Account
balance as of the date of distribution including interest at the Plan Interest
Rate for the period between the last quarterly interest adjustment, as described
in Section 3.03, and the date of distribution. After a Participant has received
a termination benefit under the Plan, neither the Participant nor his spouse or
other Beneficiary shall be entitled to any further benefit hereunder.
5.05. DISABILITY.
(a) A Participant who has suffered a Disability and is within
the initial exclusion period under the Disability Plan and
solely for that reason is not receiving benefits thereunder,
or is receiving benefits under the Disability Plan, shall be
deemed to be an Executive during such period and shall
continue to be eligible for Retirement Income Benefits under
Section 5.01 without reduction and Pre-Retirement and Post-
Retirement Death Benefits under Sections 6.01 and 7.01. If
the period of Disability occurs within a Deferral Period,
and the disabled Participant had not completed making his
Total Deferrals prior to the period of Disability, he shall,
at his election, be excused from making one additional
Deferral under each applicable Benefit Agreement for each
Plan Year of Disability, but no amounts shall be credited to
his Account with respect to such excused Deferral(s).
However, if he returns to employment within the Deferral
Period, he may elect, upon his return, to make the Deferrals
that were previously excused to the extent that the amount
of such Deferrals does not exceed the amount of compensation
which the Participant expects to receive but has not yet
been paid during the remainder of the Plan Year.
(b) With the approval of the Committee, the disabled Participant
may withdraw his Account balance in a lump-sum. Such
withdrawal shall render the disabled Participant, his spouse
12
<PAGE>
and his Beneficiary ineligible for further benefits
hereunder.
5.06. HARDSHIP WITHDRAWAL BENEFIT. At any time prior to the
commencement of Retirement Income Benefits hereunder, a Participant may request
the Committee to make a distribution to him from his Account balance in a lump-
sum within 120 days. Such distribution shall be made only if the Committee
determines that the Participant is suffering from a financial hardship that
cannot be satisfied from his normal sources of income. In making this
determination, the Committee shall utilize the regulations proposed or adopted
by the Treasury pursuant to Section 401(k) of the Code. In addition, the
following rules shall apply separately with respect to each of the Participant's
Benefit Agreements:
(a) If the hardship withdrawal is to be made prior to completion
of his Total Deferral under his initial Benefit Agreement,
the amount to be distributed shall be the entire Account
balance including interest at the Plan Interest Rate through
the date of withdrawal, the Participant shall cease to be a
participant in the Plan, and neither the Participant, nor
his spouse or Beneficiary shall be entitled to any further
benefit hereunder.
(b) If the hardship withdrawal is to be made after completion of
his Total Deferral under his initial Benefit Agreement, the
Participant may select the portion of his Account to be
withdrawn. The Participant will remain eligible for
retirement, death, termination and disability benefits
hereunder (based upon his remaining Account balance where
applicable).
5.07. CHANGE IN CONTROL BENEFIT. In the event of a Change in Control,
a Participant may elect to withdraw his entire Account balance (including
interest accrued to the date of payment) by giving written notice to the
Committee. Upon the delivery of such notice, the Participant's Account balance
shall become due and payable as a lump-sum distribution as of the date of the
Change in Control.
13
<PAGE>
SECTION 6. PRE-RETIREMENT DEATH BENEFITS
6.01. PRE-RETIREMENT DEATH BENEFIT. If a Participant dies while
employed by the Employer, or after termination of employment, but prior to the
commencement of his Retirement Income Benefit, his Beneficiary shall be entitled
to receive the balance in the Participant's Account. This amount will be paid
to the Beneficiary in a lump-sum unless the Participant (with the consent of the
Committee) elected a different payment period prior to his death. A Participant
may change this election annually during the month of December. The benefit
shall be paid or shall commence to be paid as soon as practicable after the
Participant's death.
14
<PAGE>
SECTION 7. POST-RETIREMENT DEATH BENEFITS
7.01. POST-RETIREMENT DEATH BENEFIT. The beneficiary of a Participant
who dies after commencement of his Retirement Income Benefit shall be entitled
to continue to receive the Retirement Income Benefit payments being made to the
Participant under Section 5 for the remainder of the period specified in that
section.
15
<PAGE>
SECTION 8. VESTING OF BENEFITS
8.01. PARTICIPANT'S ACCOUNT. A Participant shall be 100% vested in his
Account balance at all times and shall rank as an unsecured creditor of the
Company for his entire Account balance.
16
<PAGE>
SECTION 9. ADDITIONAL PROVISIONS
AFFECTING BENEFITS
9.01. BENEFIT AGREEMENT. The Committee shall provide to each Executive
a form of Benefit Agreement with respect to each Deferral Period for which the
Committee will permit the Executive to make Deferrals, which shall set forth the
Executive's acceptance of the benefits provided hereunder, his agreement to be
bound by the terms of the Plan and such other matters as are set forth in this
Plan or deemed advisable by the Committee.
9.02. LEAVE OF ABSENCE. An Executive who is on Leave, with or without
salary, for a period of not more than six months, shall be deemed to be an
Executive employed by the Employer during such Leave. An Executive who is on
Leave without salary for a period in excess of six months shall be deemed to
have voluntarily terminated his employment as of the end of such six-month
period and therefore shall be subject to the conditions set forth in Section
5.04.
9.03. ALTERNATIVE FORMS OF BENEFIT. The Committee in its sole
discretion, but with the consent of the recipient, may elect to pay the
Participant, spouse or Beneficiary an actuarially equivalent lump-sum or other
form of benefit that it deems appropriate in lieu of the form of benefit
otherwise provided.
9.04. WITHHOLDING. Benefit payments hereunder shall be subject to
applicable federal, state or local withholding laws.
17
<PAGE>
SECTION 10. ADMINISTRATION OF THE PLAN
10.01. DUTIES AND POWERS. The Committee shall be responsible for the
general administration of the Plan and the proper execution of its provisions.
It shall also be responsible for the interpretation of the Plan and the
determination of all questions arising thereunder. It shall maintain all
necessary books of accounts and records. It shall have power to establish,
interpret, enforce, amend, and revoke, from time to time, such rules and
regulations for the administration of the Plan and the conduct of its business
as it deems appropriate, including the right to remedy ambiguities,
inconsistencies and omissions (provided such rules and regulations are uniformly
applied to all persons similarly situated). Any action that the Committee is
required or authorized to take shall be final and binding upon each and every
person who is or may become a Plan Participant or Beneficiary.
10.02. CONDUCT OF ITS AFFAIRS. The Committee may act by a majority of
its members in office from time to time. It may elect, from time to time, one
of its own members to act as Chairman and a different person, who may but need
not be a member of the Committee, to act as Secretary. It may authorize any one
or more of its members to execute and deliver any documents on behalf of the
Committee. A Committee member must absent himself from any vote on any matter
which directly affects him.
10.03. ALLOCATION OF RESPONSIBILITIES. The Committee may, from time to
time, allocate to one or more of its members and may delegate to any other
person or organization any of its rights, powers, duties, and responsibilities
with respect to the operation and administration of the Plan. Any such
allocation and delegation shall be reviewed at least annually by the Committee
and shall be terminable upon such notice as the Committee in its sole discretion
deems reasonable and prudent under the circumstances.
10.04. EXPENSES OF THE COMMITTEE. The expenses of the Committee
properly and actually incurred in the performance of its duties under the Plan
shall be paid by the Employer.
10.05. BONDING AND COMPENSATION. The members of the Committee shall
serve without bond, and without compensation for their services as Committee
members except as the Employer may provide in its discretion.
10.06. INFORMATION TO BE SUBMITTED TO THE COMMITTEE. To enable the
Committee to perform its functions, the Employer shall supply full and timely
information to the Committee on
18
<PAGE>
all matters relating to Executives and Participants as the Committee may
require, and shall maintain such other records as the Committee may determine
are necessary in order to determine the benefits due or which may become due to
Participants or their Beneficiaries under the Plan. The Committee may rely on
such records as conclusive with respect to the matters set forth therein.
10.07. NOTICES, STATEMENTS AND REPORTS. The Company shall be the
"administrator" of the Plan as defined in Section 3(16)(A) of the Act for
purposes of the reporting and disclosure requirements imposed by the Act and the
Code. The Committee shall assist the Company, as requested, in complying with
such reporting and disclosure requirements.
10.08. SERVICE OF PROCESS. The Committee may from time to time
designate an agent of the Plan for the service of legal process. The Committee
shall cause such agent to be identified in materials it distributes or causes to
be distributed when such identification is required under applicable law. In
the absence of such a designation, the Company shall be the agent of the Plan
for the service of legal process.
10.09. INSURANCE. The Company, in its discretion, may obtain, pay for
and keep current a policy or policies of insurance, insuring the Committee
members, the members of the Board of Directors and other employees to whom any
responsibility with respect to the administration of the Plan has been delegated
against any and all costs, expenses and liabilities (including attorneys' fees)
incurred by such persons as a result of any act, or omission to act, in
connection with the performance of their duties, responsibilities and
obligations under the Plan and any applicable law.
10.10. INDEMNITY. If the Company does not obtain, pay for and keep
current the type of insurance policy or policies referred to in Section 10.09,
or if such insurance is provided but any of the parties referred to in Section
10.09 incur any costs or expenses which are not covered under such policies,
then the Company shall indemnify and hold such parties harmless in the same
manner and to the same extent as directors and officers of the Company pursuant
to its Bylaws, subject to any limitations imposed by the Act on such
indemnification.
19
<PAGE>
SECTION 11. AMENDMENT, SUSPENSION, AND TERMINATION
11.01. RIGHT TO AMEND OR TERMINATE. The Plan may be amended or
terminated by the Board of Directors at any time. Such amendment or termination
may modify or eliminate any benefit hereunder other than a benefit that is in
pay status, or the vested portion of a benefit that is not in pay status.
11.02. RIGHT TO SUSPEND. If the Board of Directors determines that
payments under the Plan would have a material adverse effect on the Employer's
ability to carry on its business, the Board of Directors may suspend such
payments temporarily for such time as in its sole discretion it deems advisable,
but in no event for a period in excess of one year. The Employer shall pay such
suspended payments immediately upon the expiration of the period of suspension.
11.03. NON-ERISA PLAN. The Plan is intended to provide benefits for "a
select group of management or highly compensated employees" within the meaning
of Sections 201, 301 and 401 of ERISA, and therefore to be exempt from Sections
2, 3 and 4 of Title 1 of ERISA. Accordingly, the Plan shall terminate and,
except for existing Account balances and other benefits in pay status (which, at
the option of the Board of Directors, may be accelerated and the balance paid in
a single, actuarially equivalent lump-sum), no further benefits, vested or non-
vested, shall be paid hereunder in the event it is determined by a court of
competent jurisdiction or by an opinion of counsel that the Plan constitutes an
employee pension benefit plan within the meaning of Section 3(2) of ERISA which
is not so exempt.
11.04. RIGHT TO ACCELERATE. The Board of Directors in its sole
discretion may accelerate all vested benefits upon termination of the Plan, and
pay such benefits in a single, actuarially equivalent lump-sum.
20
<PAGE>
SECTION 12. MISCELLANEOUS
12.01 RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan shall be
construed as giving any person employed by the Employer the right to be retained
in the Employer's employ. The Employer expressly reserves the right to dismiss
any person at any time, with or without cause, without liability for the effect
that such dismissal might have upon him as a Participant in the Plan.
12.02. PROHIBITION AGAINST ALIENATION. Except as otherwise provided in
the Plan, no right or benefit under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge, and any attempt to so anticipate, alienate, sell, transfer, assign,
pledge, encumber, or charge the same shall be void. No such right or benefit
shall be liable for or subject to the debts, contracts, liabilities,
engagements, or torts of the person entitled to such right or benefit.
12.03. SAVINGS CLAUSE. If any provision of this instrument shall be
finally held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
12.04. PAYMENT OF BENEFIT OF INCOMPETENT. In the event the Committee
finds that a Participant, former Participant, or Beneficiary is unable to care
for his affairs because of his minority, illness, accident, or other reason, any
benefits payable hereunder may, unless other claim has been made therefor by a
duly appointed guardian, committee or other legal representative, be paid to a
spouse, child, parent, or other blood relative or dependent or to any person
found by the Committee to have incurred expenses for the support and maintenance
of such Participant, former Participant, or Beneficiary; and any such payments
so made shall be a complete discharge of all liability therefor.
12.05. SPOUSE'S INTEREST. The interest in the benefits hereunder of a
spouse of a Participant who has predeceased the Participant shall automatically
pass to the Participant and shall not be transferable by such spouse in any
manner including but not limited to such spouse's will, nor shall such interest
pass under the laws of interstate succession.
12.06. SUCCESSORS. In the event of any consolidation, merger,
acquisition or reorganization of the Employer, the obligations of the Employer
under this Plan shall continue and be binding upon the Employer and its
successors.
21
<PAGE>
12.07. IMPACT ON OTHER PLANS. Amounts of Covered Salary and Covered
Bonus which are deferred pursuant to Section 2 of the Plan will not be
considered covered compensation for the year of the deferral for purposes of the
Broad Inc./SunAmerica Profit Sharing and Retirement Plan [401(k) Plan] and the
Broad Inc./SunAmerica Supplemental Deferral Plan [Excess Plan].
12.08. GENDER, TENSE AND HEADINGS. Whenever any words are used herein
in the masculine gender, they shall be construed as though they were also used
in the feminine gender in all cases where they would so apply. Whenever any
words used herein are in the singular form, they shall be construed as though
they were also used in the plural form in all cases where they would so apply.
Headings of Sections and subsections as used herein are inserted
solely for convenience and reference and constitute no part of the Plan.
22
<PAGE>
SECTION 13. CONSTRUCTION
13.01 CHOICE OF LAW. This Plan shall be governed by and construed in
accordance with the laws of the State of California to the extent not superseded
by applicable federal statutes or regulations.
IN WITNESS WHEREOF, BROAD INC. has caused this Plan to be executed
this 29th day of September, 1989.
BROAD INC.
By /s/ Darlene Chandler
--------------------------------
Its Vice President
-----------------------------
By /s/ Scott L. Robinson
--------------------------------
Its Vice President
-----------------------------
23
<PAGE>
Exhibit 10(k)
[Execution Copy]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$90,000,000
CREDIT AGREEMENT
Dated as of February 1, 1993
Among
SUNAMERICA INC.,
SUNAMERICA CORPORATION
and
SUNAMERICA FINANCIAL, INC.,
as Borrowers,
THE BANKS NAMED HEREIN,
as Lenders,
and
CITIBANK, N.A.,
as Agent
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . 19
1.03 Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.04 Convention Statement. . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE II
THE ADVANCES
2.01 Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . 20
2.02 Notice of Committed Borrowings. . . . . . . . . . . . . . . . . . . 20
2.03 Money Market Borrowings . . . . . . . . . . . . . . . . . . . . . . 21
2.04 Notice to Lenders; Funding of Advances. . . . . . . . . . . . . . . 26
2.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.06 Maturity of Advances. . . . . . . . . . . . . . . . . . . . . . . . 28
2.07 Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.08 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.09 Regulation D Compensation . . . . . . . . . . . . . . . . . . . . . 33
2.10 Optional Termination or Reduction of Commitments. . . . . . . . . . 34
2.11 Mandatory Termination or Reduction of the Commitments . . . . . . . 34
2.12 Optional Prepayments. . . . . . . . . . . . . . . . . . . . . . . . 35
2.13 General Provisions as to Payments . . . . . . . . . . . . . . . . . 35
2.14 Funding Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.15 Computation of Interest and Fees. . . . . . . . . . . . . . . . . . 37
2.16 Sharing of Payments, etc. . . . . . . . . . . . . . . . . . . . . . 37
2.17 Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE III
CHANGES IN CIRCUMSTANCES
3.01 Basis for Determining Interest Rate Inadequate or Unfair. . . . . . 40
3.02 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.03 Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . 42
3.04 Base Rate Advances Substituted for Affected Fixed Rate
Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.05 Substitution of Lender. . . . . . . . . . . . . . . . . . . . . . . 44
i
<PAGE>
Section Page
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3.06 Discretion of Lenders as to Manner of Funding . . . . . . . . . . . 45
3.07 Conclusiveness of Statements; Survival of Provisions . . . . . . . 45
ARTICLE IV
CONDITIONS OF LENDING
4.01 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.02 Conditions Precedent to Advances. . . . . . . . . . . . . . . . . . 47
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Organization, etc . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.02 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.03 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.04 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . 49
5.05 Validity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.06 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 49
5.07 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.08 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.09 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.10 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . 51
5.11 Investment Company Act. . . . . . . . . . . . . . . . . . . . . . . 51
5.12 Public Utility Holding Company Act. . . . . . . . . . . . . . . . . 51
5.13 Margin Regulation . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.15 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . 52
5.16 Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.17 Governmental Authorizations . . . . . . . . . . . . . . . . . . . . 53
5.18 Insurance Licenses. . . . . . . . . . . . . . . . . . . . . . . . . 53
5.19 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . 53
5.20 No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VI
AFFIRMATIVE COVENANTS
6.01 Reports, Certificates and Other Information . . . . . . . . . . . . 54
6.02 Corporate Existence; Foreign Qualification. . . . . . . . . . . . . 59
6.03 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . 60
ii
<PAGE>
Section Page
- ------- ----
6.04 Books, Records and Inspections. . . . . . . . . . . . . . . . . . . 60
6.05 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.06 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . 60
6.07 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.08 Maintenance of Ratings. . . . . . . . . . . . . . . . . . . . . . . 61
6.09 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE VII
NEGATIVE COVENANTS
7.01 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.02 Consolidation, Merger, Sales of Stock and Assets, etc . . . . . . . 64
7.03 Business Activities . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE VIII
FINANCIAL COVENANTS
8.01 Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . 66
8.02 Consolidated Debt to Total Capital. . . . . . . . . . . . . . . . . 66
8.03 Risk-Based Capital Ratio. . . . . . . . . . . . . . . . . . . . . . 66
8.04 Total Invested Assets . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE IX
EVENTS OF DEFAULT
9.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE X
AGENT
10.01 Authorization and Action. . . . . . . . . . . . . . . . . . . . . . 69
10.02 Agent's Reliance, etc . . . . . . . . . . . . . . . . . . . . . . . 70
10.03 Agent and Affiliates. . . . . . . . . . . . . . . . . . . . . . . . 70
10.04 Lender Credit Decision. . . . . . . . . . . . . . . . . . . . . . . 71
10.05 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.06 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 72
iii
<PAGE>
Section Page
- ------- ----
ARTICLE XI
MISCELLANEOUS
11.01 Amendments, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.02 Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.03 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . 74
11.04 Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 74
11.05 Right of Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.06 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.07 Assignments and Participations. . . . . . . . . . . . . . . . . . . 76
11.08 Submission to Jurisdiction; Waiver of Jury Trial. . . . . . . . . . 79
11.09 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
11.10 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . 80
11.11 Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
iv
<PAGE>
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Notice of Committed Borrowing
Exhibit C - Form of Money Market Quote Request
Exhibit D - Form of Invitation for Money Market Quotes
Exhibit E - Form of Money Market Quote
Exhibit F - Form of Opinion of counsel for the Borrowers
Exhibit G - Form of Assignment and Acceptance
Exhibit H - Form of Consolidating Quarterly Reports of the Borrowers
v
<PAGE>
CREDIT AGREEMENT
Dated as of February 1, 1993
SUNAMERICA INC., a Maryland corporation ("SunAmerica"), SUNAMERICA
CORPORATION, a Delaware corporation ("SACO"), and SUNAMERICA FINANCIAL, INC., a
Georgia corporation ("SAFI," and together with SunAmerica and SACO, the
"Borrowers"), the banks listed on the signature pages hereof (the "Lenders") and
CITIBANK, N.A., as agent (the "Agent") for the Lenders hereunder, agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ABSOLUTE RATE AUCTION" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"ADJUSTED CD RATE" has the meaning set forth in Section 2.07(b).
"ADVANCE" means an advance under Article II by a Lender to a Borrower
pursuant to its Commitment, and refers to a CD Advance, Base Rate Advance,
Eurodollar Advance or Money Market Advance (each of which shall be a "Type"
of Advance).
"AFFILIATE" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person.
"AGENT" means Citibank, as agent, or any successor thereof.
"AGREEMENT" means this Credit Agreement, as the same may be amended,
modified or supplemented from time to time.
<PAGE>
"ANCHOR" means Anchor National Life Insurance Company, a California
stock insurance company.
"ANNUAL REPORTS" has the meaning set forth in Section 5.06(b)(i).
"APPLICABLE LENDING OFFICE" means, with respect to each Lender, (a) in
the case of its Domestic Advances, its Domestic Lending Office, (b) in the
case of its Eurodollar Advances, its Eurodollar Lending Office, and (c) in
the case of its Money Market Advances, its Money Market Lending Office.
"ASSESSMENT RATE" has the meaning set forth in Section 2.07(b).
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by a Lender and an Eligible Assignee, and accepted by the Agent, in
substantially the form of Exhibit G hereto.
"BASE RATE" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time which rate per annum shall at
all times be equal to the higher of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate; or
(b) the sum (adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4 of one
percent) of (i) 1/2 of one percent per annum PLUS (ii) the rate per
annum obtained by dividing (A) the latest three-week moving average of
secondary market morning offered rates in the United States for three-
month certificates of deposit of major United States money market
banks, such three-week moving average being determined weekly on each
Monday (or, if any such day is not a Domestic Business Day, on the
next succeeding Domestic Business Day) for the three-week period
ending on the previous Friday by Citibank on the basis of such rates
reported by certificate of deposit dealers to and published by the
Federal Reserve Bank of New York or, if such publication shall be
suspended or
2
<PAGE>
terminated, on the basis of quotations for such rates received by
Citibank from three New York certificate of deposit dealers of
recognized standing selected by Citibank, by (B) a percentage equal to
100% minus the average of the daily percentages specified during such
threeweek period by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, but not limited to, any emergency,,
supplemental or other marginal reserve requirement) for Citibank in
respect of liabilities consisting of or including (among other
liabilities) three month U.S. dollar nonpersonal time deposits in the
United States, PLUS (iii) the average during such three-week period of
the highest and lowest annual assessment rate (rounded upward, if
necessary, to the next higher 1/100 of 1%) which the Federal Deposit
Insurance Corporation (or any successor) charges banking institutions
on the basis of their assessment rate classification for such
Corporation's insuring U.S. dollar deposits in the United States.
"BASE RATE ADVANCE" means an Advance that bears interest as provided
in Section 2.07(a).
"BENEFIT ARRANGEMENT" means, at any time, an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by
any member of the ERISA Group.
"BORROWERS" has the meaning set forth in the first paragraph of this
Agreement and their permitted successors and assigns.
"BORROWING" means a borrowing pursuant to a Notice of Borrowing
consisting of Advances of the same Type made on the same day by the
Lenders.
"CAPITAL LEASE" means a lease which has been or should be, in
accordance with GAAP, treated as a capital lease.
"CD ADVANCE" means an Advance that bears interest as provided in
Section 2.07(b).
3
<PAGE>
"CD BASE RATE" has the meaning set forth in Section 2.07(b).
"CD MARGIN" has the meaning set forth in Section 2.07(b).
"CD REFERENCE BANKS" means Citibank, Chemical Bank and The First
National Bank of Chicago.
"CHANGE IN CONTROL" means, during any 12 month period, that
individuals who as of the first day of such 12 month period constitute
SunAmerica's Board of Directors (such Board of Directors as of the day
immediately preceding such first day, the "incumbent Board"), cease for any
reason to constitute at least a majority of the directors constituting the
Board of Directors, PROVIDED that any person becoming a director during
such 12 month period whose election, or nomination for election by
SunAmerica's shareholders, was approved by a vote of at least three-
quarters of the then directors who are members of the incumbent Board shall
be, for purposes of this definition, considered as though such person were
a member of the incumbent Board unless such person's initial assumption of
office is (a) in connection with the acquisition by a third person,
including a "group" as such term is used in Section 13(d)(3) of the
Exchange Act, of beneficial ownership, directly or indirectly, of 20% or
more of the total voting power of outstanding SunAmerica Voting Stock
(unless such acquisition of beneficial ownership was approved by a majority
of the Board of Directors who are members of the incumbent Board), or (b)
in connection with an actual or threatened election contest relating to the
election of the directors of SunAmerica, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act.
"CITIBANK" means Citibank, N.A.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITMENT" means the amount set forth opposite each Lender's name on
the signature pages hereof (or in an Assignment and Acceptance entered into
by it) as its Commitment (which shall be
4
<PAGE>
$90,000,000 in the aggregate for all Lenders as of the Effective Date), as
such amount may be adjusted from time to time to give effect to Money
Market Reductions pursuant to Section 2.01 or reduced from time to time
pursuant to Section 2.10.
"COMMITTED ADVANCE" means an Advance made by a Lender pursuant to
Section 2.01.
"COMMITTED BORROWING" means a Borrowing consisting of Committed
Advances.
"CONSOLIDATED DEBT" means the consolidated Debt of SunAmerica and its
Subsidiaries, determined in accordance with GAAP, to the extent such Debt
is reflected or is required under GAAP to be reflected on the consolidated
balance sheet of SunAmerica and its Subsidiaries, PROVIDED that such Debt
shall not include Debt specified in clause (vii) of the definition of Debt
or in clauses (ii) and (iii) (so long as none of the events referred to in
the parenthetical clause of such clause (iii) has occurred) of the
definition of Permitted Collateralization Obligations.
"CONSOLIDATED TANGIBLE NET WORTH" means, without duplication, the
total of (a) the consolidated shareholders' equity of SunAmerica and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP,
PLUS (b) the stated value of all outstanding SACO preferred stock reflected
thereon (less the stated value of SACO preferred stock held by SunAmerica
or any of its Subsidiaries), PLUS OR MINUS, as the case may be, (c) any net
unrealized losses or gains, as the case may be, on securities "available
for sale" shown thereon as a separate component of consolidated
shareholders' equity in accordance with the Proposed Statement of Financial
Accounting Standards "Accounting for Certain Investments in Debt and Equity
Securities", as the same may be implemented, MINUS (d) the carrying value
of goodwill, any covenant not to compete, capitalized organizational
expenses and other assets treated as intangibles under GAAP arising from
the acquisition, through stock purchase, merger or otherwise, of the stock
or assets of any Person (other than intangibles classified as deferred
acquisition costs arising from the writing of new insurance policies or
contracts),
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and MINUS (e) treasury stock and capital stock, obligations or other
securities of, or capital contributions to, or investments in, any
unconsolidated Subsidiary.
"CONSOLIDATED TOTAL CAPITAL" means, as of any date of determination,
the sum of Consolidated Tangible Net Worth plus Consolidated Debt.
"CONTINGENT OBLIGATION" means any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise becomes
or is contingently liable upon (by direct or indirect agreement, contingent
or otherwise, to provide funds for payment, to supply funds to, or
otherwise to invest in, a debtor, or otherwise to assure a creditor against
loss) the obligation or other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
Person. The amount of any Person's liability with respect to any
Contingent Obligation shall (subject to any limitation set forth therein)
be deemed to be the outstanding principal amount (or maximum outstanding
principal amount, if larger) of the debt, obligation or other liability
outstanding thereunder.
"CONVENTION STATEMENT" means each annual and quarterly financial
statement of each Insurance Subsidiary as filed with the appropriate
Governmental Authority of its state of domicile, as such form may be
amended from time to time pursuant to the requirements of such Governmental
Authority.
"DEBT" means, with respect to any Person at any date, without
duplication: (i) all obligations of such Person for borrowed money or for
loans or advances; (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments; (iii) all Capital Lease
obligations of such Person; (iv) all obligations of such Person to pay the
deferred purchase price of property or services, and Debt secured by a Lien
on property owned or being purchased by such Person (including Debt arising
under conditional sales or other title retention agreements); (v) all Debt
of another Person secured by a Lien on any assets of such first Person,
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whether or not such Debt is assumed by such first Person; (vi) all non-
contingent obligations of such Person as account party to reimburse any
bank or other Person in respect of amounts actually paid under a letter of
credit or similar instrument; (vii) all obligations of such Person to
purchase securities (or other property) that arise out of or in connection
with the sale of the same or substantially similar securities or property
(E._G., obligations under repurchase agreements and reverse repurchase
agreements); and (viii) all Contingent Obligations of such Person with
respect to the Debt of another Person, PROVIDED that Debt shall not include
(a) accounts payable arising in the ordinary course of business, (b)
contingent liabilities with respect to certain reinsurance arrangements of
Sun Life disclosed in footnote number 6 to Consolidated Financial
Statements of SunAmerica for the fiscal year ended September 30, 1992,
(c) obligations arising in the capacity as a creditor in respect of loan or
swap participations and similar arrangements in the ordinary course of
business or (d) obligations under insurance policies or contracts,
guaranteed investment contracts, funding agreements or similar obligations
issued or entered into by the Borrowers and their Subsidiaries; and
PROVIDED FURTHER that, with respect to any Debt of another Person specified
in clause (v) not assumed by the first Person, the amount of such Debt
shall be the lower of the amount of the obligation or the fair market value
of the collateral securing such obligation.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DEPARTMENT" means, with respect to an Insurance Subsidiary, the
Governmental Authority responsible for the regulation of the insurance
business in its state of domicile.
"DOMESTIC ADVANCES" means Base Rate Advances or CD Advances or both.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial
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banks in New York City are authorized by law to close.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" on the
signature pages hereof or in the Assignment and Acceptance pursuant to
which it became a Lender, or such other office of such Lender as such
Lender may from time to time specify to SunAmerica and the Agent.
"DOMESTIC RESERVE PERCENTAGE" has the meaning set forth in
Section 2.07(b).
"EFFECTIVE DATE" has the meaning set forth in Section 4.01.
"ELIGIBLE ASSIGNEE" means (i) a commercial bank organized under the
laws of the United States, or any State thereof, and having a combined
capital and surplus of at least $500,000,000; (ii) a savings and loan
association or savings bank organized under the laws of the United States,
or any State thereof, and having a combined capital and surplus of at least
$500,000,000; (iii) a commercial bank organized under the laws of any
other country which is a member of the OECD, or has concluded special
lending arrangements with the International Monetary Fund associated with
its General Arrangements to Borrow, or a political subdivision of any such
country, and having a combined capital and surplus of at least
$500,000,000, PROVIDED that, in the case of clause (iii), such bank is
acting through a branch or agency located in the United States and, in the
case of clauses (i) through (iii), such institution has a senior secured
long term debt rating of at least "BBB-" or above by Standard & Poor's or
"Baa3" or above by Moody's; (iv) a finance company, insurance company or
other financial institution or fund organized under the laws of the United
States, or any State thereof, which is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its
business and which has total assets in excess of $5,000,000,000, PROVIDED
that any such Person under this clause (iv) is acceptable to SunAmerica in
its discretion; and (v) any other Person who is acceptable to SunAmerica
and the Agent or is an Affiliate of a Person identified in
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clause (i), (ii) or (iii) above; PROVIDED that no Affiliate of SunAmerica
shall be an Eligible Assignee hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA GROUP" means SunAmerica and all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with SunAmerica, are treated as a
single employer under Section 414 of the Code.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"EURODOLLAR ADVANCE" means an Advance that bears interest as provided
in Section 2.07(c).
"EURODOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" on the
signature page hereto or in the Assignment and Acceptance pursuant to which
it became a Lender (or, if no such office is specified, its Domestic
Lending Office), or such other office of such Lender as such Lender may
from time to time specify to SunAmerica and the Agent.
"EURODOLLAR MARGIN" has the meaning set forth in Section 2.07(c).
"EURODOLLAR REFERENCE BANKS" means Citibank, Chemical Bank and The
First National Bank of Chicago.
"EURODOLLAR RESERVE PERCENTAGE" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by
the Board of Governors of the Federal Reserve System (or any
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successor) for determining the maximum reserve requirement for a member
bank of the Federal Reserve System in New York City with deposits exceeding
five billion dollars in respect of "Eurocurrency liabilities" under
Regulation D (including any category of extensions of credit or other
assets in respect of "Eurocurrency Liabilities" that includes loans by a
non-United States office of any Lender to United States residents).
"EVENT OF DEFAULT" has the meaning set forth in Section 9.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 and the rules
and regulations of the Securities and Exchange Commission thereunder, all
as the same shall be in effect from time to time.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, PROVIDED that (i) if such day is not
a Domestic Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to
Citibank on such day on such transactions as determined by the Agent.
"FIRST SUN" means First SunAmerica Life Insurance Company, a New York
stock life insurance company.
"FIXED RATE ADVANCES" means CD Advances or Eurodollar Advances or
Money Market Advances (excluding Money Market LIBOR Advances bearing
interest at the Base Rate pursuant to Section 3.01) or any combination of
the foregoing.
"GAAP" means generally accepted accounting principles in the United
States of America used in
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connection with the preparation of the financial statements referred to in
Section 5.06(b).
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of
government.
"INFORMATION MEMORANDUM" has the meaning set forth in
Section 5.06(b)(ii).
"INSURANCE CODE" means the Insurance Code of the state where any
Insurance Subsidiary is domiciled or doing insurance business and any
successor statute of similar import, together with the regulations
thereunder, as amended or otherwise modified and in effect from time to
time.
"INSURANCE SUBSIDIARIES" means Anchor, First Sun and Sun Life so long
as they are Subsidiaries of any Borrower and any other Subsidiary of any
Borrower that holds one or more Licenses to conduct an insurance business.
"INTEREST PERIOD" means:
(a) with respect to each Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending 1, 2, 3 or 6
months thereafter, as the applicable Borrower may elect in the
applicable Notice of Borrowing, PROVIDED that:
(i) any Interest Period that would otherwise end on a day
that is not a Eurodollar Business Day shall be extended to the
next succeeding Eurodollar Business Day unless such Eurodollar
Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Eurodollar
Business Day; and
(ii) any Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on
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the last Eurodollar Business Day of a calendar month;
(b) with respect to each CD Borrowing, the period commencing on
the date of such Borrowing and ending 30, 60, 90 or 180 days
thereafter, as the applicable Borrower may elect in the applicable
Notice of Borrowing, PROVIDED that any Interest Period that would
otherwise end on a day that is not a Domestic Business Day shall be
extended to the next succeeding Domestic Business Day;
(c) with respect to each Base Rate Borrowing, the period
commencing on the date of such Borrowing and ending any number of days
thereafter up to 30, as the applicable Borrower may elect in the
applicable Notice of Borrowing, PROVIDED that such Interest Period
shall end on a Domestic Business Day; and
(d) with respect to (x) any Money Market Absolute Rate Advance,
the period commencing on the date of such Borrowing and ending such
number of days thereafter (but not less than 7 nor more than 180 days)
or (y) any Money Market LIBOR Advance, the period commencing on the
date of such Borrowing and ending 1, 2, 3, or 6 months thereafter, in
each case as the applicable Borrower shall select in the applicable
Notice of Borrowing, PROVIDED that such Interest Period shall end on a
Eurodollar Business Day or Domestic Business Day, as the case may be;
PROVIDED that with respect to clauses (a), (b), (c) and (d) above:
(i) the Borrowers may not select any Interest Period that
ends after the Termination Date; and
(ii) Interest Periods commencing on the same date for
Advances comprising part of the same Borrowing shall be of the
same duration.
"INVESTMENT" shall mean any investment in any Person, whether by means
of share purchase, capital contribution, loan, time deposit or otherwise.
"INVESTMENT GRADE SECURITIES" shall mean non-equity securities that
are rated "BBB-" or better
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by Standard & Poor's or "Baa3" or better by Moody's or "1" or "2" by
the NAIC.
"LENDERS" means each of the financial institutions identified as such
on the signature pages hereof and their successors and assigns.
"LEVEL I Status" means that, at 8:30 a.m. New York City time at any
date of determination, SunAmerica's senior unsecured long term debt is
rated "AA-" or better by Standard & Poor's and "A3" or better by Moody's.
"LEVEL II STATUS" means that, at 8:30 a.m. New York City time at any
date of determination, neither Level I Status nor Level III Status exists.
"LEVEL III STATUS" means that, at 8:30 a.m. New York City time at any
date of determination, SunAmerica's senior unsecured long term debt is
rated "BBB+" or below by Standard & Poor's or "Baa3" or below by Moody's
or is not rated as of such date by Standard & Poor's or Moody's.
"LIABILITIES" means all obligations of the Borrowers to the Lenders or
the Agent which arise out of or in connection with this Agreement or the
Notes.
"LIBOR AUCTION" means a solicitation of Money Market quotes setting
forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.03.
"LICENSE" has the meaning set forth in Section 5.18.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement,
Capital Lease or other title retention agreement relating to such asset.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in
Section 2.07(c).
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"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any
change, event, action, condition or effect that individually or in the
aggregate (i) materially and adversely affects the consolidated business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Borrowers and their Subsidiaries taken as a whole or
(ii) materially and adversely impairs the ability of the Borrowers
collectively to perform their obligations under this Agreement.
"MATERIAL SUBSIDIARY" means Anchor and Sun Life so long as they are
Subsidiaries of any Borrower and any other Subsidiary of any Borrower now
existing or hereafter acquired or formed that for or as of the end of
SunAmerica's most recent fiscal year had (i) pretax income in excess of 10%
of the consolidated pretax income of SunAmerica reflected in its
consolidated financial statements for its most recent fiscal year or
(ii) assets in excess of 10% of the consolidated assets of SunAmerica
reflected in its consolidated financial statements as of the end of its
most recent fiscal year.
"MONEY MARKET ABSOLUTE RATE" has the meaning set forth in
Section 2.03(d).
"MONEY MARKET ABSOLUTE RATE ADVANCE" means an Advance to be made by a
Lender pursuant to an Absolute Rate Auction.
"MONEY MARKET ADVANCE" means a Money Market LIBOR Advance or a Money
Market Absolute Rate Advance.
"MONEY MARKET BORROWING" means a Borrowing consisting of Money Market
Advances.
"MONEY MARKET LENDING OFFICE" means, as to each Lender, its Domestic
Lending Office or such other office, branch or affiliate of such Lender as
it may hereafter designate as its Money Market Lending Office by notice to
SunAmerica and the Agent, PROVIDED that any Lender may from time to time by
notice to SunAmerica and the Agent designate separate Money Market Lending
Offices for its Money Market LIBOR Advances and its Money Market Absolute
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Rate Advances, in which case all references herein to the Money Market
Lending Office of such Lender shall be deemed to refer to either or both of
such offices, as the context may require.
"MONEY MARKET LIBOR ADVANCE" means an Advance to be made by a Lender
pursuant to a LIBOR Auction (including such an Advance bearing interest at
the Base Rate pursuant to Section 3.01).
"MONEY MARKET MARGIN" has the meaning set forth in Section 2.03(d).
"MONEY MARKET QUOTE" means an offer by a Lender to make a Money Market
Advance in accordance with Section 2.03.
"MONEY MARKET REDUCTION" has the meaning set forth in Section 2.01.
"MOODY'S" means Moody's Investors Service, Inc. and any successor
thereto.
"MULTIEMPLOYER PLAN" means a Plan described in Section 4001(a)(3) of
ERISA.
"NAIC" means the National Association of Insurance Commissioners.
"NOTE" means a promissory note of the Borrowers payable to the order
of any Lender, in substantially the form of Exhibit A hereto, evidencing
the aggregate indebtedness of the Borrowers to such Lender resulting from
the Advances made by such Lender.
"NOTICE OF BORROWING" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined
in Section 2.03(f)).
"OTHER AGREEMENT" means the Credit Agreement dated as of February 1,
1993 among the Borrowers, Citibank, as Agent, and the Lenders providing a
$60,000,000 revolving credit facility.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
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"PERMITTED COLLATERALIZATION ASSETS" means assets pledged to secure
Permitted Collateralization Obligations.
"PERMITTED COLLATERALIZATION OBLIGATIONS" means the collateralized
obligations of the Borrowers and their Subsidiaries relating to (i) the
1989 securitization of variable annuity fees of Anchor, (ii) real estate
mortgage investment conduits (REMICs), pass-through obligations,
collateralized mortgage obligations, collateralized bond and loan
obligations, other asset-backed securitizations of properties, rights or
receivables of SunAmerica or its Subsidiaries, or similar instruments,
except any such collateralized obligations to the extent such
collateralized obligations require a cash payment by any Borrower or its
Subsidiary (other than advances in connection with the servicing of any
such REMIC, pass-through obligation, collateralized mortgage obligation,
collateralized bond obligation or similar instrument or payments to
repurchase collateral), recourse for the payment of which is not limited to
the specific assets of such Borrower or such Subsidiary serving as
collateral for such obligations and (iii) the securitization of Rule 12b-1
fee income under the Investment Company Act of 1940, as amended, and
associated sales charges earned by the Borrowers or their Subsidiaries,
except any such securitization to the extent such securitization requires a
cash payment by any Borrower or its Subsidiary (other than payments that
may be required upon the occurrence of certain events, the occurrence of
which is considered unlikely by management of SunAmerica), recourse for the
payment of which is not limited to such Rule 12b-1 fees or sales charges.
"PERMITTED LIENS" has the meaning set forth in Section 7.01.
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
"PLAN" means, at any time, an employee pension benefit plan (other
than a Multiemployer Plan) that
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is subject to Title IV of ERISA or the minimum funding standards under
Section 412 of the Internal Revenue Code and is maintained, or contributed
to, by any member of the ERISA Group.
"REGISTER" has the meaning set forth in Section 11.07(c) .
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REQUIRED LENDERS" means Lenders having more than 66 2/3% of the
Commitments, or if the Commitments have terminated or expired, more than 66
2/3% of the aggregate principal amount of the Advances outstanding at such
time.
"RESPONSIBLE OFFICER" means any of the following officers of any
Borrower: the chairman, the chief executive officer, the president, the
chief financial officer, the chief operating officer, the chief investment
officer or the treasurer. If any of the titles of the preceding officers
are changed after the date hereof, the term "Responsible Officer" shall
thereafter mean any officer performing substantially the same functions as
are presently performed by one or more of the officers listed in the first
sentence of this definition.
"RISK-BASED CAPITAL RATIO" means, with respect to any Insurance
Subsidiary, the ratio computed in accordance with the Risk Based Capital
Formula for life insurance companies as adopted by the NAIC and in effect
on December 6, 1992.
"SACO" means SunAmerica Corporation, a Delaware corporation.
"SAFI" means SunAmerica Financial, Inc., a Georgia corporation.
"SAP" means, as to any Insurance Subsidiary, the statutory accounting
practices prescribed or permitted by the applicable Department.
"STANDARD & POOR'S" or "S&P" means Standard & Poor's Corporation and
any successor thereto.
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"SUBSIDIARY" means, as to any Person, any corporation, partnership,
joint venture, trust, association or other unincorporated organization of
which or in which such Person and such Person's Subsidiaries own directly
or indirectly more than 50% of (i) the combined voting power of all classes
then outstanding of Voting Stock, if it is a corporation, (ii) the capital
interest or partnership interest, if it is a partnership, joint venture or
similar entity, or (iii) the beneficial interest, if it is a trust,
association or other unincorporated organization, PROVIDED that (a) no
Person of which any Borrower or any of its Subsidiaries acquires or has
acquired control in the ordinary course of its business in connection with
or as a consequence of any debt or equity financing shall be deemed a
Subsidiary and (b) no Person (including a joint venture) which has been
organized by any Borrower or any of its Subsidiaries solely for the
purpose of making or holding an individual asset or group of related
assets and has no other operations or independent management shall be
deemed a Subsidiary, unless such Person (1) is or under GAAP should be
treated as a consolidated subsidiary of SunAmerica in the preparation of
its consolidated financial statements and (2) would also be classified as
a Material subsidiary.
"SUNAMERICA" means SunAmerica Inc., a Maryland corporation.
"SUN LIFE" means Sun Life Insurance Company of America, a Maryland
stock insurance company.
"TERMINATION DATE" means January 31, 1996 or the earlier date of
termination in whole of the Commitments pursuant to Section 2.10 or 9.01.
"TOTAL INVESTED ASSETS" means, as of any date of determination, the
amount of invested assets directly owned by the Borrowers, excluding
Investments in Affiliates, and reflected in the line "Total Investments" on
the balance sheet of the Borrowers, as a group, delivered pursuant to
Section 6.01(c), such amount to be calculated on a basis consistent with
the preparation of the consolidating balance sheet as
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of September 30, 1992 delivered to the Lenders and attached as Exhibit H
hereto.
"TYPE" refers to the distinction between Advances bearing interest at
the Eurodollar Rate, Adjusted CD Rate, Base Rate or a Money Market Quote
rate.
"U.S. WITHHOLDING TAXES" has the meaning set forth in Section 2.17(a).
"VOTING STOCK" means, with respect to any Person, any class of capital
stock of such Person normally entitled to vote for the election of
directors.
SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" mean
"to but excluding."
SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically
defined herein other than those used solely in respect of an Insurance
Subsidiary shall be construed in accordance with GAAP. All accounting terms not
specifically defined herein and used solely in respect of an Insurance
Subsidiary shall, unless GAAP is otherwise specified, be construed in accordance
with SAP applicable to that Insurance subsidiary.
SECTION 1.04. CONVENTION STATEMENT. In the event any amendment to the
form of or requirements for Convention Statements causes the calculation of the
Risk-Based Capital Ratio as adopted by the NAIC on December 6, 1992 to be
impracticable or to produce results that do not reflect the original intent of
the parties hereto, the provisions of this Agreement relating to the Risk Based
Capital Ratio shall be adjusted as the Required Lenders and Borrowers in good
faith may negotiate to insure that the operation of the affected provisions of
this Agreement after such amendment is consistent with the operation prior
thereto.
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ARTICLE II
THE ADVANCES
SECTION 2.01. COMMITMENTS TO LEND. Each Lender severally agrees, on
the terms and conditions set forth in this Agreement, to make Advances
constituting Committed Advances from time to time during the period from the
Effective Date to the Termination Date in an aggregate amount not to exceed at
any time outstanding the amount of such Lender's Commitment, PROVIDED that the
aggregate amount of the Commitments shall be deemed used from time to time, for
purposes of making Committed Advances pursuant to this Section 2.01, in the
aggregate amount of Money Market Advances outstanding from time to time, and
such deemed use of the aggregate amount of Commitments shall be applied to the
Lenders ratably according to their respective Commitments (such deemed use of
the aggregate amount of Commitments referred to herein as the "Money Market
Reduction"). Each Borrowing under this Section 2.01 in respect of such
Committed Advances shall be in an aggregate principal amount of $10,000,000 or
any larger multiple of $5,000,000 (except that any such Borrowing may be in the
aggregate amount available in accordance with Section 4.02(d)), and shall be
made from the several Lenders ratably in proportion to their respective
Commitments. Within the foregoing limits, the Borrowers may borrow under this
Section, repay, or to the extent permitted by Section 2.12, prepay Advances and
reborrow at any time during the period from the Effective Date to the
Termination Date.
SECTION 2.02. NOTICE OF COMMITTED BORROWINGS. The applicable Borrower
shall give the Agent notice (a "Notice of Committed Borrowing"), in
substantially the form of Exhibit B hereto, not later than (x) 11:00 A.M. New
York City time on the date of each Base Rate Borrowing, (y) 12:00 P.M. New
York City time on the second Domestic Business Day before each CD Borrowing and
(z) 12:00 P.M. New York City time on the third Eurodollar Business Day before
each Eurodollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Eurodollar Business Day in the
case of a Eurodollar Borrowing;
(b) the aggregate amount of such Borrowing;
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(c) whether the Advances comprising such Borrowing are to be CD
Advances, Base Rate Advances or Eurodollar Advances;
(d) whether Level I Status, Level II Status or Level III Status
exists on the date of such notice; and
(e) the duration of the Interest Period with respect thereto, subject
to the provisions of the definition of Interest Period.
SECTION 2.03. MONEY MARKET BORROWINGS.
(a) THE MONEY MARKET OPTION. Each Borrower may, as set forth in this Section
2.03, request the Lenders before the Termination Date to make offers to make
Money Market Advances to such Borrower. The Lenders may, but shall have no
obligation to, make such offers and such Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section.
A Lender lending to the Borrower pursuant to an accepted offer to make Money
Market Advances shall remain obligated to make Committed Advances in proportion
to its respective Commitment within the limitations of Section 4.02(d).
(b) MONEY MARKET QUOTE REQUEST. When a Borrower wishes to request
offers to make Money Market Advances under this Section 2.03, it shall transmit
to the Agent by telex or facsimile telecopy a Money Market Quote Request
substantially in the form of Exhibit C hereto so as to be received no later than
11:00 A.M. New York City time (x) on the fifth Eurodollar Business Day prior to
the date of Borrowing proposed therein, in the case of a LIBOR Auction, or (y)
on the Domestic Business Day next preceding the date of Borrowing proposed
therein, in the case of an Absolute Rate Auction (or, in either case, such other
time or date as the requesting Borrower and the Agent shall have mutually agreed
and shall have notified to the Lenders not later than the date of the Money
Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective), specifying:
(i) the proposed date of Borrowing, which shall be a Eurodollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction;
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(ii) the aggregate amount of such Borrowing, which shall be
$10,000,000 or a larger multiple of $5,000,000 (except that such Borrowing
may be in the aggregate amount available in accordance with Section 4.02
(d));
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period; and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrowers may request offers to make Money Market Advances for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within 5 Eurodollar Business Days in the case of a LIBOR
Auction or 5 Domestic Business Days in the case of an Absolute Rate Auction (or
such other number of days as SunAmerica and the Agent may agree) of any other
Money Market Quote Request.
(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of a
Money Market Quote Request, the Agent shall send to the Lenders by telex or
facsimile telecopy an Invitation for Money Market Quotes substantially in the
form of Exhibit D hereto, which shall constitute an invitation by the requesting
Borrower to each Lender to submit Money Market Quotes offering to make the Money
Market Advances to which such Money Market Quote Request relates in accordance
with this Section 2.03.
(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each Lender
may submit a Money Market Quote containing an offer or offers to make Money
Market Advances in response to any Invitation for Money Market Quotes. Each
Money Market Quote must comply with the requirements of this subsection (d) and
must be submitted to the Agent by facsimile telecopy at its offices specified in
or pursuant to Section 11.02 not later than (x) 2:00 P.M. New York City time on
the fourth Eurodollar Business Day prior to the proposed date of Borrowing, in
the case of a LIBOR Auction or (y) 10:00 A.M. New York City time on the
proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the requesting Borrower and the
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Agent shall have mutually agreed to and shall have notified to the Lenders not
later than the date of the Money Market Quote Request for the first LIBOR
Auction or Absolute Rate Auction for which such change is to be effective),
PROVIDED that Money Market Quotes submitted by the Agent (or any Affiliate of
the Agent) in the capacity of a Lender may be submitted, and may only be
submitted, if the Agent or such Affiliate notifies the requesting Borrower of
the terms of the offer or offers contained therein not later than (x) one hour
prior to the deadline for the other Lenders, in the case of a LIBOR Auction, or
(y) 15 minutes prior to the deadline for the other Lenders, in the case of an
Absolute Rate Auction. Subject to Articles IV and IX, any Money Market Quote so
made shall be irrevocable except with the written consent of the Agent given on
the instructions of the requesting Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit E hereto and shall in any case specify:
(A) the proposed date of Borrowing and the Interest Period therefor;
(B) the principal amount of the Money Market Advance for which each
such offer is being made, which principal amount (w) may be greater than or
less than the Commitment of the quoting Lender, (x) must be $5,000,000 or a
larger multiple of $1,000,000, (y) may not exceed the principal amount of
Money Market Advances for which offers were requested and (Z) may be
subject to an aggregate limitation as to the principal amount of Money
Market Advances for which offers being made by such quoting Lender may be
accepted;
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Advance, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such applicable rate;
(D) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute
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Rate") offered for each such Money Market Advance; and
(E) the identity of the quoting Lender.
