-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, lzcc3Ks8VYz+D7QyGS8Ua73f2f63y0+QhR11PGObCFiHTwbaEhtGABlLmPpBBCY3 0Xgf0i40LyRCe+yh5gj+tQ== 0000912057-94-004076.txt : 19941202 0000912057-94-004076.hdr.sgml : 19941202 ACCESSION NUMBER: 0000912057-94-004076 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941201 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04618 FILM NUMBER: 94562984 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-K 1 FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended September 30, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to Commission File Number 1-4618 SUNAMERICA INC. INCORPORATED IN MARYLAND 86-0176061 IRS EMPLOYER IDENTIFICATION NO.
1 SunAmerica Center, Los Angeles, California 90067-6022 Registrant's telephone number, including area code (310) 772-6000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common Stock (par value $1.00 per share) New York Stock Exchange Pacific Stock Exchange 9 1/4% Preferred Stock, Series B New York Stock Exchange $2.78 Depositary Shares representing Series D Mandatory Conversion Premium Dividend Preferred Stock New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ The aggregate market value of voting stock held by non-affiliates of the Company on October 31, 1994 was $1,137,638,000. The number of shares outstanding of each of the registrant's classes of common stock on October 31, 1994 was as follows: Common Stock (par value $1.00 per share) 28,980,173 shares Nontransferable Class B Stock (par value $1.00 per share) 6,826,439 shares
DOCUMENTS INCORPORATED BY REFERENCE NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT (INCORPORATED INTO PART III) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS GENERAL DESCRIPTION SunAmerica Inc. (the "Company") is a diversified financial services company serving the preretirement savings market. Together, the SunAmerica life insurance companies rank among the largest U.S. issuers of individual annuities. Complementing these annuity operations are the Company's asset management operations; its two broker-dealers, which the Company believes, based on industry data, represent the largest network of independent registered representatives in the nation; and its trust company which provides administrative and custodial services to qualified retirement plans. At September 30, 1994, the Company held $23.37 billion of assets, consisting of $14.66 billion of assets owned by the Company; $2.17 billion of assets managed in mutual funds and private accounts; and $6.54 billion under custody in retirement trust accounts. The Company believes that demographic trends have produced strong consumer demand for long-term, investment-oriented products. According to U.S. Census Bureau projections, the number of individuals ages 45 to 64 will grow from 47 million to 61 million during the 1990s, making this age group the fastest-growing segment of the U.S. population. Between 1983 and 1993, annual industry sales of annuities increased from $31 billion to $156 billion, while annual industry sales of mutual funds, excluding money market and other short-term funds, rose from $40 billion to $512 billion. Focusing its operations on this expanding market, the Company specializes in the sale of tax-deferred long-term savings products and investments through its life insurance, asset management, retirement trust and broker-dealer subsidiaries. The Company markets fixed annuities and fee-generating variable annuities, mutual funds and trust services, and guaranteed investment contracts ("GICs"). Its products are distributed through a broad spectrum of financial services distribution channels, including independent registered representatives of the Company's broker-dealer subsidiaries and unaffiliated broker-dealers; independent general insurance agents; and financial institutions. SunAmerica employs approximately 1,000 people. It is incorporated in Maryland and maintains its principal executive offices at 1 SunAmerica Center, Los Angeles, California 90067-6022, telephone (310) 772-6000. As used herein, the "Company" or "SunAmerica" refers to SunAmerica Inc. and, unless the context requires otherwise, its subsidiaries. In recent years, SunAmerica has strategically expanded its operations, both through internal growth and through the acquisition of blocks of fixed and variable annuity reserves, distribution networks and complementary fee-based financial services businesses. In June 1994, the Company's subsidiary, Resources Trust Company ("Resources Trust"), agreed to acquire the account servicing rights to approximately 43,000 individual retirement plan accounts, representing approximately $1 billion in plan assets, from New England Securities Corporation, the broker-dealer subsidiary of New England Mutual Life Insurance Company. This acquisition closed October 1, 1994 and has increased plan assets administered by Resources Trust to more than $8.0 billion. On November 30, 1994, the Company acquired substantially all of the assets of Imperial Premium Finance, Inc. ("Imperial"), the fourth largest insurance premium finance company in the United States, based on 1993 premiums financed of approximately $1.5 billion. Imperial provides short-term installment loans for businesses to fund their commercial property and casualty insurance premiums. These loans are secured by the unearned premium associated with the underlying insurance policy. Currently, Imperial sells most of the short-term loans it originates in its premium finance operations and earns fee income by servicing the sold loans. At September 30, 1994, Imperial had $132.7 million of assets and for the year then ended earned net income of $4.2 million. As consumer demand for investment-oriented products has grown, the Company has increased its fee income significantly in recent years by emphasizing the marketing of variable annuities, mutual 1 funds and trust services, and through the receipt of broker-dealer net retained commissions. Its fee generating businesses entail no portfolio credit risk and require significantly less capital support than its fixed-rate business. For the year ended September 30, 1994, the Company's net investment income (including net realized investment losses) and fee income by primary product line or service are as follows: NET INVESTMENT AND FEE INCOME
AMOUNT PERCENT PRIMARY PRODUCT OR SERVICE --------------- ----------- --------------------------------------- (IN THOUSANDS) Net investment income (including net realized investment losses)................ $ 273,330 64.5% Fixed-rate products --------------- ----- Fee income: Variable annuity fees..................... 79,483 18.7 Variable annuities Asset management fees..................... 31,302 7.4 Mutual funds/private management accounts Net retained commissions.................. 28,009 6.6 Broker-dealer sales Trust fees................................ 11,942 2.8 Self-directed retirement accounts --------------- ----- Total fee income.......................... 150,736 35.5 --------------- ----- Total....................................... $ 424,066 100.0% --------------- ----- --------------- -----
For financial information on the Company's business segments, see Part IV -- "Notes to Consolidated Financial Statements -- Note 10 -- Business Segments." LIFE INSURANCE COMPANIES The Company's life insurance group includes 104-year-old Sun Life Insurance Company of America ("Sun Life of America"), acquired in 1971; Anchor National Life Insurance Company ("Anchor"), acquired in 1986; and First SunAmerica Life Insurance Company ("First SunAmerica"), acquired in 1987. Collectively, these companies had $12.98 billion of assets at September 30, 1994 and served all 50 states and the District of Columbia. Based on the latest available statutory industry data, the Company believes that its life insurance group ranks among the largest issuers of fixed and variable annuities in the nation, as measured by 1993 individual annuity premiums and deposits, and that Sun Life of America, Anchor and First SunAmerica collectively rank among the top 2% of all U.S. life insurance companies, as measured by 1993 total assets. Anchor ranks among the largest issuers of variable annuities in America, according to the latest published industry data. The Company's life insurance group issues a portfolio of fixed and variable annuities, as well as other products that cater to the market for tax-deferred, long-term savings products. Sun Life of America is an Arizona-chartered company licensed in 48 states and the District of Columbia. Anchor, founded in 1965, is a California-chartered company licensed in 49 states and the District of Columbia. Sun Life of America and Anchor each have a "AA" (Excellent) claims-paying ability rating from Standard & Poor's Corporation ("S&P"), a "AA" (Very High) rating from Duff & Phelps, Inc. ("Duff & Phelps") and an "A2" (Excellent) rating from Moody's Investors Service ("Moody's"). They also have an "A" (Excellent) rating from industry analyst A.M. Best Company. Sun Life of America focuses on the sale of single premium fixed-rate annuities and GICs. Sun Life of America had $6.66 billion of assets at September 30, 1994. Anchor specializes in the sale of flexible premium variable annuities. At September 30, 1994, it had $6.60 billion of assets. First SunAmerica is a New York-chartered company that markets its products only in the state of New York. It has an "A" (Excellent) rating from A.M. Best Company. At September 30, 1994, it had $114.1 million of assets. Benefitting from continued strong demographic growth of the preretirement savings market, industry sales of tax-deferred savings products have represented, for a number of years, a significantly 2 larger source of new premiums for the U.S. life insurance industry than have traditional life insurance products. Recognizing the growth potential of this market, the Company focuses its life insurance operations exclusively on the sale of annuities and GICs. Because of its focus on annuity products, which generally have more contractholder transactions than traditional life insurance products, the Company utilizes sophisticated, computer-driven, transaction-oriented systems that employ optical disk imaging and artificial intelligence, in lieu of paper- intensive life insurance processing procedures. The Company believes its service support and its associated cost structure to be among the most competitive in the industry. The Company currently markets its fixed and variable annuities through the following distribution channels: (i) independent registered representatives of SunAmerica Securities, Inc. and Royal Alliance Associates, Inc. ("Royal Alliance"); (ii) approximately 400 other securities firms and several financial institutions; and (iii) independent general insurance agents who specialize in selling annuities and other single premium products. Approximately 21,000 independent sales representatives nationally are licensed to sell the Company's annuity products. In addition, in June 1994, the Company signed separate, exclusive agreements with First Interstate Bancorp ("First Interstate") and The Chase Manhattan Bank, N.A. ("Chase") to develop variable annuity products whose underlying funds will be managed by the respective institutions. Each institution will have the right to make these private label variable annuities available through its retail branch network and distribution channels. First Interstate currently has over 1,000 bank branches in 13 western states. Chase currently has approximately 350 bank branches in New York, Connecticut, Maryland and Florida and its new variable annuity product will also be available through a number of the broker-dealer and financial planning organizations that currently offer other investment products managed by Chase. FIXED ANNUITIES AND GICS Sun Life of America and First SunAmerica offer single premium and flexible premium deferred annuities that provide one-, three-, five-, seven-, or ten-year fixed interest rate guarantees. Although the Company's contracts remain in force an average of seven to ten years, a majority (approximately 69% at September 30, 1994) reprice annually at discretionary rates determined by the Company. In repricing, the Company takes into account yield characteristics of its investment portfolio, annuity surrender assumptions and competitive industry pricing. Its fixed-rate products offer many of the same features as conventional certificates of deposit from financial institutions, giving investors a choice of interest period and yield as well as additional advantages particularly applicable to retirement planning, such as tax-deferred accumulation and flexible payout options. The average new single premium fixed annuity contract sold by the Company amounted to approximately $37,000 in 1994. The Company augments its retail annuity sales effort with the marketing of institutional products. At September 30, 1994, the Company had $2.78 billion of primarily fixed-rate, fixed-maturity GIC obligations. Of these, approximately 41% were sold to state and local governmental authorities, 33% were sold to pension plans and 26% were sold to asset management firms. The Company designs its fixed-rate products and conducts its investment operations in order to closely match the duration of the assets in its investment portfolio to its annuity and GIC obligations. The Company seeks to achieve a predictable spread between what it earns on its assets and what it pays on its liabilities by investing principally in fixed maturities. The Company's fixed-rate products incorporate surrender charges, two-tiered interest rate structures or other limitations on when contracts can be surrendered for cash to encourage persistency and discourage withdrawals. Approximately 78% of the Company's fixed annuity and GIC reserves had surrender penalties or other restrictions at September 30, 1994. VARIABLE ANNUITIES The variable annuity products of Anchor and First SunAmerica offer investors a broad spectrum of fund alternatives, as well as fixed-rate account options. Anchor also offers investors a choice of investment managers, a product feature that First SunAmerica expects to offer in the 1995 fiscal year. 3 These companies earn fee income through the sale, administration and management of the variable account options of their variable annuity products. They also earn investment income on monies allocated to the fixed-rate account options of these products. Variable annuities offer retirement planning features and surrender charges similar to those offered by fixed annuities, but differ in that the annuity holder's rate of return is generally dependent upon the investment performance of the particular equity, fixed-income, money market or asset allocation fund selected by the contractholder. Because the investment risk is borne by the customer in all but the fixed-rate account options, these products require significantly less capital support than fixed annuities. The average new variable annuity contract sold by the Company amounted to approximately $33,000 in 1994. INVESTMENT OPERATIONS The Company believes that its fixed-rate liabilities should be backed by a portfolio principally composed of fixed maturities that generate predictable rates of return. The Company does not have a specific target rate of return. Instead, its rates of return vary over time depending on the current interest rate environment, the slope of the yield curve, the spread at which fixed maturities are priced over the yield curve and general competitive conditions within the industry. The Company manages most of its investments internally. Its portfolio strategy is designed to achieve adequate risk-adjusted returns consistent with its investment objectives of effective asset-liability matching, liquidity and safety. As part of its asset-liability matching discipline, the Company conducts detailed computer simulations that model its fixed-maturity assets and liabilities under commonly used stress-test interest rate scenarios. Based on the results of these computer simulations, the investment portfolio has been constructed with a view to maintaining a desired investment spread between the yield on portfolio assets and the rate paid on its reserves under a variety of possible future interest rate scenarios. In addition, the Company has designed its portfolio to limit the market discount from book value on the aggregate portfolio that might result from a sharp rise in interest rates. The cash flow obtained from mortgage-backed securities ("MBSs") helps to maintain the anticipated spread, while providing desired liquidity. For the years ended September 30, 1994, 1993 and 1992, the Company's yield on average invested assets was 8.50%, 9.00% and 9.78%, respectively, before net realized investment losses, and it realized net investment spreads of 3.30%, 3.15% and 2.81%, respectively, on average invested assets. At September 30, 1994, the weighted average life of the Company's investments was approximately four-and-one-half years and the portfolio had a duration of approximately three-and-three-fourths years. Weighted average life is defined as the average time to receipt of all principal, incorporating the effects of scheduled amortization and expected prepayments, weighted by book value. Duration is a common measure for the price sensitivity of a fixed-income security or portfolio to changes in interest rates. It is the weighted average time to receipt of all expected cash flows, both principal and interest, including the effects of scheduled amortization and expected prepayments, in which the weight attached to each year of receipt is the proportion of the present value of cash to be received during that year to the total present value of the portfolio. The Company's general investment philosophy is to hold fixed maturity assets for long-term investment. Thus, it does not have a trading portfolio. Effective September 30, 1993, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" and, accordingly, began to carry the portion of its portfolio of bonds, notes and redeemable preferred stocks that is available for sale (the "Available for Sale Portfolio") at estimated fair value. The remaining portion of its portfolio of bonds, notes and redeemable preferred stocks is held for investment and continues to be carried at amortized cost. The table on the following page summarizes the Company's investment portfolio at September 30, 1994. 4 SUMMARY OF INVESTMENTS
AMORTIED PERCENT OF COST PORTFOLIO -------------- ----------- (IN THOUSANDS) Fixed maturities: Cash and short-term investments...................................................... $ 569,382 5.9% U.S. government securities........................................................... 498,477 5.2 Mortgage-backed securities........................................................... 3,751,783 39.1 Other bonds, notes and redeemable preferred stocks................................... 2,413,652 25.1 Mortgage loans....................................................................... 1,426,924 14.9 -------------- ----- Total................................................................................ 8,660,218 90.2 Real estate............................................................................ 107,053 1.1 Equity securities...................................................................... 49,336 0.5 Other invested assets.................................................................. 780,501 8.2 -------------- ----- Total investments...................................................................... $ 9,597,108 100.0% -------------- ----- -------------- -----
At September 30, 1994, approximately $6.65 billion or 99.6% (at amortized cost) of bonds, notes and redeemable preferred stocks, including those held for investment and the Available for Sale Portfolio (the "Bond Portfolio"), was rated by S&P, Moody's or under comparable statutory rating guidelines established by the National Association of Insurance Commissioners ("NAIC") and implemented by either the NAIC or the Company. At September 30, 1994, approximately $5.66 billion (at amortized cost) was rated investment grade by one or both of these agencies or under the NAIC guidelines, including $4.20 billion of U.S. government/agency securities and MBSs. At September 30, 1994, the Bond Portfolio included $988.2 million (fair value, $946.4 million) of bonds not rated investment grade by S&P, Moody's or the NAIC. Based on their September 30, 1994 amortized cost, these bonds accounted for 6.6% of the Company's total assets and 10.3% of invested assets. For a detailed discussion concerning non-investment grade bonds, including the risks inherent in such investments, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Financial Condition and Liquidity." Senior secured loans ("Secured Loans") are included in the Bond Portfolio and their amortized cost aggregated $719.0 million at September 30, 1994. Secured Loans are primarily originated by money center or investment banks or are originated directly by the Company. Secured Loans are senior to subordinated debt and equity, and virtually all are secured by assets of the issuer. At September 30, 1994, Secured Loans consisted of loans to 92 borrowers spanning 26 industries, with no industry concentration constituting more than 8% of these assets. For more information regarding Secured Loans, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Financial Condition and Liquidity." Mortgage loans aggregated $1.43 billion at September 30, 1994 and consisted of 666 first mortgage loans with an average loan balance of approximately $2.1 million, collateralized by properties located in 26 states. Approximately 51% of the portfolio was multifamily residential, 21% was retail, 8% was office, 7% was industrial and 13% was other types. At September 30, 1994, approximately 33% of the portfolio was secured by properties located in California and no more than 12% of the portfolio was secured by properties in any other single state. At September 30, 1994, there were no construction, takeout, farm or land loans and there were 22 loans with outstanding balances of $10 million or more, which loans aggregated approximately 25% of the portfolio. At the time of their origination or purchase by the Company, virtually all mortgage loans had loan-to-value ratios of 75% or less. At September 30, 1994, approximately 21% of the mortgage loan portfolio consisted of loans with balloon payments due before October 1, 1997. At September 30, 1994, loans delinquent by more than 90 days totaled $45.9 million and constituted 3.2% of total mortgages. Loans foreclosed upon and transferred 5 to real estate in the balance sheet during fiscal 1994 totaled $6.0 million (0.4% of total mortgages). For more information regarding mortgage loans, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Financial Condition and Liquidity." At September 30, 1994, the amortized cost of all investments in default as to the payment of principal or interest totaled $56.2 million, constituting 0.6% of total invested assets at amortized cost and their fair value was equal to their amortized cost. MUTUAL FUNDS AND INVESTMENT SERVICES Through its registered investment advisor, SunAmerica Asset Management Corp. ("SunAmerica Asset Management"), and its related mutual fund distributor, the Company earns fee income by distributing and managing a diversified family of mutual funds and by providing professional management of individual, corporate and pension plan portfolios. SunAmerica's mutual funds offer investors an array of equity, fixed-income, money market and tax-exempt portfolios. Founded in 1983 and acquired by the Company in January 1990, SunAmerica Asset Management managed approximately $3.63 billion of assets at September 30, 1994, including approximately $2.12 billion of mutual fund assets; $47.9 million of assets for investment companies, individuals, pension and profit sharing plans, and corporate and trust accounts; and $1.46 billion of the Company's variable annuity assets. The SunAmerica mutual funds are distributed nationally through a network of more than 300 financial institutions and unaffiliated broker-dealers, as well as by the Company's broker-dealer subsidiaries. RETIREMENT TRUST SERVICES Through Resources Trust, acquired in January 1990, the Company earns fee income by providing administrative and custodial services for approximately 152,000 self-directed retirement accounts. Self-directed retirement accounts include individual retirement accounts (IRAs), Keoghs, 401(k) plans, and pension and profit sharing plans with combined account assets at September 30, 1994 of approximately $6.54 billion. In September 1994, Resources Trust also began making available its new "Complete 401(k)," a product that combines the administrative and custodial services of Resources Trust with the variable annuity products of the Company. Resources Trust also earns investment income on customer cash balances that are interest-bearing and insured by the Federal Deposit Insurance Corporation. Resources Trust's services are sold nationally through approximately 12,000 registered representatives affiliated with 1,000 broker-dealers, including the Company's broker-dealer subsidiaries. BROKER-DEALERS The Company also owns two broker-dealers: SunAmerica Securities, Inc., which commenced business in 1989; and Royal Alliance, acquired by the Company in January 1990. As a result of the Company's ongoing active recruitment of independent registered representatives, the Company has increased its network of representatives from approximately 3,600 at September 30, 1993 to approximately 4,300 at September 30, 1994. The Company believes that, through ownership of these firms, it has the largest network of independent registered representatives in the nation, based on industry data. REGULATION The Company's insurance subsidiaries are subject to regulation and supervision by the states in which they are authorized to transact business. State insurance laws establish supervisory agencies with broad administrative and supervisory powers related to granting and revoking licenses to transact business, regulating marketing and other trade practices, operating guaranty associations, licensing agents, approving policy forms, regulating certain premium rates, regulating insurance holding company systems, establishing reserve requirements, prescribing the form and content of required financial statements and reports, performing financial and other examinations, determining 6 the reasonableness and adequacy of statutory capital and surplus, regulating the type and amount of investments permitted, limiting the amount of dividends that can be paid without first obtaining regulatory approval and other related matters. In recent years, the insurance regulatory framework has been placed under increased scrutiny by various states, the federal government and the NAIC. Various states have considered or enacted legislation that changes, and in many cases increases, the states' authority to regulate insurance companies. Legislation has been introduced from time to time in Congress that could result in the federal government assuming some role in the regulation of insurance companies. The NAIC has recently approved and recommended to the states for adoption and implementation several regulatory initiatives designed to reduce the risk of insurance company insolvencies. These initiatives include new investment reserve requirements, risk-based capital standards and restrictions on an insurance company's ability to pay dividends to its stockholders. A committee is also currently developing model laws to govern insurance company investments for adoption by the NAIC. Current proposals are still being debated and the Company is monitoring developments in this area and the effects any change would have on the Company. SunAmerica Asset Management is registered with the Securities and Exchange Commission (the "Commission") as a registered investment adviser under the Investment Advisers Act of 1940. The mutual funds that it markets are subject to regulation under the Investment Company Act of 1940. SunAmerica Asset Management and the mutual funds are subject to regulation and examination by the Commission. In addition, variable annuities and the related separate accounts of the Company's life insurance subsidiaries are subject to regulation by the Commission under the Securities Act of 1933 and the Investment Company Act of 1940. Resources Trust is subject to regulation by the Colorado State Banking Board and the Federal Deposit Insurance Corporation. The Company's broker-dealer subsidiaries are subject to regulation and supervision by the states in which they transact business, as well as by the National Association of Securities Dealers, Inc. (the "NASD"). The NASD has broad administrative and supervisory powers relative to all aspects of business and may examine the subsidiaries' business and accounts at any time. COMPETITION The businesses conducted by the Company's subsidiaries are highly competitive. The Company's life insurance subsidiaries compete with other life insurers, and also compete for customers' funds with a variety of investment products offered by financial services companies other than life insurance companies, such as banks, investment advisers, mutual fund companies and other financial institutions. Within the U.S. life insurance industry, there are at least 125 companies that individually collect in excess of $150 million of annuity premiums annually. Certain of these companies and other life insurers with which the Company competes are significantly larger and have available to them much greater financial and other resources. The Company believes the primary competitive factors among life insurance companies for investment-oriented life insurance products, such as annuities, include product flexibility, the portfolio managers featured in the product, the number and quality of investment options offered, the availability of distribution networks, service rendered to an insured after a policy is issued, and the commissions paid. Other factors affecting the business include pricing of the product and the benefits (including before-tax and after-tax investment returns) and guarantees provided. Competitors of SunAmerica Asset Management include a large number of mutual fund organizations, both independent and affiliated with other financial services companies, including banks and insurance companies. Competition in mutual fund sales is based on investment performance, service to clients, and product design. 7 The Company's broker-dealers face competition from regional firms and large, national full service and discount brokerage firms. Resources Trust competes for retirement plan assets against other trust companies, brokerage firms, mutual funds, banks and insurance companies. ITEM 2. PROPERTIES The Company's executive offices and the principal offices of its life insurance subsidiaries are in leased premises at 1 SunAmerica Center, Los Angeles, California. The Company's life insurance subsidiaries also lease office space in Atlanta, Georgia; Houston, Texas; and New York, New York. The Company's broker-dealers lease space in Phoenix, Arizona and New York, New York. The Company's asset management subsidiary leases offices in New York, New York, and the retirement trust services subsidiary occupies leased premises in Englewood, Colorado. The Company believes that such properties, including the equipment located therein, are suitable and adequate to meet the requirements of its businesses. ITEM 3. LEGAL PROCEEDINGS The Company is involved in various kinds of litigation common to its businesses. These cases are in various stages of development and, based on reports of counsel, management believes that provisions made for potential losses are adequate and any further liabilities and costs will not have a material adverse impact upon the Company's financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS No matters were submitted during the fourth quarter 1994 to a vote of security-holders, through the solicitation of proxies or otherwise. 8 EXECUTIVE OFFICERS OF THE COMPANY The following sets forth certain information regarding the executive officers of SunAmerica Inc. as of November 30, 1994:
YEAR ASSUMED OTHER POSITIONS AND OTHER PRESENT POSITION AT PRESENT BUSINESS EXPERIENCE WITHIN NAME AGE NOVEMBER 30, 1994 POSITION THE LAST FIVE YEARS FROM-TO - ------------------ --- ------------------------- -------- -------------------------- ------------ Eli Broad 61 Chairman and Chief 1976 (Cofounded Company in Executive Officer 1957) President 1986 Jay S. Wintrob 37 Executive Vice President 1991 Senior Vice President 1989-1991 (Joined Company in 1987) James R. Belardi 37 Senior Vice President 1992 Vice President and 1989-1992 and Treasurer Treasurer (Joined Company in 1986) Jana Waring Greer 42 Senior Vice President 1991 Vice President 1981-1991 (Joined Company in 1974) Gary W. Krat 47 Senior Vice President 1992 Chairman, Royal Alliance 1991-Present Associates, Inc. Chief Executive Officer, 1990-Present Royal Alliance Associates, Inc. 1986-1990 President, Integrated Resources Equity Corp. Clark P. Manning, 36 Senior Vice President 1994 Senior Vice President and 1993-Present Jr. Chief Actuary 1991-1992 SunAmerica Life Companies Consulting Actuary, 1992-1993 Milliman & Robertson Inc. 1988-1991 Scott L. Robinson 48 Senior Vice President 1991 Vice President and 1986-1991 and Controller Controller (Joined Company in 1978) Darlene Chandler 42 Vice President 1988 (Joined Company in 1976) Lorin M. Fife 41 Vice President and 1994 Vice President and 1989-1994 General Counsel -- Associate General Counsel Regulatory Affairs (Joined Company in 1989) Michael L. Fowler 40 Vice President 1988 (Joined Company in 1988) Susan L. Harris 37 Vice President, General 1994 Vice President, Associate 1989-1994 Counsel -- Corporate General Counsel and Affairs, and Secretary Secretary (Joined Company in 1985) Scott H. Richland 32 Vice President and 1994 Assistant Treasurer 1993-1994 Assistant Treasurer Director, SunAmerica 1990-1993 Investments Director, Corporate 1989-1990 Development, Act III Communications James W. Rowan 32 Vice President 1993 Assistant to the Chairman 1992 Senior Vice President, 1990-1992 Security Pacific Corp.
9 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION The Company's Common Stock is principally traded on the New York Stock Exchange. The Company's Common Stock is also listed on the Pacific Stock Exchange and traded on the Boston, Midwest, Philadelphia and Cincinnati Stock Exchanges. There is no trading market for the Nontransferable Class B Stock. High and low sales prices for the Company's Common Stock for each quarter during the fiscal years ended September 30, 1994 and 1993 are as follows:
1994 1993 -------------------- -------------------- HIGH LOW HIGH LOW ------- ------- ------- ------- First quarter........................... $46 1/2 $ 33 $27 3/4 $21 5/8 Second quarter.......................... 43 5/8 33 1/2 39 1/2 25 1/2 Third quarter........................... 44 1/4 34 1/4 35 3/4 27 1/4 Fourth quarter.......................... 46 1/4 40 1/4 45 27 3/8 ------- ------- ------- ------- ------- ------- ------- -------
HOLDERS As of October 31, 1994, the approximate number of holders of record of each class of common equity of the Company was as follows:
NUMBER OF HOLDERS TITLE OF CLASS OF RECORD - ------------------------------------------------------------------------------------------------------ ---------- Common Stock (par value $1.00 per share).............................................................. 2,320 Nontransferable Class B Stock (par value $1.00 per share)............................................. 14 ---------- ----------
DIVIDENDS Dividends paid on the Company's Common Stock and Nontransferable Class B Stock for each quarter during the fiscal years ended September 30, 1994 and 1993 are as follows:
1994 1993 --------------------------- --------------------------- COMMON NON-TRANSFERABLE COMMON NON-TRANSFERABLE STOCK CLASS B STOCK STOCK CLASS B STOCK --------- ---------------- --------- ---------------- First quarter........................................... $.100 $.090 $.070 $.063 Second quarter.......................................... .100 .090 .070 .063 Third quarter........................................... .100 .090 .070 .063 Fourth quarter.......................................... .100 .090 .070 .063 --------- ---------------- --------- ---------------- Total................................................... $.400 $.360 $.280 $.252 --------- ---------------- --------- ---------------- --------- ---------------- --------- ----------------
10 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data of the Company and its subsidiaries should be read in conjunction with the consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are included elsewhere herein.
YEARS ENDED SEPTEMBER 30, -------------------------------------------------------------------- 1994 1993 1992 1991 1990 ------------ ------------ ------------ ------------ ------------ (IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS AND RATIOS) RESULTS OF OPERATIONS Net investment income.............................. $ 294,454 $ 263,791 $ 219,384 $ 162,412 $ 132,947 Net realized investment losses..................... (21,124) (21,287) (56,364) (46,060) (29,319) Fee income......................................... 150,736 134,305 112,831 92,689 72,327 General and administrative expenses................ (132,743) (135,790) (133,058) (120,475) (112,860) Provision for future guaranty fund assessments..... -- (22,000) -- -- -- Amortization of deferred acquisition costs......... (66,925) (51,860) (48,375) (40,088) (27,872) Other income and expenses, net..................... 15,603 16,852 16,673 24,903 25,644 ------------ ------------ ------------ ------------ ------------ Pretax income...................................... 240,001 184,011 111,091 73,381 60,867 Income tax expense................................. (74,700) (57,000) (34,300) (25,900) (22,100) ------------ ------------ ------------ ------------ ------------ INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES....................... 165,301 127,011 76,791 47,481 38,767 Cumulative effect of change in accounting for income taxes...................................... (33,500) -- -- -- -- ------------ ------------ ------------ ------------ ------------ NET INCOME......................................... $ 131,801 $ 127,011 $ 76,791 $ 47,481 $ 38,767 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ EARNINGS PER SHARE: INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES..................... $ 3.58 $ 2.75 $ 1.80 $ 1.32 $ 1.02 Cumulative effect of change in accounting for income taxes.................................... (.81) -- -- -- -- ------------ ------------ ------------ ------------ ------------ NET INCOME....................................... $ 2.77 $ 2.75 $ 1.80 $ 1.32 $ 1.02 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ CASH DIVIDENDS PER SHARE PAID TO COMMON SHAREHOLDERS: Nontransferable Class B Stock.................... $ 0.360 $ 0.252 $ 0.180 $ 0.180 $ 0.180 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Common Stock..................................... $ 0.400 $ 0.280 $ 0.200 $ 0.200 $ 0.200 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Ratio of earnings to combined fixed charges and preferred stock dividends (excluding interest on fixed annuities, guaranteed investment contracts and trust deposits) (1)........................... 2.8 2.8 2.7 2.3 2.0 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Ratio of earnings to combined fixed charges and preferred stock dividends (including interest on fixed annuities, guaranteed investment contracts and trust deposits) (2)........................... 1.4 1.3 1.2 1.1 1.1 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ - ------------------------ Footnotes to Item 6 -- "Selected Consolidated Financial Data" appear on the following page.
11 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
AT SEPTEMBER 30, ------------------------------------------------------------------------------ 1994 1993 1992 1991 1990 -------------- -------------- -------------- -------------- -------------- (IN THOUSANDS) FINANCIAL POSITION Investments.................... $ 9,280,390 $ 10,364,952 $ 9,428,266 $ 7,596,275 $ 7,275,401 Variable annuity assets........ 4,513,093 4,194,970 3,293,343 2,746,685 2,145,196 Deferred acquisition costs..... 581,874 475,917 436,209 392,278 356,088 Other assets................... 280,868 231,582 245,833 279,007 301,906 -------------- -------------- -------------- -------------- -------------- TOTAL ASSETS................... $ 14,656,225 $ 15,267,421 $ 13,403,651 $ 11,014,245 $ 10,078,591 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Reserves for fixed annuity contracts..................... $ 4,519,623 $ 4,934,871 $ 5,143,339 $ 5,359,757 $ 5,523,320 Reserves for guaranteed investment contracts.......... 2,783,522 2,216,104 2,023,048 1,598,963 1,294,338 Trust deposits................. 442,320 378,986 367,458 -- -- Variable annuity liabilities... 4,513,093 4,194,970 3,293,343 2,746,685 2,145,196 Other payables and accrued liabilities................... 860,763 1,828,153 1,372,010 344,789 159,416 Long-term notes and debentures.................... 472,835 380,560 225,000 -- -- Collateralized mortgage obligations and reverse repurchase agreements......... 28,662 112,032 182,784 299,343 368,907 Other senior indebtedness...... -- 15,119 25,919 38,035 43,503 Subordinated notes............. -- -- -- 117,985 119,485 Deferred income taxes.......... 74,319 96,599 40,682 58,779 40,353 Shareholders' equity........... 961,088 1,110,027 730,068 449,909 384,073 -------------- -------------- -------------- -------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......... $ 14,656,225 $ 15,267,421 $ 13,403,651 $ 11,014,245 $ 10,078,591 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- - ------------------------ (1) In computing the ratio of earnings to combined fixed charges and preferred stock dividends (excluding interest on fixed annuities, guaranteed investment contracts and trust deposits), combined fixed charges and preferred stock dividends consist of interest expense on senior and subordinated indebtedness and dividends on Preferred Stock on a tax equivalent basis. Earnings are computed by adding interest incurred on senior and subordinated indebtedness to pretax income. (2) In computing the ratio of earnings to combined fixed charges and preferred stock dividends (including interest on fixed annuities, guaranteed investment contracts and trust deposits), combined fixed charges and preferred stock dividends consist of interest expense on senior and subordinated indebtedness, fixed annuity contracts, guaranteed investment contracts and trust deposits and dividends on Preferred Stock on a tax equivalent basis. Earnings are computed by adding interest incurred on senior and subordinated indebtedness, fixed annuity contracts, guaranteed investment contracts and trust deposits to pretax income.
12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of financial condition and results of operations of SunAmerica Inc. (the "Company") for the three years in the period ended September 30, 1994. RESULTS OF OPERATIONS INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES totaled $165.3 million or $3.58 per common share in 1994, compared with $127.0 million or $2.75 per common share in 1993 and $76.8 million or $1.80 per common share in 1992. The cumulative effect of the change in accounting for income taxes resulting from the implementation of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," amounted to a nonrecurring non-cash charge of $33.5 million or $.81 per common share in 1994. Accordingly, net income amounted to $131.8 million or $2.77 per common share in 1994. PRETAX INCOME totaled $240.0 million in 1994, $184.0 million in 1993 and $111.1 million in 1992. The $56.0 million improvement in 1994 primarily resulted from increased net investment income and fee income, partially offset by additional amortization of deferred acquisition costs. In addition, 1993 results include a $22.0 million provision for future guaranty fund assessments. The $72.9 million improvement in 1993 over 1992 primarily resulted from increased net investment income, decreased net realized investment losses and increased fee income, all of which were partially offset by the provision for future guaranty fund assessments. NET INVESTMENT INCOME, which is the spread between the income earned on invested assets and the interest paid on fixed annuities and other interest-bearing liabilities, increased to $294.5 million in 1994 from $263.8 million in 1993 and $219.4 million in 1992. These amounts represent net investment spreads of 3.30% on average invested assets (computed on a daily basis) of $8.92 billion in 1994, 3.15% on average invested assets of $8.38 billion in 1993 and 2.81% on average invested assets of $7.80 billion in 1992. These improvements in net investment income primarily resulted from reductions in interest rates paid on all interest-bearing liabilities and increases in the excess of average invested assets over average interest-bearing liabilities, partially offset by declines in investment yield. The excess of average invested assets over average interest-bearing liabilities amounted to $647.1 million in 1994, $456.0 million in 1993 and $115.4 million in 1992. Total interest expense aggregated $463.7 million in 1994, $490.6 million in 1993 and $543.6 million in 1992. The average rate paid on all interest-bearing liabilities fell to 5.60% (5.43% on fixed annuities) in 1994 from 6.19% (6.11% on fixed annuities) in 1993 and 7.07% (6.92% on fixed annuities) in 1992. These declines in rates were primarily due to a decline in prevailing interest rates that began during the latter half of fiscal 1992 and continued into the first half of fiscal 1994. This was reflected in a corresponding decline in the average crediting rate on annuity contracts, the majority of which reprice annually as interest rate guarantees are renewed. Interest-bearing liabilities averaged $8.27 billion during 1994, compared with $7.92 billion during 1993 and $7.69 billion during 1992. Investment income totaled $758.2 million in 1994, $754.4 million in 1993 and $763.0 million in 1992. Investment income has been relatively stable over the three year period as increases in earnings from average invested assets have been offset by declines in investment yield. The yield on average invested assets declined to 8.50% in 1994 from 9.00% in 1993 and 9.78% in 1992. These yields are computed without subtracting net realized investment losses. If net realized investment losses were included in the computation, the yields would be 8.26% in 1994, 8.75% in 1993 and 9.06% in 1992. These declines in yield resulted primarily from sales of higher-yielding securities and the reinvestment of sales proceeds in lower-yielding securities. The Company has principally made such sales to obtain certain mortgage-backed securities ("MBSs") that the market demands for the formation of collateralized mortgage obligations ("CMOs"). Ownership of these MBSs has permitted the Company to engage in dollar roll transactions ("Dollar Rolls"). The Company has also sold securities to take 13 advantage of changes in relative value between its portfolio sectors, and to more closely match assets and liabilities (see "Asset-Liability Matching"). In addition, investment yield has declined as the net cash provided by the Company's operating and financing activities, as well as the cash flows from redemptions and maturities of securities in the Company's investment portfolio, have been invested in lower-yielding securities due to the lower interest rate environment prevailing during 1993 and the first half of 1994. The Company has enhanced investment yield since 1992 through Dollar Rolls, whereby the proceeds from sales of MBSs are invested in short-term securities pending the contractual repurchase of substantially the same securities at discounted prices in the forward market. The Company has been able to engage in Dollar Rolls due to the market demand for MBSs for formation of CMOs, which was particularly high in 1993. The Company recorded $15.6 million of enhanced yield on a weighted average volume of $1.05 billion of such transactions during 1994, compared with $21.0 million of enhanced yield on a weighted average volume of $1.01 billion during 1993 and $5.4 million of enhanced yield on a weighted average volume of $383.2 million during 1992. The decline in enhanced yield relative to the volume of Dollar Rolls in 1994 is primarily due to a narrowing of market spreads on such transactions. In addition, the Company has enhanced investment yield since 1992 through total return corporate bond swap agreements (the "Total Return Agreements"). The Company recorded income of $1.3 million on the Total Return Agreements during 1994, compared with $14.6 million recorded during 1993 and $12.3 million recorded during 1992. The reduction in income recorded on the Total Return Agreements during 1994 resulted primarily from declines in the market value of the underlying assets as a result of an increase in prevailing interest rates. The Company has also entered into certain interest rate swap agreements (the "Swap Agreements"). (See "Asset-Liability Matching" for additional discussion of Total Return Agreements and Swap Agreements.) GROWTH IN AVERAGE INVESTED ASSETS since 1992 primarily reflects $424.1 million of aggregate net proceeds from the issuances of long-term notes and debentures and the Company's Preferred Stock. In addition, the growth reflects sales of the Company's fixed-rate products, consisting of fixed annuities (including fixed accounts of variable annuity products) and guaranteed investment contracts ("GICs"). Fixed annuity premiums aggregated $230.0 million in 1994, $223.8 million in 1993 and $243.7 million in 1992. These premiums include premiums for the fixed accounts of variable annuities totaling $140.6 million, $63.9 million, and $86.0 million, respectively. Total fixed annuity premiums increased during 1994 primarily due to rising demand for fixed-rate investment options as prevailing interest rates increased during the latter half of fiscal 1994. These premiums declined during 1993 principally due to the Company's de-emphasis of fixed-rate products given the then prevailing low interest rate environment. GIC premiums totaled $1.04 billion in 1994, $691.6 million in 1993 and $930.0 million in 1992. Changes in GIC sales reflect the variable demand for such products from state and local governmental authorities, pension plans and asset management firms. In addition, the increase in GIC sales in 1994 reflects the success of the Company's efforts to increase its GIC client base, particularly among asset management firms. The GICs issued by the Company and Sun Life Insurance Company of America ("Sun Life of America") typically guarantee the payment of principal and interest at a fixed rate for a fixed term of one to ten years. In the case of GICs sold to pension plans, certain withdrawals may be made at book value in the event of circumstances specified in the plan document, such as employee retirement, death, disability, hardship withdrawal or employee termination. Sun Life of America imposes surrender penalties in the event of other withdrawals prior to maturity. Contracts purchased by state and local governmental authorities may also permit scheduled book value withdrawals subject to the terms of the underlying indenture. Contracts purchased by asset management firms either prohibit withdrawals or permit withdrawals with notice ranging from 7 to 270 days. In pricing GICs, the Company analyzes cash flow information and prices accordingly so that it is compensated for possible withdrawals prior to maturity (see "Financial Condition and Liquidity"). 14 NET REALIZED INVESTMENT LOSSES totaled $21.1 million in 1994, $21.3 million in 1993 and $56.4 million in 1992, and include impairment writedowns of $55.9 million in 1994, $114.3 million in 1993 and $119.7 million in 1992. Therefore, net gains from sales of investments totaled $34.8 million in 1994, $93.0 million in 1993 and $63.3 million in 1992. Net gains in 1994 include $22.6 million of net gains on $17.6 million of sales of common stocks made primarily to maximize total return and $27.0 million of net losses on $3.25 billion of sales of bonds. These bond sales include approximately $1.43 billion of sales of MBSs made primarily to acquire other MBSs that were then used in Dollar Rolls. In addition, bond sales include $625.3 million of sales of high-yield investments and $569.9 million of sales of certain CMOs and asset-backed securities, which were primarily made to maximize total return. The Company also realized $35.1 million of net gains on sales of $105.9 million of certain limited partnership interests. Net gains in 1993 include $69.1 million of net gains realized on $4.82 billion of sales of bonds. These bond sales include approximately $2.95 billion of sales of MBSs made primarily to acquire other MBSs that were then used in Dollar Rolls. In addition, bond sales include $759.6 million of sales of high-yield investments and $338.5 million of sales of securitized residential whole loans made primarily to maximize total return. Bond sales in 1993 also include sales of $68.6 million of certain interest-only strips ("IOs") and $251.0 million of sales of senior secured loans ("Secured Loans") that were made primarily to improve the overall credit quality of the portfolio. Net gains in 1993 also include $21.5 million of net gains realized on the sales of $104.4 million of certain limited partnership interests. Net gains in 1992 include $52.9 million of net gains realized on $5.26 billion of sales of bonds. These bond sales include approximately $3.45 billion of sales of MBSs made primarily to acquire other MBSs for use in Dollar Rolls and $838.8 million of high-yield investments made primarily to improve the overall credit quality of the portfolio. In addition, bond sales in 1992 include $520.8 million of sales of Secured Loans that also were made primarily to improve the overall credit quality of the portfolio. Net gains in 1992 also include $9.5 million of net gains realized on the sales of $35.4 million of certain limited partnership interests. Impairment writedowns in 1994 include $35.0 million applied to real estate. During 1994, the Company decided to hold for sale all properties owned in Arizona, thereby changing its previous intention to hold such real estate for future development. Accordingly, the Company reappraised its Arizona properties and reduced their carrying values to estimated fair values. Impairment writedowns in 1994 also include $13.2 million of additional provisions applied to defaulted bonds and $2.5 million of reserves for mortgage loan losses resulting from the January 17, 1994 Los Angeles earthquake. Impairment writedowns in 1993 include $11.8 million of provisions applied to mortgage loans that were restructured during 1993 and reduced to the aggregate appraised value of the underlying real estate, and $11.1 million of provisions applied to the Company's investment in a real estate-related separate account of Anchor National Life Insurance Company ("Anchor"), which separate account was liquidated through sales of underlying assets to affiliated and nonaffiliated parties during 1993. Impairment writedowns in 1993 also include $88.2 million of additional provisions applied to bonds. These bond writedowns include $25.0 million applied to certain IOs. IOs, a type of MBS used as an asset-liability matching tool to hedge against rising interest rates, are investment grade securities that give the holder the right to receive only the interest payments on a pool of underlying mortgage loans. As would be anticipated in a lower interest rate environment, the amortized cost of these IOs became impaired as a result of increased prepayments of the underlying loans. At September 30, 1994, the amortized cost, which is net of impairment writedowns, of the IOs held by the Company was $22.7 million and their fair value was $18.1 million. Impairment writedowns in 1992 include $37.9 million of provisions applied to bonds in response to increased defaults and $26.1 million of provisions applied to the Company's investment in the 15 aforementioned real estate-related separate account of Anchor. In addition, 1992 impairment writedowns include $26.3 million of provisions applied to Arizona real estate to reduce the carrying values of such properties to their estimated net realizable values based upon appraisals which reflected an intention to hold the properties for future development. VARIABLE ANNUITY FEES are based on the market value of assets supporting variable annuity contracts in separate accounts. Such fees totaled $79.5 million in 1994, $67.5 million in 1993 and $57.7 million in 1992. Variable annuity fees have increased over the last three years principally due to asset growth from the receipt of variable annuity premiums and, during 1993, from increased market values. Variable annuity assets averaged $4.43 billion during 1994, $3.65 billion during 1993 and $3.05 billion during 1992. Variable annuity premiums, which exclude premiums allocated to the fixed accounts of variable annuity products, totaled $759.3 million in 1994, $796.9 million in 1993 and $590.2 million in 1992. Total variable annuity product sales, which include premiums allocated to the fixed accounts of variable annuities, aggregated $900.0 million in 1994, $860.8 million in 1993 and $676.1 million in 1992 (see "Growth in Average Invested Assets"). Though total variable annuity product sales rose modestly in 1994, variable annuity premiums declined, principally due to a rising demand for fixed-rate investment options, including the fixed accounts of variable annuities, as prevailing interest rates increased during the latter half of fiscal 1994. The Company has encountered increased competition in the variable annuity marketplace in 1994 and anticipates that the market will remain highly competitive for the foreseeable future. ASSET MANAGEMENT FEES, which include investment advisory fees and 12b-1 distribution fees, are based on the market value of assets managed in mutual funds and private accounts by SunAmerica Asset Management Corp. Such fees totaled $31.3 million on average assets managed of $2.39 billion in 1994, $32.3 million on average assets managed of $2.46 billion in 1993 and $25.3 million on average assets managed of $2.15 billion in 1992. Asset management fees decreased in 1994 primarily due to a decline in the market value of assets managed and increased redemptions, both a reflection of adverse market conditions for fixed-income and equity securities which can be attributed, in part, to rising interest rates during the latter half of fiscal 1994. Mutual fund sales in 1994 also were affected by these adverse market conditions. Sales of mutual funds, excluding sales of money market funds, totaled $342.6 million in 1994, compared with $532.4 million in 1993 and $827.6 million in 1992. The decline in mutual fund sales during 1993 resulted primarily from the Company's strategic decision to diversify its mutual fund product sales, and to reduce the percentage of sales derived from back-end loaded products. NET RETAINED COMMISSIONS are primarily derived from commissions on the sales of nonproprietary investment products by the Company's broker-dealer subsidiaries, after deducting the substantial portion of such commissions that is passed on to registered representatives. Net retained commissions totaled $28.0 million in 1994, $23.7 million in 1993 and $18.9 million in 1992. Sales of nonproprietary products (mainly mutual funds and general securities) totaled $6.30 billion in 1994, $5.87 billion in 1993 and $4.70 billion in 1992. The increases in net retained commissions are not proportionate to the related changes in sales, primarily due to changes in sales mix. TRUST FEES are earned by Resources Trust Company for providing administrative and custodial services primarily for individual retirement accounts, as well as for other qualified pension plans. Trust fees totaled $11.9 million in 1994, $10.9 million in 1993 and $11.0 million in 1992. SURRENDER CHARGES on fixed and variable annuities totaled $10.7 million in 1994, compared with $9.8 million in 1993 and $14.3 million in 1992. Surrender charges generally are assessed on annuity withdrawals at declining rates during the first seven years of the contract. Withdrawal payments, which include surrenders and lump-sum annuity benefits, totaled $1.13 billion in 1994, $824.5 million in 1993 and $901.1 million in 1992. These payments represent 13.2%, 10.0% and 11.6%, respectively, of average fixed and variable annuity reserves. Withdrawals include variable annuity payments from the separate accounts totaling $461.5 million in 1994, $314.6 million in 1993 and $306.6 million in 1992. Variable annuity surrenders have increased during 1994 primarily due to surrenders on a closed 16 block of business, policies coming off surrender charge restrictions and increased competition in the marketplace. In addition, fixed annuity surrenders have increased in 1994, due to policies coming off surrender charge restrictions. Management anticipates that withdrawal rates will be reasonably stable for the foreseeable future and the Company's investment portfolio has been structured to provide sufficient liquidity for anticipated withdrawals. PROVISION FOR FUTURE GUARANTY FUND ASSESSMENTS totaled $22.0 million in 1993. No such provision was recorded in 1994 or 1992. Guaranty associations of the states in which the Company sells annuities assess insurance companies to pay policyholder claims relating to insurer insolvencies. This provision represents management's best estimate, based upon available industry data, of the Company's ultimate exposure to future assessments anticipated as a result of certain large insurance company failures that occurred during the past few years. Currently, management estimates that the remaining assessments will be primarily paid over the next four years. GENERAL AND ADMINISTRATIVE EXPENSES totaled $132.7 million in 1994, compared with $135.8 million in 1993 and $133.1 million in 1992, and represent 0.9%, 1.0% and 1.1% of average total assets for fiscal years 1994, 1993 and 1992, respectively. General and administrative expenses remain closely controlled through a company-wide cost containment program. AMORTIZATION OF DEFERRED ACQUISITION COSTS increased during the three-year period primarily due to additional fixed and variable annuity and mutual fund sales and the subsequent amortization of related deferred commissions and other acquisition costs. Amortization of all deferred acquisition costs totaled $66.9 million in 1994, $51.9 million in 1993 and $48.4 million in 1992. INCOME TAX EXPENSE totaled $74.7 million in 1994, $57.0 million in 1993 and $34.3 million in 1992, representing effective tax rates of 31% in all three fiscal years. These tax rates reflect the favorable impact of certain affordable housing tax credits. FINANCIAL CONDITION AND LIQUIDITY SHAREHOLDERS' EQUITY decreased by $148.9 million to $961.1 million at September 30, 1994 from $1.11 billion at September 30, 1993, primarily as a result of $250.9 million of change in net unrealized losses on debt and equity securities available for sale charged directly to shareholders' equity. Book value per common share amounted to $18.90 at September 30, 1994, compared with $22.64 at September 30, 1993 and $14.54 at September 30, 1992. Excluding net unrealized gains and losses on debt and equity securities available for sale, book value per common share amounted to $22.58 at September 30, 1994, $20.16 at September 30, 1993 and $14.32 at September 30, 1992. TOTAL ASSETS decreased by $611.2 million to $14.66 billion at September 30, 1994 from $15.27 billion at September 30, 1993, principally due to a decrease in invested assets, partially offset by an increase in the separate account for variable annuities, which increased by $318.1 million during 1994. INVESTED ASSETS at year-end totaled $9.28 billion in 1994, compared with $10.36 billion in 1993. The Company managed most of these investments internally. Invested assets declined by $1.08 billion during 1994, primarily as a result of a reduction in dollar-roll positions, as indicated by the $943.2 million decline in amounts payable to brokers for purchases of securities. Invested assets also declined as a consequence of the change in net unrealized losses on debt and equity securities available for sale charged directly to shareholders' equity. The Company's general investment philosophy is to hold fixed maturity assets for long-term investment. Thus, it does not have a trading portfolio. Effective September 30, 1993, the Company adopted Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities" and, accordingly, began to carry the portion of its portfolio of bonds, notes and redeemable preferred stocks that is available for sale (the "Available for Sale Portfolio") at estimated fair value. The remaining portion of its portfolio of bonds, notes and redeemable preferred stocks is held for investment and continues to be carried at amortized cost. 17 BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS, including those held for investment and the Available for Sale Portfolio (the "Bond Portfolio"), at September 30, 1994, had an aggregate amortized cost that exceeded its fair value by $321.0 million (including net unrealized losses of $329.0 million on the Available for Sale Portfolio). The fair value of the Bond Portfolio was $167.2 million above its amortized cost at September 30, 1993 (including net unrealized gains of $91.9 million on the Available for Sale Portfolio). The unrealized losses on the Bond Portfolio at September 30, 1994 principally resulted from increases in prevailing interest rates since September 30, 1993 and the corresponding effect on the Bond Portfolio. Approximately $6.65 billion or 99.6% of the Bond Portfolio (at amortized cost) at September 30, 1994 was rated by Standard and Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's") or under comparable statutory rating guidelines established by the National Association of Insurance Commissioners ("NAIC") and implemented by either the NAIC or the Company. At September 30, 1994, approximately $5.66 billion (at amortized cost) was rated investment grade by one or both of these agencies or under the NAIC guidelines, including $4.20 billion of U.S. government/agency securities and MBSs. At September 30, 1994, the Bond Portfolio included $988.2 million (fair value, $946.4 million) of bonds not rated investment grade by S&P, Moody's or the NAIC. Based on their September 30, 1994 amortized cost, these bonds accounted for 6.6% of the Company's total assets and 10.3% of invested assets. In addition to its direct investment in non-investment grade bonds, the Company has entered into Total Return Agreements with an aggregate notional principal amount of $158.5 million at September 30, 1994 (see "Asset-Liability Matching"). Non-investment grade securities generally provide higher yields and involve greater risks than investment grade securities because their issuers typically are more highly leveraged and more vulnerable to adverse economic conditions than investment grade issuers. In addition, the trading market for these securities is usually more limited than for investment grade securities. The Company intends that its holdings of such securities not exceed current levels, but its policies may change from time to time, including in connection with any possible acquisition. The Company had no material concentrations of non-investment grade securities at September 30, 1994. The table on the following page summarizes the Company's rated bonds by rating classification as of September 30, 1994. 18 SUMMARY OF RATED BONDS (In thousands)
ISSUES NOT RATED BY S&P/MOODY'S TOTAL ISSUES RATED BY S&P/MOODY'S BY NAIC CATEGORY ------------------------------------ - ----------------------------------------- ----------------------------------------- PERCENT OF S&P/(MOODY'S) AMORTIZED ESTIMATED NAIC AMORTIZED ESTIMATED AMORTIZED INVESTED ESTIMATED CATEGORY (1) COST FAIR VALUE CATEGORY (2) COST FAIR VALUE COST ASSETS (3) FAIR VALUE - ----------------- ---------- ---------- ----------------- ---------- ---------- ---------- ------------ ---------- AAA+ to A- (Aaa to A3) $2,990,108 $2,813,760 1 $1,316,944 $1,254,503 $4,307,052 44.88% $4,068,263 BBB+ to BBB- (Baa1 to Baa3) 452,624 424,168 2 901,170 877,895 1,353,794 14.11 1,302,063 BB+ to BB- (Ba1 to Ba3) 116,282 111,011 3 276,931 281,140 393,213 4.10 392,151 B+ to B- (B1 to B3) 325,737 305,139 4 177,994 162,787 503,731 5.25 467,926 CCC+ to C (Caa to C) 10,506 9,797 5 42,125 41,500 52,631 0.55 51,297 D -- -- 6 38,577 35,058 38,577 0.40 35,058 ---------- ---------- ---------- ---------- ---------- ---------- Total rated issues $3,895,257 $3,663,875 $2,753,741 $2,652,883 $6,648,998 $6,316,758 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ------------------------------ (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 are included in the Bond Portfolio and their amortized cost aggregated $719.0 million at September 30, 1994. Secured Loans are primarily originated by money center or investment banks or are originated directly by the Company. Secured Loans are senior to subordinated debt and equity, and virtually all are secured by assets of the issuer. At September 30, 1994, Secured Loans consisted of loans to 92 borrowers spanning 26 industries, with no industry concentration constituting more than 8% of these assets. While the trading market for Secured Loans is more limited than for publicly traded corporate debt issues, management believes that participation in these transactions has enabled the Company to improve its investment yield. The majority of the Company's Secured Loans are not rated by S&P or Moody's. However, 92% of the Secured Loans (at amortized cost) are rated in NAIC categories 1 and 2. Although, as a result of restrictive financial covenants, Secured Loans involve greater risk of technical default than do publicly traded investment grade securities, management believes that generally the risk of loss upon default for its Secured Loans is mitigated by their three-year average lives, financial covenants and senior secured positions. MORTGAGE LOANS aggregated $1.43 billion at September 30, 1994 and consisted of 666 first mortgage loans with an average loan balance of approximately $2.1 million, collateralized by properties located in 26 states. Approximately 51% of the portfolio was multifamily residential, 21% was retail, 8% was office, 7% was industrial and 13% was other types. At September 30, 1994, approximately 33% of the portfolio was secured by properties located in California and no more than 12% of the portfolio 19 was secured by properties in any other single state. At September 30, 1994, there were no construction, takeout, farm or land loans and there were 22 loans with outstanding balances of $10 million or more, which loans aggregated approximately 25% of the portfolio. At the time of their origination or purchase by the Company, virtually all mortgage loans had loan-to-value ratios of 75% or less. At September 30, 1994, approximately 21% of the mortgage loan portfolio consisted of loans with balloon payments due before October 1, 1997. At September 30, 1994, loans delinquent by more than 90 days totaled $45.9 million and constituted 3.2% of total mortgages. Loans foreclosed upon and transferred to real estate in the balance sheet during fiscal 1994 totaled $6.0 million (0.4% of total mortgages). Approximately 44% of the mortgage loans in the portfolio at September 30, 1994 were seasoned loans underwritten to the Company's standards and purchased at or near par from the Resolution Trust Corporation and other financial institutions, many of which were downsizing their portfolios. Such loans generally have higher average interest rates than loans that could be originated today. The balance of the mortgage loan portfolio has been originated by the Company under strict underwriting standards. Commercial mortgage loans on properties such as offices, hotels and shopping centers generally represent a higher level of risk for the industry than have mortgage loans secured by multifamily residences. This greater risk is due to several factors, including the larger size of such loans, and the effects of general economic conditions on these commercial properties. However, due to the seasoned nature of the Company's mortgage loans, its emphasis on multifamily loans and its strict underwriting standards, the Company believes that it has reduced the risk attributable to its mortgage loan portfolio while maintaining attractive yields. At September 30, 1994, mortgage loans having an aggregate carrying value of $74.7 million had been restructured. Of this amount, $0.6 million was restructured during 1994 and $24.2 million was restructured during 1993. ASSET-LIABILITY MATCHING is utilized by the Company to minimize the risks of interest rate fluctuations and disintermediation. The Company believes that its fixed-rate liabilities should be backed by a portfolio principally composed of fixed maturities that generate predictable rates of return. The Company does not have a specific target rate of return. Instead, its rates of return vary over time depending on the current interest rate environment, the slope of the yield curve, the spread at which fixed maturities are priced over the yield curve and general competitive conditions within the industry. Its portfolio strategy is designed to achieve adequate risk-adjusted returns consistent with its investment objectives of effective asset-liability matching, liquidity and safety. The Company designs its fixed-rate products and conducts its investment operations in order to closely match the duration of the assets in its investment portfolio to its annuity and GIC obligations. The Company seeks to achieve a predictable spread between what it earns on its assets and what it pays on its liabilities by investing principally in fixed maturities. The Company's fixed-rate products incorporate surrender charges, two-tiered interest rate structures or other limitations on when contracts can be surrendered for cash to encourage persistency and discourage withdrawals. Approximately 78% of the Company's fixed annuity and GIC reserves had surrender penalties or other restrictions at September 30, 1994. As part of its asset-liability matching discipline, the Company conducts detailed computer simulations that model its fixed-maturity assets and liabilities under commonly used stress-test interest rate scenarios. Based on the results of these computer simulations, the investment portfolio has been constructed with a view to maintaining a desired investment spread between the yield on portfolio assets and the rate paid on its reserves under a variety of possible future interest rate scenarios. In addition, the Company has designed its portfolio to limit the market discount from book value on the aggregate portfolio that might result from a sharp rise in interest rates. The cash flow obtained from MBSs helps to maintain the anticipated spread, while providing desired liquidity. At September 30, 1994, the weighted average life of the Company's investments was approximately four-and-one-half years and the portfolio had a duration of approximately three-and-three-fourths years. 20 As a component of investment strategy, the Company utilizes Swap Agreements to match assets more closely to liabilities. Swap Agreements are agreements to exchange with a counterparty interest rate payments of differing character (for example, fixed-rate payments exchanged for variable-rate payments) based on an underlying principal balance (notional principal) to hedge against interest rate changes. The Company generally utilizes Swap Agreements to create a hedge that effectively converts floating-rate assets into fixed-rate assets. At September 30, 1994, the Company had 25 outstanding Swap Agreements with an aggregate notional principal amount of $1.23 billion. These agreements mature in various years through 1998 and have an average remaining maturity of 27 months. The Company also seeks to provide liquidity, while enhancing its spread income, by using reverse repurchase agreements ("Reverse Repos"), Dollar Rolls, Total Return Agreements and by investing in MBSs. Reverse Repos involve a sale of securities and an agreement to repurchase the same securities at a later date at an agreed upon price and are generally over-collateralized. Dollar Rolls are similar to Reverse Repos except that the repurchase involves securities that are only substantially the same as the securities sold and the arrangement is not collateralized, nor is it governed by a repurchase agreement. Total Return Agreements effectively exchange a fixed rate of interest on the notional amount for the coupon income plus or minus the increase or decrease in the market value of specified non-investment grade corporate bonds. MBSs are generally investment grade securities collateralized by large pools of mortgage loans. MBSs generally pay principal and interest monthly. The amount of principal and interest payments may fluctuate as a result of prepayments of the underlying mortgage loans. There are risks associated with some of the techniques the Company uses to enhance its spread income and match its assets and liabilities. The primary risk associated with Dollar Rolls, Reverse Repos and Swap Agreements is the risk associated with counterparty nonperformance. In addition, Swap Agreements also have interest rate risk. However, the Company's Swap Agreements hedge variable-rate assets, and interest rate fluctuations that adversely affect the net cash received or paid under the terms of the Swap Agreement would be offset by increased interest income earned on the variable-rate assets. The primary risks associated with Total Return Agreements are the risk of potential loss due to bond market fluctuation and counterparty risk. The Company believes, however, that the counterparties to its Dollar Rolls, Reverse Repos, Swap Agreements and Total Return Agreements are financially responsible and that the counterparty risk associated with those transactions is minimal. Counterparty risk associated with Dollar Rolls is further mitigated by the Company's participation in an MBS trading clearinghouse. The sell and buy transactions that are submitted to this clearinghouse are marked to market on a daily basis and each participant is required to over-collateralize its net loss position by 30% with either cash, letters of credit or government securities. The primary risk associated with MBSs is that a changing interest rate environment might cause prepayment of the underlying obligations at speeds slower or faster than anticipated at the time of their purchase. INVESTED ASSETS EVALUATION routinely includes a review by the Company of its portfolio of debt securities. Management identifies monthly those investments that require additional monitoring and carefully reviews the carrying value of such investments at least quarterly to determine whether specific investments should be placed on a nonaccrual basis and to determine declines in value that may be other than temporary. In making these reviews for bonds, management principally considers the adequacy of collateral (if any), compliance with contractual covenants, the borrower's recent financial performance, news reports and other externally generated information concerning the creditor's affairs. In the case of publicly traded bonds, management also considers market value quotations, if available. For mortgage loans, management generally considers information concerning the mortgaged property and, among other things, factors impacting the current and expected payment status of the loan and, if available, the current fair value of the underlying collateral. The carrying values of bonds that are determined to have declines in value that are other than temporary are reduced to net realizable value and no further accruals of interest are made. The valuation allowances on mortgage loans are based on losses expected by management to be realized on 21 transfers of mortgage loans to real estate, on the disposition and settlement of mortgage loans and on mortgage loans that management believes may not be collectible in full. Accrual of interest is suspended when principal and interest payments on mortgage loans are past due more than 90 days. DEFAULTED INVESTMENTS, comprising all investments (at amortized cost, net of impairment writedowns) that are in default as to the payment of principal or interest, totaled $56.2 million at September 30, 1994, including $10.3 million of unsecured loans and $45.9 million of mortgage loans. At September 30, 1994, defaulted investments constituted 0.6% of total invested assets at amortized cost and their fair value was equal to their amortized cost. At September 30, 1993, defaulted investments totaled $60.8 million, including $40.7 million of unsecured loans and $20.1 million of mortgage loans. At September 30, 1993, defaulted investments constituted 0.6% of total invested assets at amortized cost and their fair value totaled $56.3 million. SOURCES OF LIQUIDITY are readily available to the Company in the form of existing cash and short-term investments, Reverse Repo capacity on invested assets and, if required, proceeds from invested asset sales. At September 30, 1994, approximately $1.57 billion of the Company's Bond Portfolio had an aggregate unrealized gain of $46.0 million, while approximately $5.10 billion had an aggregate unrealized loss of $367.0 million. In addition, the Company's investment portfolio also currently provides approximately $101.4 million of monthly cash flow from scheduled principal and interest payments. Management is aware that prevailing market interest rates may shift significantly and has strategies in place to manage either an increase or decrease in prevailing rates. In a rising interest rate environment, the Company's average cost of funds would increase over time as it prices its new and renewing annuities to maintain a generally competitive market rate. Management would seek to place new funds in investments that were matched in duration to, and higher yielding than, the liabilities assumed. The Company believes that liquidity to fund withdrawals would be available through incoming cash flow, the sale of short-term or floating-rate instruments or Reverse Repos on the Company's substantial MBS segment of the Bond Portfolio, thereby avoiding the sale of fixed-rate assets in an unfavorable bond market. In a declining rate environment, the Company's cost of funds would decrease over time, reflecting lower interest crediting rates on its fixed annuities and GICs. Should increased liquidity be required for withdrawals, the Company believes that a significant portion of its investments could be sold without adverse consequences in light of the general strengthening that would be expected in the bond market. On a parent company stand-alone basis, SunAmerica Inc. (the "Parent"), at September 30, 1994, had invested assets with an amortized cost of $972.0 million (fair value, $941.8 million) and outstanding indebtedness of $472.8 million, comprising all of the Company's consolidated senior indebtedness. Additionally, as of September 30, 1994, the Parent had three GICs purchased by local government authorities that aggregated $265.4 million. The GIC agreements provided liquidity to the Company at a lower cost than other sources of liquidity with similar maturities. The Parent's annual debt service with respect to these debt and GIC obligations totals $75.2 million for fiscal 1995, $70.3 million for fiscal 1996, $70.2 million for fiscal 1997, $89.9 million for fiscal 1998, $198.9 million for fiscal 1999 and $909.1 million, in the aggregate, thereafter. In addition to the Parent's stand-alone sources of liquidity, at September 30, 1994 there was approximately $57.9 million of dividends available to the Parent from its regulated life insurance subsidiaries. The Parent received dividends of $43.0 million in December 1993, $30.0 million in December 1992 and $25.0 million in December 1991 from Sun Life of America. The Parent also received dividends of $2.4 million in fiscal 1994, $4.7 million in fiscal 1993, $17.1 million in fiscal 1992 and $43.2 million in fiscal 1991 from its other directly-owned subsidiaries. 22 The Parent; Sun Life of America; SunAmerica Financial, Inc.; and SunAmerica Asset Management Corp. have sold certain of their interests in various limited partnerships that make tax-advantaged affordable housing investments. As part of the sales transactions, the Parent has guaranteed a minimum defined yield and funding of certain defined operating deficits in return for a fee. A portion of the fees received has been deferred to absorb any required payments with respect to these guarantees. Based on an evaluation of the underlying housing projects, it is management's belief that such deferrals are ample for this purpose. Accordingly, management does not anticipate any material future losses with respect to these guarantees. Anchor has undertaken to dispose of $84.5 million (its statutory carrying value) of certain of its real estate located in the Phoenix, Arizona metropolitan area during the next one to three years, either to affiliated or nonaffiliated parties, and the Parent has guaranteed that Anchor will receive its statutory carrying value of these assets. The Parent has pledged certain marketable securities having an amortized cost of $40.3 million at September 30, 1994 to secure this guarantee. This real estate has a consolidated carrying value of approximately $45.5 million at September 30, 1994. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company's consolidated financial statements begin on page F-3. Reference is made to the Index to Financial Statements on page F-1 herein. Additional financial statement schedules are included on pages S-3 through S-8 herein. Reference is made to the Index to Financial Statement Schedules on page S-1 herein. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III The Notice of 1995 Annual Meeting of Shareholders and Proxy Statement, which, when filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, will be incorporated by reference in this Annual Report on Form 10-K pursuant to General Instruction G(3) of Form 10-K, provides the information required under Part III (Items 10, 11, 12 and 13) except for the information regarding the executive officers of the Company, which is included in Part I on page 9, and the information regarding indebtedness of management, which is included in Schedule II on Page S-3 herein. 23 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Reference is made to the indexes set forth on page F-1 and S-1 of this report. EXHIBITS
EXHIBIT NO. DESCRIPTION - ------------ --------------------------------------------------------------------------------------------------------- 3(a) Restated Charter, dated October 2, 1991, is incorporated herein by reference to Exhibit 3(a) to the Company's Form 8, dated and filed October 4, 1991, amending the Company's Annual Report on Form 10-K for the year ended September 30, 1990. 3(b) Articles Supplementary, dated June 24, 1992, which define the rights of the holders of the Company's 9 1/4% Preferred Stock, Series B, are incorporated herein by reference to Exhibit 3(c) to the Company's 1992 Annual Report on Form 10-K, filed November 30, 1992. 3(c) Amendment to the Company's Restated Articles of Incorporation, dated February 1, 1993, is incorporated herein by reference to Exhibit 1 to the Company's Form 8-K, filed February 3, 1993. 3(d) Articles Supplementary, dated March 9, 1993, which define the rights of the holders of the Company's Series D Mandatory Conversion Premium Dividend Preferred Stock, are incorporated herein by reference to Exhibit 3(e) to the Company's Registration Statement No. 33-66048 on Form S-4, filed July 22, 1993. 3(e) Articles Supplementary, dated August 31, 1993, which define the rights of the holders of the Company's Adjustable Rate Cumulative Preferred Stock, Series C, are incorporated herein by reference to Exhibit 3(f) to the Company's 1993 Annual Report on Form 10-K, filed December 16, 1993. 3(f) Articles of Merger, dated July 30, 1993, between the Company and SunAmerica Corporation are incorporated herein by reference to Exhibit 3(g) to the Company's 1993 Annual Report on Form 10-K, filed December 16, 1993. 3(g) Bylaws, as revised on October 23, 1987, are incorporated herein by reference to Exhibit 3(b) to the Company's 1987 Annual Report on Form 10-K, filed February 26, 1988. 4(a) Restated Charter. See Exhibit 3(a). 4(b) Bylaws, as revised on October 23, 1987. See Exhibit 3(g). 4(c) Articles Supplementary, dated June 24, 1992. See Exhibit 3(b). 4(d) Articles Supplementary, dated March 9, 1993. See Exhibit 3(d). 4(e) Articles Supplementary, dated August 31, 1993. See Exhibit 3(e). 4(f) Senior Indenture, dated as of December 15, 1991, between the Company and Bank of America NT & SA (formerly Security Pacific National Bank), as Trustee, defining the rights of the holders of the Company's 9% Notes due January 15, 1995 and 9.95% Debentures due February 1, 2012, is incorporated herein by reference to Exhibit No. 4.1 to the Company's Registration Statement No. 33-44084 on Form S-3, filed November 20, 1991. 4(g) Senior Debt Indenture, dated as of April 15, 1993, between the Company and the First National Bank of Chicago, as Trustee, defining the rights of the holders of the Company's 8 1/8% Debentures due April 28, 2023 and certain other debt securities of the Company, is incorporated herein by reference to Exhibit 4(h) to the Company's Annual Report on Form 10-K, filed December 16, 1993. 4(h) Tri-Party Agreement, dated as of July 1, 1993, among The First National Bank of Chicago, Bank of America, NT & SA and the Company, appointing The First National Bank of Chicago as Successor Trustee to Bank of America NT & SA for the Company's 9% Notes due January 15, 1995 and 9.95% Debentures due February 1, 2012, is incorporated herein by reference to Exhibit 4(i) to the Company's Annual Report on Form 10-K, filed December 16, 1993.
