-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NRsSHoITlQIsgfZtjhMXgcKaUb5FgvQG1npbM6bjRDEzqTraeT17/SM889M4q5b9 8r6QuVa/qycjyhB8PCMbZQ== 0000054727-96-000023.txt : 19960216 0000054727-96-000023.hdr.sgml : 19960216 ACCESSION NUMBER: 0000054727-96-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960214 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUNAMERICA INC CENTRAL INDEX KEY: 0000054727 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 860176061 STATE OF INCORPORATION: MD FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04618 FILM NUMBER: 96517871 BUSINESS ADDRESS: STREET 1: 1 SUNAMERICA CENTER CITY: LOS ANGELES STATE: CA ZIP: 90067-6022 BUSINESS PHONE: 3107726000 FORMER COMPANY: FORMER CONFORMED NAME: KAUFMAN & BROAD INC DATE OF NAME CHANGE: 19890515 FORMER COMPANY: FORMER CONFORMED NAME: KAUFMAN & BROAD BUILDING CO DATE OF NAME CHANGE: 19711006 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________ FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1995 -------------------------------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_________________to__________________ Commission file number 1-4618 SUNAMERICA INC. --------------- (Exact Name of Registrant as Specified in Its Charter) Maryland 86-0176061 -------- ---------- (State or Other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) 1 SunAmerica Center, Los Angeles, California 90067-6022 ------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (310) 772-6000 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 the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date: Common Stock, par value $1.00 per share, 44,300,271 shares outstanding Nontransferable Class B Stock, par value $1.00 per share, 10,239,656 shares outstanding SUNAMERICA INC. INDEX Page Number(s) --------- Part I - Financial Information Consolidated Balance Sheet (Unaudited) - December 31, 1995 and September 30, 1995 3-4 Consolidated Income Statement (Unaudited) - Three Months Ended December 31, 1995 and 1994 5 Consolidated Statement of Cash Flows (Unaudited) - Three Months Ended December 31, 1995 and 1994 6-7 Notes to Consolidated Financial Statements (Unaudited) 8-10 Management's Discussion and Analysis of Financial Condition and Results of Operations 11-25 Part II - Other Information 26-27 SUNAMERICA INC. CONSOLIDATED BALANCE SHEET (In thousands - unaudited) December 31, September 30, 1995 1995 ------------ ------------- ASSETS Investments: Cash and short-term investments $ 657,210 $ 855,350 Bonds, notes and redeemable preferred stocks: Available for sale, at fair value (amortized cost: December 31, 1995, $8,125,928; September 30, 1995, $6,615,620) 8,210,874 6,584,488 Held for investment, at amortized cost (fair value: September 30, 1995, $736,835) -- 718,283 Mortgage loans 1,575,390 1,543,285 Common stocks, at fair value (cost: December 31, 1995 $19,642; September 30, 1995, $21,403) 36,619 39,906 Partnerships 794,279 774,417 Real estate 103,418 105,637 Other invested assets 209,318 187,593 ------------ ------------- Total investments 11,587,108 10,808,959 Variable annuity assets 5,454,132 5,263,006 Accrued investment income 116,715 95,038 Deferred acquisition costs 532,941 526,415 Other assets 153,457 150,749 ------------ ------------- TOTAL ASSETS $ 17,844,353 $ 16,844,167 ============ ============= SUNAMERICA INC. CONSOLIDATED BALANCE SHEET (Continued) (In thousands - unaudited) December 31, September 30, 1995 1995 ------------- ------------- LIABILITIES AND SHAREHOLDERS' EQUITY Reserves, payables and accrued liabilities: Reserves for fixed annuity contracts $ 5,486,957 $ 4,862,250 Reserves for guaranteed investment contracts 3,683,168 3,607,192 Trust deposits 427,788 426,595 Payable to brokers for purchases of securities -- 473,728 Income taxes currently payable 36,243 2,465 Other liabilities 245,409 271,540 ------------ ------------- Total reserves, payables and accrued liabilities 9,879,565 9,643,770 ------------ ------------- Variable annuity liabilities 5,454,132 5,263,006 ------------ ------------- Long-term notes and debentures 539,835 524,835 ------------ ------------- Deferred income taxes 167,188 146,847 ------------ ------------- Company-obligated mandatorily redeemable preferred securities of subsidiary grantor trusts whose sole assets are junior subordinated debentures of the Company 237,631 52,631 ------------ ------------- Shareholders' equity: Preferred Stock 569,642 321,642 Nontransferable Class B Stock 10,240 10,240 Common Stock 44,300 44,175 Additional paid-in capital 177,449 185,211 Retained earnings 705,336 656,509 Net unrealized gains (losses) on debt and equity securities available for sale 59,035 (4,699) ------------ ------------- Total shareholders' equity 1,566,002 1,213,078 ------------ ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 17,844,353 $ 16,844,167 ============ ============= SUNAMERICA INC. CONSOLIDATED INCOME STATEMENT For the three months ended December 31, 1995 and 1994 (In thousands, except per-share amounts - unaudited) 1995 1994 ---------- ---------- Investment income $ 253,990 $ 202,167 ---------- ---------- Interest expense on: Fixed annuity contracts (68,096) (59,878) Guaranteed investment contracts (61,424) (47,255) Trust deposits (2,571) (2,670) Senior indebtedness (15,052) (14,255) ---------- ---------- Total interest expense (147,143) (124,058) ---------- ---------- Dividends paid on preferred securities of grantor trusts (4,721) -- ---------- ---------- NET INVESTMENT INCOME 102,126 78,109 ---------- ---------- NET REALIZED INVESTMENT GAINS (LOSSES) 1,404 (7,231) ---------- ---------- Fee income: Variable annuity fees 24,416 20,453 Net retained commissions 8,865 6,620 Asset management fees 6,503 7,025 Loan servicing fees 5,570 1,978 Trust fees 4,195 3,750 ---------- ---------- TOTAL FEE INCOME 49,549 39,826 ---------- ---------- Other income and expenses: Surrender charges 2,588 2,744 General and administrative expenses (44,098) (33,108) Amortization of deferred acquisition costs (19,002) (18,674) Other, net 19 1,868 ---------- ---------- TOTAL OTHER INCOME AND EXPENSES (60,493) (47,170) ---------- ---------- PRETAX INCOME 92,586 63,534 Income tax expense (27,800) (18,400) ---------- ---------- NET INCOME $ 64,786 $ 45,134 ========== ========== EARNINGS PER SHARE $ 0.94 $ 0.65 ========== ========== NET EARNINGS APPLICABLE TO COMMON STOCK (used in the computation of earnings per share) $ 61,903 $ 40,995 ========== ========== AVERAGE SHARES OUTSTANDING 65,746 62,776 ========== ========== SUNAMERICA INC. CONSOLIDATED STATEMENT OF CASH FLOWS For the three months ended December 31, 1995 and 1994 (In thousands - unaudited) 1995 1994 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 64,786 $ 45,134 Adjustments to reconcile net income to net cash provided by operating activities: Interest credited to: Fixed annuity contracts 68,096 59,878 Guaranteed investment contracts 61,424 47,255 Trust deposits 2,571 2,670 Net realized investment losses (gains) (1,404) 7,066 Accretion of net discounts on investments (4,318) (5,726) Provision for deferred income taxes (10,525) 4,177 Change in: Deferred acquisition costs (5,529) (1,580) Other assets (2,582) (17,517) Income taxes currently payable 32,566 14,485 Other liabilities (15,205) 1,887 Other, net (3,301) 7,420 ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 186,579 165,149 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of: Bonds, notes and redeemable preferred stocks available for sale (1,920,072) (871,311) Bonds, notes and redeemable preferred stocks held for investment (7,172) (38,395) Mortgage loans (65,905) (115,868) Partnerships (209,987) (136,054) Other investments, excluding short-term investments (39,276) (38,507) Net assets of Imperial Premium Finance, Inc. -- (442,804) Net assets of CalFarm Life Insurance Company (52,102) -- Sales of: Bonds, notes and redeemable preferred stocks available for sale 1,264,089 1,080,553 Partnerships 60,425 26,795 Other investments, excluding short-term investments 33,160 16,898 Traditional life insurance business of CalFarm Life Insurance Company (117,719) -- Redemptions and maturities of: Bonds, notes and redeemable preferred stocks available for sale 516,230 268,118 Bonds, notes and redeemable preferred stocks held for investment 23,817 117,716 Mortgage loans 36,827 15,464 Partnerships 70,621 41,916 Other investments, excluding short-term investments 20,174 1,792 ------------ ------------ NET CASH USED BY INVESTING ACTIVITIES (386,890) (73,687) ------------ ------------ SUNAMERICA INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) For the three months ended December 31, 1995 and 1994 (In thousands - unaudited) 1995 1994 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payments of cash dividends to shareholders $ (15,959) $ (12,685) Premium receipts on: Fixed annuity contracts 147,340 142,276 Guaranteed investment contracts 231,505 564,320 Net exchanges to (from) the fixed accounts of variable annuity contracts (37,432) 39,671 Receipts of trust deposits 103,984 167,706 Withdrawal payments on: Fixed annuity contracts (131,418) (172,459) Guaranteed investment contracts (216,232) (376,862) Trust deposits (105,302) (147,828) Claims and annuity payments on fixed annuity contracts (41,787) (43,696) Net proceeds from issuances of long-term notes 14,475 -- Net proceeds from issuance of preferred securities of a grantor trust 179,172 -- Net proceeds from issuance of Series E Preferred Stock 241,180 -- Repayments of collateralized mortgage obligations -- (28,662) Net borrowings (repayments) of other short-term financings (367,355) 69,202 ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 2,171 200,983 ------------ ------------ NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS (198,140) 292,445 CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD 855,350 569,382 ------------ ------------ CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 657,210 $ 861,827 ============ ============ SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid on indebtedness $ 13,629 $ 12,981 ============ ============ Income taxes paid, net of refunds received $ 5,759 $ 262 ============ ============ SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation --------------------- In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company's consolidated financial position as of December 31, 1995 and September 30, 1995, the results of its consolidated operations and its consolidated cash flows for the three months ended December 31, 1995 and 1994. The results of operations for the three months ended December 31, 1995 are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended September 30, 1995, contained in the Company's 1995 Annual Report to Shareholders. 2. Reclassification of Securities Held for Investment -------------------------------------------------- On December 1, 1995, the Company reassessed the appropriateness of classifying a portion of its portfolio of bonds, notes and redeemable preferred stock as held for investment (the "Held for Investment Portfolio"). This reassessment was made pursuant to the provisions of "Special Report: A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities," issued by the Financial Accounting Standards Board in November 1995. As a result of its reassessment, the Company reclassified all of its Held for Investment Portfolio as available for sale. At December 1, 1995, the amortized cost of the Held for Investment Portfolio aggregated $701,512,000 and its fair value was $723,423,000. Upon reclassification, the resulting net unrealized gain of $21,911,000 was credited to Net Unrealized Gains (Losses) on Debt and Equity Securities Available for Sale in the shareholders' equity section of the balance sheet. 