A Money Market Quote may set forth up to five separate offers by the quoting
Lender with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit E hereto or does
not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language or, in
particular, is conditioned on acceptance by the requesting Borrower of all
or some specified minimum principal amount of the Money Market Advance for
which such Money Market Quote is being made;
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) NOTICE TO BORROWER. The Agent shall notify the requesting
Borrower promptly of the terms (i) of any Money Market Quote submitted by a
Lender that is in accordance with subsection (d) and (ii) of any Money Market
Quote that amends, modifies or is otherwise inconsistent with a previous Money
Market Quote submitted by such Lender with respect to the same Money Market
Quote Request. Any such subsequent Money Market Quote shall be disregarded by
the Agent unless such subsequent Money Market Quote is submitted solely to
correct a manifest error in such former Money Market Quote. The Agent's notice
to the requesting Borrower shall specify (A) the aggregate principal amount of
Money Market Advances for which offers have been received for each Interest
Period specified in the related Money Market Quote Request, (B) the respective
principal amounts and Money Market Margins or Money Market Absolute Rates so
offered and
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(C), if applicable, limitations on the aggregate principal amount of Money
Market Advances for which offers in any single Money Market Quote may be
accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 11:00 A.M. New
York City time on (x) the third Eurodollar Business Day prior to the proposed
date of Borrowing, in the case of LIBOR Auction, or (y) the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the requesting Borrower and the Agent shall have mutually
agreed to and shall have notified to the Lenders not later than the date of the
Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction
for which such change is to be effective), the requesting Borrower shall notify
the Agent of its acceptance or non-acceptance of the offers so notified to it
pursuant to subsection (e), and the failure of such Borrower to provide such
notice in accordance with this clause (f) shall constitute the non-acceptance of
such offers. In the case of acceptance, such notice (a "Notice of Money Market
Borrowing") shall specify the aggregate principal amount of offers for each
Interest Period that are accepted. The requesting Borrower may accept any Money
Market Quote in whole or in part, PROVIDED that:
(i) the aggregate principal amount of each Money Market Borrowing
may not exceed the applicable amount set forth in the related Money Market
Quote Request;
(ii) the principal amount of each Money Market Borrowing must be
$10,000,000 or a larger multiple of $5,000,000 (except that any such
Borrowing may be in the aggregate amount available in accordance with
Section 4.02(d));
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the case
may be; and
(iv) the requesting Borrower may not accept any offer that is
described in subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
Promptly after receipt by the Agent of the notice of acceptance from the
Borrowers pursuant to this subsec-
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tion (f), the Agent will notify each Lender of the amount of the Money Market
Borrowing and the amount of the consequent pro rata Money Market Reduction in
its Commitment and the dates upon which such Money Market Reduction commenced
and will terminate.
(g) ALLOCATION BY AGENT. If offers are made by two or more Lenders
with the same Money Market Margins or Money Market Absolute Rates, as the case
may be, for a greater aggregate principal amount than the amount in respect of
which such offers are accepted for the related Interest Period, the principal
amount of Money Market Advances in respect of which such offers are accepted
shall be allocated by the Agent among such Lenders as nearly as possible (in
multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the
aggregate principal amounts of such offers. Determinations by the Agent of the
amount of Money Market Advances shall be conclusive in the absence of manifest
error.
SECTION 2.04. NOTICE TO LENDERS; FUNDING OF ADVANCES. (a) Upon receipt
of a Notice of Borrowing, the Agent shall promptly notify each Lender of the
contents thereof and of such Lender's share (if any) of such Borrowing and such
Notice of Borrowing shall not thereafter be revocable by the requesting
Borrower.
(b) Not later than 1:00 P.M. New York City time on the date of each
Borrowing, each Lender participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing, in
Federal or other funds immediately available in New York City, to the Agent at
its address specified in or pursuant to Section 11.02. Unless the Agent deter-
mines that any applicable condition specified in Article IV has not been
satisfied, the Agent will make the funds so received from the Lenders available
to the Borrowers at the Agent's aforesaid address for the account of the
Borrowers or to such other account as any Borrower may specify.
(c) The Borrowers may refinance all or any part of any Borrowing with
a Borrowing of the same or a different Type (e._g., Money Market Borrowings may
be refinanced with, or may be used to refinance, Committed Borrowings) provided
the conditions specified in Article IV have been satisfied. Any Borrowing or
part thereof so refinanced shall be deemed to be repaid with the proceeds
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of the new Borrowing hereunder. If any Lender makes a new Advance hereunder on
a day on which the applicable Borrower is to repay all or any part of an
outstanding Advance from such Lender, such Lender shall apply the proceeds of
its new Advance to make such repayment and only an amount equal to the excess
(if any) of the amount being borrowed over the amount being repaid shall be made
available by such Lender to the Agent as provided in subsection (b). To the
extent any Lender fails to pay the Agent amounts due from it pursuant to this
subsection (c), the Borrowers shall not be deemed to be overdue in respect of
their obligation to make the relevant payment until one Domestic Business Day
after SunAmerica shall have received notice from the Agent of the failure of
such Lender to make such payment.
(d) Unless the Agent shall have received notice from a Lender prior
to the date of any Borrowing that such Lender will not make available to the
Agent such Lender's share of such Borrowing, the Agent may assume that such
Lender has made such share available to the Agent on the date of such Borrowing
in accordance with subsections (b) and (c) of this Section 2.04 and the Agent
may, in reliance upon such assumption, make available to the applicable Borrower
on such date a corresponding amount. If and to the extent that such Lender
shall not have so made such share available to the Agent, such Lender and the
applicable Borrower severally agree to repay to the Agent forthwith on demand
such corresponding amount together with interest thereon, for each day from the
date such amount is made available to such Borrower until the date such amount
is repaid to the Agent, at the Federal Funds Rate. If such Lender shall repay
to the Agent such corresponding amount, such amount so repaid shall constitute
such Lender's Advance included in such Borrowing for purposes of this Agreement.
The failure of any Lender to make any Advance to be made by it on the date
specified therefor shall not relieve any other Lender of any obligation to make
an Advance on such date, but no Lender shall be responsible for the failure of
any other Lender to make an Advance to be made by such other Lender.
SECTION 2.05. NOTES. (a) The Advances of each Lender to any Borrower
shall be evidenced by a single Note of the Borrowers, jointly and severally,
payable to the order of such Lender in an amount equal to the aggregate unpaid
principal amount of all such Lender's Advances to the Borrowers.
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(b) Each Lender may, by notice to the Borrowers and the Agent but at
no cost to the Borrowers, request that its Advances of a particular Type be
evidenced by a separate Note in an amount equal to the aggregate unpaid
principal amount of such Advances. Each such Note shall be in substantially the
form of Exhibit A hereto with appropriate modifications to reflect the fact that
it evidences solely Advances of the relevant Type. Each reference in this
Agreement to the "Note" of such Lender shall be deemed to refer to and include
any or all of such Notes, as the context may require.
(c) Upon receipt of each Lender's Notes pursuant to Section 4.01(a),
the Agent shall mail such Note to such Lender by overnight courier or registered
mail. Each Lender shall record the date, amount, type and maturity of each
Advance made by it and the date and amount of each payment of principal made by
any Borrower with respect thereto, and prior to any transfer of its Note or
Notes shall endorse on the schedule forming a part thereof appropriate notations
to evidence the foregoing information with respect to each such Advance then
outstanding, PROVIDED that the failure of any Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrowers
hereunder or under the Notes. Each Lender is hereby irrevocably authorized by
each Borrower so to endorse its Notes and to attach to and make a part of its
Notes a continuation of any such schedule as and when required.
SECTION 2.06. MATURITY OF ADVANCES. Each Advance included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
SECTION 2.07. INTEREST RATES. (a) Each Base Rate Advance shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Advance is made until it becomes due, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of or interest on any Base Rate
Advance shall bear interest, payable on demand, for each day it remains unpaid
at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to
Base Rate Advances for such day.
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(b) Each CD Advance shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate per annum
equal to the sum of the CD Margin plus the applicable Adjusted CD Rate. Such
interest shall be payable for each Interest Period on the last day thereof and,
if such Interest Period is longer than 90 days, on the 90th day of such Interest
Period. Any overdue principal of or interest on any CD Advance shall bear
interest, payable on demand, for each day it remains unpaid at a rate per annum
equal to the sum of 2% plus the higher of (i) the sum of the CD Margin
applicable on such day plus the Adjusted CD Rate applicable to such Advance and
(ii) the rate applicable to Base Rate Advances for such day.
"CD Margin" means (i) 0.475% for any day on which Level I Status
exists and (ii) 0.675% for any day on which Level II Status or Level III Status
exists.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
--------------
* The amount in brackets being rounded upward, if necessary, to the
next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid
at 10:00 A.M. New York City time (or as soon thereafter as practicable) on the
first day of such Interest Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from each CD
Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Advance of such CD Reference Bank to which such
Interest
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Period applies and having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding 5 billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means, for any Interest Period, the average of the
highest and lowest annual assessment rate (rounded upward, if necessary, to the
next higher 1/100 of 1%) which the Federal Deposit Insurance Corporation (or any
successor) charges banking institutions on the basis of their assessment rate
classification for such Corporation's (or such successor's) insuring time
deposits at offices of such institutions in the United States during the most
recent period for which such rate has been determined prior to the commencement
of such Interest Period.
(c) (i) Each Eurodollar Advance shall bear interest on the
outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Eurodollar Margin plus the
applicable London Interbank Offered Rate. Such interest shall be payable for
each Interest Period on the last day thereof and, if such Interest Period is
longer than 3 months, 3 months after the first day thereof.
"Eurodollar Margin" means (1) 0.35% for any day on which Level I
Status exists and (2) 0.55% for any day on which Level II Status or Level III
Status exists.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Eurodollar Reference Banks in the
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London interbank market at approximately 11:00 A.M. London time 2 Eurodollar
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Eurodollar Advance of such
Eurodollar Reference Bank to which such Interest Period is to apply and for a
period of time comparable to such Interest Period.
(ii) Any overdue principal of or interest on any Eurodollar Advance
shall bear interest, payable on demand, for each day from and including the date
payment thereof was due to but excluding the date of actual payment, at a rate
per annum equal to the sum of 2% plus the Eurodollar Margin applicable on such
day plus the higher of (x) the London Interbank Offered Rate applicable to such
Advance and (y) the quotient obtained (rounded upward, if necessary, to the next
higher 1/100 of 1%) by dividing (A) the average (rounded upward, if necessary,
to the next higher 1/16 of 1%) of the respective rates per annum at which one
day (or, if such amount due remains unpaid more than 3 Eurodollar Business Days,
then for such other period of time not longer than 3 months as the Agent may
select) deposits in dollars in an amount approximately equal to such overdue
payment due to each of the Eurodollar Reference Banks are offered to such Euro-
dollar Reference Bank in the London interbank market for the applicable period
determined as provided above by (B) 1.00 minus the Eurodollar Reserve Percentage
(or, if the circumstances described in clause (a) or (b) of Section 3.01 shall
exist, at a rate per annum equal to the sum of 2% plus the rate applicable to
Base Rate Advances for such day).
(d) Subject to Section 3.01, each Money Market LIBOR Advance shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Borrowing) plus the Money Market Margin quoted by the Lender making such Advance
in accordance with Section 2.03. Each Money Market Absolute Rate Advance shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the Money Market
Absolute Rate quoted by the Lender making such Advance in accordance with Sec-
tion 2.03. Such interest shall be payable for each Inter-
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est Period on the last day thereof and, if such Interest Period is longer than
90 days, on the 90th day of such Interest Period. Any overdue principal of or
interest on any Money Market Advance shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the sum of 2% plus the Base
Rate for such day.
(e) The Agent shall determine each interest rate applicable to the
Advances hereunder. The Agent shall give prompt notice to the applicable
Borrower and the participating Lenders by facsimile of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error. If the rating system of Moody's or Standard and Poor's shall
change in a manner that causes the definition of "Level I Status", "Level II
Status" or "Level III Status" no longer to have its intended meaning hereunder,
or if any such rating agency shall have ceased to rate corporate debt
obligations of SunAmerica for any reason other than action or inaction on the
part of the Borrowers, at the request of the Borrowers, the Borrowers, the Agent
and the Lenders shall negotiate in good faith to amend the references to
specific ratings in the definition of "Level I Status", "Level II Status" and
"Level III Status", to reflect such changed rating system or the non-
availability of ratings from such rating agency.
(f) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section 2.07. If any Reference
Bank does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 3.01 shall apply.
SECTION 2.08. FEES. (a) COMMITMENT FEE. The Borrowers shall pay to
the Agent for the account of the Lenders ratably in proportion to their
respective Commitments a commitment fee at the following rates per annum:
(i) 0.10% for any day on which Level I Status exists, (ii) 0.15% for any day
on which Level II Status exists and (iii) 0.25% for any day on which Level III
Status exists. Such commitment fee shall accrue from the Effective Date to the
Termination Date on the daily amount by which the aggregate amount of the
Commitments (without giving effect to any Money Market Reductions), exceeds the
aggregate outstanding principal amount of the Advances.
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(b) FACILITY FEE. The Borrowers shall pay to the Agent for the
account of the Lenders ratably a facility fee at the following rates per annum:
(i) 0.15% for any day on which Level I Status or Level II Status exists and (ii)
0.25% for any day on which Level III Status exists. Such facility fee shall
accrue from the Effective Date to the Termination Date (or, if all Advances have
not been repaid in full on the Termination Date, to the date such Advances are
repaid) on the daily average of the aggregate amount of Commitments (without
giving effect to any Money Market Reductions), or, if greater, on the daily
average of the outstanding principal amount of Advances.
(c) ADDITIONAL UTILIZATION FEE. The Borrowers shall pay to the Agent
for the account of the Lenders ratably in proportion to the aggregate
outstanding principal amount of Advances under this Agreement and of advances
under the Other Agreement of each such Lender an additional utilization fee at
the rate of 0.0625% per annum on the aggregate principal amount of all Advances
under this Agreement and of advances under the Other Agreement then outstanding
for any day on which such aggregate outstanding principal amount of Advances and
other advances exceeds 33 1/3% of the sum of the Commitments and commitments
under the Other Agreement as of such date, PROVIDED that such fee shall be at
the rate of 0.125% per annum of such aggregate outstanding principal amount for
each day after the occurrence of the Termination Date under the Other Agreement.
(d) PAYMENTS. Accrued fees under this Section 2.08 shall be
calculated on a 360 day basis and shall be payable quarterly in arrears on each
March 15, June 15, September 15 and December 15 and upon the Termination Date
(and, if later, the date the Advances shall be repaid in their entirety).
SECTION 2.09. REGULATION D COMPENSATION. For so long as any Lender
maintains reserves against "Eurocurrency liabilities" (or any other category of
liabilities that includes deposits by reference to which the interest rate on
Eurodollar Advances or Money Market LIBOR Advances is determined or any category
of extensions of credit or other assets which includes loans by a non-United
States office of such Lender to United States residents), and as a result the
cost to such Lender (or its Eurodollar Lending Office or Money Market Lending
office, as the case may be) of making or maintaining its Eurodollar Advances
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or Money Market LIBOR Advances is increased, then such Lender may require the
Borrowers to pay, contemporaneously with each payment of interest on the
Eurodollar Advances or Money Market LIBOR Advances, additional interest on the
related Eurodollar Advance or Money Market LIBOR Advance of such Lender at a
rate per annum up to but not exceeding the excess of (i) (A) the applicable
London Interbank Offered Rate divided by (B) one MINUS the Eurodollar Reserve
Percentage over (ii) the applicable London Interbank Offered Rate. Any Lender
wishing to require payment of such additional interest (x) shall so notify
SunAmerica, on behalf of the Borrowers, and the Agent, in which case such
additional interest on the Eurodollar Advances and Money Market LIBOR Advances
of such Lender shall be payable to such Lender at the place indicated in such
notice with respect to each Interest Period commencing at least 3 Eurodollar
Business Days after the giving of such notice and (y .) shall furnish to such
Borrower at least 5 Eurodollar Business Days prior to each date on which
interest is payable on the Eurodollar Advances or Money Market LIBOR Advances an
officer's certificate setting forth in reasonable detail the amount to which
such Lender is then entitled under this Section 2.09 (which shall be consistent
with such Lender's good faith estimate of the level at which the related
reserves are maintained by it and shall be conclusive and binding absent
manifest error) and the calculations used in determining such amount.
SECTION 2.10. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. At
any time prior to the Termination Date, the Borrowers may, upon at least 3
Domestic Business Days' notice to the Agent, (a) terminate the Commitments in
full, if no Advances are outstanding at such time, or (b) reduce from time to
time by (i) an aggregate amount of $6,000,000 or any larger multiple of
$3,000,000 or (ii) the full amount thereof, the aggregate amount of the
commitments in excess of the aggregate outstanding principal amount of the
Advances, PROVIDED that no such termination shall be effective unless the
Borrowers shall also have terminated the commitments under the other Agreement,
and no such reduction shall be effective unless the Borrowers shall also have
reduced the commitments under the Other Agreement in an aggregate amount equal
to 66 2/3% of the amount of the reduction under clause (b). In each case the
Lenders' Commitments will be terminated or ratably reduced, as the case may be.
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SECTION 2.11. MANDATORY TERMINATION OR REDUCTION OF THE COMMITMENTS.
The Commitments shall terminate on the Termination Date and any Advances then
outstanding (together with accrued interest thereon) shall be due and payable on
such date.
SECTION 2.12. OPTIONAL PREPAYMENTS. (a) The Borrowers may upon at
least one Domestic Business Day's or Eurodollar Business Day's notice to the
Agent, as the case may be, at any time and from time to time prepay any Base
Rate Borrowing (or any Money Market Borrowing bearing interest at the Base Rate
pursuant to Section 3.04) or, subject to section 2.14, any CD Borrowing or
Eurodollar Borrowing in whole or in part in amounts (i) aggregating $10,000,000
or any larger multiple of $5,000,000 or (ii) the full amount thereof, by paying
the principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay
ratably the Advances of the same Type of the several Lenders included in such
Borrowing.
(b) Each notice of prepayment delivered pursuant to clause (a) above
shall specify the date and amount of prepayment and the allocation of such
prepayment among Advances at the time outstanding. Upon receipt of a notice of
prepayment pursuant to this Section, the Agent shall promptly notify each Lender
of the contents thereof and of such Lender's ratable share (if any) of such pre-
payment and such notice shall not thereafter be revocable by the applicable
Borrower.
SECTION 2.13. GENERAL PROVISIONS AS TO PAYMENTS. (a) Each obligation
of any Borrower under this Agreement and under the Notes shall be a joint and
several obligation of the Borrowers. Each Borrower waives any right it may have
to require the Agent or any Lender to exhaust its remedies against any Borrower
before seeking to enforce the obligations of any other Borrower hereunder.
(b) The Borrowers shall make each payment of principal of, and
interest on, the Advances and of fees hereunder, not later than 12:00 P.M. New
York City time on the date when due, in Federal or other funds immediately
available in New York City, to the Agent at its address referred to in Section
11.02. The Agent will promptly distribute to each Lender its ratable share of
each such
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payment received by the Agent for the account of the Lenders. Whenever any
payment of principal of, or interest on, the Domestic Advances or Money Market
Absolute Rate Advances or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Eurodollar Advances or Money Market LIBOR Advances shall be due
on a day which is not a Eurodollar Business Day, the date for payment thereof
shall be extended to the next succeeding Eurodollar Business Day unless such
Eurodollar Business Day falls in another calendar month, in which case the date
for payment thereof shall be the next preceding Eurodollar Business Day. If the
date for any payment of principal is extended under this Section or any other
provision of this Agreement, interest thereon shall be payable for such extended
time.
(c) Unless the Agent shall have received notice from any Borrower
prior to the date on which any payment is due to the Lenders hereunder that one
or more of the Borrowers will not make such payment in full, the Agent may
assume that the Borrowers have made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Lender on such due date an amount equal to the amount then
due such Lender. If and to the extent that the Borrowers shall not have so made
such payment, each Lender shall repay to the Agent forthwith on demand such
amount distributed to such Lender together with interest thereon, for each day
from the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Agent, at the Federal Funds Rate.
SECTION 2.14. FUNDING LOSSES. If the Borrowers make any payment of
principal with respect to any Fixed Rate Advance (pursuant to Article II, III or
IX or otherwise) on any day other than the last day of the Interest Period
applicable thereto or the end of an applicable period fixed pursuant to Section
2.07(d), or if the Borrowers fail to borrow or prepay any Fixed Rate Advance
after notice has been given to any Lender in accordance with Section 2.04(a) or
2.12(b), the Borrowers shall reimburse each Lender within 30 days after demand
for any resulting loss or expense incurred by it (or by any participant in the
related Advance to the extent provided in Section 11.07(e)), including (without
limitation) any loss incurred in obtaining, liquidating or employing deposits
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from third parties, but excluding loss of margin for the period after any such
payment or failure to borrow, PROVIDED that such Lender shall have delivered to
SunAmerica (with a copy to the Agent) a certificate setting forth in reasonable
detail calculations as to the amount of such loss or expense, which certificate
shall be conclusive and binding on the Borrowers in the absence of manifest
error.
SECTION 2.15. COMPUTATION OF INTEREST AND FEES. Interest based on the
Base Rate hereunder shall be computed on the basis of a year of 365 days (or 366
days in a leap year) and paid for the actual number of days elapsed (including
the first day but excluding the last day). All other interest and fees shall be
computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
SECTION 2.16. SHARING OF PAYMENTS, ETC. If any Lender shall obtain
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) on account of the Advances owing to it (other than
pursuant to Section 2.17 or 3.03) in excess of its ratable share of payments on
account of the Advances obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the Advances owing to
them as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them, PROVIDED that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrowers agree that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.16 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrowers in the amount of such participation.
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SECTION 2.17. WITHHOLDING TAX EXEMPTION. (a) On the Effective Date
(or (i) in the case of an entity that becomes a Lender after the Effective Date,
on the date such entity becomes a Lender and (ii) in the case of a Lender that
designates a substitute or additional Applicable Lending Office to which forms
previously furnished by such Lender do not apply, on the date of such
designation) and thereafter as required by applicable law each Lender that is
not incorporated under the laws of the United States of America or a state
thereof agrees that it will deliver to each of the Borrowers and the Agent 2
duly completed, accurate and signed copies of United States Internal Revenue
Service Form 1001 or any successor thereto ("Form 1001") or Form 4224 or any
successor thereto ("Form 422411) for each of such Lender's Applicable Lending
Offices certifying in each case that such Applicable Lending Office is entitled
to receive payments under this Agreement and the Notes without deduction or
withholding of any United States federal withholding taxes on income ("U.S.
Withholding Taxes"). Each Lender that so delivers a Form 1001 or Form 4224, as
the case may be, for an Applicable Lending Office further undertakes to deliver
to SunAmerica, on behalf of itself and the other Borrowers, and the Agent 2
additional duly completed, accurate and signed copies of Form 1001 or Form 4224
before the date that the prior form expires or becomes obsolete or prior to the
occurrence of any event (or promptly upon the Lender's knowledge of such event
if the Lender obtains knowledge of such event only after its occurrence) requir-
ing a change in the most recent form so delivered by it, and such amendments
thereto or extensions or renewals thereof as may be reasonably requested by
SunAmerica or the Agent, in each case certifying that such Applicable Lending
Office is entitled to receive payments under this Agreement and the Notes
without deduction or withholding of any U.S. Withholding Taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on-which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender promptly advises SunAmerica, on behalf of itself and the other
Borrowers, and the Agent in writing that it is not capable of receiving payments
without any deduction or withholding of U.S. Withholding Taxes. If an event
occurs after the date on which a Form 1001 or Form 4224 is submitted by a Lender
in respect of such Lender's Applicable Lending Office that renders
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such Form inapplicable for a complete exemption from deduction or withholding of
any U.S. Withholding Taxes but such Lender's Applicable Lending Office is
entitled to a reduced rate of deduction or withholding for such taxes, such
Lender shall promptly upon the request of the Borrowers submit 2 duly completed,
accurate and signed copies of the applicable Form certifying that such
Applicable Lending Office is entitled to receive payments under this Agreement
and the Notes with such reduced rate of deduction or withholding. Unless the
Borrowers and the Agent have received with respect to a Lender organized under
the laws of a jurisdiction outside the United States the forms required to be
delivered in this Section 2.17 entitling the Lenders to a complete exemption
from U.S. Withholding Tax, such Borrower shall withhold taxes from such payments
to or for such Lender as required by applicable law. Each Lender hereby
represents and warrants to each Borrower that as of the Effective Date, no
payments to it hereunder are subject to any U.S. Withholding Taxes, and each
Lender who at any time becomes a Lender hereunder represents and warrants to
each Borrower that as of the date it becomes a Lender hereunder, no payments to
it hereunder are subject to any U.S. Withholding Taxes.
(b) In the event that the Borrowers or the Agent are required by
applicable law to make any withholding or deduction of U.S. Withholding Taxes
with respect to any Advance or fee, the Borrowers shall pay such deduction or
withholding to the applicable taxing authority, shall furnish to the Agent for
the Lender in respect of which such deduction or withholding is made all
receipts, if any, and other documents evidencing such payment and shall to the
extent provided below pay to the Agent or such Lender such additional amounts
with respect to U.S. Withholding Taxes ("Additional Amounts") as may be
necessary in order that the net amount received by the Agent or such Lender
after the required withholding or other payment (including any required
withholding or other payment on such Additional Amounts) shall equal the amount
the Agent or such Lender would have received had no such withholding or other
payment been made. Notwithstanding anything in this Agreement, the Borrowers
shall only be required to pay Additional Amounts for the account of a Lender or
bear the cost of or indemnify a Lender against U.S. Withholding Taxes, if such
amounts arise by reason of (i) changes in income tax provisions of the Internal
Revenue Code from and after the date such Lender becomes a lender to the
Borrowers (in the case where such Lender's Applicable
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Lending Office is located in the United States) affecting the scope, definition
or taxation of effectively connected income (as described in Section 864(c) of
the Internal Revenue Code) or (ii) changes in withholding tax treaty rates
between the United States and such Lender's country of residence, from and after
the date such Lender becomes a lender to the Borrowers, PROVIDED that the
Borrowers shall not be required to pay any Additional Amounts, or indemnify
against any U.S. Withholding taxes, imposed as a result of a Lender's failure to
comply with subsection (a) above, but following the correction of such failure
shall take such steps as such Lender shall reasonably request to assist such
Lender in recovering any U.S. Withholding Taxes paid as a result of such
failure.
ARTICLE III
CHANGES IN CIRCUMSTANCES
SECTION 3.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If on or prior to the first day of any Interest Period for any Fixed
Rate Advance:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period; or
(b) in the case of a Committed Advance, the Required Lenders advise
the Agent that the Adjusted CD Rate or the London Interbank Offered Rate,
as the case may be, as determined by the Agent will not adequately and
fairly reflect the cost to such Lenders of funding their CD Advances or
Eurodollar Advances, as the case may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrowers and the Lenders,
whereupon until the Agent notifies the Borrowers that the circumstances giving
rise to such suspension no longer exist, the obligations of the Lenders to make
CD Advances or Eurodollar Advances, as the case may be, shall be suspended.
Unless the Borrowers notify the Agent at least 2 Domestic Business Days prior to
the date of any Fixed Rate Advance for which a Notice of Borrowing has
previously been given that it elects not to borrow on such date, (i) if such
Fixed Rate Advance is a Committed Advance, such Advance shall instead be made as
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a Base Rate Advance and (ii) if such Fixed Rate Advance is a Money Market LIBOR
Advance, the Money Market LIBOR Advances comprising such Advance shall bear
interest for each day from and including the first day to but excluding the last
day of the Interest Period applicable thereto at the Base Rate for such day.
SECTION 3.02. ILLEGALITY. If, after the Effective Date, the adoption
of any applicable law, rule or regulation, or any change therein, or any change
in the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Eurodollar Lending
Office) with any request or directive (whether or not having the force of law)
of any such Governmental Authority, central bank or comparable agency shall make
it unlawful or impossible for any Lender (or its Eurodollar Lending Office) to
make, maintain or fund its Eurodollar Advances and such Lender shall so notify
the Agent, the Agent shall forthwith give notice thereof to the other Lenders
and the Borrowers, whereupon until such Lender notifies the Borrowers and the
Agent that the circumstances giving rise to such suspension no longer exist, the
obligation of such Lender to make Eurodollar Advances shall be suspended.
Before giving any notice to the Agent pursuant to this Section 3.02, such Lender
shall designate a different Eurodollar Lending office if such designation will
avoid the need for giving such notice and will not, in the reasonable judgment
of such Lender, be otherwise disadvantageous to such Lender. If such Lender or
any Lender having outstanding any Money Market LIBOR Advances shall determine
that it may not lawfully continue to maintain and fund any of its outstanding
Eurodollar Advances or Money Market LIBOR Advances, as the case may be, to
maturity and shall so specify in such notice, the Borrowers shall immediately
prepay in full the then outstanding principal amount of each such Eurodollar
Advance or Money Market LIBOR Advance, as the case may be, together with accrued
interest thereon. Concurrently with prepaying each such Eurodollar Advance,
each Borrower may borrow a Base Rate Advance in an equal principal amount from
any such Lender that has outstanding Eurodollar Advances (on which interest and
principal shall be payable contemporaneously with the related Eurodollar
Advances of the other Lenders), and such Lender shall make such a Base Rate
Advance.
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SECTION 3.03. INCREASED COST AND REDUCED RETURN. (a) If after (x) the
Effective Date, in the case of any Committed Advance or any obligation to make
Committed Advances, or (y) the date of the related Money Market Quote, in the
case of any Money Market Advance, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Applicable Lending office) with any request or directive
(whether or not having the force of law) of any such Governmental Authority,
central bank or comparable agency:
(i) shall subject any Lender (or its Applicable Lending Office) to
any tax, duty or other charge with respect to its Fixed Rate Advances, its
Notes or its obligation to make Fixed Rate Advances, or shall change the
basis of taxation of payments to any Lender (or its Applicable Lending
Office) of the principal of or interest on its Fixed Rate Advances or any
other amounts due under this Agreement in respect of its Fixed Rate
Advances or its obligation to make Fixed Rate Advances (except for changes
in the rate of tax on the overall net income of such Lender or its
Applicable Lending Office imposed by the jurisdiction of its incorporation
or in which such Lender's principal executive office or Applicable Lending
Office is located); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding (A) with respect to any CD
Advance any such requirement included in an applicable Domestic Reserve
Percentage and (B) with respect to any Eurodollar Advance or Money Market
LIBOR Advance, any such requirement included in an applicable Eurodollar
Reserve Percentage), special deposit, insurance assessment (excluding, with
respect to any CD Advance, any such requirement reflected in an applicable
Assessment Rate, including any change therein resulting from changes in the
Lender's assessment rate classification) or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any
Lender (or its Applicable Lending Office) or shall impose on any
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Lender (or its Applicable Lending Office), or on the United States market
for certificates of deposit or the London interbank market, any other
condition affecting its Fixed Rate Advances, its Notes or its obligation to
make Fixed Rate Advances;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making or maintaining any Fixed Rate
Advance, or to reduce the amount of any sum received or receivable by such
Lender (or its Applicable Lending Office) under this Agreement or under its
Notes with respect thereto, by an amount deemed by such Lender to be material,
then, within 30 days after demand by such Lender, which demand shall be
accompanied by a statement setting forth in reasonable detail the basis of and
calculations with respect to such demand (with a copy to the Agent), the
Borrowers shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such increased cost or reduction.
(b) If any Lender shall have determined that, after the Effective
Date, the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or any request
or directive regarding capital adequacy (whether or not having the force of law)
of any such Governmental Authority, central bank or comparable agency has or
would have the effect of reducing the rate of return on capital of such Lender
(or any Person controlling such Lender) as a consequence of such Lender's
obligations hereunder to a level below that which such Lender (or such
controlling Person) could have achieved but for such adoption, change, request
or directive (taking into consideration its internal policies with respect to
capital adequacy) by an amount reasonably deemed by such Lender to be material,
then from time to time, within 30 days after demand by such Lender, which demand
shall be accompanied by a statement setting forth in reasonable detail the basis
of and calculations with respect to such demand (with a copy to the Agent), the
Borrowers shall pay to such Lender such additional amount or amounts as will
compensate such Lender (or such controlling Person) for such reduction.
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(c) Each Lender will promptly notify the Borrowers and the Agent of
any event of which it has knowledge, occurring after the date hereof, that will
entitle such Lender to compensation pursuant to this Section 3.03 and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.
A certificate of any Lender claiming compensation in accordance with this
Section 3.03 and setting forth the additional amount or amounts to be paid to it
hereunder shall, in the absence of manifest error, be conclusive and binding on
the Borrowers.
SECTION 3.04. BASE RATE ADVANCES SUBSTITUTED FOR AFFECTED FIXED RATE
ADVANCES. If (i) the obligation of any Lender to make Eurodollar Advances has
been suspended pursuant to Section 3.02 or (ii) any Lender has demanded
compensation under Section 3.03(a) and the Borrowers shall, by at least 5
Eurodollar Business Days' prior notice to such Lender through the Agent, have
elected that the provisions of this Section 3.04 shall apply to such Lender,
then, unless and until such Lender notifies such Borrower that the circumstances
giving rise to such suspension or demand for compensation no longer apply, which
such Lender hereby agrees to give as soon as practicable under the
circumstances:
(a) all Advances that would otherwise be made by such Lender as CD
Advances or Eurodollar Advances, as the case may be, shall be made instead
as Base Rate Advances (on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Advances of the other
Lenders), and
(b) after each of its CD Advances or Eurodollar Advances, as the case
may be, has been repaid (or converted to a Base Rate Advance), all payments
of principal that would otherwise be applied to repay such Fixed Rate
Advances shall be applied to repay its Base Rate Advances instead.
SECTION 3.05. SUBSTITUTION OF LENDER. If (i) the obligation of any
Lender to make Eurodollar Advances has been suspended pursuant to Section 3.02,
(ii) any Lender has demanded compensation under Section 3.03, (iii) the
Borrowers are required to pay any Additional Amounts under Section 2.17 to any
Lender, or
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(iv) any Lender has determined not to consent to a Notice of Extension in
accordance with Section 2.09 of the Other Agreement, the Borrowers shall have
the right, with the assistance of the Agent, to seek a mutually satisfactory
substitute bank or banks, which shall be an Eligible Assignee (and which may be
one or more of the Lenders), to purchase the Notes and assume the Commitment of
such Lender.
SECTION 3.06. DISCRETION OF LENDERS AS TO MANNER OF FUNDING.
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of its
Advances in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder shall be made as if such
Lender had actually funded and maintained each CD Advance, Eurodollar Advance,
Money Market Absolute Rate Advance or Money Market LIBOR Advance through the
purchase of deposits having a maturity corresponding to the Interest Period for
such CD Advance, Eurodollar Advance, Money Market Absolute Rate Advance or Money
Market LIBOR Advance, as the case may be, and bearing an interest rate equal to
the Adjusted CD Rate, London Interbank Offered Rate or Money Market Absolute
Rate, as the case may be, for such Interest Period.
SECTION 3.07. CONCLUSIVENESS OF STATEMENTS; SURVIVAL OF PROVISIONS.
Determinations and statements of the Agent or any Lender made in accordance with
Section 2.14 and Section 3.01 through Section 3.03 shall be conclusive and
binding on the Borrowers absent manifest error. The provisions of Sections
2.14, 3.02, 3.03 and 3.04 shall survive termination of this Agreement.
ARTICLE IV
CONDITIONS OF LENDING
The obligation of each of the Lenders to make the Advances is subject
to the satisfaction of the following conditions precedent:
SECTION 4.01. EFFECTIVENESS. This Agreement shall become effective on
the date this Agreement has been executed and the Agent has received the notices
provided for in Section 11.06 (the "Effective Date"). In addition,
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no Lender shall be obligated to make Advances in respect of the initial
Borrowing under this Agreement unless the following conditions shall have been
satisfied (or waived in accordance with Section 11.01):
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by the Agent of appropriately completed Notes, executed
by each Borrower and payable to the order of each of the Lenders, respec-
tively;
(c) receipt by the Agent of an opinion of Susan L. Harris, the
Secretary and Associate General Counsel of SunAmerica, substantially in the
form of Exhibit F and covering such additional matters relating to the
transactions contemplated hereby as the Agent may reasonably request;
(d) receipt by the Agent of an opinion of Debevoise & Plimpton,
special counsel to the Agent;
(e) receipt by the Agent of a certificate of a Responsible Officer of
each Borrower, to the effect that (i) the representations and warranties of
such Borrower contained in Article V were true and correct in all material
respects on the Effective Date and on the date of such certificate and (ii)
no Default exists or results from the execution and delivery by such
Borrower of this Agreement or the Notes; and
(f) receipt by the Agent of all documents reasonably requested by the
Agent relating to the existence and good standing of the Borrowers and
their respective Subsidiaries, the corporate authority for and validity of
this Agreement and the Notes, and any other matters relevant hereto, all in
form and substance satisfactory to the Agent and the Agent's counsel;
and such conditions shall have been satisfied not later
than February 28, 1993. The Agent shall promptly notify
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the Borrowers and the Lenders of the satisfaction of the foregoing conditions,
and such notice shall be conclusive and binding on all parties hereto.
SECTION 4.02. CONDITIONS PRECEDENT TO ADVANCES. The obligation of
each Lender to make any Advance is subject to the satisfaction of the following
additional conditions precedent:
(a) The Agent shall have received a Notice of Borrowing from such
Borrower in accordance with Section 2.02 or 2.03, as the case may be; and
the delivery of such Notice of Borrowing from such Borrower shall
constitute a representation and warranty by each Borrower, and a
certification by the Responsible Officer signing such Notice of Borrowing,
that as of the date of such Advance the conditions specified in this
Section 4.02 have been satisfied;
(b) The representations and warranties of each Borrower contained in
Article V are true and correct in all material respects on the date of such
Advance with the same effect as though made on and as of such date except
to the extent they were expressly made as of the Effective Date or
expressly relate to a prior date, PROVIDED that such representations and
warranties shall not include those set forth in Sections 5.06(b)(iii) and
5.07 if, upon the making of the Advances specified in the applicable Notice
of Borrowing, the aggregate outstanding amount of Advances owing to the
Lenders would not exceed the aggregate amount of such Advances outstanding
and owing to the Lenders immediately prior to the making of the Advances
subject to such Notice of Borrowing;
(c) No Default exists or will result from the making of such Advance;
and
(d) Immediately after such Advance, the outstanding aggregate
principal amount of all Advances will not exceed the aggregate amount of
all Commitments.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Advances hereunder, each of the Borrowers jointly and severally represents and
warrants to the Agent and to each of the Lenders that:
SECTION 5.01. ORGANIZATION, ETC. Each Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has all requisite corporate power, authority and legal
right to own or lease and to operate its properties, to carry on its business as
now conducted and as proposed to be conducted and to enter into and carry out
the terms of this Agreement and the Notes; and each such Borrower is duly
qualified to transact business and in good standing as a foreign corporation
authorized to do business in each jurisdiction where the ownership, leasing or
operation of property or the conduct of its business makes such qualification
necessary, except where the failure to so qualify or be in good standing would
not have a Material Adverse Effect.
SECTION 5.02. AUTHORIZATION. Each Borrower has taken all necessary
action to authorize the borrowings hereunder and the execution, delivery and
performance by it of this Agreement and the Notes.
SECTION 5.03. NO CONFLICT. The execution, delivery and performance by
each Borrower of this Agreement and the Notes, and the use of proceeds of the
borrowings hereunder, does not and will not (a) contravene or conflict with any
provision of any applicable law, statute, rule or regulation of any relevant
Governmental Authority, or any applicable order, writ, judgment or decree of any
court, arbitrator or relevant Governmental Authority, (b) contravene or conflict
with, result in any breach of, or constitute a default under, any agreement or
instrument binding on it, (c) result in the creation or imposition of or the
obligation to create or impose any Lien (except for Permitted Liens) upon any of
the property or assets of such Borrower, or (d) contravene or conflict with any
provision of the certificate of incorporation or by-laws of such Borrower.
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SECTION 5.04. GOVERNMENTAL CONSENTS. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with or exemption by, any relevant Governmental Authority is required in
connection with the Borrowings hereunder or the execution, delivery or
performance by any Borrower hereunder or the validity or enforceability of this
Agreement and the Notes, except that this Agreement may be filed as an exhibit
to a report of any Borrower filed under the Exchange Act.
SECTION 5.05. VALIDITY. Each Borrower has duly executed and delivered
this Agreement and the Notes and this Agreement and the Notes constitute legal,
valid and binding obligations of such Borrower.
SECTION 5.06. FINANCIAL STATEMENTS. (a) STATUTORY FINANCIAL
STATEMENTS. (i) The annual Convention Statement of each Insurance Subsidiary
including, without limitation, the provisions made therein for investments and
the valuation thereof, reserves, policy and contract claims and Statutory
Liabilities, as filed with their respective Departments and delivered to each
Lender prior to the execution and delivery of this Agreement, as of and for the
years ended December 31, 1989, 1990 and 1991 (collectively, the "Statutory
Financial Statements"), have been prepared in accordance with SAP applicable
thereto applied on a consistent basis (except as noted therein). Each such
Statutory Financial Statement was in compliance with applicable law when filed.
The Statutory Financial Statements are complete and correct and fairly present
the financial position, results of operations and changes in equity of the
Insurance Subsidiary presented therein as of and for the respective dates and
periods indicated therein in conformity with SAP.
As of June 30, 1992, the Risk-Based Capital Ratio of Anchor and
Sun Life were, respectively, 124.7% and 145.4%, and as of the Effective Date
there has been no material reduction in the Risk-Based Capital Ratio of Anchor
or Sun Life.
(b) GAAP FINANCIAL STATEMENTS. (i) The Borrowers have delivered to
the Agent complete and correct copies of (A) the annual reports to stockholders
of SunAmerica for the fiscal years ended September 30, 1989, 1990, 1991 and 1992
(the "Annual Reports"), (B) annual reports on Form 10-K for such fiscal years
and all quar-
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terly reports on Form 10-Q of SunAmerica for periods after September 30, 1991,
in each case as filed with the Securities and Exchange Commission (the "SEC
Reports") and (C) consolidating balance sheets and income statements of
SunAmerica, SACO and SAFI (but not their respective Subsidiaries) as of and for
the year ended September 30, 1992. The Annual Reports and the SEC Reports
correctly describe, as of their respective dates, the business then conducted
and proposed to be conducted by SunAmerica and its Subsidiaries. There are
included in the SEC Reports consolidated financial statements at and for the
periods specified therein. The Borrowers have also delivered to the Agent
complete and correct copies of all current reports on Form 8-K, proxy
statements, registration statements and prospectuses, if any, filed by any of
the Borrowers or any of their respective Subsidiaries with the Securities and
Exchange Commission since September 30, 1991. All financial statements
delivered to the Agent in the foregoing materials (except as otherwise specified
therein) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods specified with respect to each consolidated entity,
and present fairly the financial position of the corporation or corporations to
which they relate as of the respective dates specified and the results of its or
their operations and changes in financial position for the respective periods
specified.
(ii) The projected financial statements of SunAmerica and its
Subsidiaries, including the cash flow projections of the Borrowers, which are
set forth in the Information Memorandum, dated October 1992, prepared for use in
connection with this revolving credit facility (the "Information Memorandum"),
are based on good faith estimates and assumptions made by the management of
SunAmerica, it being recognized, however, that projections are subject to
significant uncertainties and contingencies, many of which are beyond the
Borrowers' control, and that the actual results during the period or periods
covered by such projections may differ from the projected results and that the
differences may be material. Notwithstanding the foregoing, as of the Effective
Date, management of SunAmerica believes that such projections were, taken as a
whole, reasonable and attainable.
(iii) There has been no Material Adverse Change since September
30, 1991.
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SECTION 5.07. LITIGATION. There is no action, suit or proceeding
pending against, or to the knowledge of such Borrower threatened against or
affecting, any Borrower or any of its Subsidiaries before any court or arbi-
trator or any governmental body or agency in which there is a reasonable
likelihood of an adverse decision which any Borrower reasonably believes would
have a Material Adverse Effect or which questions the validity of this Agreement
or the Notes.
SECTION 5.08. LIENS. As of the Effective Date, none of the property
or assets of any Borrower or any Material Subsidiary is subject to any Lien,
except for Permitted Liens.
SECTION 5.09. SUBSIDIARIES. Each Material Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all corporate power and authority to
own or lease and to operate its properties and to carry on its business as now
conducted and as proposed to be conducted.
SECTION 5.10. COMPLIANCE WITH ERISA. Neither any Borrower nor any
member of the ERISA Group, as of the Effective Date, maintains, sponsors or has
an obligation to contribute to any Plan. Neither any Borrower nor any member of
the ERISA Group has incurred any liability pursuant to Title IV of ERISA which
remains unsatisfied.
SECTION 5.11. INVESTMENT COMPANY ACT. None of the Borrowers is an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
SECTION 5.12. PUBLIC UTILITY HOLDING COMPANY ACT. None of the
Borrowers is subject to regulation under the Public Utility Holding Company Act
of 1935, as amended.
SECTION 5.13. MARGIN REGULATION. No part of the proceeds of any
Advance will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock (within the
meaning of Regulation G or Regulation U of the Board of Governors of the Federal
Reserve System), other than in the ordinary course of investment activities
where such uses would not cause the transactions hereunder to
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violate such Regulations. Neither the making of any Advance nor the use of
proceeds thereof will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
SECTION 5.14. TAXES. As of the Effective Date,
(a) Each Borrower and each of its Subsidiaries have filed all tax
returns required by law to have been filed by them and have paid or
provided adequate reserves for all taxes thereby shown to be owing, except
any such taxes that are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves have been
established and are being maintained in accordance with GAAP. The
consolidated liability stated for taxes for such Borrower and its
Subsidiaries as of September 30, 1992 in the financial statements described
in Section 5.06 is sufficient in all material respects for all taxes as of
such date.
(b) All life insurance reserves shown as such on federal tax returns
(other than individual annuity contracts) of such Borrower qualify as life
insurance reserves under section 816(b) of the Code or under former section
801(b) of the Code.
(c) Each Insurance Subsidiary is a life insurance company as defined
in section 816 of the Code and is an includable life insurance company as
described in section 1504(c)(1) of the Code.
SECTION 5.15. ACCURACY OF INFORMATION. Neither the representations
and warranties contained in this Article V, the Information Memorandum, nor any
other document, certificate or instrument delivered to the Lenders by any
Borrower on or prior to the Effective Date in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained in this Article V, and in such other documents, certificates or
instruments not misleading, and all projections contained in any such document
were based on information which when delivered was to the best knowledge of each
Borrower true and correct, and, to the best knowledge of such Borrower, all
calculations contained in such projections were accurate, and such projections
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presented such Borrower's then-current estimate of its future business,
operations and affairs.
SECTION 5.16. PROCEEDS. The proceeds of the Advances will be used (a)
to provide short-term liquidity to the Borrowers for general corporate purposes
and (b) to support the Borrowers' obligations under the commercial paper program
of SunAmerica, and will not under any circumstances be used to make long-term
loans to or equity investments in or equity contributions to any Subsidiary of
the Borrowers.
SECTION 5.17. GOVERNMENTAL AUTHORIZATIONS. As of the Effective Date,
each Borrower and its Subsidiaries have all licenses, franchises, permits and
other governmental authorizations necessary for all businesses presently carried
on by them (including ownership and leasing of the real and personal property
owned and leased by them), except where the failure to do so would not indi-
vidually or in the aggregate have a Material Adverse Effect.
SECTION 5.18. INSURANCE LICENSES. No material license (including,
without limitation, any license or certificate of authority from any applicable
Department), permit or authorization to engage in the business of insurance or
reinsurance of any Insurance Subsidiary, other than licenses, permits or
authorizations to perform services as an agent or broker (individually, a
"License" and collectively, the "Licenses") is the subject of a proceeding for
suspension or revocation, except where such suspension or revocation would not
individually or in the aggregate have a Material Adverse Effect.
SECTION 5.19. COMPLIANCE WITH LAWS. As of the Effective Date, neither
any Borrower nor any of its Subsidiaries is in violation of any law, ordinance,
rule, regulation, order, policy, guideline or other requirement of any
Governmental Authority, and, to the best of each Borrower's knowledge, no such
violation has been alleged, which violation would individually or in the
aggregate have a Material Adverse Effect.
SECTION 5.20. NO DEFAULT. As of the Effective Date, none of the
Borrowers or their respective Subsidiaries is in default under any agreement or
instrument to which it is a party or by which any of its properties or
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assets is bound or affected, which default would have a Material Adverse Effect.
ARTICLE VI
AFFIRMATIVE COVENANTS
On and after the Effective Date and for so long thereafter as any
Liabilities for the payment of principal or interest on the Notes remain unpaid
or outstanding or the Commitments remain in effect, the Borrowers will:
SECTION 6.01. REPORTS, CERTIFICATES AND OTHER INFORMATION. Unless
otherwise provided herein, furnish or cause to be furnished to each Lender:
(a) AUDIT REPORT. As soon as available, but in any event within 90
days after the end of each fiscal year of SunAmerica: (i) copies of the
audited consolidated balance sheet of SunAmerica and its Subsidiaries as of
the end of such fiscal year and the related consolidated statements of
earnings and cash flows of SunAmerica and its Subsidiaries for such fiscal
year, in each case setting forth in comparative form the consolidated
figures for the previous fiscal year, prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein (except as set forth therein); (ii) a report of Price Waterhouse
(or other independent certified public accountants of nationally recognized
standing selected by SunAmerica), which report shall state that such
consolidated financial statements present fairly the financial position of
SunAmerica and its consolidated Subsidiaries as at the date indicated and
the consolidated results of their operations and cash flows in conformity
with GAAP applied on a basis consistent with prior years (except as
otherwise specified in report) and that the audit by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards; and (iii) a
certificate from such accountants to the effect that, in making the
examination necessary for the signing of the annual audit report of
SunAmerica by such accountants referred to in clause (ii) above, they have
reviewed this Agreement and have not (unless otherwise stated) become aware
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of any Default or Event of Default under this Agreement.
(b) QUARTERLY REPORTS OF SUNAMERICA. Promptly upon becoming available,
but in any event within 60 days after the end of the first 3 quarters of each
fiscal year of SunAmerica, copies of the unaudited consolidated balance sheet of
SunAmerica and its Subsidiaries as of the end of such fiscal quarter and the
related unaudited statements of earnings and cash flows of SunAmerica and its
Subsidiaries for such fiscal quarter, prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein (except as set forth therein) and certified by the chief accounting
officer or chief financial officer or treasurer or controller of SunAmerica, as
presenting fairly the financial condition and results of operations of
SunAmerica and its Subsidiaries (subject to normal year-end adjustments).
(c) CONSOLIDATING QUARTERLY REPORTS OF THE BORROWERS. Promptly upon
becoming available, but in any event within 60 days after the end of each
quarter of each fiscal year of SunAmerica, copies of the unaudited consolidating
balance sheet of the Borrowers as of the end of such fiscal quarter and the
related unaudited consolidating income statements for such fiscal quarter,
substantially in the form of Exhibit H attached hereto, setting forth subtotals
for each of the Borrowers separately and for the Borrowers (but not their
respective Subsidiaries) as a group and showing all eliminations and adjustments
made in arriving at such subtotals, all in reasonable detail in accordance with
GAAP applied consistently throughout the periods reflected therein (except as
set forth therein) and certified by the chief accounting officer or chief
financial officer or treasurer or controller of SunAmerica as presenting fairly,
in relation to the consolidated financial statements of SunAmerica and its
Subsidiaries referred to in paragraphs (a) and (b) above, the financial con-
dition and results of operations of the Borrowers separately and as a group in
accordance with GAAP (subject to normal year-end adjustments and otherwise as
noted therein).