24
EXHIBIT NO. DESCRIPTION - ------------ --------------------------------------------------------------------------------------------------------- 10(a) Employment Agreement, dated July 30, 1992, between the Company and Gary W. Krat, is incorporated herein by reference to Exhibit 10(e) to the Company's 1992 Annual Report on Form 10-K, filed November 30, 1992. 10(b) Employment Agreement, dated July 14, 1992, between the Company and Michael L. Fowler, is incorporated herein by reference to Exhibit 10(f) to the Company's 1992 Annual Report on Form 10-K, filed November 30, 1992. 10(c) 1988 Employee Stock Plan, is incorporated herein by reference to Exhibit B to the Company's and Kaufman and Broad Home Corporation's Notice of and Joint Proxy Statement for Special Meeting of Shareholders held on February 21, 1989, filed January 24, 1989. 10(d) Amended and Restated 1978 Employee Stock Option Program, is incorporated herein by reference to Appendix A to the Company's Notice of 1987 Annual Meeting of Shareholder's and Proxy Statement, filed March 24, 1987. 10(e) Executive Deferred Compensation Plan is incorporated herein by reference to Exhibit 10(l) to the Company's 1985 Annual Report on Form 10-K, filed February 27, 1986. 10(f) 1987 Restricted Stock Plan is incorporated herein by reference to Appendix A to the Company's Notice of 1988 Annual Meeting of Shareholders and Proxy Statement, filed March 22, 1988. 10(g) SunAmerica Profit Sharing and Retirement Plan, is incorporated herein by reference to Exhibit 10(l) to the Company's 1989 Annual Report on Form 10-K, filed December 20, 1989. 10(h) Executive Deferred Compensation Plan, dated as of October 1, 1989. 10(i) SunAmerica Supplemental Deferral Plan is incorporated herein by reference to Exhibit 10(m) to the Company's 1989 Annual Report on Form 10-K, filed December 20, 1989. 10(j) Long-Term Performance-Based Incentive Plan is incorporated herein by reference to Appendix A to the Company's Notice of 1994 Annual Meeting of Shareholders and Proxy Statement, filed December 21, 1993. 10(k) $90,000,000 Credit Agreement, dated as of February 1, 1993, among the Company, SunAmerica Corporation and SunAmerica Financial, Inc., as Borrowers, and Citibank, N.A., as Agent for the banks named therein. 10(l) $60,000,000 Credit Agreement, dated as of February 1, 1993, among the Company, SunAmerica Corporation and SunAmerica Financial, Inc., as Borrowers, and Citibank, N.A., as Agent for the banks named therein. 10(m) First Amendment to Credit Agreement, dated as of January 30, 1994, among the Company, SunAmerica Financial, Inc. and Citibank, N.A., amending the Credit Agreement of February 1, 1993. 10(n) First Amendment to Credit Agreement, dated as of January 30, 1994, among the Company, SunAmerica Financial, Inc. and Citibank, N.A., amending the Credit Agreement of February 1, 1993. 10(o) Executive Compensation Plans and Arrangements. 12 Statement re Computations of Ratios. 21 Subsidiaries of the Company. 23 Consent of Independent Accountants. 27 Financial Data Schedule.
REPORTS ON FORM 8-K On July 20, 1994, the Company filed a current report on Form 8-K that announced its third quarter 1994 earnings. On November 14, 1994, the Company filed a current report on Form 8-K that announced its fourth quarter 1994 earnings. 25 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SUNAMERICA INC. Date: November 30, 1994 By: SCOTT L. ROBINSON ----------------------------- -------------------------------- Scott L. Robinson SENIOR VICE PRESIDENT AND CONTROLLER Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE - --------------------------------- ------------------------- ------------------ Chairman, President and ELI BROAD Chief Executive Officer - --------------------------------- (Principal Executive November 30, 1994 Eli Broad Officer) JAMES R. BELARDI Senior Vice President and - --------------------------------- Treasurer (Principal November 30, 1994 James R. Belardi Financial Officer) SCOTT L. ROBINSON Senior Vice President and - --------------------------------- Controller (Principal November 30, 1994 Scott L. Robinson Accounting Officer) RONALD J. ARNAULT - --------------------------------- Director November 30, 1994 Ronald J. Arnault KAREN HASTIE-WILLIAMS - --------------------------------- Director November 30, 1994 Karen Hastie-Williams DAVID O. MAXWELL - --------------------------------- Director November 30, 1994 David O. Maxwell BARRY MUNITZ - --------------------------------- Director November 30, 1994 Barry Munitz LESTER POLLACK - --------------------------------- Director November 30, 1994 Lester Pollack RICHARD D. ROHR - --------------------------------- Director November 30, 1994 Richard D. Rohr SANFORD C. SIGOLOFF - --------------------------------- Director November 30, 1994 Sanford C. Sigoloff HAROLD M. WILLIAMS - --------------------------------- Director November 30, 1994 Harold M. Williams 26 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS
PAGE(S) -------------------- Report of Independent Accountants........................................................... F-2 Consolidated Balance Sheet as of September 30, 1994 and 1993................................ F-3 Consolidated Income Statement for the years ended September 30, 1994, 1993 and 1992.......................................................... F-4 Consolidated Statement of Cash Flows for the years ended September 30, 1994, 1993 and 1992.......................................................... F-5 through F-6 Notes to Consolidated Financial Statements.................................................. F-7 through F-23
Separate financial statements of subsidiaries not consolidated and 50% or less owned persons accounted for by the equity method have been omitted because they do not individually constitute a significant subsidiary. F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of SunAmerica Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated income statement and statement of cash flows present fairly, in all material respects, the financial position of SunAmerica Inc. and its subsidiaries at September 30, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 7, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in fiscal 1994. Price Waterhouse LLP Los Angeles, California November 9, 1994 F-2 SUNAMERICA INC. CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, ------------------------------ 1994 1993 -------------- -------------- (IN THOUSANDS) ASSETS Investments: Cash and short-term investments................................................ $ 569,382 $ 1,797,796 Bonds, notes and redeemable preferred stocks: Available for sale, at fair value (amortized cost: 1994, $5,599,780,000; 1993, $4,659,741,000)....................................................... 5,270,738 4,751,665 Held for investment, at amortized cost (fair value: 1994, $1,072,222,000; 1993, $1,701,362,000)....................................................... 1,064,132 1,626,109 Mortgage loans................................................................. 1,426,924 1,286,436 Common stocks, at fair value (cost: 1994, $49,336,000; 1993, $21,009,000)...... 61,660 57,610 Kaufman and Broad Home Corporation warrants, at fair value (cost: $1,188,000)................................................................... -- 26,538 Real estate.................................................................... 107,053 143,857 Other invested assets.......................................................... 780,501 674,941 -------------- -------------- Total investments.............................................................. 9,280,390 10,364,952 Variable annuity assets.......................................................... 4,513,093 4,194,970 Accrued investment income........................................................ 105,686 105,895 Deferred acquisition costs....................................................... 581,874 475,917 Other assets..................................................................... 175,182 125,687 -------------- -------------- TOTAL ASSETS..................................................................... $ 14,656,225 $ 15,267,421 -------------- -------------- -------------- -------------- LIABILITIES AND SHAREHOLDERS' EQUITY Reserves, payables and accrued liabilities: Reserves for fixed annuity contracts........................................... $ 4,519,623 $ 4,934,871 Reserves for guaranteed investment contracts................................... 2,783,522 2,216,104 Trust deposits................................................................. 442,320 378,986 Payable to brokers for purchases of securities................................. 643,734 1,586,923 Income taxes currently payable................................................. 4,600 9,280 Other liabilities.............................................................. 212,429 231,950 -------------- -------------- Total reserves, payables and accrued liabilities............................... 8,606,228 9,358,114 -------------- -------------- Variable annuity liabilities..................................................... 4,513,093 4,194,970 -------------- -------------- Senior indebtedness: Long-term notes and debentures................................................. 472,835 380,560 Bank notes..................................................................... -- 15,119 Collateralized mortgage obligations............................................ 28,662 112,032 -------------- -------------- Total senior indebtedness...................................................... 501,497 507,711 -------------- -------------- Deferred income taxes............................................................ 74,319 96,599 -------------- -------------- Shareholders' equity: Preferred Stock................................................................ 374,273 452,273 Nontransferable Class B Stock.................................................. 6,826 6,828 Common Stock................................................................... 28,977 26,335 Additional paid-in capital..................................................... 188,667 110,120 Retained earnings.............................................................. 512,571 413,770 Net unrealized gains (losses) on debt and equity securities available for sale.......................................................................... (150,226) 100,701 -------------- -------------- Total shareholders' equity..................................................... 961,088 1,110,027 -------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY....................................... $ 14,656,225 $ 15,267,421 -------------- -------------- -------------- --------------
SEE ACCOMPANYING NOTES F-3 SUNAMERICA INC. CONSOLIDATED INCOME STATEMENT
YEARS ENDED SEPTEMBER 30, ---------------------------------------- 1994 1993 1992 ------------ ------------ ------------ (IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS) Investment income....................................................... $ 758,150 $ 754,369 $ 763,013 ------------ ------------ ------------ Interest expense on: Fixed annuity contracts............................................... (254,464) (308,910) (362,094) Guaranteed investment contracts....................................... (150,424) (136,984) (140,114) Trust deposits........................................................ (8,516) (8,438) (4,256) Senior indebtedness................................................... (50,292) (36,246) (33,224) Subordinated notes.................................................... -- -- (3,941) ------------ ------------ ------------ Total interest expense................................................ (463,696) (490,578) (543,629) ------------ ------------ ------------ NET INVESTMENT INCOME................................................... 294,454 263,791 219,384 ------------ ------------ ------------ NET REALIZED INVESTMENT LOSSES.......................................... (21,124) (21,287) (56,364) ------------ ------------ ------------ Fee income: Variable annuity fees................................................. 79,483 67,461 57,666 Asset management fees................................................. 31,302 32,293 25,269 Net retained commissions.............................................. 28,009 23,658 18,855 Trust fees............................................................ 11,942 10,893 11,041 ------------ ------------ ------------ TOTAL FEE INCOME........................................................ 150,736 134,305 112,831 ------------ ------------ ------------ Other income and expenses: Surrender charges..................................................... 10,716 9,766 14,291 General and administrative expenses................................... (132,743) (135,790) (133,058) Provision for future guaranty fund assessments........................ -- (22,000) -- Amortization of deferred acquisition costs............................ (66,925) (51,860) (48,375) Other, net............................................................ 4,887 7,086 2,382 ------------ ------------ ------------ TOTAL OTHER INCOME AND EXPENSES......................................... (184,065) (192,798) (164,760) ------------ ------------ ------------ PRETAX INCOME........................................................... 240,001 184,011 111,091 Income tax expense...................................................... (74,700) (57,000) (34,300) ------------ ------------ ------------ INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES.................................................................. 165,301 127,011 76,791 Cumulative effect of change in accounting for income taxes.............. (33,500) -- -- ------------ ------------ ------------ NET INCOME.............................................................. $ 131,801 $ 127,011 $ 76,791 ------------ ------------ ------------ ------------ ------------ ------------ PER COMMON SHARE: INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES................................................................ $ 3.58 $ 2.75 $ 1.80 Cumulative effect of change in accounting for income taxes............ (.81) -- -- ------------ ------------ ------------ NET INCOME............................................................ $ 2.77 $ 2.75 $ 1.80 ------------ ------------ ------------ ------------ ------------ ------------
SEE ACCOMPANYING NOTES F-4 SUNAMERICA INC. CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, ----------------------------------------------- 1994 1993 1992 --------------- -------------- -------------- (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income..................................................... $ 131,801 $ 127,011 $ 76,791 Adjustments to reconcile net income to net cash provided by operating activities: Interest credited to: Fixed annuity contracts.................................... 254,464 308,910 362,094 Guaranteed investment contracts............................ 150,424 136,984 140,114 Trust deposits............................................. 8,516 8,438 4,256 Net realized investment losses............................... 21,124 21,287 56,364 Accretion of net discounts on investments.................... (2,949) (22,289) (33,419) Provision for deferred income taxes.......................... 78,285 8,433 (16,568) Cumulative effect of change in accounting for income taxes... 33,500 -- -- Change in: Deferred acquisition costs................................... (20,357) (39,708) (43,931) Other assets................................................. 365 8,140 34,472 Income taxes currently payable............................... (61,211) (1,817) 9,754 Other liabilities............................................ (18,964) 74,165 (4,366) Other, net..................................................... 4,330 27,317 6,291 --------------- -------------- -------------- NET CASH PROVIDED BY OPERATING ACTIVITIES........................ 579,328 656,871 591,852 --------------- -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of: Bonds, notes and redeemable preferred stocks available for sale........................................................ (6,657,431) (5,332,008) -- Other bonds, notes and redeemable preferred stocks........... (81,975) (561,372) (5,566,690) Mortgage loans............................................... (333,384) (199,106) (193,335) Other investments, excluding short-term investments.......... (549,450) (342,194) (575,608) Sales of: Bonds, notes and redeemable preferred stocks available for sale........................................................ 4,300,252 4,185,951 -- Other bonds, notes and redeemable preferred stocks........... 17,027 211,348 4,743,827 Kaufman and Broad Home Corporation warrants.................. 28,618 -- 38,770 Other investments, excluding short-term investments.......... 204,024 337,075 305,477 Redemptions and maturities of: Bonds, notes and redeemable preferred stocks available for sale........................................................ 1,007,680 865,201 -- Other bonds, notes and redeemable preferred stocks........... 456,252 260,692 791,883 Mortgage loans............................................... 157,304 173,327 140,055 Other investments, excluding short-term investments.......... 313,307 13,851 184,133 --------------- -------------- -------------- NET CASH USED BY INVESTING ACTIVITIES............................ (1,137,776) (387,235) (131,488) --------------- -------------- --------------
F-5 SUNAMERICA INC. CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
YEARS ENDED SEPTEMBER 30, -------------------------------------- 1994 1993 1992 ------------ ----------- ----------- (IN THOUSANDS) CASH FLOWS FROM FINANCING ACTIVITIES: Payments of cash dividends to shareholders........ $ (50,830) $ (38,760) $ (18,945) Premium receipts on: Fixed annuity contracts......................... 230,037 223,827 243,715 Guaranteed investment contracts................. 1,038,699 691,639 930,016 Receipts of trust deposits........................ 319,318 217,058 436,720 Withdrawal payments on: Fixed annuity contracts......................... (724,547) (561,291) (644,516) Guaranteed investment contracts................. (621,706) (635,567) (646,045) Trust deposits.................................. (264,500) (213,966) (73,518) Claims and annuity payments on fixed annuity contracts........................................ (176,136) (179,792) (177,459) Net proceeds from issuances of long-term notes and debentures....................................... 91,711 153,433 222,828 Repayments of collateralized mortgage obligations...................................... (83,370) (70,752) (48,984) Net decrease in other senior indebtedness......... (15,119) (10,800) (79,691) Redemption of senior subordinated fixed rate notes............................................ -- -- (119,886) Net proceeds from issuances of Preferred Stock.... -- 178,983 210,734 Net borrowings (repayments) of other short-term financings....................................... (413,523) 262,782 599,581 Other, net........................................ -- -- (15,616) ------------ ----------- ----------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES.... (669,966) 16,794 818,934 ------------ ----------- ----------- NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS........................................ (1,228,414) 286,430 1,279,298 CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD............................................. 1,797,796 1,511,366 232,068 ------------ ----------- ----------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD.... $ 569,382 $ 1,797,796 $ 1,511,366 ------------ ----------- ----------- ------------ ----------- ----------- Supplemental cash flow information: Interest paid on indebtedness..................... $ 56,169 $ 42,154 $ 38,344 ------------ ----------- ----------- ------------ ----------- ----------- Income taxes paid, net of refunds received........ $ 57,626 $ 34,971 $ 36,379 ------------ ----------- ----------- ------------ ----------- -----------
SEE ACCOMPANYING NOTES F-6 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION. The consolidated financial statements include the accounts of SunAmerica Inc. (the "Company") and all significant subsidiaries, including Sun Life Insurance Company of America ("Sun Life of America"); Anchor National Life Insurance Company ("Anchor"); First SunAmerica Life Insurance Company; SunAmerica Asset Management Corp.; Royal Alliance Associates, Inc.; Resources Trust Company and SunAmerica Securities, Inc. All significant intercompany transactions have been eliminated. Certain items have been reclassified to conform to the current year's presentation. INVESTMENTS. Cash and short-term investments primarily include cash, commercial paper, money market investments, repurchase agreements and short-term bank participations. All such investments are carried at cost plus accrued interest, which approximates fair value, have maturities of twelve months or less and are considered cash equivalents for purposes of reporting cash flows. Bonds, notes and redeemable preferred stocks available for sale and common stocks, including the Kaufman and Broad Home Corporation warrants (the "KBH Warrants") are carried at aggregate fair value and changes in unrealized gains or losses, net of tax, are credited or charged directly to shareholders' equity. It is management's intent, and the Company has the ability, to hold the remainder of bonds, notes and redeemable preferred stocks until maturity, and therefore, these investments are carried at amortized cost. Bonds, notes and redeemable preferred stocks, whether available for sale or held for investment, are reduced to estimated net realizable value when necessary for declines in value considered to be other than temporary. Estimates of net realizable value are subjective and actual realization will be dependant upon future events. Mortgage loans are carried at amortized unpaid balances, net of provisions for estimated losses. Real estate is carried at the lower of cost or fair value. Other invested assets include $593,854,000 of investments in limited partnerships, of which approximately half are accounted for by using the equity method of accounting and the remainder are accounted for by using the cost method. Realized gains and losses on the sale of investments are recognized in operations at the date of sale and are determined using the specific cost identification method. Premiums and discounts on investments are amortized to investment income using the interest method over the contractual lives of the investments. INTEREST RATE SWAP AGREEMENTS. The net differential to be paid or received on interest rate swap agreements ("Swap Agreements") entered into to reduce the impact of changes in interest rates is recognized over the lives of the agreements, and such differential is classified as Investment Income in the income statement. All outstanding Swap Agreements are designated as hedges, and, therefore, are not marked to market. TOTAL RETURN CORPORATE BOND SWAP AGREEMENTS. Total return corporate bond swap agreements ("Total Return Agreements") have been entered into for investment purposes, and, accordingly, are marked to market with the related gain or loss classified as Investment Income in the income statement. DEFERRED ACQUISITION COSTS. Policy acquisition costs are deferred and amortized, with interest, over the estimated lives of the contracts in relation to the present value of estimated gross profits, which are composed of net interest income, net realized investment gains and losses, surrender charges and direct administrative expenses. Costs incurred to sell mutual funds are also deferred and amortized over the estimated lives of the funds obtained. Deferred acquisition costs consist of commissions and other costs that vary with, and are primarily related to, the production or acquisition of new business. As debt and equity securities available for sale are carried at aggregate fair value, an adjustment is made to deferred acquisition costs equal to the change in amortization that would have been F-7 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) recorded if such securities had been sold at their stated aggregate fair value and the proceeds reinvested at current yields. The change in this adjustment, net of tax, is included with the change in net unrealized gains or losses on debt and equity securities available for sale that is credited or charged directly to shareholders' equity. At September 30, 1994, Deferred Acquisition Costs have been increased by $85,600,000 for this adjustment. VARIABLE ANNUITY ASSETS AND LIABILITIES. The assets and liabilities resulting from the receipt of variable annuity premiums are segregated in separate accounts. The Company receives administrative fees for managing the funds and other fees for assuming mortality and certain expense risks. Such fees are included in Variable Annuity Fees in the income statement. GOODWILL. Goodwill, amounting to $27,932,000 at September 30, 1994, is amortized by using the straight-line method over a period averaging 25 years and is included in Other Assets in the balance sheet. CONTRACTHOLDER RESERVES. Contractholder reserves for fixed annuity contracts and guaranteed investment contracts are accounted for as investment-type contracts in accordance with Statement of Financial Accounting Standards No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments," and are recorded at accumulated value (premiums received, plus accrued interest, less withdrawals and assessed fees). INCOME PER COMMON SHARE. The calculation of net income per common share is based on the weighted average number of shares of Common Stock and Nontransferable Class B Stock (collectively referred to as "Common Stock") outstanding during each year after deduction for preferred stock dividend requirements other than for those paid on convertible issues. The calculation of the weighted average number of shares of Common Stock outstanding includes the effect of common stock equivalents arising from the October 1991 and March 1993 issuances of convertible preferred stock (see Note 6 -- Shareholders' Equity) and the Company's various employee stock option programs. Weighted average shares outstanding totaled 41,610,000 in 1994, 40,255,000 in 1993 and 38,342,000 in 1992. Preferred stock dividend requirements other than for those paid on convertible issues totaled $16,420,000 in 1994, $16,474,000 in 1993 and $7,879,000 in 1992. F-8 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 -- INVESTMENTS The amortized cost and estimated fair value of bonds, notes and redeemable preferred stocks available for sale and held for investment by major category follow:
ESTIMATED AMORTIZED FAIR COST VALUE ------------- ------------- (IN THOUSANDS) AT SEPTEMBER 30, 1994: AVAILABLE FOR SALE: Securities of the United States Government........................................ $ 419,489 $ 414,592 Mortgage-backed securities........................................................ 3,528,761 3,268,199 Securities of public utilities.................................................... 21,126 20,302 Corporate bonds and notes......................................................... 1,450,882 1,384,622 Redeemable preferred stocks....................................................... 24,489 26,202 Other debt securities............................................................. 155,033 156,821 ------------- ------------- Total available for sale.......................................................... $ 5,599,780 $ 5,270,738 ------------- ------------- ------------- ------------- HELD FOR INVESTMENT: Securities of the United States Government........................................ $ 78,988 $ 75,322 Mortgage-backed securities........................................................ 223,022 221,622 Securities of public utilities.................................................... 14,485 14,420 Corporate bonds and notes......................................................... 717,286 730,507 Other debt securities............................................................. 30,351 30,351 ------------- ------------- Total held for investment......................................................... $ 1,064,132 $ 1,072,222 ------------- ------------- ------------- ------------- AT SEPTEMBER 30, 1993: AVAILABLE FOR SALE: Securities of the United States Government........................................ $ 58,200 $ 59,457 Mortgage-backed securities........................................................ 3,234,615 3,279,085 Securities of public utilities.................................................... 29,093 30,408 Corporate bonds and notes......................................................... 1,114,168 1,152,099 Redeemable preferred stocks....................................................... 18,995 25,946 Other debt securities............................................................. 204,670 204,670 ------------- ------------- Total available for sale.......................................................... $ 4,659,741 $ 4,751,665 ------------- ------------- ------------- ------------- HELD FOR INVESTMENT: Securities of the United States Government........................................ $ 334,492 $ 361,177 Mortgage-backed securities........................................................ 318,710 305,571 Corporate bonds and notes......................................................... 942,756 1,004,463 Other debt securities............................................................. 30,151 30,151 ------------- ------------- Total held for investment......................................................... $ 1,626,109 $ 1,701,362 ------------- ------------- ------------- -------------
F-9 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 -- INVESTMENTS (CONTINUED) The amortized cost and estimated fair value of bonds, notes and redeemable preferred stocks available for sale and held for investment by contractual maturity follow:
ESTIMATED AMORTIZED FAIR COST VALUE ------------- ------------- (IN THOUSANDS) AT SEPTEMBER 30, 1994: AVAILABLE FOR SALE: Due in one year or less........................................................... $ 36,483 $ 32,863 Due after one year through five years............................................. 706,648 697,805 Due after five years through ten years............................................ 884,668 837,871 Due after ten years............................................................... 443,220 434,000 Mortgage-backed securities........................................................ 3,528,761 3,268,199 ------------- ------------- Total available for sale.......................................................... $ 5,599,780 $ 5,270,738 ------------- ------------- ------------- ------------- HELD FOR INVESTMENT: Due in one year or less........................................................... $ 103,983 $ 104,221 Due after one year through five years............................................. 271,660 271,086 Due after five years through ten years............................................ 278,178 285,306 Due after ten years............................................................... 187,289 189,987 Mortgage-backed securities........................................................ 223,022 221,622 ------------- ------------- Total held for investment......................................................... $ 1,064,132 $ 1,072,222 ------------- ------------- ------------- -------------
F-10 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 -- INVESTMENTS (CONTINUED) Gross unrealized gains and losses on bonds, notes and redeemable preferred stocks available for sale and held for investment by major category follow:
GROSS GROSS UNREALIZED UNREALIZED GAINS LOSSES ----------- ------------ (IN THOUSANDS) AT SEPTEMBER 30, 1994: AVAILABLE FOR SALE: Securities of the United States Government........................................... $ 3,142 $ (8,039) Mortgage-backed securities........................................................... 13,171 (273,733) Securities of public utilities....................................................... 28 (852) Corporate bonds and notes............................................................ 6,579 (72,839) Redeemable preferred stocks.......................................................... 1,854 (141) Other debt securities................................................................ 2,129 (341) ----------- ------------ Total available for sale............................................................. $ 26,903 $ (355,945) ----------- ------------ ----------- ------------ HELD FOR INVESTMENT: Securities of the United States Government........................................... $ 196 $ (3,862) Mortgage-backed securities........................................................... 2,070 (3,470) Securities of public utilities....................................................... -- (65) Corporate bonds and notes............................................................ 16,858 (3,637) ----------- ------------ Total held for investment............................................................ $ 19,124 $ (11,034) ----------- ------------ ----------- ------------ AT SEPTEMBER 30, 1993: AVAILABLE FOR SALE: Securities of the United States Government........................................... $ 1,257 $ -- Mortgage-backed securities........................................................... 59,638 (15,168) Securities of public utilities....................................................... 1,315 -- Corporate bonds and notes............................................................ 43,884 (5,953) Redeemable preferred stocks.......................................................... 6,951 -- ----------- ------------ Total available for sale............................................................. $ 113,045 $ (21,121) ----------- ------------ ----------- ------------ HELD FOR INVESTMENT: Securities of the United States Government........................................... $ 26,685 $ -- Mortgage-backed securities........................................................... 2,351 (15,490) Corporate bonds and notes............................................................ 70,133 (8,426) ----------- ------------ Total held for investment............................................................ $ 99,169 $ (23,916) ----------- ------------ ----------- ------------
At September 30, 1994, gross unrealized gains on equity securities aggregated $22,619,000 and gross unrealized losses aggregated $10,295,000. At September 30, 1993, gross unrealized gains on equity securities aggregated $65,274,000 (including $25,350,000 on the KBH Warrants) and gross unrealized losses aggregated $3,323,000. During 1994, the Company sold the remaining KBH Warrants to purchase 2,377,000 shares of the special common stock of Kaufman and Broad Home Corporation (the "KBH Special Common Stock") for net sales proceeds of $28,618,000, and recorded a gain of $17,830,000, net of a provision for income taxes of $9,600,000. During 1992, the Company sold KBH Warrants to purchase 5,123,000 shares of KBH Special Common Stock for net sales proceeds of $57,470,000, and recorded a gain of $36,208,000, net of a provision for income taxes of $18,700,000. In accordance with the method used to account for F-11 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 -- INVESTMENTS (CONTINUED) the 1989 distribution of substantially all of the common stock of Kaufman and Broad Home Corporation then owned by the Company to holders of the Company's Common Stock, the Company credited these net gains directly to Retained Earnings. Therefore, there was no impact on net income as a result of these sales. Gross realized investment gains and losses on sales of all types of investments are as follows:
YEARS ENDED SEPTEMBER 30, -------------------------------------- 1994 1993 1992 ---------- ------------ ------------ (IN THOUSANDS) BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS: Available for sale: Realized gains....................................................... $ 44,124 $ 117,488 $ -- Realized losses...................................................... (69,317) (34,377) -- Other: Realized gains....................................................... 10,571 11,031 180,601 Realized losses...................................................... (10,008) (24,994) (127,725) EQUITIES: Realized gains......................................................... 23,120 20,177 1,087 Realized losses........................................................ (496) (4,232) (1,311) OTHER INVESTMENTS: Realized gains......................................................... 41,720 30,456 12,862 Realized losses........................................................ (4,950) (22,592) (2,148) IMPAIRMENT WRITEDOWNS.................................................... (55,888) (114,244) (119,730) ---------- ------------ ------------ Total net realized investment losses..................................... $ (21,124) $ (21,287) $ (56,364) ---------- ------------ ------------ ---------- ------------ ------------
The sources and related amounts of investment income are as follows:
YEARS ENDED SEPTEMBER 30, ------------------------------------- 1994 1993 1992 ----------- ----------- ----------- (IN THOUSANDS) Short-term investments..................................................... $ 30,900 $ 33,593 $ 16,970 Bonds, notes and redeemable preferred stocks............................... 518,215 515,995 529,070 Mortgage loans............................................................. 132,297 132,069 145,059 Common stocks.............................................................. 61 35 132 Real estate................................................................ 865 (314) (1,690) Equity-method limited partnerships......................................... 37,205 21,579 28,659 Cost-method limited partnerships........................................... 20,948 22,683 15,943 Other invested assets...................................................... 17,659 28,729 28,870 ----------- ----------- ----------- Total investment income.................................................... $ 758,150 $ 754,369 $ 763,013 ----------- ----------- ----------- ----------- ----------- -----------
Expenses incurred to manage the investment portfolio amounted to $16,751,000 for the year ended September 30, 1994; $16,443,000 for the year ended September 30, 1993 and $16,344,000 for the year ended September 30, 1992; and are included in General and Administrative Expenses in the income statement. At September 30, 1994 and 1993, Other Invested Assets include $593,854,000 and $501,328,000, respectively, of investments in limited partnerships. The Company's limited partnership interests primarily include (i) partnerships that have purchased mortgage loans or other real estate-related F-12 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 -- INVESTMENTS (CONTINUED) assets from the Resolution Trust Corporation or other financial institutions, (ii) partnerships that invest largely in equity securities, and (iii) partnerships that make tax-advantaged investments in affordable housing. Investments in unconsolidated limited partnerships accounted for by using the equity method of accounting totaled $268,102,000 at September 30, 1994. At that date, total combined assets of these partnerships were $447,182,000 (including $442,322,000 of investments) and total combined liabilities were $172,451,000 (including $143,476,000 of nonrecourse notes payable to banks). For the year then ended, total combined revenues and expenses of such partnerships were $131,975,000 and $85,813,000, respectively, resulting in $46,162,000 of total combined pretax income. Investments in unconsolidated limited partnerships accounted for by using the equity method of accounting totaled $321,584,000 at September 30, 1993. At that date, total combined assets of these partnerships were $497,067,000 (including $480,517,000 of investments) and total combined liabilities were $173,104,000 (including $158,595,000 of nonrecourse notes payable to banks). For the year then ended, total combined revenues and expenses of such partnerships were $94,213,000 and $71,431,000, respectively, resulting in $22,782,000 of total combined pretax income. At September 30, 1994, no investment exceeded 10% of the Company's consolidated shareholders' equity. At September 30, 1994, mortgage loans were collateralized by properties located in 26 states, with loans totaling approximately 33% of the aggregate carrying value of the portfolio secured by properties located in California. At September 30, 1994, bonds, notes and redeemable preferred stocks included $988,152,000 (at amortized cost, with fair value of $946,432,000) of investments not rated investment grade by either Standard & Poor's Corporation, Moody's Investors Service or under National Association of Insurance Commissioners' guidelines. The Company had no material concentrations of non-investment grade assets at September 30, 1994. At September 30, 1994, the amortized cost (and fair value) of investments in default as to the payment of principal or interest was $56,222,000, consisting of $10,271,000 of unsecured non-investment grade bonds and $45,951,000 of mortgage loans. The Company has entered into various Swap Agreements with major brokerage firms and money center banks to reduce the impact of changes in interest rates on certain floating-rate investments. At September 30, 1994, the Company had 25 outstanding Swap Agreements with an aggregate notional principal amount of $1,228,746,000. The Swap Agreements effectively convert certain variable-rate corporate bonds and notes and variable-rate mortgage loans into fixed-rate instruments. These Swap Agreements mature in various years through 1998 and have an average remaining maturity of approximately 27 months. The Company is exposed to potential credit loss in the event of nonperformance by the investment grade-rated counterparties only with respect to the net differential payments. However, nonperformance is not anticipated and, therefore, no collateral is held or pledged. Related net interest receivable of $10,675,000 and $21,664,000 at September 30, 1994 and 1993, respectively, is included in Accrued Investment Income in the balance sheet. For investment purposes, the Company also has entered into various Total Return Agreements with an aggregate notional principal amount of $158,492,000 (the "Notional Amount") at September 30, 1994. The Total Return Agreements effectively exchange a fixed rate of interest (the "Payment Amount") on the Notional Amount for the coupon income plus or minus the increase or decrease in the market value (the "Total Return") of specified non-investment grade corporate bonds F-13 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 -- INVESTMENTS (CONTINUED) (the "Bonds"). The Total Return Agreements mature in November 1994; however, the Company intends to enter into other similar agreements. The Company is exposed to potential loss due to bond market fluctuations equal to the Payment Amount plus any reduction in the aggregate market value of the Bonds below the Notional Amount. The Company is also exposed to potential credit loss in the event of nonperformance by the investment grade-rated counterparty with respect to any increase in the aggregate market value of the Bonds above the Notional Amount. However, nonperformance is not anticipated and, therefore, no collateral is held or pledged. Related income of $1,306,000, $14,574,000 and $12,330,000 for the years ended September 30, 1994, 1993 and 1992, respectively, is included in Investment Income in the income statement. Mortgage-backed securities with an amortized cost of $172,788,000 at September 30, 1994 are pledged to secure outstanding collateralized mortgage obligations (see Note 4 -- Indebtedness). NOTE 3 -- FAIR VALUE OF FINANCIAL INSTRUMENTS The following estimated fair value disclosures are limited to the reasonable estimates of the fair value of only the Company's financial instruments. The disclosures do not address the value of the Company's recognized and unrecognized nonfinancial assets (including its other invested assets, equity investments and real estate investments) and liabilities or the value of anticipated future business. The Company does not plan to sell most of its assets or settle most of its liabilities at these estimated fair values. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Selling expenses and potential taxes are not included. The estimated fair value amounts were determined using available market information, current pricing information and various valuation methodologies. If quoted market prices were not readily available for a financial instrument, management determined an estimated fair value. Accordingly, the estimates may not be indicative of the amounts the financial instruments could be exchanged for in a current or future market transaction. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: CASH AND SHORT-TERM INVESTMENTS: Carrying value is considered to be a reasonable estimate of fair value. BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS: Fair value is based principally on independent pricing services, broker quotes and other independent information. Fair values include the market value, determined from independent broker quotes, of Swap Agreements that hedge certain variable-rate bonds and notes. MORTGAGE LOANS: Fair values are primarily determined by discounting future cash flows to the present at current market rates, using expected prepayment rates. Fair values include the market value, determined from independent broker quotes, of Swap Agreements that hedge certain variable-rate mortgage loans. VARIABLE ANNUITY ASSETS: Variable annuity assets are carried at the market value of the underlying securities. RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts and single premium life contracts are assigned fair value equal to current net surrender value. Annuitized contracts are valued based on the present value of future cash flows at current pricing rates. F-14 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) RESERVES FOR GUARANTEED INVESTMENT CONTRACTS: Fair value is based on the present value of future cash flows at current pricing rates. TRUST DEPOSITS: Trust deposits are carried at the fair value of deposits payable upon demand. PAYABLE TO BROKERS FOR PURCHASES OF SECURITIES: Such obligations represent net transactions of a short-term nature for which the carrying value is considered a reasonable estimate of fair value. VARIABLE ANNUITY LIABILITIES: Fair value of contracts in the accumulation phase are based on net surrender values. Fair values of contracts in the payout phase are based on the present value of future cash flows at assumed investment rates. LONG-TERM NOTES AND DEBENTURES: Fair value is estimated based on the quoted market prices for the same or similar issues and is net of the estimated fair market value of a hedging Swap Agreement. BANK NOTES AND COLLATERALIZED MORTGAGE OBLIGATIONS: Such obligations are variable-rate obligations for which the fair value approximates the carrying value. The estimated fair values of the Company's financial instruments at September 30, 1994 and 1993, compared with their respective carrying values are as follows:
CARRYING VALUE FAIR VALUE -------------- ------------- (IN THOUSANDS) 1994: ASSETS: Cash and short-term investments................................................. $ 569,382 $ 569,382 Bonds, notes and redeemable preferred stocks.................................... 6,334,870 6,342,960 Mortgage loans.................................................................. 1,426,924 1,404,562 Variable annuity assets......................................................... 4,513,093 4,513,093 LIABILITIES: Reserves for fixed annuity contracts............................................ 4,519,623 4,415,386 Reserves for guaranteed investment contracts.................................... 2,783,522 2,480,086 Trust deposits.................................................................. 442,320 442,320 Payable to brokers for purchases of securities.................................. 643,734 643,734 Variable annuity liabilities.................................................... 4,513,093 4,361,220 Long-term notes and debentures.................................................. 472,835 458,692 Collateralized mortgage obligations............................................. 28,662 28,662 -------------- ------------- -------------- ------------- 1993: ASSETS: Cash and short-term investments................................................. $1,797,796 $ 1,797,796 Bonds, notes and redeemable preferred stocks.................................... 6,377,774 6,453,027 Mortgage loans.................................................................. 1,286,436 1,355,773 Variable annuity assets......................................................... 4,194,970 4,194,970 LIABILITIES: Reserves for fixed annuity contracts............................................ 4,932,750 4,815,529 Reserves for guaranteed investment contracts.................................... 2,216,104 2,454,677 Trust deposits.................................................................. 378,986 378,986 Payable to brokers for purchases of securities.................................. 1,586,923 1,586,923 Variable annuity liabilities.................................................... 4,194,970 4,053,182 Long-term notes and debentures.................................................. 380,560 432,025 Bank notes and collateralized mortgage obligations.............................. 127,151 127,151 -------------- ------------- -------------- -------------
F-15 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4 -- INDEBTEDNESS Indebtedness consists of the following (interest rates are as of September 30):
SEPTEMBER 30, ------------------------ 1994 1993 ----------- ----------- (IN THOUSANDS) LONG-TERM NOTES AND DEBENTURES: Medium-term notes due 1998 through 2005 (5 3/8% to 6 3/4% in 1994 and 6% to 6 3/4% in 1993)................................................................................ $ 147,835 $ 55,560 8 1/8% debentures due April 28, 2023.................................................. 100,000 100,000 9.95% debentures due February 1, 2012................................................. 100,000 100,000 9% notes due January 15, 1999......................................................... 125,000 125,000 ----------- ----------- Total long-term notes and debentures.................................................. 472,835 380,560 ----------- ----------- BANK NOTES: Borrowings under a term loan agreement repaid in 1994 (4 1/4% in 1993)................ -- 15,119 ----------- ----------- Total bank notes...................................................................... -- 15,119 ----------- ----------- COLLATERALIZED MORTGAGE OBLIGATIONS redeemable in 1995 (5 5/8% in 1994 and 4% in 1993).................................................................................. 28,662 112,032 ----------- ----------- Total indebtedness...................................................................... $ 501,497 $ 507,711 ----------- ----------- ----------- -----------
At September 30, 1994, the Company had approximately $52,165,000 of securities available under shelf registration statements that could be issued as medium-term notes or other forms of debt securities. Short-term borrowings, which include short-term bank notes, reverse repurchase agreements and borrowings under a commercial paper program, averaged $224,169,000 at a weighted average interest rate of 4 1/8% during 1994 and $97,914,000 at a weighted average interest rate of 3 3/8% during 1993. The highest level of short-term borrowings at any month-end was $395,745,000 at 4 1/2% during 1994 and $192,932,000 at 3 1/4% during 1993. There were no short-term borrowings outstanding at September 30, 1994. Principal payments on long-term borrowings are due as follows: 1995, $28,662,000; 1998, $20,000,000; 1999, $17,775,000; and thereafter, $435,060,000. NOTE 5 -- CONTINGENT LIABILITIES The Company is involved in various kinds of litigation common to its businesses. These cases are in various stages of development and, based on reports of counsel, management believes that provisions made for potential losses are adequate and any further liabilities and costs will not have a material adverse impact upon the Company's financial position or results of operations. In 1989, the Company sold, through a 100% coinsurance transaction, Sun Life of America's General Agency Division. With respect to the coinsurance transaction, Sun Life of America could become liable for in-force amounts ceded if the coinsurer were to become unable to meet the obligations assumed under the coinsurance agreement. In-force amounts ceded approximate $1,463,846,000 at September 30, 1994. As part of the transaction, assets substantially equal to the policyholder reserves assumed by the coinsurer are held in trust to secure the obligations of the coinsurer. F-16 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6 -- SHAREHOLDERS' EQUITY On January 29, 1993, the Company's shareholders approved an increase in the number of authorized shares of the Company's Preferred Stock to 20,000,000 shares from 7,000,000 shares. On March 10, 1993, the Company issued 5,002,500 $2.78 Depositary Shares (the "Series D Depositary Shares"), each representing one-fiftieth of a share of Series D Mandatory Conversion Premium Dividend Preferred Stock, with a liquidation preference of $37 per share. On March 1, 1996, each of the outstanding Series D Depositary Shares will convert into one share of Common Stock and the Company may redeem these shares prior to such date, in whole or in part, at a price per share initially equal to $57.45, declining by $.007003 on each day following the date of issue to $50.37 on January 1, 1996, and equal to $49.95 thereafter. The call price is payable in shares of Common Stock having an aggregate current market price equal to such call price, plus an amount in cash equal to all accrued and unpaid dividends. In 1992, the Company issued 5,620,000 shares of 9 1/4% Preferred Stock, Series B (the "Series B Preferred Shares"), with a liquidation preference of $25.00 per share. On or after June 15, 1997, the Company may redeem the Series B Preferred Shares, in whole or in part, at a price per share of $25.00, plus accrued and unpaid dividends. On October 21, 1991, the Company issued 6,000,000 $1.11 Depositary Shares (the "Series A Depositary Shares"), each representing ownership of one-fifth of a share of Series A Mandatory Conversion Premium Dividend Preferred Stock, with a liquidation preference of $13 per share. On August 16, 1994, the Company redeemed all of the Series A Depositary Shares for a call price equal to $17.55 per share plus accrued and unpaid dividends of approximately $.096 per share. The call price was paid with 2,476,000 shares of Common Stock of the Company. On January 21, 1986, the Company's subsidiary, SunAmerica Corporation, issued 750,000 shares of Adjustable Rate Cumulative Preferred Stock, Series A, with a liquidation preference of $100 per share. On August 31, 1993, as part of the merger of SunAmerica Corporation into the Company, the Company canceled all of the 486,800 outstanding shares and converted each of them into one share of SunAmerica Adjustable Rate Cumulative Preferred Stock, Series C (the "Series C Preferred Shares"), with a liquidation preference of $100 per share. The Series C Preferred Shares are redeemable at the option of the Company. The quarterly dividend rate is 50 basis points below the higher of three defined treasury rate indexes. However, the dividend rate may not be less than 7% per annum nor greater than 13 1/2% per annum. On September 1, 1994, the dividend rate was 7.1%. All preferred shares of the Company rank on a parity with each other and rank senior to Common Stock and Nontransferable Class B Stock of the Company as to payment of dividends and distribution of assets upon dissolution, liquidation or winding up of the Company. The Company is authorized to issue 50,000,000 shares of its $1.00 par value Common Stock and is authorized to repurchase 4,000,000 shares of such stock. At September 30, 1994, 28,977,000 shares are outstanding; at September 30, 1993, 26,335,000 shares are outstanding; and at September 30, 1992, 25,179,000 shares are outstanding. The Company is authorized to issue 15,000,000 shares of its $1.00 par value Nontransferable Class B Stock. Holders of this stock have rights identical to those of the Company's common stockholders except that they have ten votes per share and are entitled to only 90% of any cash dividend paid on the Common Stock. This stock is convertible at any time into shares of Common Stock. At September 30, 1994, 6,826,000 shares are outstanding; at September 30, 1993, 6,828,000 shares are outstanding; and at September 30, 1992, 6,834,000 shares are outstanding. F-17 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6 -- SHAREHOLDERS' EQUITY (CONTINUED) Changes in shareholders' equity are as follows:
YEARS ENDED SEPTEMBER 30, -------------------------------------- 1994 1993 1992 ------------ ----------- ----------- (IN THOUSANDS) PREFERRED STOCK: Beginning balance......................................................... $ 452,273 $ 267,180 $ 64,900 Redemption of 6,000,000 Series A Depositary Shares........................ (78,000) -- -- Issuance of 5,002,500 Series D Depositary Shares.......................... -- 185,093 -- Issuance of 5,620,000 Series B Preferred Shares........................... -- -- 140,500 Issuance of 6,000,000 Series A Depositary Shares.......................... -- -- 78,000 Repurchase of 162,200 Series C Preferred Shares........................... -- -- (16,220) ------------ ----------- ----------- Ending balance............................................................ $ 374,273 $ 452,273 $ 267,180 ------------ ----------- ----------- ------------ ----------- ----------- NONTRANSFERABLE CLASS B STOCK: Beginning balance......................................................... $ 6,828 $ 6,834 $ 6,835 Conversion of 2,000; 6,500; and 700 shares to Common Stock................ (2) (6) (1) ------------ ----------- ----------- Ending balance............................................................ $ 6,826 $ 6,828 $ 6,834 ------------ ----------- ----------- ------------ ----------- ----------- COMMON STOCK: Beginning balance......................................................... $ 26,335 $ 25,179 $ 24,619 Issuance of 2,476,000 shares to redeem the Series A Depositary Shares..... 2,476 -- -- Conversion of Nontransferable Class B Stock to 2,000; 6,500; and 700 shares................................................................... 2 6 1 Stock options and other employee benefit plans............................ 164 1,150 559 ------------ ----------- ----------- Ending balance............................................................ $ 28,977 $ 26,335 $ 25,179 ------------ ----------- ----------- ------------ ----------- ----------- ADDITIONAL PAID-IN CAPITAL: Beginning balance......................................................... $ 110,120 $ 97,295 $ 100,079 Excess of redemption value of 6,000,000 Series A Depositary Shares over par value of 2,476,000 shares of Common Stock issued..................... 75,524 -- -- Cost of issuance of 5,002,500 Series D Depositary Shares.................. -- (6,110) -- Cost of issuance of 5,620,000 Series B Preferred Shares................... -- -- (4,826) Cost of issuance of 6,000,000 Series A Depositary Shares.................. -- -- (2,940) Excess of redemption value of the repurchase of 162,200 Series C Preferred Shares over cost......................................................... -- -- 1,054 Stock options and other employee benefit plans............................ 3,023 18,935 3,928 ------------ ----------- ----------- Ending balance............................................................ $ 188,667 $ 110,120 $ 97,295 ------------ ----------- ----------- ------------ ----------- -----------
F-18 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6 -- SHAREHOLDERS' EQUITY (CONTINUED)
YEARS ENDED SEPTEMBER 30, -------------------------------------- 1994 1993 1992 ------------ ----------- ----------- (IN THOUSANDS) RETAINED EARNINGS: Beginning balance......................................................... $ 413,770 $ 325,227 $ 230,708 Net income................................................................ 131,801 127,011 76,791 Dividends on: Preferred Stock......................................................... (37,556) (29,456) (12,258) Nontransferable Class B Stock........................................... (2,458) (1,721) (1,230) Common Stock............................................................ (10,816) (7,291) (4,992) Gain on sale of KBH Warrants, net of income taxes of $9,600,000 and $18,700,000.............................................................. 17,830 -- 36,208 ------------ ----------- ----------- Ending balance............................................................ $ 512,571 $ 413,770 $ 325,227 ------------ ----------- ----------- ------------ ----------- ----------- NET UNREALIZED INVESTMENT GAINS (LOSSES): Beginning balance......................................................... $ 100,701 $ 8,353 $ 22,768 Change in net unrealized gains (losses) on debt securities available for sale..................................................................... (420,966) 91,924 -- Change in net unrealized losses on equity securities available for sale... (49,627) 47,830 (21,912) Adjustment to deferred acquisition costs.................................. 85,600 -- -- Tax effects of net changes................................................ 134,066 (47,406) 7,497 ------------ ----------- ----------- Ending balance............................................................ $ (150,226) $ 100,701 $ 8,353 ------------ ----------- ----------- ------------ ----------- -----------
Dividends that the Company may receive from its life insurance subsidiaries in any year without prior approval of the California, Arizona or New York insurance commissioners are limited by statute. At September 30, 1994, restricted net assets of these consolidated life insurance subsidiaries totaled approximately $699,520,000, of which approximately $57,864,000 is available for dividends for the remainder of calendar year 1994. The combined statutory equity of the Company's three life insurance subsidiaries totaled $679,559,000 at September 30, 1994; $578,643,000 at December 31, 1993 and $430,901,000 at December 31, 1992. The combined statutory net income of these subsidiaries totaled $121,001,000 for the nine months ended September 30, 1994; $192,466,000 for the year ended December 31, 1993; and $45,634,000 for the year ended December 31, 1992. F-19 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7 -- INCOME TAXES The components of the provisions for income taxes on pretax income consist of the following:
FEDERAL STATE TOTAL ---------- --------- ---------- (IN THOUSANDS) 1994: Currently payable............................................................. $ (4,840) $ 1,255 $ (3,585) Deferred...................................................................... 80,029 (1,744) 78,285 ---------- --------- ---------- Total income tax expense...................................................... $ 75,189 $ (489) $ 74,700 ---------- --------- ---------- ---------- --------- ---------- 1993: Currently payable............................................................. $ 44,049 $ 4,518 $ 48,567 Deferred...................................................................... 9,462 (1,029) 8,433 ---------- --------- ---------- Total income tax expense...................................................... $ 53,511 $ 3,489 $ 57,000 ---------- --------- ---------- ---------- --------- ---------- 1992: Currently payable............................................................. $ 47,227 $ 3,641 $ 50,868 Deferred...................................................................... (19,516) 2,948 (16,568) ---------- --------- ---------- Total income tax expense...................................................... $ 27,711 $ 6,589 $ 34,300 ---------- --------- ---------- ---------- --------- ----------
Income taxes computed at the United States federal income tax rate of 35% for 1994, 34.75% for 1993 and 34% for 1992 and income taxes provided differ as follows:
YEARS ENDED SEPTEMBER 30, ------------------------------- 1994 1993 1992 --------- --------- --------- (IN THOUSANDS) Amount computed at statutory rate.............................................. $ 84,000 $ 63,944 $ 37,771 Increases (decreases) resulting from: Affordable housing tax credits............................................... (9,619) (7,484) (6,722) State income taxes, net of federal tax benefit............................... (317) 1,589 4,348 Other, net................................................................... 636 (1,049) (1,097) --------- --------- --------- Total income tax expense....................................................... $ 74,700 $ 57,000 $ 34,300 --------- --------- --------- --------- --------- ---------
Effective October 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Accordingly, the cumulative effect of this change in accounting for income taxes was recorded during the quarter ended December 31, 1993 to increase the liability for Deferred Income Taxes by $33,500,000. Also in accordance with the new pronouncement, the Company reclassified deferred tax liabilities associated with unrealized gains on certain debt and equity securities credited directly to shareholders' equity, which liabilities previously had been netted against the carrying values of the related securities, to the liability for Deferred Income Taxes, increasing that liability by $53,174,000 at September 30, 1993. Also as part of this accounting change, the Company reclassified $2,121,000 of certain deferred tax benefits to the liability for Deferred Income Taxes at September 30, 1993 that were previously netted against Reserves for Fixed Annuity Contracts. F-20 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7 -- INCOME TAXES (CONTINUED) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes. The significant components of the liability for Deferred Income Taxes are as follows:
SEPTEMBER 30, SEPTEMBER 30, 1994 1993 ------------- ------------- (IN THOUSANDS) DEFERRED TAX LIABILITIES: Investments...................................................................... $ 102,175 $ 39,734 Deferred acquisition costs....................................................... 159,471 149,598 State income taxes............................................................... 3,978 3,854 Deferred income.................................................................. 3,327 4,714 Net unrealized gains on certain debt and equity securities....................... -- 53,174 ------------- ------------- Total deferred tax liabilities................................................... 268,951 251,074 ------------- ------------- DEFERRED TAX ASSETS: Contractholder reserves.......................................................... (97,944) (94,211) Guaranty fund assessments........................................................ (5,144) (7,700) Deferred expenses................................................................ (10,653) (19,064) Net unrealized losses on certain debt and equity securities...................... (80,891) -- ------------- ------------- Total deferred tax assets........................................................ (194,632 ) (120,975 ) ------------- ------------- Net deferred tax liability (pro forma at September 30, 1993)....................... 74,319 130,099 Cumulative effect of change in accounting for income taxes recorded in the first quarter of 1994................................................................... -- (33,500 ) ------------- ------------- Deferred income taxes, per balance sheet........................................... $ 74,319 $ 96,599 ------------- ------------- ------------- -------------
NOTE 8 -- EMPLOYEE BENEFIT PLANS Benefits are provided to most employees of the Company under a deferred profit sharing plan. The aggregate cost of this plan was $1,529,000 in 1994, $2,509,000 in 1993 and $1,581,000 in 1992. Under the Company's 1988 Employee Stock Plan (the "1988 Plan"), options to purchase 1,687,567 shares at prices ranging from $3.88 to $45.06 are outstanding and 1,331,567 shares are reserved at September 30, 1994 for future grants. F-21 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9 -- QUARTERLY FINANCIAL DATA (UNAUDITED) Quarterly financial data for the years ended September 30, 1994 and 1993 follow:
FIRST SECOND THIRD FOURTH ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS) 1994: Net investment income.......................................... $ 70,714 $ 70,736 $ 74,241 $ 78,763 Net realized investment losses................................. (5,367) (5,887) (5,312) (4,558) Fee income..................................................... 37,627 37,837 37,640 37,632 General and administrative expenses............................ (33,457) (32,500) (32,198) (34,588) Amortization of deferred acquisition costs..................... (15,243) (16,090) (17,241) (18,351) Other income and expenses...................................... 2,990 3,711 4,033 4,869 ---------- ---------- ---------- ---------- Pretax income.................................................. 57,264 57,807 61,163 63,767 Income tax expense............................................. (17,700) (17,800) (19,100) (20,100) ---------- ---------- ---------- ---------- Income before cumulative effect of change in accounting for income taxes.................................................. 39,564 40,007 42,063 43,667 Cumulative effect of change in accounting for income taxes..... (33,500) -- -- -- ---------- ---------- ---------- ---------- Net income..................................................... $ 6,064 $ 40,007 $ 42,063 $ 43,667 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Per common share: Income before cumulative change in accounting for income taxes....................................................... $ .85 $ .86 $ .91 $ .95 Cumulative effect of change in accounting for income taxes... (.80) -- -- -- ---------- ---------- ---------- ---------- Net income................................................... $ .05 $ .86 $ .91 $ .95 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 1993: Net investment income.......................................... $ 50,057 $ 59,635 $ 69,699 $ 84,400 Net realized investment losses................................. (3,748) (5,325) (4,468) (7,746) Fee income..................................................... 31,305 32,538 34,476 35,986 General and administrative expenses............................ (29,754) (33,690) (34,506) (37,840) Provision for future guaranty fund assessments................. -- (1,000) (3,070) (17,930) Amortization of deferred acquisition costs..................... (12,674) (12,861) (13,027) (13,298) Other income and expenses...................................... 4,219 2,412 2,331 7,890 ---------- ---------- ---------- ---------- Pretax income.................................................. 39,405 41,709 51,435 51,462 Income tax expense............................................. (11,400) (12,100) (17,600) (15,900) ---------- ---------- ---------- ---------- Net income..................................................... $ 28,005 $ 29,609 $ 33,835 $ 35,562 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Per common share............................................... $ .63 $ .66 $ .70 $ .75 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