3. Preferred Securities of Grantor Trusts -------------------------------------- Preferred securities of grantor trusts comprise $52,630,875 liquidation amount of 9.95% Trust Originated Preferred Securities of SunAmerica Capital Trust I and $185,000,000 liquidation amount of 8.35% Trust Originated Preferred Securities of SunAmerica Capital Trust II. Both grantor trusts are wholly owned subsidiaries of the Company. SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) 3. Preferred Securities of Grantor Trusts (continued) -------------------------------------- In connection with the issuance of the 9.95% Trust Originated Preferred Securities and the related purchase by the Company of the grantor trust's common securities, the Company issued to the grantor trust $54,258,650 principal amount of 9.95% junior subordinated debentures, due 2044. These debentures constitute the sole asset of the grantor trust. The debentures are redeemable at the option of the Company on or after June 15, 1997 at a redemption price of $25 per debenture plus accrued and unpaid interest. The preferred and common securities will be redeemed on a pro rata basis, to the same extent as the debentures are repaid, at $25 per security plus accumulated and unpaid distributions. In connection with the issuance of the 8.35% Trust Originated Preferred Securities and the related purchase by the Company of the grantor trust's common securities, the Company issued to the grantor trust $191,224,250 principal amount of 8.35% junior subordinated debentures, due 2044. These debentures constitute the sole asset of the grantor trust. The debentures are redeemable at the option of the Company on or after September 30, 2000 at a redemption price of $25 per debenture plus accrued and unpaid interest. The preferred and common securities will be redeemed on a pro rata basis, to the same extent as the debentures are repaid, at $25 per security plus accumulated and unpaid distributions. 4. Earnings per Share ------------------ The calculation of earnings per share is made by dividing applicable earnings by the weighted average number of shares of Common Stock and Nontransferable Class B Stock (collectively referred to as "Common Stock") outstanding during each period, adjusted for the incremental shares attributed to common stock equivalents. Common stock equivalents include outstanding employee stock options and convertible preferred stock, which includes the Series D and E Depositary Shares issued in March 1993 and November 1995, respectively. Common stock equivalents are included in the computation only if their effect is dilutive. Net Earnings Applicable To Common Stock are reduced by preferred stock dividend requirements, which amounted to $2,883,000 and $4,139,000 for the three months ended December 31, 1995 and 1994, respectively. These preferred stock dividend requirements do not include dividends paid on the convertible issues, which amounted to $4,992,000 and $3,477,000 in the three months ended December 31, 1995 and 1994, respectively. SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) 5. Ratios of Earnings to Fixed Charges ----------------------------------- The ratios of earnings to fixed charges follow: Three months ended December 31, ------------------- 1995 1994 ------- ------- Ratio of earnings to fixed charges (excluding interest incurred on fixed annuities, guaranteed investment contracts and trust deposits) 5.7x 5.5x ======= ======= Ratio of earnings to fixed charges (including interest incurred on fixed annuities, guaranteed investment contracts and trust deposits) 1.6x 1.5x ======= ======= Ratio of earnings to combined fixed charges and preferred stock dividends (excluding interest incurred on fixed annuities, guaranteed investment contracts and trust deposits) 3.6x 3.1x ======= ======= Ratio of earnings to combined fixed charges and preferred stock dividends (including interest incurred on fixed annuities, guaranteed investment contracts and trust deposits 1.5x 1.4x ======= ======= SUNAMERICA INC. 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 months ended December 31, 1995 ("Fiscal 1996") and December 31, 1994 ("Fiscal 1995"). RESULTS OF OPERATIONS NET INCOME totaled $64.8 million or $0.94 per share in Fiscal 1996, compared with $45.1 million or $0.65 per share in Fiscal 1995. PRETAX INCOME totaled $92.6 million in Fiscal 1996, up from $63.5 million in Fiscal 1995. This $29.1 million improvement primarily resulted from increased net investment income, fee income and net realized investment gains, partially offset by increased general and administrative expenses. NET INVESTMENT INCOME, which is the spread between the income earned on invested assets and the interest or dividends paid on fixed annuities and other interest-bearing liabilities, increased to $102.1 million in Fiscal 1996 from $78.1 million in Fiscal 1995. These amounts represent net investment spreads of 3.71% on average invested assets (computed on a daily basis) of $11.01 billion in Fiscal 1996 and 3.33% on average invested assets of $9.39 billion in Fiscal 1995. Net investment spreads include the effect of income earned on the excess of average invested assets over average interest-bearing liabilities, which excess amounted to $1.00 billion in Fiscal 1996 and $699.5 million in Fiscal 1995. The difference between the Company's yield on average invested assets and the rate paid on average interest-bearing liabilities was 3.16% in Fiscal 1996 and 2.90% in Fiscal 1995. Investment income totaled $254.0 million in Fiscal 1996, compared with $202.2 million in Fiscal 1995. Investment income increased in Fiscal 1996 as a result of an increase in investment yield on a higher level of average invested assets. The yield on average invested assets increased to 9.23% in Fiscal 1996 from 8.61% in Fiscal 1995. Over the last nine fiscal quarters, the Company's quarterly investment yields on average invested assets have ranged from 8.32% to 9.54%; however, there can be no assurance that the Company will achieve similar yields in future periods. The increased investment yield in Fiscal 1996 primarily resulted from increased partnership income, which amounted to $36.3 million in Fiscal 1996, compared with $23.6 million in Fiscal 1995. This partnership income represents a yield of 18.03% on related average assets of $804.3 million in Fiscal 1996, compared with 14.47% on related average assets of $652.8 million in Fiscal 1995. The Company has also historically enhanced investment yield through its use of both dollar roll transactions ("Dollar Rolls") and total return corporate bond swap agreements ("Total Return Agreements"). The Company recorded income of $4.9 million on the Total Return Agreements during Fiscal 1996, compared with losses of $1.5 million in Fiscal 1995. The improved results in Fiscal 1996 reflect increases in the fair value of the underlying assets, resulting primarily from lower prevailing interest rates at December 31, 1995 and improved overall performance of non-investment-grade bonds in Fiscal 1996 relative to Fiscal 1995. Although the Company continues to use Dollar Rolls, they did not have a significant impact on investment income in Fiscal 1996 or Fiscal 1995. (See "Asset-Liability Matching" for additional discussion of Total Return Agreements and Dollar Rolls). Total interest and dividend expense aggregated $151.9 million in Fiscal 1996 and $124.1 million in Fiscal 1995. The average rate paid on all interest-bearing liabilities was 6.07% (5.61% on fixed annuity contracts) in Fiscal 1996, compared with 5.71% (5.31% on fixed annuity contracts) in Fiscal 1995. Interest-bearing liabilities averaged $10.01 billion during Fiscal 1996, compared with $8.69 billion during Fiscal 1995. The increase in the average rate paid on all interest-bearing liabilities during Fiscal 1996 primarily resulted from a higher crediting rate on a greater level of average reserves for guaranteed investment contracts ("GICs"). The average GIC crediting rate was 6.70% on related average liabilities of $3.67 billion in Fiscal 1996, compared with 6.53% on related average liabilities of $2.89 billion in Fiscal 1995. The higher average crediting rate on GICs in Fiscal 1996 reflects the crediting rates on contracts issued and repriced during the 1995 calendar year. In response to prevailing interest rates, these new and repriced crediting rates were generally greater than those on GICs outstanding in Fiscal 1995. During Fiscal 1996 and Fiscal 1995, approximately 32% and 27%, respectively, of the Company's average GIC portfolio were variable-rate obligations that reprice periodically based upon certain defined indexes. At December 31, 1995, approximately 28% of the Company's GIC portfolio was composed of such obligations. The average rate paid on all interest- bearing liabilities also increased as a result of the dividends paid in Fiscal 1996 on the preferred securities of grantor trusts. In Fiscal 1996, the average dividend rate on preferred securities of grantor trusts was 8.74% on related average liabilities of $216.1 million. The preferred securities of grantor trusts were issued in June 1995 and October 1995, and, therefore, there were no such dividends paid in Fiscal 1995. GROWTH IN AVERAGE INVESTED ASSETS to $11.01 billion in Fiscal 1996 from $9.39 billion in Fiscal 1995 primarily reflects sales of the Company's fixed-rate products, consisting of both fixed annuities (including the fixed accounts of variable annuity products) and GICs, and $486.5 million of aggregate net proceeds from the issuances of preferred securities of grantor trusts and long-term notes. Since December 31, 1994, fixed annuity premiums have aggregated $948.8 million and GIC premiums have totaled $1.43 billion. Fixed annuity premiums totaled $147.3 million in Fiscal 1996, up slightly from $143.2 million in Fiscal 1995. These premiums include premiums for the fixed accounts of variable annuities totaling $64.1 million and $59.9 million, respectively. GIC premiums decreased significantly to $231.5 million in Fiscal 1996 from $564.3 million in Fiscal 1995. This $332.8 million reduction primarily resulted from the cyclical demand for GICs by municipalities, due principally to the interdependency of demand for GICs and the funding of new municipal bond offerings. The GICs issued by the Company and its life insurance subsidiaries generally guarantee the payment of principal and interest at a fixed rate for a fixed term of three to five 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. The life insurance subsidiaries impose surrender penalties in the event of other withdrawals prior to maturity. Contracts purchased by banks or state and local governmental authorities may also permit scheduled book value withdrawals subject to the terms of the underlying indenture or agreement. Contracts purchased by asset management firms either prohibit withdrawals or permit withdrawals with notice ranging from seven 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"). NET REALIZED INVESTMENT GAINS totaled $1.4 million in Fiscal 1996, compared with net realized investment losses of $7.2 million in Fiscal 1995. These amounts represent 0.05% and 0.31%, respectively, of average invested assets. Net realized investment gains are net of impairment writedowns of $6.8 million in Fiscal 1996 and $4.7 million in Fiscal 1995. Therefore, net gains from sales of investments totaled $8.2 million in Fiscal 1996, compared with $2.5 million of net losses in Fiscal 1995. Net gains in Fiscal 1996 include $6.5 million of net gains realized on $17.1 million of sales of other invested assets, principally leveraged leases, and $1.3 million of net gains realized on $5.2 million of sales of common stocks. These sales were made primarily to maximize total return. Net losses in Fiscal 1995 include $3.1 million of net gains realized on $5.7 million of sales of common stocks made primarily to maximize total return and $8.3 million of net losses on $1.09 billion of sales of bonds. These bonds sales include approximately $215.4 million of sales of MBSs, $177.8 million of sales on high-yield investments and $106.7 million of sales of certain collateralized mortgage obligations and asset-backed securities that also were made primarily to maximize total return. The Company also sold $439.5 million of premium finance loans at no gain or loss (see "Loan Servicing Fees"). Impairment writedowns include additional provisions applied to defaulted bonds amounting to $5.7 million in Fiscal 1996 and $4.3 million in Fiscal 1995. VARIABLE ANNUITY FEES are based on the market value of assets supporting variable annuity contracts in separate accounts. Such fees increased to $24.4 million in Fiscal 1996 from $20.5 million in Fiscal 1995. This increase reflects growth in average variable annuity assets, principally due to increased market values and the receipt of variable annuity premiums, partially offset by surrenders. Variable annuity assets averaged $5.33 billion during Fiscal 1996 and $4.43 billion during Fiscal 1995. Variable annuity premiums, which exclude premiums allocated to the fixed accounts of variable annuity products, totaled $210.0 million in Fiscal 1996 and $99.3 million in Fiscal 1995. This increase in premiums can be attributed, in part, to a heightened demand for equity and bond investments, principally as a result of generally improved market performance in the 1995 calendar year. The Company has encountered increased competition in the variable annuity marketplace during recent years and anticipates that the market will remain highly competitive for the foreseeable future. 