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(d) INVESTMENTS. Contemporaneously with the delivery of the financial
statements provided for in paragraph (c) above, a detailed list, certified by
the chief financial officer or chief investment officer or chief accounting
officer or treasurer or controller of SunAmerica, of all Investments included in
Total Invested Assets, including (i) the market valuation thereof as determined
in the preparation of the consolidated balance sheets of SunAmerica delivered
under this Section 6.01 and (ii) the credit rating of each such Investment, as
rated by either Standard & Poor's, Moody's or the NAIC, if any.
(e) COMPLIANCE CERTIFICATE. Contemporaneously with the delivery of the
financial statements provided for in paragraph (c) above, a duly completed
certificate, signed by the chief accounting officer or chief financial officer
or treasurer or controller of SunAmerica setting forth in reasonable detail the
data and computations necessary to demonstrate compliance with each of the
applicable financial ratios and restrictions contained in Article VIII, and to
the effect that as of such date no Default or Event of Default has occurred and
is continuing, or if any Default or Event of Default has occurred and is
continuing, the actions taken or proposed to be taken to remedy such Default or
Event of Default.
(f) SAP FINANCIAL STATEMENTS. With respect to each Insurance Subsidiary:
(i) (A) Promptly upon becoming available, but in any event within 75
days after the end of each calendar year, a copy of the annual Convention
Statements of such Insurance Subsidiary for such calendar year, and (B)
promptly upon becoming available, but in any event within 60 days after the
end of each of the first three calendar quarters, a copy of the quarterly
Convention Statements of such Insurance Subsidiary for such quarter, in
each case prepared in accordance with SAP and accompanied by the
certification of the chief financial officer or chief executive officer of
such Insurance Subsidiary or controller or treasurer that such annual or
quarterly Convention Statement presents fairly, in accordance with SAP, the
financial position and results of operations of such Insurance Sub-
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sidiary as at and for the period ending on the date of such Convention
Statement;
(ii) Within 90 days after the end of each calendar year, a copy of
each "Statement of Actuarial Opinion" that is provided to the applicable
Department (or equivalent information should the Department no longer
require such a statement) as to the adequacy of aggregate reserves for life
policies and contracts of such Insurance Subsidiary. Such opinion shall be
in the format prescribed by the Insurance Code of the state of domicile of
such Insurance Subsidiary.
(g) CASH FLOW STATEMENTS. Contemporaneously with the delivery of the
financial statements for the fourth fiscal quarter provided for in paragraph (c)
above, a copy of the unconsolidated statement of cash flows for the fiscal year
then ended and a projected unconsolidated statement of cash flows for each of
the immediately succeeding fiscal years through at least September 30, 1995 for
the Borrowers on a combined basis, together with a certificate of a Responsible
Officer to the effect that such projections have been prepared on the basis of
good faith estimates and assumptions and sound financial planning practices of
management of the Borrowers and that such Responsible Officer has no reason to
believe that they are incorrect or misleading in any material respect.
(h) REPORTS TO SEC AND TO SHAREHOLDERS. Promptly upon the filing or
making thereof, copies of all registration statements and regular periodic
reports (including reports on Form 8-K), if any, which any Borrower shall have
filed with or to any securities exchange or the Securities and Exchange
Commission, and promptly after the mailing thereof, copies of all financial
reports and proxy statements from any of them to shareholders generally.
(i) NOTICE OF DEFAULT, LITIGATION, ETC. Promptly upon a Responsible
Officer of any Borrower learning of the occurrence of any of the following,
written notice thereof, describing the same and the steps being taken by such
Borrower with respect thereto:
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(i) the occurrence of any Default or Event of Default and the actions
taken or proposed to be taken to remedy such Default or Event of Default;
(ii) any material default or event of default on any material
contractual obligation of such Borrower or any Material Subsidiary;
(iii) any action, suit or proceeding affecting such Borrower or
any Material Subsidiary before any court or arbitrator or any governmental
body or agency in which there is a reasonable possibility of an adverse
decision which any Borrower reasonably believes would have a Material
Adverse Effect; and
(iv) the occurrence of any Material Adverse Change;
(j) ERISA. If and when any member of the ERISA Group (i) gives, or is
required in the future to give, notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan that might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows that
the plan administrator of any Plan has given or is required to give notice in
the future of any such reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC; (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA or notice that
any Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice (whether or not in
writing) from the PBGC that it is considering whether to terminate, impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer, any Plan, a copy (or a written description)
of such notice; (iv) applies for a waiver of the minimum funding standards under
Section 412 of the Code, a copy of such application; (v) gives notice to
participants of intent to terminate any Plan under Section 4041(c) of ERISA, a
copy of such notice and other information to be filed with the PBGC; or (vi)
fails to make payments or contributions in an aggregate amount of
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more than $10,000,000 to any Plan or Multiemployer Plan or determines to
make any amendment to any Plan that has resulted or could result in the
imposition of a Lien or the posting of a bond or other security in an
aggregate amount of more than $10,000,000, a certificate of the chief
financial officer or the chief accounting officer of SunAmerica setting
forth details as to such occurrence and action, if any, that SunAmerica or
the applicable member of the ERISA Group is required or proposes to take.
(k) CHANGE IN CREDIT RATING. Promptly upon learning thereof, written
notice of any change in (i) the credit rating of SunAmerica's senior
unsecured long term debt by Standard & Poor's or Moody's or (ii) the rating
of any Insurance Subsidiary by A.M. Best Company Inc.
(l) INSURANCE LICENSES. Prompt notice of the actual suspension,
termination or revocation of any material License, or any material
restriction on license authority, of any Insurance Subsidiary by any
relevant Governmental Authority or of receipt of notice from any relevant
Governmental Authority notifying any Insurance Subsidiary of a hearing
relating to such a suspension, termination, revocation, restriction or
limitation, including any request by a relevant Governmental Authority that
commits any Insurance Subsidiary to take, or refrain from taking, any
action, which materially and adversely affects the authority of any
Insurance Subsidiary to conduct its insurance business.
(m) OTHER INFORMATION. From time to time such other information and
certifications concerning the condition and operations, financial or
otherwise, of such Borrower and its Subsidiaries as the Agent or any Lender
through the Agent may reasonably request.
SECTION 6.02. CORPORATE EXISTENCE; FOREIGN QUALIFICATION. Do, and
cause each of its Material Subsidiaries to do, or cause to be done, all things
necessary to preserve and keep in full force and effect its existence and its
material rights, franchises, licenses and patents, PROVIDED that nothing in this
Section 6.02 shall (a) prohibit actions permitted under Section 7.02 or (b)
prevent the withdrawal by such Borrower or any such Subsidiary of its
Qualification as a foreign corporation
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or its termination of any license in any jurisdiction where such withdrawal or
termination or failure to keep in full force and effect would not individually
or in the aggregate have a Material Adverse Effect.
SECTION 6.03. COMPLIANCE WITH LAWS. Comply, and cause each of its
Subsidiaries to comply, with all applicable statutes, regulations and orders of,
and all applicable restrictions imposed by, any Governmental Authority in
respect of the conduct of its business and the ownership of its properties,
except such noncompliance as would not individually or in the aggregate have a
Material Adverse Effect.
SECTION 6.04. BOOKS, RECORDS AND INSPECTIONS. (a) Maintain, and cause
each of its Material Subsidiaries to maintain, books and records which are
complete and correct in all material respects; (b) permit access at reasonable
times by the Agent to its books and records; (c) permit the Agent and each
Lender to inspect at all reasonable times its properties and operations; and (d)
upon reasonable notice to such Borrower, permit the Agent and each Lender to
discuss its business, operations and financial condition with its officers.
SECTION 6.05. INSURANCE. Maintain, and cause each of its Material
Subsidiaries to maintain, with responsible and reputable insurance companies,
insurance with respect to its properties and business against such casualties
and contingencies and of such types and in such amounts as is customary in the
case of similar businesses (it being understood that insurance and self-
insurance shall be permitted to the extent consistent with prudent business
practice among such similar businesses).
SECTION 6.06. MAINTENANCE OF PROPERTIES. Maintain and preserve, and
cause each of its Material Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in the
ordinary course in good working order and condition, ordinary wear and tear
excepted, except where the failure to do so would not have a Material Adverse
Effect.
SECTION 6.07. TAXES. Pay, and cause each of its Material Subsidiaries
to pay, when due all taxes, except such as are being contested in good faith and
by appropriate proceedings and with respect to which appro-
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priate reserves have been established, and are being maintained, in accordance
with GAAP.
SECTION 6.08. MAINTENANCE OF RATINGS. At all times use their
reasonable efforts to cause the senior unsecured long term debt of SunAmerica to
be rated by Standard & Poor's and by Moody's, unless management determines it is
in the best interests of SunAmerica not to do so.
SECTION 6.09. COMPLIANCE WITH ERISA. (a) Fulfill, and cause each
member of the ERISA Group to fulfill, its obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan, (b) comply, and cause
each member of the ERISA Group to comply, with all applicable provisions of
ERISA and the Code with respect to each Plan, except where such failure or non-
compliance individually or in the aggregate would not have a Material Adverse
Effect and (c) not, and not permit any member of the ERISA Group to, (i) seek a
waiver of the minimum funding standards under ERISA, (ii) terminate or withdraw
from any Plan or (iii) take any other action with respect to any Plan which
would reasonably be expected to entitle the PBGC to terminate, impose liability
in respect of, or cause a trustee to be appointed to administer, any Plan,
unless the actions or events described in the foregoing clauses (i), (ii) or
(iii) individually or in the aggregate would not have a Material Adverse Effect.
ARTICLE VII
NEGATIVE COVENANTS
On and after the Effective Date and for so long thereafter as any
Liabilities for the payment of principal or interest on the Notes remain unpaid
or outstanding or the Commitments are in effect, the Borrowers will (unless
otherwise consented to by the Required Lenders in accordance with Section
11.01):
SECTION 7.01. LIENS. Not, and not permit any Material Subsidiary to,
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except for the following (collectively called "Permitted
Liens"):
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(a) Liens for current taxes not delinquent or for taxes being contested in
good faith and by appropriate proceedings and with respect to which adequate
reserves are being maintained in accordance with GAAP;
(b) leases or subleases granted to others, easements, rights-of-way,
restrictions and similar Liens on real property in each case that do not
materially impair the use of such property by such Borrower or any of its
Subsidiaries;
(c) Liens (other than any Lien imposed by ERISA) incurred in the ordinary
course of business in connection with workers' compensation, unemployment
insurance or other forms of governmental insurance or benefits or to secure
performance of tenders, statutory obligations, leases and contracts (other than
for borrowed money) entered into in the ordinary course of business or to secure
obligations on surety or appeal bonds;
(d) Liens of mechanics, carriers, materialmen, warehousemen, repairmen and
other like Liens arising in the ordinary course of business in respect of
obligations which are not delinquent or which are being contested in good faith
and by appropriate proceedings and with respect to which adequate reserves are
being maintained in accordance with GAAP;
(e) any Lien existing on any asset prior to the acquisition thereof by
such Borrower or Material Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien existing on any asset of any corporation at the time such
corporation becomes a Material Subsidiary or is merged or consolidated with or
into a Borrower or its Subsidiary and, in each case, not created in
contemplation of such event;
(g) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset,
PROVIDED that (i) such Lien attaches to such asset concurrently with or within
90 days after the acquisition thereof, and (ii) such Lien is confined solely to
the asset so acquired and, if required by
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the terms of the instrument originally creating such Lien, other property which
is an improvement to or is acquired for specific use in connection with such
acquired asset;
(h) Liens (including Liens existing on the date hereof) on securities or
other property which are assets of any Borrower or any Material Subsidiary in
respect of such Borrower's or Subsidiary's obligations under repurchase
agreements, reverse repurchase agreements and securities lending arrangements
with respect to such securities or other property and in respect of any other
obligations contemplated by subsection (vii) of the definition of Debt in Sec-
tion 1.01;
(i) any Liens (i) that any applicable regulatory authority may require any
Borrower or Material Subsidiary to place on its assets in connection with such
authority's regulation of an Insurance Subsidiary, PROVIDED such requirement is
not at the request of any Borrower or its Subsidiaries, or (ii) that may be
required to comply with applicable insurance laws or regulations;
(j) Liens on Permitted Collateralization Assets;
(k) any Liens arising in connection with
(i) guaranteed investment contracts, funding agreements and other similar
contracts and (ii) leasing arrangements, in each case entered into in the ordi-
nary conduct of the business of any Borrower or Material Subsidiary;
(l) Liens on assets securing Debt or other liabilities in respect of which
recourse of the holder is limited solely to such assets directly securing such
Debt or other liabilities;
(m) Liens on assets having an aggregate book value not exceeding
$40,000,000 at any one time granted under interest rate and/or currency swap
arrangements, interest rate protection arrangements and futures contracts (and
similar arrangements), regardless of notional amount;
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(n) Liens on assets of any Material Subsidiary that secure Debt or
other liabilities of such Material Subsidiary and are not otherwise
permitted by the foregoing clauses of this Section 7.01 so long as the
aggregate principal amount of all such Debt and the aggregate amount of all
such other liabilities subject to this clause (n) at any time outstanding
does not exceed $50,000,000; and
(o) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt or other liabilities secured by any Lien permitted by
any of the foregoing clauses, PROVIDED that after giving effect to such
refinancing, extension, renewal or refunding, such Lien would be permitted
under the foregoing clauses.
SECTION 7.02. CONSOLIDATION, MERGER, SALES OF STOCK AND ASSETS, ETC.
Not, and not permit any Material Subsidiary which for or as of the end of
SunAmerica's most recent fiscal year had pretax income in excess of 20% of the
consolidated pretax income of SunAmerica reflected in its consolidated financial
statements or assets in excess of 20% of the consolidated assets of SunAmerica
reflected in its consolidated financial statements to, consolidate with or merge
into or with, any other Person, or sell, lease or otherwise transfer any shares
of the capital stock of SACO, SAFI or any such Material Subsidiary or all or
substantially all of the assets of any Borrower or any Material Subsidiary to
any other Person, PROVIDED that this Section 7.02 shall not apply:
(a) to any merger of SunAmerica with another Person if (x) SunAmerica
is the corporation surviving such merger and (y) immediately after giving
effect to such merger, no Default or Event of Default shall have occurred
and be continuing;
(b) to any merger or consolidation of SACO, SAFI or any such Material
Subsidiary with or into, or sale of all or substantially all of its assets
to, any Borrower or any wholly-owned Material Subsidiary, PROVIDED that in
the case of SACO and SAFI, such Borrower is the corporation surviving such
transaction, or such merger, consolidation or sale of assets is with, into
or to another Borrower;
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(c) to any sale, transfer or other disposition that 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 any Borrower or
such Material Subsidiary, or that is required to comply with applicable
insurance law or regulation;
(d) to any shares of capital stock issued, sold, assigned,
transferred or otherwise disposed of which constitute directors' qualifying
shares;
(e) if after giving effect to the sale, transfer or other disposition
of capital stock of SACO, SAFI or any such Material Subsidiary, SunAmerica
would own, directly or through SACO, 100% of the issued and outstanding
Voting Stock of SACO (other than Adjustable Rate Cumulative Preferred
Stock, Series A, of SACO) and SAFI and the Borrowers and their Material
Subsidiaries would own directly or indirectly at least 80% of the issued
and outstanding Voting Stock of such Material Subsidiary, and such 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 the capital stock disposed of; or
(f) to any transaction which involves the disposition of investment
assets in connection with the management of such Borrower's or Material
Subsidiary's investment portfolio.
SECTION 7.03. BUSINESS ACTIVITIES. Not engage in any type of
business, directly or indirectly, except the general types of businesses
presently engaged in by the Borrowers and their respective Subsidiaries.
ARTICLE VIII
FINANCIAL COVENANTS
On and after the Effective Date and for so long thereafter as any
Liabilities for the payment of principal or interest on the Notes remain unpaid
or outstanding or the Commitments remain in effect:
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SECTION 8.01. CONSOLIDATED TANGIBLE NET WORTH. SunAmerica shall at
all times maintain a consolidated Tangible Net Worth of no less than the greater
of (a) $600,000,000 and (b) 85% of the highest Consolidated Tangible Net Worth
of SunAmerica as at the end of any fiscal year ending September 30, 1991 or
thereafter.
SECTION 8.02. CONSOLIDATED DEBT TO TOTAL CAPITAL. SunAmerica shall at
all times maintain Consolidated Debt as a percentage of Consolidated Total
Capital at no greater than 40%.
SECTION 8.03. RISK-BASED CAPITAL RATIO. The Borrowers shall at all
times cause each of Anchor, Sun Life and any other Insurance subsidiary that is
a Material Subsidiary to maintain a Risk-Based Capital Ratio of no less than
100%.
SECTION 8.04. TOTAL INVESTED ASSETS. (a) At all times when the senior
unsecured debt of SunAmerica is rated at least "A-" by Standard & Poor's and
"Baa3" by Moody's, the Borrowers, considered as a consolidated entity, shall
own directly Investment Grade Securities which are readily saleable and which
have a market value of not less than the greater of (x) $50,000,000 and (y) 10%
of Total Invested Assets, and (b) at all times when the senior unsecured debt of
SunAmerica is rated lower than "A-" by Standard & Poor's or "Baa3" by Moody's,
the Borrowers shall own directly Investment Grade Securities which are readily
saleable and which have a market value of not less than the greater of
(A) $100,000,000 and (B) 20% of Total Invested Assets.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01. EVENTS OF DEFAULT. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Any Borrower shall (i) fail to pay any principal of any Advance
when the same becomes due and payable hereunder or (ii) fail to pay any
interest on any Advance or any fee pursuant hereto within 5 Domestic
Business Days after the same becomes due and payable hereunder or (iii)
fail to pay any other
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amount pursuant hereto within 15 Domestic Business Days after the same becomes
due and payable hereunder; or
(b) Any representation or warranty made by any Borrower herein or pursuant
hereto shall prove to have been incorrect in any material respect when made, or
any certificate or financial statement, or any report or notice prepared by any
Borrower, in each case furnished by any Borrower to the Agent or any Lender
pursuant hereto, shall prove to have been false or misleading in any material
respect on the date as of which the facts therein set forth are stated or
certified; or
(c) Any Borrower fails to perform or observe in any material respect, to
the extent applicable to it, (i) any term, covenant or agreement contained in
Section 6.01(i), Article VII or Article VIII if such failure shall remain
unremedied for 5 Domestic Business Days after a Responsible Officer of any
Borrower first learns of such failure, or (ii) any other term, covenant or
agreement contained in this Agreement on its part to be performed or observed if
such failure shall remain unremedied for 30 days after written notice thereof
shall have been given to such Borrower by the Agent; or
(d) Any Borrower or any Material Subsidiary shall fail to pay any
principal of or premium or interest on any Debt that is outstanding in a prin-
cipal amount of at least $25,000,000 (but excluding Debt outstanding hereunder)
of such Borrower or such Material Subsidiary, within the applicable grace period
for such payment after the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise); or any other
event shall occur or condition shall exist under any agreement or instrument
relating to any such Debt which has not been effectively waived under such
agreement or instrument if the effect of such event or condition (after the
expiration of any grace or cure periods provided for therein) is to accelerate,
or to permit the acceleration of, the maturity of such Debt; or any such Debt
shall be accelerated or otherwise declared to be due and payable, or required to
be prepaid prior to its maturity (other
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than by a regularly scheduled required prepayment); or
(e) Any Borrower or any Material Subsidiary shall (i) be generally not
paying its debts as they become due, (ii) file, or consent in writing to the
filing against it of, a petition for relief or reorganization or arrangement or
any other petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (iii) make an assignment for
the benefit of its creditors, (iv) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, (v) be adjudicated
insolvent or be liquidated under any bankruptcy or insolvency law or (vi) take
any corporate action for the purpose of accomplishing any of the foregoing; or
(f) A court or governmental authority of competent jurisdiction shall
enter an order appointing, without consent by any Borrower or Material Sub-
sidiary, as the case may be, a custodian, receiver, trustee, liquidator,
rehabilitator, or conservator or other officer with similar powers with respect
to such Borrower or with respect to any substantial part of its property, or if
an order for relief shall be entered in any case or proceeding for liquidation,
rehabilitation or reorganization or otherwise to take advantage of any
bankruptcy, insolvency or similar law of any jurisdiction, or ordering the
dissolution, winding-up, liquidation, receivership, rehabilitation, or
conservatorship of any Borrower or any Material Subsidiary, as the case may be,
or if any petition for any such relief shall be filed against any Borrower or
Material Subsidiary, as the case may be, and such petition shall not be
dismissed within 90 days; or
(g) A judgment or order for the payment of $25,000,000 or more entered
against any Borrower or any Material Subsidiary shall not have been vacated,
satisfied, discharged or stayed pending appeal within 60 days from the entry
thereof, or, in the event of such a stay, such judgment shall not be discharged
within 60 days after such stay expires; or
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(h) The occurrence of a Change in Control;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to each Borrower, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to each Borrower, declare the Notes,
the Advances, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Notes, the Advances,
all such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by each Borrower, PROVIDED that upon the
occurrence of an Event of Default of the types described in paragraphs (e) and
(f), (A) the obligation of each Lender to make Advances shall automatically be
terminated and (B) the Notes, the Advances, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by each Borrower.
ARTICLE X
AGENT
SECTION 10.01. AUTHORIZATION AND ACTION. Each Lender hereby appoints
and authorizes the Agent to take such action on its behalf and to exercise such
powers under this Agreement as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement (including, without limita-
tion, enforcement or collection of the Notes), the Agent shall not be required
to exercise any discretion or take any action, but shall be required to act or
to refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders (or of all Lenders in
the case of actions requiring the consent of all Lenders under Section 11.01),
and such instructions shall be binding upon all Lenders, PROVIDED that the Agent
shall not be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement or applicable law.
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The Agent agrees to give to each Lender prompt notice of each notice given to it
by the Borrowers pursuant to the terms of this Agreement.
SECTION 10.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any of
its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or wilful misconduct.
Without limitation of the generality of the foregoing, the Agent (i) may treat
the payee of any Note as the holder thereof until the Agent receives and accepts
an Assignment and Acceptance entered into by the Lender which is the payee of
such Note, as assignor, and an Eligible Assignee, as assignee, as provided in
Section 11.07, (ii) may consult with legal counsel (including counsel for any
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts, (iii)
may perform any of its duties under this Agreement by or through agents or
attorneys-in-fact selected by it with reasonable care and shall not be liable
for any action taken or omitted to be taken by any such agent or attorney-in-
fact, (iv) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or representations made
in or in connection with this Agreement, (v) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement on the part of or to inspect the
property (including the books and records) of any Borrower, (vi) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto, and (vii) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 10.03. AGENT AND AFFILIATES. With respect to its Commitment,
the Advances made by it and the Notes issued to it, the Agent shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not an Agent; and
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the term "Lender" or "Lenders" shall, unless otherwise expressly indicated,
include the Agent in its individual capacity. The Agent and its Affiliates may
accept deposits from, lend money to, act as trustee under indentures of, and
generally engage in any kind of business with, any Borrower, any of their
respective Subsidiaries and any Person who may do business with or own
securities of any Borrower or any such Subsidiaries, all as if the Agent were
not an Agent hereunder and without any duty to account therefor to the Lenders.
SECTION 10.04. LENDER CREDIT DECISION. Each Lender expressly
acknowledges that neither the Agent, nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of any Borrower or any of their respective subsidiaries,
shall be deemed to constitute any representation or warranty by any of them to
any Lender. Each Lender acknowledges that it has, independently and without
reliance upon the Agent or any other Lender and based on the financial
statements referred to in Section 5.06 and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Agent hereunder, the Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, condition (financial or otherwise),
operations, property, prospects or creditworthiness of the Borrowers or any of
their respective Subsidiaries which may come into the possession of the Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
SECTION 10.05. INDEMNIFICATION. The Lenders agree to indemnify the
Agent (to the extent not reimbursed by any Borrower), ratably according to the
respective amounts of their respective Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may
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at any time be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement or any documents contemplated by or
referred to herein or the transactions contemplated hereby or any action taken
or omitted by the Agent under or in connection with any of the foregoing,
PROVIDED that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or wilful
misconduct. Without limiting the foregoing, each Lender agrees to reimburse the
Agent promptly upon demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
to the extent that the Agent is not reimbursed for such expenses by any
Borrower. The agreements in this Section 10.05 shall survive the payment of the
Notes and Advances and all other amounts payable hereunder.
SECTION 10.06. SUCCESSOR AGENT. The Agent may resign at any time by
giving written notice thereof to the Lenders and each Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Agent who is reasonably acceptable to the Borrowers. If no successor Agent
shall have been so appointed by the Required Lenders, and shall have accepted
such appointment, within 30 days after the retiring Agent gives notice of
resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent, which shall be a commercial bank organized under the laws of
the United States of America or of any State thereof who is reasonably
acceptable to the Borrowers and has a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring Agent's resignation hereunder as Agent the
provisions of this Article X shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement or the Notes, nor consent to any departure by any
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by such Borrower and the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given, PROVIDED that (a) no amendment, waiver or
consent shall, unless in writing and signed by all the Lenders, do any of the
following: (i) increase or decrease the Commitments of the Lenders (except for a
ratable decrease in the Commitments of all Lenders) or subject the Lenders to
any additional obligations, (ii) reduce the principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, (iii) postpone any date
fixed for any payment of principal of, or interest on, the Notes or any fees or
other amounts payable hereunder, (iv) change the percentage of the Commitments
or of the aggregate unpaid principal amount of the Notes, or the number of
Lenders, which shall be required for the Lenders or any of them to take any
action hereunder or (v) amend this 11.01, and (b) no amendment, waiver or
consent shall, unless in writing and signed by the Agent in addition to the
Lenders required above to take such action, affect the rights or duties of the
Agent under this Agreement or any Note.
SECTION 11.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telex, cable
communication, facsimile telecopy or similar writing) and shall be given: if to
any Borrower, at its address specified below its name on the signature pages
hereof; if to any Lender, at its Domestic Lending Office specified below its
name on the signature page hereof; if to any other Lender, at its Domestic
Lending Office specified in the Assignment and Acceptance pursuant to which it
became a Lender; and if to the Agent, at its address at Citibank, N.A., 399 Park
Avenue, New York, New York 10043, Attention: Insurance Department, 12th Floor;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the Agent and the Borrowers. All such notices and
communications shall, when mailed, telegraphed, telexed, cabled or telecopied,
be effective
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(i) on the first Domestic Business Day following the day timely deposited with
Federal Express (or other equivalent national overnight courier) or United
States Express Mail, with the cost of delivery prepaid or for the account of the
sender; (ii) on the fifth Domestic Business Day following the day duly sent by
certified or registered United States mail, postage prepaid and return receipt
requested; or (iii) when otherwise actually received by the addressee on a
Domestic Business Day (or on the next Domestic Business Day if received after
the close of normal business hours or on any non-Domestic Business Day), except
that notices and communications to the Agent pursuant to Article II or X shall
not be effective until received by the Agent.
SECTION 11.03. NO WAIVER; REMEDIES. No failure on the part of any
Lender or the Agent to exercise, and no delay in exercising, any right hereunder
or under any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 11.04. COSTS AND EXPENSES. Each Borrower jointly and
severally agrees to pay within 30 days of demand all reasonable costs and
expenses of the Agent in connection with the preparation, execution, delivery,
modification and amendment of this Agreement, the Notes and the other documents
to be delivered hereunder, including, without limitation, the reasonable fees
and out-of-pocket expenses of counsel for the Agent with respect thereto and
with respect to advising the Agent as to its rights and responsibilities under
this Agreement, and all reasonable costs and expenses, if any (including,
without limitation, reasonable counsel fees and expenses, which may include the
reasonable allocable costs of inhouse counsel), of each Lender and the Agent in
connection with the enforcement (whether through negotiations, legal proceedings
or otherwise) of this Agreement, the Notes, and the other documents to be
delivered hereunder. Each Borrower jointly and severally agrees to pay,
indemnify, and hold each Lender and the Agent harmless from and against any and
all other liabilities, losses, damages, penalties, actions, judgments and suits,
and related reasonable costs, expenses or disbursements, of any kind or nature
whatsoever in connection with or arising out of any governmental investigation,
litigation or proceeding
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with respect to the execution, delivery, enforcement and performance of this
Agreement, the Notes or the use of the proceeds of the Advances (all the
foregoing, collectively, the "indemnified liabilities"), PROVIDED that no
Borrower shall have any obligation hereunder to the Agent or any Lender with
respect to indemnified liabilities arising from the gross negligence or willful
misconduct of the Agent or any such Lender. The agreements in this Section
11.04 shall survive repayment of the Notes and all other amounts payable
hereunder.
SECTION 11.05. RIGHT OF SET-OFF. Upon (a) the occurrence and during
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 9.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 9.01,
each Lender is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by
such Lender to or for the credit or the account of any Borrower against any and
all of the obligations of such Borrower now or hereafter existing under this
Agreement and the Notes held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement or any such Note and
although such obligations may be unmatured. Each Lender agrees promptly to
notify such Borrower after any such set-off and application made by such Lender,
PROVIDED that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender under this Section
11.05 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that such Lender may have.
SECTION 11.06. BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by each Borrower and the Agent and when the
Agent shall have been notified by each Lender that such Lender has executed it
and thereafter shall be binding upon and inure to the benefit of each Borrower,
the Agent and each Lender and their respective successors and assigns, except
that no Borrower shall have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Lenders.
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SECTION 11.07. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may,
and if demanded by any Borrower (pursuant to Section 2.09 of the Other Agreement
or following a demand by such Lender pursuant to Section 2.17 or 3.03) upon at
least 10 Domestic Business Days' notice to such Lender and the Agent will,
assign to one or more banks or other entities all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and the Note or Notes held
by it), PROVIDED that (i) each such assignment shall be of a constant, and not a
varying, percentage of all of the assigning Lender's rights and obligations
under this Agreement, (ii) each such assignment shall be to an Eligible
Assignee, (iii) the amount of the Commitment of the assigning Lender being
assigned pursuant to each such assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall in no event be
less than $6,000,000 (or 100% of such Lender's remaining Commitment, if less
than $6,000,000), (iv) the assigning Lender shall have entered into an
assignment and acceptance agreement with such Eligible Assignee pursuant to
which such Lender shall assign an amount of its commitment under the Other
Agreement equal to 66 2/3% of the amount of its Commitment to be assigned
hereunder, (v) the Agent and SunAmerica, on behalf of itself and the other
Borrowers, shall have consented in writing to such assignment, which consent
shall not be unreasonably withheld, and (vi) the parties to each such assignment
shall execute and deliver to the Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance substantially in the form of Exhibit G
hereto, together with any Note or Notes subject to such assignment. In
connection with any such assignment, the Lender assignor shall pay to the Agent
a processing and recordation fee of $3,000. Upon such execution, delivery,
acceptance and recordation and upon payment by the Lender assignee to such
Lender assignor of an amount equal to the purchase price agreed between such
Lender assignor and such Lender assignee, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least 3 Domestic Business Days after the execution thereof, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder, and (y) the
Lender assignor thereunder shall, to the extent that rights and obliga-
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tions hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any
Borrower or the performance or observance by any Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 5.06 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(c) The Agent shall maintain at its address referred to in Section
11.02 a copy of each Assignment and
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Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Commitment of, and principal
amount of the Advances owing to, each Lender from time to time (the "Register").
The entries in the Register shall be prima facie evidence of amounts due, and
each Borrower, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrowers or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any Note or Notes subject to such assignment, the Agent shall, if
such Assignment and Acceptance has been completed and is in substantially the
form of Exhibit G hereto, (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register and (iii) give prompt notice
thereof to the Borrowers. Within 10 Domestic Business Days after its receipt of
such notice, the Borrowers, at their own expense, shall execute and deliver to
the Agent in exchange for the surrendered Notes a new Note to the order of such
Eligible Assignee in an amount equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance and, if the assigning Lender has retained a
Commitment hereunder, a new Note to the order of the assigning Lender in an
amount equal to the Commitment retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes and shall be dated the effective date
of such Assignment and Acceptance.
(e) Each Lender may sell participations to one or more banks or
financial institutions in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment, the Advances owing to it and the Note or Notes held by it), PROVIDED
that (i) such Lender's obligations under this Agreement (including, without
limitation, its Commitment to the Borrowers hereunder) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) such Lender shall remain the holder
of any such Note for all purposes of this Agreement, (iv) the
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Borrowers, the Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and (v) any agreement pursuant to which such
Lender sells such participation shall provide that such Lender shall retain the
sole right and responsibility to enforce the obligations of the Borrowers
hereunder including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement other than, if
provided in such participation agreement, the right of the participant
thereunder to consent to a modification, amendment or waiver described in clause
(i), (ii) or (iii) of Section 11.01. The Borrowers agree that each participant
shall, to the extent provided in its participation agreement, be entitled to the
benefits of Section 2.14 or Article III with respect to its participating
interest (provided that any resulting costs to the Borrowers would not exceed
those which would have otherwise been payable to the Lender which shall have
sold the participation to such participant).
(f) Any Lender or participant may, in connection with any assignment
or participation or proposed assignment or participation pursuant to this
Section 11.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrowers furnished to such Lender
by or on behalf of the Borrowers, PROVIDED that, through the Agent, each Lender
will notify the Borrowers of its intent to disclose such information and prior
to any such disclosure of information designated by a Borrower as confidential,
each such assignee or participant or proposed assignee or participant shall
execute a confidentiality agreement with the Borrowers whereby such assignee or
participant shall agree (subject to the exceptions set forth therein) to
preserve the confidentiality of such confidential information.
(g) Notwithstanding any other provision of this Section 11.07, any
Lender may at any time assign all or any portion of its rights under this
Agreement and its Notes to, or create a security interest therein in favor of,
any Federal Reserve Bank, PROVIDED that no such assignment or grant shall
release such Lender from its obligations hereunder.
SECTION 11.08. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. For
the purpose of assuring that
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the Agent and the Lenders may enforce their respective rights under this
Agreement, each Borrower hereby irrevocably (a) agrees that any legal or
equitable action, suit or proceeding against the Borrowers arising out of or
relating to this Agreement or any transaction contemplated hereby or the subject
matter hereof or thereof may be instituted in any state or federal court in the
State of New York, (b) waives any objection that it may now or hereafter have to
the venue of any action, suit or proceeding, (c) irrevocably submits itself to
the nonexclusive jurisdiction of any state or federal court of competent
jurisdiction in the State of New York for purposes of any such action, suit or
proceeding, and (d) irrevocably waives personal service of process and hereby
consents to service of process upon it by certified or registered mail, return
receipt requested, at its address specified in accordance with Section 11.02 and
service so made shall be deemed completed on the third business day after such
service is deposited in the mail. Nothing contained in this Section 11.08 shall
be deemed to affect the right of the Agent and the Lenders to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Borrowers in any jurisdiction. THE BORROWERS, THE AGENT,
AND THE LENDERS HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH
THEY ARE EACH PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONCERNED WITH THIS AGREEMENT AND THE NOTES.
SECTION 11.09. GOVERNING LAW. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 11.10. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 11.11. COLLATERAL. Each Lender represents to the Agent and
each other Lender that it in good faith is not relying upon any "margin stock"
(as defined in Regulation U) as collateral in the extension or maintenance of
the credit provided for in this Agreement.
80
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
SUNAMERICA INC.
11601 Wilshire Boulevard
Los Angeles, California 90025
By: /s/ James R. Belardi
----------------------------------
Name: James R. Belardi
Title: Senior Vice President
and Treasurer
SUNAMERICA CORPORATION
11601 Wilshire Boulevard
Los Angeles, California 90025
By: /s/ James R. Belardi
----------------------------------
Name: James R. Belardi
Title: Authorized Agent
SUNAMERICA FINANCIAL, INC.
11601 Wilshire Boulevard
Los Angeles, California 90025
By: /s/ James R. Belardi
---------------------------------
Name: James R. Belardi
Title: Authorized Agent
81
<PAGE>
CITIBANK, N.A.,
in its capacity as
Agent and Lender,
399 Park Avenue, 12th Floor
New York, NY 10043
Attention: Ms. Kelley Hebert
By: /s/ Kelley T. Herbert
----------------------------------
Name: Kelley T. Hebert
Title: Vice President
Commitment: $10,500,000
LENDERS
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION
555 South Flower Street
49th Floor
Los Angeles, CA 90071
Attention: Mr. Dennis Arriola
By: /s/ Dennis V. Arriola
---------------------------------
Name: Dennis V. Arriola
Title: Vice President
Commitment: $10,500,000
CHEMICAL BANK
4 New York Plaza
New York, NY 10004
Attention: Mr. Peter Platten
By: /s/ Peter Platten
----------------------------------
Name: Peter Platten
Title: Vice President
Commitment: $10,500,000
82
<PAGE>
FIRST INTERSTATE BANK OF CALIFORNIA
707 Wilshire Blvd. W16-14
Los Angeles, CA 90017
Attention: Mr. Robert Meyer
By: /s/ Robert C. Meyer / Margot E. Edel
--------------------------------------
Name: Robert C. Meyer / Margot E. Edel
Title: Vice President / Vice President
Commitment: $10,500,000
THE FIRST NATIONAL BANK OF CHICAGO
One First National Plaza
12th Floor
Chicago, IL 60670-0429
Attention: Ms. Marcia Saper
By: /s/ Marcia P. Saper
--------------------------------------
Name: Marcia P. Saper
Title: Vice President
Commitment: $10,500,000
THE INDUSTRIAL BANK OF JAPAN, LIMITED
350 South Grand Ave., Suite 1500
Los Angeles, CA 90017
Attention: Mr. Carl-Eric Benzinger
By: /s/ Juichi Tsuda
--------------------------------------
Name: Juichi Tsuda
Title: General Manager
Commitment: $10,500,000
83
<PAGE>
THE CHASE MANHATTAN BANK, N.A.
1 Chase Manhattan Plaza
5th Floor
New York, NY 10081
Attention: Ms. Sarah Lee Martin
By: /s/ Sarah Lee Martin
---------------------------------------
Name: Sarah Lee Martin
Title: Vice President
Commitment: $9,000,000
THE BANK OF NEW YORK
1 Wall Street
17th Floor
New York, NY 10286
Attention: Mr. Stratton Heath
By: /s/ W. Michael George
--------------------------------------
Name: W. Michael George
Title: Vice President
Commitment: $6,000,000
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
60 Wall Street, 22nd Floor
New York, NY 10260
Attention: Ms. Anne Kelly
By: /s/ Anne M. Kelly
---------------------------------------
Name: ANNE M. KELLY
Title: VICE PRESIDENT
Commitment: $6,000,000
84
<PAGE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE
NEW YORK AND CAYMAN ISLANDS BRANCHES
1211 Avenue of the Americas
New York, NY 10021
Attention: Operations
By: /s/ Michael F. McWalters
---------------------------------------
Name: Matthew F. Tallo Name: Michael F. McWalters
Associate Title: Managing Director
Commitment: $6,000,000
with a copy to:
633 West Fifth Street
Suite 6750
Los Angeles, CA 90071
Attention: Mr. Robert F. Edmonds
85
<PAGE>
EXHIBIT A
FORM OF NOTE
New York, New York
___________ __, 1993
For value received, SUNAMERICA INC., a Maryland corporation,
SUNAMERICA CORPORATION, a Delaware corporation, and SUNAMERICA FINANCIAL, INC.,
a Georgia corporation (collectively, the "Borrowers"), jointly and severally
promise to pay to the order of [NAME OF LENDER] (the "Lender"), for the account
of its Applicable Lending Office, the unpaid principal amount of each Advance
made by the Lender to the Borrowers pursuant to the Credit Agreement referred to
below on the last day of the Interest Period relating to such Advance. The
Borrowers jointly and severally promise to pay interest on the unpaid principal
amount of each such Advance on the dates and at the rate or rates provided for
in the Credit Agreement. All such payments of principal and interest shall be
made in lawful money of the United States in Federal or other immediately
available funds at the office of Citibank, N.A., 399 Park Avenue, New York, New
York 10043, Attention: Insurance Department, 12th Floor.
All Advances made by the Lender, the respective Types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Lender and, prior to any transfer hereof, appropriate notations to evidence the
foregoing information with respect to each such Advance then outstanding shall
be endorsed by the Lender on the schedule attached hereto, or on a continuation
of such schedule attached to and made a part hereof, PROVIDED that the failure
of the Lender to make any such recordation or endorsement shall not affect the
obligations of the Borrowers hereunder or under the Credit Agreement.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement, dated as of February 1, 1993, among the
Borrowers, the Lenders listed on the signature pages thereof and Citibank, N.A.,
as Agent for the Lenders, providing for a $90,000,000 revolving credit facility
(as the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the acceleration of
the maturity hereof upon the happening of certain events and the
<PAGE>
prepayment hereof upon the terms and conditions therein specified.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
SUNAMERICA INC
By
---------------------------------
Title:
SUNAMERICA CORPORATION
By
---------------------------------
Title:
SUNAMERICA FINANCIAL, INC.
By
---------------------------------
Title:
2
<PAGE>
Form of Note (cont'd)
ADVANCES AND PAYMENTS OF PRINCIPAL
- -------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Advance Advance Repaid Date Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3
<PAGE>
EXHIBIT B
FORM OF NOTICE OF
COMMITTED BORROWING
[DATE)
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
Attention: Insurance Department
12th Floor
Ladies and Gentlemen:
The undersigned, [Borrower], a_________________corporation, on behalf
of itself and the other Borrowers, refers to the Credit Agreement, dated as of
February 1, 1993, providing for a $90,000,000 revolving credit facility (the
"Credit Agreement", the terms defined therein being used herein as therein
defined), among the undersigned, the other Borrowers, the Lenders listed on the
signature pages thereof and Citibank, N.A., as Agent for the Lenders, and hereby
gives notice pursuant to Section 2.02 of the Credit Agreement that the
undersigned hereby requests a Borrowing under the Credit Agreement, and in that
connection sets forth below the information relating to such Borrowing (the
"Proposed Borrowing") as required by Section 2.02 of the Credit Agreement:
(i) the (Domestic Business Day] (Eurodollar Business Day] of the
Proposed Borrowing is _________, 199__;
(ii) the aggregate amount of the Proposed Borrowing is $_________;*
(iii) the Type of Advances comprising the Proposed Borrowing is
[CD Advances] [Base Rate Advances] [Eurodollar Advances);
- -----------------------
* Amount must be $10,000,000 or a larger multiple of $5,000,000 (or such
other amount as equals the aggregate amount of the unused Commitments).
<PAGE>
(iv) Level [I] [II] [III] Status exists on the date of this Notice;
and
(v) the Interest Period for each Advance made as part of the Proposed
Borrowing is [______ days] [month[s]].
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in Article V of the
Credit Agreement are true and correct, before and after giving effect to
the Proposed Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date, except to the extent they were
expressly made as of the Effective Date or expressly relate to a prior
date[, PROVIDED that such representations and warranties do not include
those set forth in Sections 5.06(b)(iii) and 5.07]**;
(B) no Default exists or will result from such Proposed Borrowing;
and
(C) the outstanding aggregate principal amount of all Advances, after
giving effect to the Proposed Borrowing, will not exceed the aggregate
amount of all Commitments in effect as of the date of such Proposed
Borrowing.
Very truly yours,
[BORROWER]
By
-----------------------------
Title:
- -------------------
** Proviso to be included in Notice if, after giving effect to the Proposed
Borrowing, the aggregate outstanding amount of Advances owing to the
Lenders would not exceed the aggregate amount of such Advances outstanding
and owing to the Lenders immediately prior to the making of the Proposed
Borrowing.
2
<PAGE>
EXHIBIT C
FORM OF MONEY MARKET QUOTE REQUEST
[DATE]
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
Attention: Insurance Department
12th Floor
Ladies and Gentlemen:
The undersigned, [Borrower], a____________________ corporation, on behalf
of itself and the other Borrowers, refers to the Credit Agreement, dated as of
February 1, 1993, providing for a $90,000,000 revolving credit facility (the
"Credit Agreement", the terms defined therein being used herein as therein
defined), among the undersigned, the other Borrowers, the Lenders listed on the
signature pages thereof and Citibank, N.A., as Agent for the Lenders, and hereby
requests, pursuant to Section 2.03(b) of the Credit Agreement, Money Market
Quotes under the Credit Agreement for a Borrowing comprised of Money Market
Advances, and in that connection sets forth below the information relating to
any such Borrowing (the "Proposed Borrowing"):
(i) the [Domestic Business Day] [Eurodollar Business Day] of
the Proposed Borrowing is _________, 199__;
(ii) the aggregate amount of the Proposed Borrowing is
$______________;*
(iii) such Money Market Quote shall offer a Money Market (Margin]
[Absolute Rate]; and
- -------------------------
* Amount must be $10,000,000 or a larger multiple of $5,000,000 (or such
other amount as equals the aggregate amount of the unused Commitments).
<PAGE>
(iv) the Interest Period for each Advance made
as part of the Proposed Borrowing is_________**.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in Article V of the
Credit Agreement are true and correct, before and after giving effect to
the Proposed Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date, except to the extent they were
expressly made as of the Effective Date or expressly relate to a prior
date[, PROVIDED that such representations and warranties do not include
those set forth in Sections 5.06(b)(iii) and 5.07] *** ;
(B) no Default exists or will result from such Proposed Borrowing;
and
(C) the outstanding aggregate principal amount of all Advances, after
giving effect to the Proposed Borrowing, will not exceed the aggregate
amount of all commitments in effect as of the date of such Proposed
Borrowing.
Very truly yours,
[BORROWER]
By
------------------------
Title:
- -----------------------
** Not less than 7 nor more than 180 days for each Money Market Absolute Rate
Advance, and 1, 2, 3, or 6 months for each Money Market LIBOR Advance, in
each case subject to the provisions of the definition of Interest Period.
*** Proviso to be included in Notice if, after giving effect to the Proposed
Borrowing, the aggregate outstanding amount of Advances owing to the
Lenders would not exceed the aggregate amount of such Advances outstanding
and owing to the Lenders immediately prior to the making of the Proposed
Borrowing.
2
<PAGE>
EXHIBIT D
FORM OF INVITATION FOR MONEY MARKET QUOTES
[DATE]
[Name of Lender]
[Address]
Attention: __________________
Ladies and Gentlemen:
Pursuant to Section 2.03(c) of the Credit Agreement, dated as of
February 1, 1993, providing for a $90,000,000 revolving credit facility (the
"Credit Agreement", the terms defined therein being used herein as therein
defined), among SunAmerica Inc., a Maryland corporation, SunAmerica Corporation,
a Delaware corporation, SunAmerica Financial, Inc., a Georgia corporation
(collectively, the "Borrowers"), the Lenders listed on the signatures pages
thereof and Citibank, N.A., as Agent for the Lenders, we are pleased on behalf
of the Borrowers to invite you to submit Money Market Quotes to the Borrowers
for the following proposed Money Market Borrowing(s):
Date of Borrowing:_________________
PRINCIPAL AMOUNT INTEREST PERIOD
$
Such Money Market Quotes shall offer a Money Market [Margin] [Absolute
Rate].
Please respond to this invitation by no later than [2:00 P.M.] [10:00
A.M.] New York City time on [date].
CITIBANK, N.A., as Agent
By
--------------------
Authorized Officer
<PAGE>
EXHIBIT E
FORM OF MONEY MARKET QUOTE
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
Attention: Insurance Department
12th Floor
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of February 1,
1993, providing for a $90,000,000 revolving credit facility (the "Credit
Agreement", the terms defined therein being used herein as therein defined),
among SunAmerica Inc., a Maryland corporation, SunAmerica Corporation, a
Delaware corporation, SunAmerica Financial, Inc., a Georgia corporation
(collectively, the "Borrowers"), the Lenders listed on the signatures pages
thereof and Citibank, N.A., as Agent for the Lenders. In response to your
invitation on behalf of the Borrowers, dated__________, 199_, we hereby make
the following Money Market Quote on the following terms:
1. Quoting Lender:
-------------------------------------------------------
2. Person to contact at Quoting Lender:
-----------------------------------------------------------------------
3. Date of Borrowing: *
-----------------------
4. We hereby offer to make Money Market Advance(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
- -----------------------
* As specified in the related Invitation.
<PAGE>
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- ----- ------ ------- --------------------
$
$
[Provided, that the aggregate principal amount of Money Market Advances for
which the above offers may be accepted shall not exceed $______________.]**
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in the
Credit Agreement, irrevocably obligates us to make the Money Market
Advance(s) for which any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF LENDER)
Dated: By:
----------------- ---------------------
Authorized Officer
- ---------------------------
** Principal amount bid may not exceed the principal amount requested.
Specify aggregate limitation if the sum of the individual offers
exceeds the amount the Lender is willing to lend. Bids must be made
for $5,000,000 or a larger multiple of $1,000,000.
*** As specified in the related Invitation. No more than 5 bids are
permitted for each Interest Period.
**** Margin over or under the London Interbank Offered Rate determined for
the applicable Interest Period. Specify percentage (to the nearest
1/10,000 of 1%) and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE>
EXHIBIT F
February __, 1993
To the Lenders listed
on Annex A hereto
SUNAMERICA INC.
Ladies and Gentlemen:
I am a Vice President and Associate General Counsel of SunAmerica
Inc. (formerly Broad Inc.), a Maryland corporation ("SunAmerica") and have acted
as such in connection with the Credit Agreement dated as of February 1, 1993
(the "Credit Agreement") by and among SunAmerica, SunAmerica Corporation, a
Delaware corporation ("SACO"), and SunAmerica Financial, Inc., a Georgia
corporation ("SAFI") (SunAmerica, SACO and SAFI are each referred to as a
"Borrower" and are collectively referred to as "Borrowers"), Citibank, N.A., as
Agent (the "Agent") and the Lenders named therein (the "Lenders") and the
$90,000,000 loan facility contemplated by the Credit Agreement. Capitalized
terms used herein, unless otherwise expressly defined, have the meanings
specified in the Credit Agreement.
I have examined and relied upon the originals, or copies
certified or otherwise identified to my satisfaction, of such records,
documents, certificates and other instruments, and have made such other
investigations or inquiries and considered such questions of law, as in my
judgment are necessary or appropriate to enable me to render the opinions
expressed below. In particular, I have examined or caused to be examined under
my direction certificates of public officials, and copies, certified to my
satisfaction, of such corporate documents and records of the Borrowers and of
the Material Subsidiaries and of First Sun and of such other persons as I have
deemed relevant and necessary as a basis for this opinion. In addition, I have
relied, to the extent I have deemed such reliance proper, upon certificates of
officers of the Borrowers and of the Material Subsidiaries and of First Sun with
respect to the accuracy of certain material factual matters which were not
independently established.
<PAGE>
I have assumed the authenticity of all documents submitted to me as
originals, the conformity to originals of all documents submitted to me as
copies and the genuineness of all signatures on such documents. I have also
assumed that the Credit Agreement has been duly authorized, executed and
delivered by all parties thereto other than the Borrowers, and constitutes all
such other parties respective legal, valid, binding and enforceable obligations.
Based on an officer's certificate of an officer of SunAmerica with respect to
the definition in Section 1.01 of the Credit Agreement of the term "Material
Subsidiary", the term "Material Subsidiary" means Sun Life, Anchor, Sun Mortgage
Acceptance Corporation, and Saamsun Holdings Corp.
For purposes of the opinion in the second sentence of paragraph 4
below, I have reviewed the opinion of Messrs. Debevoise & Plimpton dated
February 5, 1993 to the effect that the Credit Agreement and the Notes
constitute the legal, valid, binding and enforceable obligations of the
Borrowers under the laws of the State of New York, and I have assumed that the
Lenders and the Agent shall act in good faith and in a commercially reasonable
manner in all matters in connection with the Credit Agreement and the Notes, and
that the laws of the State of California are the same as the laws of the State
of New York.
I am an attorney admitted to practice in the State of California, and
I express no opinion as to any laws other than the laws of the State of
California and the federal laws of the United States of America and for the
purposes of the opinions with respect to the relevant Borrower or Material
Subsidiary, as the case may be, in paragraphs 1, 4 (but only to the extent of
the first sentence thereof and as to execution of the Credit Agreement and the
Notes) and 6 below, the general corporate laws of the States of Maryland,
Delaware, Georgia and Virginia.