F-22 SUNAMERICA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 10 -- BUSINESS SEGMENTS The Company has four business segments: annuity operations, asset management, retirement trust services and broker-dealer operations. Respectively, these include the sale of fixed and variable annuities and guaranteed investment contracts; the management and marketing of mutual funds; custodial and administrative services for self-directed retirement plans; and the sale of securities and financial services products. Summarized data for the years ended September 30, 1994, 1993 and 1992 follow:
TOTAL DEPRECIATION AND TOTAL AMORTIZATION PRETAX TOTAL REVENUES EXPENSE INCOME ASSETS ----------- ------------ ----------- -------------- (IN THOUSANDS) 1994: Annuity operations....................................... $ 790,211 $ 55,724 $ 211,419 $ 14,034,879 Asset management......................................... 32,803 19,330 7,916 102,192 Retirement trust services................................ 36,412 838 10,210 478,805 Broker-dealer operations................................. 28,336 853 10,456 40,349 ----------- ------------ ----------- -------------- Total.................................................... $ 887,762 $ 76,745 $ 240,001 $ 14,656,225 ----------- ------------ ----------- -------------- ----------- ------------ ----------- -------------- 1993: Annuity operations....................................... $ 775,072 $ 53,688 $ 150,109 $ 14,693,701 Asset management......................................... 33,826 8,853 14,806 98,137 Retirement trust services................................ 33,562 806 10,213 433,889 Broker-dealer operations................................. 24,927 821 8,883 41,694 ----------- ------------ ----------- -------------- Total.................................................... $ 867,387 $ 64,168 $ 184,011 $ 15,267,421 ----------- ------------ ----------- -------------- ----------- ------------ ----------- -------------- 1992: Annuity operations....................................... $ 752,622 $ 53,939 $ 93,492 $ 12,846,585 Asset management......................................... 26,926 5,141 10,194 94,534 Retirement trust services................................ 19,804 620 4,809 424,579 Broker-dealer operations................................. 20,128 867 2,596 37,953 ----------- ------------ ----------- -------------- Total.................................................... $ 819,480 $ 60,567 $ 111,091 $ 13,403,651 ----------- ------------ ----------- -------------- ----------- ------------ ----------- --------------
F-23 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES INDEX TO FINANCIAL STATEMENT SCHEDULES
PAGE NUMBER IN THIS ANNUAL REPORT ON FORM 10-K ------------------- Report of Independent Accountants on Financial Statement Schedules........................... S-2 Schedule II -- Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other than Related Parties........................................................ S-3 Schedule III -- Condensed Financial Information of Registrant................................ S-4 through S-7 Schedule VI -- Reinsurance................................................................... S-8
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. S-1 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors of SunAmerica Inc. Our audits of the consolidated financial statements referred to in our report dated November 9, 1994 appearing on page F-2 of this Annual Report on Form 10-K of SunAmerica Inc. also included an audit of the Financial Statement Schedules listed on page S-1 of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. As discussed in Note 7 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in fiscal 1994. Price Waterhouse LLP Los Angeles, California November 9, 1994 S-2 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
YEARS ENDED SEPTEMBER 30, -------------------------------------- NAME OF BORROWER 1994 1993 1992 - -------------------------------------------------------------------------- ----------- ----------- ------------ Robert P. Saltzman Beginning balance....................................................... $ -- $ -- $ 286,476 Borrowings.............................................................. -- -- 28,980 Collections............................................................. -- -- (315,456) ----------- ----------- ------------ Ending balance.......................................................... $ -- $ -- $ -- ----------- ----------- ------------ ----------- ----------- ------------
The receivable from Mr. Saltzman includes $250,732 pursuant to purchases of shares under the Company's 1978 Employee Stock Option Plan, which provides for interest at 1% above the prime rate and payment of principal and accrued interest one year after the date of purchase, and was collateralized by the shares purchased. This receivable also includes $35,744 pursuant to purchases of shares under the Company's 1988 Employee Stock Option Plan, which also provides for interest at 1% above the prime rate. S-3 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED BALANCE SHEET
SEPTEMBER 30, SEPTEMBER 30, 1994 1993 ------------------ ------------------ ASSETS Investment in and advances to subsidiaries................................ $ 839,092,000 $ 958,010,000 Other investments......................................................... 944,427,000 1,416,651,000 Other assets.............................................................. 113,762,000 37,274,000 ------------------ ------------------ TOTAL ASSETS.............................................................. $ 1,897,281,000 $ 2,411,935,000 ------------------ ------------------ ------------------ ------------------ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Reserves for guaranteed investment contracts............................ $ 265,354,000 $ 429,059,000 Notes payable........................................................... 472,835,000 395,679,000 Payable to brokers for purchases of securities.......................... 136,238,000 403,515,000 Other liabilities....................................................... 61,766,000 73,655,000 ------------------ ------------------ Total liabilities....................................................... 936,193,000 1,301,908,000 Shareholders' equity...................................................... 961,088,000 1,110,027,000 ------------------ ------------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................ $ 1,897,281,000 $ 2,411,935,000 ------------------ ------------------ ------------------ ------------------
CONDENSED INCOME STATEMENT
YEARS ENDED SEPTEMBER 30, --------------------------------------------------- 1994 1993 1992 ---------------- ---------------- --------------- Dividends received from subsidiary corporations.............. $ 45,400,000 $ 34,700,000 $ 42,121,000 Investment income............................................ 104,299,000 75,710,000 64,809,000 Net realized investment gains (losses)....................... 7,231,000 (6,989,000) (39,636,000) Other income and (expenses).................................. 3,518,000 (444,000) 4,818,000 ---------------- ---------------- --------------- TOTAL INCOME................................................. 160,448,000 102,977,000 72,112,000 ---------------- ---------------- --------------- Interest expense on notes payable............................ (45,989,000) (28,846,000) (20,913,000) Interest expense on guaranteed investment contracts.......... (25,624,000) (25,677,000) (15,119,000) General and administrative expenses, net of reimbursement from subsidiaries of $11,374,000 in 1994, $9,009,000 in 1993 and $7,652,000 in 1992...................................... 417,000 449,000 (199,000) ---------------- ---------------- --------------- TOTAL EXPENSES............................................... (71,196,000) (54,074,000) (36,231,000) ---------------- ---------------- --------------- PRETAX INCOME................................................ 89,252,000 48,903,000 35,881,000 Income tax expense........................................... (9,607,000) (3,150,000) (2,036,000) ---------------- ---------------- --------------- INCOME BEFORE EQUITY IN UNDISTRIBUTED NET INCOME OF UNCONSOLIDATED SUBSIDIARIES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES.............................. 79,645,000 45,753,000 33,845,000 Equity in undistributed net income of unconsolidated subsidiaries................................................ 29,956,000 81,258,000 42,946,000 Cumulative effect of change in accounting for income taxes... 22,200,000 -- -- ---------------- ---------------- --------------- NET INCOME................................................... $ 131,801,000 $ 127,011,000 $ 76,791,000 ---------------- ---------------- --------------- ---------------- ---------------- ---------------
S-4 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED) CONDENSED STATEMENT OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, ---------------------------------------------------- 1994 1993 1992 ---------------- ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income.............................................. $ 131,801,000 $ 127,011,000 $ 76,791,000 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed net income of unconsolidated subsidiaries......................................... (29,956,000) (81,258,000) (42,946,000) Net realized investment (gains) losses................ (7,231,000) 6,989,000 39,636,000 Cumulative effect of change in accounting for income taxes................................................ (22,200,000) -- -- Other, net.............................................. (6,532,000) (6,902,000) (4,301,000) ---------------- ---------------- ---------------- NET CASH PROVIDED BY OPERATING ACTIVITIES................. 65,882,000 45,840,000 69,180,000 ---------------- ---------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES: Net purchases of investments............................ (63,883,000) (246,956,000) (357,573,000) Increase in investment in subsidiary corporations....... (45,539,000) -- (85,700,000) ---------------- ---------------- ---------------- NET CASH USED BY INVESTING ACTIVITIES..................... (109,422,000) (246,956,000) (443,273,000) ---------------- ---------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments of cash dividends.............................. (50,830,000) (38,760,000) (18,945,000) Proceeds from issuances of guaranteed investment contracts.............................................. 110,000,000 158,372,000 202,391,000 Withdrawal payments on guaranteed investment contracts.............................................. (299,330,000) -- -- Net proceeds from issuances of long-term notes and debentures............................................. 91,711,000 153,433,000 222,828,000 Net decrease in senior indebtedness..................... (15,119,000) (10,800,000) (6,786,000) Redemption of senior subordinated fixed rate notes...... -- -- (119,886,000) Net proceeds from issuances of Preferred Stock.......... -- 178,983,000 210,734,000 Other, net.............................................. -- -- (15,616,000) ---------------- ---------------- ---------------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES.......... (163,568,000) 441,228,000 474,720,000 ---------------- ---------------- ---------------- NET (DECREASE) INCREASE IN CASH AND SHORT-TERM INVESTMENTS.............................................. (207,108,000) 240,112,000 100,627,000 CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD.... 356,751,000 116,639,000 16,012,000 ---------------- ---------------- ---------------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD.......... $ 149,643,000 $ 356,751,000 $ 116,639,000 ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
S-5 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED) NOTES TO CONDENSED FINANCIAL STATEMENTS NOTE 1 -- INDEBTEDNESS Notes payable consist of the following (interest rates are as of September 30):
SEPTEMBER 30, SEPTEMBER 30, 1994 1993 ---------------- ---------------- LONG-TERM NOTES AND DEBENTURES: Medium-term notes due 1998 through 2005 (5 3/8% to 6 3/4% in 1994 and 6% to 6 3/4% in 1993).............................................................. $ 147,835,000 $ 55,560,000 8 1/8% debentures due April 28, 2023.......................................... 100,000,000 100,000,000 9.95% debentures due February 1, 2012......................................... 100,000,000 100,000,000 9% notes due January 15, 1999................................................. 125,000,000 125,000,000 ---------------- ---------------- Total long-term notes and debentures.......................................... 472,835,000 380,560,000 ---------------- ---------------- BANK NOTES: Borrowings under a term loan agreement repaid in 1994 (4 1/4% in 1993)........ -- 15,119,000 ---------------- ---------------- Total bank notes.............................................................. -- 15,119,000 ---------------- ---------------- Total indebtedness............................................................ $ 472,835,000 $ 395,679,000 ---------------- ---------------- ---------------- ----------------
Aggregate debt service payments are due as follows: 1995, $38,582,000; 1996, $38,582,000; 1997, $38,582,000; 1998, $58,253,000; 1999, $174,033,000 and $651,076,000 thereafter. In addition, the Company is the issuer of the following guaranteed investment contracts ("GICs") (interest rates are as of September 30):
SEPTEMBER 30, SEPTEMBER 30, 1994 1993 ---------------- ---------------- 8 1/2% GIC due serially through 2002 (including interest credited of $1,382,000 in 1994 and $1,400,000 in 1993)................................... $ 196,497,000 $ 199,055,000 8 3/8% GIC due serially through 2003 (including interest credited of $416,000 in 1994 and $495,000 in 1993)................................................ 59,986,000 71,405,000 7 3/8% GIC due in 2018 (including interest credited of $267,000 in 1994 and $212,000 in 1993)............................................................ 8,871,000 8,584,000 Floating-rate GICs due in 1994 (including interest credited of $15,000 and 3 5/8% in 1993).............................................................. -- 150,015,000 ---------------- ---------------- Total guaranteed investment contracts......................................... $ 265,354,000 $ 429,059,000 ---------------- ---------------- ---------------- ----------------
Aggregate debt service payments are due as follows: 1995, $36,605,000; 1996, $31,711,000; 1997, $31,657,000; 1998, $31,611,000; 1999, $24,820,000; and $258,038,000 thereafter. S-6 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED) NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 -- GUARANTEES Certain subsidiaries of the Company have sold certain of their interests in various limited partnerships that invest in tax-advantaged affordable housing projects. The Company has guaranteed a minimum yield and funding of certain defined operating deficits with respect to these sales in return for a fee. Management does not anticipate any material liability with respect to these guarantees. During December 1992, a non-regulated subsidiary, ALIGP Corporation, sold all of its net assets, composed primarily of an investment in Athena Loan Investors, L.P., whose principal assets are senior secured loans ("Secured Loans") and whose principal liabilities are notes payable to Sun Life Insurance Company of America ("Sun Life of America") secured by such Secured Loans, to an unaffiliated third party. The Company has guaranteed the full repayment of principal and interest on a note payable in the amount of $62,700,000 incurred by the buyer as part of the sale transaction. Based on an evaluation of the projected cash flows, it is management's belief that adequate provision has been made for any future losses with respect to this guarantee. Anchor National Life Insurance Company ("Anchor") has undertaken to dispose of $84,544,000 of certain of its real estate during the next one to three years, either to affiliated or nonaffiliated parties, and the Company has guaranteed that Anchor will receive its current carrying value for these assets. The Company has pledged certain marketable securities having an amortized cost of $40,338,000 at September 30, 1994 with respect to this guarantee. In September 1994, the Company's subsidiaries, Sun Life of America and Anchor, pooled certain performing mortgage loans with an aggregate principal balance of approximately $64,000,000, creating mortgage-backed pass-through certificates. The Company has provided limited guarantees in the aggregate amount of approximately $22,000,000 for losses, if any, realized by Sun Life of America and Anchor as holders of the certificates. NOTE 3 -- CONTINGENCIES The Company is involved in various kinds of litigation common to its businesses. These cases are in various stages of development and, based on reports of counsel, management believes that provisions made for potential losses are adequate and any further liabilities and costs will not have a material adverse impact upon the Company's financial position or results of operations. S-7 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE VI -- REINSURANCE AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
CEDED TO GROSS AMOUNT OTHER COMPANIES NET AMOUNT ------------------ ------------------ ---------------- 1994: Life insurance in force................................. $ 2,140,257,000 $ 1,822,112,000 $ 318,145,000 ------------------ ------------------ ---------------- ------------------ ------------------ ---------------- Premiums: Annuities and other single premiums................... $ 230,037,000 $ -- $ 230,037,000 Annual life insurance premiums........................ 9,591,000 9,591,000 -- ------------------ ------------------ ---------------- Total premiums........................................ $ 239,628,000 $ 9,591,000 $ 230,037,000 ------------------ ------------------ ---------------- ------------------ ------------------ ---------------- 1993: Life insurance in force................................. $ 2,459,830,000 $ 2,139,123,000 $ 320,707,000 ------------------ ------------------ ---------------- ------------------ ------------------ ---------------- Premiums: Annuities and other single premiums................... $ 223,827,000 $ -- $ 223,827,000 Annual life insurance premiums........................ 14,144,000 14,144,000 -- ------------------ ------------------ ---------------- Total premiums........................................ $ 237,971,000 $ 14,144,000 $ 223,827,000 ------------------ ------------------ ---------------- ------------------ ------------------ ---------------- 1992: Life insurance in force................................. $ 2,700,668,000 $ 2,372,244,000 $ 328,424,000 ------------------ ------------------ ---------------- ------------------ ------------------ ---------------- Premiums: Annuities and other single premiums................... $ 243,715,000 $ -- $ 243,715,000 Annual life insurance premiums........................ 17,515,000 17,515,000 -- ------------------ ------------------ ---------------- Total premiums........................................ $ 261,230,000 $ 17,515,000 $ 243,715,000 ------------------ ------------------ ---------------- ------------------ ------------------ ----------------
S-8 SUNAMERICA INC. 1994 FORM 10-K [LOGO] 1 SunAmerica Center Los Angeles, California 90067-6022 (310) 772-6000 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES LIST OF EXHIBITS FILED
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10(h) Executive Deferred Compensation Plan, dated as of October 1, 1989. 10(k) $90,000,000 Credit Agreement dated, as of February 1, 1993, among the Company, SunAmerica Corporation and SunAmerica Financial, Inc., as Borrowers, and Citibank, N.A., as Agent for the bank named therein. 10(l) $60,000,000 Credit Agreement, dated as of February 1, 1993, among the Company, SunAmerica Corporation and SunAmerica Financial, Inc., as Borrowers, and Citibank, N.A., as Agent for the banks named therein. 10(m) First Amendment to Credit Agreement, dated as of January 30, 1994, among the Company, SunAmerica Financial, Inc. and Citibank, N.A., amending the Credit Agreement of February 1, 1993. 10(n) First Amendment to Credit Agreement, dated as of January 30, 1994, among the Company and SunAmerica Financial, Inc. and Citibank, N.A., amending the Credit Agreement of February 1, 1993. 10(o) List of Executive Compensation Plans and Arrangements. 12 Statement re Computations of Ratios. 21 Subsidiaries of the Company. 23 Consent of Independent Accountants. 27 Financial Data Schedule.
EX-10.(H) 2 EXHIBIT 10 (H) EXECUTIVE DEFERRED COMP. PLAN EXHIBIT 10 (h) BROAD INC. ---------- EXECUTIVE DEFERRED COMPENSATION PLAN ------------------------------------ TABLE OF CONTENTS Section Page - ------- ---- 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1 1.01. "Account" . . . . . . . . . . . . . . . . . . 1 1.02. "Act" . . . . . . . . . . . . . . . . . . . . 1 1.03. "Anniversary Date" . . . . . . . . . . . . . . 1 1.04. "Beneficiary" . . . . . . . . . . . . . . . . 1 1.05. "Benefit Agreement" . . . . . . . . . . . . . 2 1.06. "Board of Directors" . . . . . . . . . . . . . 2 1.07. "Change in Control" . . . . . . . . . . . . . 2 1.08. "Claims Coordinator" . . . . . . . . . . . . . 2 1.09. "Code" . . . . . . . . . . . . . . . . . . . . 2 1.10. "Committee" . . . . . . . . . . . . . . . . . 2 1.11. "Company" . . . . . . . . . . . . . . . . . . 3 1.12. "Covered Bonus" . . . . . . . . . . . . . . . 3 1.13. "Covered Salary" . . . . . . . . . . . . . . . 3 1.14. "Deferral" . . . . . . . . . . . . . . . . . . 3 1.15. "Deferral Period" . . . . . . . . . . . . . . 3 1.16. "Disability" . . . . . . . . . . . . . . . . . 3 1.17. "Disability Plan" . . . . . . . . . . . . . . 3 1.18. "Early Retirement Date" . . . . . . . . . . . 3 1.19. "Effective Date" . . . . . . . . . . . . . . . 4 1.20. "Employer" . . . . . . . . . . . . . . . . . . 4 1.21. "Executive" . . . . . . . . . . . . . . . . . 4 1.22. "Leave" . . . . . . . . . . . . . . . . . . . 4 1.23. "Minimum Annual Deferral" . . . . . . . . . . 4 1.24. "Normal Retirement Date" . . . . . . . . . . . 4 1.25. "Participant" . . . . . . . . . . . . . . . . 4 1.26. "Plan" . . . . . . . . . . . . . . . . . . . . 4 1.27. "Plan Interest Rate" . . . . . . . . . . . . . 4 1.28. "Plan Year" . . . . . . . . . . . . . . . . . 5 1.29. "Post-Retirement Death Benefit" . . . . . . . 5 1.30. "Pre-Retirement Death Benefit" . . . . . . . . 5 1.31. "Retirement Income Benefit" . . . . . . . . . 5 1.32. "Total Deferral" . . . . . . . . . . . . . . . 5 2. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . 6 2.01. Commencement of Deferral Period . . . . . . . . . . . . . . . . . . . . 6 2.02. Deferrals . . . . . . . . . . . . . . . . . . 6 2.03. Election of Total Deferral . . . . . . . . . . 6 2.04. Annual Election . . . . . . . . . . . . . . . 6 2.05. Change in Circumstances . . . . . . . . . . . 7 (i) Section Page - ------- ---- 3. FUNDING OF BENEFITS . . . . . . . . . . . . . . . . . . . 8 3.01. Unfunded Plan . . . . . . . . . . . . . . . . 8 3.02. No Employer Matching Contributions . . . . . . 8 3.03. Interest . . . . . . . . . . . . . . . . . . . 8 4. CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . 9 4.01. Benefit Claims Procedure . . . . . . . . . . . 9 4.02. Appeals Procedure . . . . . . . . . . . . . . 9 5. RETIREMENT INCOME BENEFITS . . . . . . . . . . . . . . . 11 5.01. Normal Retirement Benefit . . . . . . . . . . 11 5.02. Early Retirement Benefit . . . . . . . . . . . 11 5.03. Deferred Retirement Benefit . . . . . . . . . 11 5.04. Termination Benefit . . . . . . . . . . . . . 12 5.05. Disability . . . . . . . . . . . . . . . . . . 12 5.06. Hardship Withdrawal Benefit . . . . . . . . . 13 5.07. Change in Control Benefit . . . . . . . . . . 13 6. PRE-RETIREMENT DEATH BENEFITS . . . . . . . . . . . . . . 14 6.01. Pre-Retirement Death Benefit . . . . . . . . . 14 7. POST-RETIREMENT DEATH BENEFITS . . . . . . . . . . . . . 15 7.01. Post-Retirement Death Benefit . . . . . . . . 15 8. VESTING OF BENEFITS . . . . . . . . . . . . . . . . . . . 16 8.01. Participant's Account . . . . . . . . . . . . 16 (ii) Section Page - ------- ---- 9. ADDITIONAL PROVISIONS AFFECTING BENEFITS . . . . . . . . 17 9.01. Benefit Agreement . . . . . . . . . . . . . . 17 9.02. Leave of Absence . . . . . . . . . . . . . . . 17 9.03. Alternative Forms of Benefit . . . . . . . . . 17 9.04. Withholding . . . . . . . . . . . . . . . . . 17 10. ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . 18 10.01. Duties and Powers . . . . . . . . . . . . . . 18 10.02. Conduct of Its Affairs . . . . . . . . . . . . 18 10.03. Allocation of Responsibilities . . . . . . . . 18 10.04. Expenses of the Committee . . . . . . . . . . 18 10.05. Bonding and Compensation . . . . . . . . . . . 18 10.06. Information to be Submitted to the Committee . . . . . . . . . . . . . . . 18 10.07. Notices, Statements and Reports . . . . . . . . . . . . . . . . . . . 19 10.08. Service of Process . . . . . . . . . . . . . . 19 10.09. Insurance . . . . . . . . . . . . . . . . . . 19 10.10. Indemnity . . . . . . . . . . . . . . . . . . 19 11. AMENDMENT, SUSPENSION, AND TERMINATION . . . . . . . . . 20 11.01. Right to Amend or Terminate . . . . . . . . . 20 11.02. Right to Suspend . . . . . . . . . . . . . . . 20 11.03. Non-ERISA Plan . . . . . . . . . . . . . . . . 20 11.04. Right to Accelerate . . . . . . . . . . . . . 20 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 21 12.01. Right to Continued Employment . . . . . . . . 21 12.02. Prohibition Against Alienation . . . . . . . . . . . . . . . . . . 21 12.03. Savings Clause . . . . . . . . . . . . . . . . 21 12.04. Payment of Benefit of Incompetent . . . . . . . . . . . . . . . . . 21 12.05. Spouse's Interest . . . . . . . . . . . . . . 21 12.06. Successors . . . . . . . . . . . . . . . . . . 21 12.07. Impact on Other Plans . . . . . . . . . . . . 22 12.08. Gender, Tense and Headings . . . . . . . . . . 22 (iii) Section Page - ------- ---- 13. CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . 23 13.01. Choice of Law . . . . . . . . . . . . . . . . 23 (iv) BROAD INC. EXECUTIVE DEFERRED COMPENSATION PLAN BROAD INC., a California corporation (hereinafter referred to as the "Company"), hereby adopts the following Executive Deferred Compensation Plan (hereinafter referred to as the "Plan") effective as of October 1, 1989. The purpose of the Plan is to provide supplemental retirement income for certain Executives (hereinafter defined). It is intended that this Plan provide benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301 and 401 of the Act (hereinafter defined), and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title I of the Act. SECTION 1. DEFINITIONS The following words and terms as used herein shall, unless the context clearly requires a different meaning, have the respective meanings hereinafter set forth. Except as otherwise expressly provided, the masculine gender includes the feminine and the singular includes the plural. 1.01. "Account" means the record maintained by the Committee of each Participant's Deferrals, credited interest and distributions under the Plan. 1.02. "Act" means the Employee Retirement Income Security Act of 1974 (ERISA), as amended from time to time. 1.03. "Anniversary Date" means any October 1 including or after the Effective Date. 1.04. "Beneficiary" means the person, persons or entity designated in writing by the Participant on forms provided by the Committee to receive distribution of certain death benefits under the Plan in the event of the Participant's death. A Participant may change the designated Beneficiary from time to time by filing a new written designation with the Committee, and such designation shall be effective upon receipt by the Committee. The designation of a Beneficiary other than the Participant's spouse must be consented to in writing by the spouse. If a Participant has not designated a Beneficiary, or if a designated Beneficiary is not living or in existence at the time of a Participant's death, any death benefits payable under the Plan shall be paid to the 1 Participant's spouse, if then living, and if the Participant's spouse is not then living, to the Participant's estate. 1.05. "Benefit Agreement" means a benefit agreement described in Section 9.01 relating to a Total Deferral commitment beginning in a specific Plan Year. 1.06. "Board of Directors" means the Board of Directors of the Company, as defined in Section 1.11. 1.07. "Change in Control" means, after the Effective Date, as defined in Section 1.19, (a) the acquisition by any person, entity or "group" (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) as beneficial owner, directly or indirectly, of securities of the Employer representing 25% or more of the combined voting power of the Employer's then outstanding securities; (b) a change, as a result of or in connection with any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, of a majority of the Board of Directors as constituted immediately prior to the occurrence of such event, unless the election of each director who was not a director immediately prior to the occurrence of such event was approved by the vote of at least two-thirds of the directors then in office who were directors immediately prior to the occurrence of such event; or (c) the approval, by the shareholders of the Company, of an agreement providing for a transaction in which the Company will cease to be an independent publicly-owned company or for the exchange of at least a majority of the outstanding stock for cash or property or securities (other than common stock of the Company) or for the sale or other disposition of all or substantially all of the assets of the Company. 1.08. "Claims Coordinator" means the individual(s) designated by the Committee to receive applications for benefits by participants or their beneficiaries. 1.09. "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.10. "Committee" means the Personnel, Compensation and Stock Option Committee of the Board of Directors or any successor thereof. 2 1.11. "Company" means Broad Inc., a California corporation, its successors and assigns. 1.12. "Covered Bonus" means the annual cash bonus payable in the current Plan Year. 1.13. "Covered Salary" means annual base salary, excluding any bonus or other form of remuneration, payable in the current Plan Year. 1.14. "Deferral" means the portion of a Participant's Covered Salary and/or Covered Bonus that has been deferred in accordance with Section 2.04. Deferral amounts are retained by the Employer as part of its general assets. 1.15. "Deferral Period" means, initially, the five-year period beginning with the Effective Date and ending on September 30, 1994, and thereafter, a five-year period beginning on any Anniversary Date, assuming all prior deferrals have been satisfied. 1.16. "Disability" means the inability, caused by disease or bodily injury and originating after his designation as a Participant, of an Executive to do substantially all the material duties of his regular job, which condition the Executive must suffer from continuously for a period of at least 6 months, except that (a) after such inability has continued for two years, such Executive shall be considered to be suffering Disability only if he cannot work for pay or profit at another job for which he is reasonably fitted by education, training or experience; and (b) such Executive shall be considered to be suffering Disability only for those periods during which he is not working for pay or profit. Disability specifically does not include intentional self-inflicted injury, war or any act incident to war, or service in the armed forces or any auxiliary civilian force of any country at war. 1.17. "Disability Plan" means the insured long-term disability plan maintained by the Employer which covers the Participants in the Plan, or any successor disability plan. 1.18. "Early Retirement Date" means the first day of the month coinciding with or next following the later of: (a) Attainment of age 50; 3 (b) Completion of all Total Deferred commitments under the Plan; and (c) Completion of ten (10) years of continuous employment with the Employer (including employment with its predecessor, Kaufman and Broad, Inc.). 1.19. "Effective Date" means October 1, 1989. 1.20. "Employer" means the Company, and those of its subsidiaries and other corporations it controls that have been approved by the Board of Directors for inclusion in the Plan. 1.21. "Executive" means a management or highly compensated employee of the Employer who has been specifically designated by the Board of Directors or the Committee as eligible to become a Plan Participant, such designation not having been revoked. 1.22. "Leave" means any period during which an Executive who is employed by the Employer immediately prior to the commencement thereof is absent from the Employer pursuant to a leave of absence granted by the Employer. 1.23. "Minimum Annual Deferral" means the minimum amount of Deferral that a Participant may make in any Plan Year under Section 2.04. 1.24. "Normal Retirement Date" means the first day of the month coinciding with or next following the later of: (a) Attainment of age 65; and (b) Completion of all Total Deferral commitments under the Plan. 1.25. "Participant" means an Executive who has made a written election to participate in the Plan in accordance with Section 2.01. 1.26. "Plan" means the BROAD INC. EXECUTIVE DEFERRED COMPENSATION PLAN, as described herein and as hereafter amended. 1.27. "Plan Interest Rate" for a Plan Year means the average of the Moody's Aaa Seasoned Corporate Bond Yield (which yield is published in Section H.15(519) of the Federal Reserve Statistical Release) for the 12 months preceding such Plan Year. 4 1.28. "Plan Year" means the period beginning October 1 and ending September 30 of each year. 1.29. "Post-Retirement Death Benefit" means the benefit payable to the Beneficiary of a Participant who dies after the commencement of his Retirement Income Benefit, as described in Section 7.01. 1.30. "Pre-Retirement Death Benefit" means the benefit payable to the Beneficiary of a Participant who dies prior to the commencement of his Retirement Income Benefit, as described in Section 6.01. 1.31. "Retirement Income Benefit" means the retirement benefit described in Section 5. 1.32. "Total Deferral" means the total amount of Deferrals that a Participant commits to make during the Deferral Period under Section 2.03 with respect to a particular Benefit Agreement. 5 SECTION 2. PARTICIPATION 2.01. COMMENCEMENT OF DEFERRAL PERIOD. An Executive shall become a Participant hereunder upon execution by the Participant and the Committee of an initial Benefit Agreement. A Participant (with the consent of the Committee) who has satisfied all prior deferral commitments may enter into additional Benefit Agreements for Deferral Periods commencing in subsequent Plan Years. Each Benefit Agreement shall become effective on the next October 1 after execution, and shall contain the items described in this Section and in Section 9.01. Subject to Section 2.02, the elections made in a Benefit Agreement shall be irrevocable. 2.02. DEFERRALS. A Participant may continue to make the Deferrals provided under Section 2.04 with respect to a specific Benefit Agreement until his designation as an Executive is revoked by the Board of Directors (in which event he shall be treated as a terminated Participant), he terminates employment with the Employer, he receives a hardship withdrawal before completing a total Deferral under his initial Benefit Agreement, or he has made the Total Deferral described in Section 2.03. 2.03. ELECTION OF TOTAL DEFERRAL. The Participant shall elect the Total Deferral that he will make during the Deferral Period in his Benefit Agreement. Such Total Deferral shall be based on the Participant's selection of one of the three options set forth below and shall be between the minimum and maximum for such option (in $4,000 increments from the minimum) as follows:
Minimum Maximum ------- ------- Option A $100,000 $200,000 Option B 40,000 80,000 Option C 20,000 40,000
2.04. ANNUAL ELECTION. Participants may irrevocably elect in writing with respect to each Benefit Agreement to make a Deferral for a Plan Year in the Deferral Period in accordance with the following rules: (a) Each Participant shall make a Deferral for the first Plan Year of the respective Deferral Period equal to a minimum of 20% of his Total Deferral. The source of such Deferral shall be the Participant's Covered Bonus payable in such Plan Year and/or the Participant's Covered Salary for such Plan Year, as indicated by the Participant in his Benefit Agreement for such Deferral Period. 6 (b) Each Participant may elect to make an annual Deferral for a subsequent Plan Year of the respective Deferral Period from his Covered Bonus and/or his Covered Salary payable in such Plan Year. Such election must be made on or before the September 30 preceding the Plan Year. If the Participant elects to make a Deferral, the amount of the annual Deferral shall be at least $20,000, $8,000 or $4,000 (the Minimum Annual Deferral under Options A, B and C, respectively), and not more than the amount needed to complete his Total Deferral. (c) Deferrals for a Plan Year shall be credited to Participants' Accounts as of the end of the month in which the Deferral is withheld from the Participant's Covered Bonus or Covered Salary. 2.05. CHANGE IN CIRCUMSTANCES. A Participant who experiences an unanticipated substantial change in his financial situation may request that the Committee waive his obligation to make one or more Deferrals under the Plan. The Committee shall establish a uniform set of rules, which shall be applied on a consistent basis to all Participants, in determining whether to grant or deny such requests. Among the factors the Committee shall consider are unanticipated changes in the Participant's family structure and unforeseen medical, educational and housing expenditures. No waiver shall apply to a Deferral election with respect to a Plan Year which has already commenced. Once such a waiver is granted, the Participant shall be treated as having satisfied those Deferrals which were waived. A Participant for whom a waiver was granted will not be precluded from entering into additional Benefit Agreements provided all prior deferral commitments either were satisfied or waived. In addition, such a Participant will not be precluded from making additional Deferrals during a Deferral Period in which a prior year's Deferral was waived. 7 SECTION 3. FUNDING OF BENEFITS 3.01. UNFUNDED PLAN. The Plan shall be unfunded. All benefits payable under the Plan shall be paid from the Employer's general assets. The Employer shall not be required to set aside or hold in trust any funds for the benefit of a Participant or Beneficiary, who shall have the status of a general unsecured creditor with respect to the Employer's obligation to make benefit payments pursuant to the Plan. Any assets of the Employer available to pay Plan benefits shall be subject to the claims of the Employer's general creditors and may be used by the Employer in its sole discretion for any purpose. 3.02. NO EMPLOYER MATCHING CONTRIBUTIONS. No Employer matching contributions shall be permitted under the Plan. 3.03. INTEREST. Except as otherwise provided, interest shall be credited to each Participant's Account quarterly during each Plan Year based upon the Plan Interest Rate in effect for such Plan Year for so long as there remains an Account balance. 8 SECTION 4. CLAIMS PROCEDURE 4.01. BENEFIT CLAIMS PROCEDURE. All applications for benefits under the Plan shall be submitted to the Claims Coordinator at the Employer's principal place of business. Applications for benefits must be in writing and must be signed by the Participant or, in the case of a Pre-Retirement or Post- Retirement Death Benefit, by the Beneficiary or legal representative of the deceased Participant. The Claims Coordinator reserves the right to require that the Participant furnish proof of his age prior to processing any application. Each application shall be acted upon and approved or disapproved within ninety (90) days following its receipt by the Claims Coordinator. In the event any application for benefits is denied in whole or in part, the Claims Coordinator shall notify the applicant in writing of such denial and of his right to a review by the Committee and shall set forth, in a manner calculated to be understood by the applicant, specific reasons for such denial, specific references to pertinent Plan provisions on which the denial is based, a description of any additional material or information necessary for the applicant to perfect his application, an explanation of why such material or information is necessary, and an explanation of the Plan's review procedure. 4.02. APPEALS PROCEDURE. Any person or his duly authorized representative whose application for benefits is denied in whole or in part may appeal such denial to the Committee for a review of the decision by submitting to a Committee member within ninety (90) days after receiving written notice from the Committee of the denial of his claim a written statement (a) requesting a review by the Committee of his application for benefits; (b) setting forth all of the grounds upon which his request for review is based and any facts in support thereof; and (c) setting forth any issues or comments that the applicant deems pertinent to his application. The Committee shall regularly review appeals applications submitted to it. The Committee shall act upon each application within sixty (60) days after receipt of the applicant's request for review by the Committee. The Committee shall make a full and fair review of each such application and any written materials submitted by the 9 applicant or the Employer in connection therewith and may require the Employer or the applicant to submit such additional facts, documents, or other evidence as the Committee in its sole discretion deems necessary or advisable in making such a review. On the basis of its review, the Committee shall make an independent determination of the applicant's eligibility for benefits under the Plan. The decision of the Committee on any application for benefits shall be final and conclusive upon all persons, if supported by substantial evidence in the record. In the event that the Committee denies an application in whole or in part, the Committee shall give written notice of the Committee's decision to the applicant setting forth, in a manner calculated to be understood by the applicant, the specific reasons for such denial and specific references to the pertinent Plan provisions on which the Committee's decision was based. 10 SECTION 5. RETIREMENT INCOME BENEFITS 5.01. NORMAL RETIREMENT BENEFIT. Each Participant who retires on his Normal Retirement Date shall be entitled to a Retirement Income Benefit commencing at Normal Retirement Date consisting of equal monthly payments over 10 or 15 years, as selected by the Participant in his Benefit Agreement. The amount of the monthly payments shall be calculated to pay out over the specified period the entire balance in the Participant's Account as of his Normal Retirement Date with interest credited quarterly on the declining balance at the Plan Interest Rate. The Participant's Account shall continue to be credited quarterly with interest at the Plan Interest Rate and charged with the monthly payments to the Participant. Because the Plan Interest Rate changes annually, the amount of the monthly payments to the Participant shall be adjusted on January 1 of each year, commencing January 1, 1991, to reflect changes in the Plan Interest Rate and other changes in the Participant's Account balance as of the immediately preceding Anniversary Date. 5.02. EARLY RETIREMENT BENEFIT. (a) A Participant who retires prior to his Normal Retirement Date, but on or after his Early Retirement Date, shall be entitled to a Retirement Income Benefit commencing on his Normal Retirement Date, determined in accordance with Section 5.01. (b) In lieu of the Retirement Income Benefit described above, a Participant who retires prior to his Normal Retirement Date, but on or after his Early Retirement Date, may elect with the consent of the Committee at any time prior to his Normal Retirement Date to commence to receive on the first day of the month following his early retirement a Retirement Income Benefit determined in the manner set forth in Section 5.01, based upon the balance in his Account as of such date. 5.03. DEFERRED RETIREMENT BENEFIT. A Participant who retires after his Normal Retirement Date shall be entitled to a Retirement Income Benefit commencing on the first day of the month following his actual retirement, determined in accordance with Section 5.01, using the balance in his Account as of his actual retirement date in lieu of the balance as of his Normal Retirement Date. 11 5.04. TERMINATION BENEFIT. A Participant who terminates employment prior to his Early Retirement Date or who fails to make his Total Deferral without receiving a waiver from the Committee in accordance with Section 2.05 by the end of the Deferral Period shall be entitled to a termination benefit. The termination benefit shall be a lump-sum payment made within 120 days after the end of the Plan Year in which his employment terminates, equal to his Account balance as of the date of distribution including interest at the Plan Interest Rate for the period between the last quarterly interest adjustment, as described in Section 3.03, and the date of distribution. After a Participant has received a termination benefit under the Plan, neither the Participant nor his spouse or other Beneficiary shall be entitled to any further benefit hereunder. 5.05. DISABILITY. (a) A Participant who has suffered a Disability and is within the initial exclusion period under the Disability Plan and solely for that reason is not receiving benefits thereunder, or is receiving benefits under the Disability Plan, shall be deemed to be an Executive during such period and shall continue to be eligible for Retirement Income Benefits under Section 5.01 without reduction and Pre-Retirement and Post- Retirement Death Benefits under Sections 6.01 and 7.01. If the period of Disability occurs within a Deferral Period, and the disabled Participant had not completed making his Total Deferrals prior to the period of Disability, he shall, at his election, be excused from making one additional Deferral under each applicable Benefit Agreement for each Plan Year of Disability, but no amounts shall be credited to his Account with respect to such excused Deferral(s). However, if he returns to employment within the Deferral Period, he may elect, upon his return, to make the Deferrals that were previously excused to the extent that the amount of such Deferrals does not exceed the amount of compensation which the Participant expects to receive but has not yet been paid during the remainder of the Plan Year. (b) With the approval of the Committee, the disabled Participant may withdraw his Account balance in a lump-sum. Such withdrawal shall render the disabled Participant, his spouse 12 and his Beneficiary ineligible for further benefits hereunder. 5.06. HARDSHIP WITHDRAWAL BENEFIT. At any time prior to the commencement of Retirement Income Benefits hereunder, a Participant may request the Committee to make a distribution to him from his Account balance in a lump- sum within 120 days. Such distribution shall be made only if the Committee determines that the Participant is suffering from a financial hardship that cannot be satisfied from his normal sources of income. In making this determination, the Committee shall utilize the regulations proposed or adopted by the Treasury pursuant to Section 401(k) of the Code. In addition, the following rules shall apply separately with respect to each of the Participant's Benefit Agreements: (a) If the hardship withdrawal is to be made prior to completion of his Total Deferral under his initial Benefit Agreement, the amount to be distributed shall be the entire Account balance including interest at the Plan Interest Rate through the date of withdrawal, the Participant shall cease to be a participant in the Plan, and neither the Participant, nor his spouse or Beneficiary shall be entitled to any further benefit hereunder. (b) If the hardship withdrawal is to be made after completion of his Total Deferral under his initial Benefit Agreement, the Participant may select the portion of his Account to be withdrawn. The Participant will remain eligible for retirement, death, termination and disability benefits hereunder (based upon his remaining Account balance where applicable). 5.07. CHANGE IN CONTROL BENEFIT. In the event of a Change in Control, a Participant may elect to withdraw his entire Account balance (including interest accrued to the date of payment) by giving written notice to the Committee. Upon the delivery of such notice, the Participant's Account balance shall become due and payable as a lump-sum distribution as of the date of the Change in Control. 13 SECTION 6. PRE-RETIREMENT DEATH BENEFITS 6.01. PRE-RETIREMENT DEATH BENEFIT. If a Participant dies while employed by the Employer, or after termination of employment, but prior to the commencement of his Retirement Income Benefit, his Beneficiary shall be entitled to receive the balance in the Participant's Account. This amount will be paid to the Beneficiary in a lump-sum unless the Participant (with the consent of the Committee) elected a different payment period prior to his death. A Participant may change this election annually during the month of December. The benefit shall be paid or shall commence to be paid as soon as practicable after the Participant's death. 14 SECTION 7. POST-RETIREMENT DEATH BENEFITS 7.01. POST-RETIREMENT DEATH BENEFIT. The beneficiary of a Participant who dies after commencement of his Retirement Income Benefit shall be entitled to continue to receive the Retirement Income Benefit payments being made to the Participant under Section 5 for the remainder of the period specified in that section. 15 SECTION 8. VESTING OF BENEFITS 8.01. PARTICIPANT'S ACCOUNT. A Participant shall be 100% vested in his Account balance at all times and shall rank as an unsecured creditor of the Company for his entire Account balance. 16 SECTION 9. ADDITIONAL PROVISIONS AFFECTING BENEFITS 9.01. BENEFIT AGREEMENT. The Committee shall provide to each Executive a form of Benefit Agreement with respect to each Deferral Period for which the Committee will permit the Executive to make Deferrals, which shall set forth the Executive's acceptance of the benefits provided hereunder, his agreement to be bound by the terms of the Plan and such other matters as are set forth in this Plan or deemed advisable by the Committee. 9.02. LEAVE OF ABSENCE. An Executive who is on Leave, with or without salary, for a period of not more than six months, shall be deemed to be an Executive employed by the Employer during such Leave. An Executive who is on Leave without salary for a period in excess of six months shall be deemed to have voluntarily terminated his employment as of the end of such six-month period and therefore shall be subject to the conditions set forth in Section 5.04. 9.03. ALTERNATIVE FORMS OF BENEFIT. The Committee in its sole discretion, but with the consent of the recipient, may elect to pay the Participant, spouse or Beneficiary an actuarially equivalent lump-sum or other form of benefit that it deems appropriate in lieu of the form of benefit otherwise provided. 9.04. WITHHOLDING. Benefit payments hereunder shall be subject to applicable federal, state or local withholding laws. 17 SECTION 10. ADMINISTRATION OF THE PLAN 10.01. DUTIES AND POWERS. The Committee shall be responsible for the general administration of the Plan and the proper execution of its provisions. It shall also be responsible for the interpretation of the Plan and the determination of all questions arising thereunder. It shall maintain all necessary books of accounts and records. It shall have power to establish, interpret, enforce, amend, and revoke, from time to time, such rules and regulations for the administration of the Plan and the conduct of its business as it deems appropriate, including the right to remedy ambiguities, inconsistencies and omissions (provided such rules and regulations are uniformly applied to all persons similarly situated). Any action that the Committee is required or authorized to take shall be final and binding upon each and every person who is or may become a Plan Participant or Beneficiary. 10.02. CONDUCT OF ITS AFFAIRS. The Committee may act by a majority of its members in office from time to time. It may elect, from time to time, one of its own members to act as Chairman and a different person, who may but need not be a member of the Committee, to act as Secretary. It may authorize any one or more of its members to execute and deliver any documents on behalf of the Committee. A Committee member must absent himself from any vote on any matter which directly affects him. 10.03. ALLOCATION OF RESPONSIBILITIES. The Committee may, from time to time, allocate to one or more of its members and may delegate to any other person or organization any of its rights, powers, duties, and responsibilities with respect to the operation and administration of the Plan. Any such allocation and delegation shall be reviewed at least annually by the Committee and shall be terminable upon such notice as the Committee in its sole discretion deems reasonable and prudent under the circumstances. 10.04. EXPENSES OF THE COMMITTEE. The expenses of the Committee properly and actually incurred in the performance of its duties under the Plan shall be paid by the Employer. 10.05. BONDING AND COMPENSATION. The members of the Committee shall serve without bond, and without compensation for their services as Committee members except as the Employer may provide in its discretion. 10.06. INFORMATION TO BE SUBMITTED TO THE COMMITTEE. To enable the Committee to perform its functions, the Employer shall supply full and timely information to the Committee on 18 all matters relating to Executives and Participants as the Committee may require, and shall maintain such other records as the Committee may determine are necessary in order to determine the benefits due or which may become due to Participants or their Beneficiaries under the Plan. The Committee may rely on such records as conclusive with respect to the matters set forth therein. 10.07. NOTICES, STATEMENTS AND REPORTS. The Company shall be the "administrator" of the Plan as defined in Section 3(16)(A) of the Act for purposes of the reporting and disclosure requirements imposed by the Act and the Code. The Committee shall assist the Company, as requested, in complying with such reporting and disclosure requirements. 10.08. SERVICE OF PROCESS. The Committee may from time to time designate an agent of the Plan for the service of legal process. The Committee shall cause such agent to be identified in materials it distributes or causes to be distributed when such identification is required under applicable law. In the absence of such a designation, the Company shall be the agent of the Plan for the service of legal process. 10.09. INSURANCE. The Company, in its discretion, may obtain, pay for and keep current a policy or policies of insurance, insuring the Committee members, the members of the Board of Directors and other employees to whom any responsibility with respect to the administration of the Plan has been delegated against any and all costs, expenses and liabilities (including attorneys' fees) incurred by such persons as a result of any act, or omission to act, in connection with the performance of their duties, responsibilities and obligations under the Plan and any applicable law. 10.10. INDEMNITY. If the Company does not obtain, pay for and keep current the type of insurance policy or policies referred to in Section 10.09, or if such insurance is provided but any of the parties referred to in Section 10.09 incur any costs or expenses which are not covered under such policies, then the Company shall indemnify and hold such parties harmless in the same manner and to the same extent as directors and officers of the Company pursuant to its Bylaws, subject to any limitations imposed by the Act on such indemnification. 19 SECTION 11. AMENDMENT, SUSPENSION, AND TERMINATION 11.01. RIGHT TO AMEND OR TERMINATE. The Plan may be amended or terminated by the Board of Directors at any time. Such amendment or termination may modify or eliminate any benefit hereunder other than a benefit that is in pay status, or the vested portion of a benefit that is not in pay status. 11.02. RIGHT TO SUSPEND. If the Board of Directors determines that payments under the Plan would have a material adverse effect on the Employer's ability to carry on its business, the Board of Directors may suspend such payments temporarily for such time as in its sole discretion it deems advisable, but in no event for a period in excess of one year. The Employer shall pay such suspended payments immediately upon the expiration of the period of suspension. 11.03. NON-ERISA PLAN. The Plan is intended to provide benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301 and 401 of ERISA, and therefore to be exempt from Sections 2, 3 and 4 of Title 1 of ERISA. Accordingly, the Plan shall terminate and, except for existing Account balances and other benefits in pay status (which, at the option of the Board of Directors, may be accelerated and the balance paid in a single, actuarially equivalent lump-sum), no further benefits, vested or non- vested, shall be paid hereunder in the event it is determined by a court of competent jurisdiction or by an opinion of counsel that the Plan constitutes an employee pension benefit plan within the meaning of Section 3(2) of ERISA which is not so exempt. 11.04. RIGHT TO ACCELERATE. The Board of Directors in its sole discretion may accelerate all vested benefits upon termination of the Plan, and pay such benefits in a single, actuarially equivalent lump-sum. 20 SECTION 12. MISCELLANEOUS 12.01 RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan shall be construed as giving any person employed by the Employer the right to be retained in the Employer's employ. The Employer expressly reserves the right to dismiss any person at any time, with or without cause, without liability for the effect that such dismissal might have upon him as a Participant in the Plan. 12.02. PROHIBITION AGAINST ALIENATION. Except as otherwise provided in the Plan, no right or benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void. No such right or benefit shall be liable for or subject to the debts, contracts, liabilities, engagements, or torts of the person entitled to such right or benefit. 12.03. SAVINGS CLAUSE. If any provision of this instrument shall be finally held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. 12.04. PAYMENT OF BENEFIT OF INCOMPETENT. In the event the Committee finds that a Participant, former Participant, or Beneficiary is unable to care for his affairs because of his minority, illness, accident, or other reason, any benefits payable hereunder may, unless other claim has been made therefor by a duly appointed guardian, committee or other legal representative, be paid to a spouse, child, parent, or other blood relative or dependent or to any person found by the Committee to have incurred expenses for the support and maintenance of such Participant, former Participant, or Beneficiary; and any such payments so made shall be a complete discharge of all liability therefor. 12.05. SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner including but not limited to such spouse's will, nor shall such interest pass under the laws of interstate succession. 12.06. SUCCESSORS. In the event of any consolidation, merger, acquisition or reorganization of the Employer, the obligations of the Employer under this Plan shall continue and be binding upon the Employer and its successors. 21 12.07. IMPACT ON OTHER PLANS. Amounts of Covered Salary and Covered Bonus which are deferred pursuant to Section 2 of the Plan will not be considered covered compensation for the year of the deferral for purposes of the Broad Inc./SunAmerica Profit Sharing and Retirement Plan [401(k) Plan] and the Broad Inc./SunAmerica Supplemental Deferral Plan [Excess Plan]. 12.08. GENDER, TENSE AND HEADINGS. Whenever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine gender in all cases where they would so apply. Whenever any words used herein are in the singular form, they shall be construed as though they were also used in the plural form in all cases where they would so apply. Headings of Sections and subsections as used herein are inserted solely for convenience and reference and constitute no part of the Plan. 22 SECTION 13. CONSTRUCTION 13.01 CHOICE OF LAW. This Plan shall be governed by and construed in accordance with the laws of the State of California to the extent not superseded by applicable federal statutes or regulations. IN WITNESS WHEREOF, BROAD INC. has caused this Plan to be executed this 29th day of September, 1989. BROAD INC. By /s/ Darlene Chandler -------------------------------- Its Vice President ----------------------------- By /s/ Scott L. Robinson -------------------------------- Its Vice President ----------------------------- 23 EX-10.K 3 EXHIBIT 10(K)--CREDIT AGREEMENT $90,000,000 Exhibit 10(k) [Execution Copy] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $90,000,000 CREDIT AGREEMENT Dated as of February 1, 1993 Among SUNAMERICA INC., SUNAMERICA CORPORATION and SUNAMERICA FINANCIAL, INC., as Borrowers, THE BANKS NAMED HEREIN, as Lenders, and CITIBANK, N.A., as Agent - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS Section Page - ------- ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 1 1.02 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . 19 1.03 Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . . . . 19 1.04 Convention Statement. . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE II THE ADVANCES 2.01 Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . 20 2.02 Notice of Committed Borrowings. . . . . . . . . . . . . . . . . . . 20 2.03 Money Market Borrowings . . . . . . . . . . . . . . . . . . . . . . 21 2.04 Notice to Lenders; Funding of Advances. . . . . . . . . . . . . . . 26 2.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 2.06 Maturity of Advances. . . . . . . . . . . . . . . . . . . . . . . . 28 2.07 Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2.08 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 2.09 Regulation D Compensation . . . . . . . . . . . . . . . . . . . . . 33 2.10 Optional Termination or Reduction of Commitments. . . . . . . . . . 34 2.11 Mandatory Termination or Reduction of the Commitments . . . . . . . 34 2.12 Optional Prepayments. . . . . . . . . . . . . . . . . . . . . . . . 35 2.13 General Provisions as to Payments . . . . . . . . . . . . . . . . . 35 2.14 Funding Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . 36 2.15 Computation of Interest and Fees. . . . . . . . . . . . . . . . . . 37 2.16 Sharing of Payments, etc. . . . . . . . . . . . . . . . . . . . . . 37 2.17 Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE III CHANGES IN CIRCUMSTANCES 3.01 Basis for Determining Interest Rate Inadequate or Unfair. . . . . . 40 3.02 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 3.03 Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . 42 3.04 Base Rate Advances Substituted for Affected Fixed Rate Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 3.05 Substitution of Lender. . . . . . . . . . . . . . . . . . . . . . . 44 i Section Page - ------- ---- 3.06 Discretion of Lenders as to Manner of Funding . . . . . . . . . . . 45 3.07 Conclusiveness of Statements; Survival of Provisions . . . . . . . 45 ARTICLE IV CONDITIONS OF LENDING 4.01 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 4.02 Conditions Precedent to Advances. . . . . . . . . . . . . . . . . . 47 ARTICLE V REPRESENTATIONS AND WARRANTIES 5.01 Organization, etc . . . . . . . . . . . . . . . . . . . . . . . . . 48 5.02 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 5.03 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 5.04 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . 49 5.05 Validity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 5.06 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 49 5.07 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 5.08 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 5.09 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 5.10 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . 51 5.11 Investment Company Act. . . . . . . . . . . . . . . . . . . . . . . 51 5.12 Public Utility Holding Company Act. . . . . . . . . . . . . . . . . 51 5.13 Margin Regulation . . . . . . . . . . . . . . . . . . . . . . . . . 51 5.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 5.15 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . 52 5.16 Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 5.17 Governmental Authorizations . . . . . . . . . . . . . . . . . . . . 53 5.18 Insurance Licenses. . . . . . . . . . . . . . . . . . . . . . . . . 53 5.19 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . 53 5.20 No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 ARTICLE VI AFFIRMATIVE COVENANTS 6.01 Reports, Certificates and Other Information . . . . . . . . . . . . 54 6.02 Corporate Existence; Foreign Qualification. . . . . . . . . . . . . 59 6.03 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . 60 ii Section Page - ------- ---- 6.04 Books, Records and Inspections. . . . . . . . . . . . . . . . . . . 60 6.05 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 6.06 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . 60 6.07 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 6.08 Maintenance of Ratings. . . . . . . . . . . . . . . . . . . . . . . 61 6.09 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . 61 ARTICLE VII NEGATIVE COVENANTS 7.01 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 7.02 Consolidation, Merger, Sales of Stock and Assets, etc . . . . . . . 64 7.03 Business Activities . . . . . . . . . . . . . . . . . . . . . . . . 65 ARTICLE VIII FINANCIAL COVENANTS 8.01 Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . 66 8.02 Consolidated Debt to Total Capital. . . . . . . . . . . . . . . . . 66 8.03 Risk-Based Capital Ratio. . . . . . . . . . . . . . . . . . . . . . 66 8.04 Total Invested Assets . . . . . . . . . . . . . . . . . . . . . . . 66 ARTICLE IX EVENTS OF DEFAULT 9.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 66 ARTICLE X AGENT 10.01 Authorization and Action. . . . . . . . . . . . . . . . . . . . . . 69 10.02 Agent's Reliance, etc . . . . . . . . . . . . . . . . . . . . . . . 70 10.03 Agent and Affiliates. . . . . . . . . . . . . . . . . . . . . . . . 70 10.04 Lender Credit Decision. . . . . . . . . . . . . . . . . . . . . . . 71 10.05 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 71 10.06 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 72 iii Section Page - ------- ---- ARTICLE XI MISCELLANEOUS 11.01 Amendments, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 73 11.02 Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 11.03 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . 74 11.04 Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 74 11.05 Right of Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . 75 11.06 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . 75 11.07 Assignments and Participations. . . . . . . . . . . . . . . . . . . 76 11.08 Submission to Jurisdiction; Waiver of Jury Trial. . . . . . . . . . 79 11.09 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 11.10 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . 80 11.11 Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 iv EXHIBITS Exhibit A - Form of Note Exhibit B - Form of Notice of Committed Borrowing Exhibit C - Form of Money Market Quote Request Exhibit D - Form of Invitation for Money Market Quotes Exhibit E - Form of Money Market Quote Exhibit F - Form of Opinion of counsel for the Borrowers Exhibit G - Form of Assignment and Acceptance Exhibit H - Form of Consolidating Quarterly Reports of the Borrowers v CREDIT AGREEMENT Dated as of February 1, 1993 SUNAMERICA INC., a Maryland corporation ("SunAmerica"), SUNAMERICA CORPORATION, a Delaware corporation ("SACO"), and SUNAMERICA FINANCIAL, INC., a Georgia corporation ("SAFI," and together with SunAmerica and SACO, the "Borrowers"), the banks listed on the signature pages hereof (the "Lenders") and CITIBANK, N.A., as agent (the "Agent") for the Lenders hereunder, agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ABSOLUTE RATE AUCTION" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "ADJUSTED CD RATE" has the meaning set forth in Section 2.07(b). "ADVANCE" means an advance under Article II by a Lender to a Borrower pursuant to its Commitment, and refers to a CD Advance, Base Rate Advance, Eurodollar Advance or Money Market Advance (each of which shall be a "Type" of Advance). "AFFILIATE" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. "AGENT" means Citibank, as agent, or any successor thereof. "AGREEMENT" means this Credit Agreement, as the same may be amended, modified or supplemented from time to time. "ANCHOR" means Anchor National Life Insurance Company, a California stock insurance company. "ANNUAL REPORTS" has the meaning set forth in Section 5.06(b)(i). "APPLICABLE LENDING OFFICE" means, with respect to each Lender, (a) in the case of its Domestic Advances, its Domestic Lending Office, (b) in the case of its Eurodollar Advances, its Eurodollar Lending Office, and (c) in the case of its Money Market Advances, its Money Market Lending Office. "ASSESSMENT RATE" has the meaning set forth in Section 2.07(b). "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of Exhibit G hereto. "BASE RATE" means, for any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the higher of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; or (b) the sum (adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent) of (i) 1/2 of one percent per annum PLUS (ii) the rate per annum obtained by dividing (A) the latest three-week moving average of secondary market morning offered rates in the United States for three- month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Domestic Business Day, on the next succeeding Domestic Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or 2 terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, by (B) a percentage equal to 100% minus the average of the daily percentages specified during such threeweek period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency,, supplemental or other marginal reserve requirement) for Citibank in respect of liabilities consisting of or including (among other liabilities) three month U.S. dollar nonpersonal time deposits in the United States, PLUS (iii) the average during such three-week period of the highest and lowest annual assessment rate (rounded upward, if necessary, to the next higher 1/100 of 1%) which the Federal Deposit Insurance Corporation (or any successor) charges banking institutions on the basis of their assessment rate classification for such Corporation's insuring U.S. dollar deposits in the United States. "BASE RATE ADVANCE" means an Advance that bears interest as provided in Section 2.07(a). "BENEFIT ARRANGEMENT" means, at any time, an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "BORROWERS" has the meaning set forth in the first paragraph of this Agreement and their permitted successors and assigns. "BORROWING" means a borrowing pursuant to a Notice of Borrowing consisting of Advances of the same Type made on the same day by the Lenders. "CAPITAL LEASE" means a lease which has been or should be, in accordance with GAAP, treated as a capital lease. "CD ADVANCE" means an Advance that bears interest as provided in Section 2.07(b). 3 "CD BASE RATE" has the meaning set forth in Section 2.07(b). "CD MARGIN" has the meaning set forth in Section 2.07(b). "CD REFERENCE BANKS" means Citibank, Chemical Bank and The First National Bank of Chicago. "CHANGE IN CONTROL" means, during any 12 month period, that individuals who as of the first day of such 12 month period constitute SunAmerica's Board of Directors (such Board of Directors as of the day immediately preceding such first day, the "incumbent Board"), cease for any reason to constitute at least a majority of the directors constituting the Board of Directors, PROVIDED that any person becoming a director during such 12 month period whose election, or nomination for election by SunAmerica's shareholders, was approved by a vote of at least three- quarters of the then directors who are members of the incumbent Board shall be, for purposes of this definition, considered as though such person were a member of the incumbent Board unless such person's initial assumption of office is (a) in connection with the acquisition by a third person, including a "group" as such term is used in Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, of 20% or more of the total voting power of outstanding SunAmerica Voting Stock (unless such acquisition of beneficial ownership was approved by a majority of the Board of Directors who are members of the incumbent Board), or (b) in connection with an actual or threatened election contest relating to the election of the directors of SunAmerica, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act. "CITIBANK" means Citibank, N.A. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "COMMITMENT" means the amount set forth opposite each Lender's name on the signature pages hereof (or in an Assignment and Acceptance entered into by it) as its Commitment (which shall be 4 $90,000,000 in the aggregate for all Lenders as of the Effective Date), as such amount may be adjusted from time to time to give effect to Money Market Reductions pursuant to Section 2.01 or reduced from time to time pursuant to Section 2.10. "COMMITTED ADVANCE" means an Advance made by a Lender pursuant to Section 2.01. "COMMITTED BORROWING" means a Borrowing consisting of Committed Advances. "CONSOLIDATED DEBT" means the consolidated Debt of SunAmerica and its Subsidiaries, determined in accordance with GAAP, to the extent such Debt is reflected or is required under GAAP to be reflected on the consolidated balance sheet of SunAmerica and its Subsidiaries, PROVIDED that such Debt shall not include Debt specified in clause (vii) of the definition of Debt or in clauses (ii) and (iii) (so long as none of the events referred to in the parenthetical clause of such clause (iii) has occurred) of the definition of Permitted Collateralization Obligations. "CONSOLIDATED TANGIBLE NET WORTH" means, without duplication, the total of (a) the consolidated shareholders' equity of SunAmerica and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, PLUS (b) the stated value of all outstanding SACO preferred stock reflected thereon (less the stated value of SACO preferred stock held by SunAmerica or any of its Subsidiaries), PLUS OR MINUS, as the case may be, (c) any net unrealized losses or gains, as the case may be, on securities "available for sale" shown thereon as a separate component of consolidated shareholders' equity in accordance with the Proposed Statement of Financial Accounting Standards "Accounting for Certain Investments in Debt and Equity Securities", as the same may be implemented, MINUS (d) the carrying value of goodwill, any covenant not to compete, capitalized organizational expenses and other assets treated as intangibles under GAAP arising from the acquisition, through stock purchase, merger or otherwise, of the stock or assets of any Person (other than intangibles classified as deferred acquisition costs arising from the writing of new insurance policies or contracts), 5 and MINUS (e) treasury stock and capital stock, obligations or other securities of, or capital contributions to, or investments in, any unconsolidated Subsidiary. "CONSOLIDATED TOTAL CAPITAL" means, as of any date of determination, the sum of Consolidated Tangible Net Worth plus Consolidated Debt. "CONTINGENT OBLIGATION" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the obligation or other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's liability with respect to any Contingent Obligation shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum outstanding principal amount, if larger) of the debt, obligation or other liability outstanding thereunder. "CONVENTION STATEMENT" means each annual and quarterly financial statement of each Insurance Subsidiary as filed with the appropriate Governmental Authority of its state of domicile, as such form may be amended from time to time pursuant to the requirements of such Governmental Authority. "DEBT" means, with respect to any Person at any date, without duplication: (i) all obligations of such Person for borrowed money or for loans or advances; (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (iii) all Capital Lease obligations of such Person; (iv) all obligations of such Person to pay the deferred purchase price of property or services, and Debt secured by a Lien on property owned or being purchased by such Person (including Debt arising under conditional sales or other title retention agreements); (v) all Debt of another Person secured by a Lien on any assets of such first Person, 6 whether or not such Debt is assumed by such first Person; (vi) all non- contingent obligations of such Person as account party to reimburse any bank or other Person in respect of amounts actually paid under a letter of credit or similar instrument; (vii) all obligations of such Person to purchase securities (or other property) that arise out of or in connection with the sale of the same or substantially similar securities or property (E._G., obligations under repurchase agreements and reverse repurchase agreements); and (viii) all Contingent Obligations of such Person with respect to the Debt of another Person, PROVIDED that Debt shall not include (a) accounts payable arising in the ordinary course of business, (b) contingent liabilities with respect to certain reinsurance arrangements of Sun Life disclosed in footnote number 6 to Consolidated Financial Statements of SunAmerica for the fiscal year ended September 30, 1992, (c) obligations arising in the capacity as a creditor in respect of loan or swap participations and similar arrangements in the ordinary course of business or (d) obligations under insurance policies or contracts, guaranteed investment contracts, funding agreements or similar obligations issued or entered into by the Borrowers and their Subsidiaries; and PROVIDED FURTHER that, with respect to any Debt of another Person specified in clause (v) not assumed by the first Person, the amount of such Debt shall be the lower of the amount of the obligation or the fair market value of the collateral securing such obligation. "DEFAULT" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "DEPARTMENT" means, with respect to an Insurance Subsidiary, the Governmental Authority responsible for the regulation of the insurance business in its state of domicile. "DOMESTIC ADVANCES" means Base Rate Advances or CD Advances or both. "DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or other day on which commercial 7 banks in New York City are authorized by law to close. "DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" on the signature pages hereof or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to SunAmerica and the Agent. "DOMESTIC RESERVE PERCENTAGE" has the meaning set forth in Section 2.07(b). "EFFECTIVE DATE" has the meaning set forth in Section 4.01. "ELIGIBLE ASSIGNEE" means (i) a commercial bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $500,000,000; (ii) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $500,000,000; (iii) a commercial bank organized under the laws of any other country which is a member of the OECD, or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having a combined capital and surplus of at least $500,000,000, PROVIDED that, in the case of clause (iii), such bank is acting through a branch or agency located in the United States and, in the case of clauses (i) through (iii), such institution has a senior secured long term debt rating of at least "BBB-" or above by Standard & Poor's or "Baa3" or above by Moody's; (iv) a finance company, insurance company or other financial institution or fund organized under the laws of the United States, or any State thereof, which is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and which has total assets in excess of $5,000,000,000, PROVIDED that any such Person under this clause (iv) is acceptable to SunAmerica in its discretion; and (v) any other Person who is acceptable to SunAmerica and the Agent or is an Affiliate of a Person identified in 8 clause (i), (ii) or (iii) above; PROVIDED that no Affiliate of SunAmerica shall be an Eligible Assignee hereunder. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA GROUP" means SunAmerica and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with SunAmerica, are treated as a single employer under Section 414 of the Code. "EUROCURRENCY LIABILITIES" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EURODOLLAR ADVANCE" means an Advance that bears interest as provided in Section 2.07(c). "EURODOLLAR BUSINESS DAY" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" on the signature page hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to SunAmerica and the Agent. "EURODOLLAR MARGIN" has the meaning set forth in Section 2.07(c). "EURODOLLAR REFERENCE BANKS" means Citibank, Chemical Bank and The First National Bank of Chicago. "EURODOLLAR RESERVE PERCENTAGE" means, for any day, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any 9 successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" under Regulation D (including any category of extensions of credit or other assets in respect of "Eurocurrency Liabilities" that includes loans by a non-United States office of any Lender to United States residents). "EVENT OF DEFAULT" has the meaning set forth in Section 9.01. "EXCHANGE ACT" means the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission thereunder, all as the same shall be in effect from time to time. "FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, PROVIDED that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Citibank on such day on such transactions as determined by the Agent. "FIRST SUN" means First SunAmerica Life Insurance Company, a New York stock life insurance company. "FIXED RATE ADVANCES" means CD Advances or Eurodollar Advances or Money Market Advances (excluding Money Market LIBOR Advances bearing interest at the Base Rate pursuant to Section 3.01) or any combination of the foregoing. "GAAP" means generally accepted accounting principles in the United States of America used in 10 connection with the preparation of the financial statements referred to in Section 5.06(b). "GOVERNMENTAL AUTHORITY" means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of government. "INFORMATION MEMORANDUM" has the meaning set forth in Section 5.06(b)(ii). "INSURANCE CODE" means the Insurance Code of the state where any Insurance Subsidiary is domiciled or doing insurance business and any successor statute of similar import, together with the regulations thereunder, as amended or otherwise modified and in effect from time to time. "INSURANCE SUBSIDIARIES" means Anchor, First Sun and Sun Life so long as they are Subsidiaries of any Borrower and any other Subsidiary of any Borrower that holds one or more Licenses to conduct an insurance business. "INTEREST PERIOD" means: (a) with respect to each Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending 1, 2, 3 or 6 months thereafter, as the applicable Borrower may elect in the applicable Notice of Borrowing, PROVIDED that: (i) any Interest Period that would otherwise end on a day that is not a Eurodollar Business Day shall be extended to the next succeeding Eurodollar Business Day unless such Eurodollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Eurodollar Business Day; and (ii) any Interest Period that begins on the last Eurodollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on 11 the last Eurodollar Business Day of a calendar month; (b) with respect to each CD Borrowing, the period commencing on the date of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the applicable Borrower may elect in the applicable Notice of Borrowing, PROVIDED that any Interest Period that would otherwise end on a day that is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; (c) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending any number of days thereafter up to 30, as the applicable Borrower may elect in the applicable Notice of Borrowing, PROVIDED that such Interest Period shall end on a Domestic Business Day; and (d) with respect to (x) any Money Market Absolute Rate Advance, the period commencing on the date of such Borrowing and ending such number of days thereafter (but not less than 7 nor more than 180 days) or (y) any Money Market LIBOR Advance, the period commencing on the date of such Borrowing and ending 1, 2, 3, or 6 months thereafter, in each case as the applicable Borrower shall select in the applicable Notice of Borrowing, PROVIDED that such Interest Period shall end on a Eurodollar Business Day or Domestic Business Day, as the case may be; PROVIDED that with respect to clauses (a), (b), (c) and (d) above: (i) the Borrowers may not select any Interest Period that ends after the Termination Date; and (ii) Interest Periods commencing on the same date for Advances comprising part of the same Borrowing shall be of the same duration. "INVESTMENT" shall mean any investment in any Person, whether by means of share purchase, capital contribution, loan, time deposit or otherwise. "INVESTMENT GRADE SECURITIES" shall mean non-equity securities that are rated "BBB-" or better 12 by Standard & Poor's or "Baa3" or better by Moody's or "1" or "2" by the NAIC. "LENDERS" means each of the financial institutions identified as such on the signature pages hereof and their successors and assigns. "LEVEL I Status" means that, at 8:30 a.m. New York City time at any date of determination, SunAmerica's senior unsecured long term debt is rated "AA-" or better by Standard & Poor's and "A3" or better by Moody's. "LEVEL II STATUS" means that, at 8:30 a.m. New York City time at any date of determination, neither Level I Status nor Level III Status exists. "LEVEL III STATUS" means that, at 8:30 a.m. New York City time at any date of determination, SunAmerica's senior unsecured long term debt is rated "BBB+" or below by Standard & Poor's or "Baa3" or below by Moody's or is not rated as of such date by Standard & Poor's or Moody's. "LIABILITIES" means all obligations of the Borrowers to the Lenders or the Agent which arise out of or in connection with this Agreement or the Notes. "LIBOR AUCTION" means a solicitation of Money Market quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "LICENSE" has the meaning set forth in Section 5.18. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset. "LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section 2.07(c). 13 "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any change, event, action, condition or effect that individually or in the aggregate (i) materially and adversely affects the consolidated business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrowers and their Subsidiaries taken as a whole or (ii) materially and adversely impairs the ability of the Borrowers collectively to perform their obligations under this Agreement. "MATERIAL SUBSIDIARY" means Anchor and Sun Life so long as they are Subsidiaries of any Borrower and any other Subsidiary of any Borrower now existing or hereafter acquired or formed that for or as of the end of SunAmerica's most recent fiscal year had (i) pretax income in excess of 10% of the consolidated pretax income of SunAmerica reflected in its consolidated financial statements for its most recent fiscal year or (ii) assets in excess of 10% of the consolidated assets of SunAmerica reflected in its consolidated financial statements as of the end of its most recent fiscal year. "MONEY MARKET ABSOLUTE RATE" has the meaning set forth in Section 2.03(d). "MONEY MARKET ABSOLUTE RATE ADVANCE" means an Advance to be made by a Lender pursuant to an Absolute Rate Auction. "MONEY MARKET ADVANCE" means a Money Market LIBOR Advance or a Money Market Absolute Rate Advance. "MONEY MARKET BORROWING" means a Borrowing consisting of Money Market Advances. "MONEY MARKET LENDING OFFICE" means, as to each Lender, its Domestic Lending Office or such other office, branch or affiliate of such Lender as it may hereafter designate as its Money Market Lending Office by notice to SunAmerica and the Agent, PROVIDED that any Lender may from time to time by notice to SunAmerica and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Advances and its Money Market Absolute 14 Rate Advances, in which case all references herein to the Money Market Lending Office of such Lender shall be deemed to refer to either or both of such offices, as the context may require. "MONEY MARKET LIBOR ADVANCE" means an Advance to be made by a Lender pursuant to a LIBOR Auction (including such an Advance bearing interest at the Base Rate pursuant to Section 3.01). "MONEY MARKET MARGIN" has the meaning set forth in Section 2.03(d). "MONEY MARKET QUOTE" means an offer by a Lender to make a Money Market Advance in accordance with Section 2.03. "MONEY MARKET REDUCTION" has the meaning set forth in Section 2.01. "MOODY'S" means Moody's Investors Service, Inc. and any successor thereto. "MULTIEMPLOYER PLAN" means a Plan described in Section 4001(a)(3) of ERISA. "NAIC" means the National Association of Insurance Commissioners. "NOTE" means a promissory note of the Borrowers payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrowers to such Lender resulting from the Advances made by such Lender. "NOTICE OF BORROWING" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "OTHER AGREEMENT" means the Credit Agreement dated as of February 1, 1993 among the Borrowers, Citibank, as Agent, and the Lenders providing a $60,000,000 revolving credit facility. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. 15 "PERMITTED COLLATERALIZATION ASSETS" means assets pledged to secure Permitted Collateralization Obligations. "PERMITTED COLLATERALIZATION OBLIGATIONS" means the collateralized obligations of the Borrowers and their Subsidiaries relating to (i) the 1989 securitization of variable annuity fees of Anchor, (ii) real estate mortgage investment conduits (REMICs), pass-through obligations, collateralized mortgage obligations, collateralized bond and loan obligations, other asset-backed securitizations of properties, rights or receivables of SunAmerica or its Subsidiaries, or similar instruments, except any such collateralized obligations to the extent such collateralized obligations require a cash payment by any Borrower or its Subsidiary (other than advances in connection with the servicing of any such REMIC, pass-through obligation, collateralized mortgage obligation, collateralized bond obligation or similar instrument or payments to repurchase collateral), recourse for the payment of which is not limited to the specific assets of such Borrower or such Subsidiary serving as collateral for such obligations and (iii) the securitization of Rule 12b-1 fee income under the Investment Company Act of 1940, as amended, and associated sales charges earned by the Borrowers or their Subsidiaries, except any such securitization to the extent such securitization requires a cash payment by any Borrower or its Subsidiary (other than payments that may be required upon the occurrence of certain events, the occurrence of which is considered unlikely by management of SunAmerica), recourse for the payment of which is not limited to such Rule 12b-1 fees or sales charges. "PERMITTED LIENS" has the meaning set forth in Section 7.01. "PERSON" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "PLAN" means, at any time, an employee pension benefit plan (other than a Multiemployer Plan) that 16 is subject to Title IV of ERISA or the minimum funding standards under Section 412 of the Internal Revenue Code and is maintained, or contributed to, by any member of the ERISA Group. "REGISTER" has the meaning set forth in Section 11.07(c) . "REGULATION U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "REQUIRED LENDERS" means Lenders having more than 66 2/3% of the Commitments, or if the Commitments have terminated or expired, more than 66 2/3% of the aggregate principal amount of the Advances outstanding at such time. "RESPONSIBLE OFFICER" means any of the following officers of any Borrower: the chairman, the chief executive officer, the president, the chief financial officer, the chief operating officer, the chief investment officer or the treasurer. If any of the titles of the preceding officers are changed after the date hereof, the term "Responsible Officer" shall thereafter mean any officer performing substantially the same functions as are presently performed by one or more of the officers listed in the first sentence of this definition. "RISK-BASED CAPITAL RATIO" means, with respect to any Insurance Subsidiary, the ratio computed in accordance with the Risk Based Capital Formula for life insurance companies as adopted by the NAIC and in effect on December 6, 1992. "SACO" means SunAmerica Corporation, a Delaware corporation. "SAFI" means SunAmerica Financial, Inc., a Georgia corporation. "SAP" means, as to any Insurance Subsidiary, the statutory accounting practices prescribed or permitted by the applicable Department. "STANDARD & POOR'S" or "S&P" means Standard & Poor's Corporation and any successor thereto. 17 "SUBSIDIARY" means, as to any Person, any corporation, partnership, joint venture, trust, association or other unincorporated organization of which or in which such Person and such Person's Subsidiaries own directly or indirectly more than 50% of (i) the combined voting power of all classes then outstanding of Voting Stock, if it is a corporation, (ii) the capital interest or partnership interest, if it is a partnership, joint venture or similar entity, or (iii) the beneficial interest, if it is a trust, association or other unincorporated organization, PROVIDED that (a) no Person of which any Borrower or any of its Subsidiaries acquires or has acquired control in the ordinary course of its business in connection with or as a consequence of any debt or equity financing shall be deemed a Subsidiary and (b) no Person (including a joint venture) which has been organized by any Borrower or any of its Subsidiaries solely for the purpose of making or holding an individual asset or group of related assets and has no other operations or independent management shall be deemed a Subsidiary, unless such Person (1) is or under GAAP should be treated as a consolidated subsidiary of SunAmerica in the preparation of its consolidated financial statements and (2) would also be classified as a Material subsidiary. "SUNAMERICA" means SunAmerica Inc., a Maryland corporation. "SUN LIFE" means Sun Life Insurance Company of America, a Maryland stock insurance company. "TERMINATION DATE" means January 31, 1996 or the earlier date of termination in whole of the Commitments pursuant to Section 2.10 or 9.01. "TOTAL INVESTED ASSETS" means, as of any date of determination, the amount of invested assets directly owned by the Borrowers, excluding Investments in Affiliates, and reflected in the line "Total Investments" on the balance sheet of the Borrowers, as a group, delivered pursuant to Section 6.01(c), such amount to be calculated on a basis consistent with the preparation of the consolidating balance sheet as 18 of September 30, 1992 delivered to the Lenders and attached as Exhibit H hereto. "TYPE" refers to the distinction between Advances bearing interest at the Eurodollar Rate, Adjusted CD Rate, Base Rate or a Money Market Quote rate. "U.S. WITHHOLDING TAXES" has the meaning set forth in Section 2.17(a). "VOTING STOCK" means, with respect to any Person, any class of capital stock of such Person normally entitled to vote for the election of directors. SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" mean "to but excluding." SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically defined herein other than those used solely in respect of an Insurance Subsidiary shall be construed in accordance with GAAP. All accounting terms not specifically defined herein and used solely in respect of an Insurance Subsidiary shall, unless GAAP is otherwise specified, be construed in accordance with SAP applicable to that Insurance subsidiary. SECTION 1.04. CONVENTION STATEMENT. In the event any amendment to the form of or requirements for Convention Statements causes the calculation of the Risk-Based Capital Ratio as adopted by the NAIC on December 6, 1992 to be impracticable or to produce results that do not reflect the original intent of the parties hereto, the provisions of this Agreement relating to the Risk Based Capital Ratio shall be adjusted as the Required Lenders and Borrowers in good faith may negotiate to insure that the operation of the affected provisions of this Agreement after such amendment is consistent with the operation prior thereto. 19 ARTICLE II THE ADVANCES SECTION 2.01. COMMITMENTS TO LEND. Each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Advances constituting Committed Advances from time to time during the period from the Effective Date to the Termination Date in an aggregate amount not to exceed at any time outstanding the amount of such Lender's Commitment, PROVIDED that the aggregate amount of the Commitments shall be deemed used from time to time, for purposes of making Committed Advances pursuant to this Section 2.01, in the aggregate amount of Money Market Advances outstanding from time to time, and such deemed use of the aggregate amount of Commitments shall be applied to the Lenders ratably according to their respective Commitments (such deemed use of the aggregate amount of Commitments referred to herein as the "Money Market Reduction"). Each Borrowing under this Section 2.01 in respect of such Committed Advances shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $5,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 4.02(d)), and shall be made from the several Lenders ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrowers may borrow under this Section, repay, or to the extent permitted by Section 2.12, prepay Advances and reborrow at any time during the period from the Effective Date to the Termination Date. SECTION 2.02. NOTICE OF COMMITTED BORROWINGS. The applicable Borrower shall give the Agent notice (a "Notice of Committed Borrowing"), in substantially the form of Exhibit B hereto, not later than (x) 11:00 A.M. New York City time on the date of each Base Rate Borrowing, (y) 12:00 P.M. New York City time on the second Domestic Business Day before each CD Borrowing and (z) 12:00 P.M. New York City time on the third Eurodollar Business Day before each Eurodollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Eurodollar Business Day in the case of a Eurodollar Borrowing; (b) the aggregate amount of such Borrowing; 20 (c) whether the Advances comprising such Borrowing are to be CD Advances, Base Rate Advances or Eurodollar Advances; (d) whether Level I Status, Level II Status or Level III Status exists on the date of such notice; and (e) the duration of the Interest Period with respect thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. MONEY MARKET BORROWINGS. (a) THE MONEY MARKET OPTION. Each Borrower may, as set forth in this Section 2.03, request the Lenders before the Termination Date to make offers to make Money Market Advances to such Borrower. The Lenders may, but shall have no obligation to, make such offers and such Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. A Lender lending to the Borrower pursuant to an accepted offer to make Money Market Advances shall remain obligated to make Committed Advances in proportion to its respective Commitment within the limitations of Section 4.02(d). (b) MONEY MARKET QUOTE REQUEST. When a Borrower wishes to request offers to make Money Market Advances under this Section 2.03, it shall transmit to the Agent by telex or facsimile telecopy a Money Market Quote Request substantially in the form of Exhibit C hereto so as to be received no later than 11:00 A.M. New York City time (x) on the fifth Eurodollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction, or (y) on the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the requesting Borrower and the Agent shall have mutually agreed and shall have notified to the Lenders not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), specifying: (i) the proposed date of Borrowing, which shall be a Eurodollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction; 21 (ii) the aggregate amount of such Borrowing, which shall be $10,000,000 or a larger multiple of $5,000,000 (except that such Borrowing may be in the aggregate amount available in accordance with Section 4.02 (d)); (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period; and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrowers may request offers to make Money Market Advances for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within 5 Eurodollar Business Days in the case of a LIBOR Auction or 5 Domestic Business Days in the case of an Absolute Rate Auction (or such other number of days as SunAmerica and the Agent may agree) of any other Money Market Quote Request. (c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of a Money Market Quote Request, the Agent shall send to the Lenders by telex or facsimile telecopy an Invitation for Money Market Quotes substantially in the form of Exhibit D hereto, which shall constitute an invitation by the requesting Borrower to each Lender to submit Money Market Quotes offering to make the Money Market Advances to which such Money Market Quote Request relates in accordance with this Section 2.03. (d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each Lender may submit a Money Market Quote containing an offer or offers to make Money Market Advances in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by facsimile telecopy at its offices specified in or pursuant to Section 11.02 not later than (x) 2:00 P.M. New York City time on the fourth Eurodollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 10:00 A.M. New York City time on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the requesting Borrower and the 22 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 23 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 24 (C), if applicable, limitations on the aggregate principal amount of Money Market Advances for which offers in any single Money Market Quote may be accepted. (f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 11:00 A.M. New York City time on (x) the third Eurodollar Business Day prior to the proposed date of Borrowing, in the case of LIBOR Auction, or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the requesting Borrower and the Agent shall have mutually agreed to and shall have notified to the Lenders not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the requesting Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e), and the failure of such Borrower to provide such notice in accordance with this clause (f) shall constitute the non-acceptance of such offers. In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The requesting Borrower may accept any Money Market Quote in whole or in part, PROVIDED that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request; (ii) the principal amount of each Money Market Borrowing must be $10,000,000 or a larger multiple of $5,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 4.02(d)); (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be; and (iv) the requesting Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. Promptly after receipt by the Agent of the notice of acceptance from the Borrowers pursuant to this subsec- 25 tion (f), the Agent will notify each Lender of the amount of the Money Market Borrowing and the amount of the consequent pro rata Money Market Reduction in its Commitment and the dates upon which such Money Market Reduction commenced and will terminate. (g) ALLOCATION BY AGENT. If offers are made by two or more Lenders with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Advances in respect of which such offers are accepted shall be allocated by the Agent among such Lenders as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amount of Money Market Advances shall be conclusive in the absence of manifest error. SECTION 2.04. NOTICE TO LENDERS; FUNDING OF ADVANCES. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Lender of the contents thereof and of such Lender's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the requesting Borrower. (b) Not later than 1:00 P.M. New York City time on the date of each Borrowing, each Lender participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address specified in or pursuant to Section 11.02. Unless the Agent deter- mines that any applicable condition specified in Article IV has not been satisfied, the Agent will make the funds so received from the Lenders available to the Borrowers at the Agent's aforesaid address for the account of the Borrowers or to such other account as any Borrower may specify. (c) The Borrowers may refinance all or any part of any Borrowing with a Borrowing of the same or a different Type (e._g., Money Market Borrowings may be refinanced with, or may be used to refinance, Committed Borrowings) provided the conditions specified in Article IV have been satisfied. Any Borrowing or part thereof so refinanced shall be deemed to be repaid with the proceeds 26 of the new Borrowing hereunder. If any Lender makes a new Advance hereunder on a day on which the applicable Borrower is to repay all or any part of an outstanding Advance from such Lender, such Lender shall apply the proceeds of its new Advance to make such repayment and only an amount equal to the excess (if any) of the amount being borrowed over the amount being repaid shall be made available by such Lender to the Agent as provided in subsection (b). To the extent any Lender fails to pay the Agent amounts due from it pursuant to this subsection (c), the Borrowers shall not be deemed to be overdue in respect of their obligation to make the relevant payment until one Domestic Business Day after SunAmerica shall have received notice from the Agent of the failure of such Lender to make such payment. (d) Unless the Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Agent such Lender's share of such Borrowing, the Agent may assume that such Lender has made such share available to the Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such share available to the Agent, such Lender and the applicable Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Agent, at the Federal Funds Rate. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance included in such Borrowing for purposes of this Agreement. The failure of any Lender to make any Advance to be made by it on the date specified therefor shall not relieve any other Lender of any obligation to make an Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make an Advance to be made by such other Lender. SECTION 2.05. NOTES. (a) The Advances of each Lender to any Borrower shall be evidenced by a single Note of the Borrowers, jointly and severally, payable to the order of such Lender in an amount equal to the aggregate unpaid principal amount of all such Lender's Advances to the Borrowers. 27 (b) Each Lender may, by notice to the Borrowers and the Agent but at no cost to the Borrowers, request that its Advances of a particular Type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Advances. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Advances of the relevant Type. Each reference in this Agreement to the "Note" of such Lender shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Lender's Notes pursuant to Section 4.01(a), the Agent shall mail such Note to such Lender by overnight courier or registered mail. Each Lender shall record the date, amount, type and maturity of each Advance made by it and the date and amount of each payment of principal made by any Borrower with respect thereto, and prior to any transfer of its Note or Notes shall endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Advance then outstanding, PROVIDED that the failure of any Lender to make any such recordation or endorsement shall not affect the obligations of the Borrowers hereunder or under the Notes. Each Lender is hereby irrevocably authorized by each Borrower so to endorse its Notes and to attach to and make a part of its Notes a continuation of any such schedule as and when required. SECTION 2.06. MATURITY OF ADVANCES. Each Advance included in any Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. INTEREST RATES. (a) Each Base Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from the date such Advance is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of or interest on any Base Rate Advance shall bear interest, payable on demand, for each day it remains unpaid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate Advances for such day. 28 (b) Each CD Advance shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin plus the applicable Adjusted CD Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, on the 90th day of such Interest Period. Any overdue principal of or interest on any CD Advance shall bear interest, payable on demand, for each day it remains unpaid at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the CD Margin applicable on such day plus the Adjusted CD Rate applicable to such Advance and (ii) the rate applicable to Base Rate Advances for such day. "CD Margin" means (i) 0.475% for any day on which Level I Status exists and (ii) 0.675% for any day on which Level II Status or Level III Status exists. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate -------------- * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1% The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. New York City time (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Advance of such CD Reference Bank to which such Interest 29 Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means, for any day, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding 5 billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means, for any Interest Period, the average of the highest and lowest annual assessment rate (rounded upward, if necessary, to the next higher 1/100 of 1%) which the Federal Deposit Insurance Corporation (or any successor) charges banking institutions on the basis of their assessment rate classification for such Corporation's (or such successor's) insuring time deposits at offices of such institutions in the United States during the most recent period for which such rate has been determined prior to the commencement of such Interest Period. (c) (i) Each Eurodollar Advance shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Eurodollar Margin plus the applicable London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 3 months, 3 months after the first day thereof. "Eurodollar Margin" means (1) 0.35% for any day on which Level I Status exists and (2) 0.55% for any day on which Level II Status or Level III Status exists. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Eurodollar Reference Banks in the 30 London interbank market at approximately 11:00 A.M. London time 2 Eurodollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Eurodollar Advance of such Eurodollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (ii) Any overdue principal of or interest on any Eurodollar Advance shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the Eurodollar Margin applicable on such day plus the higher of (x) the London Interbank Offered Rate applicable to such Advance and (y) the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (A) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than 3 Eurodollar Business Days, then for such other period of time not longer than 3 months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Eurodollar Reference Banks are offered to such Euro- dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (B) 1.00 minus the Eurodollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 3.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Advances for such day). (d) Subject to Section 3.01, each Money Market LIBOR Advance shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed Borrowing) plus the Money Market Margin quoted by the Lender making such Advance in accordance with Section 2.03. Each Money Market Absolute Rate Advance shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Lender making such Advance in accordance with Sec- tion 2.03. Such interest shall be payable for each Inter- 31 est Period on the last day thereof and, if such Interest Period is longer than 90 days, on the 90th day of such Interest Period. Any overdue principal of or interest on any Money Market Advance shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (e) The Agent shall determine each interest rate applicable to the Advances hereunder. The Agent shall give prompt notice to the applicable Borrower and the participating Lenders by facsimile of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. If the rating system of Moody's or Standard and Poor's shall change in a manner that causes the definition of "Level I Status", "Level II Status" or "Level III Status" no longer to have its intended meaning hereunder, or if any such rating agency shall have ceased to rate corporate debt obligations of SunAmerica for any reason other than action or inaction on the part of the Borrowers, at the request of the Borrowers, the Borrowers, the Agent and the Lenders shall negotiate in good faith to amend the references to specific ratings in the definition of "Level I Status", "Level II Status" and "Level III Status", to reflect such changed rating system or the non- availability of ratings from such rating agency. (f) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section 2.07. If any Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 3.01 shall apply. SECTION 2.08. FEES. (a) COMMITMENT FEE. The Borrowers shall pay to the Agent for the account of the Lenders ratably in proportion to their respective Commitments a commitment fee at the following rates per annum: (i) 0.10% for any day on which Level I Status exists, (ii) 0.15% for any day on which Level II Status exists and (iii) 0.25% for any day on which Level III Status exists. Such commitment fee shall accrue from the Effective Date to the Termination Date on the daily amount by which the aggregate amount of the Commitments (without giving effect to any Money Market Reductions), exceeds the aggregate outstanding principal amount of the Advances. 32 (b) FACILITY FEE. The Borrowers shall pay to the Agent for the account of the Lenders ratably a facility fee at the following rates per annum: (i) 0.15% for any day on which Level I Status or Level II Status exists and (ii) 0.25% for any day on which Level III Status exists. Such facility fee shall accrue from the Effective Date to the Termination Date (or, if all Advances have not been repaid in full on the Termination Date, to the date such Advances are repaid) on the daily average of the aggregate amount of Commitments (without giving effect to any Money Market Reductions), or, if greater, on the daily average of the outstanding principal amount of Advances. (c) ADDITIONAL UTILIZATION FEE. The Borrowers shall pay to the Agent for the account of the Lenders ratably in proportion to the aggregate outstanding principal amount of Advances under this Agreement and of advances under the Other Agreement of each such Lender an additional utilization fee at the rate of 0.0625% per annum on the aggregate principal amount of all Advances under this Agreement and of advances under the Other Agreement then outstanding for any day on which such aggregate outstanding principal amount of Advances and other advances exceeds 33 1/3% of the sum of the Commitments and commitments under the Other Agreement as of such date, PROVIDED that such fee shall be at the rate of 0.125% per annum of such aggregate outstanding principal amount for each day after the occurrence of the Termination Date under the Other Agreement. (d) PAYMENTS. Accrued fees under this Section 2.08 shall be calculated on a 360 day basis and shall be payable quarterly in arrears on each March 15, June 15, September 15 and December 15 and upon the Termination Date (and, if later, the date the Advances shall be repaid in their entirety). SECTION 2.09. REGULATION D COMPENSATION. For so long as any Lender maintains reserves against "Eurocurrency liabilities" (or any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Advances or Money Market LIBOR Advances is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of such Lender to United States residents), and as a result the cost to such Lender (or its Eurodollar Lending Office or Money Market Lending office, as the case may be) of making or maintaining its Eurodollar Advances 33 or Money Market LIBOR Advances is increased, then such Lender may require the Borrowers to pay, contemporaneously with each payment of interest on the Eurodollar Advances or Money Market LIBOR Advances, additional interest on the related Eurodollar Advance or Money Market LIBOR Advance of such Lender at a rate per annum up to but not exceeding the excess of (i) (A) the applicable London Interbank Offered Rate divided by (B) one MINUS the Eurodollar Reserve Percentage over (ii) the applicable London Interbank Offered Rate. Any Lender wishing to require payment of such additional interest (x) shall so notify SunAmerica, on behalf of the Borrowers, and the Agent, in which case such additional interest on the Eurodollar Advances and Money Market LIBOR Advances of such Lender shall be payable to such Lender at the place indicated in such notice with respect to each Interest Period commencing at least 3 Eurodollar Business Days after the giving of such notice and (y .) shall furnish to such Borrower at least 5 Eurodollar Business Days prior to each date on which interest is payable on the Eurodollar Advances or Money Market LIBOR Advances an officer's certificate setting forth in reasonable detail the amount to which such Lender is then entitled under this Section 2.09 (which shall be consistent with such Lender's good faith estimate of the level at which the related reserves are maintained by it and shall be conclusive and binding absent manifest error) and the calculations used in determining such amount. SECTION 2.10. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. At any time prior to the Termination Date, the Borrowers may, upon at least 3 Domestic Business Days' notice to the Agent, (a) terminate the Commitments in full, if no Advances are outstanding at such time, or (b) reduce from time to time by (i) an aggregate amount of $6,000,000 or any larger multiple of $3,000,000 or (ii) the full amount thereof, the aggregate amount of the commitments in excess of the aggregate outstanding principal amount of the Advances, PROVIDED that no such termination shall be effective unless the Borrowers shall also have terminated the commitments under the other Agreement, and no such reduction shall be effective unless the Borrowers shall also have reduced the commitments under the Other Agreement in an aggregate amount equal to 66 2/3% of the amount of the reduction under clause (b). In each case the Lenders' Commitments will be terminated or ratably reduced, as the case may be. 34 SECTION 2.11. MANDATORY TERMINATION OR REDUCTION OF THE COMMITMENTS. The Commitments shall terminate on the Termination Date and any Advances then outstanding (together with accrued interest thereon) shall be due and payable on such date. SECTION 2.12. OPTIONAL PREPAYMENTS. (a) The Borrowers may upon at least one Domestic Business Day's or Eurodollar Business Day's notice to the Agent, as the case may be, at any time and from time to time prepay any Base Rate Borrowing (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 3.04) or, subject to section 2.14, any CD Borrowing or Eurodollar Borrowing in whole or in part in amounts (i) aggregating $10,000,000 or any larger multiple of $5,000,000 or (ii) the full amount thereof, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Advances of the same Type of the several Lenders included in such Borrowing. (b) Each notice of prepayment delivered pursuant to clause (a) above shall specify the date and amount of prepayment and the allocation of such prepayment among Advances at the time outstanding. Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Lender of the contents thereof and of such Lender's ratable share (if any) of such pre- payment and such notice shall not thereafter be revocable by the applicable Borrower. SECTION 2.13. GENERAL PROVISIONS AS TO PAYMENTS. (a) Each obligation of any Borrower under this Agreement and under the Notes shall be a joint and several obligation of the Borrowers. Each Borrower waives any right it may have to require the Agent or any Lender to exhaust its remedies against any Borrower before seeking to enforce the obligations of any other Borrower hereunder. (b) The Borrowers shall make each payment of principal of, and interest on, the Advances and of fees hereunder, not later than 12:00 P.M. New York City time on the date when due, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 11.02. The Agent will promptly distribute to each Lender its ratable share of each such 35 payment received by the Agent for the account of the Lenders. Whenever any payment of principal of, or interest on, the Domestic Advances or Money Market Absolute Rate Advances or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Eurodollar Advances or Money Market LIBOR Advances shall be due on a day which is not a Eurodollar Business Day, the date for payment thereof shall be extended to the next succeeding Eurodollar Business Day unless such Eurodollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Eurodollar Business Day. If the date for any payment of principal is extended under this Section or any other provision of this Agreement, interest thereon shall be payable for such extended time. (c) Unless the Agent shall have received notice from any Borrower prior to the date on which any payment is due to the Lenders hereunder that one or more of the Borrowers will not make such payment in full, the Agent may assume that the Borrowers have made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that the Borrowers shall not have so made such payment, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.14. FUNDING LOSSES. If the Borrowers make any payment of principal with respect to any Fixed Rate Advance (pursuant to Article II, III or IX or otherwise) on any day other than the last day of the Interest Period applicable thereto or the end of an applicable period fixed pursuant to Section 2.07(d), or if the Borrowers fail to borrow or prepay any Fixed Rate Advance after notice has been given to any Lender in accordance with Section 2.04(a) or 2.12(b), the Borrowers shall reimburse each Lender within 30 days after demand for any resulting loss or expense incurred by it (or by any participant in the related Advance to the extent provided in Section 11.07(e)), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits 36 from third parties, but excluding loss of margin for the period after any such payment or failure to borrow, PROVIDED that such Lender shall have delivered to SunAmerica (with a copy to the Agent) a certificate setting forth in reasonable detail calculations as to the amount of such loss or expense, which certificate shall be conclusive and binding on the Borrowers in the absence of manifest error. SECTION 2.15. COMPUTATION OF INTEREST AND FEES. Interest based on the Base Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.16. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances owing to it (other than pursuant to Section 2.17 or 3.03) in excess of its ratable share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, PROVIDED that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrowers agree that any Lender so purchasing a participation from another Lender pursuant to this Section 2.16 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrowers in the amount of such participation. 37 SECTION 2.17. WITHHOLDING TAX EXEMPTION. (a) On the Effective Date (or (i) in the case of an entity that becomes a Lender after the Effective Date, on the date such entity becomes a Lender and (ii) in the case of a Lender that designates a substitute or additional Applicable Lending Office to which forms previously furnished by such Lender do not apply, on the date of such designation) and thereafter as required by applicable law each Lender that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to each of the Borrowers and the Agent 2 duly completed, accurate and signed copies of United States Internal Revenue Service Form 1001 or any successor thereto ("Form 1001") or Form 4224 or any successor thereto ("Form 422411) for each of such Lender's Applicable Lending Offices certifying in each case that such Applicable Lending Office is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal withholding taxes on income ("U.S. Withholding Taxes"). Each Lender that so delivers a Form 1001 or Form 4224, as the case may be, for an Applicable Lending Office further undertakes to deliver to SunAmerica, on behalf of itself and the other Borrowers, and the Agent 2 additional duly completed, accurate and signed copies of Form 1001 or Form 4224 before the date that the prior form expires or becomes obsolete or prior to the occurrence of any event (or promptly upon the Lender's knowledge of such event if the Lender obtains knowledge of such event only after its occurrence) requir- ing a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by SunAmerica or the Agent, in each case certifying that such Applicable Lending Office is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any U.S. Withholding Taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on-which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender promptly advises SunAmerica, on behalf of itself and the other Borrowers, and the Agent in writing that it is not capable of receiving payments without any deduction or withholding of U.S. Withholding Taxes. If an event occurs after the date on which a Form 1001 or Form 4224 is submitted by a Lender in respect of such Lender's Applicable Lending Office that renders 38 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 39 Lending Office is located in the United States) affecting the scope, definition or taxation of effectively connected income (as described in Section 864(c) of the Internal Revenue Code) or (ii) changes in withholding tax treaty rates between the United States and such Lender's country of residence, from and after the date such Lender becomes a lender to the Borrowers, PROVIDED that the Borrowers shall not be required to pay any Additional Amounts, or indemnify against any U.S. Withholding taxes, imposed as a result of a Lender's failure to comply with subsection (a) above, but following the correction of such failure shall take such steps as such Lender shall reasonably request to assist such Lender in recovering any U.S. Withholding Taxes paid as a result of such failure. ARTICLE III CHANGES IN CIRCUMSTANCES SECTION 3.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. If on or prior to the first day of any Interest Period for any Fixed Rate Advance: (a) the Agent is advised by the Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period; or (b) in the case of a Committed Advance, the Required Lenders advise the Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as determined by the Agent will not adequately and fairly reflect the cost to such Lenders of funding their CD Advances or Eurodollar Advances, as the case may be, for such Interest Period, the Agent shall forthwith give notice thereof to the Borrowers and the Lenders, whereupon until the Agent notifies the Borrowers that the circumstances giving rise to such suspension no longer exist, the obligations of the Lenders to make CD Advances or Eurodollar Advances, as the case may be, shall be suspended. Unless the Borrowers notify the Agent at least 2 Domestic Business Days prior to the date of any Fixed Rate Advance for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Advance is a Committed Advance, such Advance shall instead be made as 40 a Base Rate Advance and (ii) if such Fixed Rate Advance is a Money Market LIBOR Advance, the Money Market LIBOR Advances comprising such Advance shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 3.02. ILLEGALITY. If, after the Effective Date, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Eurodollar Lending Office) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency shall make it unlawful or impossible for any Lender (or its Eurodollar Lending Office) to make, maintain or fund its Eurodollar Advances and such Lender shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Lenders and the Borrowers, whereupon until such Lender notifies the Borrowers and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Eurodollar Advances shall be suspended. Before giving any notice to the Agent pursuant to this Section 3.02, such Lender shall designate a different Eurodollar Lending office if such designation will avoid the need for giving such notice and will not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. If such Lender or any Lender having outstanding any Money Market LIBOR Advances shall determine that it may not lawfully continue to maintain and fund any of its outstanding Eurodollar Advances or Money Market LIBOR Advances, as the case may be, to maturity and shall so specify in such notice, the Borrowers shall immediately prepay in full the then outstanding principal amount of each such Eurodollar Advance or Money Market LIBOR Advance, as the case may be, together with accrued interest thereon. Concurrently with prepaying each such Eurodollar Advance, each Borrower may borrow a Base Rate Advance in an equal principal amount from any such Lender that has outstanding Eurodollar Advances (on which interest and principal shall be payable contemporaneously with the related Eurodollar Advances of the other Lenders), and such Lender shall make such a Base Rate Advance. 41 SECTION 3.03. INCREASED COST AND REDUCED RETURN. (a) If after (x) the Effective Date, in the case of any Committed Advance or any obligation to make Committed Advances, or (y) the date of the related Money Market Quote, in the case of any Money Market Advance, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending office) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency: (i) shall subject any Lender (or its Applicable Lending Office) to any tax, duty or other charge with respect to its Fixed Rate Advances, its Notes or its obligation to make Fixed Rate Advances, or shall change the basis of taxation of payments to any Lender (or its Applicable Lending Office) of the principal of or interest on its Fixed Rate Advances or any other amounts due under this Agreement in respect of its Fixed Rate Advances or its obligation to make Fixed Rate Advances (except for changes in the rate of tax on the overall net income of such Lender or its Applicable Lending Office imposed by the jurisdiction of its incorporation or in which such Lender's principal executive office or Applicable Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (A) with respect to any CD Advance any such requirement included in an applicable Domestic Reserve Percentage and (B) with respect to any Eurodollar Advance or Money Market LIBOR Advance, any such requirement included in an applicable Eurodollar Reserve Percentage), special deposit, insurance assessment (excluding, with respect to any CD Advance, any such requirement reflected in an applicable Assessment Rate, including any change therein resulting from changes in the Lender's assessment rate classification) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (or its Applicable Lending Office) or shall impose on any 42 Lender (or its Applicable Lending Office), or on the United States market for certificates of deposit or the London interbank market, any other condition affecting its Fixed Rate Advances, its Notes or its obligation to make Fixed Rate Advances; and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making or maintaining any Fixed Rate Advance, or to reduce the amount of any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or under its Notes with respect thereto, by an amount deemed by such Lender to be material, then, within 30 days after demand by such Lender, which demand shall be accompanied by a statement setting forth in reasonable detail the basis of and calculations with respect to such demand (with a copy to the Agent), the Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction. (b) If any Lender shall have determined that, after the Effective Date, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency has or would have the effect of reducing the rate of return on capital of such Lender (or any Person controlling such Lender) as a consequence of such Lender's obligations hereunder to a level below that which such Lender (or such controlling Person) could have achieved but for such adoption, change, request or directive (taking into consideration its internal policies with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, then from time to time, within 30 days after demand by such Lender, which demand shall be accompanied by a statement setting forth in reasonable detail the basis of and calculations with respect to such demand (with a copy to the Agent), the Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender (or such controlling Person) for such reduction. 43 (c) Each Lender will promptly notify the Borrowers and the Agent of any event of which it has knowledge, occurring after the date hereof, that will entitle such Lender to compensation pursuant to this Section 3.03 and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate of any Lender claiming compensation in accordance with this Section 3.03 and setting forth the additional amount or amounts to be paid to it hereunder shall, in the absence of manifest error, be conclusive and binding on the Borrowers. SECTION 3.04. BASE RATE ADVANCES SUBSTITUTED FOR AFFECTED FIXED RATE ADVANCES. If (i) the obligation of any Lender to make Eurodollar Advances has been suspended pursuant to Section 3.02 or (ii) any Lender has demanded compensation under Section 3.03(a) and the Borrowers shall, by at least 5 Eurodollar Business Days' prior notice to such Lender through the Agent, have elected that the provisions of this Section 3.04 shall apply to such Lender, then, unless and until such Lender notifies such Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply, which such Lender hereby agrees to give as soon as practicable under the circumstances: (a) all Advances that would otherwise be made by such Lender as CD Advances or Eurodollar Advances, as the case may be, shall be made instead as Base Rate Advances (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Advances of the other Lenders), and (b) after each of its CD Advances or Eurodollar Advances, as the case may be, has been repaid (or converted to a Base Rate Advance), all payments of principal that would otherwise be applied to repay such Fixed Rate Advances shall be applied to repay its Base Rate Advances instead. SECTION 3.05. SUBSTITUTION OF LENDER. If (i) the obligation of any Lender to make Eurodollar Advances has been suspended pursuant to Section 3.02, (ii) any Lender has demanded compensation under Section 3.03, (iii) the Borrowers are required to pay any Additional Amounts under Section 2.17 to any Lender, or 44 (iv) any Lender has determined not to consent to a Notice of Extension in accordance with Section 2.09 of the Other Agreement, the Borrowers shall have the right, with the assistance of the Agent, to seek a mutually satisfactory substitute bank or banks, which shall be an Eligible Assignee (and which may be one or more of the Lenders), to purchase the Notes and assume the Commitment of such Lender. SECTION 3.06. DISCRETION OF LENDERS AS TO MANNER OF FUNDING. Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of its Advances in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Lender had actually funded and maintained each CD Advance, Eurodollar Advance, Money Market Absolute Rate Advance or Money Market LIBOR Advance through the purchase of deposits having a maturity corresponding to the Interest Period for such CD Advance, Eurodollar Advance, Money Market Absolute Rate Advance or Money Market LIBOR Advance, as the case may be, and bearing an interest rate equal to the Adjusted CD Rate, London Interbank Offered Rate or Money Market Absolute Rate, as the case may be, for such Interest Period. SECTION 3.07. CONCLUSIVENESS OF STATEMENTS; SURVIVAL OF PROVISIONS. Determinations and statements of the Agent or any Lender made in accordance with Section 2.14 and Section 3.01 through Section 3.03 shall be conclusive and binding on the Borrowers absent manifest error. The provisions of Sections 2.14, 3.02, 3.03 and 3.04 shall survive termination of this Agreement. ARTICLE IV CONDITIONS OF LENDING The obligation of each of the Lenders to make the Advances is subject to the satisfaction of the following conditions precedent: SECTION 4.01. EFFECTIVENESS. This Agreement shall become effective on the date this Agreement has been executed and the Agent has received the notices provided for in Section 11.06 (the "Effective Date"). In addition, 45 no Lender shall be obligated to make Advances in respect of the initial Borrowing under this Agreement unless the following conditions shall have been satisfied (or waived in accordance with Section 11.01): (a) receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Agent of appropriately completed Notes, executed by each Borrower and payable to the order of each of the Lenders, respec- tively; (c) receipt by the Agent of an opinion of Susan L. Harris, the Secretary and Associate General Counsel of SunAmerica, substantially in the form of Exhibit F and covering such additional matters relating to the transactions contemplated hereby as the Agent may reasonably request; (d) receipt by the Agent of an opinion of Debevoise & Plimpton, special counsel to the Agent; (e) receipt by the Agent of a certificate of a Responsible Officer of each Borrower, to the effect that (i) the representations and warranties of such Borrower contained in Article V were true and correct in all material respects on the Effective Date and on the date of such certificate and (ii) no Default exists or results from the execution and delivery by such Borrower of this Agreement or the Notes; and (f) receipt by the Agent of all documents reasonably requested by the Agent relating to the existence and good standing of the Borrowers and their respective Subsidiaries, the corporate authority for and validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent and the Agent's counsel; and such conditions shall have been satisfied not later than February 28, 1993. The Agent shall promptly notify 46 the Borrowers and the Lenders of the satisfaction of the foregoing conditions, and such notice shall be conclusive and binding on all parties hereto. SECTION 4.02. CONDITIONS PRECEDENT TO ADVANCES. The obligation of each Lender to make any Advance is subject to the satisfaction of the following additional conditions precedent: (a) The Agent shall have received a Notice of Borrowing from such Borrower in accordance with Section 2.02 or 2.03, as the case may be; and the delivery of such Notice of Borrowing from such Borrower shall constitute a representation and warranty by each Borrower, and a certification by the Responsible Officer signing such Notice of Borrowing, that as of the date of such Advance the conditions specified in this Section 4.02 have been satisfied; (b) The representations and warranties of each Borrower contained in Article V are true and correct in all material respects on the date of such Advance with the same effect as though made on and as of such date except to the extent they were expressly made as of the Effective Date or expressly relate to a prior date, PROVIDED that such representations and warranties shall not include those set forth in Sections 5.06(b)(iii) and 5.07 if, upon the making of the Advances specified in the applicable Notice of Borrowing, the aggregate outstanding amount of Advances owing to the Lenders would not exceed the aggregate amount of such Advances outstanding and owing to the Lenders immediately prior to the making of the Advances subject to such Notice of Borrowing; (c) No Default exists or will result from the making of such Advance; and (d) Immediately after such Advance, the outstanding aggregate principal amount of all Advances will not exceed the aggregate amount of all Commitments. 