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 $8.9 million in Fiscal 1996 and $6.6 million in Fiscal 1995. Broker-dealer sales (mainly general securities, mutual funds and annuities) totaled $2.26 billion in Fiscal 1996 and $1.37 billion in Fiscal 1995. Net retained commissions are not proportionate to sales primarily due to differences in sales mix. 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. ("SunAmerica Asset Management"). Such fees totaled $6.5 million on average assets managed of $2.15 billion in Fiscal 1996 and $7.0 million on average assets managed of $2.10 billion in Fiscal 1995. Asset management fees are not proportionate to average assets managed primarily due to changes in product mix. Sales of mutual funds, excluding sales of money market accounts, amounted to $36.3 million in Fiscal 1996, compared with $29.5 million in Fiscal 1995. Redemptions of mutual funds, excluding redemptions of money market accounts, amounted to $97.6 million in Fiscal 1996, compared with $140.5 million in Fiscal 1995. LOAN SERVICING FEES are earned by the Company's subsidiary, Imperial Premium Finance, Inc. ("Imperial"). 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 policies. Currently, Imperial sells most of the short- term loans it originates and earns fee income by servicing these sold loans. Such fee income totaled $5.6 million on average loans serviced of $440.7 million in Fiscal 1996, compared with $2.0 million on average loans serviced of $143.6 million in Fiscal 1995. Imperial's net assets were acquired on November 30, 1994, and, therefore, Fiscal 1995 includes only one month of loan servicing fee income. 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 increased to $4.2 million in Fiscal 1996 (on an average of 198,000 trust accounts) from $3.8 million in Fiscal 1995 (on an average of 189,000 trust accounts). SURRENDER CHARGES on fixed and variable annuities totaled $2.6 million in Fiscal 1996 and $2.7 million in Fiscal 1995. 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 $284.5 million in Fiscal 1996 and $312.9 million in Fiscal 1995. These payments represent 11.8% and 14.8%, respectively, of average fixed and variable annuity reserves. Withdrawals include variable annuity payments from the separate accounts totaling $155.4 million in Fiscal 1996 and $144.4 million in Fiscal 1995. Although variable annuity surrenders have increased, principally as a result of growth in the variable annuity separate accounts, variable annuity withdrawal rates have declined. Variable annuity surrenders represent 11.7% and 13.0%, respectively, of average variable annuity liabilities in Fiscal 1996 and Fiscal 1995. The decrease in fixed annuity surrenders to $129.1 million in Fiscal 1996 from $168.5 million in Fiscal 1995 results primarily from unusually high surrenders in Fiscal 1995, principally due to policies coming off surrender charge restrictions and a greater volume of surrenders on a closed block of business in Fiscal 1995. In addition, fixed annuity surrenders in Fiscal 1996 reflect the success of the Company's conservation efforts. Management anticipates that withdrawal rates will remain relatively stable for the foreseeable future and the Company's investment portfolio has been structured to provide sufficient liquidity for anticipated withdrawals. GENERAL AND ADMINISTRATIVE EXPENSES totaled $44.1 million in Fiscal 1996, compared with $33.1 million in Fiscal 1995. General and administrative expenses in Fiscal 1996 include the expenses of recently acquired Imperial for a full quarter, compared with only one month of such expenses in Fiscal 1995. In addition, Fiscal 1996 includes expenses related to a national advertising campaign to further increase the Company's brand name awareness. General and administrative expenses remain closely controlled through a company-wide cost containment program and represent approximately 1% of average total assets. AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $19.0 million in Fiscal 1996 and $18.7 million in Fiscal 1995. This increase was primarily due to additional fixed and variable annuity and mutual fund sales and the subsequent amortization of related deferred commissions and other acquisition costs. INCOME TAX EXPENSE totaled $27.8 million in Fiscal 1996 and $18.4 million in Fiscal 1995, representing effective tax rates of 30% and 29%, respectively. These tax rates reflect the favorable impact of certain affordable housing tax credits. FINANCIAL CONDITION AND LIQUIDITY SHAREHOLDERS' EQUITY increased by $352.9 million to $1.57 billion at December 31, 1995 from $1.21 billion at September 30, 1995, primarily as a result of the issuance of $248.0 million of the Company's Series E Preferred Stock and the $64.8 million of net income recorded in Fiscal 1996. Shareholders' equity at December 31, 1995 was also favorably impacted by the recording of a $59.0 million net unrealized gain on debt and equity securities available for sale, a $63.7 million improvement over the $4.7 million net unrealized loss recorded at September 30, 1995. These favorable factors were partially offset by $16.0 million of dividends paid to shareholders. BOOK VALUE PER SHARE amounted to $21.76 at December 31, 1995, compared with $17.78 at September 30, 1995. Excluding net unrealized gains and losses on debt and equity securities available for sale, book value per share amounted to $20.86 at December 31, 1995 and $17.86 at September 30, 1995. TOTAL ASSETS increased by $1.00 billion to $17.84 billion at December 31, 1995 from $16.84 billion at September 30, 1995, principally due to a $778.1 million increase in invested assets and a $191.1 million increase in the separate accounts for variable annuities. INVESTED ASSETS at December 31, 1995 totaled $11.59 billion, compared with $10.81 billion at September 30, 1995. This $778.1 million increase primarily resulted from the acquisition of CalFarm Life Insurance Company, whose invested assets totaled $719.2 million at December 31, 1995, for a cash purchase price of $120 million. In addition, the increase in invested assets reflects the issuance of $248.0 million of Series E Preferred Stock, the October 1995 issuance of $185.0 million of preferred securities of a grantor trust and a $116.0 million improvement in net unrealized gains on debt and equity securities available for sale. These favorable factors were partially offset by a $473.7 million reduction in amounts payable to brokers. The Company manages most of its invested assets internally. 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 December 1, 1995, pursuant to guidelines issued by the Financial Accounting Standards Board, the Company determined that all of its portfolio of bonds, notes and redeemable preferred stocks (the "Bond Portfolio") is available to be sold in response to changes in market interest rates, changes in prepayment risk, the Company's need for liquidity and other similar factors. Accordingly, the Company does not presently classify a portion of its Bond Portfolio as held for investment. THE BOND PORTFOLIO had an aggregate fair value that exceeded its amortized cost by $84.9 million at December 31, 1995. At September 30, 1995, the amortized cost of the Bond Portfolio was $12.6 million above its fair value (including $31.1 million of net unrealized losses on the portion of the portfolio that was designated as available for sale). The net unrealized gains on the Bond Portfolio since September 30, 1995 principally reflect the lower relative prevailing interest rates at December 31, 1995 and their corresponding effect on the fair value of the Bond Portfolio. Approximately $8.09 billion or 99.5% of the Bond Portfolio (at amortized cost) at December 31, 1995 was rated by Standard & 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 December 31, 1995, approximately $7.16 billion (at amortized cost) was rated investment grade by one or both of these agencies or under the NAIC guidelines, including $5.01 billion of U.S. government/agency securities and MBSs. At December 31, 1995, the Bond Portfolio included $925.0 million (fair value, $915.5 million) of bonds not rated investment grade by S&P, Moody's or the NAIC. Based on their December 31, 1995 amortized cost, these non- investment-grade bonds accounted for 5.2% of the Company's total assets and 8.1% 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 $316.4 million at December 31, 1995 (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 December 31, 1995. The following table summarizes the Company's rated bonds by rating classification as of December 31, 1995 (dollars in thousands):
Issues not rated by S&P/Moody's Issues Rated by S&P/Moody's By NAIC Category Total - ---------------------------------------------- ----------------------------------- ---------------------------------- Estimated NAIC Estimated Percent of Estimated S&P (Moody's) Amortized fair category Amortized fair Amortized invested fair category(1) cost value (2) cost value cost assets(3) value - --------------- ---------- ---------- -------- ---------- ----------- ---------- --------- ---------- AAA+ to A- (Aaa to A3) $4,546,061 $4,589,332 1 $1,393,098 $1,415,402 $5,939,159 51.71% $6,004,734 BBB+ to BBB- (Baa1 to Baa3) 497,335 503,423 2 727,736 742,755 1,225,071 10.67 1,246,178 BB+ to BB- (Ba1 to Ba3) 90,305 91,594 3 143,474 143,664 233,779 2.04 235,258 B+ to B- (B1 to B3) 375,991 375,780 4 240,925 236,434 616,916 5.37 612,214 CCC+ to C- (Caa to C) 30,385 26,030 5 18,556 18,222 48,941 0.43 44,252 D -- -- 6 25,353 23,741 25,353 0.22 23,741 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL RATED ISSUES $5,540,077 $5,586,159 $2,549,142 $2,580,218 $8,089,219 $8,166,377 ========== ========== ========== ========== ========== ========== (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.