Based upon and subject to the foregoing, I am of the opinion that:
1. Each Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation, and has
all requisite corporate power and authority to own or lease and to operate its
properties and to carry on its business as now conducted. Each Borrower is duly
qualified to transact business, and is in good standing as a foreign corporation
authorized to transact business, in each jurisdiction where the ownership,
leasing or operation of its properties or the conduct of its business makes such
qualification necessary, except where the failure to so qualify or be in good
standing would not have a Material Adverse Effect.
2. The execution, delivery and performance by each Borrower of the
Credit Agreement and the Notes does not (a) to the best of my knowledge, violate
any law or statute or any rule or regulation of any relevant Governmental
Authority applicable to any Borrower, (b) to the best of my knowledge,
contravene or conflict with any order, writ, judgment or decree of any court,
arbitrator or any Governmental Authority or result in any breach of or
constitute a default under any agreement or instrument binding on such Borrower,
or (c) contravene or conflict with any provision of the Articles of
Incorporation or Bylaws of such Borrower.
- 2 -
<PAGE>
3. No material order, consent, approval, license, authorization or
validation of, or material filing, recording or registration with or exemption
by, any Governmental Authority regulating any Borrower is required in connection
with the borrowings under the Credit Agreement or the execution, delivery or
performance by each Borrower of the Credit Agreement or the Notes or the
validity or enforceability of the Credit Agreement or the Notes, except such
disclosure as may be necessary or appropriate under securities laws.
4. Each Borrower has taken all necessary action to authorize the
borrowings under the Credit Agreement and the execution, delivery and
performance by such Borrower of the Credit Agreement and the Notes. Each
Borrower has duly executed and delivered the Credit Agreement and the Notes, and
the Credit Agreement and the Notes constitute legal, valid and binding
obligations of each Borrower enforceable against such Borrower in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting the rights and remedies of
creditors and general principles of equity (regardless of whether asserted in a
proceeding in equity or at law).
5. To the best of my knowledge, there is no action, suit or
proceeding pending or threatened against any Borrower or any Material Subsidiary
before any court or arbitrator or any governmental body or agency for which I
believe there is a reasonable likelihood of an adverse decision which I believe
would have a Material Adverse Effect or which questions the validity of the
Credit Agreement or the Notes.
6. Each Material Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own or
lease and to operate its properties and to carry on its business as now
conducted.
7. None of the Borrowers is an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
8. Each Borrower and each Material Subsidiary has all licenses,
franchises, permits and other governmental authorizations necessary for the
businesses presently carried on by them except where the failure to do so would
not individually or in the aggregate have a Material Adverse Effect.
9. No material License of an Insurance Subsidiary (i.e., Sun Life,
Anchor or First Sun) is the subject of a proceeding for suspension or
revocation, except where such suspension or revocation would not individually or
in the aggregate have a Material Adverse Effect.
I express no opinion as to the enforceability of provisions of the
Credit Agreement and the Notes (a) which broadly or vaguely waive stated rights,
statutory rights, constitutional
- 3 -
<PAGE>
rights or unknown future rights, (b) to the effect that rights or remedies are
not exclusive, that every right or remedy is cumulative, that the election of a
particular remedy or remedies does not preclude recourse to one or more other
remedies, that the failure to exercise or delay in exercising any remedy does
not affect or waive any rights or remedies, and that waivers, amendments or
modifications may only be made in writing, (c) imposing charges in the nature of
forfeitures, penalties, unreasonable liquidated damages or late charges, (d)
requiring any party to indemnify any other party against loss for such other
party's own negligence, tortious conduct, wrongful or unlawful act or violation
of public policy, or absolving any party from liability, or limiting the
liability of any party for such party's own negligence, tortious conduct,
wrongful or unlawful act or violation of public policy, (e) waiving, expressly
or by implication, presentment, demand, protest or notice, or the right to
object to the laying of the venue of any suit, action or proceeding, or the
right to claim that any suit, action or proceeding has been brought in an
inconvenient forum, or the right to a jury trial or to due process of law, or
other rights, remedies, claims or defenses, to the extent such waivers are
contrary to law or are or would be found to be against public policy, (f)
requiring the Borrowers to pay attorneys' fees of the Lenders or the Agent in
connection with any proceeding in which the Lenders or the Agent are not the
prevailing party, (g) the provisions of the last sentence of Section 11.07(e) of
the Agreement or (h) which provide that actions may be taken or that decisions
may be made at the discretion or judgment of the Agent or any Lenders or
arbitrarily by the Agent or any Lenders.
This opinion is rendered as of the date set forth above and I shall
have no responsibility to advise you of any changes, facts or circumstances
after the date hereof. This letter may not be relied upon by any other person
or entity except counsel to the Agent and the Lenders. This opinion may not be
furnished without my prior consent to any person or entity other than potential
assignees or participants or as may be required by applicable law or regulators.
Very truly yours,
-----------------------------------------
Susan L. Harris
- 4 -
<PAGE>
ANNEX A
CITIBANK, N.A.
399 Park Avenue, 12th Floor
New York, NY 10043
Attention: Ms. Kelley Hebert
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION
555 South Flower Street
49th Floor
Los Angeles, CA 90071
Attention: Mr. Dennis Arriola
CHEMICAL BANK
4 New York Plaza
New York, NY 10004
Attention: Mr. Peter Platten
FIRST INTERSTATE BANK OF CALIFORNIA
707 Wilshire Blvd. W16-14
Los Angeles, CA 90017
Attention: Mr. Robert Meyer
THE FIRST NATIONAL BANK OF CHICAGO
One First National Plaza
12th Floor
Chicago, IL 60670-0429
Attention: Ms. Marcia Saper
THE INDUSTRIAL BANK OF JAPAN, LIMITED
350 South Grand Ave., Suite 1500
Los Angeles, CA 90017
Attention: Mr. Carl-Eric Benzinger
<PAGE>
THE CHASE MANHATTAN BANK, N.A.
1 Chase Manhattan Plaza
5th Floor
New York, NY 10081
Attention: Ms. Sarah Lee Martin
THE BANK OF NEW YORK
1 Wall Street
17th Floor
New York, NY 10286
Attention: Mr. Stratton Heath
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
60 Wall Street, 22nd Floor
New York, NY 10260
Attention: Ms. Anne Kelly
WESTDEUTSCHE LANDESBANK GIROZENTRALE
NEW YORK AND CAYMAN ISLANDS BRANCHES
1211 Avenue of the Americas
New York, NY 10021
Attention: Operations
with a copy to:
633 West Fifth Street
Suite 6750
Los Angeles, CA 90071
Attention: Mr. Robert F. Edmonds
<PAGE>
EXHIBIT G
ASSIGNMENT AND ACCEPTANCE
Dated_________, 199_
Reference is made to the Credit Agreement, dated as of February 1,
1993, providing for a $90,000,000 revolving credit facility (the "Credit
Agreement"), among SunAmerica Inc., a Maryland corporation ("SunAmerica"),
SunAmerica Corporation, a Delaware corporation ("SACO"), SunAmerica Financial,
Inc., a Georgia corporation (together with SunAmerica and SACO, the
"Borrowers"), the Lenders identified on the signature pages thereof and
Citibank, N.A., as Agent for the Lenders (the "Agent"). Terms defined in the
Credit Agreement are used herein with the same meanings.
________________(the "Assignor") and _______________(the "Assignee")
agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, for a purchase price of
$_______, a______% interest in and to all of the Assignor's rights and
obligations under the Credit Agreement as of the Effective Date (as defined in
paragraph 4 below) (including, without limitation, such percentage interest in
the Assignor's Commitment as in effect on the Effective Date (before giving
effect to any Money Market Reduction), the Advances (including Money Market
Advances) owing to the Assignor on the Effective Date, and the Notes held by the
Assignor).* Schedule 1 hereto sets forth the respective Commitments and
Advances of the Assignor and the Assignee immediately after giving effect to
this Assignment and Acceptance.
2. The Assignor (i) represents and warrants that as of the date
hereof its Commitment (without giving effect to assignments thereof which have
not yet become effective or any Money Market Reduction) is $__________, and the
aggregate outstanding principal amount of Advances owing to it (without giving
effect to assignments thereof which have not yet become effective) is $________;
(ii) represents and warrants that it is the legal and beneficial owner of the
interests being assigned by it hereunder and that such interest is free and
clear of any adverse claim; (iii) makes no representation or warranty
- -----------------------
* The amount of Commitments being assigned shall comply with Section 11.07(a)
of the Credit Agreement.
<PAGE>
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document furnished pursuant
thereto; (iv) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of any Borrower or the performance or
observance by any Borrower of any of its obligations under the Credit Agreement
or any other instrument or document furnished pursuant thereto; and (v) attaches
the Note referred to in paragraph 1 above and requests that the Agent exchange
such Note for [a new Note dated_________, 199_ in the principal amount of
$______, payable to the order of the Assignee] [new Notes as follows: a Note
dated__________, 199_ in the principal amount of $____________, payable to the
order of the Assignee, and a Note dated _________, 199_ in the principal amount
of $_______________, payable to the order of the Assignor].
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 5.06 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under the Credit Agreement as are delegated to the Agent
by the terms thereof, together with such powers as are reasonably incidental
thereto; (v) agrees that it will perform in accordance with their terms all of
the obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender; [and] (vi) specifies as its Domestic Lending office
(and address for notices), Money Market Lending office and Eurodollar Lending
Office the offices set forth beneath its name on the signature pages hereof [and
(vii) attaches the forms prescribed by the
2
<PAGE>
Internal Revenue Service of the United States evidencing their exemption from
U.S. withholding taxes].**
4. The effective date for this Assignment and Acceptance shall be
_________(the "Effective Date").*** Following, and subject to, the consent in
writing by the Agent and SunAmerica, on behalf of itself and the other
Borrowers, to such assignment and the execution of this Assignment and
Acceptance, this Assignment and Acceptance will be delivered to the Agent
together with the processing fee specified in Section 11.07(a) of the Credit
Agreement, for acceptance and recording by the Agent.
5. Upon such acceptance and recording and the payment by the
Assignee to the Assignor of the purchase price specified in paragraph 1 above,
as of the Effective Date, (i) the Assignee shall be a party to the Credit
Agreement and, to the extent provided in the Credit Agreement, have the rights
and obligations of a Lender thereunder and (ii) the Assignor shall, to the
extent provided in the Credit Agreement, relinquish its rights and be released
from its obligations under the Credit Agreement.
6. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments under the Credit Agreement and the Notes
in respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and fees with respect thereto) to the Assignee.
The Assignor and Assignee shall make all appropriate adjustments in payments
under the Credit Agreement and the Notes for periods prior to the Effective Date
directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
[NAME OF ASSIGNOR]
- ------------------------
** If the Assignee is organized under the laws of a jurisdiction outside the
United States.
*** See Section 11.07(a). Such date shall be at least 3 Domestic Business Days
after the execution of this Assignment and Acceptance.
3
<PAGE>
By:
--------------------------
Name:
Title:
[NAME OF ASSIGNEE]
By:
--------------------------
Name:
Title:
Domestic Lending Office (and
address for notices):
[Address]
Money Market Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
4
<PAGE>
Accepted and consented
to this_______ day of
____________, 199_
CITIBANK, N.A., as Agent
By:
---------------------
Name:
Title:
SUNAMERICA INC.
By:
---------------------
Name:
Title:
5
<PAGE>
SCHEDULE 1
TO
ASSIGNMENT AND ACCEPTANCE
Dated___________, 199_
Assignor's Commitment: $
----------------------
Aggregate Outstanding Principal
Amount of Committed Advances
Owing to Assignor $
----------------------
Aggregate Outstanding Principal
Amount of Money Market Advances
Owing to Assignor $
----------------------
Assignee's Commitment: $
----------------------
Aggregate Outstanding Principal
Amount of Committed Advances
Owing to Assignee $
----------------------
Aggregate Outstanding Principal
Amount of Money Market Advances
Owing to Assignee $
----------------------
6
<PAGE>
EXHIBIT H
BROAD INC.
CONSOLIDATING BALANCE SHEET
September 30, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUN FIRST BROKER/ ASSSET
LIFE ANLIC SUN DEALER MANAGER TRUST ELIM-
CONSOL CONSOL AMERICA CONSOL CONSOL COMPANY INATIONS
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
BONDS, NOTES AND REDEM PREF STOCK 3,530,366 1,185,199 49,072 0 0 337,864 0
SENIOR SECURED BANK LOANS 308,204 156,907 0 0 0 0 0
COMMON STOCKS, AT MARKET VALUE 22,108 10,390 0 0 0 0 0
KBHC WARRANTS, AT MARKET VALUE 7,330 0 0 0 0 0 0
SHORT-TERM INVESTMENTS 791,814 362,197 40,904 8,625 18,832 0 0
CASH 35,625 3,530 402 7,559 286 74,354 0
MORTGAGE LOANS 1,146,074 96,427 20,975 0 0 0 0
POLICY LOANS 28,196 13,195 0 0 0 0 0
REAL ESTATE 37,021 156,684 0 0 0 0 0
OTHER INVESTED ASSETS 262,943 131,965 0 0 0 0 0
--------- --------- --------- --------- --------- --------- ---------
TOTAL INVESTMENTS 6,169,681 2,116,494 111,353 16,184 19,118 412,218 0
INVESTMENTS IN AFFILIATES 328,718 61,829 0 0 0 0 (410,119)
ACCRUED INVESTMENT INCOME 82,699 16,664 443 57 0 4,184 0
DAC AND PVFP 145,696 240,572 1,297 0 47,692 0 0
SEPARATE ACCOUNT ASSETS 0 3,284,507 8,836 0 0 0 0
INVESTMENT IN DISCONT. OPERATIONS 0 0 0 0 0 0 0
OTHER ASSETS 24,726 12,479 1,084 21,712 27,724 8,177 0
--------- --------- --------- --------- --------- --------- ---------
TOTAL ASSETS 6,751,520 5,732,545 123,013 37,953 94,534 424,579 (410,119)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
LIABILITIES:
RES. FOR FUTURE POLICYHOLDER BEN.:
ANNUITIES AND SPL 3,346,131 1,735,565 59,400 0 0 0 0
GICs 1,739,683 0 0 0 0 0 0
CLAIMS & OTHER POLICYHOLDERS' FUNDS 0 7,406 227 0 0 0 0
NOTES PAYABLE:
L-TERM NOTES AND DEBENTURES 0 0 0 0 0 0 0
CMO 182,784 0 0 0 0 0 0
SECURED NOTES PAYABLE 0 0 0 0 0 0 0
BANK NOTES 0 0 0 0 0 524 0
REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 0 0
SUBORDINATED DEBENTURES 0 0 0 0 0 0 0
SEPARATE ACCOUNT LIABILITIES 0 3,284,507 8,836 0 0 0 0
DUE TO/FROM AFFILIATES (2,123) 21,121 229 353 16,495 484 0
OTHER LIABILITIES 788,055 356,706 33,625 20,076 5,549 399,247 0
FEDERAL INCOME TAXES:
CURRENT (11,969) (8,459) 609 2,298 (11,817) 1,654 0
DEFERRED 12,561 13,548 (835) (1,067) 19,212 82 0
--------- --------- --------- --------- --------- --------- ---------
TOTAL LIABILITIES 6,055,122 5,410,394 102,091 21,660 29,439 401,991 0
--------- --------- --------- --------- --------- --------- ---------
SHAREHOLDERS' EQUITY:
PREFERRED STOCK 0 0 0 0 0 0 0
NON-TRANSFER CLASS B STOCK 0 0 0 0 0 0 0
COMMON STOCK 5,636 3,511 3,000 1 56 700 (7,267)
CONTRIBUTED CAPITAL 267,670 252,876 14,428 16,249 46,738 19,415 (338,956)
URCG (L) 2,675 (2,385) 0 0 0 0 2,385
URCG (L) K&B WARRANTS 6,142 0 0 0 0 0 0
RETAINED EARNINGS 414,275 68,149 3,494 43 18,301 2,473 (66,281)
--------- --------- --------- --------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 696,398 322,151 20,922 16,293 65,095 22,588 (410,119)
--------- --------- --------- --------- --------- --------- ---------
TOTAL LIAB. & SH EQUITY 6,751,520 5,732,545 123,013 37,953 94,534 424,579 (410,119)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
CONSOL NON- SUNAMERICA
IDATED REGULATED ELIM- CORP BROAD INC. ELIM- BROAD INC.
REGULATED CONSOL INATIONS CONSOL (PARENT) INATIONS CONSOL
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
BONDS, NOTES AND REDEM PREF STOCK 5,102,501 15,194 (17,870) 5,099,825 273,481 (269,254) 5,104,052
SENIOR SECURED BANK LOANS 465,111 0 0 465,111 230,432 0 695,543
COMMON STOCKS, AT MARKET VALUE 32,498 134 0 32,632 1,038 0 33,670
KBHC WARRANTS, AT MARKET VALUE 7,330 0 0 7,330 0 0 7,330
SHORT-TERM INVESTMENTS 1,222,372 13,006 0 1,235,378 139,536 0 1,374,914
CASH 121,756 4 0 121,760 14,692 0 136,452
MORTGAGE LOANS 1,263,476 0 0 1,263,476 1,981 0 1,265,457
POLICY LOANS 41,391 0 0 41,391 0 0 41,391
REAL ESTATE 193,705 0 0 193,705 (29,530) 0 164,175
OTHER INVESTED ASSETS 394,908 5,850 0 400,758 198,756 0 599,514
---------- --------- --------- ---------- --------- --------- ----------
TOTAL INVESTMENTS 8,845,048 34,188 (17,870) 8,861,366 830,386 (269,254) 9,422,498
INVESTMENTS IN AFFILIATES (19,572) 671,104 (632,899) 18,633 700,428 (719,061) 0
ACCRUED INVESTMENT INCOME 104,047 494 0 104,541 8,631 0 113,172
DAC AND PVFP 435,257 0 0 435,257 952 0 436,209
SEPARATE ACCOUNT ASSETS 3,293,343 0 0 3,293,343 0 0 3,293,343
INVESTMENT IN DISCONT. OPERATIONS 0 0 0 0 0 0 0
OTHER ASSETS 95,902 15,847 0 111,749 8,383 12,529 132,661
---------- --------- --------- ---------- --------- --------- ----------
TOTAL ASSETS 12,754,025 721,633 (650,769) 12,824,889 1,548,780 (975,786) 13,397,883
---------- --------- --------- ---------- --------- --------- ----------
---------- --------- --------- ---------- --------- --------- ----------
LIABILITIES:
RES. FOR FUTURE POLICYHOLDER BEN.:
ANNUITIES AND SPL 5,141,096 0 0 5,141,096 0 0 5,141,096
GICs 1,739,683 0 0 1,739,683 283,365 0 2,023,048
CLAIMS & OTHER POLICYHOLDERS' FUNDS 7,633 0 0 7,633 0 0 7,633
NOTES PAYABLE:
L-TERM NOTES AND DEBENTURES 0 0 0 0 225,000 0 225,000
CMO 182,784 0 0 182,784 264,988 (264,988) 182,784
SECURED NOTES PAYABLE 0 0 0 0 0 0 0
BANK NOTES 524 25,919 0 26,443 0 0 26,443
REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 0 0
SUBORDINATED DEBENTURES 0 0 0 0 0 0 0
SEPARATE ACCOUNT LIABILITIES 3,293,343 0 0 3,293,343 0 0 3,293,343
DUE TO/FROM AFFILIATES 36,559 (13,072) 18 23,505 (19,239) (4,266) 0
OTHER LIABILITIES 1,603,258 24,882 (27) 1,628,113 92,101 0 1,720,214
FEDERAL INCOME TAXES:
CURRENT (27,684) 8,175 0 (19,509) 18,077 12,529 11,097
DEFERRED 43,501 (8,688) 0 34,813 2,344 0 37,157
---------- --------- --------- ---------- --------- --------- ----------
TOTAL LIABILITIES 12,020,697 37,216 (9) 12,057,904 866,636 (256,725) 12,667,815
---------- --------- --------- ---------- --------- --------- ----------
SHAREHOLDERS' EQUITY:
PREFERRED STOCK 0 48,700 0 48,700 218,500 0 267,200
NON-TRANSFER CLASS B STOCK 0 0 0 0 6,834 0 6,834
COMMON STOCK 5,637 4 (5,637) 4 25,179 (4) 25,179
CONTRIBUTED CAPITAL 278,420 366,935 (278,420) 366,935 98,051 (367,711) 97,275
URCG (L) 2,675 2,673 (2,675) 2,673 2,211 (2,673) 2,211
URCG (L) K&B WARRANTS 6,142 6,142 (6,142) 6,142 6,142 (6,142) 6,142
RETAINED EARNINGS 440,454 259,963 (357,886) 342,531 325,227 (342,531) 325,227
---------- --------- --------- ---------- --------- --------- ----------
TOTAL SHAREHOLDERS' EQUITY 733,328 684,417 (650,760) 766,985 682,144 (719,061) 730,068
---------- --------- --------- ---------- --------- --------- ----------
TOTAL LIAB. & SH EQUITY 12,754,025 721,633 (650,769) 12,824,889 1,548,780 (975,786) 13,397,883
---------- --------- --------- ---------- --------- --------- ----------
---------- --------- --------- ---------- --------- --------- ----------
</TABLE>
1-37
<PAGE>
BROAD INC.
CONSOLIDATING INCOME STATEMENT
September 30, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUN FIRST BROKER/ ASSSET
LIFE ANLIC SUN DEALER MANAGER TRUST ELIM-
CONSOL CONSOL AMERICA CONSOL CONSOL COMPANY INATIONS
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT SPREAD
Investment income 525,518 158,436 6,472 620 742 8,972 (3,112)
Less: Credit losses 6,000 0 0 0 0 0 0
--------------------------------------------------------------------------------------
Subtotal investment income 519,518 158,436 6,472 620 742 8,972 (3,112)
Less: Interest - senior debt 17,867 1,452 0 0 0 45 (3,112)
Interest - subordinated de 0 0 0 0 0 0 0
Interest - accumulated val 363,204 119,781 4,104 0 0 0 0
Interest - trust deposits 0 0 0 0 0 4,256 0
Preferred dividends 0 0 0 0 0 0 0
--------------------------------------------------------------------------------------
NET INVESTMENT SPREAD 138,447 37,203 2,368 620 742 4,671 0
OTHER REVENUE
Net Realized gains (losses 17,881 (23,364) 3,489 0 615 (209) 0
Elimination gains (losses) 15 (7,708) 0 0 0 0 0
Equity in earnings of aff- 0 0 0 0 0 0 0
Net Retained Commissions (87) (215) (40) 19,508 300 0 0
Variable annuity fees 0 57,626 40 0 0 0 0
Asset management fees 0 0 0 0 25,269 0 0
Trust fees 0 0 0 0 0 11,041 0
Surrender charges 7,063 7,201 27 0 0 0 0
Other income (expenses), n (8,320) (1,830) 574 3,638 993 1,803 0
--------------------------------------------------------------------------------------
TOTAL OTHER REVENUE 16,552 31,710 4,090 23,146 27,177 12,635 0
--------------------------------------------------------------------------------------
EXPENSES
General and administrative 53,696 28,754 1,584 21,170 13,768 12,497 0
Amortization of DAC 27,676 14,267 2,356 0 3,957 0 0
--------------------------------------------------------------------------------------
81,372 43,021 3,940 21,170 17,725 12,497 0
INCOME BEFORE INCOME TAXES 73,627 25,892 2,518 2,596 10,194 4,809 0
INCOME TAXES (BENEFIT):
Current 21,628 5,106 2,140 2,315 (10,560) 1,860 0
Deferred (828) 1,494 (1,290) (494) 14,883 40 0
--------------------------------------------------------------------------------------
*******NET INCOME******* 52,827 19,292 1,668 775 5,871 2,909 0
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
<CAPTION>
CONSOL NON- SUNAMERICA
IDATED REGULATED ELIM- CORP BROAD INC. ELIM- BROAD INC.
REGULATED CONSOL INATIONS CONSOL (PARENT) INATIONS CONSOL
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT SPREAD
Investment income 697,648 4,377 0 702,025 79,992 (13,004) 769,013
Less: Credit losses 6,000 0 0 6,000 0 0 6,000
--------------------------------------------------------------------------------------
Subtotal investment income 691,648 4,377 0 696,025 79,992 (13,004) 763,013
Less: Interest - senior debt 16,252 1,584 0 17,836 28,392 (13,004) 33,224
Interest - subordinated de 0 0 0 0 3,941 0 3,941
Interest - accumulated val 487,089 0 0 487,089 15,119 0 502,208
Interest - trust deposits 4,256 0 0 4,256 0 0 4,256
Preferred dividends 0 4,630 0 4,630 0 0 4,630
--------------------------------------------------------------------------------------
NET INVESTMENT SPREAD 184,051 (1,837) 0 182,214 32,540 0 214,754
OTHER REVENUE
Net Realized gains (losses (1,588) (7,506) 0 (9,094) (39,577) 0 (48,671)
Elimination gains (losses) (7,693) 0 0 (7,693) 0 0 (7,693)
Equity in earnings of aff- 0 0 0 0 79,894 (79,894) (0)
Net Retained Commissions 19,466 0 0 19,466 (611) 0 18,855
Variable annuity fees 57,666 0 0 57,666 0 0 57,666
Asset management fees 25,269 0 0 25,269 0 0 25,269
Trust fees 11,041 0 0 11,041 0 0 11,041
Surrender charges 14,291 0 0 14,291 0 0 14,291
Other income (expenses), n (3,142) 2,040 0 (1,102) 3,484 0 2,382
--------------------------------------------------------------------------------------
TOTAL OTHER REVENUE 115,310 (5,466) 0 109,844 43,190 (79,894) 73,140
--------------------------------------------------------------------------------------
EXPENSES
General and administrative 131,469 445 0 131,914 1,144 0 133,058
Amortization of DAC 48,256 0 0 48,256 119 0 48,375
--------------------------------------------------------------------------------------
179,725 445 0 180,170 1,263 0 181,433
INCOME BEFORE INCOME TAXES 119,636 (7,748) 0 111,888 74,467 (79,894) 106,461
INCOME TAXES (BENEFIT):
Current 22,489 2,566 0 25,055 25,813 0 50,868
Deferred 13,805 (6,866) 0 6,939 (23,507) 0 (16,568)
--------------------------------------------------------------------------------------
*******NET INCOME******* 83,342 (3,448) 0 79,894 72,161 (79,894) 72,161
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
1-38
<PAGE>
BROAD INC. (PARENT) & NON-REGULATED AFFILIATES CONSOLIDATED 10/22/92
LEGAL CONSOLIDATING BALANCE SHEET 01:57 PM
September 30, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUN SUN SUN
BROAD INC. AMERICA SLG AMERICA AMERICA ALIGP
(PARENT) CORP. FINANCIAL ADV CORP
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
BONDS, NOTES AND REDEM PREF STOCK 213,981 2,501 0 12,693 0 0
SENIOR SECURED BANK LOANS 0 0 0 0 0 0
COMMON STOCKS, AT MARKET VALUE 1,038 0 0 134 0 0
KBHC WARRANTS, AT MARKET VALUE 0 0 0 0 0 0
SHORT-TERM INVESTMENTS 91,397 11,441 0 1,565 0 0
CASH 13,801 0 0 4 0 0
MORTGAGE LOANS 1,981 0 0 0 0 0
POLICY LOANS 0 0 0 0 0 0
REAL ESTATE (29,530) 0 0 0 0 0
OTHER INVESTED ASSETS 278,894 0 0 5,824 0 26
--------- --------- --------- --------- --------- ---------
TOTAL INVESTMENTS 571,562 13,942 0 20,220 0 26
INVESTMENTS IN AFFILIATES 700,430 790,951 0 17,176 0 776
ACCRUED INVESTMENT INCOME 5,448 0 0 494 0 0
DAC AND PVFP 952 0 0 0 0 0
SEPARATE ACCOUNT ASSETS 0 0 0 0 0 0
INVESTMENT IN DISCONTINUED OPERATIONS 0 0 0 0 0 0
OTHER ASSETS 8,383 726 0 7,198 0 2,000
--------- --------- --------- --------- --------- ---------
TOTAL ASSETS 1,286,775 805,619 0 45,088 0 2,802
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
LIABILITIES
RES. FOR FUTURE POLICYHOLDER BEN.:
ANNUITIES AND SPL 0 0 0 0 0 0
GICs 283,365 0 0 0 0 0
CLAIMS & OTHER POLICYHOLDERS' FUNDS 0 0 0 0 0 0
NOTES PAYABLE:
LONG-TERM NOTES AND DEBENTURES 225,000 0 0 0 0 0
COLLATERALIZED MORTGAGE OBLIGATION 0 0 0 0 0 0
SECURED NOTES PAYABLE 0 0 0 0 0 0
BANK NOTES 0 25,919 0 0 0 0
REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 0
SUBORDINATED DEBENTURES 0 0 0 0 0 0
SEPARATE ACCOUNT LIABILITIES 0 0 0 0 0 0
DUE TO/FROM AFFILIATES (19,321) 0 0 (13,072) 0 0
OTHER LIABILITIES 95,944 2,859 0 22,023 0 0
FEDERAL INCOME TAXES:
CURRENT 9,619 5,842 0 3,051 0 46
DEFERRED 10,802 (1,837) 0 (6,383) 0 0
--------- --------- --------- --------- --------- ---------
TOTAL LIABILITIES 605,409 32,783 0 5,619 0 46
--------- --------- --------- --------- --------- ---------
SHAREHOLDERS' EQUITY:
PREFERRED STOCK 218,500 48,700 0 0 0 0
NON-TRANSFER CLASS B STOCK 6,834 0 0 0 0 0
COMMON STOCK 25,179 4 0 0 0 0
CONTRIBUTED CAPITAL 97,275 366,935 0 76,564 0 2,756
URCG (L) ON OTHER EQUITY SECURITIES 2,211 2,673 0 (2) 0 0
URCG (L) ON KBHC WARRANTS 6,142 6,142 0 0 0 0
RETAINED EARNINGS 325,225 348,382 0 (37,093) 0 0
--------- --------- --------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 681,366 772,836 0 39,469 0 2,756
--------- --------- --------- --------- --------- ---------
TOTAL LIAB. & SH EQUITY 1,286,775 805,619 0 45,088 0 2,802
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
BROAD INC.
(PARENT) &
NON-REG
1401 KBHS N/A ELIM- AFFILIATES
SEPULVEDA (OLDCO) INATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
ASSETS:
BONDS, NOTES AND REDEM PREF STOCK 0 0 0 0 229,175
SENIOR SECURED BANK LOANS 0 0 0 0 0
COMMON STOCKS, AT MARKET VALUE 0 0 0 0 1,172
KBHC WARRANTS, AT MARKET VALUE 0 0 0 0 0
SHORT-TERM INVESTMENTS 0 0 0 0 104,403
CASH 0 0 0 0 13,805
MORTGAGE LOANS 0 0 0 0 1,981
POLICY LOANS 0 0 0 0 0
REAL ESTATE 0 0 0 0 (29,530)
OTHER INVESTED ASSETS 0 0 0 0 284,744
-------------------------------------------------------------
TOTAL INVESTMENTS 0 0 0 0 605,750
INVESTMENTS IN AFFILIATES 0 0 0 0 605,750
ACCRUED INVESTMENT INCOME 0 0 0 (773,521) 735,812
DAC AND PVFP 0 0 0 0 5,942
SEPARATE ACCOUNT ASSETS 0 0 0 0 952
INVESTMENT IN DISCONTINUED OPERATIONS 0 0 0 0 0
OTHER ASSETS 0 0 0 0 0
1,412 4,511 0 0 24,230
--------- --------- --------- --------- ---------
TOTAL ASSETS 1,412 4,511 0 (773,521) 1,372,686
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
LIABILITIES
RES. FOR FUTURE POLICYHOLDER BEN.:
ANNUITIES AND SPL 0 0 0 0 0
GICs 0 0 0 0 283,365
CLAIMS & OTHER POLICYHOLDERS' FUNDS 0 0 0 0 0
NOTES PAYABLE:
LONG-TERM NOTES AND DEBENTURES 0 0 0 0 225,000
COLLATERALIZED MORTGAGE OBLIGATION 0 0 0 0 0
SECURED NOTES PAYABLE 0 0 0 0 0
BANK NOTES 0 0 0 0 25,919
REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0
SUBORDINATED DEBENTURES 0 0 0 0 0
SEPARATE ACCOUNT LIABILITIES 0 0 0 0 0
DUE TO/FROM AFFILIATES 0 0 0 0 (32,393)
OTHER LIABILITIES 0 0 0 (5) 120,821
FEDERAL INCOME TAXES:
CURRENT 0 (764) 0 0 17,794
DEFERRED 0 (468) 0 0 2,114
--------- --------- --------- --------- ---------
TOTAL LIABILITIES 0 (1,232) 0 (5) 642,620
--------- --------- --------- --------- ---------
SHAREHOLDERS' EQUITY:
PREFERRED STOCK 0 0 0 0 267,200
NON-TRANSFER CLASS B STOCK 0 0 0 0 6,834
COMMON STOCK 0 0 0 (4) 25,179
CONTRIBUTED CAPITAL 1,412 8,907 0 (456,574) 97,275
URCG (L) ON OTHER EQUITY SECURITIES 0 0 0 (2,671) 2,211
URCG (L) ON KBHC WARRANTS 0 0 0 (6,142) 6,142
RETAINED EARNINGS 0 (3,164) 0 (308,125) 325,225
--------- --------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 1,412 5,743 0 (773,516) 730,066
--------- --------- --------- --------- ---------
TOTAL LIAB. & SH EQUITY 1,412 4,511 0 (773,521) 1,372,686
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Other liabilities includes SAF's cash overdraft of $14.2 million.
9-22
<PAGE>
BROAD INC. (PARENT) & NON-REGULATED AFFILIATES CONSOLIDATED 10/22/92
LEGAL CONSOLIDATING INCOME STATEMENT 01:58 PM
September 30, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUN SUN SUN
BROAD INC. AMERICA SLG AMERICA AMERICA ALIGP
(PARENT) CORP. FINANCIAL ADV CORP
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT SPREAD
Investment income 63,945 864 0 3,468 0 45
Less: Credit losses 0 0 0 0 0
--------------------------------------------------------------------------
Subtotal investment income 63,945 864 0 3,468 0 45
Less: Interest on senior debt 15,388 1,584 0 0 0 0
Interest on subordinated deb 3,941 0 0 0 0 0
Interest on accumulated valu 15,119 0 0 0 0 0
Interest on trust deposits 0 0 0 0 0 0
Preferred dividends 0 4,630 0 0 0 0
--------------------------------------------------------------------------
NET INVESTMENT SPREAD 29,497 (5,350) 0 3,468 0 45
OTHER REVENUE
Net Realized gains (losses) (39,577) (59) 0 (6,651) 0 0
Elimination gains (losses) 0 0 0 0 0 0
Equity in earnings of aff. 54,629 90,143 0 (1,319) 0 0
Net Retained Commissions (611) 0 0 0 0 0
Variable annuity fees 0 0 0 0 0 0
Asset management fees 0 0 0 0 0 0
Trust fees 0 0 0 0 0 0
Surrender charges 0 0 0 0 0 0
Other income (expenses), net 5,550 (2) 0 1,952 0 90
--------------------------------------------------------------------------
TOTAL OTHER REVENUE 19,991 90,082 0 (6,018) 0 90
--------------------------------------------------------------------------
EXPENSES
General and administrative 167 32 0 413 0 0
Amortization of DAC 119 0 0 0 0 0
--------------------------------------------------------------------------
286 32 0 413 0 0
--------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 49,202 84,700 0 (2,963) 0 135
INCOME TAXES (BENEFIT):
Current 17,355 (270) 0 2,783 0 46
Deferred (15,049) 0 0 (6,847) 0 0
--------------------------------------------------------------------------
*******NET INCOME******* 46,896 84,970 0 1,101 0 89
--------------------------------------------------------------------------
--------------------------------------------------------------------------
<CAPTION>
BROAD INC.
(PARENT) &
NON-REG
1401 KBHS N/A ELIM- AFFILIATES
SEPULVEDA (OLDCO) INATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
INVESTMENT SPREAD
Investment income 0 0 0 0 68,322
Less: Credit losses 0 0 0 0 0
--------------------------------------------------------------
Subtotal investment income 0 0 0 0 68,322
Less: Interest - senior debt 0 0 0 0 16,972
Interest - subordinated deb 0 0 0 0 3,941
Interest - accumulated valu 0 0 0 0 15,119
Interest - trust deposits 0 0 0 0 0
Preferred dividends 0 0 0 0 4,630
--------------------------------------------------------------
NET INVESTMENT SPREAD 0 0 0 0 27,660
OTHER REVENUE
Net Realized gains (losses) 0 (796) 0 0 (47,083)
Elimination gains (losses) 0 0 0 0 0
Equity in earnings of aff. 0 0 0 (85,375) 58,078
Net Retained Commissions 0 0 0 0 (611)
Variable annuity fees 0 0 0 0 0
Asset management fees 0 0 0 0 0
Trust fees 0 0 0 0 0
Surrender charges 0 0 0 0 0
Other income (expenses), net 0 0 0 0 7,590
--------------------------------------------------------------
TOTAL OTHER REVENUE 0 (796) 0 (85,375) 17,974
--------------------------------------------------------------
EXPENSES
General and administrative 0 0 0 0 612
Amortization of DAC 0 0 0 0 119
--------------------------------------------------------------
0 0 0 0 731
--------------------------------------------------------------
INCOME BEFORE INCOME TAXES 0 (796) 0 (85,375) 44,903
INCOME TAXES (BENEFIT):
Current 0 7 0 0 19,921
Deferred 0 (19) 0 0 (21,915)
--------------------------------------------------------------
*******NET INCOME******* 0 (784) 0 (85,375) 46,896
--------------------------------------------------------------
--------------------------------------------------------------
</TABLE>
9-23
<PAGE>
Exhibit 10(l)
[Execution Copy]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$60,000,000
CREDIT AGREEMENT
Dated as of February 1, 1993
Among
SUNAMERICA INC.,
SUNAMERICA CORPORATION
and
SUNAMERICA FINANCIAL, INC.,
as Borrowers,
THE BANKS NAMED HEREIN,
as Lenders,
and
CITIBANK, N.A.,
as Agent
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . 1
1.02 Computation of Time Periods. . . . . . . . . . . . . . . . . . 19
1.03 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . 19
1.04 Convention Statement . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE II
THE ADVANCES
2.01 Commitments to Lend. . . . . . . . . . . . . . . . . . . . . . 20
2.02 Notice of Committed Borrowings . . . . . . . . . . . . . . . . 20
2.03 Money Market Borrowings. . . . . . . . . . . . . . . . . . . . 21
2.04 Notice to Lenders; Funding of Advances . . . . . . . . . . . . 26
2.05 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.06 Maturity of Advances . . . . . . . . . . . . . . . . . . . . . 28
2.07 Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . 28
2.08 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.09 Extension of Termination Date. . . . . . . . . . . . . . . . . 33
2.10 Optional Termination or Reduction
of Commitments . . . . . . . . . . . . . . . . . . . . . . . 35
2.11 Mandatory Termination or Reduction
of the Commitments . . . . . . . . . . . . . . . . . . . . . 35
2.12 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . 35
2.13 General Provisions as to Payments. . . . . . . . . . . . . . . 36
2.14 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . 37
2.15 Computation of Interest and Fees . . . . . . . . . . . . . . . 37
2.16 Sharing of Payments, etc . . . . . . . . . . . . . . . . . . . 37
2.17 Withholding Tax Exemption. . . . . . . . . . . . . . . . . . . 38
2.18 Regulation D Compensation. . . . . . . . . . . . . . . . . . . 40
ARTICLE III
CHANGES IN CIRCUMSTANCES
3.01 Basis for Determining Interest
Rate Inadequate or Unfair. . . . . . . . . . . . . . . . . . 41
3.02 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.03 Increased Cost and Reduced Return. . . . . . . . . . . . . . . 43
3.04 Base Rate Advances Substituted for
Affected Fixed Rate Advances . . . . . . . . . . . . . . . . 45
i
<PAGE>
Section Page
- ------- ----
3.05 Substitution of Lender . . . . . . . . . . . . . . . . . . . . 46
3.06 Discretion of Lenders as to
Manner of Funding. . . . . . . . . . . . . . . . . . . . . . 46
3.07 Conclusiveness of Statements;
Survival of Provisions . . . . . . . . . . . . . . . . . . . 47
ARTICLE IV
CONDITIONS OF LENDING
4.01 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . 47
4.02 Conditions Precedent to Advances . . . . . . . . . . . . . . . 48
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Organization, etc. . . . . . . . . . . . . . . . . . . . . . . 49
5.02 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 49
5.03 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.04 Governmental Consents. . . . . . . . . . . . . . . . . . . . . 50
5.05 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.06 Financial Statements . . . . . . . . . . . . . . . . . . . . . 50
5.07 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.08 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.09 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.10 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . 52
5.11 Investment Company Act . . . . . . . . . . . . . . . . . . . . 53
5.12 Public Utility Holding Company Act . . . . . . . . . . . . . . 53
5.13 Margin Regulation. . . . . . . . . . . . . . . . . . . . . . . 53
5.14 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.15 Accuracy of Information. . . . . . . . . . . . . . . . . . . . 54
5.16 Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.17 Governmental Authorizations. . . . . . . . . . . . . . . . . . 54
5.18 Insurance Licenses . . . . . . . . . . . . . . . . . . . . . . 54
5.19 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 55
5.20 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE VI
AFFIRMATIVE COVENANTS
6.01 Reports, Certificates and
Other Information. . . . . . . . . . . . . . . . . . . . . . 55
6.02 Corporate Existence; Foreign
Qualification. . . . . . . . . . . . . . . . . . . . . . . . 61
ii
<PAGE>
Section Page
- ------- ----
6.03 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 61
6.04 Books, Records and Inspections . . . . . . . . . . . . . . . . 61
6.05 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.06 Maintenance of Properties. . . . . . . . . . . . . . . . . . . 62
6.07 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.08 Maintenance of Ratings . . . . . . . . . . . . . . . . . . . . 62
6.09 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . 62
ARTICLE VII
NEGATIVE COVENANTS
7.01 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.02 Consolidation, Merger, Sales of Stock and
Assets, etc. . . . . . . . . . . . . . . . . . . . . . . . . 65
7.03 Business Activities. . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE VIII
FINANCIAL COVENANTS
8.01 Consolidated Tangible Net Worth. . . . . . . . . . . . . . . . 67
8.02 Consolidated Debt to Total Capital . . . . . . . . . . . . . . 67
8.03 Risk-Based Capital Ratio . . . . . . . . . . . . . . . . . . . 67
8.04 Total Invested Assets. . . . . . . . . . . . . . . . . . . . . 67
ARTICLE IX
EVENTS OF DEFAULT
9.01 Events of Default. . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE X
AGENT
10.01 Authorization and Action . . . . . . . . . . . . . . . . . . . 71
10.02 Agent's Reliance, etc. . . . . . . . . . . . . . . . . . . . . 71
10.03 Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . 72
10.04 Lender Credit Decision . . . . . . . . . . . . . . . . . . . . 72
10.05 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 73
10.06 Successor Agent. . . . . . . . . . . . . . . . . . . . . . . . 73
iii
<PAGE>
Section Page
- ------- ----
ARTICLE XI
MISCELLANEOUS
11.01 Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . 74
11.02 Notices, etc.. . . . . . . . . . . . . . . . . . . . . . . . . 75
11.03 No Waiver; Remedies. . . . . . . . . . . . . . . . . . . . . . 75
11.04 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . 75
11.05 Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . 76
11.06 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 77
11.07 Assignments and Participations . . . . . . . . . . . . . . . . 77
11.08 Submission to Jurisdiction;
Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . 81
11.09 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 81
11.10 Execution in Counterparts. . . . . . . . . . . . . . . . . . . 81
11.11 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 82
iv
<PAGE>
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Notice of Committed Borrowing
Exhibit C - Form of Money Market Quote Request
Exhibit D - Form of Invitation for Money Market Quotes
Exhibit E - Form of Money Market Quote
Exhibit F - Form of Notice of Extension
Exhibit G - Form of Opinion of counsel for the Bor-
rowers
Exhibit H - Form of Assignment and Acceptance
Exhibit I - Form of Consolidating Quarterly Reports of
the Borrowers
v
<PAGE>
CREDIT AGREEMENT
Dated as of February 1, 1993
SUNAMERICA INC., a Maryland corporation ("SunAmerica"),
SUNAMERICA CORPORATION, a Delaware corporation ("SACO"), and SUNAMERICA
FINANCIAL, INC., a Georgia corporation ("SAFI," and together with SunAmerica and
SACO, the "Borrowers"), the banks listed on the signature pages hereof (the
"Lenders") and CITIBANK, N.A., as agent (the "Agent") for the Lenders hereunder,
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ABSOLUTE RATE AUCTION" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"ADJUSTED CD RATE" has the meaning set forth in Section 2.07(b).
"ADVANCE" means an advance under Article II by a Lender to a Borrower
pursuant to its Commitment, and refers to a CD Advance, Base Rate Advance,
Eurodollar Advance or Money Market Advance (each of which shall be a "Type"
of Advance).
"AFFILIATE" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person.
"AGENT" means Citibank, as agent, or any successor thereof.
"AGREEMENT" means this Credit Agreement, as the same may be amended,
modified or supplemented from time to time.
<PAGE>
"ANCHOR" means Anchor National Life Insurance Company, a California
stock insurance company.
"ANNUAL REPORTS" has the meaning set forth in Section 5.06(b)(i).
"APPLICABLE LENDING OFFICE" means, with respect to each Lender, (a) in
the case of its Domestic Advances, its Domestic Lending Office, (b) in the
case of its Eurodollar Advances, its Eurodollar Lending Office, and (c) in
the case of its Money Market Advances, its Money Market Lending Office.
"ASSESSMENT RATE" has the meaning set forth in Section 2.07(b).
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by a Lender and an Eligible Assignee, and accepted by the Agent, in
substantially the form of Exhibit H hereto.
"BASE RATE" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time which rate per annum shall at
all times be equal to the higher of:
(a) the rate of interest announced publicly by Citibank in New York,
New York, from time to time, as Citibank's base rate; or
(b) the sum (adjusted to the nearest 1/4 of one percent or, if there
is no nearest 1/4 of one percent, to the next higher 1/4 of one percent) of
(i) 1/2 of one percent per annum PLUS (ii) the rate per annum obtained by
dividing (A) the latest three-week moving average of secondary market
morning offered rates in the United States for three-month certificates of
deposit of major United States money market banks, such three-week moving
average being determined weekly on each Monday (or, if any such day is not
a Domestic Business Day, on the next succeeding Domestic Business Day) for
the three-week period ending on the previous Friday by Citibank on the
basis of such rates reported by certificate of deposit dealers to and pub-
lished by the Federal Reserve Bank of New York or, if such publication
shall be suspended or
2
<PAGE>
terminated, on the basis of quotations for such rates received by Citibank
from three New York certificate of deposit dealers of recognized standing
selected by Citibank, by (B) a percentage equal to 100% minus the average
of the daily percentages specified during such three-week period by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but not limited to,
any emergency, supplemental or other marginal reserve requirement) for
Citibank in respect of liabilities consisting of or including (among other
liabilities) three month U.S. dollar nonpersonal time deposits in the
United States, PLUS (iii) the average during such three-week period of the
highest and lowest annual assessment rate (rounded upward, if necessary, to
the next higher 1/100 of 1%) which the Federal Deposit Insurance
Corporation (or any successor) charges banking institutions on the basis of
their assessment rate classification for such Corporation's insuring U.S.
dollar deposits in the United States.
"BASE RATE ADVANCE" means an Advance that bears interest as provided
in Section 2.07(a).
"BENEFIT ARRANGEMENT" means, at any time, an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a Multi-
employer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"BORROWERS" has the meaning set forth in the first paragraph of this
Agreement and their permitted successors and assigns.
"BORROWING" means a borrowing pursuant to a Notice of Borrowing
consisting of Advances of the same Type made on the same day by the
Lenders.
"CAPITAL LEASE" means a lease which has been or should be, in
accordance with GAAP, treated as a capital lease.
"CD ADVANCE" means an Advance that bears interest as provided in
Section 2.07(b).
3
<PAGE>
"CD BASE RATE" has the meaning set forth in Section 2.07(b).
"CD MARGIN" has the meaning set forth in Section 2.07(b).
"CD REFERENCE BANKS" means Citibank, Chemical Bank and The First
National Bank of Chicago.
"CHANGE IN CONTROL" means, during any 12 month period, that
individuals who as of the first day of such 12 month period constitute
SunAmerica's Board of Directors (such Board of Directors as of the day
immediately preceding such first day, the "incumbent Board"), cease for any
reason to constitute at least a majority of the directors constituting the
Board of Directors, PROVIDED that any person becoming a director during
such 12 month period whose election, or nomination for election by
SunAmerica's shareholders, was approved by a vote of at least three-
quarters of the then directors who are members of the incumbent Board shall
be, for purposes of this definition, considered as though such person were
a member of the incumbent Board unless such person's initial assumption of
office is (a) in connection with the acquisition by a third person,
including a "group" as such term is used in Section 13(d)(3) of the
Exchange Act, of beneficial ownership, directly or indirectly, of 20% or
more of the total voting power of outstanding SunAmerica Voting Stock
(unless such acquisition of beneficial ownership was approved by a majority
of the Board of Directors who are members of the incumbent Board), or (b)
in connection with an actual or threatened election contest relating to the
election of the directors of SunAmerica, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act.
"CITIBANK" means Citibank, N.A.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITMENT" means the amount set forth opposite each Lender's name on
the signature pages hereof (or in an Assignment and Acceptance entered into
by it) as its Commitment (which shall be
4
<PAGE>
$60,000,000 in the aggregate for all Lenders as of the Effective Date), as
such amount may be adjusted from time to time to give effect to Money
Market Reductions pursuant to Section 2.01 or reduced from time to time
pursuant to Section 2.10.
"COMMITTED ADVANCE" means an Advance made by a Lender pursuant to
Section 2.01.
"COMMITTED BORROWING" means a Borrowing consisting of Committed
Advances.
"CONSOLIDATED DEBT" means the consolidated Debt of SunAmerica and its
Subsidiaries, determined in accordance with GAAP, to the extent such Debt
is reflected or is required under GAAP to be reflected on the consolidated
balance sheet of SunAmerica and its Subsidiaries, PROVIDED that such Debt
shall not include Debt specified in clause (vii) of the definition of Debt
or in clauses (ii) and (iii) (so long as none of the events referred to in
the parenthetical clause of such clause (iii) has occurred) of the
definition of Permitted Collateralization Obligations.
"CONSOLIDATED TANGIBLE NET WORTH" means, without duplication, the
total of (a) the consolidated shareholders' equity of SunAmerica and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP,
PLUS (b) the stated value of all outstanding SACO preferred stock reflected
thereon (less the stated value of SACO preferred stock held by SunAmerica
or any of its Subsidiaries), PLUS OR MINUS, as the case may be, (c) any net
unrealized losses or gains, as the case may be, on securities "available
for sale" shown thereon as a separate component of consolidated
shareholders' equity in accordance with the Proposed Statement of Financial
Accounting Standards "Accounting for Certain Investments in Debt and Equity
Securities", as the same may be implemented, MINUS (d) the carrying value
of goodwill, any covenant not to compete, capitalized organizational
expenses and other assets treated as intangibles under GAAP arising from
the acquisition, through stock purchase, merger or otherwise, of the stock
or assets of any Person (other than intangibles classified as deferred
acquisition costs arising from the writing of new insurance policies or
contracts),
5
<PAGE>
and MINUS (e) treasury stock and capital stock, obligations or other
securities of, or capital contributions to, or investments in, any
unconsolidated Subsidiary.