47 ARTICLE V REPRESENTATIONS AND WARRANTIES To induce the Lenders to enter into this Agreement and to make the Advances hereunder, each of the Borrowers jointly and severally represents and warrants to the Agent and to each of the Lenders that: SECTION 5.01. ORGANIZATION, ETC. Each Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power, authority and legal right to own or lease and to operate its properties, to carry on its business as now conducted and as proposed to be conducted and to enter into and carry out the terms of this Agreement and the Notes; and each such Borrower is duly qualified to transact business and in good standing as a foreign corporation authorized to do business in each jurisdiction where the ownership, leasing or operation of property or the conduct of its business makes such qualification necessary, except where the failure to so qualify or be in good standing would not have a Material Adverse Effect. SECTION 5.02. AUTHORIZATION. Each Borrower has taken all necessary action to authorize the borrowings hereunder and the execution, delivery and performance by it of this Agreement and the Notes. SECTION 5.03. NO CONFLICT. The execution, delivery and performance by each Borrower of this Agreement and the Notes, and the use of proceeds of the borrowings hereunder, does not and will not (a) contravene or conflict with any provision of any applicable law, statute, rule or regulation of any relevant Governmental Authority, or any applicable order, writ, judgment or decree of any court, arbitrator or relevant Governmental Authority, (b) contravene or conflict with, result in any breach of, or constitute a default under, any agreement or instrument binding on it, (c) result in the creation or imposition of or the obligation to create or impose any Lien (except for Permitted Liens) upon any of the property or assets of such Borrower, or (d) contravene or conflict with any provision of the certificate of incorporation or by-laws of such Borrower. 48 SECTION 5.04. GOVERNMENTAL CONSENTS. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with or exemption by, any relevant Governmental Authority is required in connection with the Borrowings hereunder or the execution, delivery or performance by any Borrower hereunder or the validity or enforceability of this Agreement and the Notes, except that this Agreement may be filed as an exhibit to a report of any Borrower filed under the Exchange Act. SECTION 5.05. VALIDITY. Each Borrower has duly executed and delivered this Agreement and the Notes and this Agreement and the Notes constitute legal, valid and binding obligations of such Borrower. SECTION 5.06. FINANCIAL STATEMENTS. (a) STATUTORY FINANCIAL STATEMENTS. (i) The annual Convention Statement of each Insurance Subsidiary including, without limitation, the provisions made therein for investments and the valuation thereof, reserves, policy and contract claims and Statutory Liabilities, as filed with their respective Departments and delivered to each Lender prior to the execution and delivery of this Agreement, as of and for the years ended December 31, 1989, 1990 and 1991 (collectively, the "Statutory Financial Statements"), have been prepared in accordance with SAP applicable thereto applied on a consistent basis (except as noted therein). Each such Statutory Financial Statement was in compliance with applicable law when filed. The Statutory Financial Statements are complete and correct and fairly present the financial position, results of operations and changes in equity of the Insurance Subsidiary presented therein as of and for the respective dates and periods indicated therein in conformity with SAP. As of June 30, 1992, the Risk-Based Capital Ratio of Anchor and Sun Life were, respectively, 124.7% and 145.4%, and as of the Effective Date there has been no material reduction in the Risk-Based Capital Ratio of Anchor or Sun Life. (b) GAAP FINANCIAL STATEMENTS. (i) The Borrowers have delivered to the Agent complete and correct copies of (A) the annual reports to stockholders of SunAmerica for the fiscal years ended September 30, 1989, 1990, 1991 and 1992 (the "Annual Reports"), (B) annual reports on Form 10-K for such fiscal years and all quar- 49 terly reports on Form 10-Q of SunAmerica for periods after September 30, 1991, in each case as filed with the Securities and Exchange Commission (the "SEC Reports") and (C) consolidating balance sheets and income statements of SunAmerica, SACO and SAFI (but not their respective Subsidiaries) as of and for the year ended September 30, 1992. The Annual Reports and the SEC Reports correctly describe, as of their respective dates, the business then conducted and proposed to be conducted by SunAmerica and its Subsidiaries. There are included in the SEC Reports consolidated financial statements at and for the periods specified therein. The Borrowers have also delivered to the Agent complete and correct copies of all current reports on Form 8-K, proxy statements, registration statements and prospectuses, if any, filed by any of the Borrowers or any of their respective Subsidiaries with the Securities and Exchange Commission since September 30, 1991. All financial statements delivered to the Agent in the foregoing materials (except as otherwise specified therein) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods specified with respect to each consolidated entity, and present fairly the financial position of the corporation or corporations to which they relate as of the respective dates specified and the results of its or their operations and changes in financial position for the respective periods specified. (ii) The projected financial statements of SunAmerica and its Subsidiaries, including the cash flow projections of the Borrowers, which are set forth in the Information Memorandum, dated October 1992, prepared for use in connection with this revolving credit facility (the "Information Memorandum"), are based on good faith estimates and assumptions made by the management of SunAmerica, it being recognized, however, that projections are subject to significant uncertainties and contingencies, many of which are beyond the Borrowers' control, and that the actual results during the period or periods covered by such projections may differ from the projected results and that the differences may be material. Notwithstanding the foregoing, as of the Effective Date, management of SunAmerica believes that such projections were, taken as a whole, reasonable and attainable. (iii) There has been no Material Adverse Change since September 30, 1991. 50 SECTION 5.07. LITIGATION. There is no action, suit or proceeding pending against, or to the knowledge of such Borrower threatened against or affecting, any Borrower or any of its Subsidiaries before any court or arbi- trator or any governmental body or agency in which there is a reasonable likelihood of an adverse decision which any Borrower reasonably believes would have a Material Adverse Effect or which questions the validity of this Agreement or the Notes. SECTION 5.08. LIENS. As of the Effective Date, none of the property or assets of any Borrower or any Material Subsidiary is subject to any Lien, except for Permitted Liens. SECTION 5.09. SUBSIDIARIES. Each Material Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all corporate power and authority to own or lease and to operate its properties and to carry on its business as now conducted and as proposed to be conducted. SECTION 5.10. COMPLIANCE WITH ERISA. Neither any Borrower nor any member of the ERISA Group, as of the Effective Date, maintains, sponsors or has an obligation to contribute to any Plan. Neither any Borrower nor any member of the ERISA Group has incurred any liability pursuant to Title IV of ERISA which remains unsatisfied. SECTION 5.11. INVESTMENT COMPANY ACT. None of the Borrowers is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. SECTION 5.12. PUBLIC UTILITY HOLDING COMPANY ACT. None of the Borrowers is subject to regulation under the Public Utility Holding Company Act of 1935, as amended. SECTION 5.13. MARGIN REGULATION. No part of the proceeds of any Advance will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock (within the meaning of Regulation G or Regulation U of the Board of Governors of the Federal Reserve System), other than in the ordinary course of investment activities where such uses would not cause the transactions hereunder to 51 violate such Regulations. Neither the making of any Advance nor the use of proceeds thereof will violate or be inconsistent with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. SECTION 5.14. TAXES. As of the Effective Date, (a) Each Borrower and each of its Subsidiaries have filed all tax returns required by law to have been filed by them and have paid or provided adequate reserves for all taxes thereby shown to be owing, except any such taxes that are being diligently contested in good faith by appropriate proceedings and for which adequate reserves have been established and are being maintained in accordance with GAAP. The consolidated liability stated for taxes for such Borrower and its Subsidiaries as of September 30, 1992 in the financial statements described in Section 5.06 is sufficient in all material respects for all taxes as of such date. (b) All life insurance reserves shown as such on federal tax returns (other than individual annuity contracts) of such Borrower qualify as life insurance reserves under section 816(b) of the Code or under former section 801(b) of the Code. (c) Each Insurance Subsidiary is a life insurance company as defined in section 816 of the Code and is an includable life insurance company as described in section 1504(c)(1) of the Code. SECTION 5.15. ACCURACY OF INFORMATION. Neither the representations and warranties contained in this Article V, the Information Memorandum, nor any other document, certificate or instrument delivered to the Lenders by any Borrower on or prior to the Effective Date in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in this Article V, and in such other documents, certificates or instruments not misleading, and all projections contained in any such document were based on information which when delivered was to the best knowledge of each Borrower true and correct, and, to the best knowledge of such Borrower, all calculations contained in such projections were accurate, and such projections 52 presented such Borrower's then-current estimate of its future business, operations and affairs. SECTION 5.16. PROCEEDS. The proceeds of the Advances will be used (a) to provide short-term liquidity to the Borrowers for general corporate purposes and (b) to support the Borrowers' obligations under the commercial paper program of SunAmerica, and will not under any circumstances be used to make long-term loans to or equity investments in or equity contributions to any Subsidiary of the Borrowers. SECTION 5.17. GOVERNMENTAL AUTHORIZATIONS. As of the Effective Date, each Borrower and its Subsidiaries have all licenses, franchises, permits and other governmental authorizations necessary for all businesses presently carried on by them (including ownership and leasing of the real and personal property owned and leased by them), except where the failure to do so would not indi- vidually or in the aggregate have a Material Adverse Effect. SECTION 5.18. INSURANCE LICENSES. No material license (including, without limitation, any license or certificate of authority from any applicable Department), permit or authorization to engage in the business of insurance or reinsurance of any Insurance Subsidiary, other than licenses, permits or authorizations to perform services as an agent or broker (individually, a "License" and collectively, the "Licenses") is the subject of a proceeding for suspension or revocation, except where such suspension or revocation would not individually or in the aggregate have a Material Adverse Effect. SECTION 5.19. COMPLIANCE WITH LAWS. As of the Effective Date, neither any Borrower nor any of its Subsidiaries is in violation of any law, ordinance, rule, regulation, order, policy, guideline or other requirement of any Governmental Authority, and, to the best of each Borrower's knowledge, no such violation has been alleged, which violation would individually or in the aggregate have a Material Adverse Effect. SECTION 5.20. NO DEFAULT. As of the Effective Date, none of the Borrowers or their respective Subsidiaries is in default under any agreement or instrument to which it is a party or by which any of its properties or 53 assets is bound or affected, which default would have a Material Adverse Effect. ARTICLE VI AFFIRMATIVE COVENANTS On and after the Effective Date and for so long thereafter as any Liabilities for the payment of principal or interest on the Notes remain unpaid or outstanding or the Commitments remain in effect, the Borrowers will: SECTION 6.01. REPORTS, CERTIFICATES AND OTHER INFORMATION. Unless otherwise provided herein, furnish or cause to be furnished to each Lender: (a) AUDIT REPORT. As soon as available, but in any event within 90 days after the end of each fiscal year of SunAmerica: (i) copies of the audited consolidated balance sheet of SunAmerica and its Subsidiaries as of the end of such fiscal year and the related consolidated statements of earnings and cash flows of SunAmerica and its Subsidiaries for such fiscal year, in each case setting forth in comparative form the consolidated figures for the previous fiscal year, prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as set forth therein); (ii) a report of Price Waterhouse (or other independent certified public accountants of nationally recognized standing selected by SunAmerica), which report shall state that such consolidated financial statements present fairly the financial position of SunAmerica and its consolidated Subsidiaries as at the date indicated and the consolidated results of their operations and cash flows in conformity with GAAP applied on a basis consistent with prior years (except as otherwise specified in report) and that the audit by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; and (iii) a certificate from such accountants to the effect that, in making the examination necessary for the signing of the annual audit report of SunAmerica by such accountants referred to in clause (ii) above, they have reviewed this Agreement and have not (unless otherwise stated) become aware 54 of any Default or Event of Default under this Agreement. (b) QUARTERLY REPORTS OF SUNAMERICA. Promptly upon becoming available, but in any event within 60 days after the end of the first 3 quarters of each fiscal year of SunAmerica, copies of the unaudited consolidated balance sheet of SunAmerica and its Subsidiaries as of the end of such fiscal quarter and the related unaudited statements of earnings and cash flows of SunAmerica and its Subsidiaries for such fiscal quarter, prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as set forth therein) and certified by the chief accounting officer or chief financial officer or treasurer or controller of SunAmerica, as presenting fairly the financial condition and results of operations of SunAmerica and its Subsidiaries (subject to normal year-end adjustments). (c) CONSOLIDATING QUARTERLY REPORTS OF THE BORROWERS. Promptly upon becoming available, but in any event within 60 days after the end of each quarter of each fiscal year of SunAmerica, copies of the unaudited consolidating balance sheet of the Borrowers as of the end of such fiscal quarter and the related unaudited consolidating income statements for such fiscal quarter, substantially in the form of Exhibit H attached hereto, setting forth subtotals for each of the Borrowers separately and for the Borrowers (but not their respective Subsidiaries) as a group and showing all eliminations and adjustments made in arriving at such subtotals, all in reasonable detail in accordance with GAAP applied consistently throughout the periods reflected therein (except as set forth therein) and certified by the chief accounting officer or chief financial officer or treasurer or controller of SunAmerica as presenting fairly, in relation to the consolidated financial statements of SunAmerica and its Subsidiaries referred to in paragraphs (a) and (b) above, the financial con- dition and results of operations of the Borrowers separately and as a group in accordance with GAAP (subject to normal year-end adjustments and otherwise as noted therein). 55 (d) INVESTMENTS. Contemporaneously with the delivery of the financial statements provided for in paragraph (c) above, a detailed list, certified by the chief financial officer or chief investment officer or chief accounting officer or treasurer or controller of SunAmerica, of all Investments included in Total Invested Assets, including (i) the market valuation thereof as determined in the preparation of the consolidated balance sheets of SunAmerica delivered under this Section 6.01 and (ii) the credit rating of each such Investment, as rated by either Standard & Poor's, Moody's or the NAIC, if any. (e) COMPLIANCE CERTIFICATE. Contemporaneously with the delivery of the financial statements provided for in paragraph (c) above, a duly completed certificate, signed by the chief accounting officer or chief financial officer or treasurer or controller of SunAmerica setting forth in reasonable detail the data and computations necessary to demonstrate compliance with each of the applicable financial ratios and restrictions contained in Article VIII, and to the effect that as of such date no Default or Event of Default has occurred and is continuing, or if any Default or Event of Default has occurred and is continuing, the actions taken or proposed to be taken to remedy such Default or Event of Default. (f) SAP FINANCIAL STATEMENTS. With respect to each Insurance Subsidiary: (i) (A) Promptly upon becoming available, but in any event within 75 days after the end of each calendar year, a copy of the annual Convention Statements of such Insurance Subsidiary for such calendar year, and (B) promptly upon becoming available, but in any event within 60 days after the end of each of the first three calendar quarters, a copy of the quarterly Convention Statements of such Insurance Subsidiary for such quarter, in each case prepared in accordance with SAP and accompanied by the certification of the chief financial officer or chief executive officer of such Insurance Subsidiary or controller or treasurer that such annual or quarterly Convention Statement presents fairly, in accordance with SAP, the financial position and results of operations of such Insurance Sub- 56 sidiary as at and for the period ending on the date of such Convention Statement; (ii) Within 90 days after the end of each calendar year, a copy of each "Statement of Actuarial Opinion" that is provided to the applicable Department (or equivalent information should the Department no longer require such a statement) as to the adequacy of aggregate reserves for life policies and contracts of such Insurance Subsidiary. Such opinion shall be in the format prescribed by the Insurance Code of the state of domicile of such Insurance Subsidiary. (g) CASH FLOW STATEMENTS. Contemporaneously with the delivery of the financial statements for the fourth fiscal quarter provided for in paragraph (c) above, a copy of the unconsolidated statement of cash flows for the fiscal year then ended and a projected unconsolidated statement of cash flows for each of the immediately succeeding fiscal years through at least September 30, 1995 for the Borrowers on a combined basis, together with a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of good faith estimates and assumptions and sound financial planning practices of management of the Borrowers and that such Responsible Officer has no reason to believe that they are incorrect or misleading in any material respect. (h) REPORTS TO SEC AND TO SHAREHOLDERS. Promptly upon the filing or making thereof, copies of all registration statements and regular periodic reports (including reports on Form 8-K), if any, which any Borrower shall have filed with or to any securities exchange or the Securities and Exchange Commission, and promptly after the mailing thereof, copies of all financial reports and proxy statements from any of them to shareholders generally. (i) NOTICE OF DEFAULT, LITIGATION, ETC. Promptly upon a Responsible Officer of any Borrower learning of the occurrence of any of the following, written notice thereof, describing the same and the steps being taken by such Borrower with respect thereto: 57 (i) the occurrence of any Default or Event of Default and the actions taken or proposed to be taken to remedy such Default or Event of Default; (ii) any material default or event of default on any material contractual obligation of such Borrower or any Material Subsidiary; (iii) any action, suit or proceeding affecting such Borrower or any Material Subsidiary before any court or arbitrator or any governmental body or agency in which there is a reasonable possibility of an adverse decision which any Borrower reasonably believes would have a Material Adverse Effect; and (iv) the occurrence of any Material Adverse Change; (j) ERISA. If and when any member of the ERISA Group (i) gives, or is required in the future to give, notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan that might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice in the future of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice (whether or not in writing) from the PBGC that it is considering whether to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer, any Plan, a copy (or a written description) of such notice; (iv) applies for a waiver of the minimum funding standards under Section 412 of the Code, a copy of such application; (v) gives notice to participants of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information to be filed with the PBGC; or (vi) fails to make payments or contributions in an aggregate amount of 58 more than $10,000,000 to any Plan or Multiemployer Plan or determines to make any amendment to any Plan that has resulted or could result in the imposition of a Lien or the posting of a bond or other security in an aggregate amount of more than $10,000,000, a certificate of the chief financial officer or the chief accounting officer of SunAmerica setting forth details as to such occurrence and action, if any, that SunAmerica or the applicable member of the ERISA Group is required or proposes to take. (k) CHANGE IN CREDIT RATING. Promptly upon learning thereof, written notice of any change in (i) the credit rating of SunAmerica's senior unsecured long term debt by Standard & Poor's or Moody's or (ii) the rating of any Insurance Subsidiary by A.M. Best Company Inc. (l) INSURANCE LICENSES. Prompt notice of the actual suspension, termination or revocation of any material License, or any material restriction on license authority, of any Insurance Subsidiary by any relevant Governmental Authority or of receipt of notice from any relevant Governmental Authority notifying any Insurance Subsidiary of a hearing relating to such a suspension, termination, revocation, restriction or limitation, including any request by a relevant Governmental Authority that commits any Insurance Subsidiary to take, or refrain from taking, any action, which materially and adversely affects the authority of any Insurance Subsidiary to conduct its insurance business. (m) OTHER INFORMATION. From time to time such other information and certifications concerning the condition and operations, financial or otherwise, of such Borrower and its Subsidiaries as the Agent or any Lender through the Agent may reasonably request. SECTION 6.02. CORPORATE EXISTENCE; FOREIGN QUALIFICATION. Do, and cause each of its Material Subsidiaries to do, or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, licenses and patents, PROVIDED that nothing in this Section 6.02 shall (a) prohibit actions permitted under Section 7.02 or (b) prevent the withdrawal by such Borrower or any such Subsidiary of its Qualification as a foreign corporation 59 or its termination of any license in any jurisdiction where such withdrawal or termination or failure to keep in full force and effect would not individually or in the aggregate have a Material Adverse Effect. SECTION 6.03. COMPLIANCE WITH LAWS. Comply, and cause each of its Subsidiaries to comply, with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, any Governmental Authority in respect of the conduct of its business and the ownership of its properties, except such noncompliance as would not individually or in the aggregate have a Material Adverse Effect. SECTION 6.04. BOOKS, RECORDS AND INSPECTIONS. (a) Maintain, and cause each of its Material Subsidiaries to maintain, books and records which are complete and correct in all material respects; (b) permit access at reasonable times by the Agent to its books and records; (c) permit the Agent and each Lender to inspect at all reasonable times its properties and operations; and (d) upon reasonable notice to such Borrower, permit the Agent and each Lender to discuss its business, operations and financial condition with its officers. SECTION 6.05. INSURANCE. Maintain, and cause each of its Material Subsidiaries to maintain, with responsible and reputable insurance companies, insurance with respect to its properties and business against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses (it being understood that insurance and self- insurance shall be permitted to the extent consistent with prudent business practice among such similar businesses). SECTION 6.06. MAINTENANCE OF PROPERTIES. Maintain and preserve, and cause each of its Material Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in the ordinary course in good working order and condition, ordinary wear and tear excepted, except where the failure to do so would not have a Material Adverse Effect. SECTION 6.07. TAXES. Pay, and cause each of its Material Subsidiaries to pay, when due all taxes, except such as are being contested in good faith and by appropriate proceedings and with respect to which appro- 60 priate reserves have been established, and are being maintained, in accordance with GAAP. SECTION 6.08. MAINTENANCE OF RATINGS. At all times use their reasonable efforts to cause the senior unsecured long term debt of SunAmerica to be rated by Standard & Poor's and by Moody's, unless management determines it is in the best interests of SunAmerica not to do so. SECTION 6.09. COMPLIANCE WITH ERISA. (a) Fulfill, and cause each member of the ERISA Group to fulfill, its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan, (b) comply, and cause each member of the ERISA Group to comply, with all applicable provisions of ERISA and the Code with respect to each Plan, except where such failure or non- compliance individually or in the aggregate would not have a Material Adverse Effect and (c) not, and not permit any member of the ERISA Group to, (i) seek a waiver of the minimum funding standards under ERISA, (ii) terminate or withdraw from any Plan or (iii) take any other action with respect to any Plan which would reasonably be expected to entitle the PBGC to terminate, impose liability in respect of, or cause a trustee to be appointed to administer, any Plan, unless the actions or events described in the foregoing clauses (i), (ii) or (iii) individually or in the aggregate would not have a Material Adverse Effect. ARTICLE VII NEGATIVE COVENANTS On and after the Effective Date and for so long thereafter as any Liabilities for the payment of principal or interest on the Notes remain unpaid or outstanding or the Commitments are in effect, the Borrowers will (unless otherwise consented to by the Required Lenders in accordance with Section 11.01): SECTION 7.01. LIENS. Not, and not permit any Material Subsidiary to, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except for the following (collectively called "Permitted Liens"): 61 (a) Liens for current taxes not delinquent or for taxes being contested in good faith and by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (b) leases or subleases granted to others, easements, rights-of-way, restrictions and similar Liens on real property in each case that do not materially impair the use of such property by such Borrower or any of its Subsidiaries; (c) Liens (other than any Lien imposed by ERISA) incurred in the ordinary course of business in connection with workers' compensation, unemployment insurance or other forms of governmental insurance or benefits or to secure performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (d) Liens of mechanics, carriers, materialmen, warehousemen, repairmen and other like Liens arising in the ordinary course of business in respect of obligations which are not delinquent or which are being contested in good faith and by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (e) any Lien existing on any asset prior to the acquisition thereof by such Borrower or Material Subsidiary and not created in contemplation of such acquisition; (f) any Lien existing on any asset of any corporation at the time such corporation becomes a Material Subsidiary or is merged or consolidated with or into a Borrower or its Subsidiary and, in each case, not created in contemplation of such event; (g) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, PROVIDED that (i) such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof, and (ii) such Lien is confined solely to the asset so acquired and, if required by 62 the terms of the instrument originally creating such Lien, other property which is an improvement to or is acquired for specific use in connection with such acquired asset; (h) Liens (including Liens existing on the date hereof) on securities or other property which are assets of any Borrower or any Material Subsidiary in respect of such Borrower's or Subsidiary's obligations under repurchase agreements, reverse repurchase agreements and securities lending arrangements with respect to such securities or other property and in respect of any other obligations contemplated by subsection (vii) of the definition of Debt in Sec- tion 1.01; (i) any Liens (i) that any applicable regulatory authority may require any Borrower or Material Subsidiary to place on its assets in connection with such authority's regulation of an Insurance Subsidiary, PROVIDED such requirement is not at the request of any Borrower or its Subsidiaries, or (ii) that may be required to comply with applicable insurance laws or regulations; (j) Liens on Permitted Collateralization Assets; (k) any Liens arising in connection with (i) guaranteed investment contracts, funding agreements and other similar contracts and (ii) leasing arrangements, in each case entered into in the ordi- nary conduct of the business of any Borrower or Material Subsidiary; (l) Liens on assets securing Debt or other liabilities in respect of which recourse of the holder is limited solely to such assets directly securing such Debt or other liabilities; (m) Liens on assets having an aggregate book value not exceeding $40,000,000 at any one time granted under interest rate and/or currency swap arrangements, interest rate protection arrangements and futures contracts (and similar arrangements), regardless of notional amount; 63 (n) Liens on assets of any Material Subsidiary that secure Debt or other liabilities of such Material Subsidiary and are not otherwise permitted by the foregoing clauses of this Section 7.01 so long as the aggregate principal amount of all such Debt and the aggregate amount of all such other liabilities subject to this clause (n) at any time outstanding does not exceed $50,000,000; and (o) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt or other liabilities secured by any Lien permitted by any of the foregoing clauses, PROVIDED that after giving effect to such refinancing, extension, renewal or refunding, such Lien would be permitted under the foregoing clauses. SECTION 7.02. CONSOLIDATION, MERGER, SALES OF STOCK AND ASSETS, ETC. Not, and not permit any Material Subsidiary which for or as of the end of SunAmerica's most recent fiscal year had pretax income in excess of 20% of the consolidated pretax income of SunAmerica reflected in its consolidated financial statements or assets in excess of 20% of the consolidated assets of SunAmerica reflected in its consolidated financial statements to, consolidate with or merge into or with, any other Person, or sell, lease or otherwise transfer any shares of the capital stock of SACO, SAFI or any such Material Subsidiary or all or substantially all of the assets of any Borrower or any Material Subsidiary to any other Person, PROVIDED that this Section 7.02 shall not apply: (a) to any merger of SunAmerica with another Person if (x) SunAmerica is the corporation surviving such merger and (y) immediately after giving effect to such merger, no Default or Event of Default shall have occurred and be continuing; (b) to any merger or consolidation of SACO, SAFI or any such Material Subsidiary with or into, or sale of all or substantially all of its assets to, any Borrower or any wholly-owned Material Subsidiary, PROVIDED that in the case of SACO and SAFI, such Borrower is the corporation surviving such transaction, or such merger, consolidation or sale of assets is with, into or to another Borrower; 64 (c) to any sale, transfer or other disposition that is required to comply with the order of a court or regulatory authority of competent jurisdiction, other than an order issued at the request of any Borrower or such Material Subsidiary, or that is required to comply with applicable insurance law or regulation; (d) to any shares of capital stock issued, sold, assigned, transferred or otherwise disposed of which constitute directors' qualifying shares; (e) if after giving effect to the sale, transfer or other disposition of capital stock of SACO, SAFI or any such Material Subsidiary, SunAmerica would own, directly or through SACO, 100% of the issued and outstanding Voting Stock of SACO (other than Adjustable Rate Cumulative Preferred Stock, Series A, of SACO) and SAFI and the Borrowers and their Material Subsidiaries would own directly or indirectly at least 80% of the issued and outstanding Voting Stock of such Material Subsidiary, and such sale, assignment, transfer or other disposition is made for a consideration consisting of cash or other property which is at least equal to the fair value of the capital stock disposed of; or (f) to any transaction which involves the disposition of investment assets in connection with the management of such Borrower's or Material Subsidiary's investment portfolio. SECTION 7.03. BUSINESS ACTIVITIES. Not engage in any type of business, directly or indirectly, except the general types of businesses presently engaged in by the Borrowers and their respective Subsidiaries. ARTICLE VIII FINANCIAL COVENANTS On and after the Effective Date and for so long thereafter as any Liabilities for the payment of principal or interest on the Notes remain unpaid or outstanding or the Commitments remain in effect: 65 SECTION 8.01. CONSOLIDATED TANGIBLE NET WORTH. SunAmerica shall at all times maintain a consolidated Tangible Net Worth of no less than the greater of (a) $600,000,000 and (b) 85% of the highest Consolidated Tangible Net Worth of SunAmerica as at the end of any fiscal year ending September 30, 1991 or thereafter. SECTION 8.02. CONSOLIDATED DEBT TO TOTAL CAPITAL. SunAmerica shall at all times maintain Consolidated Debt as a percentage of Consolidated Total Capital at no greater than 40%. SECTION 8.03. RISK-BASED CAPITAL RATIO. The Borrowers shall at all times cause each of Anchor, Sun Life and any other Insurance subsidiary that is a Material Subsidiary to maintain a Risk-Based Capital Ratio of no less than 100%. SECTION 8.04. TOTAL INVESTED ASSETS. (a) At all times when the senior unsecured debt of SunAmerica is rated at least "A-" by Standard & Poor's and "Baa3" by Moody's, the Borrowers, considered as a consolidated entity, shall own directly Investment Grade Securities which are readily saleable and which have a market value of not less than the greater of (x) $50,000,000 and (y) 10% of Total Invested Assets, and (b) at all times when the senior unsecured debt of SunAmerica is rated lower than "A-" by Standard & Poor's or "Baa3" by Moody's, the Borrowers shall own directly Investment Grade Securities which are readily saleable and which have a market value of not less than the greater of (A) $100,000,000 and (B) 20% of Total Invested Assets. ARTICLE IX EVENTS OF DEFAULT SECTION 9.01. EVENTS OF DEFAULT. If any of the following events ("Events of Default") shall occur and be continuing: (a) Any Borrower shall (i) fail to pay any principal of any Advance when the same becomes due and payable hereunder or (ii) fail to pay any interest on any Advance or any fee pursuant hereto within 5 Domestic Business Days after the same becomes due and payable hereunder or (iii) fail to pay any other 66 amount pursuant hereto within 15 Domestic Business Days after the same becomes due and payable hereunder; or (b) Any representation or warranty made by any Borrower herein or pursuant hereto shall prove to have been incorrect in any material respect when made, or any certificate or financial statement, or any report or notice prepared by any Borrower, in each case furnished by any Borrower to the Agent or any Lender pursuant hereto, shall prove to have been false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified; or (c) Any Borrower fails to perform or observe in any material respect, to the extent applicable to it, (i) any term, covenant or agreement contained in Section 6.01(i), Article VII or Article VIII if such failure shall remain unremedied for 5 Domestic Business Days after a Responsible Officer of any Borrower first learns of such failure, or (ii) any other term, covenant or agreement contained in this Agreement on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to such Borrower by the Agent; or (d) Any Borrower or any Material Subsidiary shall fail to pay any principal of or premium or interest on any Debt that is outstanding in a prin- cipal amount of at least $25,000,000 (but excluding Debt outstanding hereunder) of such Borrower or such Material Subsidiary, within the applicable grace period for such payment after the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt which has not been effectively waived under such agreement or instrument if the effect of such event or condition (after the expiration of any grace or cure periods provided for therein) is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be accelerated or otherwise declared to be due and payable, or required to be prepaid prior to its maturity (other 67 than by a regularly scheduled required prepayment); or (e) Any Borrower or any Material Subsidiary shall (i) be generally not paying its debts as they become due, (ii) file, or consent in writing to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, (iii) make an assignment for the benefit of its creditors, (iv) consent to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) be adjudicated insolvent or be liquidated under any bankruptcy or insolvency law or (vi) take any corporate action for the purpose of accomplishing any of the foregoing; or (f) A court or governmental authority of competent jurisdiction shall enter an order appointing, without consent by any Borrower or Material Sub- sidiary, as the case may be, a custodian, receiver, trustee, liquidator, rehabilitator, or conservator or other officer with similar powers with respect to such Borrower or with respect to any substantial part of its property, or if an order for relief shall be entered in any case or proceeding for liquidation, rehabilitation or reorganization or otherwise to take advantage of any bankruptcy, insolvency or similar law of any jurisdiction, or ordering the dissolution, winding-up, liquidation, receivership, rehabilitation, or conservatorship of any Borrower or any Material Subsidiary, as the case may be, or if any petition for any such relief shall be filed against any Borrower or Material Subsidiary, as the case may be, and such petition shall not be dismissed within 90 days; or (g) A judgment or order for the payment of $25,000,000 or more entered against any Borrower or any Material Subsidiary shall not have been vacated, satisfied, discharged or stayed pending appeal within 60 days from the entry thereof, or, in the event of such a stay, such judgment shall not be discharged within 60 days after such stay expires; or 68 (h) The occurrence of a Change in Control; then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to each Borrower, declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to each Borrower, declare the Notes, the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by each Borrower, PROVIDED that upon the occurrence of an Event of Default of the types described in paragraphs (e) and (f), (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Notes, the Advances, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by each Borrower. ARTICLE X AGENT SECTION 10.01. AUTHORIZATION AND ACTION. Each Lender hereby appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limita- tion, enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders (or of all Lenders in the case of actions requiring the consent of all Lenders under Section 11.01), and such instructions shall be binding upon all Lenders, PROVIDED that the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or applicable law. 69 The Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrowers pursuant to the terms of this Agreement. SECTION 10.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or wilful misconduct. Without limitation of the generality of the foregoing, the Agent (i) may treat the payee of any Note as the holder thereof until the Agent receives and accepts an Assignment and Acceptance entered into by the Lender which is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 11.07, (ii) may consult with legal counsel (including counsel for any Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, (iii) may perform any of its duties under this Agreement by or through agents or attorneys-in-fact selected by it with reasonable care and shall not be liable for any action taken or omitted to be taken by any such agent or attorney-in- fact, (iv) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement, (v) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of or to inspect the property (including the books and records) of any Borrower, (vi) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto, and (vii) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 10.03. AGENT AND AFFILIATES. With respect to its Commitment, the Advances made by it and the Notes issued to it, the Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not an Agent; and 70 the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, any Borrower, any of their respective Subsidiaries and any Person who may do business with or own securities of any Borrower or any such Subsidiaries, all as if the Agent were not an Agent hereunder and without any duty to account therefor to the Lenders. SECTION 10.04. LENDER CREDIT DECISION. Each Lender expressly acknowledges that neither the Agent, nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of any Borrower or any of their respective subsidiaries, shall be deemed to constitute any representation or warranty by any of them to any Lender. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements referred to in Section 5.06 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, condition (financial or otherwise), operations, property, prospects or creditworthiness of the Borrowers or any of their respective Subsidiaries which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. SECTION 10.05. INDEMNIFICATION. The Lenders agree to indemnify the Agent (to the extent not reimbursed by any Borrower), ratably according to the respective amounts of their respective Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may 71 at any time be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Agent under or in connection with any of the foregoing, PROVIDED that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or wilful misconduct. Without limiting the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Agent is not reimbursed for such expenses by any Borrower. The agreements in this Section 10.05 shall survive the payment of the Notes and Advances and all other amounts payable hereunder. SECTION 10.06. SUCCESSOR AGENT. The Agent may resign at any time by giving written notice thereof to the Lenders and each Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent who is reasonably acceptable to the Borrowers. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof who is reasonably acceptable to the Borrowers and has a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as Agent the provisions of this Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 72 ARTICLE XI MISCELLANEOUS SECTION 11.01. AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement or the Notes, nor consent to any departure by any Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by such Borrower and the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given, PROVIDED that (a) no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (i) increase or decrease the Commitments of the Lenders (except for a ratable decrease in the Commitments of all Lenders) or subject the Lenders to any additional obligations, (ii) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (iii) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Lenders, which shall be required for the Lenders or any of them to take any action hereunder or (v) amend this 11.01, and (b) no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement or any Note. SECTION 11.02. NOTICES, ETC. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, cable communication, facsimile telecopy or similar writing) and shall be given: if to any Borrower, at its address specified below its name on the signature pages hereof; if to any Lender, at its Domestic Lending Office specified below its name on the signature page hereof; if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; and if to the Agent, at its address at Citibank, N.A., 399 Park Avenue, New York, New York 10043, Attention: Insurance Department, 12th Floor; or, as to each party, at such other address as shall be designated by such party in a written notice to the Agent and the Borrowers. All such notices and communications shall, when mailed, telegraphed, telexed, cabled or telecopied, be effective 73 (i) on the first Domestic Business Day following the day timely deposited with Federal Express (or other equivalent national overnight courier) or United States Express Mail, with the cost of delivery prepaid or for the account of the sender; (ii) on the fifth Domestic Business Day following the day duly sent by certified or registered United States mail, postage prepaid and return receipt requested; or (iii) when otherwise actually received by the addressee on a Domestic Business Day (or on the next Domestic Business Day if received after the close of normal business hours or on any non-Domestic Business Day), except that notices and communications to the Agent pursuant to Article II or X shall not be effective until received by the Agent. SECTION 11.03. NO WAIVER; REMEDIES. No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 11.04. COSTS AND EXPENSES. Each Borrower jointly and severally agrees to pay within 30 days of demand all reasonable costs and expenses of the Agent in connection with the preparation, execution, delivery, modification and amendment of this Agreement, the Notes and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities under this Agreement, and all reasonable costs and expenses, if any (including, without limitation, reasonable counsel fees and expenses, which may include the reasonable allocable costs of inhouse counsel), of each Lender and the Agent in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes, and the other documents to be delivered hereunder. Each Borrower jointly and severally agrees to pay, indemnify, and hold each Lender and the Agent harmless from and against any and all other liabilities, losses, damages, penalties, actions, judgments and suits, and related reasonable costs, expenses or disbursements, of any kind or nature whatsoever in connection with or arising out of any governmental investigation, litigation or proceeding 74 with respect to the execution, delivery, enforcement and performance of this Agreement, the Notes or the use of the proceeds of the Advances (all the foregoing, collectively, the "indemnified liabilities"), PROVIDED that no Borrower shall have any obligation hereunder to the Agent or any Lender with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the Agent or any such Lender. The agreements in this Section 11.04 shall survive repayment of the Notes and all other amounts payable hereunder. SECTION 11.05. RIGHT OF SET-OFF. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 9.01 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of Section 9.01, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by such Lender to or for the credit or the account of any Borrower against any and all of the obligations of such Borrower now or hereafter existing under this Agreement and the Notes held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or any such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify such Borrower after any such set-off and application made by such Lender, PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 11.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. SECTION 11.06. BINDING EFFECT. This Agreement shall become effective when it shall have been executed by each Borrower and the Agent and when the Agent shall have been notified by each Lender that such Lender has executed it and thereafter shall be binding upon and inure to the benefit of each Borrower, the Agent and each Lender and their respective successors and assigns, except that no Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. 75 SECTION 11.07. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may, and if demanded by any Borrower (pursuant to Section 2.09 of the Other Agreement or following a demand by such Lender pursuant to Section 2.17 or 3.03) upon at least 10 Domestic Business Days' notice to such Lender and the Agent will, assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it), PROVIDED that (i) each such assignment shall be of a constant, and not a varying, percentage of all of the assigning Lender's rights and obligations under this Agreement, (ii) each such assignment shall be to an Eligible Assignee, (iii) the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $6,000,000 (or 100% of such Lender's remaining Commitment, if less than $6,000,000), (iv) the assigning Lender shall have entered into an assignment and acceptance agreement with such Eligible Assignee pursuant to which such Lender shall assign an amount of its commitment under the Other Agreement equal to 66 2/3% of the amount of its Commitment to be assigned hereunder, (v) the Agent and SunAmerica, on behalf of itself and the other Borrowers, shall have consented in writing to such assignment, which consent shall not be unreasonably withheld, and (vi) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance substantially in the form of Exhibit G hereto, together with any Note or Notes subject to such assignment. In connection with any such assignment, the Lender assignor shall pay to the Agent a processing and recordation fee of $3,000. Upon such execution, delivery, acceptance and recordation and upon payment by the Lender assignee to such Lender assignor of an amount equal to the purchase price agreed between such Lender assignor and such Lender assignee, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least 3 Domestic Business Days after the execution thereof, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder, and (y) the Lender assignor thereunder shall, to the extent that rights and obliga- 76 tions hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or the performance or observance by any Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 5.06 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (c) The Agent shall maintain at its address referred to in Section 11.02 a copy of each Assignment and 77 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 78 Borrowers, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and (v) any agreement pursuant to which such Lender sells such participation shall provide that such Lender shall retain the sole right and responsibility to enforce the obligations of the Borrowers hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement other than, if provided in such participation agreement, the right of the participant thereunder to consent to a modification, amendment or waiver described in clause (i), (ii) or (iii) of Section 11.01. The Borrowers agree that each participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Section 2.14 or Article III with respect to its participating interest (provided that any resulting costs to the Borrowers would not exceed those which would have otherwise been payable to the Lender which shall have sold the participation to such participant). (f) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 11.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrowers furnished to such Lender by or on behalf of the Borrowers, PROVIDED that, through the Agent, each Lender will notify the Borrowers of its intent to disclose such information and prior to any such disclosure of information designated by a Borrower as confidential, each such assignee or participant or proposed assignee or participant shall execute a confidentiality agreement with the Borrowers whereby such assignee or participant shall agree (subject to the exceptions set forth therein) to preserve the confidentiality of such confidential information. (g) Notwithstanding any other provision of this Section 11.07, any Lender may at any time assign all or any portion of its rights under this Agreement and its Notes to, or create a security interest therein in favor of, any Federal Reserve Bank, PROVIDED that no such assignment or grant shall release such Lender from its obligations hereunder. SECTION 11.08. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. For the purpose of assuring that 79 the Agent and the Lenders may enforce their respective rights under this Agreement, each Borrower hereby irrevocably (a) agrees that any legal or equitable action, suit or proceeding against the Borrowers arising out of or relating to this Agreement or any transaction contemplated hereby or the subject matter hereof or thereof may be instituted in any state or federal court in the State of New York, (b) waives any objection that it may now or hereafter have to the venue of any action, suit or proceeding, (c) irrevocably submits itself to the nonexclusive jurisdiction of any state or federal court of competent jurisdiction in the State of New York for purposes of any such action, suit or proceeding, and (d) irrevocably waives personal service of process and hereby consents to service of process upon it by certified or registered mail, return receipt requested, at its address specified in accordance with Section 11.02 and service so made shall be deemed completed on the third business day after such service is deposited in the mail. Nothing contained in this Section 11.08 shall be deemed to affect the right of the Agent and the Lenders to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Borrowers in any jurisdiction. THE BORROWERS, THE AGENT, AND THE LENDERS HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE EACH PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONCERNED WITH THIS AGREEMENT AND THE NOTES. SECTION 11.09. GOVERNING LAW. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 11.10. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 11.11. COLLATERAL. Each Lender represents to the Agent and each other Lender that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. 80 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. SUNAMERICA INC. 11601 Wilshire Boulevard Los Angeles, California 90025 By: /s/ James R. Belardi ---------------------------------- Name: James R. Belardi Title: Senior Vice President and Treasurer SUNAMERICA CORPORATION 11601 Wilshire Boulevard Los Angeles, California 90025 By: /s/ James R. Belardi ---------------------------------- Name: James R. Belardi Title: Authorized Agent SUNAMERICA FINANCIAL, INC. 11601 Wilshire Boulevard Los Angeles, California 90025 By: /s/ James R. Belardi --------------------------------- Name: James R. Belardi Title: Authorized Agent 81 CITIBANK, N.A., in its capacity as Agent and Lender, 399 Park Avenue, 12th Floor New York, NY 10043 Attention: Ms. Kelley Hebert By: /s/ Kelley T. Herbert ---------------------------------- Name: Kelley T. Hebert Title: Vice President Commitment: $10,500,000 LENDERS BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION 555 South Flower Street 49th Floor Los Angeles, CA 90071 Attention: Mr. Dennis Arriola By: /s/ Dennis V. Arriola --------------------------------- Name: Dennis V. Arriola Title: Vice President Commitment: $10,500,000 CHEMICAL BANK 4 New York Plaza New York, NY 10004 Attention: Mr. Peter Platten By: /s/ Peter Platten ---------------------------------- Name: Peter Platten Title: Vice President Commitment: $10,500,000 82 FIRST INTERSTATE BANK OF CALIFORNIA 707 Wilshire Blvd. W16-14 Los Angeles, CA 90017 Attention: Mr. Robert Meyer By: /s/ Robert C. Meyer / Margot E. Edel -------------------------------------- Name: Robert C. Meyer / Margot E. Edel Title: Vice President / Vice President Commitment: $10,500,000 THE FIRST NATIONAL BANK OF CHICAGO One First National Plaza 12th Floor Chicago, IL 60670-0429 Attention: Ms. Marcia Saper By: /s/ Marcia P. Saper -------------------------------------- Name: Marcia P. Saper Title: Vice President Commitment: $10,500,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED 350 South Grand Ave., Suite 1500 Los Angeles, CA 90017 Attention: Mr. Carl-Eric Benzinger By: /s/ Juichi Tsuda -------------------------------------- Name: Juichi Tsuda Title: General Manager Commitment: $10,500,000 83 THE CHASE MANHATTAN BANK, N.A. 1 Chase Manhattan Plaza 5th Floor New York, NY 10081 Attention: Ms. Sarah Lee Martin By: /s/ Sarah Lee Martin --------------------------------------- Name: Sarah Lee Martin Title: Vice President Commitment: $9,000,000 THE BANK OF NEW YORK 1 Wall Street 17th Floor New York, NY 10286 Attention: Mr. Stratton Heath By: /s/ W. Michael George -------------------------------------- Name: W. Michael George Title: Vice President Commitment: $6,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK 60 Wall Street, 22nd Floor New York, NY 10260 Attention: Ms. Anne Kelly By: /s/ Anne M. Kelly --------------------------------------- Name: ANNE M. KELLY Title: VICE PRESIDENT Commitment: $6,000,000 84 WESTDEUTSCHE LANDESBANK GIROZENTRALE NEW YORK AND CAYMAN ISLANDS BRANCHES 1211 Avenue of the Americas New York, NY 10021 Attention: Operations By: /s/ Michael F. McWalters --------------------------------------- Name: Matthew F. Tallo Name: Michael F. McWalters Associate Title: Managing Director Commitment: $6,000,000 with a copy to: 633 West Fifth Street Suite 6750 Los Angeles, CA 90071 Attention: Mr. Robert F. Edmonds 85 EXHIBIT A FORM OF NOTE New York, New York ___________ __, 1993 For value received, SUNAMERICA INC., a Maryland corporation, SUNAMERICA CORPORATION, a Delaware corporation, and SUNAMERICA FINANCIAL, INC., a Georgia corporation (collectively, the "Borrowers"), jointly and severally promise to pay to the order of [NAME OF LENDER] (the "Lender"), for the account of its Applicable Lending Office, the unpaid principal amount of each Advance made by the Lender to the Borrowers pursuant to the Credit Agreement referred to below on the last day of the Interest Period relating to such Advance. The Borrowers jointly and severally promise to pay interest on the unpaid principal amount of each such Advance on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Citibank, N.A., 399 Park Avenue, New York, New York 10043, Attention: Insurance Department, 12th Floor. All Advances made by the Lender, the respective Types and maturities thereof and all repayments of the principal thereof shall be recorded by the Lender and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such Advance then outstanding shall be endorsed by the Lender on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof, PROVIDED that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrowers hereunder or under the Credit Agreement. This Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement, dated as of February 1, 1993, among the Borrowers, the Lenders listed on the signature pages thereof and Citibank, N.A., as Agent for the Lenders, providing for a $90,000,000 revolving credit facility (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the acceleration of the maturity hereof upon the happening of certain events and the prepayment hereof upon the terms and conditions therein specified. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SUNAMERICA INC By --------------------------------- Title: SUNAMERICA CORPORATION By --------------------------------- Title: SUNAMERICA FINANCIAL, INC. By --------------------------------- Title: 2 Form of Note (cont'd) ADVANCES AND PAYMENTS OF PRINCIPAL - ------------------------------------------------------------------------------- Amount of Amount of Type of Principal Maturity Notation Date Advance Advance Repaid Date Made By - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 3 EXHIBIT B FORM OF NOTICE OF COMMITTED BORROWING [DATE) Citibank, N.A., as Agent for the Lenders parties to the Credit Agreement referred to below 399 Park Avenue New York, New York 10043 Attention: Insurance Department 12th Floor Ladies and Gentlemen: The undersigned, [Borrower], a_________________corporation, on behalf of itself and the other Borrowers, refers to the Credit Agreement, dated as of February 1, 1993, providing for a $90,000,000 revolving credit facility (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, the other Borrowers, the Lenders listed on the signature pages thereof and Citibank, N.A., as Agent for the Lenders, and hereby gives notice pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.02 of the Credit Agreement: (i) the (Domestic Business Day] (Eurodollar Business Day] of the Proposed Borrowing is _________, 199__; (ii) the aggregate amount of the Proposed Borrowing is $_________;* (iii) the Type of Advances comprising the Proposed Borrowing is [CD Advances] [Base Rate Advances] [Eurodollar Advances); - ----------------------- * Amount must be $10,000,000 or a larger multiple of $5,000,000 (or such other amount as equals the aggregate amount of the unused Commitments). (iv) Level [I] [II] [III] Status exists on the date of this Notice; and (v) the Interest Period for each Advance made as part of the Proposed Borrowing is [______ days] [month[s]]. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties contained in Article V of the Credit Agreement are true and correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, except to the extent they were expressly made as of the Effective Date or expressly relate to a prior date[, PROVIDED that such representations and warranties do not include those set forth in Sections 5.06(b)(iii) and 5.07]**; (B) no Default exists or will result from such Proposed Borrowing; and (C) the outstanding aggregate principal amount of all Advances, after giving effect to the Proposed Borrowing, will not exceed the aggregate amount of all Commitments in effect as of the date of such Proposed Borrowing. Very truly yours, [BORROWER] By ----------------------------- Title: - ------------------- ** Proviso to be included in Notice if, after giving effect to the Proposed Borrowing, the aggregate outstanding amount of Advances owing to the Lenders would not exceed the aggregate amount of such Advances outstanding and owing to the Lenders immediately prior to the making of the Proposed Borrowing. 2 EXHIBIT C FORM OF MONEY MARKET QUOTE REQUEST [DATE] Citibank, N.A., as Agent for the Lenders parties to the Credit Agreement referred to below 399 Park Avenue New York, New York 10043 Attention: Insurance Department 12th Floor Ladies and Gentlemen: The undersigned, [Borrower], a____________________ corporation, on behalf of itself and the other Borrowers, refers to the Credit Agreement, dated as of February 1, 1993, providing for a $90,000,000 revolving credit facility (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, the other Borrowers, the Lenders listed on the signature pages thereof and Citibank, N.A., as Agent for the Lenders, and hereby requests, pursuant to Section 2.03(b) of the Credit Agreement, Money Market Quotes under the Credit Agreement for a Borrowing comprised of Money Market Advances, and in that connection sets forth below the information relating to any such Borrowing (the "Proposed Borrowing"): (i) the [Domestic Business Day] [Eurodollar Business Day] of the Proposed Borrowing is _________, 199__; (ii) the aggregate amount of the Proposed Borrowing is $______________;* (iii) such Money Market Quote shall offer a Money Market (Margin] [Absolute Rate]; and - ------------------------- * Amount must be $10,000,000 or a larger multiple of $5,000,000 (or such other amount as equals the aggregate amount of the unused Commitments). (iv) the Interest Period for each Advance made as part of the Proposed Borrowing is_________**. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties contained in Article V of the Credit Agreement are true and correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, except to the extent they were expressly made as of the Effective Date or expressly relate to a prior date[, PROVIDED that such representations and warranties do not include those set forth in Sections 5.06(b)(iii) and 5.07] *** ; (B) no Default exists or will result from such Proposed Borrowing; and (C) the outstanding aggregate principal amount of all Advances, after giving effect to the Proposed Borrowing, will not exceed the aggregate amount of all commitments in effect as of the date of such Proposed Borrowing. Very truly yours, [BORROWER] By ------------------------ Title: - ----------------------- ** Not less than 7 nor more than 180 days for each Money Market Absolute Rate Advance, and 1, 2, 3, or 6 months for each Money Market LIBOR Advance, in each case subject to the provisions of the definition of Interest Period. *** Proviso to be included in Notice if, after giving effect to the Proposed Borrowing, the aggregate outstanding amount of Advances owing to the Lenders would not exceed the aggregate amount of such Advances outstanding and owing to the Lenders immediately prior to the making of the Proposed Borrowing. 2 EXHIBIT D FORM OF INVITATION FOR MONEY MARKET QUOTES [DATE] [Name of Lender] [Address] Attention: __________________ Ladies and Gentlemen: Pursuant to Section 2.03(c) of the Credit Agreement, dated as of February 1, 1993, providing for a $90,000,000 revolving credit facility (the "Credit Agreement", the terms defined therein being used herein as therein defined), among SunAmerica Inc., a Maryland corporation, SunAmerica Corporation, a Delaware corporation, SunAmerica Financial, Inc., a Georgia corporation (collectively, the "Borrowers"), the Lenders listed on the signatures pages thereof and Citibank, N.A., as Agent for the Lenders, we are pleased on behalf of the Borrowers to invite you to submit Money Market Quotes to the Borrowers for the following proposed Money Market Borrowing(s): Date of Borrowing:_________________ PRINCIPAL AMOUNT INTEREST PERIOD $ Such Money Market Quotes shall offer a Money Market [Margin] [Absolute Rate]. Please respond to this invitation by no later than [2:00 P.M.] [10:00 A.M.] New York City time on [date]. CITIBANK, N.A., as Agent By -------------------- Authorized Officer EXHIBIT E FORM OF MONEY MARKET QUOTE Citibank, N.A., as Agent for the Lenders parties to the Credit Agreement referred to below 399 Park Avenue New York, New York 10043 Attention: Insurance Department 12th Floor Ladies and Gentlemen: Reference is made to the Credit Agreement, dated as of February 1, 1993, providing for a $90,000,000 revolving credit facility (the "Credit Agreement", the terms defined therein being used herein as therein defined), among SunAmerica Inc., a Maryland corporation, SunAmerica Corporation, a Delaware corporation, SunAmerica Financial, Inc., a Georgia corporation (collectively, the "Borrowers"), the Lenders listed on the signatures pages thereof and Citibank, N.A., as Agent for the Lenders. In response to your invitation on behalf of the Borrowers, dated__________, 199_, we hereby make the following Money Market Quote on the following terms: 1. Quoting Lender: ------------------------------------------------------- 2. Person to contact at Quoting Lender: ----------------------------------------------------------------------- 3. Date of Borrowing: * ----------------------- 4. We hereby offer to make Money Market Advance(s) in the following principal amounts, for the following Interest Periods and at the following rates: - ----------------------- * As specified in the related Invitation. Principal Interest Money Market Amount** Period*** [Margin****] [Absolute Rate*****] - ----- ------ ------- -------------------- $ $ [Provided, that the aggregate principal amount of Money Market Advances for which the above offers may be accepted shall not exceed $______________.]** We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Credit Agreement, irrevocably obligates us to make the Money Market Advance(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF LENDER) Dated: By: ----------------- --------------------- Authorized Officer - --------------------------- ** Principal amount bid may not exceed the principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Lender is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. *** As specified in the related Invitation. No more than 5 bids are permitted for each Interest Period. **** Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". ***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%). 