SENIOR SECURED LOANS ("Secured Loans") are included in the Bond Portfolio and their amortized cost aggregated $833.0 million at December 31, 1995. Secured Loans are senior to subordinated debt and equity, and are secured by assets of the issuer. At December 31, 1995, Secured Loans consisted of loans to 194 borrowers spanning 32 industries, with 17% of these assets (at amortized cost) concentrated in the leisure industry and with no other industry concentration constituting more than 15% 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. 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 the risk of loss upon default for its Secured Loans is mitigated by their financial covenants and senior secured positions. The majority of the Company's Secured Loans are not rated by S&P or Moody's. MORTGAGE LOANS aggregated $1.58 billion at December 31, 1995 and consisted of 659 first mortgage loans with an average loan balance of approximately $2.4 million, collateralized by properties located in 27 states. Approximately 47% of the portfolio was multifamily residential, 23% was retail, 6% was industrial, 5% was office and 19% was other types. At December 31, 1995, approximately 28% 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 December 31, 1995, there were 31 loans with outstanding balances of $10 million or more, which loans collectively aggregated approximately 28% 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 December 31, 1995, approximately 23% of the mortgage loan portfolio consisted of loans with balloon payments due before January 1, 1999. At December 31, 1995, loans delinquent by more than 90 days totaled $28.2 million (1.8% of total mortgages). Loans foreclosed upon and carried in real estate in the balance sheet totaled $17.0 million (1.1% of total mortgages) at December 31, 1995. All of these loans were transferred to real estate during fiscal 1995. Approximately 35% of the mortgage loans in the portfolio at December 31, 1995 were seasoned loans underwritten to the Company's standards and purchased at or near par from the Resolution Trust Corporation or 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 than do 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 December 31, 1995, mortgage loans having an aggregate carrying value of $60.3 million had been restructured. Of this amount, $1.8 million was restructured during Fiscal 1996, $27.7 million was restructured during Fiscal 1995 and $30.2 million was restructured during fiscal 1992. PARTNERSHIP investments totaled $794.3 million at December 31, 1995, comprising investments in approximately 370 separate partnerships with an average size of approximately $2.1 million. This portfolio includes: (i) $317.1 million of partnerships managed by independent money managers that invest in a broad selection of equity and fixed-income securities, currently including approximately 600 separate issuers; (ii) $360.6 million of partnerships that make tax-advantaged investments in affordable housing, currently involving approximately 325 multifamily projects in 38 states; and (iii) $116.6 million of partnerships that invest in mortgage loans and income- producing real estate. At December 31, 1995, $551.9 million of the Company's partnerships was accounted for by using the cost method and $242.4 million by using the equity method. The risks generally associated with partnerships include those related to their underlying investments (i.e. equity securities, debt securities and real estate), plus a level of illiquidity, which is mitigated for the affordable housing partnerships by the marketability of the tax credits they generate. The Company believes that these risks are acceptable in light of anticipated partnership returns and the contractual termination provisions contained in the partnership agreements. 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. Approximately 78% of the Company's fixed annuity and GIC reserves had surrender penalties or other restrictions at December 31, 1995. 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. At December 31, 1995 the weighted average life of the Company's investments was approximately four years and the duration was approximately three-and-one-fourth 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. As a component of its investment strategy, the Company utilizes interest rate swap agreements ("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, variable-rate payments exchanged for fixed-rate payments) based on an underlying principal balance (notional principal) to hedge against interest rate changes. The Company utilizes Swap Agreements to create a hedge that effectively converts floating-rate assets and liabilities into fixed-rate instruments. At December 31, 1995, the Company had 27 outstanding Swap Agreements with an aggregate notional principal amount of $1.10 billion. These agreements mature in various years through 2001 and have an average remaining maturity of 26 months. The Company also seeks to provide liquidity by using reverse repurchase agreements ("Reverse Repos"), Dollar Rolls and by investing in MBSs. It also seeks to enhance its spread income by using Reverse Repos, Dollar Rolls and Total Return Agreements. 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 fair 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 provide liquidity, enhance its spread income and match its assets and liabilities. The primary risks associated with Total Return Agreements are the credit risk on the underlying non-investment grade bonds; the risk of increases in prevailing interest rates, particularly short-term interest rates; and the risk associated with counterparty nonperformance. The primary risk associated with Dollar Rolls, Reverse Repos and Swap Agreements is counterparty risk. The Company believes, however, that the counterparties to its Total Return Agreements, Dollar Rolls, Reverse Repos and Swap 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. In addition to counterparty risk, Swap Agreements also have interest rate risk. However, the Company's Swap Agreements hedge variable-rate assets or liabilities, 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 or reduced interest expense paid on the variable-rate liabilities. 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 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) that are in default as to the payment of principal or interest, totaled $56.9 million at December 31, 1995, including $28.7 million (fair value, $22.2 million) of bonds and notes and $28.2 million of mortgage loans whose fair value was equal to their amortized cost. At December 31, 1995, defaulted investments constituted 0.5% of total invested assets at amortized cost. At September 30, 1995, defaulted investments totaled $61.8 million, which constituted 0.6% of total invested assets at amortized cost. 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 December 31, 1995, approximately $6.43 billion of the Company's Bond Portfolio had an aggregate unrealized gain of $197.1 million, while approximately $1.69 billion of the Bond Portfolio had an aggregate unrealized loss of $112.2 million. In addition, the Company's investment portfolio also currently provides approximately $109.8 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 and GICs 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 December 31, 1995, had invested assets with a carrying value of $888.3 million and outstanding senior indebtedness of $539.8 million, comprising all of the Company's consolidated senior indebtedness. Additionally, as of December 31, 1995, the Parent had three GICs purchased by local government authorities that aggregated $255.4 million. During August and October 1995, the Parent purchased common securities of SunAmerica Capital Trust I and SunAmerica Capital Trust II (the "Grantor Trusts") and issued an aggregate of $245.5 million of junior subordinated debentures (the "Debentures") to the Grantor Trusts in connection with the public issuance of preferred securities of the Grantor Trusts (see Note 3 of Notes to Consolidated Financial Statements). The Parent's annual debt service with respect to its senior indebtedness, GIC obligations and Debentures totals $80.0 million for fiscal 1996, $96.5 million for fiscal 1997, $116.6 million for fiscal 1998, $225.1 million for fiscal 1999, $89.9 million for fiscal 2000 and $2.14 billion, in the aggregate, thereafter. The Parent received dividends from its regulated life insurance subsidiaries of $69.2 million in March 1995. The Parent also received dividends of $5.0 million in Fiscal 1996 from its other directly owned subsidiaries. The Company has transferred to third-party investors certain of its interests in various partnerships that make tax-advantaged affordable housing investments. As part of the transactions, the Parent has agreed to advance monies to support the operations of the underlying housing projects, if required, and has guaranteed that the transferred partnerships will provide, as of the transfer date and under then current tax laws, a specified level of associated tax credits and deductions to the third-party investors. A portion of the income received upon transfer of the partnership interests has been deferred to absorb any required payments with respect to these agreements. 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 cash outlays with respect to these agreements. The Parent has guaranteed that its life insurance subsidiaries will receive the statutory carrying value of certain invested assets, primarily bonds and real estate, aggregating $144.8 million. 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 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 and the size of transactions that can be consummated without first obtaining regulatory approval and other related matters. During the last decade, 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. In recent years, the NAIC has 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. The NAIC is also currently developing model laws to govern insurance company investments. Current proposals are still being debated and the Company is monitoring developments in this area and the effects any changes 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. The Company's premium finance subsidiaries are subject to regulation and supervision by substantially all of the states in which they are authorized to transact business. State premium finance laws establish supervisory agencies with broad administrative and supervisory powers related to granting and revoking licenses to transact business, approving finance agreement forms, regulating certain finance charge rates, regulating marketing and other trade practices (including the procedures to cancel financed insurance policies for non-payment), prescribing the form and content of required financial statements and reports, performing financial and other examinations and other related matters. SUNAMERICA INC. PART II - OTHER INFORMATION ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ On October 30, 1995 the Company held a Special Meeting of Shareholders. The shareholders voted upon a proposal to amend the Charter to increase the Company's authorized capital from (i) 50,000,000 to 175,000,000 shares of Common Stock (par value, $1.00 per share) and (ii) 15,000,000 to 25,000,000 shares of Nontransferable Class B Stock (par value, $1.00 per share). The matter was approved. The votes cast for, against or withheld, as well as the number of abstentions and broker non-votes were as follows: Votes For Votes Against Abstentions Broker Non-Votes ---------- ------------- ----------- ---------------- 89,982,628 3,412,807 27,125 0 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- EXHIBITS 10 $250,000,000 Credit Agreement, dated as of October 27, 1995, among the Company and SunAmerica Financial, Inc., as Borrowers, and Citibank, N.A., as Agent for the bank named therein. 11 Statement re computation of per-share earnings. 23 The consent of Price Waterhouse LLP, independent accountants, filed as an exhibit to the Company's 1995 Annual Report on Form 10-K, is incorporated by reference herein. 