"CONSOLIDATED TOTAL CAPITAL" means, as of any date of determination,
the sum of Consolidated Tangible Net Worth plus Consolidated Debt.
"CONTINGENT OBLIGATION" means any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise becomes
or is contingently liable upon (by direct or indirect agreement, contingent
or otherwise, to provide funds for payment, to supply funds to, or
otherwise to invest in, a debtor, or otherwise to assure a creditor against
loss) the obligation or other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
Person. The amount of any Person's liability with respect to any
Contingent Obligation shall (subject to any limitation set forth therein)
be deemed to be the outstanding principal amount (or maximum outstanding
principal amount, if larger) of the debt, obligation or other liability
outstanding thereunder.
"CONVENTION STATEMENT" means each annual and quarterly financial
statement of each Insurance Subsidiary as filed with the appropriate
Governmental Authority of its state of domicile, as such form may be
amended from time to time pursuant to the requirements of such Governmental
Authority.
"DEBT" means, with respect to any Person at any date, without
duplication: (i) all obligations of such Person for borrowed money or for
loans or advances; (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments; (iii) all Capital Lease
obligations of such Person; (iv) all obligations of such Person to pay the
deferred purchase price of property or services, and Debt secured by a Lien
on property owned or being purchased by such Person (including Debt arising
under conditional sales or other title retention agreements); (v) all Debt
of another Person secured by a Lien on any assets of such first Person,
6
<PAGE>
whether or not such Debt is assumed by such first Person; (vi) all non-
contingent obligations of such Person as account party to reimburse any
bank or other Person in respect of amounts actually paid under a letter of
credit or similar instrument; (vii) all obligations of such Person to
purchase securities (or other property) that arise out of or in connection
with the sale of the same or substantially similar securities or property
(e.g., obligations under repurchase agreements and reverse repurchase
agreements); and (viii) all Contingent Obligations of such Person with
respect to the Debt of another Person, PROVIDED that Debt shall not include
(a) accounts payable arising in the ordinary course of business, (b)
contingent liabilities with respect to certain reinsurance arrangements of
Sun Life disclosed in footnote number 6 to Consolidated Financial
Statements of SunAmerica for the fiscal year ended September 30, 1992, (c)
obligations arising in the capacity as a creditor in respect of loan or
swap participations and similar arrangements in the ordinary course of
business or (d) obligations under insurance policies or contracts,
guaranteed investment contracts, funding agreements or similar obligations
issued or entered into by the Borrowers and their Subsidiaries; and
PROVIDED FURTHER that, with respect to any Debt of another Person specified
in clause (v) not assumed by the first Person, the amount of such Debt
shall be the lower of the amount of the obligation or the fair market value
of the collateral securing such obligation.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DEPARTMENT" means, with respect to an Insurance Subsidiary, the
Governmental Authority responsible for the regulation of the insurance
business in its state of domicile.
"DOMESTIC ADVANCES" means Base Rate Advances or CD Advances or both.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial
7
<PAGE>
banks in New York City are authorized by law to close.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" on the
signature pages hereof or in the Assignment and Acceptance pursuant to
which it became a Lender, or such other office of such Lender as such
Lender may from time to time specify to SunAmerica and the Agent.
"DOMESTIC RESERVE PERCENTAGE" has the meaning set forth in Section
2.07(b).
"EFFECTIVE DATE" has the meaning set forth in Section 4.01.
"ELIGIBLE ASSIGNEE" means (i) a commercial bank organized under the
laws of the United States, or any State thereof, and having a combined
capital and surplus of at least $500,000,000; (ii) a savings and loan
association or savings bank organized under the laws of the United States,
or any State thereof, and having a combined capital and surplus of at least
$500,000,000; (iii) a commercial bank organized under the laws of any other
country which is a member of the OECD, or has concluded special lending
arrangements with the International Monetary Fund associated with its
General Arrangements to Borrow, or a political subdivision of any such
country, and having a combined capital and surplus of at least
$500,000,000, PROVIDED that, in the case of clause (iii), such bank is
acting through a branch or agency located in the United States and, in the
case of clauses (i) through (iii), such institution has a senior secured
long term debt rating of at least "BBB-" or above by Standard & Poor's or
"Baa3" or above by Moody's; (iv) a finance company, insurance company or
other financial institution or fund organized under the laws of the United
States, or any State thereof, which is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its
business and which has total assets in excess of $5,000,000,000, PROVIDED
that any such Person under this clause (iv) is acceptable to SunAmerica in
its discretion; and (v) any other Person who is acceptable to SunAmerica
and the Agent or is an Affiliate of a Person identified in
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clause (i), (ii) or (iii) above; PROVIDED that no Affiliate of SunAmerica
shall be an Eligible Assignee hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA GROUP" means SunAmerica and all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with SunAmerica, are treated as a
single employer under Section 414 of the Code.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"EURODOLLAR ADVANCE" means an Advance that bears interest as provided
in Section 2.07(c).
"EURODOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" on the
signature page hereto or in the Assignment and Acceptance pursuant to which
it became a Lender (or, if no such office is specified, its Domestic
Lending Office), or such other office of such Lender as such Lender may
from time to time specify to SunAmerica and the Agent.
"EURODOLLAR MARGIN" has the meaning set forth in Section 2.07(c).
"EURODOLLAR REFERENCE BANKS" means Citibank, Chemical Bank and The
First National Bank of Chicago.
"EURODOLLAR RESERVE PERCENTAGE" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by
the Board of Governors of the Federal Reserve System (or any
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successor) for determining the maximum reserve requirement for a member
bank of the Federal Reserve System in New York City with deposits exceeding
five billion dollars in respect of "Eurocurrency liabilities" under
Regulation D (including any category of extensions of credit or other
assets in respect of "Eurocurrency Liabilities" that includes loans by a
non-United States office of any Lender to United States residents).
"EVENT OF DEFAULT" has the meaning set forth in Section 9.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 and the rules
and regulations of the Securities and Exchange Commission thereunder, all
as the same shall be in effect from time to time.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, PROVIDED that (i) if such day is not
a Domestic Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to
Citibank on such day on such transactions as determined by the Agent.
"FIRST SUN" means First SunAmerica Life Insurance Company, a New York
stock life insurance company.
"FIXED RATE ADVANCES" means CD Advances or Eurodollar Advances or
Money Market Advances (excluding Money Market LIBOR Advances bearing
interest at the Base Rate pursuant to Section 3.01) or any combination of
the foregoing.
"GAAP" means generally accepted accounting principles in the United
States of America used in
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connection with the preparation of the financial statements referred to in
Section 5.06(b).
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of
government.
"INFORMATION MEMORANDUM" has the meaning set forth in Section
5.06(b)(ii).
"INSURANCE CODE" means the Insurance Code of the state where any
Insurance Subsidiary is domiciled or doing insurance business and any
successor statute of similar import, together with the regulations there-
under, as amended or otherwise modified and in effect from time to time.
"INSURANCE SUBSIDIARIES" means Anchor, First Sun and Sun Life so long
as they are Subsidiaries of any Borrower and any other Subsidiary of any
Borrower that holds one or more Licenses to conduct an insurance business.
"INTEREST PERIOD" means:
(a) with respect to each Eurodollar Borrowing, the period commencing
on the date of such Borrowing and ending 1, 2, 3 or 6 months thereafter, as
the applicable Borrower may elect in the applicable Notice of Borrowing,
PROVIDED that:
(i) any Interest Period that would otherwise end on a day that
is not a Eurodollar Business Day shall be extended to the next
succeeding Eurodollar Business Day unless such Eurodollar Business Day
falls in another calendar month, in which case such Interest Period
shall end on the next preceding Eurodollar Business Day; and
(ii) any Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the
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last Eurodollar Business Day of a calendar month;
(b) with respect to each CD Borrowing, the period commencing on the
date of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the
applicable Borrower may elect in the applicable Notice of Borrowing,
PROVIDED that any Interest Period that would otherwise end on a day that is
not a Domestic Business Day shall be extended to the next succeeding
Domestic Business Day;
(c) with respect to each Base Rate Borrowing, the period commencing
on the date of such Borrowing and ending any number of days thereafter up
to 30, as the applicable Borrower may elect in the applicable Notice of
Borrowing, PROVIDED that such Interest Period shall end on a Domestic
Business Day; and
(d) with respect to (x) any Money Market Absolute Rate Advance, the
period commencing on the date of such Borrowing and ending such number of
days thereafter (but not less than 7 nor more than 180 days) or (y) any
Money Market LIBOR Advance, the period commencing on the date of such
Borrowing and ending 1, 2, 3, or 6 months thereafter, in each case as the
applicable Borrower shall select in the applicable Notice of Borrowing,
PROVIDED that such Interest Period shall end on a Eurodollar Business Day
or Domestic Business Day, as the case may be;
PROVIDED that with respect to clauses (a), (b), (c) and (d) above:
(i) the Borrowers may not select any Interest Period that ends
after the Termination Date; and
(ii) Interest Periods commencing on the same date for Advances
comprising part of the same Borrowing shall be of the same duration.
"INVESTMENT" shall mean any investment in any Person, whether by means
of share purchase, capital contribution, loan, time deposit or otherwise.
"INVESTMENT GRADE SECURITIES" shall mean non-equity securities that
are rated "BBB-" or better
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by Standard & Poor's or "Baa3" or better by Moody's or "1" or "2" by the
NAIC.
"LENDERS" means each of the financial institutions identified as such
on the signature pages hereof and their successors and assigns.
"LEVEL I STATUS" means that, at 8:30 a.m. New York City time at any
date of determination, SunAmerica's senior unsecured long term debt is
rated "AA-" or better by Standard & Poor's and "A3" or better by Moody's.
"LEVEL II STATUS" means that, at 8:30 a.m. New York City time at any
date of determination, neither Level I Status nor Level III Status exists.
"LEVEL III STATUS" means that, at 8:30 a.m. New York City time at any
date of determination, SunAmerica's senior unsecured long term debt is
rated "BBB+" or below by Standard & Poor's or "Baa3" or below by Moody's or
is not rated as of such date by Standard & Poor's or Moody's.
"LIABILITIES" means all obligations of the Borrowers to the Lenders or
the Agent which arise out of or in connection with this Agreement or the
Notes.
"LIBOR AUCTION" means a solicitation of Money Market quotes setting
forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.03.
"LICENSE" has the meaning set forth in Section 5.18.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement,
Capital Lease or other title retention agreement relating to such asset.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.07(c).
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"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any
change, event, action, condition or effect that individually or in the
aggregate (i) materially and adversely affects the consolidated business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Borrowers and their Subsidiaries taken as a whole or (ii)
materially and adversely impairs the ability of the Borrowers collectively
to perform their obligations under this Agreement.
"MATERIAL SUBSIDIARY" means Anchor and Sun Life so long as they are
Subsidiaries of any Borrower and any other Subsidiary of any Borrower now
existing or hereafter acquired or formed that for or as of the end of
SunAmerica's most recent fiscal year had (i) pretax income in excess of 10%
of the consolidated pretax income of SunAmerica reflected in its
consolidated financial statements for its most recent fiscal year or (ii)
assets in excess of 10% of the consolidated assets of SunAmerica reflected
in its consolidated financial statements as of the end of its most recent
fiscal year.
"MONEY MARKET ABSOLUTE RATE" has the meaning set forth in Section
2.03(d).
"MONEY MARKET ABSOLUTE RATE ADVANCE" means an Advance to be made by a
Lender pursuant to an Absolute Rate Auction.
"MONEY MARKET ADVANCE" means a Money Market LIBOR Advance or a Money
Market Absolute Rate Advance.
"MONEY MARKET BORROWING" means a Borrowing consisting of Money Market
Advances.
"MONEY MARKET LENDING OFFICE" means, as to each Lender, its Domestic
Lending Office or such other office, branch or affiliate of such Lender as
it may hereafter designate as its Money Market Lending Office by notice to
SunAmerica and the Agent, PROVIDED that any Lender may from time to time by
notice to SunAmerica and the Agent designate separate Money Market Lending
Offices for its Money Market LIBOR Advances and its Money Market Absolute
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Rate Advances, in which case all references herein to the Money Market
Lending Office of such Lender shall be deemed to refer to either or both of
such offices, as the context may require.
"MONEY MARKET LIBOR ADVANCE" means an Advance to be made by a Lender
pursuant to a LIBOR Auction (including such an Advance bearing interest at
the Base Rate pursuant to Section 3.01).
"MONEY MARKET MARGIN" has the meaning set forth in Section 2.03(d).
"MONEY MARKET QUOTE" means an offer by a Lender to make a Money Market
Advance in accordance with Section 2.03.
"MONEY MARKET REDUCTION" has the meaning set forth in Section 2.01.
"MOODY'S" means Moody's Investors Service, Inc. and any successor
thereto.
"MULTIEMPLOYER PLAN" means a Plan described in Section 4001(a)(3) of
ERISA.
"NAIC" means the National Association of Insurance Commissioners.
"NOTE" means a promissory note of the Borrowers payable to the order
of any Lender, in substantially the form of Exhibit A hereto, evidencing
the aggregate indebtedness of the Borrowers to such Lender resulting from
the Advances made by such Lender.
"NOTICE OF BORROWING" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined
in Section 2.03(f)).
"NOTICE OF EXTENSION" has the meaning set forth in Section 2.09.
"OTHER AGREEMENT" means the Credit Agreement dated as of February 1,
1993 among the Borrowers, Citibank, as Agent, and the Lenders providing a
$90,000,000 revolving credit facility.
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"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED COLLATERALIZATION ASSETS" means assets pledged to secure
Permitted Collateralization Obligations.
"PERMITTED COLLATERALIZATION OBLIGATIONS" means the collateralized
obligations of the Borrowers and their Subsidiaries relating to (i) the
1989 securitization of variable annuity fees of Anchor, (ii) real estate
mortgage investment conduits (REMICs), pass-through obligations,
collateralized mortgage obligations, collateralized bond and loan
obligations, other asset-backed securitizations of properties, rights or
receivables of SunAmerica or its Subsidiaries, or similar instruments,
except any such collateralized obligations to the extent such
collateralized obligations require a cash payment by any Borrower or its
Subsidiary (other than advances in connection with the servicing of any
such REMIC, pass-through obligation, collateralized mortgage obligation,
collateralized bond obligation or similar instrument or payments to
repurchase collateral), recourse for the payment of which is not limited to
the specific assets of such Borrower or such Subsidiary serving as
collateral for such obligations and (iii) the securitization of Rule 12b-1
fee income under the Investment Company Act of 1940, as amended, and
associated sales charges earned by the Borrowers or their Subsidiaries,
except any such securitization to the extent such securitization requires a
cash payment by any Borrower or its Subsidiary (other than payments that
may be required upon the occurrence of certain events, the occurrence of
which is considered unlikely by management of SunAmerica), recourse for the
payment of which is not limited to such Rule 12b-1 fees or sales charges.
"PERMITTED LIENS" has the meaning set forth in Section 7.01.
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
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"PLAN" means, at any time, an employee pension benefit plan (other
than a Multiemployer Plan) that is subject to Title IV of ERISA or the
minimum funding standards under Section 412 of the Internal Revenue Code
and is maintained, or contributed to, by any member of the ERISA Group.
"REGISTER" has the meaning set forth in Section 11.07(c).
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REQUIRED LENDERS" means Lenders having more than 66 2/3% of the
Commitments, or if the Commitments have terminated or expired, more than 66
2/3% of the aggregate principal amount of the Advances outstanding at such
time.
"RESPONSIBLE OFFICER" means any of the following officers of any
Borrower: the chairman, the chief executive officer, the president, the
chief financial officer, the chief operating officer, the chief investment
officer or the treasurer. If any of the titles of the preceding officers
are changed after the date hereof, the term "Responsible Officer" shall
thereafter mean any officer performing substantially the same functions as
are presently performed by one or more of the officers listed in the first
sentence of this definition.
"RISK-BASED CAPITAL RATIO" means, with respect to any Insurance
Subsidiary, the ratio computed in accordance with the Risk Based Capital
Formula for life insurance companies as adopted by the NAIC and in effect
on December 6, 1992.
"SACO" means SunAmerica Corporation, a Delaware corporation.
"SAFI" means SunAmerica Financial, Inc., a Georgia corporation.
"SAP" means, as to any Insurance Subsidiary, the statutory accounting
practices prescribed or permitted by the applicable Department.
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"STANDARD & POOR'S" or "S&P" means Standard & Poor's Corporation and
any successor thereto.
"SUBSIDIARY" means, as to any Person, any corporation, partnership,
joint venture, trust, association or other unincorporated organization of
which or in which such Person and such Person's Subsidiaries own directly
or indirectly more than 50% of (i) the combined voting power of all classes
then outstanding of Voting Stock, if it is a corporation, (ii) the capital
interest or partnership interest, if it is a partnership, joint venture or
similar entity, or (iii) the beneficial interest, if it is a trust,
association or other unincorporated organization, PROVIDED that (a) no
Person of which any Borrower or any of its Subsidiaries acquires or has
acquired control in the ordinary course of its business in connection with
or as a consequence of any debt or equity financing shall be deemed a
Subsidiary and (b) no Person (including a joint venture) which has been
organized by any Borrower or any of its Subsidiaries solely for the
purpose of making or holding an individual asset or group of related assets
and has no other operations or independent management shall be deemed a
Subsidiary, unless such Person (1) is or under GAAP should be treated as a
consolidated subsidiary of SunAmerica in the preparation of its
consolidated financial statements and (2) would also be classified as a
Material Subsidiary.
"SUNAMERICA" means SunAmerica Inc., a Maryland corporation.
"SUN LIFE" means Sun Life Insurance Company of America, a Maryland
stock insurance company.
"TERMINATION DATE" means January 30, 1994 or any extension thereof
pursuant to Section 2.09 or the earlier date of termination in whole of the
Commitments pursuant to Section 2.10 or 9.01.
"TOTAL INVESTED ASSETS" means, as of any date of determination, the
amount of invested assets directly owned by the Borrowers, excluding
Investments in Affiliates, and reflected in the line "Total Investments" on
the balance sheet of the Borrowers, as a
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group, delivered pursuant to Section 6.01(c), such amount to be calculated
on a basis consistent with the preparation of the consolidating balance
sheet as of September 30, 1992 delivered to the Lenders and attached as
Exhibit I hereto.
"TYPE" refers to the distinction between Advances bearing interest at
the Eurodollar Rate, Adjusted CD Rate, Base Rate or a Money Market Quote
rate.
"U.S. WITHHOLDING TAXES" has the meaning set forth in Section 2.17(a).
"VOTING STOCK" means, with respect to any Person, any class of capital
stock of such Person normally entitled to vote for the election of
directors.
SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" mean
"to but excluding."
SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically
defined herein other than those used solely in respect of an Insurance
Subsidiary shall be construed in accordance with GAAP. All accounting terms not
specifically defined herein and used solely in respect of an Insurance
Subsidiary shall, unless GAAP is otherwise specified, be construed in accordance
with SAP applicable to that Insurance Subsidiary.
SECTION 1.04. CONVENTION STATEMENT. In the event any amendment to the
form of or requirements for Convention Statements causes the calculation of
the Risk-Based Capital Ratio as adopted by the NAIC on December 6, 1992 to be
impracticable or to produce results that do not reflect the original intent of
the parties hereto, the provisions of this Agreement relating to the Risk Based
Capital Ratio shall be adjusted as the Required Lenders and Borrowers in good
faith may negotiate to insure that the operation of the affected provisions of
this Agreement after such amendment is consistent with the operation prior
thereto.
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ARTICLE II
THE ADVANCES
SECTION 2.01. COMMITMENTS TO LEND. Each Lender severally agrees, on
the terms and conditions set forth in this Agreement, to make Advances
constituting Committed Advances from time to time during the period from the
Effective Date to the Termination Date in an aggregate amount not to exceed at
any time outstanding the amount of such Lender's Commitment, PROVIDED that the
aggregate amount of the Commitments shall be deemed used from time to time, for
purposes of making Committed Advances pursuant to this Section 2.01, in the
aggregate amount of Money Market Advances outstanding from time to time, and
such deemed use of the aggregate amount of Commitments shall be applied to the
Lenders ratably according to their respective Commitments (such deemed use of
the aggregate amount of Commitments referred to herein as the "Money Market
Reduction"). Each Borrowing under this Section 2.01 in respect of such
Committed Advances shall be in an aggregate principal amount of $10,000,000 or
any larger multiple of $5,000,000 (except that any such Borrowing may be in the
aggregate amount available in accordance with Section 4.02(d)), and shall be
made from the several Lenders ratably in proportion to their respective
Commitments. Within the foregoing limits, the Borrowers may borrow under this
Section, repay, or to the extent permitted by Section 2.12, prepay Advances and
reborrow at any time during the period from the Effective Date to the
Termination Date.
SECTION 2.02. NOTICE OF COMMITTED BORROWINGS. The applicable Borrower
shall give the Agent notice (a "Notice of Committed Borrowing"), in
substantially the form of Exhibit B hereto, not later than (x) 11:00 A.M. New
York City time on the date of each Base Rate Borrowing, (y) 12:00 P.M. New York
City time on the second Domestic Business Day before each CD Borrowing and (z)
12:00 P.M. New York City time on the third Eurodollar Business Day before each
Eurodollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Eurodollar Business Day in the
case of a Eurodollar Borrowing;
(b) the aggregate amount of such Borrowing;
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(c) whether the Advances comprising such Borrowing are to be CD
Advances, Base Rate Advances or Eurodollar Advances;
(d) whether Level I Status, Level II Status or Level III Status
exists on the date of such notice; and
(e) the duration of the Interest Period with respect thereto, subject
to the provisions of the definition of Interest Period.
SECTION 2.03. MONEY MARKET BORROWINGS.
(a) THE MONEY MARKET OPTION. Each Borrower may, as set forth in this
Section 2.03, request the Lenders before the Termination Date to make offers to
make Money Market Advances to such Borrower. The Lenders may, but shall have no
obligation to, make such offers and such Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section.
A Lender lending to the Borrower pursuant to an accepted offer to make Money
Market Advances shall remain obligated to make Committed Advances in proportion
to its respective Commitment within the limitations of Section 4.02(d).
(b) MONEY MARKET QUOTE REQUEST. When a Borrower wishes to request
offers to make Money Market Advances under this Section 2.03, it shall transmit
to the Agent by telex or facsimile telecopy a Money Market Quote Request
substantially in the form of Exhibit C hereto so as to be received no later than
11:00 A.M. New York City time (x) on the fifth Eurodollar Business Day prior to
the date of Borrowing proposed therein, in the case of a LIBOR Auction, or (y)
on the Domestic Business Day next preceding the date of Borrowing proposed
therein, in the case of an Absolute Rate Auction (or, in either case, such other
time or date as the requesting Borrower and the Agent shall have mutually agreed
and shall have notified to the Lenders not later than the date of the Money
Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective), specifying:
(i) the proposed date of Borrowing, which shall be a Eurodollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction;
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(ii) the aggregate amount of such Borrowing, which shall be
$10,000,000 or a larger multiple of $5,000,000 (except that such Borrowing
may be in the aggregate amount available in accordance with Section
4.02(d));
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period; and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrowers may request offers to make Money Market Advances for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within 5 Eurodollar Business Days in the case of a LIBOR
Auction or 5 Domestic Business Days in the case of an Absolute Rate Auction (or
such other number of days as SunAmerica and the Agent may agree) of any other
Money Market Quote Request.
(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of a
Money Market Quote Request, the Agent shall send to the Lenders by telex or
facsimile telecopy an Invitation for Money Market Quotes substantially in the
form of Exhibit D hereto, which shall constitute an invitation by the requesting
Borrower to each Lender to submit Money Market Quotes offering to make the Money
Market Advances to which such Money Market Quote Request relates in accordance
with this Section 2.03.
(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each Lender
may submit a Money Market Quote containing an offer or offers to make Money
Market Advances in response to any Invitation for Money Market Quotes. Each
Money Market Quote must comply with the requirements of this subsection (d) and
must be submitted to the Agent by facsimile telecopy at its offices specified in
or pursuant to Section 11.02 not later than (x) 2:00 P.M. New York City time on
the fourth Eurodollar Business Day prior to the proposed date of Borrowing, in
the case of a LIBOR Auction or (y) 10:00 A.M. New York City time on the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the requesting Borrower and the
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Agent shall have mutually agreed to and shall have notified to the Lenders not
later than the date of the Money Market Quote Request for the first LIBOR
Auction or Absolute Rate Auction for which such change is to be effective),
PROVIDED that Money Market Quotes submitted by the Agent (or any Affiliate of
the Agent) in the capacity of a Lender may be submitted, and may only be
submitted, if the Agent or such Affiliate notifies the requesting Borrower of
the terms of the offer or offers contained therein not later than (x) one hour
prior to the deadline for the other Lenders, in the case of a LIBOR Auction, or
(y) 15 minutes prior to the deadline for the other Lenders, in the case of an
Absolute Rate Auction. Subject to Articles IV and IX, any Money Market Quote so
made shall be irrevocable except with the written consent of the Agent given on
the instructions of the requesting Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit E hereto and shall in any case specify:
(A) the proposed date of Borrowing and the Interest Period therefor;
(B) the principal amount of the Money Market Advance for which each
such offer is being made, which principal amount (w) may be greater than or
less than the Commitment of the quoting Lender, (x) must be $5,000,000 or a
larger multiple of $1,000,000, (y) may not exceed the principal amount of
Money Market Advances for which offers were requested and (z) may be
subject to an aggregate limitation as to the principal amount of Money
Market Advances for which offers being made by such quoting Lender may be
accepted;
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Advance, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such applicable rate;
(D) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute
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Rate") offered for each such Money Market Advance; and
(E) the identity of the quoting Lender.
A Money Market Quote may set forth up to five separate offers by the quoting
Lender with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit E hereto or does
not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language or, in
particular, is conditioned on acceptance by the requesting Borrower of all
or some specified minimum principal amount of the Money Market Advance for
which such Money Market Quote is being made;
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) NOTICE TO BORROWER. The Agent shall notify the requesting
Borrower promptly of the terms (i) of any Money Market Quote submitted by a
Lender that is in accordance with subsection (d) and (ii) of any Money Market
Quote that amends, modifies or is otherwise inconsistent with a previous Money
Market Quote submitted by such Lender with respect to the same Money Market
Quote Request. Any such subsequent Money Market Quote shall be disregarded by
the Agent unless such subsequent Money Market Quote is submitted solely to
correct a manifest error in such former Money Market Quote. The Agent's notice
to the requesting Borrower shall specify (A) the aggregate principal amount of
Money Market Advances for which offers have been received for each Interest
Period specified in the related Money Market Quote Request, (B) the respective
principal amounts and Money Market Margins or Money Market Absolute Rates so
offered and
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(C), if applicable, limitations on the aggregate principal amount of Money
Market Advances for which offers in any single Money Market Quote may be
accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 11:00 A.M.
New York City time on (x) the third Eurodollar Business Day prior to the
proposed date of Borrowing, in the case of LIBOR Auction, or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the requesting Borrower and the Agent shall have
mutually agreed to and shall have notified to the Lenders not later than the
date of the Money Market Quote Request for the first LIBOR Auction or Absolute
Rate Auction for which such change is to be effective), the requesting Borrower
shall notify the Agent of its acceptance or non-acceptance of the offers so
notified to it pursuant to subsection (e), and the failure of such Borrower to
provide such notice in accordance with this clause (f) shall constitute the non-
acceptance of such offers. In the case of acceptance, such notice (a "Notice of
Money Market Borrowing") shall specify the aggregate principal amount of offers
for each Interest Period that are accepted. The requesting Borrower may accept
any Money Market Quote in whole or in part, PROVIDED that:
(i) the aggregate principal amount of each Money Market Borrowing
may not exceed the applicable amount set forth in the related Money Market
Quote Request;
(ii) the principal amount of each Money Market Borrowing must be
$10,000,000 or a larger multiple of $5,000,000 (except that any such
Borrowing may be in the aggregate amount available in accordance with
Section 4.02(d));
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the case
may be; and
(iv) the requesting Borrower may not accept any offer that is
described in subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
Promptly after receipt by the Agent of the notice of acceptance from the
Borrowers pursuant to this subsec-
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tion (f), the Agent will notify each Lender of the amount of the Money Market
Borrowing and the amount of the consequent pro rata Money Market Reduction in
its Commitment and the dates upon which such Money Market Reduction commenced
and will terminate.
(g) ALLOCATION BY AGENT. If offers are made by two or more Lenders
with the same Money Market Margins or Money Market Absolute Rates, as the case
may be, for a greater aggregate principal amount than the amount in respect of
which such offers are accepted for the related Interest Period, the principal
amount of Money Market Advances in respect of which such offers are accepted
shall be allocated by the Agent among such Lenders as nearly as possible (in
multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the
aggregate principal amounts of such offers. Determinations by the Agent of the
amount of Money Market Advances shall be conclusive in the absence of manifest
error.
SECTION 2.04. NOTICE TO LENDERS; FUNDING OF ADVANCES. (a) Upon receipt
of a Notice of Borrowing, the Agent shall promptly notify each Lender of the
contents thereof and of such Lender's share (if any) of such Borrowing and such
Notice of Borrowing shall not thereafter be revocable by the requesting
Borrower.
(b) Not later than 1:00 P.M. New York City time on the date of each
Borrowing, each Lender participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing, in
Federal or other funds immediately available in New York City, to the Agent at
its address specified in or pursuant to Section 11.02. Unless the Agent deter-
mines that any applicable condition specified in Article IV has not been
satisfied, the Agent will make the funds so received from the Lenders available
to the Borrowers at the Agent's aforesaid address for the account of the
Borrowers or to such other account as any Borrower may specify.
(c) The Borrowers may refinance all or any part of any Borrowing with
a Borrowing of the same or a different Type (E.G., Money Market Borrowings may
be refinanced with, or may be used to refinance, Committed Borrowings) provided
the conditions specified in Article IV have been satisfied. Any Borrowing or
part thereof so refinanced shall be deemed to be repaid with the proceeds
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of the new Borrowing hereunder. If any Lender makes a new Advance hereunder on
a day on which the applicable Borrower is to repay all or any part of an
outstanding Advance from such Lender, such Lender shall apply the proceeds of
its new Advance to make such repayment and only an amount equal to the excess
(if any) of the amount being borrowed over the amount being repaid shall be made
available by such Lender to the Agent as provided in subsection (b). To the
extent any Lender fails to pay the Agent amounts due from it pursuant to this
subsection (c), the Borrowers shall not be deemed to be overdue in respect of
their obligation to make the relevant payment until one Domestic Business Day
after SunAmerica shall have received notice from the Agent of the failure of
such Lender to make such payment.
(d) Unless the Agent shall have received notice from a Lender prior
to the date of any Borrowing that such Lender will not make available to the
Agent such Lender's share of such Borrowing, the Agent may assume that such
Lender has made such share available to the Agent on the date of such Borrowing
in accordance with subsections (b) and (c) of this Section 2.04 and the Agent
may, in reliance upon such assumption, make available to the applicable Borrower
on such date a corresponding amount. If and to the extent that such Lender
shall not have so made such share available to the Agent, such Lender and the
applicable Borrower severally agree to repay to the Agent forthwith on demand
such corresponding amount together with interest thereon, for each day from the
date such amount is made available to such Borrower until the date such amount
is repaid to the Agent, at the Federal Funds Rate. If such Lender shall repay
to the Agent such corresponding amount, such amount so repaid shall constitute
such Lender's Advance included in such Borrowing for purposes of this Agreement.
The failure of any Lender to make any Advance to be made by it on the date
specified therefor shall not relieve any other Lender of any obligation to make
an Advance on such date, but no Lender shall be responsible for the failure of
any other Lender to make an Advance to be made by such other Lender.
SECTION 2.05. NOTES. (a) The Advances of each Lender to any Borrower
shall be evidenced by a single Note of the Borrowers, jointly and severally,
payable to the order of such Lender in an amount equal to the aggregate unpaid
principal amount of all such Lender's Advances to the Borrowers.
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(b) Each Lender may, by notice to the Borrowers and the Agent but at
no cost to the Borrowers, request that its Advances of a particular Type be
evidenced by a separate Note in an amount equal to the aggregate unpaid
principal amount of such Advances. Each such Note shall be in substantially the
form of Exhibit A hereto with appropriate modifications to reflect the fact that
it evidences solely Advances of the relevant Type. Each reference in this
Agreement to the "Note" of such Lender shall be deemed to refer to and include
any or all of such Notes, as the context may require.
(c) Upon receipt of each Lender's Notes pursuant to Section 4.01(a),
the Agent shall mail such Note to such Lender by overnight courier or registered
mail. Each Lender shall record the date, amount, type and maturity of each
Advance made by it and the date and amount of each payment of principal made by
any Borrower with respect thereto, and prior to any transfer of its Note or
Notes shall endorse on the schedule forming a part thereof appropriate notations
to evidence the foregoing information with respect to each such Advance then
outstanding, PROVIDED that the failure of any Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrowers
hereunder or under the Notes. Each Lender is hereby irrevocably authorized by
each Borrower so to endorse its Notes and to attach to and make a part of its
Notes a continuation of any such schedule as and when required.
SECTION 2.06. MATURITY OF ADVANCES. Each Advance included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
SECTION 2.07. INTEREST RATES. (a) Each Base Rate Advance shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Advance is made until it becomes due, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of or interest on any Base Rate
Advance shall bear interest, payable on demand, for each day it remains unpaid
at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to
Base Rate Advances for such day.
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(b) Each CD Advance shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate per annum
equal to the sum of the CD Margin plus the applicable Adjusted CD Rate. Such
interest shall be payable for each Interest Period on the last day thereof and,
if such Interest Period is longer than 90 days, on the 90th day of such Interest
Period. Any overdue principal of or interest on any CD Advance shall bear
interest, payable on demand, for each day it remains unpaid at a rate per annum
equal to the sum of 2% plus the higher of (i) the sum of the CD Margin
applicable on such day plus the Adjusted CD Rate applicable to such Advance and
(ii) the rate applicable to Base Rate Advances for such day.
"CD Margin" means (i) 0.425% for any day on which Level I Status
exists, (ii) 0.525% for any day on which Level II Status exists and
0.625% for any day on which Level III Status exists.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ -------- ] + AR
[1.00 - DRP]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
--------------------
* The amount in brackets being rounded upward, if necessary, to the
next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid
at 10:00 A.M. New York City time (or as soon thereafter as practicable) on the
first day of such Interest Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from each CD
Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD
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Advance of such CD Reference Bank to which such Interest Period applies and
having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding 5 billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means, for any Interest Period, the average of the
highest and lowest annual assessment rate (rounded upward, if necessary, to the
next higher 1/100 of 1%) which the Federal Deposit Insurance Corporation (or any
successor) charges banking institutions on the basis of their assessment rate
classification for such Corporation's (or such successor's) insuring time
deposits at offices of such institutions in the United States during the most
recent period for which such rate has been determined prior to the commencement
of such Interest Period.
(c) (i) Each Eurodollar Advance shall bear interest on the
outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Eurodollar Margin plus the
applicable London Interbank Offered Rate. Such interest shall be payable for
each Interest Period on the last day thereof and, if such Interest Period is
longer than 3 months, 3 months after the first day thereof.
"Eurodollar Margin" means (1) 0.30% for any day on which Level I
Status exists, (2) 0.40% for any day on which Level II Status exists, and (3)
0.50% for any day on which Level III Status exists.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the re-
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spective rates per annum at which deposits in dollars are offered to each of the
Eurodollar Reference Banks in the London interbank market at approximately 11:00
A.M. London time 2 Eurodollar Business Days before the first day of such
Interest Period in an amount approximately equal to the principal amount of the
Eurodollar Advance of such Eurodollar Reference Bank to which such Interest
Period is to apply and for a period of time comparable to such Interest Period.
(ii) Any overdue principal of or interest on any Eurodollar
Advance shall bear interest, payable on demand, for each day from and including
the date payment thereof was due to but excluding the date of actual payment, at
a rate per annum equal to the sum of 2% plus the Eurodollar Margin applicable on
such day plus the higher of (x) the London Interbank Offered Rate applicable to
such Advance and (y) the quotient obtained (rounded upward, if necessary, to the
next higher 1/100 of 1%) by dividing (A) the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective rates per annum at
which one day (or, if such amount due remains unpaid more than 3 Eurodollar
Business Days, then for such other period of time not longer than 3 months as
the Agent may select) deposits in dollars in an amount approximately equal to
such overdue payment due to each of the Eurodollar Reference Banks are offered
to such Eurodollar Reference Bank in the London interbank market for the
applicable period determined as provided above by (B) 1.00 minus the Eurodollar
Reserve Percentage (or, if the circumstances described in clause (a) or (b) of
Section 3.01 shall exist, at a rate per annum equal to the sum of 2% plus the
rate applicable to Base Rate Advances for such day).
(d) Subject to Section 3.01, each Money Market LIBOR Advance shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Borrowing) plus the Money Market Margin quoted by the Lender making such Advance
in accordance with Section 2.03. Each Money Market Absolute Rate Advance shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the Money Market
Absolute Rate quoted by
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the Lender making such Advance in accordance with Section 2.03. Such interest
shall be payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than 90 days, on the 90th day of such Interest Period.
Any overdue principal of or interest on any Money Market Advance shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the sum of 2% plus the Base Rate for such day.
(e) The Agent shall determine each interest rate applicable to the
Advances hereunder. The Agent shall give prompt notice to the applicable
Borrower and the participating Lenders by facsimile of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error. If the rating system of Moody's or Standard and Poor's shall
change in a manner that causes the definition of "Level I Status", "Level II
Status" or "Level III Status" no longer to have its intended meaning hereunder,
or if any such rating agency shall have ceased to rate corporate debt
obligations of SunAmerica for any reason other than action or inaction on the
part of the Borrowers, at the request of the Borrowers, the Borrowers, the Agent
and the Lenders shall negotiate in good faith to amend the references to
specific ratings in the definition of "Level I Status", "Level II Status" and
"Level III Status", to reflect such changed rating system or the non-
availability of ratings from such rating agency.
(f) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section 2.07. If any Reference
Bank does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 3.01 shall apply.
SECTION 2.08. FEES. (a) COMMITMENT FEE. The Borrowers shall pay to
the Agent for the account of the Lenders ratably in proportion to their
respective Commitments a commitment fee at the following rates per annum: (i)
0.05% for any day on which Level I Status exists, (ii) 0.0625% for any day on
which Level II Status exists and (iii) 0.10% for any day on which Level III
Status exists. Such commitment fee shall accrue from the Effective Date to the
Termination Date on the daily amount by which the aggregate amount of the
Commitments (without
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giving effect to any Money Market Reductions), exceeds the aggregate outstanding
principal amount of the Advances.
(b) FACILITY FEE. The Borrowers shall pay to the Agent for the
account of the Lenders ratably a facility fee at the following rates per annum:
(i) 0.075% for any day on which Level I Status exists, (ii) 0.125% for any day
on which Level II Status exists and (iii) 0.175%for any day on which Level III
Status exists. Such facility fee shall accrue from the Effective Date to the
Termination Date (or, if all Advances have not been repaid in full on the
Termination Date, to the date such Advances are repaid) on the daily average of
the aggregate amount of Commitments (without giving effect to any Money Market
Reductions), or, if greater, on the daily average of the outstanding principal
amount of Advances.
(c) ADDITIONAL UTILIZATION FEE. The Borrowers shall pay to the
Agent for the account of the Lenders ratably in proportion to the aggregate
outstanding principal amount of Advances under this Agreement and of advances
under the Other Agreement of each such Lender an additional utilization fee at
the rate of 0.0625% per annum on the aggregate principal amount of all Advances
under this Agreement and of advances under the Other Agreement then outstanding
for any day on which such aggregate outstanding principal amount of Advances and
other advances exceeds 33 1/3% of the sum of the Commitments and commitments
under the Other Agreement as of such date.
(d) PAYMENTS. Accrued fees under this Section 2.08 shall be
calculated on a 360 day basis and shall be payable quarterly in arrears on each
March 15, June 15, September 15 and December 15 and upon the Termination Date
(and, if later, the date the Advances shall be repaid in their entirety).
SECTION 2.09. EXTENSION OF TERMINATION DATE. (a) SunAmerica, on
behalf of itself and the other Borrowers, may, by written notice to the Agent in
the form of Exhibit F hereto (a "Notice of Extension") given not less than 60
nor more than 90 days prior to the then effective Termination Date (the
"Existing Termination Date"), advise the Lenders that the Borrowers request an
extension of the Existing Termination Date to a date not later than 364 calendar
days after the date the Notice of Extension becomes effective pursuant to
Section 2.09(c).
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Each Notice of Extension shall specify the date to which the Existing
Termination Date is to be extended or specify that such date shall be 364 days
after such Notice of Extension shall have become effective pursuant to Section
2.09(c), PROVIDED that no Notice of Extension may specify a date that would
cause the Termination Date to be later than January 31, 1996.
(b) Each Notice of Extension shall be irrevocable and constitute a
representation by the Borrowers that (i) neither any Default nor any Event of
Default has occurred and is continuing and (ii) the representations and
warranties contained in Article V are correct in all material respects on and as
of the date of such Notice of Extension (except to the extent they were
expressly made as of the Effective Date or expressly relate to a prior date) and
will be correct in all material respects on and as of the Existing Termination
Date as though made on and as of such dates.
(c) The Agent will promptly, and in any event within 5 Domestic
Business Days of the receipt of each Notice of Extension, provide the Lenders
with a copy of each such Notice of Extension. Each Lender will in its sole
discretion determine whether to consent to such Notice of Extension and will use
its best efforts to respond to such Notice of Extension within 21 days after its
receipt of notice from the Agent. Each consent of a Lender to a Notice of
Extension shall be in writing and shall become effective and binding only if
each other Lender (or an assignee as contemplated by this subsection (c)) has
consented in writing to such Notice of Extension and such Notice of Extension
has become effective in accordance with this Section 2.09(c). The Agent shall
notify the Borrowers promptly after the expiration of such 21 day period as to
which Lenders have consented to the extension. If less than all Lenders consent
to such extension within such period, the Borrowers may require that the Lenders
that do not consent to such extension assign, and such Lenders shall assign,
their Commitments in their entirety pursuant to Section 11.07, no later than 15
days prior to the Existing Termination Date, to one or more Eligible Assignees
(which may be one or more of the Lenders), if any, identified by the Borrowers
pursuant to Section 3.05 who will consent to such extension. The Agent shall
notify the Borrowers and the Lenders at least 15 days prior to the Existing
Termination Date of the consent or failure to consent of
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the Lenders to the Notice of Extension. A Notice of Extension shall become
effective, and the Existing Termination Date shall become the extended Existing
Termination Date specified in such Notice of Extension, upon the receipt by the
Agent of written consents signed by each of the Lenders to such Notice of
Extension.
SECTION 2.10. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. At
any time prior to the Termination Date, the Borrowers may, upon at least 3
Domestic Business Days' notice to the Agent, (a) terminate the Commitments in
full, if no Advances are outstanding at such time, or (b) reduce from time to
time by (i) an aggregate amount of $4,000,000 or any larger multiple of
$2,000,000 or (ii) the full amount thereof, the aggregate amount of the
Commitments in excess of the aggregate outstanding principal amount of the
Advances, PROVIDED that no such termination shall be effective unless the
Borrowers shall also have terminated the commitments under the Other Agreement,
and no such reduction shall be effective unless the Borrowers shall also have
reduced the commitments under the Other Agreement in an aggregate amount equal
to 150% of the amount of the reduction under clause (b). In each case the
Lenders' Commitments will be terminated or ratably reduced, as the case may be.
SECTION 2.11. MANDATORY TERMINATION OR REDUCTION OF THE COMMITMENTS.
The Commitments shall terminate on the Termination Date and any Advances then
outstanding (together with accrued interest thereon) shall be due and payable on
such date.
SECTION 2.12. OPTIONAL PREPAYMENTS. (a) The Borrowers may upon at
least one Domestic Business Day's or Eurodollar Business Day's notice to the
Agent, as the case may be, at any time and from time to time prepay any Base
Rate Borrowing (or any Money Market Borrowing bearing interest at the Base Rate
pursuant to Section 3.04) or, subject to Section 2.14, any CD Borrowing or
Eurodollar Borrowing in whole or in part in amounts (i) aggregating $10,000,000
or any larger multiple of $5,000,000 or (ii) the full amount thereof, by paying
the principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay
ratably the Advances of the same Type of the several Lenders included in such
Borrowing.
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(b) Each notice of prepayment delivered pursuant to clause (a)
above shall specify the date and amount of prepayment and the allocation of such
prepayment among Advances at the time outstanding. Upon receipt of a notice of
prepayment pursuant to this Section, the Agent shall promptly notify each Lender
of the contents thereof and of such Lender's ratable share (if any) of such pre-
payment and such notice shall not thereafter be revocable by the applicable
Borrower.
SECTION 2.13. GENERAL PROVISIONS AS TO PAYMENTS. (a) Each obligation
of any Borrower under this Agreement and under the Notes shall be a joint and
several obligation of the Borrowers. Each Borrower waives any right it may have
to require the Agent or any Lender to exhaust its remedies against any Borrower
before seeking to enforce the obligations of any other Borrower hereunder.
(b) The Borrowers shall make each payment of principal of, and
interest on, the Advances and of fees hereunder, not later than 12:00 P.M. New
York City time on the date when due, in Federal or other funds immediately
available in New York City, to the Agent at its address referred to in Section
11.02. The Agent will promptly distribute to each Lender its ratable share of
each such payment received by the Agent for the account of the Lenders.
Whenever any payment of principal of, or interest on, the Domestic Advances or
Money Market Absolute Rate Advances or of fees shall be due on a day which is
not a Domestic Business Day, the date for payment thereof shall be extended to
the next succeeding Domestic Business Day. Whenever any payment of principal
of, or interest on, the Eurodollar Advances or Money Market LIBOR Advances shall
be due on a day which is not a Eurodollar Business Day, the date for payment
thereof shall be extended to the next succeeding Eurodollar Business Day unless
such Eurodollar Business Day falls in another calendar month, in which case the
date for payment thereof shall be the next preceding Eurodollar Business Day.
If the date for any payment of principal is extended under this Section or any
other provision of this Agreement, interest thereon shall be payable for such
extended time.
(c) Unless the Agent shall have received notice from any Borrower
prior to the date on which any payment is due to the Lenders hereunder that one
or more of the Borrowers will not make such payment in full, the Agent
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may assume that the Borrowers have made such payment in full to the Agent on
such date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Lender on such due date an amount equal to the amount then
due such Lender. If and to the extent that the Borrowers shall not have so made
such payment, each Lender shall repay to the Agent forthwith on demand such
amount distributed to such Lender together with interest thereon, for each day
from the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Agent, at the Federal Funds Rate.
SECTION 2.14. FUNDING LOSSES. If the Borrowers make any payment of
principal with respect to any Fixed Rate Advance (pursuant to Article II, III or
IX or otherwise) on any day other than the last day of the Interest Period
applicable thereto or the end of an applicable period fixed pursuant to Section
2.07(d), or if the Borrowers fail to borrow or prepay any Fixed Rate Advance
after notice has been given to any Lender in accordance with Section 2.04(a) or
2.12(b), the Borrowers shall reimburse each Lender within 30 days after demand
for any resulting loss or expense incurred by it (or by any participant in the
related Advance to the extent provided in Section 11.07(e)), including (without
limitation) any loss incurred in obtaining, liquidating or employing deposits
from third parties, but excluding loss of margin for the period after any such
payment or failure to borrow, PROVIDED that such Lender shall have delivered to
SunAmerica (with a copy to the Agent) a certificate setting forth in reasonable
detail calculations as to the amount of such loss or expense, which certificate
shall be conclusive and binding on the Borrowers in the absence of manifest
error.
SECTION 2.15. COMPUTATION OF INTEREST AND FEES. Interest based on the
Base Rate hereunder shall be computed on the basis of a year of 365 days (or 366
days in a leap year) and paid for the actual number of days elapsed (including
the first day but excluding the last day). All other interest and fees shall be
computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
SECTION 2.16. SHARING OF PAYMENTS, ETC. If any Lender shall obtain
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off,
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or otherwise) on account of the Advances owing to it (other than pursuant to
Section 2.17 or 3.03) in excess of its ratable share of payments on account of
the Advances obtained by all the Lenders, such Lender shall forthwith purchase
from the other Lenders such participations in the Advances owing to them as
shall be necessary to cause such purchasing Lender to share the excess payment
ratably with each of them, PROVIDED that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, such purchase from
each Lender shall be rescinded and such Lender shall repay to the purchasing
Lender the purchase price to the extent of such recovery together with an amount
equal to such Lender's ratable share (according to the proportion of (i) the
amount of such Lender's required repayment to (ii) the total amount so recovered
from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered. The Bor-
rowers agree that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.16 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of the
Borrowers in the amount of such participation.
SECTION 2.17. WITHHOLDING TAX EXEMPTION. (a) On the Effective Date
(or (i) in the case of an entity that becomes a Lender after the Effective Date,
on the date such entity becomes a Lender and (ii) in the case of a Lender that
designates a substitute or additional Applicable Lending Office to which forms
previously furnished by such Lender do not apply, on the date of such
designation) and thereafter as required by applicable law each Lender that is
not incorporated under the laws of the United States of America or a state
thereof agrees that it will deliver to each of the Borrowers and the Agent 2
duly completed, accurate and signed copies of United States Internal Revenue
Service Form 1001 or any successor thereto ("Form 1001") or Form 4224 or any
successor thereto ("Form 4224") for each of such Lender's Applicable Lending
Offices certifying in each case that such Applicable Lending Office is entitled
to receive payments under this Agreement and the Notes without deduction or
withholding of any United States federal withholding taxes on income ("U.S.
Withholding Taxes"). Each Lender that so delivers a Form 1001 or Form 4224, as
the case may be, for an Applicable Lending Office further undertakes to deliver
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to SunAmerica, on behalf of itself and the other Borrowers, and the Agent 2
additional duly completed, accurate and signed copies of Form 1001 or Form 4224
before the date that the prior form expires or becomes obsolete or prior to the
occurrence of any event (or promptly upon the Lender's knowledge of such event
if the Lender obtains knowledge of such event only after its occurrence) requir-
ing a change in the most recent form so delivered by it, and such amendments
thereto or extensions or renewals thereof as may be reasonably requested by
SunAmerica or the Agent, in each case certifying that such Applicable Lending
Office is entitled to receive payments under this Agreement and the Notes
without deduction or withholding of any U.S. Withholding Taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender promptly advises SunAmerica, on behalf of itself and the other
Borrowers, and the Agent in writing that it is not capable of receiving payments
without any deduction or withholding of U.S. Withholding Taxes. If an event
occurs after the date on which a Form 1001 or Form 4224 is submitted by a Lender
in respect of such Lender's Applicable Lending Office that renders such Form
inapplicable for a complete exemption from deduction or withholding of any U.S.
Withholding Taxes but such Lender's Applicable Lending Office is entitled to a
reduced rate of deduction or withholding for such taxes, such Lender shall
promptly upon the request of the Borrowers submit 2 duly completed, accurate and
signed copies of the applicable Form certifying that such Applicable Lending
Office is entitled to receive payments under this Agreement and the Notes with
such reduced rate of deduction or withholding. Unless the Borrowers and the
Agent have received with respect to a Lender organized under the laws of a
jurisdiction outside the United States the forms required to be delivered in
this Section 2.17 entitling the Lenders to a complete exemption from U.S.
Withholding Tax, such Borrower shall withhold taxes from such payments to or for
such Lender as required by applicable law. Each Lender hereby represents and
warrants to each Borrower that as of the Effective Date, no payments to it
hereunder are subject to any U.S. Withholding Taxes, and each Lender who at any
time becomes a Lender hereunder represents and warrants to each Borrower that as
of the
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date it becomes a Lender hereunder, no payments to it hereunder are subject to
any U.S. Withholding Taxes.