2 EXHIBIT F February __, 1993 To the Lenders listed on Annex A hereto SUNAMERICA INC. Ladies and Gentlemen: I am a Vice President and Associate General Counsel of SunAmerica Inc. (formerly Broad Inc.), a Maryland corporation ("SunAmerica") and have acted as such in connection with the Credit Agreement dated as of February 1, 1993 (the "Credit Agreement") by and among SunAmerica, SunAmerica Corporation, a Delaware corporation ("SACO"), and SunAmerica Financial, Inc., a Georgia corporation ("SAFI") (SunAmerica, SACO and SAFI are each referred to as a "Borrower" and are collectively referred to as "Borrowers"), Citibank, N.A., as Agent (the "Agent") and the Lenders named therein (the "Lenders") and the $90,000,000 loan facility contemplated by the Credit Agreement. Capitalized terms used herein, unless otherwise expressly defined, have the meanings specified in the Credit Agreement. I have examined and relied upon the originals, or copies certified or otherwise identified to my satisfaction, of such records, documents, certificates and other instruments, and have made such other investigations or inquiries and considered such questions of law, as in my judgment are necessary or appropriate to enable me to render the opinions expressed below. In particular, I have examined or caused to be examined under my direction certificates of public officials, and copies, certified to my satisfaction, of such corporate documents and records of the Borrowers and of the Material Subsidiaries and of First Sun and of such other persons as I have deemed relevant and necessary as a basis for this opinion. In addition, I have relied, to the extent I have deemed such reliance proper, upon certificates of officers of the Borrowers and of the Material Subsidiaries and of First Sun with respect to the accuracy of certain material factual matters which were not independently established. I have assumed the authenticity of all documents submitted to me as originals, the conformity to originals of all documents submitted to me as copies and the genuineness of all signatures on such documents. I have also assumed that the Credit Agreement has been duly authorized, executed and delivered by all parties thereto other than the Borrowers, and constitutes all such other parties respective legal, valid, binding and enforceable obligations. Based on an officer's certificate of an officer of SunAmerica with respect to the definition in Section 1.01 of the Credit Agreement of the term "Material Subsidiary", the term "Material Subsidiary" means Sun Life, Anchor, Sun Mortgage Acceptance Corporation, and Saamsun Holdings Corp. For purposes of the opinion in the second sentence of paragraph 4 below, I have reviewed the opinion of Messrs. Debevoise & Plimpton dated February 5, 1993 to the effect that the Credit Agreement and the Notes constitute the legal, valid, binding and enforceable obligations of the Borrowers under the laws of the State of New York, and I have assumed that the Lenders and the Agent shall act in good faith and in a commercially reasonable manner in all matters in connection with the Credit Agreement and the Notes, and that the laws of the State of California are the same as the laws of the State of New York. I am an attorney admitted to practice in the State of California, and I express no opinion as to any laws other than the laws of the State of California and the federal laws of the United States of America and for the purposes of the opinions with respect to the relevant Borrower or Material Subsidiary, as the case may be, in paragraphs 1, 4 (but only to the extent of the first sentence thereof and as to execution of the Credit Agreement and the Notes) and 6 below, the general corporate laws of the States of Maryland, Delaware, Georgia and Virginia. Based upon and subject to the foregoing, I am of the opinion that: 1. Each Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and has all requisite corporate power and authority to own or lease and to operate its properties and to carry on its business as now conducted. Each Borrower is duly qualified to transact business, and is in good standing as a foreign corporation authorized to transact business, in each jurisdiction where the ownership, leasing or operation of its properties or the conduct of its business makes such qualification necessary, except where the failure to so qualify or be in good standing would not have a Material Adverse Effect. 2. The execution, delivery and performance by each Borrower of the Credit Agreement and the Notes does not (a) to the best of my knowledge, violate any law or statute or any rule or regulation of any relevant Governmental Authority applicable to any Borrower, (b) to the best of my knowledge, contravene or conflict with any order, writ, judgment or decree of any court, arbitrator or any Governmental Authority or result in any breach of or constitute a default under any agreement or instrument binding on such Borrower, or (c) contravene or conflict with any provision of the Articles of Incorporation or Bylaws of such Borrower. - 2 - 3. No material order, consent, approval, license, authorization or validation of, or material filing, recording or registration with or exemption by, any Governmental Authority regulating any Borrower is required in connection with the borrowings under the Credit Agreement or the execution, delivery or performance by each Borrower of the Credit Agreement or the Notes or the validity or enforceability of the Credit Agreement or the Notes, except such disclosure as may be necessary or appropriate under securities laws. 4. Each Borrower has taken all necessary action to authorize the borrowings under the Credit Agreement and the execution, delivery and performance by such Borrower of the Credit Agreement and the Notes. Each Borrower has duly executed and delivered the Credit Agreement and the Notes, and the Credit Agreement and the Notes constitute legal, valid and binding obligations of each Borrower enforceable against such Borrower in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws of general application relating to or affecting the rights and remedies of creditors and general principles of equity (regardless of whether asserted in a proceeding in equity or at law). 5. To the best of my knowledge, there is no action, suit or proceeding pending or threatened against any Borrower or any Material Subsidiary before any court or arbitrator or any governmental body or agency for which I believe there is a reasonable likelihood of an adverse decision which I believe would have a Material Adverse Effect or which questions the validity of the Credit Agreement or the Notes. 6. Each Material Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own or lease and to operate its properties and to carry on its business as now conducted. 7. None of the Borrowers is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 8. Each Borrower and each Material Subsidiary has all licenses, franchises, permits and other governmental authorizations necessary for the businesses presently carried on by them except where the failure to do so would not individually or in the aggregate have a Material Adverse Effect. 9. No material License of an Insurance Subsidiary (i.e., Sun Life, Anchor or First Sun) is the subject of a proceeding for suspension or revocation, except where such suspension or revocation would not individually or in the aggregate have a Material Adverse Effect. I express no opinion as to the enforceability of provisions of the Credit Agreement and the Notes (a) which broadly or vaguely waive stated rights, statutory rights, constitutional - 3 - rights or unknown future rights, (b) to the effect that rights or remedies are not exclusive, that every right or remedy is cumulative, that the election of a particular remedy or remedies does not preclude recourse to one or more other remedies, that the failure to exercise or delay in exercising any remedy does not affect or waive any rights or remedies, and that waivers, amendments or modifications may only be made in writing, (c) imposing charges in the nature of forfeitures, penalties, unreasonable liquidated damages or late charges, (d) requiring any party to indemnify any other party against loss for such other party's own negligence, tortious conduct, wrongful or unlawful act or violation of public policy, or absolving any party from liability, or limiting the liability of any party for such party's own negligence, tortious conduct, wrongful or unlawful act or violation of public policy, (e) waiving, expressly or by implication, presentment, demand, protest or notice, or the right to object to the laying of the venue of any suit, action or proceeding, or the right to claim that any suit, action or proceeding has been brought in an inconvenient forum, or the right to a jury trial or to due process of law, or other rights, remedies, claims or defenses, to the extent such waivers are contrary to law or are or would be found to be against public policy, (f) requiring the Borrowers to pay attorneys' fees of the Lenders or the Agent in connection with any proceeding in which the Lenders or the Agent are not the prevailing party, (g) the provisions of the last sentence of Section 11.07(e) of the Agreement or (h) which provide that actions may be taken or that decisions may be made at the discretion or judgment of the Agent or any Lenders or arbitrarily by the Agent or any Lenders. This opinion is rendered as of the date set forth above and I shall have no responsibility to advise you of any changes, facts or circumstances after the date hereof. This letter may not be relied upon by any other person or entity except counsel to the Agent and the Lenders. This opinion may not be furnished without my prior consent to any person or entity other than potential assignees or participants or as may be required by applicable law or regulators. Very truly yours, ----------------------------------------- Susan L. Harris - 4 - ANNEX A CITIBANK, N.A. 399 Park Avenue, 12th Floor New York, NY 10043 Attention: Ms. Kelley Hebert BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION 555 South Flower Street 49th Floor Los Angeles, CA 90071 Attention: Mr. Dennis Arriola CHEMICAL BANK 4 New York Plaza New York, NY 10004 Attention: Mr. Peter Platten FIRST INTERSTATE BANK OF CALIFORNIA 707 Wilshire Blvd. W16-14 Los Angeles, CA 90017 Attention: Mr. Robert Meyer THE FIRST NATIONAL BANK OF CHICAGO One First National Plaza 12th Floor Chicago, IL 60670-0429 Attention: Ms. Marcia Saper THE INDUSTRIAL BANK OF JAPAN, LIMITED 350 South Grand Ave., Suite 1500 Los Angeles, CA 90017 Attention: Mr. Carl-Eric Benzinger THE CHASE MANHATTAN BANK, N.A. 1 Chase Manhattan Plaza 5th Floor New York, NY 10081 Attention: Ms. Sarah Lee Martin THE BANK OF NEW YORK 1 Wall Street 17th Floor New York, NY 10286 Attention: Mr. Stratton Heath MORGAN GUARANTY TRUST COMPANY OF NEW YORK 60 Wall Street, 22nd Floor New York, NY 10260 Attention: Ms. Anne Kelly WESTDEUTSCHE LANDESBANK GIROZENTRALE NEW YORK AND CAYMAN ISLANDS BRANCHES 1211 Avenue of the Americas New York, NY 10021 Attention: Operations with a copy to: 633 West Fifth Street Suite 6750 Los Angeles, CA 90071 Attention: Mr. Robert F. Edmonds EXHIBIT G ASSIGNMENT AND ACCEPTANCE Dated_________, 199_ Reference is made to the Credit Agreement, dated as of February 1, 1993, providing for a $90,000,000 revolving credit facility (the "Credit Agreement"), among SunAmerica Inc., a Maryland corporation ("SunAmerica"), SunAmerica Corporation, a Delaware corporation ("SACO"), SunAmerica Financial, Inc., a Georgia corporation (together with SunAmerica and SACO, the "Borrowers"), the Lenders identified on the signature pages thereof and Citibank, N.A., as Agent for the Lenders (the "Agent"). Terms defined in the Credit Agreement are used herein with the same meanings. ________________(the "Assignor") and _______________(the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, for a purchase price of $_______, a______% interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the Effective Date (as defined in paragraph 4 below) (including, without limitation, such percentage interest in the Assignor's Commitment as in effect on the Effective Date (before giving effect to any Money Market Reduction), the Advances (including Money Market Advances) owing to the Assignor on the Effective Date, and the Notes held by the Assignor).* Schedule 1 hereto sets forth the respective Commitments and Advances of the Assignor and the Assignee immediately after giving effect to this Assignment and Acceptance. 2. The Assignor (i) represents and warrants that as of the date hereof its Commitment (without giving effect to assignments thereof which have not yet become effective or any Money Market Reduction) is $__________, and the aggregate outstanding principal amount of Advances owing to it (without giving effect to assignments thereof which have not yet become effective) is $________; (ii) represents and warrants that it is the legal and beneficial owner of the interests being assigned by it hereunder and that such interest is free and clear of any adverse claim; (iii) makes no representation or warranty - ----------------------- * The amount of Commitments being assigned shall comply with Section 11.07(a) of the Credit Agreement. and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or the performance or observance by any Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; and (v) attaches the Note referred to in paragraph 1 above and requests that the Agent exchange such Note for [a new Note dated_________, 199_ in the principal amount of $______, payable to the order of the Assignee] [new Notes as follows: a Note dated__________, 199_ in the principal amount of $____________, payable to the order of the Assignee, and a Note dated _________, 199_ in the principal amount of $_______________, payable to the order of the Assignor]. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 5.06 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; [and] (vi) specifies as its Domestic Lending office (and address for notices), Money Market Lending office and Eurodollar Lending Office the offices set forth beneath its name on the signature pages hereof [and (vii) attaches the forms prescribed by the 2 Internal Revenue Service of the United States evidencing their exemption from U.S. withholding taxes].** 4. The effective date for this Assignment and Acceptance shall be _________(the "Effective Date").*** Following, and subject to, the consent in writing by the Agent and SunAmerica, on behalf of itself and the other Borrowers, to such assignment and the execution of this Assignment and Acceptance, this Assignment and Acceptance will be delivered to the Agent together with the processing fee specified in Section 11.07(a) of the Credit Agreement, for acceptance and recording by the Agent. 5. Upon such acceptance and recording and the payment by the Assignee to the Assignor of the purchase price specified in paragraph 1 above, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in the Credit Agreement, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in the Credit Agreement, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording, from and after the Effective Date, the Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. [NAME OF ASSIGNOR] - ------------------------ ** If the Assignee is organized under the laws of a jurisdiction outside the United States. *** See Section 11.07(a). Such date shall be at least 3 Domestic Business Days after the execution of this Assignment and Acceptance. 3 By: -------------------------- Name: Title: [NAME OF ASSIGNEE] By: -------------------------- Name: Title: Domestic Lending Office (and address for notices): [Address] Money Market Lending Office: [Address] Eurodollar Lending Office: [Address] 4 Accepted and consented to this_______ day of ____________, 199_ CITIBANK, N.A., as Agent By: --------------------- Name: Title: SUNAMERICA INC. By: --------------------- Name: Title: 5 SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE Dated___________, 199_ Assignor's Commitment: $ ---------------------- Aggregate Outstanding Principal Amount of Committed Advances Owing to Assignor $ ---------------------- Aggregate Outstanding Principal Amount of Money Market Advances Owing to Assignor $ ---------------------- Assignee's Commitment: $ ---------------------- Aggregate Outstanding Principal Amount of Committed Advances Owing to Assignee $ ---------------------- Aggregate Outstanding Principal Amount of Money Market Advances Owing to Assignee $ ---------------------- 6 EXHIBIT H BROAD INC. CONSOLIDATING BALANCE SHEET September 30, 1992 (IN THOUSANDS)
SUN FIRST BROKER/ ASSSET LIFE ANLIC SUN DEALER MANAGER TRUST ELIM- CONSOL CONSOL AMERICA CONSOL CONSOL COMPANY INATIONS ASSETS: BONDS, NOTES AND REDEM PREF STOCK 3,530,366 1,185,199 49,072 0 0 337,864 0 SENIOR SECURED BANK LOANS 308,204 156,907 0 0 0 0 0 COMMON STOCKS, AT MARKET VALUE 22,108 10,390 0 0 0 0 0 KBHC WARRANTS, AT MARKET VALUE 7,330 0 0 0 0 0 0 SHORT-TERM INVESTMENTS 791,814 362,197 40,904 8,625 18,832 0 0 CASH 35,625 3,530 402 7,559 286 74,354 0 MORTGAGE LOANS 1,146,074 96,427 20,975 0 0 0 0 POLICY LOANS 28,196 13,195 0 0 0 0 0 REAL ESTATE 37,021 156,684 0 0 0 0 0 OTHER INVESTED ASSETS 262,943 131,965 0 0 0 0 0 --------- --------- --------- --------- --------- --------- --------- TOTAL INVESTMENTS 6,169,681 2,116,494 111,353 16,184 19,118 412,218 0 INVESTMENTS IN AFFILIATES 328,718 61,829 0 0 0 0 (410,119) ACCRUED INVESTMENT INCOME 82,699 16,664 443 57 0 4,184 0 DAC AND PVFP 145,696 240,572 1,297 0 47,692 0 0 SEPARATE ACCOUNT ASSETS 0 3,284,507 8,836 0 0 0 0 INVESTMENT IN DISCONT. OPERATIONS 0 0 0 0 0 0 0 OTHER ASSETS 24,726 12,479 1,084 21,712 27,724 8,177 0 --------- --------- --------- --------- --------- --------- --------- TOTAL ASSETS 6,751,520 5,732,545 123,013 37,953 94,534 424,579 (410,119) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- LIABILITIES: RES. FOR FUTURE POLICYHOLDER BEN.: ANNUITIES AND SPL 3,346,131 1,735,565 59,400 0 0 0 0 GICs 1,739,683 0 0 0 0 0 0 CLAIMS & OTHER POLICYHOLDERS' FUNDS 0 7,406 227 0 0 0 0 NOTES PAYABLE: L-TERM NOTES AND DEBENTURES 0 0 0 0 0 0 0 CMO 182,784 0 0 0 0 0 0 SECURED NOTES PAYABLE 0 0 0 0 0 0 0 BANK NOTES 0 0 0 0 0 524 0 REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 0 0 SUBORDINATED DEBENTURES 0 0 0 0 0 0 0 SEPARATE ACCOUNT LIABILITIES 0 3,284,507 8,836 0 0 0 0 DUE TO/FROM AFFILIATES (2,123) 21,121 229 353 16,495 484 0 OTHER LIABILITIES 788,055 356,706 33,625 20,076 5,549 399,247 0 FEDERAL INCOME TAXES: CURRENT (11,969) (8,459) 609 2,298 (11,817) 1,654 0 DEFERRED 12,561 13,548 (835) (1,067) 19,212 82 0 --------- --------- --------- --------- --------- --------- --------- TOTAL LIABILITIES 6,055,122 5,410,394 102,091 21,660 29,439 401,991 0 --------- --------- --------- --------- --------- --------- --------- SHAREHOLDERS' EQUITY: PREFERRED STOCK 0 0 0 0 0 0 0 NON-TRANSFER CLASS B STOCK 0 0 0 0 0 0 0 COMMON STOCK 5,636 3,511 3,000 1 56 700 (7,267) CONTRIBUTED CAPITAL 267,670 252,876 14,428 16,249 46,738 19,415 (338,956) URCG (L) 2,675 (2,385) 0 0 0 0 2,385 URCG (L) K&B WARRANTS 6,142 0 0 0 0 0 0 RETAINED EARNINGS 414,275 68,149 3,494 43 18,301 2,473 (66,281) --------- --------- --------- --------- --------- --------- --------- TOTAL SHAREHOLDERS' EQUITY 696,398 322,151 20,922 16,293 65,095 22,588 (410,119) --------- --------- --------- --------- --------- --------- --------- TOTAL LIAB. & SH EQUITY 6,751,520 5,732,545 123,013 37,953 94,534 424,579 (410,119) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- CONSOL NON- SUNAMERICA IDATED REGULATED ELIM- CORP BROAD INC. ELIM- BROAD INC. REGULATED CONSOL INATIONS CONSOL (PARENT) INATIONS CONSOL ASSETS: BONDS, NOTES AND REDEM PREF STOCK 5,102,501 15,194 (17,870) 5,099,825 273,481 (269,254) 5,104,052 SENIOR SECURED BANK LOANS 465,111 0 0 465,111 230,432 0 695,543 COMMON STOCKS, AT MARKET VALUE 32,498 134 0 32,632 1,038 0 33,670 KBHC WARRANTS, AT MARKET VALUE 7,330 0 0 7,330 0 0 7,330 SHORT-TERM INVESTMENTS 1,222,372 13,006 0 1,235,378 139,536 0 1,374,914 CASH 121,756 4 0 121,760 14,692 0 136,452 MORTGAGE LOANS 1,263,476 0 0 1,263,476 1,981 0 1,265,457 POLICY LOANS 41,391 0 0 41,391 0 0 41,391 REAL ESTATE 193,705 0 0 193,705 (29,530) 0 164,175 OTHER INVESTED ASSETS 394,908 5,850 0 400,758 198,756 0 599,514 ---------- --------- --------- ---------- --------- --------- ---------- TOTAL INVESTMENTS 8,845,048 34,188 (17,870) 8,861,366 830,386 (269,254) 9,422,498 INVESTMENTS IN AFFILIATES (19,572) 671,104 (632,899) 18,633 700,428 (719,061) 0 ACCRUED INVESTMENT INCOME 104,047 494 0 104,541 8,631 0 113,172 DAC AND PVFP 435,257 0 0 435,257 952 0 436,209 SEPARATE ACCOUNT ASSETS 3,293,343 0 0 3,293,343 0 0 3,293,343 INVESTMENT IN DISCONT. OPERATIONS 0 0 0 0 0 0 0 OTHER ASSETS 95,902 15,847 0 111,749 8,383 12,529 132,661 ---------- --------- --------- ---------- --------- --------- ---------- TOTAL ASSETS 12,754,025 721,633 (650,769) 12,824,889 1,548,780 (975,786) 13,397,883 ---------- --------- --------- ---------- --------- --------- ---------- ---------- --------- --------- ---------- --------- --------- ---------- LIABILITIES: RES. FOR FUTURE POLICYHOLDER BEN.: ANNUITIES AND SPL 5,141,096 0 0 5,141,096 0 0 5,141,096 GICs 1,739,683 0 0 1,739,683 283,365 0 2,023,048 CLAIMS & OTHER POLICYHOLDERS' FUNDS 7,633 0 0 7,633 0 0 7,633 NOTES PAYABLE: L-TERM NOTES AND DEBENTURES 0 0 0 0 225,000 0 225,000 CMO 182,784 0 0 182,784 264,988 (264,988) 182,784 SECURED NOTES PAYABLE 0 0 0 0 0 0 0 BANK NOTES 524 25,919 0 26,443 0 0 26,443 REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 0 0 SUBORDINATED DEBENTURES 0 0 0 0 0 0 0 SEPARATE ACCOUNT LIABILITIES 3,293,343 0 0 3,293,343 0 0 3,293,343 DUE TO/FROM AFFILIATES 36,559 (13,072) 18 23,505 (19,239) (4,266) 0 OTHER LIABILITIES 1,603,258 24,882 (27) 1,628,113 92,101 0 1,720,214 FEDERAL INCOME TAXES: CURRENT (27,684) 8,175 0 (19,509) 18,077 12,529 11,097 DEFERRED 43,501 (8,688) 0 34,813 2,344 0 37,157 ---------- --------- --------- ---------- --------- --------- ---------- TOTAL LIABILITIES 12,020,697 37,216 (9) 12,057,904 866,636 (256,725) 12,667,815 ---------- --------- --------- ---------- --------- --------- ---------- SHAREHOLDERS' EQUITY: PREFERRED STOCK 0 48,700 0 48,700 218,500 0 267,200 NON-TRANSFER CLASS B STOCK 0 0 0 0 6,834 0 6,834 COMMON STOCK 5,637 4 (5,637) 4 25,179 (4) 25,179 CONTRIBUTED CAPITAL 278,420 366,935 (278,420) 366,935 98,051 (367,711) 97,275 URCG (L) 2,675 2,673 (2,675) 2,673 2,211 (2,673) 2,211 URCG (L) K&B WARRANTS 6,142 6,142 (6,142) 6,142 6,142 (6,142) 6,142 RETAINED EARNINGS 440,454 259,963 (357,886) 342,531 325,227 (342,531) 325,227 ---------- --------- --------- ---------- --------- --------- ---------- TOTAL SHAREHOLDERS' EQUITY 733,328 684,417 (650,760) 766,985 682,144 (719,061) 730,068 ---------- --------- --------- ---------- --------- --------- ---------- TOTAL LIAB. & SH EQUITY 12,754,025 721,633 (650,769) 12,824,889 1,548,780 (975,786) 13,397,883 ---------- --------- --------- ---------- --------- --------- ---------- ---------- --------- --------- ---------- --------- --------- ----------
1-37 BROAD INC. CONSOLIDATING INCOME STATEMENT September 30, 1992 (IN THOUSANDS)
SUN FIRST BROKER/ ASSSET LIFE ANLIC SUN DEALER MANAGER TRUST ELIM- CONSOL CONSOL AMERICA CONSOL CONSOL COMPANY INATIONS INVESTMENT SPREAD Investment income 525,518 158,436 6,472 620 742 8,972 (3,112) Less: Credit losses 6,000 0 0 0 0 0 0 -------------------------------------------------------------------------------------- Subtotal investment income 519,518 158,436 6,472 620 742 8,972 (3,112) Less: Interest - senior debt 17,867 1,452 0 0 0 45 (3,112) Interest - subordinated de 0 0 0 0 0 0 0 Interest - accumulated val 363,204 119,781 4,104 0 0 0 0 Interest - trust deposits 0 0 0 0 0 4,256 0 Preferred dividends 0 0 0 0 0 0 0 -------------------------------------------------------------------------------------- NET INVESTMENT SPREAD 138,447 37,203 2,368 620 742 4,671 0 OTHER REVENUE Net Realized gains (losses 17,881 (23,364) 3,489 0 615 (209) 0 Elimination gains (losses) 15 (7,708) 0 0 0 0 0 Equity in earnings of aff- 0 0 0 0 0 0 0 Net Retained Commissions (87) (215) (40) 19,508 300 0 0 Variable annuity fees 0 57,626 40 0 0 0 0 Asset management fees 0 0 0 0 25,269 0 0 Trust fees 0 0 0 0 0 11,041 0 Surrender charges 7,063 7,201 27 0 0 0 0 Other income (expenses), n (8,320) (1,830) 574 3,638 993 1,803 0 -------------------------------------------------------------------------------------- TOTAL OTHER REVENUE 16,552 31,710 4,090 23,146 27,177 12,635 0 -------------------------------------------------------------------------------------- EXPENSES General and administrative 53,696 28,754 1,584 21,170 13,768 12,497 0 Amortization of DAC 27,676 14,267 2,356 0 3,957 0 0 -------------------------------------------------------------------------------------- 81,372 43,021 3,940 21,170 17,725 12,497 0 INCOME BEFORE INCOME TAXES 73,627 25,892 2,518 2,596 10,194 4,809 0 INCOME TAXES (BENEFIT): Current 21,628 5,106 2,140 2,315 (10,560) 1,860 0 Deferred (828) 1,494 (1,290) (494) 14,883 40 0 -------------------------------------------------------------------------------------- *******NET INCOME******* 52,827 19,292 1,668 775 5,871 2,909 0 -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- CONSOL NON- SUNAMERICA IDATED REGULATED ELIM- CORP BROAD INC. ELIM- BROAD INC. REGULATED CONSOL INATIONS CONSOL (PARENT) INATIONS CONSOL INVESTMENT SPREAD Investment income 697,648 4,377 0 702,025 79,992 (13,004) 769,013 Less: Credit losses 6,000 0 0 6,000 0 0 6,000 -------------------------------------------------------------------------------------- Subtotal investment income 691,648 4,377 0 696,025 79,992 (13,004) 763,013 Less: Interest - senior debt 16,252 1,584 0 17,836 28,392 (13,004) 33,224 Interest - subordinated de 0 0 0 0 3,941 0 3,941 Interest - accumulated val 487,089 0 0 487,089 15,119 0 502,208 Interest - trust deposits 4,256 0 0 4,256 0 0 4,256 Preferred dividends 0 4,630 0 4,630 0 0 4,630 -------------------------------------------------------------------------------------- NET INVESTMENT SPREAD 184,051 (1,837) 0 182,214 32,540 0 214,754 OTHER REVENUE Net Realized gains (losses (1,588) (7,506) 0 (9,094) (39,577) 0 (48,671) Elimination gains (losses) (7,693) 0 0 (7,693) 0 0 (7,693) Equity in earnings of aff- 0 0 0 0 79,894 (79,894) (0) Net Retained Commissions 19,466 0 0 19,466 (611) 0 18,855 Variable annuity fees 57,666 0 0 57,666 0 0 57,666 Asset management fees 25,269 0 0 25,269 0 0 25,269 Trust fees 11,041 0 0 11,041 0 0 11,041 Surrender charges 14,291 0 0 14,291 0 0 14,291 Other income (expenses), n (3,142) 2,040 0 (1,102) 3,484 0 2,382 -------------------------------------------------------------------------------------- TOTAL OTHER REVENUE 115,310 (5,466) 0 109,844 43,190 (79,894) 73,140 -------------------------------------------------------------------------------------- EXPENSES General and administrative 131,469 445 0 131,914 1,144 0 133,058 Amortization of DAC 48,256 0 0 48,256 119 0 48,375 -------------------------------------------------------------------------------------- 179,725 445 0 180,170 1,263 0 181,433 INCOME BEFORE INCOME TAXES 119,636 (7,748) 0 111,888 74,467 (79,894) 106,461 INCOME TAXES (BENEFIT): Current 22,489 2,566 0 25,055 25,813 0 50,868 Deferred 13,805 (6,866) 0 6,939 (23,507) 0 (16,568) -------------------------------------------------------------------------------------- *******NET INCOME******* 83,342 (3,448) 0 79,894 72,161 (79,894) 72,161 -------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------
1-38 BROAD INC. (PARENT) & NON-REGULATED AFFILIATES CONSOLIDATED 10/22/92 LEGAL CONSOLIDATING BALANCE SHEET 01:57 PM September 30, 1992 (IN THOUSANDS)
SUN SUN SUN BROAD INC. AMERICA SLG AMERICA AMERICA ALIGP (PARENT) CORP. FINANCIAL ADV CORP ASSETS: BONDS, NOTES AND REDEM PREF STOCK 213,981 2,501 0 12,693 0 0 SENIOR SECURED BANK LOANS 0 0 0 0 0 0 COMMON STOCKS, AT MARKET VALUE 1,038 0 0 134 0 0 KBHC WARRANTS, AT MARKET VALUE 0 0 0 0 0 0 SHORT-TERM INVESTMENTS 91,397 11,441 0 1,565 0 0 CASH 13,801 0 0 4 0 0 MORTGAGE LOANS 1,981 0 0 0 0 0 POLICY LOANS 0 0 0 0 0 0 REAL ESTATE (29,530) 0 0 0 0 0 OTHER INVESTED ASSETS 278,894 0 0 5,824 0 26 --------- --------- --------- --------- --------- --------- TOTAL INVESTMENTS 571,562 13,942 0 20,220 0 26 INVESTMENTS IN AFFILIATES 700,430 790,951 0 17,176 0 776 ACCRUED INVESTMENT INCOME 5,448 0 0 494 0 0 DAC AND PVFP 952 0 0 0 0 0 SEPARATE ACCOUNT ASSETS 0 0 0 0 0 0 INVESTMENT IN DISCONTINUED OPERATIONS 0 0 0 0 0 0 OTHER ASSETS 8,383 726 0 7,198 0 2,000 --------- --------- --------- --------- --------- --------- TOTAL ASSETS 1,286,775 805,619 0 45,088 0 2,802 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- LIABILITIES RES. FOR FUTURE POLICYHOLDER BEN.: ANNUITIES AND SPL 0 0 0 0 0 0 GICs 283,365 0 0 0 0 0 CLAIMS & OTHER POLICYHOLDERS' FUNDS 0 0 0 0 0 0 NOTES PAYABLE: LONG-TERM NOTES AND DEBENTURES 225,000 0 0 0 0 0 COLLATERALIZED MORTGAGE OBLIGATION 0 0 0 0 0 0 SECURED NOTES PAYABLE 0 0 0 0 0 0 BANK NOTES 0 25,919 0 0 0 0 REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 0 SUBORDINATED DEBENTURES 0 0 0 0 0 0 SEPARATE ACCOUNT LIABILITIES 0 0 0 0 0 0 DUE TO/FROM AFFILIATES (19,321) 0 0 (13,072) 0 0 OTHER LIABILITIES 95,944 2,859 0 22,023 0 0 FEDERAL INCOME TAXES: CURRENT 9,619 5,842 0 3,051 0 46 DEFERRED 10,802 (1,837) 0 (6,383) 0 0 --------- --------- --------- --------- --------- --------- TOTAL LIABILITIES 605,409 32,783 0 5,619 0 46 --------- --------- --------- --------- --------- --------- SHAREHOLDERS' EQUITY: PREFERRED STOCK 218,500 48,700 0 0 0 0 NON-TRANSFER CLASS B STOCK 6,834 0 0 0 0 0 COMMON STOCK 25,179 4 0 0 0 0 CONTRIBUTED CAPITAL 97,275 366,935 0 76,564 0 2,756 URCG (L) ON OTHER EQUITY SECURITIES 2,211 2,673 0 (2) 0 0 URCG (L) ON KBHC WARRANTS 6,142 6,142 0 0 0 0 RETAINED EARNINGS 325,225 348,382 0 (37,093) 0 0 --------- --------- --------- --------- --------- --------- TOTAL SHAREHOLDERS' EQUITY 681,366 772,836 0 39,469 0 2,756 --------- --------- --------- --------- --------- --------- TOTAL LIAB. & SH EQUITY 1,286,775 805,619 0 45,088 0 2,802 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- BROAD INC. (PARENT) & NON-REG 1401 KBHS N/A ELIM- AFFILIATES SEPULVEDA (OLDCO) INATIONS CONSOLIDATED ASSETS: BONDS, NOTES AND REDEM PREF STOCK 0 0 0 0 229,175 SENIOR SECURED BANK LOANS 0 0 0 0 0 COMMON STOCKS, AT MARKET VALUE 0 0 0 0 1,172 KBHC WARRANTS, AT MARKET VALUE 0 0 0 0 0 SHORT-TERM INVESTMENTS 0 0 0 0 104,403 CASH 0 0 0 0 13,805 MORTGAGE LOANS 0 0 0 0 1,981 POLICY LOANS 0 0 0 0 0 REAL ESTATE 0 0 0 0 (29,530) OTHER INVESTED ASSETS 0 0 0 0 284,744 ------------------------------------------------------------- TOTAL INVESTMENTS 0 0 0 0 605,750 INVESTMENTS IN AFFILIATES 0 0 0 0 605,750 ACCRUED INVESTMENT INCOME 0 0 0 (773,521) 735,812 DAC AND PVFP 0 0 0 0 5,942 SEPARATE ACCOUNT ASSETS 0 0 0 0 952 INVESTMENT IN DISCONTINUED OPERATIONS 0 0 0 0 0 OTHER ASSETS 0 0 0 0 0 1,412 4,511 0 0 24,230 --------- --------- --------- --------- --------- TOTAL ASSETS 1,412 4,511 0 (773,521) 1,372,686 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- LIABILITIES RES. FOR FUTURE POLICYHOLDER BEN.: ANNUITIES AND SPL 0 0 0 0 0 GICs 0 0 0 0 283,365 CLAIMS & OTHER POLICYHOLDERS' FUNDS 0 0 0 0 0 NOTES PAYABLE: LONG-TERM NOTES AND DEBENTURES 0 0 0 0 225,000 COLLATERALIZED MORTGAGE OBLIGATION 0 0 0 0 0 SECURED NOTES PAYABLE 0 0 0 0 0 BANK NOTES 0 0 0 0 25,919 REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 SUBORDINATED DEBENTURES 0 0 0 0 0 SEPARATE ACCOUNT LIABILITIES 0 0 0 0 0 DUE TO/FROM AFFILIATES 0 0 0 0 (32,393) OTHER LIABILITIES 0 0 0 (5) 120,821 FEDERAL INCOME TAXES: CURRENT 0 (764) 0 0 17,794 DEFERRED 0 (468) 0 0 2,114 --------- --------- --------- --------- --------- TOTAL LIABILITIES 0 (1,232) 0 (5) 642,620 --------- --------- --------- --------- --------- SHAREHOLDERS' EQUITY: PREFERRED STOCK 0 0 0 0 267,200 NON-TRANSFER CLASS B STOCK 0 0 0 0 6,834 COMMON STOCK 0 0 0 (4) 25,179 CONTRIBUTED CAPITAL 1,412 8,907 0 (456,574) 97,275 URCG (L) ON OTHER EQUITY SECURITIES 0 0 0 (2,671) 2,211 URCG (L) ON KBHC WARRANTS 0 0 0 (6,142) 6,142 RETAINED EARNINGS 0 (3,164) 0 (308,125) 325,225 --------- --------- --------- --------- --------- TOTAL SHAREHOLDERS' EQUITY 1,412 5,743 0 (773,516) 730,066 --------- --------- --------- --------- --------- TOTAL LIAB. & SH EQUITY 1,412 4,511 0 (773,521) 1,372,686 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Other liabilities includes SAF's cash overdraft of $14.2 million. 9-22 BROAD INC. (PARENT) & NON-REGULATED AFFILIATES CONSOLIDATED 10/22/92 LEGAL CONSOLIDATING INCOME STATEMENT 01:58 PM September 30, 1992 (IN THOUSANDS)
SUN SUN SUN BROAD INC. AMERICA SLG AMERICA AMERICA ALIGP (PARENT) CORP. FINANCIAL ADV CORP INVESTMENT SPREAD Investment income 63,945 864 0 3,468 0 45 Less: Credit losses 0 0 0 0 0 -------------------------------------------------------------------------- Subtotal investment income 63,945 864 0 3,468 0 45 Less: Interest on senior debt 15,388 1,584 0 0 0 0 Interest on subordinated deb 3,941 0 0 0 0 0 Interest on accumulated valu 15,119 0 0 0 0 0 Interest on trust deposits 0 0 0 0 0 0 Preferred dividends 0 4,630 0 0 0 0 -------------------------------------------------------------------------- NET INVESTMENT SPREAD 29,497 (5,350) 0 3,468 0 45 OTHER REVENUE Net Realized gains (losses) (39,577) (59) 0 (6,651) 0 0 Elimination gains (losses) 0 0 0 0 0 0 Equity in earnings of aff. 54,629 90,143 0 (1,319) 0 0 Net Retained Commissions (611) 0 0 0 0 0 Variable annuity fees 0 0 0 0 0 0 Asset management fees 0 0 0 0 0 0 Trust fees 0 0 0 0 0 0 Surrender charges 0 0 0 0 0 0 Other income (expenses), net 5,550 (2) 0 1,952 0 90 -------------------------------------------------------------------------- TOTAL OTHER REVENUE 19,991 90,082 0 (6,018) 0 90 -------------------------------------------------------------------------- EXPENSES General and administrative 167 32 0 413 0 0 Amortization of DAC 119 0 0 0 0 0 -------------------------------------------------------------------------- 286 32 0 413 0 0 -------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 49,202 84,700 0 (2,963) 0 135 INCOME TAXES (BENEFIT): Current 17,355 (270) 0 2,783 0 46 Deferred (15,049) 0 0 (6,847) 0 0 -------------------------------------------------------------------------- *******NET INCOME******* 46,896 84,970 0 1,101 0 89 -------------------------------------------------------------------------- -------------------------------------------------------------------------- BROAD INC. (PARENT) & NON-REG 1401 KBHS N/A ELIM- AFFILIATES SEPULVEDA (OLDCO) INATIONS CONSOLIDATED INVESTMENT SPREAD Investment income 0 0 0 0 68,322 Less: Credit losses 0 0 0 0 0 -------------------------------------------------------------- Subtotal investment income 0 0 0 0 68,322 Less: Interest - senior debt 0 0 0 0 16,972 Interest - subordinated deb 0 0 0 0 3,941 Interest - accumulated valu 0 0 0 0 15,119 Interest - trust deposits 0 0 0 0 0 Preferred dividends 0 0 0 0 4,630 -------------------------------------------------------------- NET INVESTMENT SPREAD 0 0 0 0 27,660 OTHER REVENUE Net Realized gains (losses) 0 (796) 0 0 (47,083) Elimination gains (losses) 0 0 0 0 0 Equity in earnings of aff. 0 0 0 (85,375) 58,078 Net Retained Commissions 0 0 0 0 (611) Variable annuity fees 0 0 0 0 0 Asset management fees 0 0 0 0 0 Trust fees 0 0 0 0 0 Surrender charges 0 0 0 0 0 Other income (expenses), net 0 0 0 0 7,590 -------------------------------------------------------------- TOTAL OTHER REVENUE 0 (796) 0 (85,375) 17,974 -------------------------------------------------------------- EXPENSES General and administrative 0 0 0 0 612 Amortization of DAC 0 0 0 0 119 -------------------------------------------------------------- 0 0 0 0 731 -------------------------------------------------------------- INCOME BEFORE INCOME TAXES 0 (796) 0 (85,375) 44,903 INCOME TAXES (BENEFIT): Current 0 7 0 0 19,921 Deferred 0 (19) 0 0 (21,915) -------------------------------------------------------------- *******NET INCOME******* 0 (784) 0 (85,375) 46,896 -------------------------------------------------------------- --------------------------------------------------------------
9-23 EX-10.L 4 EXHIBIT 10(L)--CREDIT AGREEMENT $60,000,000 Exhibit 10(l) [Execution Copy] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $60,000,000 CREDIT AGREEMENT Dated as of February 1, 1993 Among SUNAMERICA INC., SUNAMERICA CORPORATION and SUNAMERICA FINANCIAL, INC., as Borrowers, THE BANKS NAMED HEREIN, as Lenders, and CITIBANK, N.A., as Agent - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS Section Page - ------- ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . 1 1.02 Computation of Time Periods. . . . . . . . . . . . . . . . . . 19 1.03 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . 19 1.04 Convention Statement . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE II THE ADVANCES 2.01 Commitments to Lend. . . . . . . . . . . . . . . . . . . . . . 20 2.02 Notice of Committed Borrowings . . . . . . . . . . . . . . . . 20 2.03 Money Market Borrowings. . . . . . . . . . . . . . . . . . . . 21 2.04 Notice to Lenders; Funding of Advances . . . . . . . . . . . . 26 2.05 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 2.06 Maturity of Advances . . . . . . . . . . . . . . . . . . . . . 28 2.07 Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . 28 2.08 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 2.09 Extension of Termination Date. . . . . . . . . . . . . . . . . 33 2.10 Optional Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . 35 2.11 Mandatory Termination or Reduction of the Commitments . . . . . . . . . . . . . . . . . . . . . 35 2.12 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . 35 2.13 General Provisions as to Payments. . . . . . . . . . . . . . . 36 2.14 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . 37 2.15 Computation of Interest and Fees . . . . . . . . . . . . . . . 37 2.16 Sharing of Payments, etc . . . . . . . . . . . . . . . . . . . 37 2.17 Withholding Tax Exemption. . . . . . . . . . . . . . . . . . . 38 2.18 Regulation D Compensation. . . . . . . . . . . . . . . . . . . 40 ARTICLE III CHANGES IN CIRCUMSTANCES 3.01 Basis for Determining Interest Rate Inadequate or Unfair. . . . . . . . . . . . . . . . . . 41 3.02 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . 42 3.03 Increased Cost and Reduced Return. . . . . . . . . . . . . . . 43 3.04 Base Rate Advances Substituted for Affected Fixed Rate Advances . . . . . . . . . . . . . . . . 45 i Section Page - ------- ---- 3.05 Substitution of Lender . . . . . . . . . . . . . . . . . . . . 46 3.06 Discretion of Lenders as to Manner of Funding. . . . . . . . . . . . . . . . . . . . . . 46 3.07 Conclusiveness of Statements; Survival of Provisions . . . . . . . . . . . . . . . . . . . 47 ARTICLE IV CONDITIONS OF LENDING 4.01 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . 47 4.02 Conditions Precedent to Advances . . . . . . . . . . . . . . . 48 ARTICLE V REPRESENTATIONS AND WARRANTIES 5.01 Organization, etc. . . . . . . . . . . . . . . . . . . . . . . 49 5.02 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 49 5.03 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . 50 5.04 Governmental Consents. . . . . . . . . . . . . . . . . . . . . 50 5.05 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 5.06 Financial Statements . . . . . . . . . . . . . . . . . . . . . 50 5.07 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 52 5.08 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 5.09 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 52 5.10 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . 52 5.11 Investment Company Act . . . . . . . . . . . . . . . . . . . . 53 5.12 Public Utility Holding Company Act . . . . . . . . . . . . . . 53 5.13 Margin Regulation. . . . . . . . . . . . . . . . . . . . . . . 53 5.14 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 5.15 Accuracy of Information. . . . . . . . . . . . . . . . . . . . 54 5.16 Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 5.17 Governmental Authorizations. . . . . . . . . . . . . . . . . . 54 5.18 Insurance Licenses . . . . . . . . . . . . . . . . . . . . . . 54 5.19 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 55 5.20 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . 55 ARTICLE VI AFFIRMATIVE COVENANTS 6.01 Reports, Certificates and Other Information. . . . . . . . . . . . . . . . . . . . . . 55 6.02 Corporate Existence; Foreign Qualification. . . . . . . . . . . . . . . . . . . . . . . . 61 ii Section Page - ------- ---- 6.03 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 61 6.04 Books, Records and Inspections . . . . . . . . . . . . . . . . 61 6.05 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 61 6.06 Maintenance of Properties. . . . . . . . . . . . . . . . . . . 62 6.07 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 6.08 Maintenance of Ratings . . . . . . . . . . . . . . . . . . . . 62 6.09 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . 62 ARTICLE VII NEGATIVE COVENANTS 7.01 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 7.02 Consolidation, Merger, Sales of Stock and Assets, etc. . . . . . . . . . . . . . . . . . . . . . . . . 65 7.03 Business Activities. . . . . . . . . . . . . . . . . . . . . . 67 ARTICLE VIII FINANCIAL COVENANTS 8.01 Consolidated Tangible Net Worth. . . . . . . . . . . . . . . . 67 8.02 Consolidated Debt to Total Capital . . . . . . . . . . . . . . 67 8.03 Risk-Based Capital Ratio . . . . . . . . . . . . . . . . . . . 67 8.04 Total Invested Assets. . . . . . . . . . . . . . . . . . . . . 67 ARTICLE IX EVENTS OF DEFAULT 9.01 Events of Default. . . . . . . . . . . . . . . . . . . . . . . 68 ARTICLE X AGENT 10.01 Authorization and Action . . . . . . . . . . . . . . . . . . . 71 10.02 Agent's Reliance, etc. . . . . . . . . . . . . . . . . . . . . 71 10.03 Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . 72 10.04 Lender Credit Decision . . . . . . . . . . . . . . . . . . . . 72 10.05 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 73 10.06 Successor Agent. . . . . . . . . . . . . . . . . . . . . . . . 73 iii Section Page - ------- ---- ARTICLE XI MISCELLANEOUS 11.01 Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . 74 11.02 Notices, etc.. . . . . . . . . . . . . . . . . . . . . . . . . 75 11.03 No Waiver; Remedies. . . . . . . . . . . . . . . . . . . . . . 75 11.04 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . 75 11.05 Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . 76 11.06 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 77 11.07 Assignments and Participations . . . . . . . . . . . . . . . . 77 11.08 Submission to Jurisdiction; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . 81 11.09 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 81 11.10 Execution in Counterparts. . . . . . . . . . . . . . . . . . . 81 11.11 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 82 iv EXHIBITS Exhibit A - Form of Note Exhibit B - Form of Notice of Committed Borrowing Exhibit C - Form of Money Market Quote Request Exhibit D - Form of Invitation for Money Market Quotes Exhibit E - Form of Money Market Quote Exhibit F - Form of Notice of Extension Exhibit G - Form of Opinion of counsel for the Bor- rowers Exhibit H - Form of Assignment and Acceptance Exhibit I - Form of Consolidating Quarterly Reports of the Borrowers v CREDIT AGREEMENT Dated as of February 1, 1993 SUNAMERICA INC., a Maryland corporation ("SunAmerica"), SUNAMERICA CORPORATION, a Delaware corporation ("SACO"), and SUNAMERICA FINANCIAL, INC., a Georgia corporation ("SAFI," and together with SunAmerica and SACO, the "Borrowers"), the banks listed on the signature pages hereof (the "Lenders") and CITIBANK, N.A., as agent (the "Agent") for the Lenders hereunder, agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ABSOLUTE RATE AUCTION" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "ADJUSTED CD RATE" has the meaning set forth in Section 2.07(b). "ADVANCE" means an advance under Article II by a Lender to a Borrower pursuant to its Commitment, and refers to a CD Advance, Base Rate Advance, Eurodollar Advance or Money Market Advance (each of which shall be a "Type" of Advance). "AFFILIATE" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. "AGENT" means Citibank, as agent, or any successor thereof. "AGREEMENT" means this Credit Agreement, as the same may be amended, modified or supplemented from time to time. "ANCHOR" means Anchor National Life Insurance Company, a California stock insurance company. "ANNUAL REPORTS" has the meaning set forth in Section 5.06(b)(i). "APPLICABLE LENDING OFFICE" means, with respect to each Lender, (a) in the case of its Domestic Advances, its Domestic Lending Office, (b) in the case of its Eurodollar Advances, its Eurodollar Lending Office, and (c) in the case of its Money Market Advances, its Money Market Lending Office. "ASSESSMENT RATE" has the meaning set forth in Section 2.07(b). "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of Exhibit H hereto. "BASE RATE" means, for any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the higher of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; or (b) the sum (adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent) of (i) 1/2 of one percent per annum PLUS (ii) the rate per annum obtained by dividing (A) the latest three-week moving average of secondary market morning offered rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Domestic Business Day, on the next succeeding Domestic Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and pub- lished by the Federal Reserve Bank of New York or, if such publication shall be suspended or 2 terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, by (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for Citibank in respect of liabilities consisting of or including (among other liabilities) three month U.S. dollar nonpersonal time deposits in the United States, PLUS (iii) the average during such three-week period of the highest and lowest annual assessment rate (rounded upward, if necessary, to the next higher 1/100 of 1%) which the Federal Deposit Insurance Corporation (or any successor) charges banking institutions on the basis of their assessment rate classification for such Corporation's insuring U.S. dollar deposits in the United States. "BASE RATE ADVANCE" means an Advance that bears interest as provided in Section 2.07(a). "BENEFIT ARRANGEMENT" means, at any time, an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multi- employer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "BORROWERS" has the meaning set forth in the first paragraph of this Agreement and their permitted successors and assigns. "BORROWING" means a borrowing pursuant to a Notice of Borrowing consisting of Advances of the same Type made on the same day by the Lenders. "CAPITAL LEASE" means a lease which has been or should be, in accordance with GAAP, treated as a capital lease. "CD ADVANCE" means an Advance that bears interest as provided in Section 2.07(b). 3 "CD BASE RATE" has the meaning set forth in Section 2.07(b). "CD MARGIN" has the meaning set forth in Section 2.07(b). "CD REFERENCE BANKS" means Citibank, Chemical Bank and The First National Bank of Chicago. "CHANGE IN CONTROL" means, during any 12 month period, that individuals who as of the first day of such 12 month period constitute SunAmerica's Board of Directors (such Board of Directors as of the day immediately preceding such first day, the "incumbent Board"), cease for any reason to constitute at least a majority of the directors constituting the Board of Directors, PROVIDED that any person becoming a director during such 12 month period whose election, or nomination for election by SunAmerica's shareholders, was approved by a vote of at least three- quarters of the then directors who are members of the incumbent Board shall be, for purposes of this definition, considered as though such person were a member of the incumbent Board unless such person's initial assumption of office is (a) in connection with the acquisition by a third person, including a "group" as such term is used in Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, of 20% or more of the total voting power of outstanding SunAmerica Voting Stock (unless such acquisition of beneficial ownership was approved by a majority of the Board of Directors who are members of the incumbent Board), or (b) in connection with an actual or threatened election contest relating to the election of the directors of SunAmerica, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act. "CITIBANK" means Citibank, N.A. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "COMMITMENT" means the amount set forth opposite each Lender's name on the signature pages hereof (or in an Assignment and Acceptance entered into by it) as its Commitment (which shall be 4 $60,000,000 in the aggregate for all Lenders as of the Effective Date), as such amount may be adjusted from time to time to give effect to Money Market Reductions pursuant to Section 2.01 or reduced from time to time pursuant to Section 2.10. "COMMITTED ADVANCE" means an Advance made by a Lender pursuant to Section 2.01. "COMMITTED BORROWING" means a Borrowing consisting of Committed Advances. "CONSOLIDATED DEBT" means the consolidated Debt of SunAmerica and its Subsidiaries, determined in accordance with GAAP, to the extent such Debt is reflected or is required under GAAP to be reflected on the consolidated balance sheet of SunAmerica and its Subsidiaries, PROVIDED that such Debt shall not include Debt specified in clause (vii) of the definition of Debt or in clauses (ii) and (iii) (so long as none of the events referred to in the parenthetical clause of such clause (iii) has occurred) of the definition of Permitted Collateralization Obligations. "CONSOLIDATED TANGIBLE NET WORTH" means, without duplication, the total of (a) the consolidated shareholders' equity of SunAmerica and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, PLUS (b) the stated value of all outstanding SACO preferred stock reflected thereon (less the stated value of SACO preferred stock held by SunAmerica or any of its Subsidiaries), PLUS OR MINUS, as the case may be, (c) any net unrealized losses or gains, as the case may be, on securities "available for sale" shown thereon as a separate component of consolidated shareholders' equity in accordance with the Proposed Statement of Financial Accounting Standards "Accounting for Certain Investments in Debt and Equity Securities", as the same may be implemented, MINUS (d) the carrying value of goodwill, any covenant not to compete, capitalized organizational expenses and other assets treated as intangibles under GAAP arising from the acquisition, through stock purchase, merger or otherwise, of the stock or assets of any Person (other than intangibles classified as deferred acquisition costs arising from the writing of new insurance policies or contracts), 5 and MINUS (e) treasury stock and capital stock, obligations or other securities of, or capital contributions to, or investments in, any unconsolidated Subsidiary. "CONSOLIDATED TOTAL CAPITAL" means, as of any date of determination, the sum of Consolidated Tangible Net Worth plus Consolidated Debt. "CONTINGENT OBLIGATION" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the obligation or other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's liability with respect to any Contingent Obligation shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum outstanding principal amount, if larger) of the debt, obligation or other liability outstanding thereunder. "CONVENTION STATEMENT" means each annual and quarterly financial statement of each Insurance Subsidiary as filed with the appropriate Governmental Authority of its state of domicile, as such form may be amended from time to time pursuant to the requirements of such Governmental Authority. "DEBT" means, with respect to any Person at any date, without duplication: (i) all obligations of such Person for borrowed money or for loans or advances; (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (iii) all Capital Lease obligations of such Person; (iv) all obligations of such Person to pay the deferred purchase price of property or services, and Debt secured by a Lien on property owned or being purchased by such Person (including Debt arising under conditional sales or other title retention agreements); (v) all Debt of another Person secured by a Lien on any assets of such first Person, 6 whether or not such Debt is assumed by such first Person; (vi) all non- contingent obligations of such Person as account party to reimburse any bank or other Person in respect of amounts actually paid under a letter of credit or similar instrument; (vii) all obligations of such Person to purchase securities (or other property) that arise out of or in connection with the sale of the same or substantially similar securities or property (e.g., obligations under repurchase agreements and reverse repurchase agreements); and (viii) all Contingent Obligations of such Person with respect to the Debt of another Person, PROVIDED that Debt shall not include (a) accounts payable arising in the ordinary course of business, (b) contingent liabilities with respect to certain reinsurance arrangements of Sun Life disclosed in footnote number 6 to Consolidated Financial Statements of SunAmerica for the fiscal year ended September 30, 1992, (c) obligations arising in the capacity as a creditor in respect of loan or swap participations and similar arrangements in the ordinary course of business or (d) obligations under insurance policies or contracts, guaranteed investment contracts, funding agreements or similar obligations issued or entered into by the Borrowers and their Subsidiaries; and PROVIDED FURTHER that, with respect to any Debt of another Person specified in clause (v) not assumed by the first Person, the amount of such Debt shall be the lower of the amount of the obligation or the fair market value of the collateral securing such obligation. "DEFAULT" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "DEPARTMENT" means, with respect to an Insurance Subsidiary, the Governmental Authority responsible for the regulation of the insurance business in its state of domicile. "DOMESTIC ADVANCES" means Base Rate Advances or CD Advances or both. "DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or other day on which commercial 7 banks in New York City are authorized by law to close. "DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" on the signature pages hereof or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to SunAmerica and the Agent. "DOMESTIC RESERVE PERCENTAGE" has the meaning set forth in Section 2.07(b). "EFFECTIVE DATE" has the meaning set forth in Section 4.01. "ELIGIBLE ASSIGNEE" means (i) a commercial bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $500,000,000; (ii) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $500,000,000; (iii) a commercial bank organized under the laws of any other country which is a member of the OECD, or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having a combined capital and surplus of at least $500,000,000, PROVIDED that, in the case of clause (iii), such bank is acting through a branch or agency located in the United States and, in the case of clauses (i) through (iii), such institution has a senior secured long term debt rating of at least "BBB-" or above by Standard & Poor's or "Baa3" or above by Moody's; (iv) a finance company, insurance company or other financial institution or fund organized under the laws of the United States, or any State thereof, which is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and which has total assets in excess of $5,000,000,000, PROVIDED that any such Person under this clause (iv) is acceptable to SunAmerica in its discretion; and (v) any other Person who is acceptable to SunAmerica and the Agent or is an Affiliate of a Person identified in 8 clause (i), (ii) or (iii) above; PROVIDED that no Affiliate of SunAmerica shall be an Eligible Assignee hereunder. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA GROUP" means SunAmerica and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with SunAmerica, are treated as a single employer under Section 414 of the Code. "EUROCURRENCY LIABILITIES" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EURODOLLAR ADVANCE" means an Advance that bears interest as provided in Section 2.07(c). "EURODOLLAR BUSINESS DAY" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" on the signature page hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to SunAmerica and the Agent. "EURODOLLAR MARGIN" has the meaning set forth in Section 2.07(c). "EURODOLLAR REFERENCE BANKS" means Citibank, Chemical Bank and The First National Bank of Chicago. "EURODOLLAR RESERVE PERCENTAGE" means, for any day, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any 9 successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" under Regulation D (including any category of extensions of credit or other assets in respect of "Eurocurrency Liabilities" that includes loans by a non-United States office of any Lender to United States residents). "EVENT OF DEFAULT" has the meaning set forth in Section 9.01. "EXCHANGE ACT" means the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission thereunder, all as the same shall be in effect from time to time. "FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, PROVIDED that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Citibank on such day on such transactions as determined by the Agent. "FIRST SUN" means First SunAmerica Life Insurance Company, a New York stock life insurance company. "FIXED RATE ADVANCES" means CD Advances or Eurodollar Advances or Money Market Advances (excluding Money Market LIBOR Advances bearing interest at the Base Rate pursuant to Section 3.01) or any combination of the foregoing. "GAAP" means generally accepted accounting principles in the United States of America used in 10 connection with the preparation of the financial statements referred to in Section 5.06(b). "GOVERNMENTAL AUTHORITY" means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of government. "INFORMATION MEMORANDUM" has the meaning set forth in Section 5.06(b)(ii). "INSURANCE CODE" means the Insurance Code of the state where any Insurance Subsidiary is domiciled or doing insurance business and any successor statute of similar import, together with the regulations there- under, as amended or otherwise modified and in effect from time to time. "INSURANCE SUBSIDIARIES" means Anchor, First Sun and Sun Life so long as they are Subsidiaries of any Borrower and any other Subsidiary of any Borrower that holds one or more Licenses to conduct an insurance business. "INTEREST PERIOD" means: (a) with respect to each Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending 1, 2, 3 or 6 months thereafter, as the applicable Borrower may elect in the applicable Notice of Borrowing, PROVIDED that: (i) any Interest Period that would otherwise end on a day that is not a Eurodollar Business Day shall be extended to the next succeeding Eurodollar Business Day unless such Eurodollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Eurodollar Business Day; and (ii) any Interest Period that begins on the last Eurodollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the 11 last Eurodollar Business Day of a calendar month; (b) with respect to each CD Borrowing, the period commencing on the date of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the applicable Borrower may elect in the applicable Notice of Borrowing, PROVIDED that any Interest Period that would otherwise end on a day that is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; (c) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending any number of days thereafter up to 30, as the applicable Borrower may elect in the applicable Notice of Borrowing, PROVIDED that such Interest Period shall end on a Domestic Business Day; and (d) with respect to (x) any Money Market Absolute Rate Advance, the period commencing on the date of such Borrowing and ending such number of days thereafter (but not less than 7 nor more than 180 days) or (y) any Money Market LIBOR Advance, the period commencing on the date of such Borrowing and ending 1, 2, 3, or 6 months thereafter, in each case as the applicable Borrower shall select in the applicable Notice of Borrowing, PROVIDED that such Interest Period shall end on a Eurodollar Business Day or Domestic Business Day, as the case may be; PROVIDED that with respect to clauses (a), (b), (c) and (d) above: (i) the Borrowers may not select any Interest Period that ends after the Termination Date; and (ii) Interest Periods commencing on the same date for Advances comprising part of the same Borrowing shall be of the same duration. "INVESTMENT" shall mean any investment in any Person, whether by means of share purchase, capital contribution, loan, time deposit or otherwise. "INVESTMENT GRADE SECURITIES" shall mean non-equity securities that are rated "BBB-" or better 12 by Standard & Poor's or "Baa3" or better by Moody's or "1" or "2" by the NAIC. "LENDERS" means each of the financial institutions identified as such on the signature pages hereof and their successors and assigns. "LEVEL I STATUS" means that, at 8:30 a.m. New York City time at any date of determination, SunAmerica's senior unsecured long term debt is rated "AA-" or better by Standard & Poor's and "A3" or better by Moody's. "LEVEL II STATUS" means that, at 8:30 a.m. New York City time at any date of determination, neither Level I Status nor Level III Status exists. "LEVEL III STATUS" means that, at 8:30 a.m. New York City time at any date of determination, SunAmerica's senior unsecured long term debt is rated "BBB+" or below by Standard & Poor's or "Baa3" or below by Moody's or is not rated as of such date by Standard & Poor's or Moody's. "LIABILITIES" means all obligations of the Borrowers to the Lenders or the Agent which arise out of or in connection with this Agreement or the Notes. "LIBOR AUCTION" means a solicitation of Money Market quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "LICENSE" has the meaning set forth in Section 5.18. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset. "LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section 2.07(c). 13 "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any change, event, action, condition or effect that individually or in the aggregate (i) materially and adversely affects the consolidated business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrowers and their Subsidiaries taken as a whole or (ii) materially and adversely impairs the ability of the Borrowers collectively to perform their obligations under this Agreement. "MATERIAL SUBSIDIARY" means Anchor and Sun Life so long as they are Subsidiaries of any Borrower and any other Subsidiary of any Borrower now existing or hereafter acquired or formed that for or as of the end of SunAmerica's most recent fiscal year had (i) pretax income in excess of 10% of the consolidated pretax income of SunAmerica reflected in its consolidated financial statements for its most recent fiscal year or (ii) assets in excess of 10% of the consolidated assets of SunAmerica reflected in its consolidated financial statements as of the end of its most recent fiscal year. "MONEY MARKET ABSOLUTE RATE" has the meaning set forth in Section 2.03(d). "MONEY MARKET ABSOLUTE RATE ADVANCE" means an Advance to be made by a Lender pursuant to an Absolute Rate Auction. "MONEY MARKET ADVANCE" means a Money Market LIBOR Advance or a Money Market Absolute Rate Advance. "MONEY MARKET BORROWING" means a Borrowing consisting of Money Market Advances. "MONEY MARKET LENDING OFFICE" means, as to each Lender, its Domestic Lending Office or such other office, branch or affiliate of such Lender as it may hereafter designate as its Money Market Lending Office by notice to SunAmerica and the Agent, PROVIDED that any Lender may from time to time by notice to SunAmerica and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Advances and its Money Market Absolute 14 Rate Advances, in which case all references herein to the Money Market Lending Office of such Lender shall be deemed to refer to either or both of such offices, as the context may require. "MONEY MARKET LIBOR ADVANCE" means an Advance to be made by a Lender pursuant to a LIBOR Auction (including such an Advance bearing interest at the Base Rate pursuant to Section 3.01). "MONEY MARKET MARGIN" has the meaning set forth in Section 2.03(d). "MONEY MARKET QUOTE" means an offer by a Lender to make a Money Market Advance in accordance with Section 2.03. "MONEY MARKET REDUCTION" has the meaning set forth in Section 2.01. "MOODY'S" means Moody's Investors Service, Inc. and any successor thereto. "MULTIEMPLOYER PLAN" means a Plan described in Section 4001(a)(3) of ERISA. "NAIC" means the National Association of Insurance Commissioners. "NOTE" means a promissory note of the Borrowers payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrowers to such Lender resulting from the Advances made by such Lender. "NOTICE OF BORROWING" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "NOTICE OF EXTENSION" has the meaning set forth in Section 2.09. "OTHER AGREEMENT" means the Credit Agreement dated as of February 1, 1993 among the Borrowers, Citibank, as Agent, and the Lenders providing a $90,000,000 revolving credit facility. 15 "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "PERMITTED COLLATERALIZATION ASSETS" means assets pledged to secure Permitted Collateralization Obligations. "PERMITTED COLLATERALIZATION OBLIGATIONS" means the collateralized obligations of the Borrowers and their Subsidiaries relating to (i) the 1989 securitization of variable annuity fees of Anchor, (ii) real estate mortgage investment conduits (REMICs), pass-through obligations, collateralized mortgage obligations, collateralized bond and loan obligations, other asset-backed securitizations of properties, rights or receivables of SunAmerica or its Subsidiaries, or similar instruments, except any such collateralized obligations to the extent such collateralized obligations require a cash payment by any Borrower or its Subsidiary (other than advances in connection with the servicing of any such REMIC, pass-through obligation, collateralized mortgage obligation, collateralized bond obligation or similar instrument or payments to repurchase collateral), recourse for the payment of which is not limited to the specific assets of such Borrower or such Subsidiary serving as collateral for such obligations and (iii) the securitization of Rule 12b-1 fee income under the Investment Company Act of 1940, as amended, and associated sales charges earned by the Borrowers or their Subsidiaries, except any such securitization to the extent such securitization requires a cash payment by any Borrower or its Subsidiary (other than payments that may be required upon the occurrence of certain events, the occurrence of which is considered unlikely by management of SunAmerica), recourse for the payment of which is not limited to such Rule 12b-1 fees or sales charges. "PERMITTED LIENS" has the meaning set forth in Section 7.01. "PERSON" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. 16 "PLAN" means, at any time, an employee pension benefit plan (other than a Multiemployer Plan) that is subject to Title IV of ERISA or the minimum funding standards under Section 412 of the Internal Revenue Code and is maintained, or contributed to, by any member of the ERISA Group. "REGISTER" has the meaning set forth in Section 11.07(c). "REGULATION U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "REQUIRED LENDERS" means Lenders having more than 66 2/3% of the Commitments, or if the Commitments have terminated or expired, more than 66 2/3% of the aggregate principal amount of the Advances outstanding at such time. "RESPONSIBLE OFFICER" means any of the following officers of any Borrower: the chairman, the chief executive officer, the president, the chief financial officer, the chief operating officer, the chief investment officer or the treasurer. If any of the titles of the preceding officers are changed after the date hereof, the term "Responsible Officer" shall thereafter mean any officer performing substantially the same functions as are presently performed by one or more of the officers listed in the first sentence of this definition. "RISK-BASED CAPITAL RATIO" means, with respect to any Insurance Subsidiary, the ratio computed in accordance with the Risk Based Capital Formula for life insurance companies as adopted by the NAIC and in effect on December 6, 1992. "SACO" means SunAmerica Corporation, a Delaware corporation. "SAFI" means SunAmerica Financial, Inc., a Georgia corporation. "SAP" means, as to any Insurance Subsidiary, the statutory accounting practices prescribed or permitted by the applicable Department. 17 "STANDARD & POOR'S" or "S&P" means Standard & Poor's Corporation and any successor thereto. "SUBSIDIARY" means, as to any Person, any corporation, partnership, joint venture, trust, association or other unincorporated organization of which or in which such Person and such Person's Subsidiaries own directly or indirectly more than 50% of (i) the combined voting power of all classes then outstanding of Voting Stock, if it is a corporation, (ii) the capital interest or partnership interest, if it is a partnership, joint venture or similar entity, or (iii) the beneficial interest, if it is a trust, association or other unincorporated organization, PROVIDED that (a) no Person of which any Borrower or any of its Subsidiaries acquires or has acquired control in the ordinary course of its business in connection with or as a consequence of any debt or equity financing shall be deemed a Subsidiary and (b) no Person (including a joint venture) which has been organized by any Borrower or any of its Subsidiaries solely for the purpose of making or holding an individual asset or group of related assets and has no other operations or independent management shall be deemed a Subsidiary, unless such Person (1) is or under GAAP should be treated as a consolidated subsidiary of SunAmerica in the preparation of its consolidated financial statements and (2) would also be classified as a Material Subsidiary. "SUNAMERICA" means SunAmerica Inc., a Maryland corporation. "SUN LIFE" means Sun Life Insurance Company of America, a Maryland stock insurance company. "TERMINATION DATE" means January 30, 1994 or any extension thereof pursuant to Section 2.09 or the earlier date of termination in whole of the Commitments pursuant to Section 2.10 or 9.01. "TOTAL INVESTED ASSETS" means, as of any date of determination, the amount of invested assets directly owned by the Borrowers, excluding Investments in Affiliates, and reflected in the line "Total Investments" on the balance sheet of the Borrowers, as a 18 group, delivered pursuant to Section 6.01(c), such amount to be calculated on a basis consistent with the preparation of the consolidating balance sheet as of September 30, 1992 delivered to the Lenders and attached as Exhibit I hereto. "TYPE" refers to the distinction between Advances bearing interest at the Eurodollar Rate, Adjusted CD Rate, Base Rate or a Money Market Quote rate. "U.S. WITHHOLDING TAXES" has the meaning set forth in Section 2.17(a). "VOTING STOCK" means, with respect to any Person, any class of capital stock of such Person normally entitled to vote for the election of directors. SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" mean "to but excluding." SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically defined herein other than those used solely in respect of an Insurance Subsidiary shall be construed in accordance with GAAP. All accounting terms not specifically defined herein and used solely in respect of an Insurance Subsidiary shall, unless GAAP is otherwise specified, be construed in accordance with SAP applicable to that Insurance Subsidiary. SECTION 1.04. CONVENTION STATEMENT. In the event any amendment to the form of or requirements for Convention Statements causes the calculation of the Risk-Based Capital Ratio as adopted by the NAIC on December 6, 1992 to be impracticable or to produce results that do not reflect the original intent of the parties hereto, the provisions of this Agreement relating to the Risk Based Capital Ratio shall be adjusted as the Required Lenders and Borrowers in good faith may negotiate to insure that the operation of the affected provisions of this Agreement after such amendment is consistent with the operation prior thereto. 