27 Financial Data Schedule. REPORTS ON FORM 8-K On October 6, 1995, the Company filed a current report on Form 8-K to file exhibits in connection with the issuance by SunAmerica Capital Trust II (the "Trust") of its 8.35% Trust Originated Preferred Securities pursuant to Registration Statement Nos. 33-62405 and 33-62405-01 filed by the Company and the Trust. SUNAMERICA INC. PART II - OTHER INFORMATION REPORTS ON FORM 8-K (continued) On October 19, 1995, the Company filed a current report on Form 8-K to file exhibits in connection with the Registration Statement on Form S-3 (File No. 33-62405) filed by the Company relating to the Company's Debt Securities, Common Stock, Preferred Stock and Warrants to Purchase Debt Securities, Common Stock and Preferred Stock. On October 31, 1995, the Company filed a current report on Form 8-K to file exhibits in connection with the issuance of its $3.10 Depositary Shares, each representing one-fiftieth of a share of Series E Mandatory Conversion Premium Dividend Preferred Stock, pursuant to the Company's Registration Statement on Form S-3 (File No. 33-62405). On November 9, 1995, the Company filed a current report on Form 8-K announcing its fourth quarter 1995 earnings. On December 12, 1995, the Company filed a current report on Form 8-K, as amended on December 14, 1995, concerning its proposed acquisition of Ford Life Insurance Company. On January 29, 1996, the Company filed a current report on Form 8-K announcing its first quarter 1996 earnings. SIGNATURES ---------- Pursuant to the requirements 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. ----------------------------------- Registrant Dated February 13, 1996 /s/ JAY S. WINTROB ---------------------------- ----------------------------------- Jay S. Wintrob Vice Chairman Dated February 13, 1996 /s/ SCOTT L. ROBINSON ---------------------------- ----------------------------------- Scott L. Robinson Senior Vice President and Controller SUNAMERICA INC. LISTS OF EXHIBITS FILED - ----------------------- 10 $250,000,000 Credit Agreement, dated as of October 27, 1995, among the Company and SunAmerica Financial, Inc., as Borrowers, and Citibank, N.A., as Agent for the bank named therein. 11 Statement re computation of per-share earnings. 27 Financial Data Schedule. EX-10 2 $250,000,000 CREDIT AGREEMENT Dated as of October 27, 1995 Among SUNAMERICA INC. and SUNAMERICA FINANCIAL, INC., as Borrowers, THE BANKS NAMED HEREIN, as Lenders, and CITIBANK, N.A., as Agent TABLE OF CONTENTS Section Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Certain Defined Terms............................1 1.2. Computation of Time Periods......................11 1.3. Accounting Terms.................................11 1.4. Convention Statement.............................11 ARTICLE II THE ADVANCES 2.1. Commitments to Lend..............................11 2.2. Notice of Committed Borrowings...................11 2.3. Money Market Borrowings..........................12 2.4. Notice to Lenders; Funding of Advances...........14 2.5. Notes............................................15 2.6. Maturity of Advances.............................16 2.7. Interest Rate....................................16 2.8. Fees.............................................17 2.9. Regulation D Compensation........................17 2.10. Optional Termination or Reduction of Commitments......................................18 2.11. Mandatory Termination or Reduction of the Commitments......................................18 2.12. Optional Prepayments.............................18 2.13. General Provisions as to Payments................18 2.14. Funding Losses...................................19 2.15. Computation of Interest and Fees.................19 2.16. Sharing of Payments, etc.........................19 2.17. Withholding Tax Exemption........................20 ARTICLE III CHANGES IN CIRCUMSTANCES 3.1. Basis for Determining Interest Rate Inadequate or Unfair........................................21 3.2. Illegality.......................................21 3.3. Increased Cost and Reduced Return................22 3.4. Base Rate Advances Substituted for Affected Fixed Rate Advances....................................23 3.5. Substitution of Lender...........................23 3.6. Discretion of Lenders as to Manner of Funding..........................................23 3.7. Conclusiveness of Statements; Survival of Provisions.......................................23 ARTICLE IV CONDITIONS OF LENDING 4.1. Effectiveness....................................24 4.2. Conditions Precedent to Advances.................24 ARTICLE V REPRESENTATIONS AND WARRANTIES 5.1. Organization, etc................................25 5.2. Authorization....................................25 5.3. No Conflict......................................25 5.4. Governmental Consents............................25 5.5. Validity.........................................25 5.6. Financial Statements.............................25 5.7. Litigation.......................................26 5.8. Liens............................................26 5.9. Subsidiaries.....................................26 5.10. Compliance with ERISA............................27 5.11. Investment Company Act...........................27 5.12. Public Utility Holding Company Act...............27 5.13. Margin Regulation................................27 5.14. Taxes............................................27 5.15. Accuracy of Information..........................27 5.16. Proceeds.........................................27 5.17. Governmental Authorizations......................28 5.18. Insurance Licenses...............................28 5.19. Compliance with Laws.............................28 5.20. No Default.......................................28 ARTICLE VI AFFIRMATIVE COVENANTS 6.1. Reports, Certificates and Other Information......28 6.2. Corporate Existence; Foreign Qualification.......31 6.3. Compliance with Laws.............................31 6.4. Books, Records and Inspections...................31 6.5. Insurance........................................31 6.6. Maintenance of Properties........................32 6.7. Taxes............................................32 6.8. Maintenance of Ratings...........................32 6.9. Compliance with ERISA............................32 ARTICLE VII NEGATIVE COVENANTS 7.1. Liens............................................32 7.2. Consolidation, Merger, Sales of Stock and Assets, etc..................................34 7.3. Business Activities..............................34 ARTICLE VIII FINANCIAL COVENANTS 8.1. Consolidated Tangible Net Worth..................34 8.2. Consolidated Debt to Total Capital...............35 8.3. Risk-Based Capital Ratio.........................35 8.4. Total Invested Assets............................35 ARTICLE IX EVENTS OF DEFAULT 9.1. Events of Default................................35 ARTICLE X AGENT 10.1. Authorization and Action.........................36 10.2. Agent's Reliance, etc............................37 10.3. Agent and Affiliates.............................37 10.4. Lender Credit Decision...........................37 10.5. Indemnification..................................38 10.6. Successor Agent..................................38 ARTICLE XI MISCELLANEOUS 11.1. Amendments, etc..................................38 11.2. Notices, etc.....................................39 11.3. No Waiver; Remedies..............................39 11.4. Costs and Expenses...............................39 11.5. Right of Set-off.................................39 11.6. Binding Effect...................................40 11.7. Assignments and Participations...................40 11.8. Submission to Jurisdiction; Waiver of Jury Trial.......................................42 11.9. Governing Law....................................42 11.10. Execution in Counterparts........................42 11.11. Collateral.......................................42 Schedule 1 to Credit Agreement 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 CREDIT AGREEMENT Dated as of October 27, 1995 SUNAMERICA INC., a Maryland corporation ("SunAmerica") and SUNAMERICA FINANCIAL, INC., a Georgia corporation ("SAFI," and together with SunAmerica, the "Borrowers"), the banks listed on the signature pages hereof and CITIBANK, N.A., as agent for the Lenders hereunder, agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1 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 2.3. "Advance" means an advance under Article II by a Lender to a Borrower pursuant to its Commitment, and refers to a 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. "Anchor" means Anchor National Life Insurance Company, a California stock insurance company. "Annual Reports" has the meaning set forth in Section 5.6(b)(i). "Applicable Lending Office" means, with respect to each Lender, (a) in the case of its Base Rate 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. "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 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 Corpora- tion's insuring U.S. dollar deposits in the United States. "Base Rate Advance" means an Advance that bears interest as provided in Section 2.7(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. "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 Schedule 1 hereto (or in an Assignment and Acceptance entered into by it) as its Commitment, as such amount may be adjusted from time to time to give effect to Money Market Reductions pursuant to Section 2.1 or reduced from time to time pursuant to Section 2.10. "Committed Advance" means an Advance made by a Lender pursuant to Section 2.1. "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 (i), (ii) and (iii) (so long as none of the events referred to in the parenthetical clause of such clause (ii) 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 Trust Originated Preferred Securities (or similar securities) on SunAmerica's balance sheet 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, capital- ized 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), 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, 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 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 SunAmerica Life disclosed in footnote number 5 to Consolidated Financial Statements of SunAmerica for the fiscal year ended September 30, 1994, (c) obligations arising in the capacity as a creditor in respect of loan or swap participations and similar arrangements in the ordi- nary 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 Business Day" means any day except a Saturday, Sunday or other day on which commercial 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. "Effective Date" has the meaning set forth in Section 4.1. "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 clause (i), (ii) or (iii) or 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 2.7(b). "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 2.7(b). "Eurodollar Reference Banks" means Citibank, Chemical Bank and The First National Bank of Chicago, or any successor thereto. "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 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 Regu- lation 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 9.1. "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. "Existing Credit Agreements" means the Existing $60,000,000 Credit Agreement and the Existing $90,000,000 Credit Agreement. "Existing $90,000,000 Credit Agreement" means the Credit Agreement dated as of February 1, 1993 among the Borrowers, the Lenders, and the Agent providing a $90,000,000 revolving credit facility for the Borrowers as amended by the first amendment thereto dated as of January 30, 1994 and the second amendment thereto dated as of December 12, 1994. "Existing $60,000,000 Credit Agreement" means the Credit Agreement dated as of February 1, 1993 among the Borrowers, the Lenders, and the Agent providing a $60,000,000 revolving credit