(b) In the event that the Borrowers or the Agent are required by
applicable law to make any withholding or deduction of U.S. Withholding Taxes
with respect to any Advance or fee, the Borrowers shall pay such deduction or
withholding to the applicable taxing authority, shall furnish to the Agent for
the Lender in respect of which such deduction or withholding is made all
receipts, if any, and other documents evidencing such payment and shall to the
extent provided below pay to the Agent or such Lender such additional amounts
with respect to U.S. Withholding Taxes ("Additional Amounts") as may be
necessary in order that the net amount received by the Agent or such Lender
after the required withholding or other payment (including any required
withholding or other payment on such Additional Amounts) shall equal the amount
the Agent or such Lender would have received had no such withholding or other
payment been made. Notwithstanding anything in this Agreement, the Borrowers
shall only be required to pay Additional Amounts for the account of a Lender or
bear the cost of or indemnify a Lender against U.S. Withholding Taxes, if such
amounts arise by reason of (i) changes in income tax provisions of the Internal
Revenue Code from and after the date such Lender becomes a lender to the
Borrowers (in the case where such Lender's Applicable Lending Office is located
in the United States) affecting the scope, definition or taxation of effectively
connected income (as described in Section 864(c) of the Internal Revenue Code)
or (ii) changes in withholding tax treaty rates between the United States and
such Lender's country of residence, from and after the date such Lender becomes
a lender to the Borrowers, PROVIDED that the Borrowers shall not be required to
pay any Additional Amounts, or indemnify against any U.S. Withholding taxes,
imposed as a result of a Lender's failure to comply with subsection (a) above,
but following the correction of such failure shall take such steps as such
Lender shall reasonably request to assist such Lender in recovering any U.S.
Withholding Taxes paid as a result of such failure.
SECTION 2.18. REGULATION D COMPENSATION. For so long as any Lender
maintains reserves against "Eurocurrency liabilities" (or any other category of
liabilities that includes deposits by reference to which the interest rate on
Eurodollar Advances or Money Market LIBOR Advances is determined or any category
of extensions of credit or
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other assets which includes loans by a non-United States office of such Lender
to United States residents), and as a result the cost to such Lender (or its
Eurodollar Lending Office or Money Market Lending Office, as the case may be) of
making or maintaining its Eurodollar Advances or Money Market LIBOR Advances is
increased, then such Lender may require the Borrowers to pay, contemporaneously
with each payment of interest on the Eurodollar Advances or Money Market LIBOR
Advances, additional interest on the related Eurodollar Advance or Money Market
LIBOR Advance of such Lender at a rate per annum up to but not exceeding the
excess of (i) (A) the applicable London Interbank Offered Rate divided by (B)
one MINUS the Eurodollar Reserve Percentage over (ii) the applicable London
Interbank Offered Rate. Any Lender wishing to require payment of such
additional interest (x) shall so notify SunAmerica, on behalf of the Borrowers,
and the Agent, in which case such additional interest on the Eurodollar Advances
and Money Market LIBOR Advances of such Lender shall be payable to such Lender
at the place indicated in such notice with respect to each Interest Period
commencing at least 3 Eurodollar Business Days after the giving of such notice
and (y) shall furnish to such Borrower at least 5 Eurodollar Business Days prior
to each date on which interest is payable on the Eurodollar Advances or Money
Market LIBOR Advances an officer's certificate setting forth in reasonable
detail the amount to which such Lender is then entitled under this Section 2.18
(which shall be consistent with such Lender's good faith estimate of the level
at which the related reserves are maintained by it and shall be conclusive and
binding absent manifest error) and the calculations used in determining such
amount.
ARTICLE III
CHANGES IN CIRCUMSTANCES
SECTION 3.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If on or prior to the first day of any Interest Period for any Fixed
Rate Advance:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period; or
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(b) in the case of a Committed Advance, the Required Lenders advise
the Agent that the Adjusted CD Rate or the London Interbank Offered Rate,
as the case may be, as determined by the Agent will not adequately and
fairly reflect the cost to such Lenders of funding their CD Advances or
Eurodollar Advances, as the case may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrowers and the Lenders,
whereupon until the Agent notifies the Borrowers that the circumstances giving
rise to such suspension no longer exist, the obligations of the Lenders to make
CD Advances or Eurodollar Advances, as the case may be, shall be suspended.
Unless the Borrowers notify the Agent at least 2 Domestic Business Days prior to
the date of any Fixed Rate Advance for which a Notice of Borrowing has
previously been given that it elects not to borrow on such date, (i) if such
Fixed Rate Advance is a Committed Advance, such Advance shall instead be made as
a Base Rate Advance and (ii) if such Fixed Rate Advance is a Money Market LIBOR
Advance, the Money Market LIBOR Advances comprising such Advance shall bear
interest for each day from and including the first day to but excluding the last
day of the Interest Period applicable thereto at the Base Rate for such day.
SECTION 3.02. ILLEGALITY. If, after the Effective Date, the adoption
of any applicable law, rule or regulation, or any change therein, or any change
in the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Eurodollar Lending
Office) with any request or directive (whether or not having the force of law)
of any such Governmental Authority, central bank or comparable agency shall make
it unlawful or impossible for any Lender (or its Eurodollar Lending Office) to
make, maintain or fund its Eurodollar Advances and such Lender shall so notify
the Agent, the Agent shall forthwith give notice thereof to the other Lenders
and the Borrowers, whereupon until such Lender notifies the Borrowers and the
Agent that the circumstances giving rise to such suspension no longer exist, the
obligation of such Lender to make Eurodollar Advances shall be suspended.
Before giving any notice to the Agent pursuant to this Section 3.02, such Lender
shall designate a different Eurodollar Lending Office if such designation will
avoid the need for giving such notice and will not,
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in the reasonable judgment of such Lender, be otherwise disadvantageous to such
Lender. If such Lender or any Lender having outstanding any Money Market LIBOR
Advances shall determine that it may not lawfully continue to maintain and fund
any of its outstanding Eurodollar Advances or Money Market LIBOR Advances, as
the case may be, to maturity and shall so specify in such notice, the Borrowers
shall immediately prepay in full the then outstanding principal amount of each
such Eurodollar Advance or Money Market LIBOR Advance, as the case may be, to-
gether with accrued interest thereon. Concurrently with prepaying each such
Eurodollar Advance, each Borrower may borrow a Base Rate Advance in an equal
principal amount from any such Lender that has outstanding Eurodollar Advances
(on which interest and principal shall be payable contemporaneously with the
related Eurodollar Advances of the other Lenders), and such Lender shall make
such a Base Rate Advance.
SECTION 3.03. INCREASED COST AND REDUCED RETURN. (a) If after (x) the
Effective Date, in the case of any Committed Advance or any obligation to make
Committed Advances, or (y) the date of the related Money Market Quote, in the
case of any Money Market Advance, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Applicable Lending Office) with any request or directive
(whether or not having the force of law) of any such Governmental Authority,
central bank or comparable agency:
(i) shall subject any Lender (or its Applicable Lending Office) to
any tax, duty or other charge with respect to its Fixed Rate Advances, its
Notes or its obligation to make Fixed Rate Advances, or shall change the
basis of taxation of payments to any Lender (or its Applicable Lending
Office) of the principal of or interest on its Fixed Rate Advances or any
other amounts due under this Agreement in respect of its Fixed Rate
Advances or its obligation to make Fixed Rate Advances (except for changes
in the rate of tax on the overall net income of such Lender or its
Applicable Lending Office imposed by the jurisdiction of its incorporation
or in which
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such Lender's principal executive office or Applicable Lending Office is
located); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding (A) with respect to any CD
Advance any such requirement included in an applicable Domestic Reserve
Percentage and (B) with respect to any Eurodollar Advance or Money Market
LIBOR Advance, any such requirement included in an applicable Eurodollar
Reserve Percentage), special deposit, insurance assessment (excluding, with
respect to any CD Advance, any such requirement reflected in an applicable
Assessment Rate, including any change therein resulting from changes in the
Lender's assessment rate classification) or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any
Lender (or its Applicable Lending Office) or shall impose on any Lender (or
its Applicable Lending Office), or on the United States market for
certificates of deposit or the London interbank market, any other condition
affecting its Fixed Rate Advances, its Notes or its obligation to make
Fixed Rate Advances;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making or maintaining any Fixed Rate
Advance, or to reduce the amount of any sum received or receivable by such
Lender (or its Applicable Lending Office) under this Agreement or under its
Notes with respect thereto, by an amount deemed by such Lender to be material,
then, within 30 days after demand by such Lender, which demand shall be
accompanied by a statement setting forth in reasonable detail the basis of and
calculations with respect to such demand (with a copy to the Agent), the
Borrowers shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such increased cost or reduction.
(b) If any Lender shall have determined that, after the Effective
Date, the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or any request
or
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directive regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority, central bank or comparable agency (including
any determination by any such Governmental Authority, central bank or comparable
agency that, for purposes of capital adequacy requirements, the Commitments
hereunder do not constitute commitments with an original maturity of one year or
less) has or would have the effect of reducing the rate of return on capital of
such Lender (or any Person controlling such Lender) as a consequence of such
Lender's obligations hereunder to a level below that which such Lender (or such
controlling Person) could have achieved but for such adoption, change, request
or directive (taking into consideration its internal policies with respect to
capital adequacy) by an amount reasonably deemed by such Lender to be material,
then from time to time, within 30 days after demand by such Lender, which demand
shall be accompanied by a statement setting forth in reasonable detail the basis
of and calculations with respect to such demand (with a copy to the Agent), the
Borrowers shall pay to such Lender such additional amount or amounts as will
compensate such Lender (or such controlling Person) for such reduction.
(c) Each Lender will promptly notify the Borrowers and the Agent of
any event of which it has knowledge, occurring after the date hereof, that will
entitle such Lender to compensation pursuant to this Section 3.03 and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.
A certificate of any Lender claiming compensation in accordance with this
Section 3.03 and setting forth the additional amount or amounts to be paid to it
hereunder shall, in the absence of manifest error, be conclusive and binding on
the Borrowers.
SECTION 3.04. BASE RATE ADVANCES SUBSTITUTED FOR AFFECTED FIXED RATE
ADVANCES. If (i) the obligation of any Lender to make Eurodollar Advances has
been suspended pursuant to Section 3.02 or (ii) any Lender has demanded
compensation under Section 3.03(a) and the Borrowers shall, by at least 5
Eurodollar Business Days' prior notice to such Lender through the Agent, have
elected that the provisions of this Section 3.04 shall apply to such Lender,
then, unless and until such Lender notifies such Borrower that the circumstances
giving rise to such
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suspension or demand for compensation no longer apply, which such Lender hereby
agrees to give as soon as practicable under the circumstances:
(a) all Advances that would otherwise be made by such Lender as CD
Advances or Eurodollar Advances, as the case may be, shall be made instead
as Base Rate Advances (on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Advances of the other
Lenders), and
(b) after each of its CD Advances or Eurodollar Advances, as the
case may be, has been repaid (or converted to a Base Rate Advance), all
payments of principal that would otherwise be applied to repay such Fixed
Rate Advances shall be applied to repay its Base Rate Advances instead.
SECTION 3.05. SUBSTITUTION OF LENDER. If (i) the obligation of any
Lender to make Eurodollar Advances has been suspended pursuant to Section 3.02,
(ii) any Lender has demanded compensation under Section 3.03, (iii) the
Borrowers are required to pay any Additional Amounts under Section 2.17 to any
Lender, or (iv) any Lender has determined not to consent to a Notice of
Extension in accordance with Section 2.09, the Borrowers shall have the right,
with the assistance of the Agent, to seek a mutually satisfactory substitute
bank or banks, which shall be an Eligible Assignee (and which may be one or more
of the Lenders), to purchase the Notes and assume the Commitment of such Lender.
SECTION 3.06. DISCRETION OF LENDERS AS TO MANNER OF FUNDING.
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of its
Advances in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder shall be made as if such
Lender had actually funded and maintained each CD Advance, Eurodollar Advance,
Money Market Absolute Rate Advance or Money Market LIBOR Advance through the
purchase of deposits having a maturity corresponding to the Interest Period for
such CD Advance, Eurodollar Advance, Money Market Absolute Rate Advance or Money
Market LIBOR Advance, as the case may be, and bearing an interest rate equal to
the Adjusted CD Rate, London Interbank Offered
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Rate or Money Market Absolute Rate, as the case may be, for such Interest
Period.
SECTION 3.07. CONCLUSIVENESS OF STATEMENTS; SURVIVAL OF PROVISIONS.
Determinations and statements of the Agent or any Lender made in accordance with
Section 2.14 and Section 3.01 through Section 3.03 shall be conclusive and
binding on the Borrowers absent manifest error. The provisions of Sections
2.14, 3.02, 3.03 and 3.04 shall survive termination of this Agreement.
ARTICLE IV
CONDITIONS OF LENDING
The obligation of each of the Lenders to make the Advances is subject
to the satisfaction of the following conditions precedent:
SECTION 4.01. EFFECTIVENESS. This Agreement shall become effective on
the date this Agreement has been executed and the Agent has received the notices
provided for in Section 11.06 (the "Effective Date"). In addition, no Lender
shall be obligated to make Advances in respect of the initial Borrowing under
this Agreement unless the following conditions shall have been satisfied (or
waived in accordance with Section 11.01):
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by the Agent of appropriately completed Notes, executed
by each Borrower and payable to the order of each of the Lenders, respec-
tively;
(c) receipt by the Agent of an opinion of Susan L. Harris, the
Secretary and Associate General Counsel of SunAmerica, substantially in the
form of Exhibit G and covering such additional matters relating to the
transactions contemplated hereby as the Agent may reasonably request;
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(d) receipt by the Agent of an opinion of Debevoise & Plimpton,
special counsel to the Agent;
(e) receipt by the Agent of a certificate of a Responsible Officer of
each Borrower, to the effect that (i) the representations and warranties of
such Borrower contained in Article V were true and correct in all material
respects on the Effective Date and on the date of such certificate and (ii)
no Default exists or results from the execution and delivery by such
Borrower of this Agreement or the Notes; and
(f) receipt by the Agent of all documents reasonably requested by the
Agent relating to the existence and good standing of the Borrowers and
their respective Subsidiaries, the corporate authority for and validity of
this Agreement and the Notes, and any other matters relevant hereto, all in
form and substance satisfactory to the Agent and the Agent's counsel;
and such conditions shall have been satisfied not later than February 28, 1993.
The Agent shall promptly notify the Borrowers and the Lenders of the
satisfaction of the foregoing conditions, and such notice shall be conclusive
and binding on all parties hereto.
SECTION 4.02. CONDITIONS PRECEDENT TO ADVANCES. The obligation of
each Lender to make any Advance is subject to the satisfaction of the following
additional conditions precedent:
(a) The Agent shall have received a Notice of Borrowing from such
Borrower in accordance with Section 2.02 or 2.03, as the case may be; and
the delivery of such Notice of Borrowing from such Borrower shall
constitute a representation and warranty by each Borrower, and a
certification by the Responsible officer signing such Notice of Borrowing,
that as of the date of such Advance the conditions specified in this
Section 4.02 have been satisfied;
(b) The representations and warranties of each Borrower contained in
Article V are true and correct in all material respects on the date of such
Advance with the same effect as though made on and as of such date except
to the extent they were expressly made as
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of the Effective Date or expressly relate to a prior date, PROVIDED that
such representations and warranties shall not include those set forth in
Sections 5.06(b)(iii) and 5.07 if, upon the making of the Advances
specified in the applicable Notice of Borrowing, the aggregate outstanding
amount of Advances owing to the Lenders would not exceed the aggregate
amount of such Advances outstanding and owing to the Lenders immediately
prior to the making of the Advances subject to such Notice of Borrowing;
(c) No Default exists or will result from the making of such Advance;
and
(d) Immediately after such Advance, the outstanding aggregate
principal amount of all Advances will not exceed the aggregate amount of
all Commitments.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Advances hereunder, each of the Borrowers jointly and severally represents and
warrants to the Agent and to each of the Lenders that:
SECTION 5.01. ORGANIZATION, ETC. Each Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has all requisite corporate power, authority and legal
right to own or lease and to operate its properties, to carry on its business as
now conducted and as proposed to be conducted and to enter into and carry out
the terms of this Agreement and the Notes; and each such Borrower is duly
qualified to transact business and in good standing as a foreign corporation
authorized to do business in each jurisdiction where the ownership, leasing or
operation of property or the conduct of its business makes such qualification
necessary, except where the failure to so qualify or be in good standing would
not have a Material Adverse Effect.
SECTION 5.02. AUTHORIZATION. Each Borrower has taken all necessary action
to authorize the borrowings
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hereunder and the execution, delivery and performance by it of this Agreement
and the Notes.
SECTION 5.03. NO CONFLICT. The execution, delivery and performance by
each Borrower of this Agreement and the Notes, and the use of proceeds of the
borrowings hereunder, does not and will not (a) contravene or conflict with any
provision of any applicable law, statute, rule or regulation of any relevant
Governmental Authority, or any applicable order, writ, judgment or decree of any
court, arbitrator or relevant Governmental Authority, (b) contravene or conflict
with, result in any breach of, or constitute a default under, any agreement or
instrument binding on it, (c) result in the creation or imposition of or the
obligation to create or impose any Lien (except for Permitted Liens) upon any of
the property or assets of such Borrower, or (d) contravene or conflict with any
provision of the certificate of incorporation or by-laws of such Borrower.
SECTION 5.04. GOVERNMENTAL CONSENTS. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with or exemption by, any relevant Governmental Authority is required in
connection with the Borrowings hereunder or the execution, delivery or
performance by any Borrower hereunder or the validity or enforceability of this
Agreement and the Notes, except that this Agreement may be filed as an exhibit
to a report of any Borrower filed under the Exchange Act.
SECTION 5.05. VALIDITY. Each Borrower has duly executed and delivered
this Agreement and the Notes and this Agreement and the Notes constitute legal,
valid and binding obligations of such Borrower.
SECTION 5.06. FINANCIAL STATEMENTS. (a) STATUTORY FINANCIAL
STATEMENTS. (i) The annual Convention Statement of each Insurance Subsidiary
including, without limitation, the provisions made therein for investments and
the valuation thereof, reserves, policy and contract claims and Statutory
Liabilities, as filed with their respective Departments and delivered to each
Lender prior to the execution and delivery of this Agreement, as of and for the
years ended December 31, 1989, 1990 and 1991 (collectively, the "Statutory
Financial Statements"), have been prepared in accordance with SAP applicable
thereto applied on a consistent basis (except as noted therein).
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Each such Statutory Financial Statement was in compliance with applicable law
when filed. The Statutory Financial Statements are complete and correct and
fairly present the financial position, results of operations and changes in
equity of the Insurance Subsidiary presented therein as of and for the
respective dates and periods indicated therein in conformity with SAP.
(ii) As of June 30, 1992, the Risk-Based Capital Ratio of Anchor and
Sun Life were, respectively, 124.7% and 145.4%, and as of the Effective Date
there has been no material reduction in the Risk-Based Capital Ratio of Anchor
or Sun Life.
(b) GAAP FINANCIAL STATEMENTS. (i) The Borrowers have delivered to
the Agent complete and correct copies of (A) the annual reports to stockholders
of SunAmerica for the fiscal years ended September 30, 1989, 1990, 1991 and 1992
(the "Annual Reports"), (B) annual reports on Form 10-K for such fiscal years
and all quarterly reports on Form l0-Q of SunAmerica for periods after September
30, 1991, in each case as filed with the Securities and Exchange Commission (the
"SEC Reports") and (C) consolidating balance sheets and income statements of
SunAmerica, SACO and SAFI (but not their respective Subsidiaries) as of and for
the year ended September 30, 1992. The Annual Reports and the SEC Reports
correctly describe, as of their respective dates, the business then conducted
and proposed to be conducted by SunAmerica and its Subsidiaries. There are
included in the SEC Reports consolidated financial statements at and for the
periods specified therein. The Borrowers have also delivered to the Agent
complete and correct copies of all current reports on Form 8-K, proxy
statements, registration statements and prospectuses, if any, filed by any of
the Borrowers or any of their respective Subsidiaries with the Securities and
Exchange Commission since September 30, 1991. All financial statements
delivered to the Agent in the foregoing materials (except as otherwise specified
therein) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods specified with respect to each consolidated entity,
and present fairly the financial position of the corporation or corporations to
which they relate as of the respective dates specified and the results of its or
their operations and changes in financial position for the respective periods
specified.
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(ii) The projected financial statements of SunAmerica and its
Subsidiaries, including the cash flow projections of the Borrowers, which are
set forth in the Information Memorandum, dated October 1992, prepared for use in
connection with this revolving credit facility (the "Information Memorandum"),
are based on good faith estimates and assumptions made by the management of
SunAmerica, it being recognized, however, that projections are subject to
significant uncertainties and contingencies, many of which are beyond the
Borrowers' control, and that the actual results during the period or periods
covered by such projections may differ from the projected results and that the
differences may be material. Notwithstanding the foregoing, as of the Effective
Date, management of SunAmerica believes that such projections were, taken as a
whole, reasonable and attainable.
(iii) There has been no Material Adverse Change since September
30, 1991.
SECTION 5.07. LITIGATION. There is no action, suit or proceeding
pending against, or to the knowledge of such Borrower threatened against or
affecting, any Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body or agency in which there is a reasonable
likelihood of an adverse decision which any Borrower reasonably believes would
have a Material Adverse Effect or which questions the validity of this Agreement
or the Notes.
SECTION 5.08. LIENS. As of the Effective Date, none of the property
or assets of any Borrower or any Material Subsidiary is subject to any Lien,
except for Permitted Liens.
SECTION 5.09. SUBSIDIARIES. Each Material Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all corporate power and authority to
own or lease and to operate its properties and to carry on its business as now
conducted and as proposed to be conducted.
SECTION 5.10. COMPLIANCE WITH ERISA. Neither any Borrower nor any member of
the ERISA Group, as of the Effective Date, maintains, sponsors or has an
obligation to contribute to any Plan. Neither any Borrower nor any
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member of the ERISA Group has incurred any liability pursuant to Title IV of
ERISA which remains unsatisfied.
SECTION 5.11. INVESTMENT COMPANY ACT. None of the Borrowers is an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
SECTION 5.12. PUBLIC UTILITY HOLDING COMPANY ACT. None of the
Borrowers is subject to regulation under the Public Utility Holding Company Act
of 1935, as amended.
SECTION 5.13. MARGIN REGULATION. No part of the proceeds of any
Advance will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock (within the
meaning of Regulation G or Regulation U of the Board of Governors of the Federal
Reserve System), other than in the ordinary course of investment activities
where such uses would not cause the transactions hereunder to violate such
Regulations. Neither the making of any Advance nor the use of proceeds thereof
will violate or be inconsistent with the provisions of Regulation G, T, U or X
of the Board of Governors of the Federal Reserve System.
SECTION 5.14. TAXES. As of the Effective Date,
(a) Each Borrower and each of its Subsidiaries have filed all tax
returns required by law to have been filed by them and have paid or
provided adequate reserves for all taxes thereby shown to be owing, except
any such taxes that are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves have been
established and are being maintained in accordance with GAAP. The
consolidated liability stated for taxes for such Borrower and its
Subsidiaries as of September 30, 1992 in the financial statements described
in Section 5.06 is sufficient in all material respects for all taxes as of
such date.
(b) All life insurance reserves shown as such on federal tax returns
(other than individual annuity contracts) of such Borrower qualify as life
insurance reserves under section 816(b) of the Code or under former section
801(b) of the Code.
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(c) Each Insurance Subsidiary is a life insurance company as defined
in section 816 of the Code and is an includable life insurance company as
described in section 1504(c)(1) of the Code.
SECTION 5.15. ACCURACY OF INFORMATION. Neither the representations
and warranties contained in this Article V, the Information Memorandum, nor any
other document, certificate or instrument delivered to the Lenders by any
Borrower on or prior to the Effective Date in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained in this Article V, and in such other documents, certificates or
instruments not misleading, and all projections contained in any such document
were based on information which when delivered was to the best knowledge of each
Borrower true and correct, and, to the best knowledge of such Borrower, all
calculations contained in such projections were accurate, and such projections
presented such Borrower's then-current estimate of its future business,
operations and affairs.
SECTION 5.16. PROCEEDS. The proceeds of the Advances will be used (a)
to provide short-term liquidity to the Borrowers for general corporate purposes
and (b) to support the Borrowers' obligations under the commercial paper program
of SunAmerica, and will not under any circumstances be used to make long-term
loans to or equity investments in or equity contributions to any Subsidiary of
the Borrowers.
SECTION 5.17. GOVERNMENTAL AUTHORIZATIONS. As of the Effective Date,
each Borrower and its Subsidiaries have all licenses, franchises, permits and
other governmental authorizations necessary for all businesses presently carried
on by them (including ownership and leasing of the real and personal property
owned and leased by them), except where the failure to do so would not indi-
vidually or in the aggregate have a Material Adverse Effect.
SECTION 5.18. INSURANCE LICENSES. No material license (including,
without limitation, any license or certificate of authority from any applicable
Department), permit or authorization to engage in the business of insurance or
reinsurance of any Insurance Subsidiary, other than licenses, permits or
authorizations to perform ser-
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vices as an agent or broker (individually, a "License" and collectively, the
"Licenses") is the subject of a proceeding for suspension or revocation, except
where such suspension or revocation would not individually or in the aggregate
have a Material Adverse Effect.
SECTION 5.19. COMPLIANCE WITH LAWS. As of the Effective Date, neither
any Borrower nor any of its Subsidiaries is in violation of any law, ordinance,
rule, regulation, order, policy, guideline or other requirement of any
Governmental Authority, and, to the best of each Borrower's knowledge, no such
violation has been alleged, which violation would individually or in the
aggregate have a Material Adverse Effect.
SECTION 5.20. NO DEFAULT. As of the Effective Date, none of the
Borrowers or their respective Subsidiaries is in default under any agreement or
instrument to which it is a party or by which any of its properties or assets is
bound or affected, which default would have a Material Adverse Effect.
ARTICLE VI
AFFIRMATIVE COVENANTS
On and after the Effective Date and for so long thereafter as any
Liabilities for the payment of principal or interest on the Notes remain unpaid
or outstanding or the Commitments remain in effect, the Borrowers will:
SECTION 6.01. REPORTS, CERTIFICATES AND OTHER INFORMATION. Unless
otherwise provided herein, furnish or cause to be furnished to each Lender:
(a) AUDIT REPORT. As soon as available, but in any event within 90
days after the end of each fiscal year of SunAmerica: (i) copies of the
audited consolidated balance sheet of SunAmerica and its Subsidiaries as of
the end of such fiscal year and the related consolidated statements of
earnings and cash flows of SunAmerica and its Subsidiaries for such fiscal
year, in each case setting forth in comparative form the consolidated
figures for the previous fiscal year, prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein (except as
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set forth therein); (ii) a report of Price Waterhouse (or other independent
certified public accountants of nationally recognized standing selected by
SunAmerica), which report shall state that such consolidated financial
statements present fairly the financial position of SunAmerica and its
consolidated Subsidiaries as at the date indicated and the consolidated results
of their operations and cash flows in conformity with GAAP applied on a basis
consistent with prior years (except as otherwise specified in report) and that
the audit by such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards; and (iii) a certificate from such accountants to the effect that, in
making the examination necessary for the signing of the annual audit report of
SunAmerica by such accountants referred to in clause (ii) above, they have
reviewed this Agreement and have not (unless otherwise stated) become aware of
any Default or Event of Default under this Agreement.
(b) QUARTERLY REPORTS OF SUNAMERICA. Promptly upon becoming available,
but in any event within 60 days after the end of the first 3 quarters of each
fiscal year of SunAmerica, copies of the unaudited consolidated balance sheet of
SunAmerica and its Subsidiaries as of the end of such fiscal quarter and the
related unaudited statements of earnings and cash flows of SunAmerica and its
Subsidiaries for such fiscal quarter, prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein (except as set forth therein) and certified by the chief accounting
officer or chief financial officer or treasurer or controller of SunAmerica, as
presenting fairly the financial condition and results of operations of
SunAmerica and its Subsidiaries (subject to normal year-end adjustments).
(c) CONSOLIDATING QUARTERLY REPORTS OF THE BORROWERS. Promptly upon
becoming available, but in any event within 60 days after the end of each quar-
ter of each fiscal year of SunAmerica, copies of the unaudited consolidating
balance sheet of the Borrowers as of the end of such fiscal quarter and the
related unaudited consolidating income statements
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for such fiscal quarter, substantially in the form of Exhibit I attached hereto,
setting forth subtotals for each of the Borrowers separately and for the Bor-
rowers (but not their respective Subsidiaries) as a group and showing all
eliminations and adjustments made in arriving at such subtotals, all in
reasonable detail in accordance with GAAP applied consistently throughout the
periods reflected therein (except as set forth therein) and certified by the
chief accounting officer or chief financial officer or treasurer or controller
of SunAmerica as presenting fairly, in relation to the consolidated financial
statements of SunAmerica and its Subsidiaries referred to in paragraphs (a) and
(b) above, the financial condition and results of operations of the Borrowers
separately and as a group in accordance with GAAP (subject to normal year-end
adjustments and otherwise as noted therein).
(d) INVESTMENTS. Contemporaneously with the delivery of the financial
statements provided for in paragraph (c) above, a detailed list, certified by
the chief financial officer or chief investment officer or chief accounting
officer or treasurer or controller of SunAmerica, of all Investments included in
Total Invested Assets, including (i) the market valuation thereof as determined
in the preparation of the consolidated balance sheets of SunAmerica delivered
under this Section 6.01 and (ii) the credit rating of each such Investment, as
rated by either Standard & Poor's, Moody's or the NAIC, if any.
(e) COMPLIANCE CERTIFICATE. Contemporaneously with the delivery of the
financial statements provided for in paragraph (c) above, a duly completed
certificate, signed by the chief accounting officer or chief financial officer
or treasurer or controller of SunAmerica setting forth in reasonable detail the
data and computations necessary to demonstrate compliance with each of the
applicable financial ratios and restrictions contained in Article VIII, and to
the effect that as of such date no Default or Event of Default has occurred and
is continuing, or if any Default or Event of Default has occurred and is
continuing, the actions taken or proposed to be taken to remedy such Default or
Event of Default.
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(f) SAP FINANCIAL STATEMENTS. With respect to each Insurance Subsidiary:
(i) (A) Promptly upon becoming available, but in any event within 75
days after the end of each calendar year, a copy of the annual Convention
Statements of such Insurance Subsidiary for such calendar year, and (B)
promptly upon becoming available, but in any event within 60 days after the
end of each of the first three calendar quarters, a copy of the quarterly
Convention Statements of such Insurance Subsidiary for such quarter, in
each case prepared in accordance with SAP and accompanied by the
certification of the chief financial officer or chief executive officer of
such Insurance Subsidiary or controller or treasurer that such annual or
quarterly Convention Statement presents fairly, in accordance with SAP,
the financial position and results of operations of such Insurance Sub-
sidiary as at and for the period ending on the date of such Convention
Statement;
(ii) Within 90 days after the end of each calendar year, a copy of
each "Statement of Actuarial Opinion" that is provided to the applicable
Department (or equivalent information should the Department no longer
require such a statement) as to the adequacy of aggregate reserves for life
policies and contracts of such Insurance Subsidiary. Such opinion shall be
in the format prescribed by the Insurance Code of the state of domicile of
such Insurance Subsidiary.
(g) CASH FLOW STATEMENTS. Contemporaneously with the delivery of the
financial statements for the fourth fiscal quarter provided for in paragraph (c)
above, a copy of the unconsolidated statement of cash flows for the fiscal year
then ended and a projected unconsolidated statement of cash flows for each of
the immediately succeeding fiscal years through at least September 30, 1995 for
the Borrowers on a combined basis, together with a certificate of a Responsible
Officer to the effect that such projections have been prepared on the basis of
good faith estimates and assumptions and sound financial planning practices of
management of the Borrowers and
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that such Responsible Officer has no reason to believe that they are incorrect
or misleading in any material respect.
(h) REPORTS TO SEC AND TO SHAREHOLDERS. Promptly upon the filing or
making thereof, copies of all registration statements and regular periodic
reports (including reports on Form 8-K), if any, which any Borrower shall have
filed with or to any securities exchange or the Securities and Exchange
Commission, and promptly after the mailing thereof, copies of all financial
reports and proxy statements from any of them to shareholders generally.
(i) NOTICE OF DEFAULT, LITIGATION, ETC. Promptly upon a Responsible
Officer of any Borrower learning of the occurrence of any of the following,
written notice thereof, describing the same and the steps being taken by such
Borrower with respect thereto:
(i) the occurrence of any Default or Event of Default and the
actions taken or proposed to be taken to remedy such Default or Event of
Default;
(ii) any material default or event of default on any material
contractual obligation of such Borrower or any Material Subsidiary;
(iii) any action, suit or proceeding affecting such Borrower or
any Material Subsidiary before any court or arbitrator or any governmental
body or agency in which there is a reasonable possibility of an adverse
decision which any Borrower reasonably believes would have a Material
Adverse Effect; and
(iv) the occurrence of any Material Adverse Change;
(j) ERISA. If and when any member of the ERISA Group (i) gives, or is
required in the future to give, notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan that might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows that
the plan administrator of any Plan has
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given or is required to give notice in the future of any such reportable event,
a copy of the notice of such reportable event given or required to be given to
the PBGC; (ii) receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives notice
(whether or not in writing) from the PBGC that it is considering whether to
terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer, any Plan, a copy (or a
written description) of such notice; (iv) applies for a waiver of the minimum
funding standards under Section 412 of the Code, a copy of such application; (v)
gives notice to participants of intent to terminate any Plan under Section
4041(c) of ERISA, a copy of such notice and other information to be filed with
the PBGC; or (vi) fails to make payments or contributions in an aggregate amount
of more than $10,000,000 to any Plan or Multiemployer Plan or determines to make
any amendment to any Plan that has resulted or could result in the imposition of
a Lien or the posting of a bond or other security in an aggregate amount of
more than $10,000,000, a certificate of the chief financial officer or the
chief accounting officer of SunAmerica setting forth details as to such
occurrence and action, if any, that SunAmerica or the applicable member of the
ERISA Group is required or proposes to take.
(k) CHANGE IN CREDIT RATING. Promptly upon learning thereof, written
notice of any change in (i) the credit rating of SunAmerica's senior unsecured
long term debt by Standard & Poor's or Moody's or (ii) the rating of any
Insurance Subsidiary by A.M. Best Company Inc.
(1) INSURANCE LICENSES. Prompt notice of the actual suspension,
termination or revocation of any material License, or any material restriction
on license authority, of any Insurance Subsidiary by any relevant Governmental
Authority or of receipt of notice from any relevant Governmental Authority
notifying any Insurance Subsidiary of a hearing relating to such a suspension,
termination, revocation, restriction or limitation, including any request by a
relevant Governmental Authority that
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commits any Insurance Subsidiary to take, or refrain from taking, any
action, which materially and adversely affects the authority of any
Insurance Subsidiary to conduct its insurance business.
(m) OTHER INFORMATION. From time to time such other information and
certifications concerning the condition and operations, financial or
otherwise, of such Borrower and its Subsidiaries as the Agent or any Lender
through the Agent may reasonably request.
SECTION 6.02. CORPORATE EXISTENCE; FOREIGN QUALIFICATION. Do, and
cause each of its Material Subsidiaries to do, or cause to be done, all things
necessary to preserve and keep in full force and effect its existence and its
material rights, franchises, licenses and patents, PROVIDED that nothing in this
Section 6.02 shall (a) prohibit actions permitted under Section 7.02 or (b)
prevent the withdrawal by such Borrower or any such Subsidiary of its
qualification as a foreign corporation or its termination of any license in any
jurisdiction where such withdrawal or termination or failure to keep in full
force and effect would not individually or in the aggregate have a Material
Adverse Effect.
SECTION 6.03. COMPLIANCE WITH LAWS. Comply, and cause each of its
Subsidiaries to comply, with all applicable statutes, regulations and orders of,
and all applicable restrictions imposed by, any Governmental Authority in
respect of the conduct of its business and the ownership of its properties,
except such noncompliance as would not individually or in the aggregate have a
Material Adverse Effect.
SECTION 6.04. BOOKS, RECORDS AND INSPECTIONS. (a) Maintain, and
cause each of its Material Subsidiaries to maintain, books and records which are
complete and correct in all material respects; (b) permit access at reasonable
times by the Agent to its books and records; (c) permit the Agent and each
Lender to inspect at all reasonable times its properties and operations; and (d)
upon reasonable notice to such Borrower, permit the Agent and each Lender to
discuss its business, operations and financial condition with its officers.
SECTION 6.05. INSURANCE. Maintain, and cause each of its Material
Subsidiaries to maintain, with responsible and reputable insurance companies,
insurance
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with respect to its properties and business against such casualties and
contingencies and of such types and in such amounts as is customary in the case
of similar businesses (it being understood that insurance and self-insurance
shall be permitted to the extent consistent with prudent business practice among
such similar businesses).
SECTION 6.06. MAINTENANCE OF PROPERTIES. Maintain and preserve, and
cause each of its Material Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in the
ordinary course in good working order and condition, ordinary wear and tear
excepted, except where the failure to do so would not have a Material Adverse
Effect.
SECTION 6.07. TAXES. Pay, and cause each of its Material Subsidiaries
to pay, when due all taxes, except such as are being contested in good faith and
by appropriate proceedings and with respect to which appropriate reserves have
been established, and are being maintained, in accordance with GAAP.
SECTION 6.08. MAINTENANCE OF RATINGS. At all times use their
reasonable efforts to cause the senior unsecured long term debt of SunAmerica to
be rated by Standard & Poor's and by Moody's, unless management determines it is
in the best interests of SunAmerica not to do so.
SECTION 6.09. COMPLIANCE WITH ERISA. (a) Fulfill, and cause each
member of the ERISA Group to fulfill, its obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan, (b) comply, and cause
each member of the ERISA Group to comply, with all applicable provisions of
ERISA and the Code with respect to each Plan, except where such failure or non-
compliance individually or in the aggregate would not have a Material Adverse
Effect and (c) not, and not permit any member of the ERISA Group to, (i) seek a
waiver of the minimum funding standards under ERISA, (ii) terminate or withdraw
from any Plan or (iii) take any other action with respect to any Plan which
would reasonably be expected to entitle the PBGC to terminate, impose liability
in respect of, or cause a trustee to be appointed to administer, any Plan,
unless the actions or events described in the foregoing clauses (i), (ii) or
(iii) individually or in the aggregate would not have a Material Adverse Effect.
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ARTICLE VII
NEGATIVE COVENANTS
On and after the Effective Date and for so long thereafter as any
Liabilities for the payment of principal or interest on the Notes remain unpaid
or outstanding or the Commitments are in effect, the Borrowers will (unless
otherwise consented to by the Required Lenders in accordance with Section
11.01):
SECTION 7.01. LIENS. Not, and not permit any Material Subsidiary to,
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except for the following (collectively called "Permitted
Liens"):
(a) Liens for current taxes not delinquent or for taxes being
contested in good faith and by appropriate proceedings and with respect to
which adequate reserves are being maintained in accordance with GAAP;
(b) leases or subleases granted to others, easements, rights-of-way,
restrictions and similar Liens on real property in each case that do not
materially impair the use of such property by such Borrower or any of its
Subsidiaries;
(c) Liens (other than any Lien imposed by ERISA) incurred in the
ordinary course of business in connection with workers' compensation,
unemployment insurance or other forms of governmental insurance or benefits
or to secure performance of tenders, statutory obligations, leases and
contracts (other than for borrowed money) entered into in the ordinary
course of business or to secure obligations on surety or appeal bonds;
(d) Liens of mechanics, carriers, materialmen, warehousemen,
repairmen and other like Liens arising in the ordinary course of business
in respect of obligations which are not delinquent or which are being
contested in good faith and by appropriate proceedings and with respect to
which adequate reserves are being maintained in accordance with GAAP;
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(e) any Lien existing on any asset prior to the acquisition thereof by
such Borrower or Material Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien existing on any asset of any corporation at the time such
corporation becomes a Material Subsidiary or is merged or consolidated with or
into a Borrower or its Subsidiary and, in each case, not created in
contemplation of such event;
(g) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset,
PROVIDED that (i) such Lien attaches to such asset concurrently with or within
90 days after the acquisition thereof, and (ii) such Lien is confined solely to
the asset so acquired and, if required by the terms of the instrument originally
creating such Lien, other property which is an improvement to or is acquired for
specific use in connection with such acquired asset;
(h) Liens (including Liens existing on the date hereof) on securities or
other property which are assets of any Borrower or any Material Subsidiary in
respect of such Borrower's or Subsidiary's obligations under repurchase
agreements, reverse repurchase agreements and securities lending arrangements
with respect to such securities or other property and in respect of any other
obligations contemplated by subsection (vii) of the definition of Debt in Sec-
tion 1.01;
(i) any Liens (i) that any applicable regulatory authority may require any
Borrower or Material Subsidiary to place on its assets in connection with such
authority's regulation of an Insurance Subsidiary, PROVIDED such requirement is
not at the request of any Borrower or its Subsidiaries, or (ii) that may be
required to comply with applicable insurance laws or regulations;
(j) Liens on Permitted Collateralization Assets;
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(k) any Liens arising in connection with (i) guaranteed investment
contracts, funding agreements and other similar contracts and (ii) leasing
arrangements, in each case entered into in the ordinary conduct of the
business of any Borrower or Material Subsidiary;
(l) Liens on assets securing Debt or other liabilities in respect of
which recourse of the holder is limited solely to such assets directly
securing such Debt or other liabilities;
(m) Liens on assets having an aggregate book value not exceeding
$40,000,000 at any one time granted under interest rate and/or currency
swap arrangements, interest rate protection arrangements and futures
contracts (and similar arrangements), regardless of notional amount;
(n) Liens on assets of any Material Subsidiary that secure Debt or
other liabilities of such Material Subsidiary and are not otherwise
permitted by the foregoing clauses of this Section 7.01 so long as the
aggregate principal amount of all such Debt and the aggregate amount of all
such other liabilities subject to this clause (n) at any time outstanding
does not exceed $50,000,000; and
(o) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt or other liabilities secured by any Lien permitted by
any of the foregoing clauses, PROVIDED that after giving effect to such
refinancing, extension, renewal or refunding, such Lien would be permitted
under the foregoing clauses.
SECTION 7.02. CONSOLIDATION, MERGER, SALES OF STOCK AND ASSETS, ETC.
Not, and not permit any Material Subsidiary which for or as of the end of
SunAmerica's most recent fiscal year had pretax income in excess of 20% of the
consolidated pretax income of SunAmerica reflected in its consolidated financial
statements or assets in excess of 20% of the consolidated assets of SunAmerica
reflected in its consolidated financial statements to, consolidate with or merge
into or with, any other Person, or sell, lease or otherwise transfer any shares
of the capital stock of SACO, SAFI or any such Material Subsidiary or all or
substantially all of the assets of any Borrower or any
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Material Subsidiary to any other Person, PROVIDED that this Section 7.02 shall
not apply:
(a) to any merger of SunAmerica with another Person if (x) SunAmerica
is the corporation surviving such merger and (y) immediately after giving
effect to such merger, no Default or Event of Default shall have occurred
and be continuing;
(b) to any merger or consolidation of SACO, SAFI or any such
Material Subsidiary with or into, or sale of all or substantially all of
its assets to, any Borrower or any wholly-owned Material Subsidiary,
PROVIDED that in the case of SACO and SAFI, such Borrower is the
corporation surviving such transaction, or such merger, consolidation or
sale of assets is with, into or to another Borrower;
(c) to any sale, transfer or other disposition that 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 any Borrower or
such Material Subsidiary, or that is required to comply with applicable
insurance law or regulation;
(d) to any shares of capital stock issued, sold, assigned,
transferred or otherwise disposed of which constitute directors' qualifying
shares;
(e) if after giving effect to the sale, transfer or other
disposition of capital stock of SACO, SAFI or any such Material Subsidiary,
SunAmerica would own, directly or through SACO, 100% of the issued and
outstanding Voting Stock of SACO (other than Adjustable Rate Cumulative
Preferred Stock, Series A, of SACO) and SAFI and the Borrowers and their
Material Subsidiaries would own directly or indirectly at least 80% of the
issued and outstanding Voting Stock of such Material Subsidiary, and such
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 the capital stock disposed of; or
(f) to any transaction which involves the disposition of investment
assets in connection with
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the management of such Borrower's or Material Subsidiary's investment
portfolio.
SECTION 7.03. BUSINESS ACTIVITIES. Not engage in any type of
business, directly or indirectly, except the general types of businesses
presently engaged in by the Borrowers and their respective Subsidiaries.
ARTICLE VIII
FINANCIAL COVENANTS
On and after the Effective Date and for so long thereafter as any
Liabilities for the payment of principal or interest on the Notes remain unpaid
or outstanding or the Commitments remain in effect:
SECTION 8.01. CONSOLIDATED TANGIBLE NET WORTH. SunAmerica shall at
all times maintain a Consolidated Tangible Net Worth of no less than the greater
of (a) $600,000,000 and (b) 85% of the highest Consolidated Tangible Net Worth
of SunAmerica as at the end of any fiscal year ending September 30, 1991 or
thereafter.
SECTION 8.02. CONSOLIDATED DEBT TO TOTAL CAPITAL. SunAmerica shall at
all times maintain Consolidated Debt as a percentage of Consolidated Total
Capital at no greater than 40%.
SECTION 8.03. RISK-BASED CAPITAL RATIO. The Borrowers shall at all
times cause each of Anchor, Sun Life and any other Insurance Subsidiary that is
a Material Subsidiary to maintain a Risk-Based Capital Ratio of no less than
100%.
SECTION 8.04. TOTAL INVESTED ASSETS. (a) At all times when the senior
unsecured debt of SunAmerica is rated at least "A-" by Standard & Poor's and
"Baa3" by Moody's, the Borrowers, considered as a consolidated entity, shall
own directly Investment Grade Securities which are readily saleable and which
have a market value of not less than the greater of (x) $50,000,000 and (y) 10%
of Total Invested Assets, and (b) at all times when the senior unsecured debt of
SunAmerica is rated lower than "A-" by Standard & Poor's or "Baa3" by Moody's,
the Borrowers shall own directly Investment Grade Securities which are readily
saleable and which have a
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market value of not less than the greater of (A) $100,000,000 and (B) 20% of
Total Invested Assets.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01. EVENTS OF DEFAULT. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Any Borrower shall (i) fail to pay any principal of any Advance
when the same becomes due and payable hereunder or (ii) fail to pay any
interest on any Advance or any fee pursuant hereto within 5 Domestic
Business Days after the same becomes due and payable hereunder or (iii)
fail to pay any other amount pursuant hereto within 15 Domestic Business
Days after the same becomes due and payable hereunder; or
(b) Any representation or warranty made by any Borrower herein or
pursuant hereto shall prove to have been incorrect in any material respect
when made, or any certificate or financial statement, or any report or
notice prepared by any Borrower, in each case furnished by any Borrower to
the Agent or any Lender pursuant hereto, shall prove to have been false or
misleading in any material respect on the date as of which the facts
therein set forth are stated or certified; or
(c) Any Borrower fails to perform or observe in any material respect,
to the extent applicable to it, (i) any term, covenant or agreement
contained in Section 6.01(i), Article VII or Article VIII if such failure
shall remain unremedied for 5 Domestic Business Days after a Responsible
Officer of any Borrower first learns of such failure, or (ii) any other
term, covenant or agreement contained in this Agreement on its part to be
performed or observed if such failure shall remain unremedied for 30 days
after written notice thereof shall have been given to such Borrower by the
Agent; or
(d) Any Borrower or any Material Subsidiary shall fail to pay any
principal of or premium or
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interest on any Debt that is outstanding in a principal amount of at least
$25,000,000 (but excluding Debt outstanding hereunder) of such Borrower or such
Material Subsidiary, within the applicable grace period for such payment after
the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise); or any other event shall occur
or condition shall exist under any agreement or instrument relating to any such
Debt which has not been effectively waived under such agreement or instrument if
the effect of such event or condition (after the expiration of any grace or cure
periods provided for therein) is to accelerate, or to permit the acceleration
of, the maturity of such Debt; or any such Debt shall be accelerated or
otherwise declared to be due and payable, or required to be prepaid prior to its
maturity (other than.by a regularly scheduled required prepayment); or
(e) Any Borrower or any Material Subsidiary shall (i) be generally not
paying its debts as they become due, (ii) file, or consent in writing to the
filing against it of, a petition for relief or reorganization or arrangement or
any other petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (iii) make an assignment for
the benefit of its creditors, (iv) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, (v) be adjudicated
insolvent or be liquidated under any bankruptcy or insolvency law or (vi) take
any corporate action for the purpose of accomplishing any of the foregoing; or
(f) A court or governmental authority of competent jurisdiction shall
enter an order appointing, without consent by any Borrower or Material Sub-
sidiary, as the case may be, a custodian, receiver, trustee, liquidator,
rehabilitator, or conservator or other officer with similar powers with respect
to such Borrower or with respect to any substantial part of its property, or if
an order for relief shall be entered in any case or proceeding for liquidation,
rehabilitation or reorganization or otherwise to take advantage of any
bankruptcy, insolvency or similar
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law of any jurisdiction, or ordering the dissolution, winding-up,
liquidation, receivership, rehabilitation, or conservatorship of any
Borrower or any Material Subsidiary, as the case may be, or if any petition
for any such relief shall be filed against any Borrower or Material
Subsidiary, as the case may be, and such petition shall not be dismissed
within 90 days; or
(g) A judgment or order for the payment of $25,000,000 or more
entered against any Borrower or any Material Subsidiary shall not have been
vacated, satisfied, discharged or stayed pending appeal within 60 days from
the entry thereof, or, in the event of such a stay, such judgment shall not
be discharged within 60 days after such stay expires; or
(h) The occurrence of a Change in Control;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to each Borrower, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to each Borrower, declare the Notes,
the Advances, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Notes, the Advances,
all such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by each Borrower, PROVIDED that upon the
occurrence of an Event of Default of the types described in paragraphs (e) and
(f), (A) the obligation of each Lender to make Advances shall automatically be
terminated and (B) the Notes, the Advances, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by each Borrower.
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ARTICLE X
AGENT
SECTION 10.01. AUTHORIZATION AND ACTION. Each Lender hereby appoints
and authorizes the Agent to take such action on its behalf and to exercise such
powers under this Agreement as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement (including, without limita-
tion, enforcement or collection of the Notes), the Agent shall not be required
to exercise any discretion or take any action, but shall be required to act or
to refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders (or of all Lenders in
the case of actions requiring the consent of all Lenders under Section 11.01),
and such instructions shall be binding upon all Lenders, PROVIDED that the Agent
shall not be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement or applicable law. The Agent
agrees to give to each Lender prompt notice of each notice given to it by the
Borrowers pursuant to the terms of this Agreement.
SECTION 10.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any of
its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or wilful misconduct.
Without limitation of the generality of the foregoing, the Agent (i) may treat
the payee of any Note as the holder thereof until the Agent receives and accepts
an Assignment and Acceptance entered into by the Lender which is the payee of
such Note, as assignor, and an Eligible Assignee, as assignee, as provided in
Section 11.07, (ii) may consult with legal counsel (including counsel for any
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts, (iii)
may perform any of its duties under this Agreement by or through agents or
attorneys-in-fact selected by it with reasonable care and shall not be liable
for any action taken or omitted to be taken by any such agent or attorney-in-
fact, (iv) makes no warranty or representation to any Lender and shall not be
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responsible to any Lender for any statements, warranties or representations made
in or in connection with this Agreement, (v) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement on the part of or to inspect the
property (including the books and records) of any Borrower, (vi) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto, and (vii) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 10.03. AGENT AND AFFILIATES. With respect to its Commitment,
the Advances made by it and the Notes issued to it, the Agent shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not an Agent; and the term "Lender" or "Lenders"
shall, unless otherwise expressly indicated, include the Agent in its individual
capacity. The Agent and its Affiliates may accept deposits from, lend money to,
act as trustee under indentures of, and generally engage in any kind of business
with, any Borrower, any of their respective Subsidiaries and any Person who may
do business with or own securities of any Borrower or any such Subsidiaries, all
as if the Agent were not an Agent hereunder and without any duty to account
therefor to the Lenders.