19 ARTICLE II THE ADVANCES SECTION 2.01. COMMITMENTS TO LEND. Each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Advances constituting Committed Advances from time to time during the period from the Effective Date to the Termination Date in an aggregate amount not to exceed at any time outstanding the amount of such Lender's Commitment, PROVIDED that the aggregate amount of the Commitments shall be deemed used from time to time, for purposes of making Committed Advances pursuant to this Section 2.01, in the aggregate amount of Money Market Advances outstanding from time to time, and such deemed use of the aggregate amount of Commitments shall be applied to the Lenders ratably according to their respective Commitments (such deemed use of the aggregate amount of Commitments referred to herein as the "Money Market Reduction"). Each Borrowing under this Section 2.01 in respect of such Committed Advances shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $5,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 4.02(d)), and shall be made from the several Lenders ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrowers may borrow under this Section, repay, or to the extent permitted by Section 2.12, prepay Advances and reborrow at any time during the period from the Effective Date to the Termination Date. SECTION 2.02. NOTICE OF COMMITTED BORROWINGS. The applicable Borrower shall give the Agent notice (a "Notice of Committed Borrowing"), in substantially the form of Exhibit B hereto, not later than (x) 11:00 A.M. New York City time on the date of each Base Rate Borrowing, (y) 12:00 P.M. New York City time on the second Domestic Business Day before each CD Borrowing and (z) 12:00 P.M. New York City time on the third Eurodollar Business Day before each Eurodollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Eurodollar Business Day in the case of a Eurodollar Borrowing; (b) the aggregate amount of such Borrowing; 20 (c) whether the Advances comprising such Borrowing are to be CD Advances, Base Rate Advances or Eurodollar Advances; (d) whether Level I Status, Level II Status or Level III Status exists on the date of such notice; and (e) the duration of the Interest Period with respect thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. MONEY MARKET BORROWINGS. (a) THE MONEY MARKET OPTION. Each Borrower may, as set forth in this Section 2.03, request the Lenders before the Termination Date to make offers to make Money Market Advances to such Borrower. The Lenders may, but shall have no obligation to, make such offers and such Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. A Lender lending to the Borrower pursuant to an accepted offer to make Money Market Advances shall remain obligated to make Committed Advances in proportion to its respective Commitment within the limitations of Section 4.02(d). (b) MONEY MARKET QUOTE REQUEST. When a Borrower wishes to request offers to make Money Market Advances under this Section 2.03, it shall transmit to the Agent by telex or facsimile telecopy a Money Market Quote Request substantially in the form of Exhibit C hereto so as to be received no later than 11:00 A.M. New York City time (x) on the fifth Eurodollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction, or (y) on the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the requesting Borrower and the Agent shall have mutually agreed and shall have notified to the Lenders not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), specifying: (i) the proposed date of Borrowing, which shall be a Eurodollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction; 21 (ii) the aggregate amount of such Borrowing, which shall be $10,000,000 or a larger multiple of $5,000,000 (except that such Borrowing may be in the aggregate amount available in accordance with Section 4.02(d)); (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period; and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrowers may request offers to make Money Market Advances for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within 5 Eurodollar Business Days in the case of a LIBOR Auction or 5 Domestic Business Days in the case of an Absolute Rate Auction (or such other number of days as SunAmerica and the Agent may agree) of any other Money Market Quote Request. (c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of a Money Market Quote Request, the Agent shall send to the Lenders by telex or facsimile telecopy an Invitation for Money Market Quotes substantially in the form of Exhibit D hereto, which shall constitute an invitation by the requesting Borrower to each Lender to submit Money Market Quotes offering to make the Money Market Advances to which such Money Market Quote Request relates in accordance with this Section 2.03. (d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each Lender may submit a Money Market Quote containing an offer or offers to make Money Market Advances in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by facsimile telecopy at its offices specified in or pursuant to Section 11.02 not later than (x) 2:00 P.M. New York City time on the fourth Eurodollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 10:00 A.M. New York City time on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the requesting Borrower and the 22 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 23 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 24 (C), if applicable, limitations on the aggregate principal amount of Money Market Advances for which offers in any single Money Market Quote may be accepted. (f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 11:00 A.M. New York City time on (x) the third Eurodollar Business Day prior to the proposed date of Borrowing, in the case of LIBOR Auction, or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the requesting Borrower and the Agent shall have mutually agreed to and shall have notified to the Lenders not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the requesting Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e), and the failure of such Borrower to provide such notice in accordance with this clause (f) shall constitute the non- acceptance of such offers. In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The requesting Borrower may accept any Money Market Quote in whole or in part, PROVIDED that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request; (ii) the principal amount of each Money Market Borrowing must be $10,000,000 or a larger multiple of $5,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 4.02(d)); (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be; and (iv) the requesting Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. Promptly after receipt by the Agent of the notice of acceptance from the Borrowers pursuant to this subsec- 25 tion (f), the Agent will notify each Lender of the amount of the Money Market Borrowing and the amount of the consequent pro rata Money Market Reduction in its Commitment and the dates upon which such Money Market Reduction commenced and will terminate. (g) ALLOCATION BY AGENT. If offers are made by two or more Lenders with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Advances in respect of which such offers are accepted shall be allocated by the Agent among such Lenders as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amount of Money Market Advances shall be conclusive in the absence of manifest error. SECTION 2.04. NOTICE TO LENDERS; FUNDING OF ADVANCES. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Lender of the contents thereof and of such Lender's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the requesting Borrower. (b) Not later than 1:00 P.M. New York City time on the date of each Borrowing, each Lender participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address specified in or pursuant to Section 11.02. Unless the Agent deter- mines that any applicable condition specified in Article IV has not been satisfied, the Agent will make the funds so received from the Lenders available to the Borrowers at the Agent's aforesaid address for the account of the Borrowers or to such other account as any Borrower may specify. (c) The Borrowers may refinance all or any part of any Borrowing with a Borrowing of the same or a different Type (E.G., Money Market Borrowings may be refinanced with, or may be used to refinance, Committed Borrowings) provided the conditions specified in Article IV have been satisfied. Any Borrowing or part thereof so refinanced shall be deemed to be repaid with the proceeds 26 of the new Borrowing hereunder. If any Lender makes a new Advance hereunder on a day on which the applicable Borrower is to repay all or any part of an outstanding Advance from such Lender, such Lender shall apply the proceeds of its new Advance to make such repayment and only an amount equal to the excess (if any) of the amount being borrowed over the amount being repaid shall be made available by such Lender to the Agent as provided in subsection (b). To the extent any Lender fails to pay the Agent amounts due from it pursuant to this subsection (c), the Borrowers shall not be deemed to be overdue in respect of their obligation to make the relevant payment until one Domestic Business Day after SunAmerica shall have received notice from the Agent of the failure of such Lender to make such payment. (d) Unless the Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Agent such Lender's share of such Borrowing, the Agent may assume that such Lender has made such share available to the Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such share available to the Agent, such Lender and the applicable Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Agent, at the Federal Funds Rate. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance included in such Borrowing for purposes of this Agreement. The failure of any Lender to make any Advance to be made by it on the date specified therefor shall not relieve any other Lender of any obligation to make an Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make an Advance to be made by such other Lender. SECTION 2.05. NOTES. (a) The Advances of each Lender to any Borrower shall be evidenced by a single Note of the Borrowers, jointly and severally, payable to the order of such Lender in an amount equal to the aggregate unpaid principal amount of all such Lender's Advances to the Borrowers. 27 (b) Each Lender may, by notice to the Borrowers and the Agent but at no cost to the Borrowers, request that its Advances of a particular Type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Advances. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Advances of the relevant Type. Each reference in this Agreement to the "Note" of such Lender shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Lender's Notes pursuant to Section 4.01(a), the Agent shall mail such Note to such Lender by overnight courier or registered mail. Each Lender shall record the date, amount, type and maturity of each Advance made by it and the date and amount of each payment of principal made by any Borrower with respect thereto, and prior to any transfer of its Note or Notes shall endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Advance then outstanding, PROVIDED that the failure of any Lender to make any such recordation or endorsement shall not affect the obligations of the Borrowers hereunder or under the Notes. Each Lender is hereby irrevocably authorized by each Borrower so to endorse its Notes and to attach to and make a part of its Notes a continuation of any such schedule as and when required. SECTION 2.06. MATURITY OF ADVANCES. Each Advance included in any Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. INTEREST RATES. (a) Each Base Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from the date such Advance is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of or interest on any Base Rate Advance shall bear interest, payable on demand, for each day it remains unpaid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate Advances for such day. 28 (b) Each CD Advance shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin plus the applicable Adjusted CD Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, on the 90th day of such Interest Period. Any overdue principal of or interest on any CD Advance shall bear interest, payable on demand, for each day it remains unpaid at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the CD Margin applicable on such day plus the Adjusted CD Rate applicable to such Advance and (ii) the rate applicable to Base Rate Advances for such day. "CD Margin" means (i) 0.425% for any day on which Level I Status exists, (ii) 0.525% for any day on which Level II Status exists and 0.625% for any day on which Level III Status exists. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ -------- ] + AR [1.00 - DRP] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate -------------------- * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1% The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. New York City time (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD 29 Advance of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means, for any day, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding 5 billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means, for any Interest Period, the average of the highest and lowest annual assessment rate (rounded upward, if necessary, to the next higher 1/100 of 1%) which the Federal Deposit Insurance Corporation (or any successor) charges banking institutions on the basis of their assessment rate classification for such Corporation's (or such successor's) insuring time deposits at offices of such institutions in the United States during the most recent period for which such rate has been determined prior to the commencement of such Interest Period. (c) (i) Each Eurodollar Advance shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Eurodollar Margin plus the applicable London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 3 months, 3 months after the first day thereof. "Eurodollar Margin" means (1) 0.30% for any day on which Level I Status exists, (2) 0.40% for any day on which Level II Status exists, and (3) 0.50% for any day on which Level III Status exists. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the re- 30 spective rates per annum at which deposits in dollars are offered to each of the Eurodollar Reference Banks in the London interbank market at approximately 11:00 A.M. London time 2 Eurodollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Eurodollar Advance of such Eurodollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (ii) Any overdue principal of or interest on any Eurodollar Advance shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the Eurodollar Margin applicable on such day plus the higher of (x) the London Interbank Offered Rate applicable to such Advance and (y) the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (A) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than 3 Eurodollar Business Days, then for such other period of time not longer than 3 months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Eurodollar Reference Banks are offered to such Eurodollar Reference Bank in the London interbank market for the applicable period determined as provided above by (B) 1.00 minus the Eurodollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 3.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Advances for such day). (d) Subject to Section 3.01, each Money Market LIBOR Advance shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed Borrowing) plus the Money Market Margin quoted by the Lender making such Advance in accordance with Section 2.03. Each Money Market Absolute Rate Advance shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by 31 the Lender making such Advance in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, on the 90th day of such Interest Period. Any overdue principal of or interest on any Money Market Advance shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (e) The Agent shall determine each interest rate applicable to the Advances hereunder. The Agent shall give prompt notice to the applicable Borrower and the participating Lenders by facsimile of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. If the rating system of Moody's or Standard and Poor's shall change in a manner that causes the definition of "Level I Status", "Level II Status" or "Level III Status" no longer to have its intended meaning hereunder, or if any such rating agency shall have ceased to rate corporate debt obligations of SunAmerica for any reason other than action or inaction on the part of the Borrowers, at the request of the Borrowers, the Borrowers, the Agent and the Lenders shall negotiate in good faith to amend the references to specific ratings in the definition of "Level I Status", "Level II Status" and "Level III Status", to reflect such changed rating system or the non- availability of ratings from such rating agency. (f) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section 2.07. If any Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 3.01 shall apply. SECTION 2.08. FEES. (a) COMMITMENT FEE. The Borrowers shall pay to the Agent for the account of the Lenders ratably in proportion to their respective Commitments a commitment fee at the following rates per annum: (i) 0.05% for any day on which Level I Status exists, (ii) 0.0625% for any day on which Level II Status exists and (iii) 0.10% for any day on which Level III Status exists. Such commitment fee shall accrue from the Effective Date to the Termination Date on the daily amount by which the aggregate amount of the Commitments (without 32 giving effect to any Money Market Reductions), exceeds the aggregate outstanding principal amount of the Advances. (b) FACILITY FEE. The Borrowers shall pay to the Agent for the account of the Lenders ratably a facility fee at the following rates per annum: (i) 0.075% for any day on which Level I Status exists, (ii) 0.125% for any day on which Level II Status exists and (iii) 0.175%for any day on which Level III Status exists. Such facility fee shall accrue from the Effective Date to the Termination Date (or, if all Advances have not been repaid in full on the Termination Date, to the date such Advances are repaid) on the daily average of the aggregate amount of Commitments (without giving effect to any Money Market Reductions), or, if greater, on the daily average of the outstanding principal amount of Advances. (c) ADDITIONAL UTILIZATION FEE. The Borrowers shall pay to the Agent for the account of the Lenders ratably in proportion to the aggregate outstanding principal amount of Advances under this Agreement and of advances under the Other Agreement of each such Lender an additional utilization fee at the rate of 0.0625% per annum on the aggregate principal amount of all Advances under this Agreement and of advances under the Other Agreement then outstanding for any day on which such aggregate outstanding principal amount of Advances and other advances exceeds 33 1/3% of the sum of the Commitments and commitments under the Other Agreement as of such date. (d) PAYMENTS. Accrued fees under this Section 2.08 shall be calculated on a 360 day basis and shall be payable quarterly in arrears on each March 15, June 15, September 15 and December 15 and upon the Termination Date (and, if later, the date the Advances shall be repaid in their entirety). SECTION 2.09. EXTENSION OF TERMINATION DATE. (a) SunAmerica, on behalf of itself and the other Borrowers, may, by written notice to the Agent in the form of Exhibit F hereto (a "Notice of Extension") given not less than 60 nor more than 90 days prior to the then effective Termination Date (the "Existing Termination Date"), advise the Lenders that the Borrowers request an extension of the Existing Termination Date to a date not later than 364 calendar days after the date the Notice of Extension becomes effective pursuant to Section 2.09(c). 33 Each Notice of Extension shall specify the date to which the Existing Termination Date is to be extended or specify that such date shall be 364 days after such Notice of Extension shall have become effective pursuant to Section 2.09(c), PROVIDED that no Notice of Extension may specify a date that would cause the Termination Date to be later than January 31, 1996. (b) Each Notice of Extension shall be irrevocable and constitute a representation by the Borrowers that (i) neither any Default nor any Event of Default has occurred and is continuing and (ii) the representations and warranties contained in Article V are correct in all material respects on and as of the date of such Notice of Extension (except to the extent they were expressly made as of the Effective Date or expressly relate to a prior date) and will be correct in all material respects on and as of the Existing Termination Date as though made on and as of such dates. (c) The Agent will promptly, and in any event within 5 Domestic Business Days of the receipt of each Notice of Extension, provide the Lenders with a copy of each such Notice of Extension. Each Lender will in its sole discretion determine whether to consent to such Notice of Extension and will use its best efforts to respond to such Notice of Extension within 21 days after its receipt of notice from the Agent. Each consent of a Lender to a Notice of Extension shall be in writing and shall become effective and binding only if each other Lender (or an assignee as contemplated by this subsection (c)) has consented in writing to such Notice of Extension and such Notice of Extension has become effective in accordance with this Section 2.09(c). The Agent shall notify the Borrowers promptly after the expiration of such 21 day period as to which Lenders have consented to the extension. If less than all Lenders consent to such extension within such period, the Borrowers may require that the Lenders that do not consent to such extension assign, and such Lenders shall assign, their Commitments in their entirety pursuant to Section 11.07, no later than 15 days prior to the Existing Termination Date, to one or more Eligible Assignees (which may be one or more of the Lenders), if any, identified by the Borrowers pursuant to Section 3.05 who will consent to such extension. The Agent shall notify the Borrowers and the Lenders at least 15 days prior to the Existing Termination Date of the consent or failure to consent of 34 the Lenders to the Notice of Extension. A Notice of Extension shall become effective, and the Existing Termination Date shall become the extended Existing Termination Date specified in such Notice of Extension, upon the receipt by the Agent of written consents signed by each of the Lenders to such Notice of Extension. SECTION 2.10. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. At any time prior to the Termination Date, the Borrowers may, upon at least 3 Domestic Business Days' notice to the Agent, (a) terminate the Commitments in full, if no Advances are outstanding at such time, or (b) reduce from time to time by (i) an aggregate amount of $4,000,000 or any larger multiple of $2,000,000 or (ii) the full amount thereof, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Advances, PROVIDED that no such termination shall be effective unless the Borrowers shall also have terminated the commitments under the Other Agreement, and no such reduction shall be effective unless the Borrowers shall also have reduced the commitments under the Other Agreement in an aggregate amount equal to 150% of the amount of the reduction under clause (b). In each case the Lenders' Commitments will be terminated or ratably reduced, as the case may be. SECTION 2.11. MANDATORY TERMINATION OR REDUCTION OF THE COMMITMENTS. The Commitments shall terminate on the Termination Date and any Advances then outstanding (together with accrued interest thereon) shall be due and payable on such date. SECTION 2.12. OPTIONAL PREPAYMENTS. (a) The Borrowers may upon at least one Domestic Business Day's or Eurodollar Business Day's notice to the Agent, as the case may be, at any time and from time to time prepay any Base Rate Borrowing (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 3.04) or, subject to Section 2.14, any CD Borrowing or Eurodollar Borrowing in whole or in part in amounts (i) aggregating $10,000,000 or any larger multiple of $5,000,000 or (ii) the full amount thereof, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Advances of the same Type of the several Lenders included in such Borrowing. 35 (b) Each notice of prepayment delivered pursuant to clause (a) above shall specify the date and amount of prepayment and the allocation of such prepayment among Advances at the time outstanding. Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Lender of the contents thereof and of such Lender's ratable share (if any) of such pre- payment and such notice shall not thereafter be revocable by the applicable Borrower. SECTION 2.13. GENERAL PROVISIONS AS TO PAYMENTS. (a) Each obligation of any Borrower under this Agreement and under the Notes shall be a joint and several obligation of the Borrowers. Each Borrower waives any right it may have to require the Agent or any Lender to exhaust its remedies against any Borrower before seeking to enforce the obligations of any other Borrower hereunder. (b) The Borrowers shall make each payment of principal of, and interest on, the Advances and of fees hereunder, not later than 12:00 P.M. New York City time on the date when due, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 11.02. The Agent will promptly distribute to each Lender its ratable share of each such payment received by the Agent for the account of the Lenders. Whenever any payment of principal of, or interest on, the Domestic Advances or Money Market Absolute Rate Advances or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Eurodollar Advances or Money Market LIBOR Advances shall be due on a day which is not a Eurodollar Business Day, the date for payment thereof shall be extended to the next succeeding Eurodollar Business Day unless such Eurodollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Eurodollar Business Day. If the date for any payment of principal is extended under this Section or any other provision of this Agreement, interest thereon shall be payable for such extended time. (c) Unless the Agent shall have received notice from any Borrower prior to the date on which any payment is due to the Lenders hereunder that one or more of the Borrowers will not make such payment in full, the Agent 36 may assume that the Borrowers have made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that the Borrowers shall not have so made such payment, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.14. FUNDING LOSSES. If the Borrowers make any payment of principal with respect to any Fixed Rate Advance (pursuant to Article II, III or IX or otherwise) on any day other than the last day of the Interest Period applicable thereto or the end of an applicable period fixed pursuant to Section 2.07(d), or if the Borrowers fail to borrow or prepay any Fixed Rate Advance after notice has been given to any Lender in accordance with Section 2.04(a) or 2.12(b), the Borrowers shall reimburse each Lender within 30 days after demand for any resulting loss or expense incurred by it (or by any participant in the related Advance to the extent provided in Section 11.07(e)), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow, PROVIDED that such Lender shall have delivered to SunAmerica (with a copy to the Agent) a certificate setting forth in reasonable detail calculations as to the amount of such loss or expense, which certificate shall be conclusive and binding on the Borrowers in the absence of manifest error. SECTION 2.15. COMPUTATION OF INTEREST AND FEES. Interest based on the Base Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.16. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, 37 or otherwise) on account of the Advances owing to it (other than pursuant to Section 2.17 or 3.03) in excess of its ratable share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, PROVIDED that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Bor- rowers agree that any Lender so purchasing a participation from another Lender pursuant to this Section 2.16 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrowers in the amount of such participation. SECTION 2.17. WITHHOLDING TAX EXEMPTION. (a) On the Effective Date (or (i) in the case of an entity that becomes a Lender after the Effective Date, on the date such entity becomes a Lender and (ii) in the case of a Lender that designates a substitute or additional Applicable Lending Office to which forms previously furnished by such Lender do not apply, on the date of such designation) and thereafter as required by applicable law each Lender that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to each of the Borrowers and the Agent 2 duly completed, accurate and signed copies of United States Internal Revenue Service Form 1001 or any successor thereto ("Form 1001") or Form 4224 or any successor thereto ("Form 4224") for each of such Lender's Applicable Lending Offices certifying in each case that such Applicable Lending Office is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal withholding taxes on income ("U.S. Withholding Taxes"). Each Lender that so delivers a Form 1001 or Form 4224, as the case may be, for an Applicable Lending Office further undertakes to deliver 38 to SunAmerica, on behalf of itself and the other Borrowers, and the Agent 2 additional duly completed, accurate and signed copies of Form 1001 or Form 4224 before the date that the prior form expires or becomes obsolete or prior to the occurrence of any event (or promptly upon the Lender's knowledge of such event if the Lender obtains knowledge of such event only after its occurrence) requir- ing a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by SunAmerica or the Agent, in each case certifying that such Applicable Lending Office is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any U.S. Withholding Taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender promptly advises SunAmerica, on behalf of itself and the other Borrowers, and the Agent in writing that it is not capable of receiving payments without any deduction or withholding of U.S. Withholding Taxes. If an event occurs after the date on which a Form 1001 or Form 4224 is submitted by a Lender in respect of such Lender's Applicable Lending Office that renders such Form inapplicable for a complete exemption from deduction or withholding of any U.S. Withholding Taxes but such Lender's Applicable Lending Office is entitled to a reduced rate of deduction or withholding for such taxes, such Lender shall promptly upon the request of the Borrowers submit 2 duly completed, accurate and signed copies of the applicable Form certifying that such Applicable Lending Office is entitled to receive payments under this Agreement and the Notes with such reduced rate of deduction or withholding. Unless the Borrowers and the Agent have received with respect to a Lender organized under the laws of a jurisdiction outside the United States the forms required to be delivered in this Section 2.17 entitling the Lenders to a complete exemption from U.S. Withholding Tax, such Borrower shall withhold taxes from such payments to or for such Lender as required by applicable law. Each Lender hereby represents and warrants to each Borrower that as of the Effective Date, no payments to it hereunder are subject to any U.S. Withholding Taxes, and each Lender who at any time becomes a Lender hereunder represents and warrants to each Borrower that as of the 39 date it becomes a Lender hereunder, no payments to it hereunder are subject to any U.S. Withholding Taxes. (b) In the event that the Borrowers or the Agent are required by applicable law to make any withholding or deduction of U.S. Withholding Taxes with respect to any Advance or fee, the Borrowers shall pay such deduction or withholding to the applicable taxing authority, shall furnish to the Agent for the Lender in respect of which such deduction or withholding is made all receipts, if any, and other documents evidencing such payment and shall to the extent provided below pay to the Agent or such Lender such additional amounts with respect to U.S. Withholding Taxes ("Additional Amounts") as may be necessary in order that the net amount received by the Agent or such Lender after the required withholding or other payment (including any required withholding or other payment on such Additional Amounts) shall equal the amount the Agent or such Lender would have received had no such withholding or other payment been made. Notwithstanding anything in this Agreement, the Borrowers shall only be required to pay Additional Amounts for the account of a Lender or bear the cost of or indemnify a Lender against U.S. Withholding Taxes, if such amounts arise by reason of (i) changes in income tax provisions of the Internal Revenue Code from and after the date such Lender becomes a lender to the Borrowers (in the case where such Lender's Applicable Lending Office is located in the United States) affecting the scope, definition or taxation of effectively connected income (as described in Section 864(c) of the Internal Revenue Code) or (ii) changes in withholding tax treaty rates between the United States and such Lender's country of residence, from and after the date such Lender becomes a lender to the Borrowers, PROVIDED that the Borrowers shall not be required to pay any Additional Amounts, or indemnify against any U.S. Withholding taxes, imposed as a result of a Lender's failure to comply with subsection (a) above, but following the correction of such failure shall take such steps as such Lender shall reasonably request to assist such Lender in recovering any U.S. Withholding Taxes paid as a result of such failure. SECTION 2.18. REGULATION D COMPENSATION. For so long as any Lender maintains reserves against "Eurocurrency liabilities" (or any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Advances or Money Market LIBOR Advances is determined or any category of extensions of credit or 40 other assets which includes loans by a non-United States office of such Lender to United States residents), and as a result the cost to such Lender (or its Eurodollar Lending Office or Money Market Lending Office, as the case may be) of making or maintaining its Eurodollar Advances or Money Market LIBOR Advances is increased, then such Lender may require the Borrowers to pay, contemporaneously with each payment of interest on the Eurodollar Advances or Money Market LIBOR Advances, additional interest on the related Eurodollar Advance or Money Market LIBOR Advance of such Lender at a rate per annum up to but not exceeding the excess of (i) (A) the applicable London Interbank Offered Rate divided by (B) one MINUS the Eurodollar Reserve Percentage over (ii) the applicable London Interbank Offered Rate. Any Lender wishing to require payment of such additional interest (x) shall so notify SunAmerica, on behalf of the Borrowers, and the Agent, in which case such additional interest on the Eurodollar Advances and Money Market LIBOR Advances of such Lender shall be payable to such Lender at the place indicated in such notice with respect to each Interest Period commencing at least 3 Eurodollar Business Days after the giving of such notice and (y) shall furnish to such Borrower at least 5 Eurodollar Business Days prior to each date on which interest is payable on the Eurodollar Advances or Money Market LIBOR Advances an officer's certificate setting forth in reasonable detail the amount to which such Lender is then entitled under this Section 2.18 (which shall be consistent with such Lender's good faith estimate of the level at which the related reserves are maintained by it and shall be conclusive and binding absent manifest error) and the calculations used in determining such amount. ARTICLE III CHANGES IN CIRCUMSTANCES SECTION 3.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. If on or prior to the first day of any Interest Period for any Fixed Rate Advance: (a) the Agent is advised by the Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period; or 41 (b) in the case of a Committed Advance, the Required Lenders advise the Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as determined by the Agent will not adequately and fairly reflect the cost to such Lenders of funding their CD Advances or Eurodollar Advances, as the case may be, for such Interest Period, the Agent shall forthwith give notice thereof to the Borrowers and the Lenders, whereupon until the Agent notifies the Borrowers that the circumstances giving rise to such suspension no longer exist, the obligations of the Lenders to make CD Advances or Eurodollar Advances, as the case may be, shall be suspended. Unless the Borrowers notify the Agent at least 2 Domestic Business Days prior to the date of any Fixed Rate Advance for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Advance is a Committed Advance, such Advance shall instead be made as a Base Rate Advance and (ii) if such Fixed Rate Advance is a Money Market LIBOR Advance, the Money Market LIBOR Advances comprising such Advance shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 3.02. ILLEGALITY. If, after the Effective Date, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Eurodollar Lending Office) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency shall make it unlawful or impossible for any Lender (or its Eurodollar Lending Office) to make, maintain or fund its Eurodollar Advances and such Lender shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Lenders and the Borrowers, whereupon until such Lender notifies the Borrowers and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Eurodollar Advances shall be suspended. Before giving any notice to the Agent pursuant to this Section 3.02, such Lender shall designate a different Eurodollar Lending Office if such designation will avoid the need for giving such notice and will not, 42 in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. If such Lender or any Lender having outstanding any Money Market LIBOR Advances shall determine that it may not lawfully continue to maintain and fund any of its outstanding Eurodollar Advances or Money Market LIBOR Advances, as the case may be, to maturity and shall so specify in such notice, the Borrowers shall immediately prepay in full the then outstanding principal amount of each such Eurodollar Advance or Money Market LIBOR Advance, as the case may be, to- gether with accrued interest thereon. Concurrently with prepaying each such Eurodollar Advance, each Borrower may borrow a Base Rate Advance in an equal principal amount from any such Lender that has outstanding Eurodollar Advances (on which interest and principal shall be payable contemporaneously with the related Eurodollar Advances of the other Lenders), and such Lender shall make such a Base Rate Advance. SECTION 3.03. INCREASED COST AND REDUCED RETURN. (a) If after (x) the Effective Date, in the case of any Committed Advance or any obligation to make Committed Advances, or (y) the date of the related Money Market Quote, in the case of any Money Market Advance, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency: (i) shall subject any Lender (or its Applicable Lending Office) to any tax, duty or other charge with respect to its Fixed Rate Advances, its Notes or its obligation to make Fixed Rate Advances, or shall change the basis of taxation of payments to any Lender (or its Applicable Lending Office) of the principal of or interest on its Fixed Rate Advances or any other amounts due under this Agreement in respect of its Fixed Rate Advances or its obligation to make Fixed Rate Advances (except for changes in the rate of tax on the overall net income of such Lender or its Applicable Lending Office imposed by the jurisdiction of its incorporation or in which 43 such Lender's principal executive office or Applicable Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (A) with respect to any CD Advance any such requirement included in an applicable Domestic Reserve Percentage and (B) with respect to any Eurodollar Advance or Money Market LIBOR Advance, any such requirement included in an applicable Eurodollar Reserve Percentage), special deposit, insurance assessment (excluding, with respect to any CD Advance, any such requirement reflected in an applicable Assessment Rate, including any change therein resulting from changes in the Lender's assessment rate classification) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (or its Applicable Lending Office) or shall impose on any Lender (or its Applicable Lending Office), or on the United States market for certificates of deposit or the London interbank market, any other condition affecting its Fixed Rate Advances, its Notes or its obligation to make Fixed Rate Advances; and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making or maintaining any Fixed Rate Advance, or to reduce the amount of any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or under its Notes with respect thereto, by an amount deemed by such Lender to be material, then, within 30 days after demand by such Lender, which demand shall be accompanied by a statement setting forth in reasonable detail the basis of and calculations with respect to such demand (with a copy to the Agent), the Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction. (b) If any Lender shall have determined that, after the Effective Date, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or 44 directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency (including any determination by any such Governmental Authority, central bank or comparable agency that, for purposes of capital adequacy requirements, the Commitments hereunder do not constitute commitments with an original maturity of one year or less) has or would have the effect of reducing the rate of return on capital of such Lender (or any Person controlling such Lender) as a consequence of such Lender's obligations hereunder to a level below that which such Lender (or such controlling Person) could have achieved but for such adoption, change, request or directive (taking into consideration its internal policies with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, then from time to time, within 30 days after demand by such Lender, which demand shall be accompanied by a statement setting forth in reasonable detail the basis of and calculations with respect to such demand (with a copy to the Agent), the Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender (or such controlling Person) for such reduction. (c) Each Lender will promptly notify the Borrowers and the Agent of any event of which it has knowledge, occurring after the date hereof, that will entitle such Lender to compensation pursuant to this Section 3.03 and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate of any Lender claiming compensation in accordance with this Section 3.03 and setting forth the additional amount or amounts to be paid to it hereunder shall, in the absence of manifest error, be conclusive and binding on the Borrowers. SECTION 3.04. BASE RATE ADVANCES SUBSTITUTED FOR AFFECTED FIXED RATE ADVANCES. If (i) the obligation of any Lender to make Eurodollar Advances has been suspended pursuant to Section 3.02 or (ii) any Lender has demanded compensation under Section 3.03(a) and the Borrowers shall, by at least 5 Eurodollar Business Days' prior notice to such Lender through the Agent, have elected that the provisions of this Section 3.04 shall apply to such Lender, then, unless and until such Lender notifies such Borrower that the circumstances giving rise to such 45 suspension or demand for compensation no longer apply, which such Lender hereby agrees to give as soon as practicable under the circumstances: (a) all Advances that would otherwise be made by such Lender as CD Advances or Eurodollar Advances, as the case may be, shall be made instead as Base Rate Advances (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Advances of the other Lenders), and (b) after each of its CD Advances or Eurodollar Advances, as the case may be, has been repaid (or converted to a Base Rate Advance), all payments of principal that would otherwise be applied to repay such Fixed Rate Advances shall be applied to repay its Base Rate Advances instead. SECTION 3.05. SUBSTITUTION OF LENDER. If (i) the obligation of any Lender to make Eurodollar Advances has been suspended pursuant to Section 3.02, (ii) any Lender has demanded compensation under Section 3.03, (iii) the Borrowers are required to pay any Additional Amounts under Section 2.17 to any Lender, or (iv) any Lender has determined not to consent to a Notice of Extension in accordance with Section 2.09, the Borrowers shall have the right, with the assistance of the Agent, to seek a mutually satisfactory substitute bank or banks, which shall be an Eligible Assignee (and which may be one or more of the Lenders), to purchase the Notes and assume the Commitment of such Lender. SECTION 3.06. DISCRETION OF LENDERS AS TO MANNER OF FUNDING. Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of its Advances in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Lender had actually funded and maintained each CD Advance, Eurodollar Advance, Money Market Absolute Rate Advance or Money Market LIBOR Advance through the purchase of deposits having a maturity corresponding to the Interest Period for such CD Advance, Eurodollar Advance, Money Market Absolute Rate Advance or Money Market LIBOR Advance, as the case may be, and bearing an interest rate equal to the Adjusted CD Rate, London Interbank Offered 46 Rate or Money Market Absolute Rate, as the case may be, for such Interest Period. SECTION 3.07. CONCLUSIVENESS OF STATEMENTS; SURVIVAL OF PROVISIONS. Determinations and statements of the Agent or any Lender made in accordance with Section 2.14 and Section 3.01 through Section 3.03 shall be conclusive and binding on the Borrowers absent manifest error. The provisions of Sections 2.14, 3.02, 3.03 and 3.04 shall survive termination of this Agreement. ARTICLE IV CONDITIONS OF LENDING The obligation of each of the Lenders to make the Advances is subject to the satisfaction of the following conditions precedent: SECTION 4.01. EFFECTIVENESS. This Agreement shall become effective on the date this Agreement has been executed and the Agent has received the notices provided for in Section 11.06 (the "Effective Date"). In addition, no Lender shall be obligated to make Advances in respect of the initial Borrowing under this Agreement unless the following conditions shall have been satisfied (or waived in accordance with Section 11.01): (a) receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Agent of appropriately completed Notes, executed by each Borrower and payable to the order of each of the Lenders, respec- tively; (c) receipt by the Agent of an opinion of Susan L. Harris, the Secretary and Associate General Counsel of SunAmerica, substantially in the form of Exhibit G and covering such additional matters relating to the transactions contemplated hereby as the Agent may reasonably request; 47 (d) receipt by the Agent of an opinion of Debevoise & Plimpton, special counsel to the Agent; (e) receipt by the Agent of a certificate of a Responsible Officer of each Borrower, to the effect that (i) the representations and warranties of such Borrower contained in Article V were true and correct in all material respects on the Effective Date and on the date of such certificate and (ii) no Default exists or results from the execution and delivery by such Borrower of this Agreement or the Notes; and (f) receipt by the Agent of all documents reasonably requested by the Agent relating to the existence and good standing of the Borrowers and their respective Subsidiaries, the corporate authority for and validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent and the Agent's counsel; and such conditions shall have been satisfied not later than February 28, 1993. The Agent shall promptly notify the Borrowers and the Lenders of the satisfaction of the foregoing conditions, and such notice shall be conclusive and binding on all parties hereto. SECTION 4.02. CONDITIONS PRECEDENT TO ADVANCES. The obligation of each Lender to make any Advance is subject to the satisfaction of the following additional conditions precedent: (a) The Agent shall have received a Notice of Borrowing from such Borrower in accordance with Section 2.02 or 2.03, as the case may be; and the delivery of such Notice of Borrowing from such Borrower shall constitute a representation and warranty by each Borrower, and a certification by the Responsible officer signing such Notice of Borrowing, that as of the date of such Advance the conditions specified in this Section 4.02 have been satisfied; (b) The representations and warranties of each Borrower contained in Article V are true and correct in all material respects on the date of such Advance with the same effect as though made on and as of such date except to the extent they were expressly made as 48 of the Effective Date or expressly relate to a prior date, PROVIDED that such representations and warranties shall not include those set forth in Sections 5.06(b)(iii) and 5.07 if, upon the making of the Advances specified in the applicable Notice of Borrowing, the aggregate outstanding amount of Advances owing to the Lenders would not exceed the aggregate amount of such Advances outstanding and owing to the Lenders immediately prior to the making of the Advances subject to such Notice of Borrowing; (c) No Default exists or will result from the making of such Advance; and (d) Immediately after such Advance, the outstanding aggregate principal amount of all Advances will not exceed the aggregate amount of all Commitments. ARTICLE V REPRESENTATIONS AND WARRANTIES To induce the Lenders to enter into this Agreement and to make the Advances hereunder, each of the Borrowers jointly and severally represents and warrants to the Agent and to each of the Lenders that: SECTION 5.01. ORGANIZATION, ETC. Each Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power, authority and legal right to own or lease and to operate its properties, to carry on its business as now conducted and as proposed to be conducted and to enter into and carry out the terms of this Agreement and the Notes; and each such Borrower is duly qualified to transact business and in good standing as a foreign corporation authorized to do business in each jurisdiction where the ownership, leasing or operation of property or the conduct of its business makes such qualification necessary, except where the failure to so qualify or be in good standing would not have a Material Adverse Effect. SECTION 5.02. AUTHORIZATION. Each Borrower has taken all necessary action to authorize the borrowings 49 hereunder and the execution, delivery and performance by it of this Agreement and the Notes. SECTION 5.03. NO CONFLICT. The execution, delivery and performance by each Borrower of this Agreement and the Notes, and the use of proceeds of the borrowings hereunder, does not and will not (a) contravene or conflict with any provision of any applicable law, statute, rule or regulation of any relevant Governmental Authority, or any applicable order, writ, judgment or decree of any court, arbitrator or relevant Governmental Authority, (b) contravene or conflict with, result in any breach of, or constitute a default under, any agreement or instrument binding on it, (c) result in the creation or imposition of or the obligation to create or impose any Lien (except for Permitted Liens) upon any of the property or assets of such Borrower, or (d) contravene or conflict with any provision of the certificate of incorporation or by-laws of such Borrower. SECTION 5.04. GOVERNMENTAL CONSENTS. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with or exemption by, any relevant Governmental Authority is required in connection with the Borrowings hereunder or the execution, delivery or performance by any Borrower hereunder or the validity or enforceability of this Agreement and the Notes, except that this Agreement may be filed as an exhibit to a report of any Borrower filed under the Exchange Act. SECTION 5.05. VALIDITY. Each Borrower has duly executed and delivered this Agreement and the Notes and this Agreement and the Notes constitute legal, valid and binding obligations of such Borrower. SECTION 5.06. FINANCIAL STATEMENTS. (a) STATUTORY FINANCIAL STATEMENTS. (i) The annual Convention Statement of each Insurance Subsidiary including, without limitation, the provisions made therein for investments and the valuation thereof, reserves, policy and contract claims and Statutory Liabilities, as filed with their respective Departments and delivered to each Lender prior to the execution and delivery of this Agreement, as of and for the years ended December 31, 1989, 1990 and 1991 (collectively, the "Statutory Financial Statements"), have been prepared in accordance with SAP applicable thereto applied on a consistent basis (except as noted therein). 50 Each such Statutory Financial Statement was in compliance with applicable law when filed. The Statutory Financial Statements are complete and correct and fairly present the financial position, results of operations and changes in equity of the Insurance Subsidiary presented therein as of and for the respective dates and periods indicated therein in conformity with SAP. (ii) As of June 30, 1992, the Risk-Based Capital Ratio of Anchor and Sun Life were, respectively, 124.7% and 145.4%, and as of the Effective Date there has been no material reduction in the Risk-Based Capital Ratio of Anchor or Sun Life. (b) GAAP FINANCIAL STATEMENTS. (i) The Borrowers have delivered to the Agent complete and correct copies of (A) the annual reports to stockholders of SunAmerica for the fiscal years ended September 30, 1989, 1990, 1991 and 1992 (the "Annual Reports"), (B) annual reports on Form 10-K for such fiscal years and all quarterly reports on Form l0-Q of SunAmerica for periods after September 30, 1991, in each case as filed with the Securities and Exchange Commission (the "SEC Reports") and (C) consolidating balance sheets and income statements of SunAmerica, SACO and SAFI (but not their respective Subsidiaries) as of and for the year ended September 30, 1992. The Annual Reports and the SEC Reports correctly describe, as of their respective dates, the business then conducted and proposed to be conducted by SunAmerica and its Subsidiaries. There are included in the SEC Reports consolidated financial statements at and for the periods specified therein. The Borrowers have also delivered to the Agent complete and correct copies of all current reports on Form 8-K, proxy statements, registration statements and prospectuses, if any, filed by any of the Borrowers or any of their respective Subsidiaries with the Securities and Exchange Commission since September 30, 1991. All financial statements delivered to the Agent in the foregoing materials (except as otherwise specified therein) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods specified with respect to each consolidated entity, and present fairly the financial position of the corporation or corporations to which they relate as of the respective dates specified and the results of its or their operations and changes in financial position for the respective periods specified. 51 (ii) The projected financial statements of SunAmerica and its Subsidiaries, including the cash flow projections of the Borrowers, which are set forth in the Information Memorandum, dated October 1992, prepared for use in connection with this revolving credit facility (the "Information Memorandum"), are based on good faith estimates and assumptions made by the management of SunAmerica, it being recognized, however, that projections are subject to significant uncertainties and contingencies, many of which are beyond the Borrowers' control, and that the actual results during the period or periods covered by such projections may differ from the projected results and that the differences may be material. Notwithstanding the foregoing, as of the Effective Date, management of SunAmerica believes that such projections were, taken as a whole, reasonable and attainable. (iii) There has been no Material Adverse Change since September 30, 1991. SECTION 5.07. LITIGATION. There is no action, suit or proceeding pending against, or to the knowledge of such Borrower threatened against or affecting, any Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body or agency in which there is a reasonable likelihood of an adverse decision which any Borrower reasonably believes would have a Material Adverse Effect or which questions the validity of this Agreement or the Notes. SECTION 5.08. LIENS. As of the Effective Date, none of the property or assets of any Borrower or any Material Subsidiary is subject to any Lien, except for Permitted Liens. SECTION 5.09. SUBSIDIARIES. Each Material Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all corporate power and authority to own or lease and to operate its properties and to carry on its business as now conducted and as proposed to be conducted. SECTION 5.10. COMPLIANCE WITH ERISA. Neither any Borrower nor any member of the ERISA Group, as of the Effective Date, maintains, sponsors or has an obligation to contribute to any Plan. Neither any Borrower nor any 52 member of the ERISA Group has incurred any liability pursuant to Title IV of ERISA which remains unsatisfied. SECTION 5.11. INVESTMENT COMPANY ACT. None of the Borrowers is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. SECTION 5.12. PUBLIC UTILITY HOLDING COMPANY ACT. None of the Borrowers is subject to regulation under the Public Utility Holding Company Act of 1935, as amended. SECTION 5.13. MARGIN REGULATION. No part of the proceeds of any Advance will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock (within the meaning of Regulation G or Regulation U of the Board of Governors of the Federal Reserve System), other than in the ordinary course of investment activities where such uses would not cause the transactions hereunder to violate such Regulations. Neither the making of any Advance nor the use of proceeds thereof will violate or be inconsistent with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. SECTION 5.14. TAXES. As of the Effective Date, (a) Each Borrower and each of its Subsidiaries have filed all tax returns required by law to have been filed by them and have paid or provided adequate reserves for all taxes thereby shown to be owing, except any such taxes that are being diligently contested in good faith by appropriate proceedings and for which adequate reserves have been established and are being maintained in accordance with GAAP. The consolidated liability stated for taxes for such Borrower and its Subsidiaries as of September 30, 1992 in the financial statements described in Section 5.06 is sufficient in all material respects for all taxes as of such date. (b) All life insurance reserves shown as such on federal tax returns (other than individual annuity contracts) of such Borrower qualify as life insurance reserves under section 816(b) of the Code or under former section 801(b) of the Code. 53 (c) Each Insurance Subsidiary is a life insurance company as defined in section 816 of the Code and is an includable life insurance company as described in section 1504(c)(1) of the Code. SECTION 5.15. ACCURACY OF INFORMATION. Neither the representations and warranties contained in this Article V, the Information Memorandum, nor any other document, certificate or instrument delivered to the Lenders by any Borrower on or prior to the Effective Date in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in this Article V, and in such other documents, certificates or instruments not misleading, and all projections contained in any such document were based on information which when delivered was to the best knowledge of each Borrower true and correct, and, to the best knowledge of such Borrower, all calculations contained in such projections were accurate, and such projections presented such Borrower's then-current estimate of its future business, operations and affairs. SECTION 5.16. PROCEEDS. The proceeds of the Advances will be used (a) to provide short-term liquidity to the Borrowers for general corporate purposes and (b) to support the Borrowers' obligations under the commercial paper program of SunAmerica, and will not under any circumstances be used to make long-term loans to or equity investments in or equity contributions to any Subsidiary of the Borrowers. SECTION 5.17. GOVERNMENTAL AUTHORIZATIONS. As of the Effective Date, each Borrower and its Subsidiaries have all licenses, franchises, permits and other governmental authorizations necessary for all businesses presently carried on by them (including ownership and leasing of the real and personal property owned and leased by them), except where the failure to do so would not indi- vidually or in the aggregate have a Material Adverse Effect. SECTION 5.18. INSURANCE LICENSES. No material license (including, without limitation, any license or certificate of authority from any applicable Department), permit or authorization to engage in the business of insurance or reinsurance of any Insurance Subsidiary, other than licenses, permits or authorizations to perform ser- 54 vices as an agent or broker (individually, a "License" and collectively, the "Licenses") is the subject of a proceeding for suspension or revocation, except where such suspension or revocation would not individually or in the aggregate have a Material Adverse Effect. SECTION 5.19. COMPLIANCE WITH LAWS. As of the Effective Date, neither any Borrower nor any of its Subsidiaries is in violation of any law, ordinance, rule, regulation, order, policy, guideline or other requirement of any Governmental Authority, and, to the best of each Borrower's knowledge, no such violation has been alleged, which violation would individually or in the aggregate have a Material Adverse Effect. SECTION 5.20. NO DEFAULT. As of the Effective Date, none of the Borrowers or their respective Subsidiaries is in default under any agreement or instrument to which it is a party or by which any of its properties or assets is bound or affected, which default would have a Material Adverse Effect. ARTICLE VI AFFIRMATIVE COVENANTS On and after the Effective Date and for so long thereafter as any Liabilities for the payment of principal or interest on the Notes remain unpaid or outstanding or the Commitments remain in effect, the Borrowers will: SECTION 6.01. REPORTS, CERTIFICATES AND OTHER INFORMATION. Unless otherwise provided herein, furnish or cause to be furnished to each Lender: (a) AUDIT REPORT. As soon as available, but in any event within 90 days after the end of each fiscal year of SunAmerica: (i) copies of the audited consolidated balance sheet of SunAmerica and its Subsidiaries as of the end of such fiscal year and the related consolidated statements of earnings and cash flows of SunAmerica and its Subsidiaries for such fiscal year, in each case setting forth in comparative form the consolidated figures for the previous fiscal year, prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as 55 set forth therein); (ii) a report of Price Waterhouse (or other independent certified public accountants of nationally recognized standing selected by SunAmerica), which report shall state that such consolidated financial statements present fairly the financial position of SunAmerica and its consolidated Subsidiaries as at the date indicated and the consolidated results of their operations and cash flows in conformity with GAAP applied on a basis consistent with prior years (except as otherwise specified in report) and that the audit by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; and (iii) a certificate from such accountants to the effect that, in making the examination necessary for the signing of the annual audit report of SunAmerica by such accountants referred to in clause (ii) above, they have reviewed this Agreement and have not (unless otherwise stated) become aware of any Default or Event of Default under this Agreement. (b) QUARTERLY REPORTS OF SUNAMERICA. Promptly upon becoming available, but in any event within 60 days after the end of the first 3 quarters of each fiscal year of SunAmerica, copies of the unaudited consolidated balance sheet of SunAmerica and its Subsidiaries as of the end of such fiscal quarter and the related unaudited statements of earnings and cash flows of SunAmerica and its Subsidiaries for such fiscal quarter, prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as set forth therein) and certified by the chief accounting officer or chief financial officer or treasurer or controller of SunAmerica, as presenting fairly the financial condition and results of operations of SunAmerica and its Subsidiaries (subject to normal year-end adjustments). (c) CONSOLIDATING QUARTERLY REPORTS OF THE BORROWERS. Promptly upon becoming available, but in any event within 60 days after the end of each quar- ter of each fiscal year of SunAmerica, copies of the unaudited consolidating balance sheet of the Borrowers as of the end of such fiscal quarter and the related unaudited consolidating income statements 56 for such fiscal quarter, substantially in the form of Exhibit I attached hereto, setting forth subtotals for each of the Borrowers separately and for the Bor- rowers (but not their respective Subsidiaries) as a group and showing all eliminations and adjustments made in arriving at such subtotals, all in reasonable detail in accordance with GAAP applied consistently throughout the periods reflected therein (except as set forth therein) and certified by the chief accounting officer or chief financial officer or treasurer or controller of SunAmerica as presenting fairly, in relation to the consolidated financial statements of SunAmerica and its Subsidiaries referred to in paragraphs (a) and (b) above, the financial condition and results of operations of the Borrowers separately and as a group in accordance with GAAP (subject to normal year-end adjustments and otherwise as noted therein). (d) INVESTMENTS. Contemporaneously with the delivery of the financial statements provided for in paragraph (c) above, a detailed list, certified by the chief financial officer or chief investment officer or chief accounting officer or treasurer or controller of SunAmerica, of all Investments included in Total Invested Assets, including (i) the market valuation thereof as determined in the preparation of the consolidated balance sheets of SunAmerica delivered under this Section 6.01 and (ii) the credit rating of each such Investment, as rated by either Standard & Poor's, Moody's or the NAIC, if any. (e) COMPLIANCE CERTIFICATE. Contemporaneously with the delivery of the financial statements provided for in paragraph (c) above, a duly completed certificate, signed by the chief accounting officer or chief financial officer or treasurer or controller of SunAmerica setting forth in reasonable detail the data and computations necessary to demonstrate compliance with each of the applicable financial ratios and restrictions contained in Article VIII, and to the effect that as of such date no Default or Event of Default has occurred and is continuing, or if any Default or Event of Default has occurred and is continuing, the actions taken or proposed to be taken to remedy such Default or Event of Default. 