facility for the Borrowers as amended by the first amendment thereto dated as of January 30, 1994 and the second amendment thereto dated as of December 12, 1994. "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 Eurodollar Advances or Money Market Advances (excluding Money Market LIBOR Advances bearing interest at the Base Rate pursuant to Section 3.1) or any com- bination of the foregoing. "GAAP" means generally accepted accounting principles in the United States of America used in connection with the preparation of the financial statements referred to in Section 5.6(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. "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 SunAmerica 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 last Eurodollar Business Day of a calendar month; (b) 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 (c) 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 Domestic Business Day or Eurodollar Business Day, as the case may be; provided that with respect to clauses (a), (b) and (c) 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 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 "A-" or better by Standard & Poor's and "Baa1" 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 "BBB+" or better by Standard & Poor's and "Baa2" 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 unsecured long term debt is rated below Level II Status 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 2.3. "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 2.7(b). "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 SunAmerica 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 2.3(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 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 3.1). "Money Market Margin" has the meaning set forth in Section 2.3(d). "Money Market Quote" means an offer by a Lender to make a Money Market Advance in accordance with Section 2.3. "Money Market Reduction" has the meaning set forth in Section 2.1. "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 2.2) or a Notice of Money Market Borrowing (as defined in Section 2.3(f)). "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) real estate mortgage investment conduits (REMICs), passthrough 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 obliga- tions, (ii) 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 and (iii) the Receivables Purchase and Sale Agreement, dated as of November 30, 1994 among IPF Funding Corp, as Seller, Corporate Asset Funding Company Inc., Preferred Receivables Funding Corporation and WCP Funding, Inc., as Investors, The First National Bank of Chicago, as Agent, and Citicorp North America, Inc., as Agent and Facility Agent, the Agreement dated January 31, 1995 to Purchase $65,000,000 of Certificates Issued by a Grantor Trust Organized by Rockford Limited I and the $100,000,000 Receivables Purchase and Sale Agreement dated as of September 22, 1995 among SunAmerica Life Insurance Company, as Seller and Initial Collection Agent, WCP Funding, Inc., as Investor, and Westdeutsche Landesbank Girozentrale, New York Branch, as Agent and the Administrator, in each case as amended from time to time, provided that no such amendment shall make any material change in the provisions of said agreements relating to or limiting recourse. "Permitted Liens" has the meaning set forth in Section 7.1. "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 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 11.7(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 and as amended to and in effect on the date hereof. "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 Ratings Group, a division of McGraw-Hill, Inc. 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. "SunAmerica Life" means SunAmerica Life Insurance Company, an Arizona stock insurance company. "Termination Date" means October 27, 1998 or the earlier date of termination in whole of the Commitments pursuant to Section 2.10 or 9.1. "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 6.1(c), such amount to be calculated on a basis consistent with the preparation of the consolidating balance sheet as of June 30, 1995 delivered to the Lenders and attached as Exhibit H hereto. "Type" refers to the distinction between Advances bearing interest at the Eurodollar 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 1.2 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 1.3 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 1.4 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 and as amended to and in effect on the date hereof 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. ARTICLE II THE ADVANCES SECTION 2.1 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 2.1, 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 2.1 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 4.2(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 2.2 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 and (y) 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 Base Rate Borrowing or a Eurodollar Business Day in the case of a Eurodollar Borrowing; (b) the aggregate amount of such Borrowing; (c) whether the Advances comprising such Borrowing are to be 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 2.3 Money Market Borrowings. (a) The Money Market Option. Each Borrower may, as set forth in this Section 2.3, 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 4.2(d). (b) Money Market Quote Request. When a Borrower wishes to request offers to make Money Market Advances under this Section 2.3, 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; (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 4.2(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 substan- tially 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 2.3. (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 11.2 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 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 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 (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 4.2(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 subsection (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 2.4 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 Borrow- ing, in Federal or other funds immediately available in New York City, to the Agent at its address specified in or pursuant to Section 11.2. Unless the Agent determines 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 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 2.4 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 cor- responding 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 2.5 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. (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 4.1(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 2.6 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 2.7 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. (b)(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) 0.23% for any day on which Level I Status exists, (2) 0.30% for any day on which Level II Status and (3) 0.425% 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 respective 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 Eurodol- lar 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 3.1 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Advances for such day). (c) Subject to Section 3.1, 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 2.7(b) 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 2.3. 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 Section 2.3. 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. (d) 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 conclu- sive 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. (e) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section 2.7. 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 3.1 shall apply. SECTION 2.8 Fees. (a) 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) 0.07% for any day on which Level I Status exists, (ii) 0.10% 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. (b) 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 an additional utilization fee at the rate of 0.10% per annum on the aggregate principal amount of all Advances under this Agreement then outstanding for any day on which both (i) such aggregate outstanding principal amount of Advances exceeds 33 1/3% of the sum of the Commitments as of such date and (ii) Level III Status exists. (c) Payments. Accrued fees under this Section 2.8 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 Ter- mination Date (and, if later, the date the Advances shall be repaid in their entirety). SECTION 2.9 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 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 2.9 (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 $5,000,000 or any larger multiple of $5,000,000 or (ii) the full amount thereof, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Advances. 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 in- terest at the Base Rate pursuant to Section 3.4) or, subject to Section 2.14, any 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 prepayment 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 11.2. 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 Base Rate 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 2.7(c), 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 2.4(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 11.7(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, or otherwise) on account of the Advances owing to it (other than pursuant to Section 2.17 or 3.3) 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 similar 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. 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 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) requiring a change in the most recent form so deliv- ered 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 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. ARTICLE III CHANGES IN CIRCUMSTANCES SECTION 3.1 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 London Interbank Offered Rate as determined by the Agent will not adequately and fairly reflect the cost to such Lenders of funding their Eurodollar Advances 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 Eurodollar Advances 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 3.2 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 3.2, 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. SECTION 3.3 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 com- parable 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 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 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 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. (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 3.3 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 3.3 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 3.4 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 3.2 or (ii) any Lender has demanded compensation under Section 3.3(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 3.4 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 Eurodollar Advances 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 Eurodollar Advances 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 3.5 Substitution of Lender. If (i) the obligation of any Lender to make Eurodollar Advances has been suspended pursuant to Section 3.2, (ii) any Lender has demanded compensation under Section 3.3, or (iii) the Borrowers are required to pay any Additional Amounts under Section 2.17 to any Lender, 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 3.6 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 hereun- der shall be made as if such Lender had actually funded and maintained each 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 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 London Interbank Offered Rate or Money Market Absolute Rate, as the case may be, for such Interest Period. SECTION 3.7 Conclusiveness of Statements; Survival of Provisions. Determinations and statements of the Agent or any Lender made in accordance with Section 2.14 and Section 3.1 through Section 3.3 shall be conclusive and binding on the Borrowers absent manifest error. The provisions of Sections 2.14, 3.2, 3.3 and 3.4 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 4.1 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 11.6 (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 11.1): (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, respectively; (c) receipt by the Agent of an opinion of Susan L. Harris, the Secretary and General Counsel-Corporate Affairs 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 Milbank, Tweed, Hadley & McCloy, 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 author- ity 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; (g) receipt by the Agent of evidence that the principal of and interest on the indebtedness outstanding under the Existing Credit Agreements on the Effective Date and all other amounts owing under the Existing Credit Agreements shall have been paid in full and that the Commitments (as such term is defined in each of the Existing Credit Agreements) shall have been terminated; and such conditions shall have been satisfied not later than October 27, 1995. 