SECTION 10.04. LENDER CREDIT DECISION. Each Lender expressly
acknowledges that neither the Agent, nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of any Borrower or any of their respective Subsidiaries,
shall be deemed to constitute any representation or warranty by any of them to
any Lender. Each Lender acknowledges that it has, independently and without
reliance upon the Agent or any other Lender and based on the financial
statements referred to in Section 5.06 and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
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and without reliance upon the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Agent hereunder, the Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, condition (financial or otherwise),
operations, property, prospects or creditworthiness of the Borrowers or any of
their respective Subsidiaries which may come into the possession of the Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
SECTION 10.05. INDEMNIFICATION. The Lenders agree to indemnify the
Agent (to the extent not reimbursed by any Borrower), ratably according to the
respective amounts of their respective Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may at
any time be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement or any documents contemplated by or
referred to herein or the transactions contemplated hereby or any action taken
or omitted by the Agent under or in connection with any of the foregoing,
PROVIDED that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or wilful
misconduct. Without limiting the foregoing, each Lender agrees to reimburse the
Agent promptly upon demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by the Agent in connection with the prep-
aration, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
to the extent that the Agent is not reimbursed for such expenses by any
Borrower. The agreements in this Section 10.05 shall survive the payment of the
Notes and Advances and all other amounts payable hereunder.
SECTION 10.06. SUCCESSOR AGENT. The Agent may resign at any time by
giving written notice thereof to the Lenders and each Borrower. Upon any such
resignation, the
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Required Lenders shall have the right to appoint a successor Agent who is
reasonably acceptable to the Borrowers. If no successor Agent shall have been
so appointed by the Required Lenders, and shall have accepted such appointment,
within 30 days after the retiring Agent gives notice of resignation, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States of
America or of any State thereof who is reasonably acceptable to the Borrowers
and has a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under this Agreement.
After any retiring Agent's resignation hereunder as Agent the provisions of this
Article X shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement or the Notes, nor consent to any departure by any
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by such Borrower and the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given, PROVIDED that (a) no amendment, waiver or
consent shall, unless in writing and signed by all the Lenders, do any of the
following: (i) increase or decrease the Commitments of the Lenders (except for a
ratable decrease in the Commitments of all Lenders) or subject the Lenders to
any additional obligations, (ii) reduce the principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, (iii) postpone any date
fixed for any payment of principal of, or interest on, the Notes or any fees or
other amounts payable hereunder, (iv) change the percentage of the Commitments
or of the aggregate unpaid principal amount of the Notes, or the number of
Lenders, which shall be required for the Lenders or any of them to take any
action hereunder or (v) amend this 11.01, and (b) no amendment,
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waiver or consent shall, unless in writing and signed by the Agent in addition
to the Lenders required above to take such action, affect the rights or duties
of the Agent under this Agreement or any Note.
SECTION 11.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telex, cable
communication, facsimile telecopy or similar writing) and shall be given: if to
any Borrower, at its address specified below its name on the signature pages
hereof; if to any Lender, at its Domestic Lending Office specified below its
name on the signature page hereof; if to any other Lender, at its Domestic
Lending Office specified in the Assignment and Acceptance pursuant to which it
became a Lender; and if to the Agent, at its address at Citibank, N.A., 399 Park
Avenue, New York, New York 10043, Attention: Insurance Department, 12th Floor;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the Agent and the Borrowers. All such notices and
communications shall, when mailed, telegraphed, telexed, cabled or telecopied,
be effective (i) on the first Domestic Business Day following the day timely
deposited with Federal Express (or other equivalent national overnight courier)
or United States Express Mail, with the cost of delivery prepaid or for the
account of the sender; (ii) on the fifth Domestic Business Day following the day
duly sent by certified or registered United States mail, postage prepaid and
return receipt requested; or (iii) when otherwise actually received by the
addressee on a Domestic Business Day (or on the next Domestic Business Day if
received after the close of normal business hours or on any non-Domestic
Business Day), except that notices and communications to the Agent pursuant to
Article II or X shall not be effective until received by the Agent.
SECTION 11.03. NO WAIVER; REMEDIES. No failure on the part of any
Lender or the Agent to exercise, and no delay in exercising, any right hereunder
or under any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 11.04. COSTS AND EXPENSES. Each Borrower jointly and
severally agrees to pay within 30 days of demand all reasonable costs and
expenses of the Agent
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in connection with the preparation, execution, delivery, modification and
amendment of this Agreement, the Notes and the other documents to be delivered
hereunder, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Agent with respect thereto and with respect to
advising the Agent as to its rights and responsibilities under this Agreement,
and all reasonable costs and expenses, if any (including, without limitation,
reasonable counsel fees and expenses, which may include the reasonable allocable
costs of in-house counsel), of each Lender and the Agent in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Notes, and the other documents to be delivered hereunder.
Each Borrower jointly and severally agrees to pay, indemnify, and hold each
Lender and the Agent harmless from and against any and all other liabilities,
losses, damages, penalties, actions, judgments and suits, and related reasonable
costs, expenses or disbursements, of any kind or nature whatsoever in connection
with or arising out of any governmental investigation, litigation or proceeding
with respect to the execution, delivery, enforcement and performance of this
Agreement, the Notes or the use of the proceeds of the Advances (all the
foregoing, collectively, the "indemnified liabilities"), PROVIDED that no
Borrower shall have any obligation hereunder to the Agent or any Lender with
respect to indemnified liabilities arising from the gross negligence or willful
misconduct of the Agent or any such Lender. The agreements in this Section
11.04 shall survive repayment of the Notes and all other amounts payable
hereunder.
SECTION 11.05. RIGHT OF SET-OFF. Upon (a) the occurrence and during
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 9.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 9.01,
each Lender is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by
such Lender to or for the credit or the account of any Borrower against any and
all of the obligations of such Borrower now or hereafter existing under this
Agreement and the Notes held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement or any such Note and
although such obligations may be unmatured. Each Lender agrees promptly to
notify such Borrower after
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any such set-off and application made by such Lender, PROVIDED that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section 11.05 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
SECTION 11.06. BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by each Borrower and the Agent and when the
Agent shall have been notified by each Lender that such Lender has executed it
and thereafter shall be binding upon and inure to the benefit of each Borrower,
the Agent and each Lender and their respective successors and assigns, except
that no Borrower shall have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Lenders.
SECTION 11.07. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may,
and if demanded by any Borrower (pursuant to Section 2.09 or following a demand
by such Lender pursuant to Section 2.17 or 3.03) upon at least 10 Domestic
Business Days' notice to such Lender and the Agent will, assign to one or more
banks or other entities all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment, the Advances owing to it and the Note or Notes held by it), PROVIDED
that (i) each such assignment shall be of a constant, and not a varying, per-
centage of all of the assigning Lender's rights and obligations under this
Agreement, (ii) each such assignment shall be to an Eligible Assignee, (iii) the
amount of the Commitment of the assigning Lender being assigned pursuant to each
such assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $4,000,000 (or 100%
of such Lender's remaining Commitment, if less than $4,000,000), (iv) the
assigning Lender shall have entered into an assignment and acceptance agreement
with such Eligible Assignee pursuant to which such Lender shall assign an amount
of its commitment under the Other Agreement equal to 150% of the amount of its
Commitment to be assigned hereunder, (v) the Agent and SunAmerica, on behalf of
itself and the other Borrowers, shall have consented in writing to such
assignment, which consent shall not be unreasonably withheld, and (vi) the
parties to each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register, an Assignment
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and Acceptance substantially in the form of Exhibit H hereto, together with any
Note or Notes subject to such assignment. In connection with any such
assignment, the Lender assignor shall pay to the Agent a processing and
recordation fee of $3,000. Upon such execution, delivery, acceptance and
recordation and upon payment by the Lender assignee to such Lender assignor of
an amount equal to the purchase price agreed between such Lender assignor and
such Lender assignee, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least 3 Domestic
Business Days after the execution thereof, (x) the assignee thereunder shall be
a party hereto and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder, and (y) the Lender assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Borrower or the performance or observance by any Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 5.06 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such As-
signment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning
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Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to the Agent by the terms hereof, together
with such powers as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(c) The Agent shall maintain at its address referred to in Section
11.02 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Lenders and
the Commitment of, and principal amount of the Advances owing to, each Lender
from time to time (the "Register"). The entries in the Register shall be prima
facie evidence of amounts due, and each Borrower, the Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Borrowers or any Lender at any reasonable time and from time
to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any Note or Notes subject to such assignment, the Agent shall, if
such Assignment and Acceptance has been completed and is in substantially the
form of Exhibit H hereto, (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register and (iii) give prompt notice
thereof to the Borrowers. Within 10 Domestic Business Days after its receipt of
such notice, the Borrowers, at their own expense, shall execute and deliver to
the Agent in exchange for the surrendered Notes a new Note to the order of such
Eligible Assignee in an amount equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance and, if the assigning Lender has retained a
Commitment hereunder, a new Note to the order of the assigning Lender in an
amount equal to the Commitment retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount
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of such surrendered Note or Notes and shall be dated the effective date of such
Assignment and Acceptance.
(e) Each Lender may sell participations to one or more banks or
financial institutions in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment, the Advances owing to it and the Note or Notes held by it), PROVIDED
that (i) such Lender's obligations under this Agreement (including, without
limitation, its Commitment to the Borrowers hereunder) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) such Lender shall remain the holder
of any such Note for all purposes of this Agreement, (iv) the Borrowers, the
Agent and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement, and (v) any agreement pursuant to which such Lender sells such
participation shall provide that such Lender shall retain the sole right and
responsibility to enforce the obligations of the Borrowers hereunder including,
without limitation, the right to approve any amendment, modification or waiver
of any provision of this Agreement other than, if provided in such participation
agreement, the right of the participant thereunder to consent to a modification,
amendment or waiver described in clause (i), (ii) or (iii) of Section 11.01. The
Borrowers agree that each participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Section 2.14 or Article
III with respect to its participating interest (provided that any resulting
costs to the Borrowers would not exceed those which would have otherwise been
payable to the Lender which shall have sold the participation to such
participant).
(f) Any Lender or participant may, in connection with any assignment
or participation or proposed assignment or participation pursuant to this Sec-
tion 11.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrowers furnished to such Lender
by or on behalf of the Borrowers, PROVIDED that, through the Agent, each Lender
will notify the Borrowers of its intent to disclose such information and prior
to any such disclosure of information designated by a Borrower as confidential,
each such assignee or participant or proposed assignee or participant shall
execute a confidentiality agreement with the Borrowers whereby such assignee or
participant
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shall agree (subject to the exceptions set forth therein) to preserve the
confidentiality of such confidential information.
(g) Notwithstanding any other provision of this Section 11.07, any
Lender may at any time assign all or any portion of its rights under this
Agreement and its Notes to, or create a security interest therein in favor of,
any Federal Reserve Bank, PROVIDED that no such assignment or grant shall
release such Lender from its obligations hereunder.
SECTION 11.08. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. For
the purpose of assuring that the Agent and the Lenders may enforce their
respective rights under this Agreement, each Borrower hereby irrevocably (a)
agrees that any legal or equitable action, suit or proceeding against the
Borrowers arising out of or relating to this Agreement or any transaction
contemplated hereby or the subject matter hereof or thereof may be instituted in
any state or federal court in the State of New York, (b) waives any objection
that it may now or hereafter have to the venue of any action, suit or pro-
ceeding, (c) irrevocably submits itself to the nonexclusive jurisdiction of any
state or federal court of competent jurisdiction in the State of New York for
purposes of any such action, suit or proceeding, and (d) irrevocably waives
personal service of process and hereby consents to service of process upon it by
certified or registered mail, return receipt requested, at its address specified
in accordance with Section 11.02 and service so made shall be deemed completed
on the third business day after such service is deposited in the mail. Nothing
contained in this Section 11.08 shall be deemed to affect the right of the Agent
and the Lenders to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Borrowers in any
jurisdiction. THE BORROWERS, THE AGENT, AND THE LENDERS HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE EACH PARTIES INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONCERNED WITH THIS AGREEMENT AND THE NOTES.
SECTION 11.09. GOVERNING LAW. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 11.10. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts
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and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
SECTION 11.11. COLLATERAL. Each Lender represents to the Agent and
each other Lender that it in good faith is not relying upon any "margin stock"
(as defined in Regulation U) as collateral in the extension or maintenance of
the credit provided for in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
SUNAMERICA INC.
11601 Wilshire Boulevard
Los Angeles, California 90025
By: /s/ James R. Belardi
--------------------------------------------
Name: James R. Belardi
Title: Senior Vice President
and Treasurer
SUNAMERICA CORPORATION
11601 Wilshire Boulevard
Los Angeles, California 90025
By: /s/ James R. Belardi
--------------------------------------------
Name: James R. Belardi
Title: Authorized Agent
SUNAMERICA FINANCIAL, INC.
11601 Wilshire Boulevard
Los Angeles, California 90025
By: /s/ James R. Belardi
--------------------------------------------
Name: James R. Belardi
Title: Authorized Agent
82
<PAGE>
CITIBANK, N.A.,
in its capacity as
Agent and Lender,
399 Park Avenue, 12th Floor
New York, NY 10043
Attention: Ms. Kelley Hebert
By: /s/ Kelley T. Hebert
------------------------------------------
Name: Kelley T. Hebert
Title: Vice President
Commitment: $7,000,000
LENDERS
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION
555 South Flower Street
49th Floor
Los Angeles, CA 90071
Attention: Mr. Dennis Arriola
By: /s/ Dennis V. Arriola
-------------------------------------------
Name: Dennis V. Arriola
Title: Vice President
Commitment: $7,000,000
CHEMICAL BANK
4 New York Plaza
New York, NY 10004
Attention: Mr. Peter Platten
By: /s/ Peter Platten
-------------------------------------------
Name: Peter Platten
Title: Vice President
Commitment: $7,000,000
83
<PAGE>
FIRST INTERSTATE BANK OF CALIFORNIA
707 Wilshire Blvd. W16-14
Los Angeles, CA 90017
Attention: Mr. Robert Meyer
By: /s/ Robert C. Meyer / Margot E. Edel
-------------------------------------------
Name: Robert C. Meyer / Margot E. Edel
Title: Vice President / Vice President
Commitment: $7,000,000
THE FIRST NATIONAL BANK OF CHICAGO
One First National Plaza
12th Floor
Chicago, IL 60670-0429
Attention: Ms. Marcia Saper
By: /s/ Marcia P. Saper
-------------------------------------------
Name: Marcia P. Saper
Title: Vice President
Commitment: $7,000,000
THE INDUSTRIAL BANK OF JAPAN, LIMITED
350 South Grand Ave., Suite 1500
Los Angeles, CA 90017
Attention: Mr. Carl-Eric Benzinger
By: /s/ Juichi Tsuda
-------------------------------------------
Name: Juichi Tsuda
Title: General Manager
Commitment: $7,000,000
84
<PAGE>
THE CHASE MANHATTAN BANK, N.A.
1 Chase Manhattan Plaza
5th Floor
New York, NY 10081
Attention: Ms. Sarah Lee Martin
By: /s/ Sarah Lee Martin
-------------------------------------------
Name: Sarah Lee Martin
Title: Vice President
Commitment: $6,000,000
THE BANK OF NEW YORK
1 Wall Street
17th Floor
New York, NY 10286
Attention: Mr. Stratton Heath
By: /s/ W. Michael George
-------------------------------------------
Name: W. Michael George
Title: Vice President
Commitment: $4,000,000
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
60 Wall Street, 22nd Floor
New York, NY 10260
Attention: Ms. Anne Kelly
By: /s/ Anne M. Kelly
-------------------------------------------
Name: Anne M. Kelly
Title: Vice President
Commitment: $4,000,000
85
<PAGE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE
NEW YORK AND CAYMAN ISLANDS BRANCHES
1211 Avenue of the Americas
New York, NY 10021
Attention: Operations
/s/ Matthew F. Tallo By: /s/ Michael F. McWalters
Name: Matthew F. Tallo -----------------------------------------
Associate Name: Michael F. McWalters
Title: Managing Director
Commitment: $4,000,000
with a copy to:
633 West Fifth Street
Suite 6750
Los Angeles, CA 90071
Attention: Mr. Robert F. Edmonds
86
<PAGE>
EXHIBIT A
FORM OF NOTE
New York, New York
________________ __, 1993
For value received, SUNAMERICA INC., a Maryland corporation,
SUNAMERICA CORPORATION, a Delaware corporation, and SUNAMERICA FINANCIAL, INC.,
a Georgia corporation (collectively, the "Borrowers"), jointly and severally
promise to pay to the order of [NAME OF LENDER] (the "Lender"), for the account
of its Applicable Lending Office, the unpaid principal amount of each Advance
made by the Lender to the Borrowers pursuant to the Credit Agreement referred to
below on the last day of the Interest Period relating to such Advance. The
Borrowers jointly and severally promise to pay interest on the unpaid principal
amount of each such Advance on the dates and at the rate or rates provided for
in the Credit Agreement. All such payments of principal and interest shall be
made in lawful money of the United States in Federal or other immediately
available funds at the office of Citibank, N.A., 399 Park Avenue, New York, New
York 10043, Attention: Insurance Department, 12th Floor.
All Advances made by the Lender, the respective Types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Lender and, prior to any transfer hereof, appropriate notations to evidence the
foregoing information with respect to each such Advance then outstanding shall
be endorsed by the Lender on the schedule attached hereto, or on a continuation
of such schedule attached to and made a part hereof, PROVIDED, that the failure
of the Lender to make any such recordation or endorsement shall not affect the
obligations of the Borrowers hereunder or under the Credit Agreement.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement, dated as of February 1, 1993, among the
Borrowers, the Lenders listed on the signature pages thereof and Citibank, N.A.,
as Agent for the Lenders, providing for a $60,000,000 revolving credit facility
(as the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the acceleration of
the maturity hereof upon the happening of certain events and the
<PAGE>
prepayment hereof upon the terms and conditions therein specified.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
SUNAMERICA INC.
By
---------------------------------------
Title:
SUNAMERICA CORPORATION
By
---------------------------------------
Title:
SUNAMERICA FINANCIAL, INC.
By
---------------------------------------
Title:
2
<PAGE>
Form of Note (cont'd)
ADVANCES AND PAYMENTS OF PRINCIPAL
- -------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Advance Advance Repaid Date Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3
<PAGE>
EXHIBIT B
FORM OF NOTICE OF
COMMITTED BORROWING
[DATE]
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
Attention: Insurance Department
12th Floor
Ladies and Gentlemen:
The undersigned, [Borrower], a _____________________________________
corporation, on behalf of itself and the other Borrowers, refers to the Credit
Agreement, dated as of February 1, 1993, providing for a $60,000,000 revolving
credit facility (the "Credit Agreement", the terms defined therein being used
herein as therein defined), among the undersigned, the other Borrowers, the
Lenders listed on the signature pages thereof and Citibank, N.A., as Agent for
the Lenders, and hereby gives notice pursuant to Section 2.02 of the Credit
Agreement that the undersigned hereby requests a Borrowing under the Credit
Agreement, and in that connection sets forth below the information relating to
such Borrowing (the "Proposed Borrowing") as required by Section 2.02 of the
Credit Agreement:
(i) the [Domestic Business Day] [Eurodollar Business Day] of the
Proposed Borrowing is _______________, 199_;
(ii) the aggregate amount of the Proposed Borrowing is $__________;*
(iii) the Type of Advances comprising the Proposed Borrowing is
[CD Advances] [Base Rate Advances] [Eurodollar Advances];
- ------------------------
* Amount must be $10,000,000 or a larger multiple of $5,000,000 (or such
other amount as equals the aggregate amount of the unused Commitments).
<PAGE>
(iv) Level [I] [II] [III] Status exists on the date of this Notice;
and
(v) the Interest Period for each Advance made as part of the Proposed
Borrowing is [____ days] ____ month[s]].
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in Article V of the
Credit Agreement are true and correct, before and after giving effect to
the Proposed Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date, except to the extent they were
expressly made as of the Effective Date or expressly relate to a prior
date[, PROVIDED that such representations and warranties do not include
those set forth in Sections 5.06(b)(iii) and 5.07]**;
(B) no Default exists or will result from such Proposed Borrowing;
and
(C) the outstanding aggregate principal amount of all Advances, after
giving effect to the Proposed Borrowing, will not exceed the aggregate
amount of all Commitments in effect as of the date of such Proposed
Borrowing.
Very truly yours,
[BORROWER]
By
-------------------------------------
Title:
- -----------------------------------
** Proviso to be included in Notice if, after giving effect to the Proposed
Borrowing, the aggregate outstanding amount of Advances owing to the
Lenders would not exceed the aggregate amount of such Advances outstanding
and owing to the Lenders immediately prior to the making of the Proposed
Borrowing.
2
<PAGE>
EXHIBIT C
FORM OF MONEY MARKET QUOTE REQUEST
[DATE]
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
Attention: Insurance Department
12th Floor
Ladies and Gentlemen:
The undersigned, [Borrower], a ______________ corporation, on behalf
of itself and the other Borrowers, refers to the Credit Agreement, dated as of
February 1, 1993, providing for a $60,000,000 revolving credit facility (the
"Credit Agreement", the terms defined therein being used herein as therein
defined), among the undersigned, the other Borrowers, the Lenders listed on the
signature pages thereof and Citibank, N.A., as Agent for the Lenders, and hereby
requests, pursuant to Section 2.03(b) of the Credit Agreement, Money Market
Quotes under the Credit Agreement for a Borrowing comprised of Money Market
Advances, and in that connection sets forth below the information relating to
any such Borrowing (the "Proposed Borrowing"):
(i) the [Domestic Business Day] [Eurodollar Business Day] of the
Proposed Borrowing is _________________, 199__;
(ii) the aggregate amount of the Proposed Borrowing is $__________*;
(iii) such Money Market Quote shall offer a Money Market [Margin]
[Absolute Rate]; and
- -------------------------
* Amount must be $10,000,000 or a larger multiple of $5,000,000 (or such
other amount as equals the aggregate amount of the unused Commitments).
<PAGE>
(iv) the Interest Period for each Advance made as part of the Proposed
Borrowing is _____**.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in Article V of the
Credit Agreement are true and correct, before and after giving effect to
the Proposed Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date, except to the extent they were
expressly made as of the Effective Date or expressly relate to a prior
date[, PROVIDED that such representations and warranties do not include
those set forth in Sections 5.06(b)(iii) and 5.07]***;
(B) no Default exists or will result from such Proposed Borrowing;
and
(C) the outstanding aggregate principal amount of all Advances, after
giving effect to the Proposed Borrowing, will not exceed the aggregate
amount of all Commitments in effect as of the date of such Proposed
Borrowing.
Very truly yours,
[BORROWER]
By
-------------------------------------
Title:
- -------------------------
** Not less than 7 nor more than 180 days for each Money Market Absolute Rate
Advance, and 1, 2, 3, or 6 months for each Money Market LIBOR Advance, in
each case subject to the provisions of the definition of Interest Period.
*** Proviso to be included in Notice if, after giving effect to the Proposed
Borrowing, the aggregate outstanding amount of Advances owing to the
Lenders would not exceed the aggregate amount of such Advances outstanding
and owing to the Lenders immediately prior to the making of the Proposed
Borrowing.
2
<PAGE>
EXHIBIT D
FORM OF INVITATION FOR MONEY MARKET QUOTES
[DATE]
[Name of Lender]
[Address]
Attention: ___________________
Ladies and Gentlemen:
Pursuant to Section 2.03(c) of the Credit Agreement, dated as of
February 1, 1993, providing for a $60,000,000 revolving credit facility (the
"Credit Agreement", the terms defined therein being used herein as therein
defined), among SunAmerica Inc., a Maryland corporation, SunAmerica Corporation,
a Delaware corporation, SunAmerica Financial, Inc., a Georgia corporation
(collectively, the "Borrowers"), the Lenders listed on the signatures pages
thereof and Citibank, N.A., as Agent for the Lenders, we are pleased on behalf
of the Borrowers to invite you to submit Money Market Quotes to the Borrowers
for the following proposed Money Market Borrowing(s):
Date of Borrowing: ____________________
PRINCIPAL AMOUNT INTEREST PERIOD
$
Such Money Market Quotes shall offer a Money Market [Margin] [Absolute
Rate].
Please respond to this invitation by no later than [2:00 P.M.] [10:00
A.M.] New York City time on [date].
CITIBANK, N.A., as Agent
By
-------------------------------------
Authorized Officer
<PAGE>
EXHIBIT E
FORM OF MONEY MARKET QUOTE
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
Attention: Insurance Department
12th Floor
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of February 1,
1993, providing for a $60,000,000 revolving credit facility (the "Credit
Agreement", the terms defined therein being used herein as therein defined),
among SunAmerica Inc., a Maryland corporation, SunAmerica Corporation, a
Delaware corporation, SunAmerica Financial, Inc., a Georgia corporation
(collectively, the "Borrowers"), the Lenders listed on the signatures pages
thereof and Citibank, N.A., as Agent for the Lenders. In response to your
invitation on behalf of the Borrowers, dated ____________, 199_, we hereby make
the following Money Market Quote on the following terms:
1. Quoting Lender: _________________________________________________________
2. Person to contact at Quoting Lender:
__________________________________________________________________________
3. Date of Borrowing: _______________________________*
4. We hereby offer to make Money Market Advance(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
- -------------------------
* As specified in the related Invitation.
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- ------ ------ ------- --------------
<S> <C> <C> <C>
$
$
</TABLE>
[Provided, that the aggregate principal amount of Money Market Advances for
which the above offers may be accepted shall not exceed $_____________.]**
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in the
Credit Agreement, irrevocably obligates us to make the Money Market
Advance(s) for which any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF LENDER]
Dated: By:
------------------ ------------------------------------
Authorized Officer
- --------------------
** Principal amount bid may not exceed the principal amount requested.
Specify aggregate limitation if the sum of the individual offers exceeds
the amount the Lender is willing to lend. Bids must be made for
$5,000,000 or a larger multiple of $1,000,000.
*** As specified in the related Invitation. No more than 5 bids are permitted
for each Interest Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000
of 1%) and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE>
EXHIBIT F
FORM OF NOTICE OF EXTENSION
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
Attention: Insurance Department
12th Floor
Ladies and Gentlemen:
The undersigned, SunAmerica Inc., a Maryland corporation, on behalf of
itself and the other Borrowers, refers to the Credit Agreement, dated as of
February 1, 1993, providing for a $60,000,000 revolving credit facility (the
"Credit Agreement", the terms defined therein being used herein as therein
defined), among the undersigned, the other Borrowers, the Lenders listed on the
signature pages thereof and Citibank, N.A., as Agent for the Lenders, and hereby
gives notice pursuant to Section 2.09 of the Credit Agreement that the Borrowers
request an extension of the Termination Date from _______________, 19_* to
_____________**.
By delivery of this Notice of Extension the Borrowers hereby represent
and warrant that neither any Default nor any Event of Default has occurred and
is continuing and that the representations and warranties contained in Article V
of the Credit Agreement are correct on and as of the date hereof and will be
correct on and as of the Existing Termination Date as though made on and as of
such date, except to the extent they were expressly
- -------------------------
* Date must be the Existing Termination Date.
** Specify a date not more than, or that the date shall be, 364 calendar days
after such Notice of Extension shall have become effective pursuant to
Section 2.09(c) of the Credit Agreement.
<PAGE>
made as of the Effective Date or expressly relate to a prior date.
Very truly yours,
SUNAMERICA INC., for itself and on
behalf of the other Borrowers
By
-------------------------------------
Name:
Title:
2
<PAGE>
EXHIBIT G
February __, 1993
To the Lenders listed
on Annex A hereto
SUNAMERICA INC.
Ladies and Gentlemen:
I am a Vice President and Associate General Counsel of SunAmerica Inc.
(formerly Broad Inc.), a Maryland corporation ("SunAmerica") and have acted as
such in connection with the Credit Agreement dated as of February 1, 1993 (the
"Credit Agreement") by and among SunAmerica, SunAmerica Corporation, a Delaware
corporation ("SACO"), and SunAmerica Financial, Inc., a Georgia corporation
("SAFI") (SunAmerica, SACO and SAFI are each referred to as a "Borrower" and are
collectively referred to as "Borrowers"), Citibank, N.A., as Agent (the "Agent")
and the Lenders named therein (the "Lenders") and the $60,000,000 loan facility
contemplated by the Credit Agreement. Capitalized terms used herein, unless
otherwise expressly defined, have the meanings specified in the Credit
Agreement.
I have examined and relied upon the originals, or copies certified or
otherwise identified to my satisfaction, of such records, documents,
certificates and other instruments, and have made such other investigations or
inquiries and considered such questions of law, as in my judgment are necessary
or appropriate to enable me to render the opinions expressed below. In
particular, I have examined or caused to be examined under my direction
certificates of public officials, and copies, certified to my satisfaction, of
such corporate documents and records of the Borrowers and of the Material
Subsidiaries and of First Sun and of such other persons as I have deemed
relevant and necessary as a basis for this opinion. In addition, I have relied,
to the extent I have deemed such reliance proper, upon certificates of officers
of the Borrowers and of the Material Subsidiaries and of First Sun with respect
to the accuracy of certain material factual matters which were not independently
established.
<PAGE>
I have assumed the authenticity of all documents submitted to me as
originals, the conformity to originals of all documents submitted to me as
copies and the genuineness of all signatures on such documents. I have also
assumed that the Credit Agreement has been duly authorized, executed and
delivered by all parties thereto other than the Borrowers, and constitutes all
such other parties respective legal, valid, binding and enforceable obligations.
Based on an officer's certificate of an officer of SunAmerica with respect to
the definition in Section 1.01 of the Credit Agreement of the term "Material
Subsidiary", the term "Material Subsidiary" means Sun Life, Anchor, Sun Mortgage
Acceptance Corporation, and Saamsun Holdings Corp.
For purposes of the opinion in the second sentence of paragraph 4
below, I have reviewed the opinion of Messrs. Debevoise & Plimpton dated
February 5, 1993 to the effect that the Credit Agreement and the Notes
constitute the legal, valid, binding and enforceable obligations of the
Borrowers under the laws of the State of New York, and I have assumed that the
Lenders and the Agent shall act in good faith and in a commercially reasonable
manner in all matters in connection with the Credit Agreement and the Notes, and
that the laws of the State of California are the same as the laws of the State
of New York.
I am an attorney admitted to practice in the State of California, and
I express no opinion as to any laws other than the laws of the State of
California and the federal laws of the United States of America and for the
purposes of the opinions with respect to the relevant Borrower or Material
Subsidiary, as the case may be, in paragraphs 1, 4 (but only to the extent of
the first sentence thereof and as to execution of the Credit Agreement and the
Notes) and 6 below, the general corporate laws of the States of Maryland,
Delaware, Georgia and Virginia.
Based upon and subject to the foregoing, I am of the opinion that:
1. Each Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation, and has
all requisite corporate power and authority to own or lease and to operate its
properties and to carry on its business as now conducted. Each Borrower is duly
qualified to transact business, and is in good standing as a foreign corporation
authorized to transact business, in each jurisdiction where the ownership,
leasing or operation of its properties or the conduct of its business makes such
qualification necessary, except where the failure to so qualify or be in good
standing would not have a Material Adverse Effect.
2. The execution, delivery and performance by each Borrower of the
Credit Agreement and the Notes does not (a) to the best of my knowledge, violate
any law or statute or any rule or regulation of any relevant Governmental
Authority applicable to any Borrower, (b) to the best of my knowledge,
contravene or conflict with any order, writ, judgment or decree of any court,
arbitrator or any Governmental Authority or result in any breach of or
constitute a default under any agreement or instrument binding on such Borrower,
or (c) contravene or conflict with any provision of the Articles of
Incorporation or Bylaws of such Borrower.
- 2 -
<PAGE>
3. No material order, consent, approval, license, authorization or
validation of, or material filing, recording or registration with or exemption
by, any Governmental Authority regulating any Borrower is required in connection
with the borrowings under the Credit Agreement or the execution, delivery or
performance by each Borrower of the Credit Agreement or the Notes or the
validity or enforceability of the Credit Agreement or the Notes, except such
disclosure as may be necessary or appropriate under securities laws.
4. Each Borrower has taken all necessary action to authorize the
borrowings under the Credit Agreement and the execution, delivery and
performance by such Borrower of the Credit Agreement and the Notes. Each
Borrower has duly executed and delivered the Credit Agreement and the Notes, and
the Credit Agreement and the Notes constitute legal, valid and binding
obligations of each Borrower enforceable against such Borrower in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting the rights and remedies of
creditors and general principles of equity (regardless of whether asserted in a
proceeding in equity or at law).
5. To the best of my knowledge, there is no action, suit or
proceeding pending or threatened against any Borrower or any Material Subsidiary
before any court or arbitrator or any governmental body or agency for which I
believe there is a reasonable likelihood of an adverse decision which I believe
would have a Material Adverse Effect or which questions the validity of the
Credit Agreement or the Notes.
6. Each Material Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own or
lease and to operate its properties and to carry on its business as now
conducted.
7. None of the Borrowers is an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
8. Each Borrower and each Material Subsidiary has all licenses,
franchises, permits and other governmental authorizations necessary for the
businesses presently carried on by them except where the failure to do so would
not individually or in the aggregate have a Material Adverse Effect.
9. No material License of an Insurance Subsidiary (i.e., Sun Life,
Anchor or First Sun) is the subject of a proceeding for suspension or
revocation, except where such suspension or revocation would not individually or
in the aggregate have a Material Adverse Effect.
I express no opinion as to the enforceability of provisions of the
Credit Agreement and the Notes (a) which broadly or vaguely waive stated rights,
statutory rights, constitutional
- 3 -
<PAGE>
rights or unknown future rights, (b) to the effect that rights or remedies are
not exclusive, that every right or remedy is cumulative, that the election of a
particular remedy or remedies does not preclude recourse to one or more other
remedies, that the failure to exercise or delay in exercising any remedy does
not affect or waive any rights or remedies, and that waivers, amendments or
modifications may only be made in writing, (c) imposing charges in the nature of
forfeitures, penalties, unreasonable liquidated damages or late charges, (d)
requiring any party to indemnify any other party against loss for such other
party's own negligence, tortious conduct, wrongful or unlawful act or violation
of public policy, or absolving any party from liability, or limiting the
liability of any party for such party's own negligence, tortious conduct,
wrongful or unlawful act or violation of public policy, (e) waiving, expressly
or by implication, presentment, demand, protest or notice, or the right to
object to the laying of the venue of any suit, action or proceeding, or the
right to claim that any suit, action or proceeding has been brought in an
inconvenient forum, or the right to a jury trial or to due process of law, or
other rights, remedies, claims or defenses, to the extent such waivers are
contrary to law or are or would be found to be against public policy, (f)
requiring the Borrowers to pay attorneys' fees of the Lenders or the Agent in
connection with any proceeding in which the Lenders or the Agent are not the
prevailing party, (g) the provisions of the last sentence of Section 11.07(e) of
the Agreement or (h) which provide that actions may be taken or that decisions
may be made at the discretion or judgment of the Agent or any Lenders or
arbitrarily by the Agent or any Lenders.
This opinion is rendered as of the date set forth above and I shall
have no responsibility to advise you of any changes, facts or circumstances
after the date hereof. This letter may not be relied upon by any other person
or entity except counsel to the Agent and the Lenders. This opinion may not be
furnished without my prior consent to any person or entity other than potential
assignees or participants or as may be required by applicable law or regulators.
Very truly yours,
---------------------------------------
Susan L. Harris
- 4 -
<PAGE>
ANNEX A
CITIBANK, N.A.
399 Park Avenue, 12th Floor
New York, NY 10043
Attention: Ms. Kelley Hebert
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION
555 South Flower Street
49th Floor
Los Angeles, CA 90071
Attention: Mr. Dennis Arriola
CHEMICAL BANK
4 New York Plaza
New York, NY 10004
Attention: Mr. Peter Platten
FIRST INTERSTATE BANK OF CALIFORNIA
707 Wilshire Blvd. W16-14
Los Angeles, CA 90017
Attention: Mr. Robert Meyer
THE FIRST NATIONAL BANK OF CHICAGO
One First National Plaza
12th Floor
Chicago, IL 60670-0429
Attention: Ms. Marcia Saper
THE INDUSTRIAL BANK OF JAPAN, LIMITED
350 South Grand Ave., Suite 1500
Los Angeles, CA 90017
Attention: Mr. Carl-Eric Benzinger
<PAGE>
THE CHASE MANHATTAN BANK, N.A.
1 Chase Manhattan Plaza
5th Floor
New York, NY 10081
Attention: Ms. Sarah Lee Martin
THE BANK OF NEW YORK
1 Wall Street
17th Floor
New York, NY 10286
Attention: Mr. Stratton Heath
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
60 Wall Street, 22nd Floor
New York, NY 10260
Attention: Ms. Anne Kelly
WESTDEUTSCHE LANDESBANK GIROZENTRALE
NEW YORK AND CAYMAN ISLANDS BRANCHES
1211 Avenue of the Americas
New York, NY 10021
Attention: Operations
with a copy to:
633 West Fifth Street
Suite 6750
Los Angeles, CA 90071
Attention: Mr. Robert F. Edmonds
<PAGE>
EXHIBIT H
ASSIGNMENT AND ACCEPTANCE
Dated ___________, 199_
Reference is made to the Credit Agreement, dated as of February 1,
1993, providing for a $60,000,000 revolving credit facility (the "Credit
Agreement"), among SunAmerica Inc., a Maryland corporation ("SunAmerica"),
SunAmerica Corporation, a Delaware corporation ("SACO"), SunAmerica Financial,
Inc., a Georgia corporation (together with SunAmerica and SACO, the
"Borrowers"), the Lenders identified on the signature pages thereof and
Citibank, N.A., as Agent for the Lenders (the "Agent"). Terms defined in the
Credit Agreement are used herein with the same meanings.
________________________ (the "Assignor") and ______________________
(the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, for a purchase price of
$_________, a _____% interest in and to all of the Assignor's rights and
obligations under the Credit Agreement as of the Effective Date (as defined in
paragraph 4 below) (including, without limitation, such percentage interest in
the Assignor's Commitment as in effect on the Effective Date (before giving
effect to any Money Market Reduction), the Advances (including Money Market
Advances) owing to the Assignor on the Effective Date, and the Notes held by the
Assignor).* Schedule 1 hereto sets forth the respective Commitments and
Advances of the Assignor and the Assignee immediately after giving effect to
this Assignment and Acceptance.
2. The Assignor (i) represents and warrants that as of the date
hereof its Commitment (without giving effect to assignments thereof which have
not yet become effective or any Money Market Reduction) is $___________, and the
aggregate outstanding principal amount of Advances owing to it (without giving
effect to assignments thereof which have not yet become effective) is
$__________; (ii) represents and warrants that it is the legal and beneficial
owner of the interests being assigned by it hereunder and that such interest is
free and clear of any adverse claim; (iii) makes no representation or warranty
- -------------------------
* The amount of Commitments being assigned shall comply with Section 11.07(a)
of the Credit Agreement.
<PAGE>
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document furnished pursuant
thereto; (iv) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of any Borrower or the performance or
observance by any Borrower of any of its obligations under the Credit Agreement
or any other instrument or document furnished pursuant thereto; and (v) attaches
the Note referred to in paragraph 1 above and requests that the Agent exchange
such Note for [a new Note dated _____________, 199_ in the principal amount of
$_______, payable to the order of the Assignee] [new Notes as follows: a Note
dated _____________, 199_ in the principal amount of $_______, payable to the
order of the Assignee, and a Note dated _______________, 199_ in the principal
amount of $_________, payable to the order of the Assignor].
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 5.06 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under the Credit Agreement as are delegated to the Agent
by the terms thereof, together with such powers as are reasonably incidental
thereto; (v) agrees that it will perform in accordance with their terms all of
the obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender; [and] (vi) specifies as its Domestic Lending Office
(and address for notices), Money Market Lending Office and Eurodollar Lending
Office the offices set forth beneath its name on the signature pages hereof [and
(vii) attaches the forms prescribed by the
2
<PAGE>
Internal Revenue Service of the United States evidencing their exemption from
U.S. withholding taxes].**
4. The effective date for this Assignment and Acceptance shall be
______________ (the "Effective Date").*** Following, and subject to, the
consent in writing by the Agent and SunAmerica, on behalf of itself and the
other Borrowers, to such assignment and the execution of this Assignment and
Acceptance, this Assignment and Acceptance will be delivered to the Agent
together with the processing fee specified in Section 11.07(a) of the Credit
Agreement, for acceptance and recording by the Agent.
5. Upon such acceptance and recording and the payment by the
Assignee to the Assignor of the purchase price specified in paragraph 1 above,
as of the Effective Date, (i) the Assignee shall be a party to the Credit
Agreement and, to the extent provided in the Credit Agreement, have the rights
and obligations of a Lender thereunder and (ii) the Assignor shall, to the
extent provided in the Credit Agreement, relinquish its rights and be released
from its obligations under the Credit Agreement.
6. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments under the Credit Agreement and the Notes
in respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and fees with respect thereto) to the Assignee.
The Assignor and Assignee shall make all appropriate adjustments in payments
under the Credit Agreement and the Notes for periods prior to the Effective Date
directly between themselves.
- -------------------------
** If the Assignee is organized under the laws of a jurisdiction outside the
United States.
*** See Section 11.07(a). Such date shall be at least 3 Domestic Business Days
after the execution of this Assignment and Acceptance.
3
<PAGE>
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
[NAME OF ASSIGNOR]
By
-------------------------------------
Name:
Title:
[NAME OF ASSIGNEE]
By
-------------------------------------
Name:
Title:
Domestic Lending Office (and address
for notices):
[Address]
Money Market Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
4
<PAGE>
Accepted and consented
to this _____ day of
_____________, 199_
CITIBANK, N.A., as Agent
By
-----------------------
Name:
Title:
SUNAMERICA INC.
By
-----------------------
Name:
Title:
5
<PAGE>
SCHEDULE 1
TO
ASSIGNMENT AND ACCEPTANCE
Dated ___________, 199_
Assignor's Commitment: $_________________
Aggregate Outstanding Principal
Amount of Committed Advances
Owing to Assignor $_________________
Aggregate Outstanding Principal
Amount of Money Market Advances
Owing to Assignor $_________________
Assignee's Commitment: $_________________
Aggregate Outstanding Principal
Amount of Committed Advances
Owing to Assignee $_________________
Aggregate Outstanding Principal
Amount of Money Market Advances
Owing to Assignee $_________________
6
<PAGE>
EXHIBIT I
BROAD INC.
CONSOLIDATING BALANCE SHEET
September 30, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUN FIRST BROKER/ ASSSET
LIFE ANLIC SUN DEALER MANAGER TRUST ELIM-
CONSOL CONSOL AMERICA CONSOL CONSOL COMPANY INATIONS
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
BONDS, NOTES AND REDEM PREF STOCK 3,530,366 1,185,199 49,072 0 0 337,864 0
SENIOR SECURED BANK LOANS 308,204 156,907 0 0 0 0 0
COMMON STOCKS, AT MARKET VALUE 22,108 10,390 0 0 0 0 0
KBHC WARRANTS, AT MARKET VALUE 7,330 0 0 0 0 0 0
SHORT-TERM INVESTMENTS 791,814 362,197 40,904 8,625 18,832 0 0
CASH 35,625 3,530 402 7,559 286 74,354 0
MORTGAGE LOANS 1,146,074 96,427 20,975 0 0 0 0
POLICY LOANS 28,196 13,195 0 0 0 0 0
REAL ESTATE 37,021 156,684 0 0 0 0 0
OTHER INVESTED ASSETS 262,943 131,965 0 0 0 0 0
--------- --------- --------- --------- --------- --------- ---------
TOTAL INVESTMENTS 6,169,681 2,116,494 111,353 16,184 19,118 412,218 0
INVESTMENTS IN AFFILIATES 328,718 61,829 0 0 0 0 (410,119)
ACCRUED INVESTMENT INCOME 82,699 16,664 443 57 0 4,184 0
DAC AND PVFP 145,696 240,572 1,297 0 47,692 0 0
SEPARATE ACCOUNT ASSETS 0 3,284,507 8,836 0 0 0 0
INVESTMENT IN DISCONT. OPERATIONS 0 0 0 0 0 0 0
OTHER ASSETS 24,726 12,479 1,084 21,712 27,724 8,177 0
--------- --------- --------- --------- --------- --------- ---------
TOTAL ASSETS 6,751,520 5,732,545 123,013 37,953 94,534 424,579 (410,119)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
LIABILITIES
RES. FOR FUTURE POLICYHOLDER BEN.:
ANNUITIES AND SPL 3,346,131 1,735,565 59,400 0 0 0 0
GICs 1,739,683 0 0 0 0 0 0
CLAIMS & OTHER POLICYHOLDERS' FUNDS 0 7,406 227 0 0 0 0
NOTES PAYABLE:
L-TERM NOTES AND DEBENTURES 0 0 0 0 0 0 0
CMO 182,784 0 0 0 0 0 0
SECURED NOTES PAYABLE 0 0 0 0 0 0 0
BANK NOTES 0 0 0 0 0 524 0
REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 0 0
SUBORDINATED DEBENTURES 0 0 0 0 0 0 0
SEPARATE ACCOUNT LIABILITIES 0 3,284,507 8,836 0 0 0 0
DUE TO/FROM AFFILIATES (2,123) 21,121 229 353 16,495 484 0
OTHER LIABILITIES 788,055 356,706 33,625 20,076 5,549 399,247 0
FEDERAL INCOME TAXES:
CURRENT (11,969) (8,459) 609 2,298 (11,817) 1,654 0
DEFERRED 12,561 13,548 (835) (1,067) 19,212 82 0
--------- --------- --------- --------- --------- --------- ---------
TOTAL LIABILITIES 6,055,122 5,410,394 102,091 21,660 29,439 401,991 0
--------- --------- --------- --------- --------- --------- ---------
SHAREHOLDERS' EQUITY:
PREFERRED STOCK 0 0 0 0 0 0 0
NON-TRANSFER CLASS B STOCK 0 0 0 0 0 0 0
COMMON STOCK 5,636 3,511 3,000 1 56 700 (7,267)
CONTRIBUTED CAPITAL 267,670 252,876 14,428 16,249 46,738 19,415 (338,956)
URCG (L) 2,675 (2,385) 0 0 0 0 2,385
URCG (L) K&B WARRANTS 6,142 0 0 0 0 0 0
RETAINED EARNINGS 414,275 68,149 3,494 43 18,301 2,473 (66,281)
--------- --------- --------- --------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 696,398 322,151 20,922 16,293 65,095 22,588 (410,119)
--------- --------- --------- --------- --------- --------- ---------
TOTAL LIAB. & SH EQUITY 6,751,520 5,732,545 123,013 37,953 94,534 424,579 (410,119)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
CONSOL NON- SUNAMERICA
IDATED REGULATED ELIM- CORP BROAD INC. ELIM- BROAD INC.
REGULATED CONSOL INATIONS CONSOL (PARENT) INATIONS CONSOL
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
BONDS, NOTES AND REDEM PREF STOCK 5,102,501 15,194 (17,870) 5,099,825 273,481 (269,254) 5,104,052
SENIOR SECURED BANK LOANS 465,111 0 0 465,111 230,432 0 695,543
COMMON STOCKS, AT MARKET VALUE 32,498 134 0 32,632 1,038 0 33,670
KBHC WARRANTS, AT MARKET VALUE 7,330 0 0 7,330 0 0 7,330
SHORT-TERM INVESTMENTS 1,222,372 13,006 0 1,235,378 139,536 0 1,374,914
CASH 121,756 4 0 121,760 14,692 0 136,452
MORTGAGE LOANS 1,263,476 0 0 1,263,476 1,981 0 1,265,457
POLICY LOANS 41,391 0 0 41,391 0 0 41,391
REAL ESTATE 193,705 0 0 193,705 (29,530) 0 164,175
OTHER INVESTED ASSETS 394,908 5,850 0 400,758 198,756 0 599,514
---------- --------- --------- ---------- --------- --------- ----------
TOTAL INVESTMENTS 8,845,048 34,188 (17,870) 8,861,366 830,386 (269,254) 9,422,498
INVESTMENTS IN AFFILIATES (19,572) 671,104 (632,899) 18,633 700,428 (719,061) 0
ACCRUED INVESTMENT INCOME 104,047 494 0 104,541 8,631 0 113,172
DAC AND PVFP 435,257 0 0 435,257 952 0 436,209
SEPARATE ACCOUNT ASSETS 3,293,343 0 0 3,293,343 0 0 3,293,343
INVESTMENT IN DISCONT. OPERATIONS 0 0 0 0 0 0 0
OTHER ASSETS 95,902 15,847 0 111,749 8,383 12,529 132,661
---------- --------- --------- ---------- --------- --------- ----------
TOTAL ASSETS 12,754,025 721,633 (650,769) 12,824,889 1,548,780 (975,786) 13,397,883
---------- --------- --------- ---------- --------- --------- ----------
---------- --------- --------- ---------- --------- --------- ----------
LIABILITIES
RES. FOR FUTURE POLICYHOLDER BEN.:
ANNUITIES AND SPL 5,141,096 0 0 5,141,096 0 0 5,141,096
GICs 1,739,683 0 0 1,739,683 283,365 0 2,023,048
CLAIMS & OTHER POLICYHOLDERS' FUNDS 7,633 0 0 7,633 0 0 7,633
NOTES PAYABLE:
L-TERM NOTES AND DEBENTURES 0 0 0 0 225,000 0 225,000
CMO 182,784 0 0 182,784 264,988 (264,988) 182,784
SECURED NOTES PAYABLE 0 0 0 0 0 0 0
BANK NOTES 524 25,919 0 26,443 0 0 26,443
REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 0 0
SUBORDINATED DEBENTURES 0 0 0 0 0 0 0
SEPARATE ACCOUNT LIABILITIES 3,293,343 0 0 3,293,343 0 0 3,293,343
DUE TO/FROM AFFILIATES 36,559 (13,072) 18 23,505 (19,239) (4,266) 0
OTHER LIABILITIES 1,603,258 24,882 (27) 1,628,113 92,101 0 1,720,214
FEDERAL INCOME TAXES:
CURRENT (27,684) 8,175 0 (19,509) 18,077 12,529 11,097
DEFERRED 43,501 (8,688) 0 34,813 2,344 0 37,157
---------- --------- --------- ---------- --------- --------- ----------
TOTAL LIABILITIES 12,020,697 37,216 (9) 12,057,904 866,636 (256,725) 12,667,815
---------- --------- --------- ---------- --------- --------- ----------
SHAREHOLDERS' EQUITY:
PREFERRED STOCK 0 48,700 0 47,700 218,500 0 267,200
NON-TRANSFER CLASS B STOCK 0 0 0 0 6,834 0 6,834
COMMON STOCK 5,637 0 (5,637) 0 25,179 (4) 25,179
CONTRIBUTED CAPITAL 278,420 366,935 (278,420) 366,935 98,051 (367,711) 97,275
URCG (L) 2,675 2,673 (2,675) 2,673 2,211 (2,673) 2,211
URCG (L) K&B WARRANTS 6,142 6,142 (6,142) 6,142 6,142 (6,142) 6,142
RETAINED EARNINGS 440,454 259,963 (357,886) 342,531 325,227 (342,531) 325,227
---------- --------- --------- ---------- --------- --------- ----------
TOTAL SHAREHOLDERS' EQUITY 733,328 684,417 (650,760) 766,985 682,144 (719,061) 730,068
---------- --------- --------- ---------- --------- --------- ----------
TOTAL LIAB. & SH EQUITY 12,754,025 721,633 (650,769) 12,824,889 1,548,780 (975,786) 13,397,883
---------- --------- --------- ---------- --------- --------- ----------
---------- --------- --------- ---------- --------- --------- ----------
</TABLE>
1-37
<PAGE>
BROAD INC.