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 4.2 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 2.2 or 2.3, 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 4.2 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 5.6(b)(iii) and 5.7; (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 5.1 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 prop- erties, 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 5.2 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 5.3 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 5.4 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 Ex- change Act. SECTION 5.5 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 5.6 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, 1992, 1993 and 1994 (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. (ii) As of June 30, 1995, the Risk-Based Capital Ratio of Anchor and SunAmerica Life were, respectively, 381% and 200%, and as the Effective Date, there has been no material reduction in the Risk-Based Capital Ratio of Anchor or SunAmerica 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, 1992, 1993 and 1994 (the "Annual Reports"), (B) annual reports on Form 10-K for such fiscal years and all quarterly reports on Form 10-Q of SunAmerica for periods ending after September 30, 1994, in each case as filed with the Securities and Exchange Commission (the "SEC Reports") and (C) consolidating balance sheets and income statements of SunAmerica and SAFI (but not their respective Subsidiaries) as of and for the year ended September 30, 1994. 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 ap- plied 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 have been provided to the Banks pursuant to Section 6.01(g) of the Existing $90,000,000 Credit Agreement 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, 1994. SECTION 5.7 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 5.8 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 5.9 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 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, 1994 in the financial statements described in Section 5.6 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, 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 docu- ments, 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 programs of SunAmerica and its Subsidiaries, 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 individually 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 Borrow- er'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 6.1 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 fi- nancial 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 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 ac- counting 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 6.1 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 con- troller 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 Subsidiary 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 pre- scribed 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, 1998 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: (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 Sec- tion 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. (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 6.2 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 6.2 shall (a) prohibit actions permitted under Section 7.2 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 6.3 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 6.4 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 6.5 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 6.6 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 6.7 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 6.8 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 6.9 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 noncompliance 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 11.1): SECTION 7.1 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 re- serves 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 ac- quisition 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 Section 1.1; (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) guar- anteed 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 7.1 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 $75,000,000; 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 7.2 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 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 7.2 shall not apply: (a) to any merger of SunAmerica with another Person if (x) SunAmerica is the corporation surviving to 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 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 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 SAFI or any such Material Subsidiary, SunAmerica would own, directly or indirectly, 100% of the issued and outstanding Voting Stock of 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 7.3 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 8.1 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 8.2 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 8.3 Risk-Based Capital Ratio. The Borrowers shall at all times cause each of Anchor, SunAmerica Life and any other Insurance Subsidiary that is a Material Subsidiary to maintain a Risk-Based Capital Ratio of no less than 125%. SECTION 8.4 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 9.1 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 6.1(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 principal amount of at least $50,000,000 (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 Subsidiary, 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 (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 termi- nated 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 10.1 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 limitation, 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 11.1), 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 10.2 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 11.7, (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 10.3 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 10.4 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 5.6 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 10.5 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 miscon- duct. 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 10.5 shall survive the payment of the Notes and Advances and all other amounts payable hereunder. SECTION 10.6 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. ARTICLE XI MISCELLANEOUS SECTION 11.1 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 pay- able 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 11.1, 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 11.2 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 11.3 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 11.4 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 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 11.4 shall survive repayment of the Notes and all other amounts payable hereunder. SECTION 11.5 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 9.1 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of Section 9.1, 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 obliga- tions 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 11.5 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. SECTION 11.6 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 11.7 Assignments and Participations. Each Lender may, and if demanded by any Borrower (following a demand by such Lender pursuant to Section 2.17 or 3.3) 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 $10,000,000 (or 100% of such Lender's remaining Commitment, if less than $10,000,000), (iv) 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 (provided, that no such consent of SunAmerica shall be required in the case of an assignment by a Bank to an affiliate or subsidiary of such Bank), and (v) 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 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 5.6 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 11.2 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 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 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 11.1. 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 11.7, 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 con- fidentiality of such confidential information. (g) Notwithstanding any other provision of this Section 11.7, 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 11.8 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 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 11.2 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 11.8 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 INDI- RECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONCERNED WITH THIS AGREEMENT AND THE NOTES. SECTION 11.9 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. 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. 1 Sun America Center Los Angeles, California 90067 By: /s/ SCOTT H. RICHLAND Name: Scott H. Richland Title: VP & AT SUNAMERICA FINANCIAL, INC. 1 Sun America Center Los Angeles, California 90067 By: /s/ SCOTT H. RICHLAND Name: Scott H. Richland Title: VP & AT 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 Lenders BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION 231 LaSalle Street, 10th Floor Chicago, IL 60670 Attention: Mr. Michael Ernst By: /s/ MICHAEL T. ERNST Name: Michael T. Ernst Title: Vice President THE BANK OF NEW YORK 1 Wall Street 17th Floor New York, NY 10286 Attention: Ms. Christine M. Herrick By: [illegible] Name: [illegible] Title: Vice President THE CHASE MANHATTAN BANK, N.A. 1 Chase Manhattan Plaza 4th Floor New York, NY 10081 Attention: Mr. Daniel Troy By: /s/ DANIEL G. TROY Name: Daniel G. Troy Title: Vice President CHEMICAL BANK 270 Park Avenue, 10th Floor New York, NY 10017 Attention: Mr. Peter Platten By: /s/ GEORGE C. JOHNSON Name: George C. Johnson Title: Vice President FIRST INTERSTATE BANK, LTD. 707 Wilshire Blvd. W16-14 Los Angeles, CA 90017 Attention: Mr. Robert Meyer By: /s/ ROBERT C. MEYER Name: Robert C. Meyer Title: Vice President THE FIRST NATIONAL BANK OF CHICAGO One First National Plaza Mail Suite 0085 Chicago, IL 60670-0085 Attention: Ms. Marcia Saper By: /s/ MARCIA P. SAPER Name: Marcia P. Saper Title: Vice President THE INDUSTRIAL BANK OF JAPAN, LIMITED Two California Plaza 350 South Grand Ave., Suite 1500 Los Angeles, CA 90017 Attention: Mr. Carl-Eric Benzinger By: /s/ KAZUTAKE KIYOTO Name: Mr. Kazutaka Kiyoto Title: Senior Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK 60 Wall Street, 22nd Floor New York, NY 10260 Attention: Mr. Jerry Fall By: /s/ ANTHONY R. MALLOY Name: Anthony R. Malloy Title: Vice President NATIONSBANK OF GEORGIA, N.A. 600 Peachtree, NE 21st Floor Atlanta, GA 30308-2213 Attention: Mr. Frank R. Callison By: /s/ FRANK R. CALLISON Name: Frank R. Callison Title: Vice President WESTDEUTSCHE LANDESBANK GIROZENTRALE NEW YORK AND CAYMAN ISLANDS BRANCHES 1211 Avenue of the Americas New York, NY 10036 Attention: Ms. Trish McGrath By: /s/ KEN CRESPO By: /s/ LAURA SPICHIGER Name: Ken Crespo Name: Laura Spichiger Title: Vice President Title: Associate with a copy to: 633 West Fifth Street Suite 6750 Los Angeles, CA 90071 Attention: Mr. John T. Seifert SCHEDULE 1 TO CREDIT AGREEMENT Name of Lender Commitment CITIBANK, N.A. $ 23,000,000 BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION $ 22,700,000 THE BANK OF NEW YORK $ 22,700,000 THE CHASE MANHATTAN BANK, N.A. $ 22,700,000 CHEMICAL BANK $ 22,700,000 FIRST INTERSTATE BANK, LTD. $ 22,700,000 THE FIRST NATIONAL BANK OF CHICAGO $ 22,700,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED $ 22,700,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK $ 22,700,000 NATIONSBANK OF GEORGIA, N.A. $ 22,700,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE NEW YORK AND CAYMAN ISLANDS BRANCHES $ 22,700,000 ____________ $250,000,000 Exhibit A Form of Note New York, New York __________ ___, 1995 For value received, SUNAMERICA INC., a Maryland corporation and SUNAMERICA FINANCIAL, INC., a Georgia corporation (collec- tively, 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 Borrow- ers 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 October 27, 1995, among the Borrowers, the Lenders listed on the signature pages thereof and Citibank, N.A., as Agent for the Lenders, providing for a $250,000,000 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 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 ________________________ Name: Title: SUNAMERICA FINANCIAL, INC. By ________________________ Name: Title: Form of Note (cont'd) ADVANCES AND PAYMENTS OF PRINCIPAL ____________________________________________________________________ Amount of Amount of Type of Principal Maturity Notation Date Advance Advance RepaidDate Made by ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ 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 October 27, 1995, providing for a $250,000,000 revolving credit facility, (as from time to time amended, 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 2.2 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 2.2 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 [Base Rate Advances] [Eurodollar Advances]; (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 5.6(b)(iii) and 5.7; (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: * 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). 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 October 27, 1995 providing for a $250,000,000 revolving credit facility (as from time to time amended, 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 2.3(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 (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 5.6(b)(iii) and 5.7; (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: * 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). ** 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 Absolute Rate Advance, and 1,2,3, or 6 months for each money. Marke LIBOR Advance, in ea. case subject to the provisions of the definition of Interest Period. Exhibit D Form of Invitation for Money Market Quotes [DATE] [Name of Lender] [Address] Attention: ________________ Ladies and Gentlemen: Pursuant to Section 2.3(c) of the Credit Agreement, dated as of October 27, 1995 providing for a $250,000,000 revolving credit facility (as from time to time amended, the "Credit Agreement", the terms defined therein being used herein as therein defined), among SunAmerica Inc., a Maryland 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 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 October 27, 1995, providing for a $250,000,000 revolving credit facility (as from time to time amended, the "Credit Agreement", the terms defined therein being used herein as therein defined), among SunAmerica Inc., a Maryland 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: Principal Interest Money Market [Absolute Amount** Period*** [Margin****] 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 * As specified in the related Invitation. ** 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%). Exhibit F October __, 1995 To the Lenders listed on Annex A hereto SunAmerica Inc. Ladies and Gentlemen: I am Vice President and General Counsel - Corporate Affairs of SunAmerica Inc., a Maryland corporation ("SunAmerica") and have acted as such in connection with the Credit Agreement dated as of October 27, 1995 (the "Credit Agreement") by and among SunAmerica and SunAmerica Financial, Inc., a Georgia corporation ("SAFI") (SunAmerica 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 $250,000,000 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. 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 SunAmerica Life and Anchor. For purposes of the opinion in the second sentence of paragraph 4 below, I have reviewed the opinion of Messrs. Milbank, Tweed, Hadley & McCloy dated _________________ 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 corporation laws of the States of Maryland and Georgia. 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 either 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 either Borrower, or (c) contravene or conflict with any provision of the Articles of Incorporation or Bylaws of either Borrower. 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 either 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. Anchor 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. SunAmerica Life is a validly existing and in good standing under the laws of the State of Arizona, it being understood that this opinion is based solely on the certificate of the Executive Secretary of the Office of the Corporation Commission of the State of Arizona dated October 11, 1995 and a letter from CT Corporation System dated as of October ___, 1995 stating that as of such date SunAmerica Life is in good standing in the State of Arizona. 8. Neither 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. 9. 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. 10. No material License of an Insurance Subsidiary (i.e., SunAmerica 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 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, (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 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 231 LaSalle Street, 10th Floor Chicago, IL 60670 Attention: Mr. Michael Ernst THE BANK OF NEW YORK 1 Wall Street 17th Floor New York, NY 10286 Attention: Ms. Christine M. Herrick THE CHASE MANHATTAN BANK, N.A. 1 Chase Manhattan Plaza 4th Floor New York, NY 10081 Attention: Mr. Daniel Troy CHEMICAL BANK 270 Park Avenue, 10th Floor New York, NY 10017 Attention: Mr. Peter Platten FIRST INTERSTATE BANK, LTD. 707 Wilshire Blvd. W16-14 Los Angeles, CA 90017 Attention: Mr. Robert Meyer THE FIRST NATIONAL BANK OF CHICAGO One First National Plaza Mail Suite 0085 Chicago, IL 60670-0085 Attention: Ms. Marcia Saper THE INDUSTRIAL BANK OF JAPAN, LIMITED Two California Plaza 350 South Grand Ave., Suite 1500 Los Angeles, CA 90017 Attention: Mr. Carl-Eric Benzinger J.P. MORGAN & COMPANY, INC. 60 Wall Street New York, NY 10260 Attention: Mr. Tony Malloy MORGAN GUARANTY TRUST COMPANY OF NEW YORK 60 Wall Street, 22nd Floor New York, NY 10260 Attention: Mr. Jerry Fall NATIONS BANK OF GEORGIA, N.A. 600 Peachtree, NE 21st Floor Atlanta, GA 30308-2213 Attention: Mr. Frank R. Callison WESTDEUTSCHE LANDESBANK GIROZENTRALE 1211 Avenue of the Americas New York, NY 10036 Attention: Ms. Trish McGrath with a copy to: 633 West Fifth Street Suite 6750 Los Angeles, CA 90071 Attention: Mr. John T. Seifert Exhibit G ASSIGNMENT AND ACCEPTANCE Dated ___________, 199__ Reference is made to the Credit Agreement, dated as of October 27, 1995, providing for a $250,000,000 revolving credit facility (the "Credit Agreement"), among SunAmerica Inc., a Maryland corporation ("SunAmerica") and SunAmerica Financial, Inc., a Georgia corporation (together with SunAmerica, 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 Monday 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 an 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 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 5.6 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 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 11.7(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] 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] Accepted and consented to this ______ day of ____________, 199_ CITIBANK, N.A., as Agent By______________________ Name: Title: SUNAMERICA INC. By______________________ Name: Title: * The amount of Commitments being assigned shall comply with Section 11.7(a) of the Credit Agreement. ** If the Assignee is organized under the laws of a jurisdiction outside the United States. *** See Section 11.7(a). Such date shall be at least 3 Domestic Business Days after the execution of this Assignment and Acceptance. 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 $ EX-11 3 EXHIBIT 11 SUNAMERICA INC. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS For the three months ended December 31, 1995 and 1994 (In thousands, except per-share amounts) 1995 1994 ---------- ---------- Average number of common and common stock equivalent shares outstanding during the period: Common Stock issued and outstanding at beginning of period 54,415 53,705 Average number of common shares issued upon exercise of employee stock options or under other employee stock plans 79 337 Average number of common stock equivalent shares arising from outstanding employee stock options 2,139 1,229 Average number of shares issuable upon conversion of convertible preferred stock: Series D Mandatory Conversion Premium Dividend Preferred Stock 5,113 7,505 Series E Mandatory Conversion Premium Dividend Preferred Stock 4,000 -- ---------- ---------- Average number of common and common stock equivalent shares outstanding during the period 65,746 62,776 ========== ========== Earnings applicable to common stock: Net income $ 64,786 $ 45,134 Less preferred dividend requirements other than those related to convertible issues: 9-1/4% Preferred Stock, Series B (2,031) (3,249) SunAmerica Adjusted Rate Cumulative Preferred Stock, Series C (852) (890) ---------- ---------- Net earnings applicable to common stock $ 61,903 $ 40,995 ========== ========== Net earnings per common and common equivalent share $ 0.94 $ 0.65 ========== ==========
EX-27 4
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND INCOME STATEMENT OF SUNAMERICA INC.'S FORM 10-Q FOR THE FIRST QUARTER ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS SEP-30-1996 DEC-31-1995 8,210,874 0 0 36,619 1,575,390 103,418 11,587,108 657,210 0 532,941 17,844,353 9,170,125 0 0 0 539,835 54,540 0 569,642 941,820 17,844,353 0 231,646 1,404 49,549 129,520 19,002 (2,607) 92,586 27,800 64,786 0 0 0 64,786 0.94 0.94 0 0 0 0 0 0 0
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