CONSOLIDATING INCOME STATEMENT
September 30, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUN FIRST BROKER/ ASSSET
LIFE ANLIC SUN DEALER MANAGER TRUST ELIM-
CONSOL CONSOL AMERICA CONSOL CONSOL COMPANY INATIONS
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT SPREAD
Investment income 525,518 158,436 6,472 620 742 8,972 (3,112)
Less: Credit losses 6,000 0 0 0 0 0 0
--------------------------------------------------------------------------------------
Subtotal investment income 519,518 158,436 6,472 620 742 8,972 (3,112)
Less: Interest - senior debt 17,867 1,452 0 0 0 45 (3,112)
Interest - subordinated de 0 0 0 0 0 0 0
Interest - accumulated val 363,204 119,781 4,104 0 0 0 0
Interest - trust deposits 0 0 0 0 0 4,256 0
Preferred dividends 0 0 0 0 0 0 0
--------------------------------------------------------------------------------------
NET INVESTMENT SPREAD 138,447 37,203 2,368 620 742 4,671 0
OTHER REVENUE
Net Realized gains (losses 17,881 (23,364 3,489 0 615 (209) 0
Elimination gains (losses) 15 (7,708) 0 0 0 0 0
Equity in earnings of aff. 0 0 0 0 0 0 0
Net Retained Commissions (87) (215) (40) 19,508 300 0 0
Variable annuity fees 0 57,626 40 0 0 0 0
Asset management fees 0 0 0 0 25,269 0 0
Trust fees 0 0 0 0 0 11,041 0
Surrender charges 7,063 7,201 27 0 0 0 0
Other income (expenses), n (8,320) (1,830) 574 3,638 993 1,803 0
--------------------------------------------------------------------------------------
TOTAL OTHER REVENUE 16,552 31,710 4,090 23,146 27,177 12,635 0
--------------------------------------------------------------------------------------
EXPENSES
General and administrative 53,696 28,754 1,584 21,170 13,768 12,497 0
Amortization of DAC 27,676 14,267 2,356 0 3,957 0 0
--------------------------------------------------------------------------------------
81,372 43,021 3,940 21,170 17,725 12,497 0
INCOME BEFORE INCOME TAXES 73,627 25,892 2,518 2,596 10,194 4,809 0
INCOME TAXES (BENEFIT):
Current 21,628 5,106 2,140 2,315 (10,560) 1,860 0
Deferred (828) 1,494 (1,290) (494) 14,883 40 0
--------------------------------------------------------------------------------------
*******NET INCOME******* 52,827 19,292 1,668 775 5,871 2,909 0
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
<CAPTION>
CONSOL NON- SUNAMERICA
IDATED REGULATED ELIM- CORP BROAD INC. ELIM- BROAD INC.
REGULATED CONSOL INATIONS CONSOL (PARENT) INATIONS CONSOL
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT SPREAD
Investment income 697,648 4,377 0 702,025 79,992 (13,004) 769,013
Less: Credit losses 6,000 0 0 6,000 0 0 6,000
--------------------------------------------------------------------------------------
Subtotal investment income 691,648 4,377 0 696,025 79,992 (13,004) 763,013
Less: Interest - senior debt 16,252 1,584 0 17,836 28,392 (13,004) 33,224
Interest - subordinated de 0 0 0 0 3,941 0 3,941
Interest - accumulated val 487,089 0 0 487,089 15,119 0 502,208
Interest - trust deposits 4,256 0 0 4,256 0 0 4,256
Preferred dividends 0 4,630 0 4,630 0 0 4,630
--------------------------------------------------------------------------------------
NET INVESTMENT SPREAD 184,051 (1,837) 0 182,214 32,540 0 214,754
OTHER REVENUE
Net Realized gains (losses (1,588) (7,506) 0 (9,094) (39,577) 0 (48,671)
Elimination gains (losses) (7,693) 0 0 (7,693) 0 0 (7,693)
Equity in earnings of aff. 0 0 0 0 79,894 (79,894) (0)
Net Retained Commissions 19,466 0 0 19,466 (611) 0 18,855
Variable annuity fees 57,666 0 0 57,666 0 0 57,666
Asset management fees 25,269 0 0 25,269 0 0 25,269
Trust fees 11,041 0 0 11,041 0 0 11,041
Surrender charges 14,291 0 0 14,291 0 0 14,291
Other income (expenses), n (3,142) 2,040 0 (1,102) 3,484 0 2,382
--------------------------------------------------------------------------------------
TOTAL OTHER REVENUE 115,310 (5,466) 0 109,844 43,190 (79,894) 73,140
--------------------------------------------------------------------------------------
EXPENSES
General and administrative 131,469 445 0 131,914 1,144 0 133,058
Amortization of DAC 48,256 0 0 48,256 119 0 48,375
--------------------------------------------------------------------------------------
179,725 445 0 180,170 1,263 0 181,433
INCOME BEFORE INCOME TAXES 119,636 (7,748) 0 111,888 74,467 (79,894) 106,461
INCOME TAXES (BENEFIT):
Current 22,489 2,566 0 25,055 25,813 0 50,868
Deferred 13,805 (6,866) 0 6,939 (23,507) 0 (16,568)
--------------------------------------------------------------------------------------
*******NET INCOME******* 83,342 (3,448) 0 79,894 72,161 (79,894) 72,161
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
1-38
<PAGE>
BROAD INC. (PARENT) & NON-REGULATED AFFILIATES CONSOLIDATED 10/22/92
LEGAL CONSOLIDATING BALANCE SHEET 01:57 PM
September 30, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUN SUN SUN
BROAD INC. AMERICA SLG AMERICA AMERICA ALIGP
(PARENT) CORP. FINANCIAL ADV CORP
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
BONDS, NOTES AND REDEM PREF STOCK 213,981 2,501 0 12,693 0 0
SENIOR SECURED BANK LOANS 0 0 0 0 0 0
COMMON STOCKS, AT MARKET VALUE 1,038 0 0 134 0 0
KBHC WARRANTS, AT MARKET VALUE 0 0 0 0 0 0
SHORT-TERM INVESTMENTS 91,397 11,441 0 1,565 0 0
CASH 13,801 0 0 4 0 0
MORTGAGE LOANS 1,981 0 0 0 0 0
POLICY LOANS 0 0 0 0 0 0
REAL ESTATE (29,530) 0 0 0 0 0
OTHER INVESTED ASSETS 278,894 0 0 5,824 0 26
--------- --------- --------- --------- --------- ---------
TOTAL INVESTMENTS 571,562 13,942 0 20,220 0 26
INVESTMENTS IN AFFILIATES 700,430 790,951 0 17,176 0 776
ACCRUED INVESTMENT INCOME 5,448 0 0 494 0 0
DAC AND PVFP 952 0 0 0 0 0
SEPARATE ACCOUNT ASSETS 0 0 0 0 0 0
INVESTMENT IN DISCONTINUED OPERATIONS 0 0 0 0 0 0
OTHER ASSETS 8,383 726 0 7,198 0 2,000
--------- --------- --------- --------- --------- ---------
TOTAL ASSETS 1,286,775 805,619 0 45,088 0 2,802
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
LIABILITIES:
RES. FOR FUTURE POLICYHOLDER BEN.:
ANNUITIES AND SPL 0 0 0 0 0 0
GICs 283,365 0 0 0 0 0
CLAIMS & OTHER POLICYHOLDERS' FUNDS 0 0 0 0 0 0
NOTES PAYABLE:
LONG-TERM NOTES AND DEBENTURES 225,000 0 0 0 0 0
COLLATERALIZED MORTGAGE OBLIGATION 0 0 0 0 0 0
SECURED NOTES PAYABLE 0 0 0 0 0 0
BANK NOTES 0 25,919 0 0 0 0
REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 0
SUBORDINATED DEBENTURES 0 0 0 0 0 0
SEPARATE ACCOUNT LIABILITIES 0 0 0 0 0 0
DUE TO/FROM AFFILIATES (19,321) 0 0 (13,072) 0 0
OTHER LIABILITIES 95,944 2,859 0 22,023 0 0
FEDERAL INCOME TAXES:
CURRENT 9,619 5,842 0 3,051 0 46
DEFERRED 10,802 (1,837) 0 (6,383) 0 0
--------- --------- --------- --------- --------- ---------
TOTAL LIABILITIES 605,409 32,783 0 5,619 0 46
--------- --------- --------- --------- --------- ---------
SHAREHOLDERS' EQUITY:
PREFERRED STOCK 218,500 48,700 0 0 0 0
NON-TRANSFER CLASS B STOCK 6,834 0 0 0 0 0
COMMON STOCK 25,179 4 0 0 0 0
CONTRIBUTED CAPITAL 97,275 366,935 0 76,564 0 2,756
URCG (L) ON OTHER EQUITY SECURITIES 2,211 2,673 0 (2) 0 0
URCG (L) ON KBHC WARRANTS 6,142 6,142 0 0 0 0
RETAINED EARNINGS 325,225 348,382 0 (37,093) 0 0
--------- --------- --------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 681,366 772,836 0 39,469 0 2,756
--------- --------- --------- --------- --------- ---------
TOTAL LIAB. & SH EQUITY 1,286,775 805,619 0 45,088 0 2,802
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
BROAD INC.
(PARENT) &
NON-REG
1401 KBHS N/A ELIM- AFFILIATES
SEPULVEDA (OLDCO) INATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
ASSETS:
BONDS, NOTES AND REDEM PREF STOCK 0 0 0 0 229,175
SENIOR SECURED BANK LOANS 0 0 0 0 0
COMMON STOCKS, AT MARKET VALUE 0 0 0 0 1,172
KBHC WARRANTS, AT MARKET VALUE 0 0 0 0 0
SHORT-TERM INVESTMENTS 0 0 0 0 104,403
CASH 0 0 0 0 13,805
MORTGAGE LOANS 0 0 0 0 1,981
POLICY LOANS 0 0 0 0 0
REAL ESTATE 0 0 0 0 (29,530)
OTHER INVESTED ASSETS 0 0 0 0 284,744
-------------------------------------------------------------
TOTAL INVESTMENTS 0 0 0 0 605,750
INVESTMENTS IN AFFILIATES 0 0 0 (773,521) 735,812
ACCRUED INVESTMENT INCOME 0 0 0 0 5,942
DAC AND PVFP 0 0 0 0 952
SEPARATE ACCOUNT ASSETS 0 0 0 0 0
INVESTMENT IN DISCONTINUED OPERATIONS 0 0 0 0 0
OTHER ASSETS 1,412 4,511 0 0 24,230
--------- --------- --------- --------- ---------
TOTAL ASSETS 1,412 4,511 0 (773,521) 1,372,686
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
LIABILITIES:
RES. FOR FUTURE POLICYHOLDER BEN.:
ANNUITIES AND SPL 0 0 0 0 0
GICs 0 0 0 0 283,365
CLAIMS & OTHER POLICYHOLDERS' FUNDS 0 0 0 0 0
NOTES PAYABLE:
LONG-TERM NOTES AND DEBENTURES 0 0 0 0 225,000
COLLATERALIZED MORTGAGE OBLIGATION 0 0 0 0 0
SECURED NOTES PAYABLE 0 0 0 0 0
BANK NOTES 0 0 0 0 25,919
REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0
SUBORDINATED DEBENTURES 0 0 0 0 0
SEPARATE ACCOUNT LIABILITIES 0 0 0 0 0
DUE TO/FROM AFFILIATES 0 0 0 0 (32,393)
OTHER LIABILITIES 0 0 0 (5) 120,821
FEDERAL INCOME TAXES:
CURRENT 0 (764) 0 0 17,794
DEFERRED 0 (468) 0 0 2,114
--------- --------- --------- --------- ---------
TOTAL LIABILITIES 0 (1,232) 0 (5) 642,620
--------- --------- --------- --------- ---------
SHAREHOLDERS' EQUITY:
PREFERRED STOCK 0 0 0 0 267,200
NON-TRANSFER CLASS B STOCK 0 0 0 0 6,834
COMMON STOCK 0 0 0 (4) 25,179
CONTRIBUTED CAPITAL 1,412 8,907 0 (456,574) 97,275
URCG (L) ON OTHER EQUITY SECURITIES 0 0 0 (2,671) 2,211
URCG (L) ON KBHC WARRANTS 0 0 0 (6,142) 6,142
RETAINED EARNINGS 0 (3,164) 0 (308,125) 325,225
--------- --------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 1,412 5,743 0 (773,516) 730,066
--------- --------- --------- --------- ---------
TOTAL LIAB. & SH EQUITY 1,412 4,511 0 (773,521) 1,372,686
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Other liabilities includes SAF's cash overdraft of $14.2 million.
9-22
<PAGE>
BROAD INC. (PARENT) & NON-REGULATED AFFILIATES CONSOLIDATED 10/22/92
LEGAL CONSOLIDATING INCOME STATEMENT 01:58 PM
September 30, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUN SUN SUN
BROAD INC. AMERICA SLG AMERICA AMERICA ALIGP
(PARENT) CORP. FINANCIAL ADV CORP
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT SPREAD
Investment income 63,945 864 0 3,468 0 45
Less: Credit losses 0 0 0 0 0 0
--------------------------------------------------------------------------
Subtotal investment income 63,945 864 0 3,468 0 45
Less: Interest on senior debt 15,388 1,584 0 0 0 0
Interest on subordinated deb 3,941 0 0 0 0 0
Interest on accumulated valu 15,119 0 0 0 0 0
Interest on trust deposits 0 0 0 0 0 0
Preferred dividends 0 4,630 0 0 0 0
--------------------------------------------------------------------------
NET INVESTMENT SPREAD 29,497 (5,350) 0 3,468 0 45
OTHER REVENUE
Net Realized gains (losses) (39,577) (59) 0 (6,651) 0 0
Elimination gains (losses) 0 0 0 0 0 0
Equity in earnings of aff. 54,629 90,143 0 (1,319) 0 0
Net Retained Commissions (611) 0 0 0 0 0
Variable annuity fees 0 0 0 0 0 0
Asset management fees 0 0 0 0 0 0
Trust fees 0 0 0 0 0 0
Surrender charges 0 0 0 0 0 0
Other income (expenses), net 5,550 (2) 0 1,952 0 90
--------------------------------------------------------------------------
TOTAL OTHER REVENUE 19,991 90,082 0 (6,018) 0 90
--------------------------------------------------------------------------
EXPENSES
General and administrative 167 32 0 413 0 0
Amortization of DAC 119 0 0 0 0 0
--------------------------------------------------------------------------
286 32 0 413 0 0
--------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 49,202 84,700 0 (2,963) 0 135
INCOME TAXES (BENEFIT):
Current 17,355 (270) 0 2,783 0 46
Deferred (15,049) 0 0 (6,847) 0 0
--------------------------------------------------------------------------
*******NET INCOME******* 46,896 84,970 0 1,101 0 89
--------------------------------------------------------------------------
--------------------------------------------------------------------------
<CAPTION>
BROAD INC.
(PARENT) &
NON-REG
1401 KBHS N/A ELIM- AFFILIATES
SEPULVEDA (OLDCO) INATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
INVESTMENT SPREAD
Investment income 0 0 0 0 68,322
Less: Credit losses 0 0 0 0 0
--------------------------------------------------------------
Subtotal investment income 0 0 0 0 68,322
Less: Interest on senior debt 0 0 0 0 16,972
Interest on subordinated deb 0 0 0 0 3,941
Interest on accumulated valu 0 0 0 0 15,119
Interest on trust deposits 0 0 0 0 0
Preferred dividends 0 0 0 0 4,630
--------------------------------------------------------------
NET INVESTMENT SPREAD 0 0 0 0 27,660
OTHER REVENUE
Net Realized gains (losses) 0 (796) 0 0 (47,083)
Elimination gains (losses) 0 0 0 0 0
Equity in earnings of aff. 0 0 0 (85,375) 58,078
Net Retained Commissions 0 0 0 0 (611)
Variable annuity fees 0 0 0 0 0
Asset management fees 0 0 0 0 0
Trust fees 0 0 0 0 0
Surrender charges 0 0 0 0 0
Other income (expenses), net 0 0 0 0 7,590
--------------------------------------------------------------
TOTAL OTHER REVENUE 0 (796) 0 (85,375) 17,974
--------------------------------------------------------------
EXPENSES
General and administrative 0 0 0 0 612
Amortization of DAC 0 0 0 0 119
--------------------------------------------------------------
0 0 0 0 731
--------------------------------------------------------------
INCOME BEFORE INCOME TAXES 0 (796) 0 (85,375) 44,903
INCOME TAXES (BENEFIT):
Current 0 7 0 0 19,921
Deferred 0 (19) 0 0 (21,915)
--------------------------------------------------------------
*******NET INCOME******* 0 (784) 0 (85,375) 46,896
--------------------------------------------------------------
--------------------------------------------------------------
</TABLE>
9-23
<PAGE>
EXHIBIT 10(m)
FIRST AMENDMENT TO CREDIT AGREEMENT
FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of
January 30, 1994, among SUNAMERICA INC., a Maryland corporation
("SunAmerica"), and SUNAMERICA FINANCIAL, INC., a Georgia
corporation (together with SunAmerica, the "Borrowers"), the banks
listed on the signature pages hereof (the "Lenders") and CITIBANK,
N.A., as agent (the "Agent") for the Lenders.
WHEREAS, the parties hereto are parties to the Credit
Agreement, dated as of February 1, 1993, originally providing for
a $90,000,000 revolving credit facility (the "Credit Agreement";
capitalized terms used herein without definition shall have the
meanings specified in the Credit Agreement);
WHEREAS, on August 31, 1993, SunAmerica Corporation, a
Borrower under the Credit Agreement, merged into SunAmerica; and
WHEREAS, the parties hereto desire to amend the Credit
Agreement as described below.
NOW, THEREFORE, the parties hereto agree was follows:
1. AMENDMENT. On the effective date hereof, the Credit
Agreement shall be amended as follows:
(a) SECTION 1.01.
(i) The definitions of "Level I Status", "Level
II Status" and "Level III Status" contained in Section 1.01 of the
Credit Agreement are amended and restated in their entirety to
read as follows:
"LEVEL I STATUS" means that, at 8:30 a.m.,
New York City time, at any date of determination, SunAmerica's
senior unsecured long term debt is rated "AA-" or better by
Standard & Poor's and "A2" or better by Moody's.
"LEVEL II STATUS" means that, at 8:30 a.m.,
New York City time, at any date of determination, SunAmerica's
senior unsecured long term debt is rated "A" or better by Standard
& Poor's and "Baa1" or better by Moody's, but Level I Status does
not exist.
"LEVEL III STATUS" means that, at 8:30 a.m.,
New York City time, at any date of determination, SunAmerica's
senior long term debt is rated "A-" or better by Standard & Poor's
and "Baa2" or better by Moody's, but neither Level I Status nor
Level II Status exists.
<PAGE>
(ii) Section 1.01 of the Credit Agreement is
amended by inserting in alphabetical order the definition of
"Level IV Status" to read in its entirety as follows:
"LEVEL IV STATUS" means that, at 8:30 a.m.,
New York City time, at any date of determination, SunAmerica's
senior unsecured long term debt is rated "BBB+" or below by
Standard & Poor's or "Baa3" or below by Moody's or is not rated as
of such date by Standard & Poor's or Moody's.
(iii) The definition of "Commitment" contained in
Section 1.01 of the Credit Agreement is amended by replacing the
phrase "the signature pages hereof" with the phrase "Schedule 1
hereto".
(iv) The definition of "Other Agreement"
contained in Section 1.01 of the Credit Agreement is amended by
replacing by phrase "providing a $60,000,000 revolving credit
facility with the phrase ", as amended by the First Amendment to
Credit Agreement dated as of January 30, 1994, providing a
$160,000,000 revolving credit facility, as the same may be further
amended from time to time".
(b) SECTION 2.02. Clause (d) of Section 2.02 of the
Credit Agreement is amended by replacing the words "or Level III
Status" with the words ", Level III Status or Level IV Status".
(c) SECTION 2.07.
(i) Section 2.07(b) of the Credit Agreement is
amended by replacing the second paragraph thereof with the
following:
"CD Margin" means (i) 0.43% for any day on
which Level I Status exists, (ii) 0.575% for any day on which
Level II Status or Level III Status exists and (iii) 0.675% for
any day on which Level IV Status exists.
(ii) Section 2.07(c) of the Credit Agreement is
amended by replacing the second paragraph of subsection (i)
thereof with the following:
"Eurodollar Margin" means (1) 0.305% for any
day on which Level I Status exists, (2) 0.45% for any day on which
Level II Status, and (3) 0.55% for any day on which Level III
Status or Level IV Status exists.
(iii) Section 2.07(e) of the Credit Agreement is
amended by (A) replacing the phrase "'Level I Status', 'Level II
2
<PAGE>
Status' or 'Level III Status'" where it appears in the last
sentence thereof with the phrase "'Level I Status', 'Level II
Status', 'Level III Status' or 'Level IV Status'", and (B)
replacing the phrase "'Level I Status', 'Level II Status' and
'Level III Status'" where it appears in the last sentence thereof
with the phrase "'Level I Status', 'Level II Status', 'Level III
Status' and 'Level IV Status'".
(d) SECTION 2.08.
(i) Section 2.08(a) of the Credit Agreement is
amended by replacing the first sentence thereof with the
following: "The Borrowers shall pay to the Agent for the account
of the Lenders ratably in proportion to their respective
Commitments a commitment fee at the following rates per annum:
(i) 0.0675% for any day on which Level I Status or Level II Status
exists, (ii) 0.075% for any day on which Level II Status exists,
(iii) 0.15% for any day on which Level III Status exists and (iv)
0.25% for any day on which Level IV Status exists."
(ii) Section 2.08(b) of the Credit Agreement is
amended by replacing the first sentence thereof with the
following: "The Borrowers shall pay to the Agent for the account
of the Lenders ratably a facility fee at the following rates per
annum: (i) 0.12% for any day on which Level I Status exists, (ii)
0.15% for any day on which Level II Status or Level III Status
exists and (iii) 0.25% for any day on which Level IV Status
exists."
(e) SECTION 5.06.
(i) Section 5.06(a) of the Credit Agreement is
amended (A) by replacing the phrase "and 1991" where it appears in
the first sentence of subsection (i) thereof with the phrase ",
1991 and 1992", and (B) inserting at the end of subsection (ii)
thereof the following: "As of September 30, 1993, the Risk-Based
Capital Ratio of Anchor and Sun Life were, respectively, 188% and
232%, and as of the effective date of the First Amendment to
Credit Agreement dated as of January 30, 1994 there has been no
material reduction in the Risk-Based Capital Ratio of Anchor or
Sun Life."
(ii) Section 5.06(b) of the Credit Agreement is
amended by (A) inserting after the words "(the 'Information
Memorandum')," in the first sentence of subsection (ii) thereof
the following: "and the projected financial statements of
SunAmerica and its Subsidiaries for the fiscal year ending
September 30, 1994 set forth in the materials titled 'SunAmerica
Inc. Bank Meeting, dated November 18, 1993' prepared for use in
3
<PAGE>
connection with the First Amendment to Credit Agreement dated as
of January 30, 1994 (the "Bank Presentation Materials")", (B)
inserting after the words "Effective Date" in the second sentence
of subsection (ii) thereof the following: ", in the case of the
projections contained in the Information Memorandum, and as of the
effective date of the First Amendment to Credit Agreement dated as
of January 30, 1994, in the case of the projections contained in
the Bank Presentation Materials,".
(f) SIGNATURE PAGES. The signature pages of the Credit
Agreement are amended by deleting the references to each Lender's
Commitment.
(g) SCHEDULE 1. A new Schedule 1 is hereby added to
the Credit Agreement to read in its entirety as set forth in
Exhibit A hereto.
(h) EXHIBITS B, C, D, E AND G. Exhibits B, C, D, E and
G to the Credit Agreement are each amended by inserting before the
words "the 'Credit Agreement'" in the first parenthetical of the
first paragraph of each such exhibit the following: "as amended
by the First Amendment to Credit Agreement, dated as of
January 30, 1994, and as the same may be further amended from time
to time,". Exhibit B is further amended by inserting after the
word "[III]" in clause (iv) of the first paragraph thereof the
following: "[IV]".
2. CONDITIONS PRECEDENT TO EFFECTIVENESS. This First
Amendment to Credit Agreement shall become effective on
January 30, 1994, PROVIDED that as of such date this First
Amendment to Credit Agreement has been executed and delivered by
each of the parties hereto and the following conditions precedent
shall have been satisfied (or waived in accordance with Section
11.01 of the Credit Agreement):
(a) receipt by the Agent of counterparts hereof signed
by each of the parties hereto (or, in the case of any Lender as to
which an executed counterpart shall not have been received,
receipt by the Agent in form satisfactory to it of telegraphic,
telex or other written confirmation from such Lender of execution
of a counterpart hereof by such Lender);
(b) receipt by the Agent of an opinion of Susan L.
Harris, the Secretary and Associate General Counsel of SunAmerica,
dated January 30, 1994, covering such matters relating to the
transactions contemplated hereby as the Agent may reasonably
request;
4
<PAGE>
(c) receipt by the Agent of a certificate of a
Responsible Officer of each Borrower, dated as of
January 30, 1994, to the effect that (i) the representations and
warranties of such Borrower contained in Article V of the Credit
Agreement (as amended by this First Amendment to Credit Agreement)
are true and correct in all material respects on the date of such
certificate with the same effect as though made on and as of the
date of such certificate except to the extent they expressly
relate to a prior date and (ii) no Default exists or results from
the execution and delivery by such Borrower of this First
Amendment to Credit Agreement; and
(d) receipt by the Agent of all documents reasonably
requested by the Agent relating to the existence and good standing
of the Borrowers, the corporate authority for and validity of the
Credit Agreement as amended by this First Amendment to Credit
Agreement, and any other matters relevant hereto, all in form and
substance satisfactory to the Agent and the Agent's counsel.
3. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers
jointly and severally represents and warrants to the Agent and
each of the Lenders that: (i) the representations and warranties
of the Borrowers contained in Article V of the Credit Agreement
(as amended by this First Amendment to Credit Agreement) are true
and correct in all material respects on the date hereof with the
same effect as though made on and as of the date hereof except to
the extent they expressly relate to a prior date and (ii) no
Default exists or results from the execution and delivery by the
Borrowers of this First Amendment to Credit Agreement.
4. FULL FORCE AND EFFECT. All of the terms and provisions
of the Credit Agreement, as amended hereby, are and shall continue
to be in full force and effect and the Agent and the Lenders shall
be entitled to all the benefits thereof.
5. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
6. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Credit Agreement to be executed by their respective
officers thereunto duly authorized, as of the date first above
written.
SUNAMERICA INC.
By: JAMES R. BELARDI
------------------------
James R. Belardi
Senior Vice President and Treasurer
SUNAMERICA FINANCIAL, INC.
By: JAMES R. BELARDI
------------------------
James R. Belardi
Authorized Agent
CITIBANK, N.A., in its capacity as Agent and Lender
By: KELLEY T. HEBERT
------------------------
Kelley T. Hebert
Vice President
6
<PAGE>
LENDERS
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION
By: DENNIS V. ARRIOLA
------------------------
Dennis V. Arriola
Vice President
CHEMICAL BANK
By: BRIAN J. TURRENTINE
------------------------
Brian J. Turrentine
Vice President
FIRST INTERSTATE BANK OF CALIFORNIA
By: ROBERT C. MEYER
------------------------
Robert C. Meyer
Vice President
By: MARGOT ANDERSON
------------------------
Margot Anderson
Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: MARCIA SAPER
------------------------
Marcia Saper
Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: SHU TAMARU
------------------------
Shu Tamaru
Joint General Manager
THE CHASE MANHATTAN BANK, N.A.
By: DANA L. RAGIEL
------------------------
Dana L. Ragiel
Vice President
7
<PAGE>
THE BANK OF NEW YORK
By: STRATTON R. HEATH
------------------------
Stratton R. Heath
Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: JOSEPH T. WILSON, JR.
------------------------
Joseph T. Wilson, Jr.
Vice President
WESTDEUTSCHE LANDESBANK GIROZENTRALE
New York and Cayman Islands Branches
By: ELIE B. KHOURY
------------------------
Elie B. Khoury
Vice President
By: MATTHEW F. TALLO
------------------------
Matthew F. Tallo
Associate
8
<PAGE>
EXHIBIT A
TO
FIRST AMENDMENT TO
CREDIT AGREEMENT
SCHEDULE 1 TO CREDIT AGREEMENT
NAME OF LENDER COMMITMENT
CITIBANK, N.A. $9,630,000
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION $9,630,000
CHEMICAL BANK $9,630,000
FIRST INTERSTATE BANK OF CALIFORNIA $9,630,000
THE FIRST NATIONAL BANK OF CALIFORNIA $9,630,000
THE INDUSTRIAL BANK OF JAPAN, LIMITED $9,630,000
THE CHASE MANHATTAN BANK, N.A. $9,630,000
THE BANK OF NEW YORK $9,630,000
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK $6,480,000
WESTDEUTSCHE LANDESBANK GIROZENTRALE
NEW YORK AND CAYMAN ISLANDS BRANCHES $6,480,000
9
<PAGE>
EXHIBIT 10(n)
FIRST AMENDMENT TO CREDIT AGREEMENT
FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of
January 30, 1994, among SUNAMERICA INC., a Maryland corporation
("SunAmerica"), and SUNAMERICA FINANCIAL, INC., a Georgia
corporation (together with SunAmerica, the "Borrowers"), the banks
listed on the signature pages hereof (the "Lenders") and CITIBANK,
N.A., as agent (the "Agent") for the Lenders.
WHEREAS, the parties hereto are parties to the Credit
Agreement, dated as of February 1, 1993, originally providing for
a $60,000,000 revolving credit facility (the "Credit Agreement";
capitalized terms used herein without definition shall have the
meanings specified in the Credit Agreement);
WHEREAS, on August 31, 1993, SunAmerica Corporation, a
Borrower under the Credit Agreement, merged into SunAmerica; and
WHEREAS, the parties hereto desire to amend the Credit
Agreement as described below.
NOW, THEREFORE, the parties hereto agree was follows:
1. AMENDMENT. On the effective date hereof, the Credit
Agreement shall be amended as follows:
(a) SECTION 1.01.
(i) The definition of "Commitment", "Level I
Status", "Level II Status" and "Level III Status" contained in
Section 1.01 of the Credit Agreement are amended and restated in
their entirety to read as follows:
"COMMITMENT" means the amount set forth
opposite each Lender's name on Schedule 1 hereto (or in an
Assignment and Acceptance entered into by it) as its Commitment
(which shall be $160,000,000 in the aggregate for all Lenders as
of January 30, 1994), as such amount may be adjusted from time to
time to give effect to Money Market Reductions pursuant to Section
2.01 or reduced from time to time pursuant to Section 2.10.
"LEVEL I STATUS" means that, at 8:30 a.m.,
New York City time, at any date of determination, SunAmerica's
senior unsecured long term debt is rated "AA-" or better by
Standard & Poor's and "A2" or better by Moody's.
"LEVEL II STATUS" means that, at 8:30 a.m.,
New York City time, at any date of determination, SunAmerica's
senior unsecured long term debt is rated "A" or better by Standard
<PAGE>
& Poor's and "Baa1" or better by Moody's, but Level I Status does
not exist.
"LEVEL III STATUS" means that, at 8:30 a.m.,
New York City time, at any date of determination, SunAmerica's
senior long term debt is rated "A-" or better by Standard & Poor's
and "Baa2" or better by Moody's, but neither Level I Status nor
Level II Status exists.
(ii) Section 1.01 of the Credit Agreement is
amended by inserting in alphabetical order the definition of
"Level IV Status" to read in its entirety as follows:
"LEVEL IV STATUS" means that, at 8:30 a.m.,
New York City time, at any date of determination, SunAmerica's
senior unsecured long term debt is rated "BBB+" or below by
Standard & Poor's or "Baa3" or below by Moody's or is not rated as
of such date by Standard & Poor's or Moody's.
(iii) The definition of "Other Agreement"
contained in Section 1.01 of the Credit Agreement is amended by
inserting at the end thereof the following: ", as amended
January 30, 1994, and as the same day be further amended from time
to time".
(iv) The definition of "Termination Date"
contained in Section 1.01 of the Credit Agreement is amended by
replacing the phrase "January 30, 1994" with the phrase
"January 28, 1995".
(b) SECTION 2.02. Clause (d) of Section 2.02 of the
Credit Agreement is amended by replacing the words "or Level III
Status" with the words ", Level III Status or Level IV Status".
(c) SECTION 2.07.
(i) Section 2.07(b) of the Credit Agreement is
amended by replacing the second paragraph thereof with the
following:
"CD Margin" means (i) 0.425% for any day on
which Level I Status exists, (ii) 0.525% for any day on which
Level II Status or Level III Status exists and (iii) 0.625% for
any day on which Level IV Status exists.
(ii) Section 2.07(c) of the Credit Agreement is
amended by replacing the second paragraph of subsection (i)
thereof with the following:
2
<PAGE>
"Eurodollar Margin" means (1) 0.30% for any
day on which Level I Status exists, (2) 0.40% for any day on which
Level II Status or Level III Status exists, and (3) 0.50% for any
day on which Level IV Status exists.
(iii) Section 2.07(e) of the Credit Agreement is
amended by (A) replacing the phrase "'Level I Status', 'Level II
Status' or 'Level III Status'" where it appears in the last
sentence thereof with the phrase "'Level I Status', 'Level II
Status', 'Level III Status' or 'Level IV Status'", and (B)
replacing the phrase "'Level I Status', 'Level II Status', 'Level
III Status'" where it appears in the last sentence thereof with
the phrase "'Level I Status', 'Level II Status', 'Level III
Status' and 'Level IV Status'".
(d) SECTION 2.08.
(i) Section 2.08(a) of the Credit Agreement is
amended by replacing the first sentence thereof with the
following: "The Borrowers shall pay to the Agent for the account
of the Lenders ratably in proportion to their respective
Commitments a commitment fee at the following rates per annum:
(i) 0.025% for any day on which Level I Status or Level II Status
exists, (ii) 0.0625% for any day on which Level II Status exists
and (iii) 0.10% for any day on which Level IV Status exists."
(ii) Section 2.08(b) of the Credit Agreement is
amended by replacing the first sentence thereof with the
following: "The Borrowers shall pay to the Agent for the account
of the Lenders ratably a facility fee at the following rates per
annum: (i) 0.075% for any day on which Level I Status exists,
(ii) 0.10% for any day on which Level II Status exists, (iii)
0.125% for any day on which Level III Status exists and (iv)
0.175% for any day on which level IV Status exists."
(e) SECTION 5.06.
(i) Section 5.06(a) of the Credit Agreement is
amended (A) by replacing the phrase "and 1991" where it appears in
the first sentence of subsection (i) thereof with the phrase ",
1991 and 1992", and (B) inserting at the end of subsection (ii)
thereof the following: "As of September 30, 1993, the Risk-Based
Capital Ratio of Anchor and Sun Life were, respectively, 188% and
232%, and as of the effective date of the First Amendment to
Credit Agreement dated as of January 30, 1994 there has been no
material reduction in the Risk-Based Capital Ratio of Anchor or
Sun Life."
3
<PAGE>
(ii) Section 5.06(b) of the Credit Agreement is
amended by (A) inserting after the words "(the 'Information
Memorandum')," in the first sentence of subsection (ii) thereof
the following: "and the projected financial statements of
SunAmerica and its Subsidiaries for the fiscal year ending
September 30, 1994 set forth in the materials titled 'SunAmerica
Inc. Bank Meeting, dated November 18, 1993' prepared for use in
connection with the First Amendment to Credit Agreement dated as
of January 30, 1994 (the "Bank Presentation Materials")", (B)
inserting after the words "Effective Date" in the second sentence
of subsection (ii) thereof the following: ", in the case of the
projections contained in the Information Memorandum, and as of the
effective date of the First Amendment to Credit Agreement dated as
of January 30, 1994, in the case of the projections contained in
the Bank Presentation Materials,".
(f) SIGNATURE PAGES. The signature pages of the Credit
Agreement are amended by deleting the references to each Lender's
Commitment.
(g) SCHEDULE 1. A new Schedule 1 is hereby added to
the Credit Agreement to read in its entirety as set forth in
Exhibit A hereto.
(h) EXHIBITS B, C, D, E, F AND H. Exhibits B, C, D, E,
F and H to the Credit Agreement are each amended by (i) replacing
the word "$60,000,000" in the first paragraph of each such exhibit
with the word "$160,000,000", and (ii) inserting before the words
"the 'Credit Agreement'" in the first parenthetical of the first
paragraph of each such exhibit the following: "as amended by the
First Amendment to Credit Agreement, dated as of January 30, 1994,
and as the same may be further amended from time to time,".
Exhibit B is further amended by inserting after the words "[III]"
in clause (iv) of the first paragraph thereof the following:
"[IV]".
2. CONDITIONS PRECEDENT TO EFFECTIVENESS. This First
Amendment to Credit Agreement shall become effective on
January 30, 1994, PROVIDED that as of such date this First
Amendment to Credit Agreement has been executed and delivered by
each of the parties hereto and the following conditions precedent
shall have been satisfied (or waived in accordance with Section
11.01 of the Credit Agreement):
(a) receipt by the Agent of counterparts hereof signed
by each of the parties hereto (or, in the case of any Lender as to
which an executed counterpart shall not have been received,
receipt by the Agent in form satisfactory to it of telegraphic,
4
<PAGE>
telex or other written confirmation from such Lender of execution
of a counterpart hereof by such Lender);
(b) receipt by the Agent of an opinion of Susan L.
Harris, the Secretary and Associate General Counsel of SunAmerica,
dated January 30, 1994, covering such matters relating to the
transactions contemplated hereby as the Agent may reasonably
request;
(c) receipt by the Agent of a certificate of a
Responsible Officer of each Borrower, dated as of
January 30, 1994, to the effect that (i) the representations and
warranties of such Borrower contained in Article V of the Credit
Agreement (as amended by this First Amendment to Credit Agreement)
are true and correct in all material respects on the date of such
certificate with the same effect as though made on and as of the
date of such certificate except to the extent they expressly
relate to a prior date and (ii) no Default exists or results from
the execution and delivery by such Borrower of this First
Amendment to Credit Agreement; and
(d) receipt by the Agent of all documents reasonably
requested by the Agent relating to the existence and good standing
of the Borrowers, the corporate authority for and validity of the
Credit Agreement as amended by this First Amendment to Credit
Agreement, and any other matters relevant hereto, all in form and
substance satisfactory to the Agent and the Agent's counsel.
3. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers
jointly and severally represents and warrants to the Agent and
each of the Lenders that: (i) the representations and warranties
of the Borrowers contained in Article V of the Credit Agreement
(as amended by this First Amendment to Credit Agreement) are true
and correct in all material respects on the date hereof with the
same effect as though made on and as of the date hereof except to
the extent they expressly relate to a prior date and (ii) no
Default exists or results from the execution and delivery by the
Borrowers of this First Amendment to Credit Agreement.
4. FULL FORCE AND EFFECT. All of the terms and provisions
of the Credit Agreement, as amended hereby, are and shall continue
to be in full force and effect and the Agent and the Lenders shall
be entitled to all the benefits thereof.
5. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
5
<PAGE>
6. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Credit Agreement to be executed by their respective
officers thereunto duly authorized, as of the date first above
written.
SUNAMERICA INC.
By: JAMES R. BELARDI
------------------------
James R. Belardi
Senior Vice President and Treasurer
SUNAMERICA FINANCIAL, INC.
By: JAMES R. BELARDI
------------------------
James R. Belardi
Authorized Agent
CITIBANK, N.A., in its capacity as Agent and Lender
By: KELLEY T. HEBERT
------------------------
Kelley T. Hebert
Vice President
6
<PAGE>
LENDERS
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION
By: DENNIS V. ARRIOLA
------------------------
Dennis V. Arriola
Vice President
CHEMICAL BANK
By: BRIAN J. TURRENTINE
------------------------
Brian J. Turrentine
Vice President
FIRST INTERSTATE BANK OF CALIFORNIA
By: ROBERT C. MEYER
------------------------
Robert C. Meyer
Vice President
By: MARGOT ANDERSON
------------------------
Margot Anderson
Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: MARCIA SAPER
------------------------
Marcia Saper
Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: SHU TAMARU
------------------------
Shu Tamaru
Joint General Manager
THE CHASE MANHATTAN BANK, N.A.
By: DANA L. RAGIEL
------------------------
Dana L. Ragiel
Vice President
7
<PAGE>
THE BANK OF NEW YORK
By: STRATTON R. HEATH
------------------------
Stratton R. Heath
Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: JOSEPH T. WILSON, JR.
------------------------
Joseph T. Wilson, Jr.
Vice President
WESTDEUTSCHE LANDESBANK GIROZENTRALE
New York and Cayman Islands Branches
By: ELIE B. KHOURY
------------------------
Elie B. Khoury
Vice President
By: MATTHEW F. TALLO
------------------------
Matthew F. Tallo
Associate
8
<PAGE>
EXHIBIT A
TO
FIRST AMENDMENT TO
CREDIT AGREEMENT
SCHEDULE 1 TO CREDIT AGREEMENT
NAME OF LENDER COMMITMENT
CITIBANK, N.A. $17,120,000
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION $17,120,000
CHEMICAL BANK $17,120,000
FIRST INTERSTATE BANK OF CALIFORNIA $17,120,000
THE FIRST NATIONAL BANK OF CALIFORNIA $17,120,000
THE INDUSTRIAL BANK OF JAPAN, LIMITED $17,120,000
THE CHASE MANHATTAN BANK, N.A. $17,120,000
THE BANK OF NEW YORK $17,120,000
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK $11,520,000
WESTDEUTSCHE LANDESBANK GIROZENTRALE
NEW YORK AND CAYMAN ISLANDS BRANCHES $11,520,000
9
<PAGE>
EXHIBIT 10(o)
LIST OF EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Employment Agreement dated July 30, 1992, between the Company and
Gary W. Krat - Exhibit 10(e) to the Company's 1992 Annual Report
on Form 10-K, filed November 30, 1992.
Employment Agreement, dated July 14, 1992, between the Company and
Michael L. Fowler - Exhibit 10(f) to the Company's 1992 Annual
Report on Form 10-K, filed November 30, 1992.
1988 Employee Stock Plan - Exhibit B to the Company's and Kaufman
and Broad Home Corporation's Notice of and Joint Proxy Statement
for Special Meeting of Shareholders held on February 21, 1989,
filed January 24, 1989.
Amended and Restated 1978 Employee Stock Option Program - Appendix
A to the Company's Notice of 1987 Annual Meeting of Shareholders
and Proxy Statement, filed March 24, 1987.
Executive Deferred Compensation Plan - Exhibit 10(l) to the
Company's 1985 Annual Report on Form 10-K, filed
February 27, 1986.
1987 Restricted Stock Plan - Appendix A to the Company's Notice of
1988 Annual Meeting of Shareholders and Proxy Statement, filed
March 22, 1988.
SunAmerica Profit Sharing and Retirement Plan - Exhibit 10(l) to
the Company's 1989 Annual Report on Form 10-K, filed
December 20, 1989.
Executive Deferred Compensation Plan dated as of October 1, 1989.
SunAmerica Supplemental Deferral Plan - Exhibit 10(m) to the
Company's 1989 Annual Report on Form 10-K, filed
December 20, 1989.
Five Year Incentive Plan (fiscal years 1989-1993) - Exhibit 10(n)
to the Company's 1989 Annual Report on Form 10-K, filed
December 20, 1989.
Long-Term Performance-Based Incentive Plan - Appendix A to the
Company's Notice of 1994 Annual Meeting of Shareholders and Proxy
Statement, filed December 21, 1993.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
SUNAMERICA INC.
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES & PREFERRED STOCK DIVIDENDS
(EXCLUDING INTEREST ON FIXED ANNUITIES, GUARANTEED INVESTMENT CONTRACTS & TRUST DEPOSITS)
Years ended September 30,
----------------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(In thousands, except ratios)
Earnings:
Pretax income $ 240,001 $ 184,011 $ 111,091 $ 73,381 $ 60,867
---------- ---------- ---------- ---------- ----------
Add:
Interest incurred on:
Senior indebtedness 50,292 36,246 33,224 33,072 31,436
Subordinated notes -- -- 3,941 10,473 13,003
---------- ---------- ---------- ---------- ----------
Total interest
incurred 50,292 36,246 37,165 43,545 44,439
---------- ---------- ---------- ---------- ----------
Total earnings $ 290,293 $ 220,257 $ 148,256 $ 116,926 $ 105,306
========== ========== ========== ========== ==========
Combined Fixed Charges and Preferred Stock Dividends:
Interest incurred on:
Senior indebtedness $ 50,292 $ 36,246 $ 33,224 $ 33,072 $ 31,436
Subordinated notes -- -- 3,941 10,473 13,003
---------- ---------- ---------- ---------- ----------
Total interest
incurred 50,292 36,246 37,165 43,545 44,439
Tax equivalent basis of
Preferred Stock
dividends 54,528 42,675 17,733 8,369 8,362
---------- ---------- ---------- ---------- ----------
Total combined fixed
charges and preferred
stock dividends $ 104,820 $ 78,921 $ 54,898 $ 51,914 $ 52,801
========== ========== ========== ========== ==========
Ratio of earnings to combined
fixed charges and preferred
stock dividends (excluding
interest incurred on fixed
annuities, guaranteed
investment contracts and
trust deposits) 2.8 2.8 2.7 2.3 2.0
========== ========== ========== ========== ==========
<PAGE>
EXHIBIT 12 (CONTINUED)
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES & PREFERRED STOCK DIVIDENDS
(INCLUDING INTEREST ON FIXED ANNUITIES, GUARANTEED INVESTMENT CONTRACTS & TRUST DEPOSITS)
<CAPTION>
Years ended September 30,
----------------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(In thousands, except ratios)
Earnings:
Pretax income $ 240,001 $ 184,011 $ 111,091 $ 73,381 $ 60,867
---------- ---------- ---------- ---------- ----------
Add:
Interest incurred on:
Fixed annuity contracts 254,464 308,910 362,094 411,084 403,775
Guaranteed investment
contracts 150,424 136,984 140,114 124,381 87,280
Trust deposits 8,516 8,438 4,256 -- 2,909
Senior indebtedness 50,292 36,246 33,224 33,072 31,436
Subordinated notes -- -- 3,941 10,473 13,003
---------- ---------- ---------- ---------- ----------
Total interest
incurred 463,696 490,578 543,629 579,010 538,403
---------- ---------- ---------- ---------- ----------
Total earnings $ 703,697 $ 674,589 $ 654,720 $ 652,391 $ 599,270
========== ========== ========== ========== ==========
Combined Fixed Charges and Preferred Stock Dividends:
Interest incurred on:
Fixed annuity contracts $ 254,464 $ 308,910 $ 362,094 $ 411,084 $ 403,775
Guaranteed investment
contracts 150,424 136,984 140,114 124,381 87,280
Trust deposits 8,516 8,438 4,256 -- 2,909
Senior indebtedness 50,292 36,246 33,224 33,072 31,436
Subordinated notes -- -- 3,941 10,473 13,003
---------- ---------- ---------- ---------- ----------
Total interest
incurred 463,696 490,578 543,629 579,010 538,403
Tax equivalent basis
of Preferred Stock
dividends 54,528 42,675 17,733 8,369 8,362
---------- ---------- ---------- ---------- ----------
Total combined fixed
charges and preferred
stock dividends $ 518,224 $ 533,253 $ 561,362 $ 587,379 $ 546,765
========== ========== ========== ========== ==========
Ratio of earnings to combined
fixed charges and preferred
stock dividends (including
interest incurred on fixed
annuities, guaranteed
investment contracts and
trust deposits) 1.4 1.3 1.2 1.1 1.1
========== ========== ========== ========== ===========
</TABLE>
<PAGE>
EXHIBIT 21
SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
LIST OF SUBSIDIARIES
List of subsidiaries and certain other affiliates with
percentage of voting securities owned by SunAmerica Inc. or
SunAmerica Inc.'s subsidiary which is the immediate parent.
PERCENTAGE OF VOTING
SECURITIES OWNED BY
COMPANY OR COMPANY'S
SUBSIDIARY WHICH IS THE
NAME OF COMPANY IMMEDIATE PARENT
ARIZONA CORPORATION: %
Sun Life Insurance Company of America 100
CALIFORNIA CORPORATIONS:
Anchor National Life Insurance Company 100
SunAmerica Premium Finance of California, Inc. 100
COLORADO CORPORATION:
Resources Trust Company 100
DELAWARE CORPORATIONS:
Capitol Life Mortgage Corp. 100
Royal Alliance Associates, Inc. 100
SunAmerica Asset Management Corp. 100
SunAmerica Capital Services, Inc. 100
SunAmerica Investments, Inc. 100
SunAmerica Premium Finance, Inc. 100
SunAmerica Securities, Inc. 100
GEORGIA CORPORATION:
SunAmerica Financial, Inc. 100
<PAGE>
MARYLAND CORPORATIONS:
Anchor Investment Adviser, Incorporated 100
SunAmerica Marketing, Inc. 100
MASSACHUSETTS BUSINESS TRUSTS:
Anchor Pathway Fund* 100
Anchor Series Trust* 100
SunAmerica Series Trust* 100
NEW YORK CORPORATION:
First SunAmerica Life Insurance Company 100
VIRGINIA CORPORATION:
Sun Mortgage Acceptance Corporation 100
*Shares of these entities are owned by a separate account of
Anchor National Life Insurance Company.
<PAGE>
EXHIBIT 23
SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 pertaining to the
Amended and Restated 1978 Employee Stock Option Program (No. 2-53718) and the
1988 Employee Stock Plan (No. 33-28744) and Form S-3 pertaining to Debt
Securities and Warrants to Purchase Debt Securities (No. 33-60940) of SunAmerica
Inc. of our report dated November 9, 1994, appearing on page F-2 of this Form
10-K. We also consent to the incorporation by reference of our report on the
Financial Statement Schedules, which appears on page S-2 of this Form 10-K.
Price Waterhouse LLP
Los Angeles, California
November 30, 1994
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND INCOME STATEMENT OF SUNAMERICA INC.'S FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<DEBT-HELD-FOR-SALE> 5,270,738
<DEBT-CARRYING-VALUE> 1,064,132
<DEBT-MARKET-VALUE> 1,072,222
<EQUITIES> 61,660
<MORTGAGE> 1,426,924
<REAL-ESTATE> 107,053
<TOTAL-INVEST> 9,280,390
<CASH> 569,382
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 581,874
<TOTAL-ASSETS> 14,656,225
<POLICY-LOSSES> 7,303,145
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 501,497
0
374,273
<COMMON> 35,803
<OTHER-SE> 551,012
<TOTAL-LIABILITY-AND-EQUITY> 14,656,225
0
<INVESTMENT-INCOME> 699,342
<INVESTMENT-GAINS> (21,124)
<OTHER-INCOME> 150,736
<BENEFITS> 404,888
<UNDERWRITING-AMORTIZATION> 66,925
<UNDERWRITING-OTHER> 117,140
<INCOME-PRETAX> 240,001
<INCOME-TAX> 74,700
<INCOME-CONTINUING> 165,301
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (33,500)
<NET-INCOME> 131,801
<EPS-PRIMARY> 2.77
<EPS-DILUTED> 2.77
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