57 (f) SAP FINANCIAL STATEMENTS. With respect to each Insurance Subsidiary: (i) (A) Promptly upon becoming available, but in any event within 75 days after the end of each calendar year, a copy of the annual Convention Statements of such Insurance Subsidiary for such calendar year, and (B) promptly upon becoming available, but in any event within 60 days after the end of each of the first three calendar quarters, a copy of the quarterly Convention Statements of such Insurance Subsidiary for such quarter, in each case prepared in accordance with SAP and accompanied by the certification of the chief financial officer or chief executive officer of such Insurance Subsidiary or controller or treasurer that such annual or quarterly Convention Statement presents fairly, in accordance with SAP, the financial position and results of operations of such Insurance Sub- sidiary as at and for the period ending on the date of such Convention Statement; (ii) Within 90 days after the end of each calendar year, a copy of each "Statement of Actuarial Opinion" that is provided to the applicable Department (or equivalent information should the Department no longer require such a statement) as to the adequacy of aggregate reserves for life policies and contracts of such Insurance Subsidiary. Such opinion shall be in the format prescribed by the Insurance Code of the state of domicile of such Insurance Subsidiary. (g) CASH FLOW STATEMENTS. Contemporaneously with the delivery of the financial statements for the fourth fiscal quarter provided for in paragraph (c) above, a copy of the unconsolidated statement of cash flows for the fiscal year then ended and a projected unconsolidated statement of cash flows for each of the immediately succeeding fiscal years through at least September 30, 1995 for the Borrowers on a combined basis, together with a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of good faith estimates and assumptions and sound financial planning practices of management of the Borrowers and 58 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 59 given or is required to give notice in the future of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice (whether or not in writing) from the PBGC that it is considering whether to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer, any Plan, a copy (or a written description) of such notice; (iv) applies for a waiver of the minimum funding standards under Section 412 of the Code, a copy of such application; (v) gives notice to participants of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information to be filed with the PBGC; or (vi) fails to make payments or contributions in an aggregate amount of more than $10,000,000 to any Plan or Multiemployer Plan or determines to make any amendment to any Plan that has resulted or could result in the imposition of a Lien or the posting of a bond or other security in an aggregate amount of more than $10,000,000, a certificate of the chief financial officer or the chief accounting officer of SunAmerica setting forth details as to such occurrence and action, if any, that SunAmerica or the applicable member of the ERISA Group is required or proposes to take. (k) CHANGE IN CREDIT RATING. Promptly upon learning thereof, written notice of any change in (i) the credit rating of SunAmerica's senior unsecured long term debt by Standard & Poor's or Moody's or (ii) the rating of any Insurance Subsidiary by A.M. Best Company Inc. (1) INSURANCE LICENSES. Prompt notice of the actual suspension, termination or revocation of any material License, or any material restriction on license authority, of any Insurance Subsidiary by any relevant Governmental Authority or of receipt of notice from any relevant Governmental Authority notifying any Insurance Subsidiary of a hearing relating to such a suspension, termination, revocation, restriction or limitation, including any request by a relevant Governmental Authority that 60 commits any Insurance Subsidiary to take, or refrain from taking, any action, which materially and adversely affects the authority of any Insurance Subsidiary to conduct its insurance business. (m) OTHER INFORMATION. From time to time such other information and certifications concerning the condition and operations, financial or otherwise, of such Borrower and its Subsidiaries as the Agent or any Lender through the Agent may reasonably request. SECTION 6.02. CORPORATE EXISTENCE; FOREIGN QUALIFICATION. Do, and cause each of its Material Subsidiaries to do, or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, licenses and patents, PROVIDED that nothing in this Section 6.02 shall (a) prohibit actions permitted under Section 7.02 or (b) prevent the withdrawal by such Borrower or any such Subsidiary of its qualification as a foreign corporation or its termination of any license in any jurisdiction where such withdrawal or termination or failure to keep in full force and effect would not individually or in the aggregate have a Material Adverse Effect. SECTION 6.03. COMPLIANCE WITH LAWS. Comply, and cause each of its Subsidiaries to comply, with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, any Governmental Authority in respect of the conduct of its business and the ownership of its properties, except such noncompliance as would not individually or in the aggregate have a Material Adverse Effect. SECTION 6.04. BOOKS, RECORDS AND INSPECTIONS. (a) Maintain, and cause each of its Material Subsidiaries to maintain, books and records which are complete and correct in all material respects; (b) permit access at reasonable times by the Agent to its books and records; (c) permit the Agent and each Lender to inspect at all reasonable times its properties and operations; and (d) upon reasonable notice to such Borrower, permit the Agent and each Lender to discuss its business, operations and financial condition with its officers. SECTION 6.05. INSURANCE. Maintain, and cause each of its Material Subsidiaries to maintain, with responsible and reputable insurance companies, insurance 61 with respect to its properties and business against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses (it being understood that insurance and self-insurance shall be permitted to the extent consistent with prudent business practice among such similar businesses). SECTION 6.06. MAINTENANCE OF PROPERTIES. Maintain and preserve, and cause each of its Material Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in the ordinary course in good working order and condition, ordinary wear and tear excepted, except where the failure to do so would not have a Material Adverse Effect. SECTION 6.07. TAXES. Pay, and cause each of its Material Subsidiaries to pay, when due all taxes, except such as are being contested in good faith and by appropriate proceedings and with respect to which appropriate reserves have been established, and are being maintained, in accordance with GAAP. SECTION 6.08. MAINTENANCE OF RATINGS. At all times use their reasonable efforts to cause the senior unsecured long term debt of SunAmerica to be rated by Standard & Poor's and by Moody's, unless management determines it is in the best interests of SunAmerica not to do so. SECTION 6.09. COMPLIANCE WITH ERISA. (a) Fulfill, and cause each member of the ERISA Group to fulfill, its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan, (b) comply, and cause each member of the ERISA Group to comply, with all applicable provisions of ERISA and the Code with respect to each Plan, except where such failure or non- compliance individually or in the aggregate would not have a Material Adverse Effect and (c) not, and not permit any member of the ERISA Group to, (i) seek a waiver of the minimum funding standards under ERISA, (ii) terminate or withdraw from any Plan or (iii) take any other action with respect to any Plan which would reasonably be expected to entitle the PBGC to terminate, impose liability in respect of, or cause a trustee to be appointed to administer, any Plan, unless the actions or events described in the foregoing clauses (i), (ii) or (iii) individually or in the aggregate would not have a Material Adverse Effect. 62 ARTICLE VII NEGATIVE COVENANTS On and after the Effective Date and for so long thereafter as any Liabilities for the payment of principal or interest on the Notes remain unpaid or outstanding or the Commitments are in effect, the Borrowers will (unless otherwise consented to by the Required Lenders in accordance with Section 11.01): SECTION 7.01. LIENS. Not, and not permit any Material Subsidiary to, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except for the following (collectively called "Permitted Liens"): (a) Liens for current taxes not delinquent or for taxes being contested in good faith and by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (b) leases or subleases granted to others, easements, rights-of-way, restrictions and similar Liens on real property in each case that do not materially impair the use of such property by such Borrower or any of its Subsidiaries; (c) Liens (other than any Lien imposed by ERISA) incurred in the ordinary course of business in connection with workers' compensation, unemployment insurance or other forms of governmental insurance or benefits or to secure performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (d) Liens of mechanics, carriers, materialmen, warehousemen, repairmen and other like Liens arising in the ordinary course of business in respect of obligations which are not delinquent or which are being contested in good faith and by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; 63 (e) any Lien existing on any asset prior to the acquisition thereof by such Borrower or Material Subsidiary and not created in contemplation of such acquisition; (f) any Lien existing on any asset of any corporation at the time such corporation becomes a Material Subsidiary or is merged or consolidated with or into a Borrower or its Subsidiary and, in each case, not created in contemplation of such event; (g) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, PROVIDED that (i) such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof, and (ii) such Lien is confined solely to the asset so acquired and, if required by the terms of the instrument originally creating such Lien, other property which is an improvement to or is acquired for specific use in connection with such acquired asset; (h) Liens (including Liens existing on the date hereof) on securities or other property which are assets of any Borrower or any Material Subsidiary in respect of such Borrower's or Subsidiary's obligations under repurchase agreements, reverse repurchase agreements and securities lending arrangements with respect to such securities or other property and in respect of any other obligations contemplated by subsection (vii) of the definition of Debt in Sec- tion 1.01; (i) any Liens (i) that any applicable regulatory authority may require any Borrower or Material Subsidiary to place on its assets in connection with such authority's regulation of an Insurance Subsidiary, PROVIDED such requirement is not at the request of any Borrower or its Subsidiaries, or (ii) that may be required to comply with applicable insurance laws or regulations; (j) Liens on Permitted Collateralization Assets; 64 (k) any Liens arising in connection with (i) guaranteed investment contracts, funding agreements and other similar contracts and (ii) leasing arrangements, in each case entered into in the ordinary conduct of the business of any Borrower or Material Subsidiary; (l) Liens on assets securing Debt or other liabilities in respect of which recourse of the holder is limited solely to such assets directly securing such Debt or other liabilities; (m) Liens on assets having an aggregate book value not exceeding $40,000,000 at any one time granted under interest rate and/or currency swap arrangements, interest rate protection arrangements and futures contracts (and similar arrangements), regardless of notional amount; (n) Liens on assets of any Material Subsidiary that secure Debt or other liabilities of such Material Subsidiary and are not otherwise permitted by the foregoing clauses of this Section 7.01 so long as the aggregate principal amount of all such Debt and the aggregate amount of all such other liabilities subject to this clause (n) at any time outstanding does not exceed $50,000,000; and (o) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt or other liabilities secured by any Lien permitted by any of the foregoing clauses, PROVIDED that after giving effect to such refinancing, extension, renewal or refunding, such Lien would be permitted under the foregoing clauses. SECTION 7.02. CONSOLIDATION, MERGER, SALES OF STOCK AND ASSETS, ETC. Not, and not permit any Material Subsidiary which for or as of the end of SunAmerica's most recent fiscal year had pretax income in excess of 20% of the consolidated pretax income of SunAmerica reflected in its consolidated financial statements or assets in excess of 20% of the consolidated assets of SunAmerica reflected in its consolidated financial statements to, consolidate with or merge into or with, any other Person, or sell, lease or otherwise transfer any shares of the capital stock of SACO, SAFI or any such Material Subsidiary or all or substantially all of the assets of any Borrower or any 65 Material Subsidiary to any other Person, PROVIDED that this Section 7.02 shall not apply: (a) to any merger of SunAmerica with another Person if (x) SunAmerica is the corporation surviving such merger and (y) immediately after giving effect to such merger, no Default or Event of Default shall have occurred and be continuing; (b) to any merger or consolidation of SACO, SAFI or any such Material Subsidiary with or into, or sale of all or substantially all of its assets to, any Borrower or any wholly-owned Material Subsidiary, PROVIDED that in the case of SACO and SAFI, such Borrower is the corporation surviving such transaction, or such merger, consolidation or sale of assets is with, into or to another Borrower; (c) to any sale, transfer or other disposition that is required to comply with the order of a court or regulatory authority of competent jurisdiction, other than an order issued at the request of any Borrower or such Material Subsidiary, or that is required to comply with applicable insurance law or regulation; (d) to any shares of capital stock issued, sold, assigned, transferred or otherwise disposed of which constitute directors' qualifying shares; (e) if after giving effect to the sale, transfer or other disposition of capital stock of SACO, SAFI or any such Material Subsidiary, SunAmerica would own, directly or through SACO, 100% of the issued and outstanding Voting Stock of SACO (other than Adjustable Rate Cumulative Preferred Stock, Series A, of SACO) and SAFI and the Borrowers and their Material Subsidiaries would own directly or indirectly at least 80% of the issued and outstanding Voting Stock of such Material Subsidiary, and such sale, assignment, transfer or other disposition is made for a consideration consisting of cash or other property which is at least equal to the fair value of the capital stock disposed of; or (f) to any transaction which involves the disposition of investment assets in connection with 66 the management of such Borrower's or Material Subsidiary's investment portfolio. SECTION 7.03. BUSINESS ACTIVITIES. Not engage in any type of business, directly or indirectly, except the general types of businesses presently engaged in by the Borrowers and their respective Subsidiaries. ARTICLE VIII FINANCIAL COVENANTS On and after the Effective Date and for so long thereafter as any Liabilities for the payment of principal or interest on the Notes remain unpaid or outstanding or the Commitments remain in effect: SECTION 8.01. CONSOLIDATED TANGIBLE NET WORTH. SunAmerica shall at all times maintain a Consolidated Tangible Net Worth of no less than the greater of (a) $600,000,000 and (b) 85% of the highest Consolidated Tangible Net Worth of SunAmerica as at the end of any fiscal year ending September 30, 1991 or thereafter. SECTION 8.02. CONSOLIDATED DEBT TO TOTAL CAPITAL. SunAmerica shall at all times maintain Consolidated Debt as a percentage of Consolidated Total Capital at no greater than 40%. SECTION 8.03. RISK-BASED CAPITAL RATIO. The Borrowers shall at all times cause each of Anchor, Sun Life and any other Insurance Subsidiary that is a Material Subsidiary to maintain a Risk-Based Capital Ratio of no less than 100%. SECTION 8.04. TOTAL INVESTED ASSETS. (a) At all times when the senior unsecured debt of SunAmerica is rated at least "A-" by Standard & Poor's and "Baa3" by Moody's, the Borrowers, considered as a consolidated entity, shall own directly Investment Grade Securities which are readily saleable and which have a market value of not less than the greater of (x) $50,000,000 and (y) 10% of Total Invested Assets, and (b) at all times when the senior unsecured debt of SunAmerica is rated lower than "A-" by Standard & Poor's or "Baa3" by Moody's, the Borrowers shall own directly Investment Grade Securities which are readily saleable and which have a 67 market value of not less than the greater of (A) $100,000,000 and (B) 20% of Total Invested Assets. ARTICLE IX EVENTS OF DEFAULT SECTION 9.01. EVENTS OF DEFAULT. If any of the following events ("Events of Default") shall occur and be continuing: (a) Any Borrower shall (i) fail to pay any principal of any Advance when the same becomes due and payable hereunder or (ii) fail to pay any interest on any Advance or any fee pursuant hereto within 5 Domestic Business Days after the same becomes due and payable hereunder or (iii) fail to pay any other amount pursuant hereto within 15 Domestic Business Days after the same becomes due and payable hereunder; or (b) Any representation or warranty made by any Borrower herein or pursuant hereto shall prove to have been incorrect in any material respect when made, or any certificate or financial statement, or any report or notice prepared by any Borrower, in each case furnished by any Borrower to the Agent or any Lender pursuant hereto, shall prove to have been false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified; or (c) Any Borrower fails to perform or observe in any material respect, to the extent applicable to it, (i) any term, covenant or agreement contained in Section 6.01(i), Article VII or Article VIII if such failure shall remain unremedied for 5 Domestic Business Days after a Responsible Officer of any Borrower first learns of such failure, or (ii) any other term, covenant or agreement contained in this Agreement on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to such Borrower by the Agent; or (d) Any Borrower or any Material Subsidiary shall fail to pay any principal of or premium or 68 interest on any Debt that is outstanding in a principal amount of at least $25,000,000 (but excluding Debt outstanding hereunder) of such Borrower or such Material Subsidiary, within the applicable grace period for such payment after the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt which has not been effectively waived under such agreement or instrument if the effect of such event or condition (after the expiration of any grace or cure periods provided for therein) is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be accelerated or otherwise declared to be due and payable, or required to be prepaid prior to its maturity (other than.by a regularly scheduled required prepayment); or (e) Any Borrower or any Material Subsidiary shall (i) be generally not paying its debts as they become due, (ii) file, or consent in writing to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, (iii) make an assignment for the benefit of its creditors, (iv) consent to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) be adjudicated insolvent or be liquidated under any bankruptcy or insolvency law or (vi) take any corporate action for the purpose of accomplishing any of the foregoing; or (f) A court or governmental authority of competent jurisdiction shall enter an order appointing, without consent by any Borrower or Material Sub- sidiary, as the case may be, a custodian, receiver, trustee, liquidator, rehabilitator, or conservator or other officer with similar powers with respect to such Borrower or with respect to any substantial part of its property, or if an order for relief shall be entered in any case or proceeding for liquidation, rehabilitation or reorganization or otherwise to take advantage of any bankruptcy, insolvency or similar 69 law of any jurisdiction, or ordering the dissolution, winding-up, liquidation, receivership, rehabilitation, or conservatorship of any Borrower or any Material Subsidiary, as the case may be, or if any petition for any such relief shall be filed against any Borrower or Material Subsidiary, as the case may be, and such petition shall not be dismissed within 90 days; or (g) A judgment or order for the payment of $25,000,000 or more entered against any Borrower or any Material Subsidiary shall not have been vacated, satisfied, discharged or stayed pending appeal within 60 days from the entry thereof, or, in the event of such a stay, such judgment shall not be discharged within 60 days after such stay expires; or (h) The occurrence of a Change in Control; then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to each Borrower, declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to each Borrower, declare the Notes, the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by each Borrower, PROVIDED that upon the occurrence of an Event of Default of the types described in paragraphs (e) and (f), (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Notes, the Advances, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by each Borrower. 70 ARTICLE X AGENT SECTION 10.01. AUTHORIZATION AND ACTION. Each Lender hereby appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limita- tion, enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders (or of all Lenders in the case of actions requiring the consent of all Lenders under Section 11.01), and such instructions shall be binding upon all Lenders, PROVIDED that the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or applicable law. The Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrowers pursuant to the terms of this Agreement. SECTION 10.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or wilful misconduct. Without limitation of the generality of the foregoing, the Agent (i) may treat the payee of any Note as the holder thereof until the Agent receives and accepts an Assignment and Acceptance entered into by the Lender which is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 11.07, (ii) may consult with legal counsel (including counsel for any Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, (iii) may perform any of its duties under this Agreement by or through agents or attorneys-in-fact selected by it with reasonable care and shall not be liable for any action taken or omitted to be taken by any such agent or attorney-in- fact, (iv) makes no warranty or representation to any Lender and shall not be 71 responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement, (v) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of or to inspect the property (including the books and records) of any Borrower, (vi) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto, and (vii) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 10.03. AGENT AND AFFILIATES. With respect to its Commitment, the Advances made by it and the Notes issued to it, the Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not an Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, any Borrower, any of their respective Subsidiaries and any Person who may do business with or own securities of any Borrower or any such Subsidiaries, all as if the Agent were not an Agent hereunder and without any duty to account therefor to the Lenders. SECTION 10.04. LENDER CREDIT DECISION. Each Lender expressly acknowledges that neither the Agent, nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of any Borrower or any of their respective Subsidiaries, shall be deemed to constitute any representation or warranty by any of them to any Lender. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements referred to in Section 5.06 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently 72 and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, condition (financial or otherwise), operations, property, prospects or creditworthiness of the Borrowers or any of their respective Subsidiaries which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. SECTION 10.05. INDEMNIFICATION. The Lenders agree to indemnify the Agent (to the extent not reimbursed by any Borrower), ratably according to the respective amounts of their respective Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Agent under or in connection with any of the foregoing, PROVIDED that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or wilful misconduct. Without limiting the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Agent in connection with the prep- aration, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Agent is not reimbursed for such expenses by any Borrower. The agreements in this Section 10.05 shall survive the payment of the Notes and Advances and all other amounts payable hereunder. SECTION 10.06. SUCCESSOR AGENT. The Agent may resign at any time by giving written notice thereof to the Lenders and each Borrower. Upon any such resignation, the 73 Required Lenders shall have the right to appoint a successor Agent who is reasonably acceptable to the Borrowers. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof who is reasonably acceptable to the Borrowers and has a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as Agent the provisions of this Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. ARTICLE XI MISCELLANEOUS SECTION 11.01. AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement or the Notes, nor consent to any departure by any Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by such Borrower and the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given, PROVIDED that (a) no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (i) increase or decrease the Commitments of the Lenders (except for a ratable decrease in the Commitments of all Lenders) or subject the Lenders to any additional obligations, (ii) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (iii) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Lenders, which shall be required for the Lenders or any of them to take any action hereunder or (v) amend this 11.01, and (b) no amendment, 74 waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement or any Note. SECTION 11.02. NOTICES, ETC. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, cable communication, facsimile telecopy or similar writing) and shall be given: if to any Borrower, at its address specified below its name on the signature pages hereof; if to any Lender, at its Domestic Lending Office specified below its name on the signature page hereof; if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; and if to the Agent, at its address at Citibank, N.A., 399 Park Avenue, New York, New York 10043, Attention: Insurance Department, 12th Floor; or, as to each party, at such other address as shall be designated by such party in a written notice to the Agent and the Borrowers. All such notices and communications shall, when mailed, telegraphed, telexed, cabled or telecopied, be effective (i) on the first Domestic Business Day following the day timely deposited with Federal Express (or other equivalent national overnight courier) or United States Express Mail, with the cost of delivery prepaid or for the account of the sender; (ii) on the fifth Domestic Business Day following the day duly sent by certified or registered United States mail, postage prepaid and return receipt requested; or (iii) when otherwise actually received by the addressee on a Domestic Business Day (or on the next Domestic Business Day if received after the close of normal business hours or on any non-Domestic Business Day), except that notices and communications to the Agent pursuant to Article II or X shall not be effective until received by the Agent. SECTION 11.03. NO WAIVER; REMEDIES. No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 11.04. COSTS AND EXPENSES. Each Borrower jointly and severally agrees to pay within 30 days of demand all reasonable costs and expenses of the Agent 75 in connection with the preparation, execution, delivery, modification and amendment of this Agreement, the Notes and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities under this Agreement, and all reasonable costs and expenses, if any (including, without limitation, reasonable counsel fees and expenses, which may include the reasonable allocable costs of in-house counsel), of each Lender and the Agent in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes, and the other documents to be delivered hereunder. Each Borrower jointly and severally agrees to pay, indemnify, and hold each Lender and the Agent harmless from and against any and all other liabilities, losses, damages, penalties, actions, judgments and suits, and related reasonable costs, expenses or disbursements, of any kind or nature whatsoever in connection with or arising out of any governmental investigation, litigation or proceeding with respect to the execution, delivery, enforcement and performance of this Agreement, the Notes or the use of the proceeds of the Advances (all the foregoing, collectively, the "indemnified liabilities"), PROVIDED that no Borrower shall have any obligation hereunder to the Agent or any Lender with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the Agent or any such Lender. The agreements in this Section 11.04 shall survive repayment of the Notes and all other amounts payable hereunder. SECTION 11.05. RIGHT OF SET-OFF. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 9.01 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of Section 9.01, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by such Lender to or for the credit or the account of any Borrower against any and all of the obligations of such Borrower now or hereafter existing under this Agreement and the Notes held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or any such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify such Borrower after 76 any such set-off and application made by such Lender, PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 11.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. SECTION 11.06. BINDING EFFECT. This Agreement shall become effective when it shall have been executed by each Borrower and the Agent and when the Agent shall have been notified by each Lender that such Lender has executed it and thereafter shall be binding upon and inure to the benefit of each Borrower, the Agent and each Lender and their respective successors and assigns, except that no Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. SECTION 11.07. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may, and if demanded by any Borrower (pursuant to Section 2.09 or following a demand by such Lender pursuant to Section 2.17 or 3.03) upon at least 10 Domestic Business Days' notice to such Lender and the Agent will, assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it), PROVIDED that (i) each such assignment shall be of a constant, and not a varying, per- centage of all of the assigning Lender's rights and obligations under this Agreement, (ii) each such assignment shall be to an Eligible Assignee, (iii) the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $4,000,000 (or 100% of such Lender's remaining Commitment, if less than $4,000,000), (iv) the assigning Lender shall have entered into an assignment and acceptance agreement with such Eligible Assignee pursuant to which such Lender shall assign an amount of its commitment under the Other Agreement equal to 150% of the amount of its Commitment to be assigned hereunder, (v) the Agent and SunAmerica, on behalf of itself and the other Borrowers, shall have consented in writing to such assignment, which consent shall not be unreasonably withheld, and (vi) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment 77 and Acceptance substantially in the form of Exhibit H hereto, together with any Note or Notes subject to such assignment. In connection with any such assignment, the Lender assignor shall pay to the Agent a processing and recordation fee of $3,000. Upon such execution, delivery, acceptance and recordation and upon payment by the Lender assignee to such Lender assignor of an amount equal to the purchase price agreed between such Lender assignor and such Lender assignee, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least 3 Domestic Business Days after the execution thereof, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder, and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or the performance or observance by any Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 5.06 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such As- signment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning 78 Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (c) The Agent shall maintain at its address referred to in Section 11.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the "Register"). The entries in the Register shall be prima facie evidence of amounts due, and each Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Note or Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit H hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrowers. Within 10 Domestic Business Days after its receipt of such notice, the Borrowers, at their own expense, shall execute and deliver to the Agent in exchange for the surrendered Notes a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment hereunder, a new Note to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount 79 of such surrendered Note or Notes and shall be dated the effective date of such Assignment and Acceptance. (e) Each Lender may sell participations to one or more banks or financial institutions in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it), PROVIDED that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitment to the Borrowers hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrowers, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and (v) any agreement pursuant to which such Lender sells such participation shall provide that such Lender shall retain the sole right and responsibility to enforce the obligations of the Borrowers hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement other than, if provided in such participation agreement, the right of the participant thereunder to consent to a modification, amendment or waiver described in clause (i), (ii) or (iii) of Section 11.01. The Borrowers agree that each participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Section 2.14 or Article III with respect to its participating interest (provided that any resulting costs to the Borrowers would not exceed those which would have otherwise been payable to the Lender which shall have sold the participation to such participant). (f) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Sec- tion 11.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrowers furnished to such Lender by or on behalf of the Borrowers, PROVIDED that, through the Agent, each Lender will notify the Borrowers of its intent to disclose such information and prior to any such disclosure of information designated by a Borrower as confidential, each such assignee or participant or proposed assignee or participant shall execute a confidentiality agreement with the Borrowers whereby such assignee or participant 80 shall agree (subject to the exceptions set forth therein) to preserve the confidentiality of such confidential information. (g) Notwithstanding any other provision of this Section 11.07, any Lender may at any time assign all or any portion of its rights under this Agreement and its Notes to, or create a security interest therein in favor of, any Federal Reserve Bank, PROVIDED that no such assignment or grant shall release such Lender from its obligations hereunder. SECTION 11.08. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. For the purpose of assuring that the Agent and the Lenders may enforce their respective rights under this Agreement, each Borrower hereby irrevocably (a) agrees that any legal or equitable action, suit or proceeding against the Borrowers arising out of or relating to this Agreement or any transaction contemplated hereby or the subject matter hereof or thereof may be instituted in any state or federal court in the State of New York, (b) waives any objection that it may now or hereafter have to the venue of any action, suit or pro- ceeding, (c) irrevocably submits itself to the nonexclusive jurisdiction of any state or federal court of competent jurisdiction in the State of New York for purposes of any such action, suit or proceeding, and (d) irrevocably waives personal service of process and hereby consents to service of process upon it by certified or registered mail, return receipt requested, at its address specified in accordance with Section 11.02 and service so made shall be deemed completed on the third business day after such service is deposited in the mail. Nothing contained in this Section 11.08 shall be deemed to affect the right of the Agent and the Lenders to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Borrowers in any jurisdiction. THE BORROWERS, THE AGENT, AND THE LENDERS HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE EACH PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONCERNED WITH THIS AGREEMENT AND THE NOTES. SECTION 11.09. GOVERNING LAW. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 11.10. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts 81 and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 11.11. COLLATERAL. Each Lender represents to the Agent and each other Lender that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. SUNAMERICA INC. 11601 Wilshire Boulevard Los Angeles, California 90025 By: /s/ James R. Belardi -------------------------------------------- Name: James R. Belardi Title: Senior Vice President and Treasurer SUNAMERICA CORPORATION 11601 Wilshire Boulevard Los Angeles, California 90025 By: /s/ James R. Belardi -------------------------------------------- Name: James R. Belardi Title: Authorized Agent SUNAMERICA FINANCIAL, INC. 11601 Wilshire Boulevard Los Angeles, California 90025 By: /s/ James R. Belardi -------------------------------------------- Name: James R. Belardi Title: Authorized Agent 82 CITIBANK, N.A., in its capacity as Agent and Lender, 399 Park Avenue, 12th Floor New York, NY 10043 Attention: Ms. Kelley Hebert By: /s/ Kelley T. Hebert ------------------------------------------ Name: Kelley T. Hebert Title: Vice President Commitment: $7,000,000 LENDERS BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION 555 South Flower Street 49th Floor Los Angeles, CA 90071 Attention: Mr. Dennis Arriola By: /s/ Dennis V. Arriola ------------------------------------------- Name: Dennis V. Arriola Title: Vice President Commitment: $7,000,000 CHEMICAL BANK 4 New York Plaza New York, NY 10004 Attention: Mr. Peter Platten By: /s/ Peter Platten ------------------------------------------- Name: Peter Platten Title: Vice President Commitment: $7,000,000 83 FIRST INTERSTATE BANK OF CALIFORNIA 707 Wilshire Blvd. W16-14 Los Angeles, CA 90017 Attention: Mr. Robert Meyer By: /s/ Robert C. Meyer / Margot E. Edel ------------------------------------------- Name: Robert C. Meyer / Margot E. Edel Title: Vice President / Vice President Commitment: $7,000,000 THE FIRST NATIONAL BANK OF CHICAGO One First National Plaza 12th Floor Chicago, IL 60670-0429 Attention: Ms. Marcia Saper By: /s/ Marcia P. Saper ------------------------------------------- Name: Marcia P. Saper Title: Vice President Commitment: $7,000,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED 350 South Grand Ave., Suite 1500 Los Angeles, CA 90017 Attention: Mr. Carl-Eric Benzinger By: /s/ Juichi Tsuda ------------------------------------------- Name: Juichi Tsuda Title: General Manager Commitment: $7,000,000 84 THE CHASE MANHATTAN BANK, N.A. 1 Chase Manhattan Plaza 5th Floor New York, NY 10081 Attention: Ms. Sarah Lee Martin By: /s/ Sarah Lee Martin ------------------------------------------- Name: Sarah Lee Martin Title: Vice President Commitment: $6,000,000 THE BANK OF NEW YORK 1 Wall Street 17th Floor New York, NY 10286 Attention: Mr. Stratton Heath By: /s/ W. Michael George ------------------------------------------- Name: W. Michael George Title: Vice President Commitment: $4,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK 60 Wall Street, 22nd Floor New York, NY 10260 Attention: Ms. Anne Kelly By: /s/ Anne M. Kelly ------------------------------------------- Name: Anne M. Kelly Title: Vice President Commitment: $4,000,000 85 WESTDEUTSCHE LANDESBANK GIROZENTRALE NEW YORK AND CAYMAN ISLANDS BRANCHES 1211 Avenue of the Americas New York, NY 10021 Attention: Operations /s/ Matthew F. Tallo By: /s/ Michael F. McWalters Name: Matthew F. Tallo ----------------------------------------- Associate Name: Michael F. McWalters Title: Managing Director Commitment: $4,000,000 with a copy to: 633 West Fifth Street Suite 6750 Los Angeles, CA 90071 Attention: Mr. Robert F. Edmonds 86 EXHIBIT A FORM OF NOTE New York, New York ________________ __, 1993 For value received, SUNAMERICA INC., a Maryland corporation, SUNAMERICA CORPORATION, a Delaware corporation, and SUNAMERICA FINANCIAL, INC., a Georgia corporation (collectively, the "Borrowers"), jointly and severally promise to pay to the order of [NAME OF LENDER] (the "Lender"), for the account of its Applicable Lending Office, the unpaid principal amount of each Advance made by the Lender to the Borrowers pursuant to the Credit Agreement referred to below on the last day of the Interest Period relating to such Advance. The Borrowers jointly and severally promise to pay interest on the unpaid principal amount of each such Advance on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Citibank, N.A., 399 Park Avenue, New York, New York 10043, Attention: Insurance Department, 12th Floor. All Advances made by the Lender, the respective Types and maturities thereof and all repayments of the principal thereof shall be recorded by the Lender and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such Advance then outstanding shall be endorsed by the Lender on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof, PROVIDED, that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrowers hereunder or under the Credit Agreement. This Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement, dated as of February 1, 1993, among the Borrowers, the Lenders listed on the signature pages thereof and Citibank, N.A., as Agent for the Lenders, providing for a $60,000,000 revolving credit facility (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the acceleration of the maturity hereof upon the happening of certain events and the prepayment hereof upon the terms and conditions therein specified. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SUNAMERICA INC. By --------------------------------------- Title: SUNAMERICA CORPORATION By --------------------------------------- Title: SUNAMERICA FINANCIAL, INC. By --------------------------------------- Title: 2 Form of Note (cont'd) ADVANCES AND PAYMENTS OF PRINCIPAL - ------------------------------------------------------------------------------- Amount of Amount of Type of Principal Maturity Notation Date Advance Advance Repaid Date Made By - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 3 EXHIBIT B FORM OF NOTICE OF COMMITTED BORROWING [DATE] Citibank, N.A., as Agent for the Lenders parties to the Credit Agreement referred to below 399 Park Avenue New York, New York 10043 Attention: Insurance Department 12th Floor Ladies and Gentlemen: The undersigned, [Borrower], a _____________________________________ corporation, on behalf of itself and the other Borrowers, refers to the Credit Agreement, dated as of February 1, 1993, providing for a $60,000,000 revolving credit facility (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, the other Borrowers, the Lenders listed on the signature pages thereof and Citibank, N.A., as Agent for the Lenders, and hereby gives notice pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.02 of the Credit Agreement: (i) the [Domestic Business Day] [Eurodollar Business Day] of the Proposed Borrowing is _______________, 199_; (ii) the aggregate amount of the Proposed Borrowing is $__________;* (iii) the Type of Advances comprising the Proposed Borrowing is [CD Advances] [Base Rate Advances] [Eurodollar Advances]; - ------------------------ * Amount must be $10,000,000 or a larger multiple of $5,000,000 (or such other amount as equals the aggregate amount of the unused Commitments). (iv) Level [I] [II] [III] Status exists on the date of this Notice; and (v) the Interest Period for each Advance made as part of the Proposed Borrowing is [____ days] ____ month[s]]. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties contained in Article V of the Credit Agreement are true and correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, except to the extent they were expressly made as of the Effective Date or expressly relate to a prior date[, PROVIDED that such representations and warranties do not include those set forth in Sections 5.06(b)(iii) and 5.07]**; (B) no Default exists or will result from such Proposed Borrowing; and (C) the outstanding aggregate principal amount of all Advances, after giving effect to the Proposed Borrowing, will not exceed the aggregate amount of all Commitments in effect as of the date of such Proposed Borrowing. Very truly yours, [BORROWER] By ------------------------------------- Title: - ----------------------------------- ** Proviso to be included in Notice if, after giving effect to the Proposed Borrowing, the aggregate outstanding amount of Advances owing to the Lenders would not exceed the aggregate amount of such Advances outstanding and owing to the Lenders immediately prior to the making of the Proposed Borrowing. 2 EXHIBIT C FORM OF MONEY MARKET QUOTE REQUEST [DATE] Citibank, N.A., as Agent for the Lenders parties to the Credit Agreement referred to below 399 Park Avenue New York, New York 10043 Attention: Insurance Department 12th Floor Ladies and Gentlemen: The undersigned, [Borrower], a ______________ corporation, on behalf of itself and the other Borrowers, refers to the Credit Agreement, dated as of February 1, 1993, providing for a $60,000,000 revolving credit facility (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, the other Borrowers, the Lenders listed on the signature pages thereof and Citibank, N.A., as Agent for the Lenders, and hereby requests, pursuant to Section 2.03(b) of the Credit Agreement, Money Market Quotes under the Credit Agreement for a Borrowing comprised of Money Market Advances, and in that connection sets forth below the information relating to any such Borrowing (the "Proposed Borrowing"): (i) the [Domestic Business Day] [Eurodollar Business Day] of the Proposed Borrowing is _________________, 199__; (ii) the aggregate amount of the Proposed Borrowing is $__________*; (iii) such Money Market Quote shall offer a Money Market [Margin] [Absolute Rate]; and - ------------------------- * Amount must be $10,000,000 or a larger multiple of $5,000,000 (or such other amount as equals the aggregate amount of the unused Commitments). (iv) the Interest Period for each Advance made as part of the Proposed Borrowing is _____**. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties contained in Article V of the Credit Agreement are true and correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, except to the extent they were expressly made as of the Effective Date or expressly relate to a prior date[, PROVIDED that such representations and warranties do not include those set forth in Sections 5.06(b)(iii) and 5.07]***; (B) no Default exists or will result from such Proposed Borrowing; and (C) the outstanding aggregate principal amount of all Advances, after giving effect to the Proposed Borrowing, will not exceed the aggregate amount of all Commitments in effect as of the date of such Proposed Borrowing. Very truly yours, [BORROWER] By ------------------------------------- Title: - ------------------------- ** Not less than 7 nor more than 180 days for each Money Market Absolute Rate Advance, and 1, 2, 3, or 6 months for each Money Market LIBOR Advance, in each case subject to the provisions of the definition of Interest Period. *** Proviso to be included in Notice if, after giving effect to the Proposed Borrowing, the aggregate outstanding amount of Advances owing to the Lenders would not exceed the aggregate amount of such Advances outstanding and owing to the Lenders immediately prior to the making of the Proposed Borrowing. 2 EXHIBIT D FORM OF INVITATION FOR MONEY MARKET QUOTES [DATE] [Name of Lender] [Address] Attention: ___________________ Ladies and Gentlemen: Pursuant to Section 2.03(c) of the Credit Agreement, dated as of February 1, 1993, providing for a $60,000,000 revolving credit facility (the "Credit Agreement", the terms defined therein being used herein as therein defined), among SunAmerica Inc., a Maryland corporation, SunAmerica Corporation, a Delaware corporation, SunAmerica Financial, Inc., a Georgia corporation (collectively, the "Borrowers"), the Lenders listed on the signatures pages thereof and Citibank, N.A., as Agent for the Lenders, we are pleased on behalf of the Borrowers to invite you to submit Money Market Quotes to the Borrowers for the following proposed Money Market Borrowing(s): Date of Borrowing: ____________________ PRINCIPAL AMOUNT INTEREST PERIOD $ Such Money Market Quotes shall offer a Money Market [Margin] [Absolute Rate]. Please respond to this invitation by no later than [2:00 P.M.] [10:00 A.M.] New York City time on [date]. CITIBANK, N.A., as Agent By ------------------------------------- Authorized Officer EXHIBIT E FORM OF MONEY MARKET QUOTE Citibank, N.A., as Agent for the Lenders parties to the Credit Agreement referred to below 399 Park Avenue New York, New York 10043 Attention: Insurance Department 12th Floor Ladies and Gentlemen: Reference is made to the Credit Agreement, dated as of February 1, 1993, providing for a $60,000,000 revolving credit facility (the "Credit Agreement", the terms defined therein being used herein as therein defined), among SunAmerica Inc., a Maryland corporation, SunAmerica Corporation, a Delaware corporation, SunAmerica Financial, Inc., a Georgia corporation (collectively, the "Borrowers"), the Lenders listed on the signatures pages thereof and Citibank, N.A., as Agent for the Lenders. In response to your invitation on behalf of the Borrowers, dated ____________, 199_, we hereby make the following Money Market Quote on the following terms: 1. Quoting Lender: _________________________________________________________ 2. Person to contact at Quoting Lender: __________________________________________________________________________ 3. Date of Borrowing: _______________________________* 4. We hereby offer to make Money Market Advance(s) in the following principal amounts, for the following Interest Periods and at the following rates: - ------------------------- * As specified in the related Invitation.
Principal Interest Money Market Amount** Period*** [Margin****] [Absolute Rate*****] - ------ ------ ------- -------------- $ $
[Provided, that the aggregate principal amount of Money Market Advances for which the above offers may be accepted shall not exceed $_____________.]** We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Credit Agreement, irrevocably obligates us to make the Money Market Advance(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF LENDER] Dated: By: ------------------ ------------------------------------ Authorized Officer - -------------------- ** Principal amount bid may not exceed the principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Lender is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. *** As specified in the related Invitation. No more than 5 bids are permitted for each Interest Period. **** Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". ***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%). 2 EXHIBIT F FORM OF NOTICE OF EXTENSION Citibank, N.A., as Agent for the Lenders parties to the Credit Agreement referred to below 399 Park Avenue New York, New York 10043 Attention: Insurance Department 12th Floor Ladies and Gentlemen: The undersigned, SunAmerica Inc., a Maryland corporation, on behalf of itself and the other Borrowers, refers to the Credit Agreement, dated as of February 1, 1993, providing for a $60,000,000 revolving credit facility (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, the other Borrowers, the Lenders listed on the signature pages thereof and Citibank, N.A., as Agent for the Lenders, and hereby gives notice pursuant to Section 2.09 of the Credit Agreement that the Borrowers request an extension of the Termination Date from _______________, 19_* to _____________**. By delivery of this Notice of Extension the Borrowers hereby represent and warrant that neither any Default nor any Event of Default has occurred and is continuing and that the representations and warranties contained in Article V of the Credit Agreement are correct on and as of the date hereof and will be correct on and as of the Existing Termination Date as though made on and as of such date, except to the extent they were expressly - ------------------------- * Date must be the Existing Termination Date. ** Specify a date not more than, or that the date shall be, 364 calendar days after such Notice of Extension shall have become effective pursuant to Section 2.09(c) of the Credit Agreement. made as of the Effective Date or expressly relate to a prior date. Very truly yours, SUNAMERICA INC., for itself and on behalf of the other Borrowers By ------------------------------------- Name: Title: 2 EXHIBIT G February __, 1993 To the Lenders listed on Annex A hereto SUNAMERICA INC. Ladies and Gentlemen: I am a Vice President and Associate General Counsel of SunAmerica Inc. (formerly Broad Inc.), a Maryland corporation ("SunAmerica") and have acted as such in connection with the Credit Agreement dated as of February 1, 1993 (the "Credit Agreement") by and among SunAmerica, SunAmerica Corporation, a Delaware corporation ("SACO"), and SunAmerica Financial, Inc., a Georgia corporation ("SAFI") (SunAmerica, SACO and SAFI are each referred to as a "Borrower" and are collectively referred to as "Borrowers"), Citibank, N.A., as Agent (the "Agent") and the Lenders named therein (the "Lenders") and the $60,000,000 loan facility contemplated by the Credit Agreement. Capitalized terms used herein, unless otherwise expressly defined, have the meanings specified in the Credit Agreement. I have examined and relied upon the originals, or copies certified or otherwise identified to my satisfaction, of such records, documents, certificates and other instruments, and have made such other investigations or inquiries and considered such questions of law, as in my judgment are necessary or appropriate to enable me to render the opinions expressed below. In particular, I have examined or caused to be examined under my direction certificates of public officials, and copies, certified to my satisfaction, of such corporate documents and records of the Borrowers and of the Material Subsidiaries and of First Sun and of such other persons as I have deemed relevant and necessary as a basis for this opinion. In addition, I have relied, to the extent I have deemed such reliance proper, upon certificates of officers of the Borrowers and of the Material Subsidiaries and of First Sun with respect to the accuracy of certain material factual matters which were not independently established. I have assumed the authenticity of all documents submitted to me as originals, the conformity to originals of all documents submitted to me as copies and the genuineness of all signatures on such documents. I have also assumed that the Credit Agreement has been duly authorized, executed and delivered by all parties thereto other than the Borrowers, and constitutes all such other parties respective legal, valid, binding and enforceable obligations. Based on an officer's certificate of an officer of SunAmerica with respect to the definition in Section 1.01 of the Credit Agreement of the term "Material Subsidiary", the term "Material Subsidiary" means Sun Life, Anchor, Sun Mortgage Acceptance Corporation, and Saamsun Holdings Corp. For purposes of the opinion in the second sentence of paragraph 4 below, I have reviewed the opinion of Messrs. Debevoise & Plimpton dated February 5, 1993 to the effect that the Credit Agreement and the Notes constitute the legal, valid, binding and enforceable obligations of the Borrowers under the laws of the State of New York, and I have assumed that the Lenders and the Agent shall act in good faith and in a commercially reasonable manner in all matters in connection with the Credit Agreement and the Notes, and that the laws of the State of California are the same as the laws of the State of New York. I am an attorney admitted to practice in the State of California, and I express no opinion as to any laws other than the laws of the State of California and the federal laws of the United States of America and for the purposes of the opinions with respect to the relevant Borrower or Material Subsidiary, as the case may be, in paragraphs 1, 4 (but only to the extent of the first sentence thereof and as to execution of the Credit Agreement and the Notes) and 6 below, the general corporate laws of the States of Maryland, Delaware, Georgia and Virginia. Based upon and subject to the foregoing, I am of the opinion that: 1. Each Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and has all requisite corporate power and authority to own or lease and to operate its properties and to carry on its business as now conducted. Each Borrower is duly qualified to transact business, and is in good standing as a foreign corporation authorized to transact business, in each jurisdiction where the ownership, leasing or operation of its properties or the conduct of its business makes such qualification necessary, except where the failure to so qualify or be in good standing would not have a Material Adverse Effect. 2. The execution, delivery and performance by each Borrower of the Credit Agreement and the Notes does not (a) to the best of my knowledge, violate any law or statute or any rule or regulation of any relevant Governmental Authority applicable to any Borrower, (b) to the best of my knowledge, contravene or conflict with any order, writ, judgment or decree of any court, arbitrator or any Governmental Authority or result in any breach of or constitute a default under any agreement or instrument binding on such Borrower, or (c) contravene or conflict with any provision of the Articles of Incorporation or Bylaws of such Borrower. - 2 - 3. No material order, consent, approval, license, authorization or validation of, or material filing, recording or registration with or exemption by, any Governmental Authority regulating any Borrower is required in connection with the borrowings under the Credit Agreement or the execution, delivery or performance by each Borrower of the Credit Agreement or the Notes or the validity or enforceability of the Credit Agreement or the Notes, except such disclosure as may be necessary or appropriate under securities laws. 4. Each Borrower has taken all necessary action to authorize the borrowings under the Credit Agreement and the execution, delivery and performance by such Borrower of the Credit Agreement and the Notes. Each Borrower has duly executed and delivered the Credit Agreement and the Notes, and the Credit Agreement and the Notes constitute legal, valid and binding obligations of each Borrower enforceable against such Borrower in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws of general application relating to or affecting the rights and remedies of creditors and general principles of equity (regardless of whether asserted in a proceeding in equity or at law). 5. To the best of my knowledge, there is no action, suit or proceeding pending or threatened against any Borrower or any Material Subsidiary before any court or arbitrator or any governmental body or agency for which I believe there is a reasonable likelihood of an adverse decision which I believe would have a Material Adverse Effect or which questions the validity of the Credit Agreement or the Notes. 6. Each Material Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own or lease and to operate its properties and to carry on its business as now conducted. 7. None of the Borrowers is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 8. Each Borrower and each Material Subsidiary has all licenses, franchises, permits and other governmental authorizations necessary for the businesses presently carried on by them except where the failure to do so would not individually or in the aggregate have a Material Adverse Effect. 9. No material License of an Insurance Subsidiary (i.e., Sun Life, Anchor or First Sun) is the subject of a proceeding for suspension or revocation, except where such suspension or revocation would not individually or in the aggregate have a Material Adverse Effect. I express no opinion as to the enforceability of provisions of the Credit Agreement and the Notes (a) which broadly or vaguely waive stated rights, statutory rights, constitutional - 3 - rights or unknown future rights, (b) to the effect that rights or remedies are not exclusive, that every right or remedy is cumulative, that the election of a particular remedy or remedies does not preclude recourse to one or more other remedies, that the failure to exercise or delay in exercising any remedy does not affect or waive any rights or remedies, and that waivers, amendments or modifications may only be made in writing, (c) imposing charges in the nature of forfeitures, penalties, unreasonable liquidated damages or late charges, (d) requiring any party to indemnify any other party against loss for such other party's own negligence, tortious conduct, wrongful or unlawful act or violation of public policy, or absolving any party from liability, or limiting the liability of any party for such party's own negligence, tortious conduct, wrongful or unlawful act or violation of public policy, (e) waiving, expressly or by implication, presentment, demand, protest or notice, or the right to object to the laying of the venue of any suit, action or proceeding, or the right to claim that any suit, action or proceeding has been brought in an inconvenient forum, or the right to a jury trial or to due process of law, or other rights, remedies, claims or defenses, to the extent such waivers are contrary to law or are or would be found to be against public policy, (f) requiring the Borrowers to pay attorneys' fees of the Lenders or the Agent in connection with any proceeding in which the Lenders or the Agent are not the prevailing party, (g) the provisions of the last sentence of Section 11.07(e) of the Agreement or (h) which provide that actions may be taken or that decisions may be made at the discretion or judgment of the Agent or any Lenders or arbitrarily by the Agent or any Lenders. This opinion is rendered as of the date set forth above and I shall have no responsibility to advise you of any changes, facts or circumstances after the date hereof. This letter may not be relied upon by any other person or entity except counsel to the Agent and the Lenders. This opinion may not be furnished without my prior consent to any person or entity other than potential assignees or participants or as may be required by applicable law or regulators. Very truly yours, --------------------------------------- Susan L. Harris - 4 - ANNEX A CITIBANK, N.A. 399 Park Avenue, 12th Floor New York, NY 10043 Attention: Ms. Kelley Hebert BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION 555 South Flower Street 49th Floor Los Angeles, CA 90071 Attention: Mr. Dennis Arriola CHEMICAL BANK 4 New York Plaza New York, NY 10004 Attention: Mr. Peter Platten FIRST INTERSTATE BANK OF CALIFORNIA 707 Wilshire Blvd. W16-14 Los Angeles, CA 90017 Attention: Mr. Robert Meyer THE FIRST NATIONAL BANK OF CHICAGO One First National Plaza 12th Floor Chicago, IL 60670-0429 Attention: Ms. Marcia Saper THE INDUSTRIAL BANK OF JAPAN, LIMITED 350 South Grand Ave., Suite 1500 Los Angeles, CA 90017 Attention: Mr. Carl-Eric Benzinger THE CHASE MANHATTAN BANK, N.A. 1 Chase Manhattan Plaza 5th Floor New York, NY 10081 Attention: Ms. Sarah Lee Martin THE BANK OF NEW YORK 1 Wall Street 17th Floor New York, NY 10286 Attention: Mr. Stratton Heath MORGAN GUARANTY TRUST COMPANY OF NEW YORK 60 Wall Street, 22nd Floor New York, NY 10260 Attention: Ms. Anne Kelly WESTDEUTSCHE LANDESBANK GIROZENTRALE NEW YORK AND CAYMAN ISLANDS BRANCHES 1211 Avenue of the Americas New York, NY 10021 Attention: Operations with a copy to: 633 West Fifth Street Suite 6750 Los Angeles, CA 90071 Attention: Mr. Robert F. Edmonds EXHIBIT H ASSIGNMENT AND ACCEPTANCE Dated ___________, 199_ Reference is made to the Credit Agreement, dated as of February 1, 1993, providing for a $60,000,000 revolving credit facility (the "Credit Agreement"), among SunAmerica Inc., a Maryland corporation ("SunAmerica"), SunAmerica Corporation, a Delaware corporation ("SACO"), SunAmerica Financial, Inc., a Georgia corporation (together with SunAmerica and SACO, the "Borrowers"), the Lenders identified on the signature pages thereof and Citibank, N.A., as Agent for the Lenders (the "Agent"). Terms defined in the Credit Agreement are used herein with the same meanings. ________________________ (the "Assignor") and ______________________ (the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, for a purchase price of $_________, a _____% interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the Effective Date (as defined in paragraph 4 below) (including, without limitation, such percentage interest in the Assignor's Commitment as in effect on the Effective Date (before giving effect to any Money Market Reduction), the Advances (including Money Market Advances) owing to the Assignor on the Effective Date, and the Notes held by the Assignor).* Schedule 1 hereto sets forth the respective Commitments and Advances of the Assignor and the Assignee immediately after giving effect to this Assignment and Acceptance. 2. The Assignor (i) represents and warrants that as of the date hereof its Commitment (without giving effect to assignments thereof which have not yet become effective or any Money Market Reduction) is $___________, and the aggregate outstanding principal amount of Advances owing to it (without giving effect to assignments thereof which have not yet become effective) is $__________; (ii) represents and warrants that it is the legal and beneficial owner of the interests being assigned by it hereunder and that such interest is free and clear of any adverse claim; (iii) makes no representation or warranty - ------------------------- * The amount of Commitments being assigned shall comply with Section 11.07(a) of the Credit Agreement. and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or the performance or observance by any Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; and (v) attaches the Note referred to in paragraph 1 above and requests that the Agent exchange such Note for [a new Note dated _____________, 199_ in the principal amount of $_______, payable to the order of the Assignee] [new Notes as follows: a Note dated _____________, 199_ in the principal amount of $_______, payable to the order of the Assignee, and a Note dated _______________, 199_ in the principal amount of $_________, payable to the order of the Assignor]. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 5.06 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; [and] (vi) specifies as its Domestic Lending Office (and address for notices), Money Market Lending Office and Eurodollar Lending Office the offices set forth beneath its name on the signature pages hereof [and (vii) attaches the forms prescribed by the 2 Internal Revenue Service of the United States evidencing their exemption from U.S. withholding taxes].** 4. The effective date for this Assignment and Acceptance shall be ______________ (the "Effective Date").*** Following, and subject to, the consent in writing by the Agent and SunAmerica, on behalf of itself and the other Borrowers, to such assignment and the execution of this Assignment and Acceptance, this Assignment and Acceptance will be delivered to the Agent together with the processing fee specified in Section 11.07(a) of the Credit Agreement, for acceptance and recording by the Agent. 5. Upon such acceptance and recording and the payment by the Assignee to the Assignor of the purchase price specified in paragraph 1 above, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in the Credit Agreement, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in the Credit Agreement, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording, from and after the Effective Date, the Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. - ------------------------- ** If the Assignee is organized under the laws of a jurisdiction outside the United States. *** See Section 11.07(a). Such date shall be at least 3 Domestic Business Days after the execution of this Assignment and Acceptance. 3 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. [NAME OF ASSIGNOR] By ------------------------------------- Name: Title: [NAME OF ASSIGNEE] By ------------------------------------- Name: Title: Domestic Lending Office (and address for notices): [Address] Money Market Lending Office: [Address] Eurodollar Lending Office: [Address] 4 Accepted and consented to this _____ day of _____________, 199_ CITIBANK, N.A., as Agent By ----------------------- Name: Title: SUNAMERICA INC. By ----------------------- Name: Title: 5 SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE Dated ___________, 199_ Assignor's Commitment: $_________________ Aggregate Outstanding Principal Amount of Committed Advances Owing to Assignor $_________________ Aggregate Outstanding Principal Amount of Money Market Advances Owing to Assignor $_________________ Assignee's Commitment: $_________________ Aggregate Outstanding Principal Amount of Committed Advances Owing to Assignee $_________________ Aggregate Outstanding Principal Amount of Money Market Advances Owing to Assignee $_________________ 6 EXHIBIT I BROAD INC. CONSOLIDATING BALANCE SHEET September 30, 1992 (IN THOUSANDS)
SUN FIRST BROKER/ ASSSET LIFE ANLIC SUN DEALER MANAGER TRUST ELIM- CONSOL CONSOL AMERICA CONSOL CONSOL COMPANY INATIONS ASSETS: BONDS, NOTES AND REDEM PREF STOCK 3,530,366 1,185,199 49,072 0 0 337,864 0 SENIOR SECURED BANK LOANS 308,204 156,907 0 0 0 0 0 COMMON STOCKS, AT MARKET VALUE 22,108 10,390 0 0 0 0 0 KBHC WARRANTS, AT MARKET VALUE 7,330 0 0 0 0 0 0 SHORT-TERM INVESTMENTS 791,814 362,197 40,904 8,625 18,832 0 0 CASH 35,625 3,530 402 7,559 286 74,354 0 MORTGAGE LOANS 1,146,074 96,427 20,975 0 0 0 0 POLICY LOANS 28,196 13,195 0 0 0 0 0 REAL ESTATE 37,021 156,684 0 0 0 0 0 OTHER INVESTED ASSETS 262,943 131,965 0 0 0 0 0 --------- --------- --------- --------- --------- --------- --------- TOTAL INVESTMENTS 6,169,681 2,116,494 111,353 16,184 19,118 412,218 0 INVESTMENTS IN AFFILIATES 328,718 61,829 0 0 0 0 (410,119) ACCRUED INVESTMENT INCOME 82,699 16,664 443 57 0 4,184 0 DAC AND PVFP 145,696 240,572 1,297 0 47,692 0 0 SEPARATE ACCOUNT ASSETS 0 3,284,507 8,836 0 0 0 0 INVESTMENT IN DISCONT. OPERATIONS 0 0 0 0 0 0 0 OTHER ASSETS 24,726 12,479 1,084 21,712 27,724 8,177 0 --------- --------- --------- --------- --------- --------- --------- TOTAL ASSETS 6,751,520 5,732,545 123,013 37,953 94,534 424,579 (410,119) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- LIABILITIES RES. FOR FUTURE POLICYHOLDER BEN.: ANNUITIES AND SPL 3,346,131 1,735,565 59,400 0 0 0 0 GICs 1,739,683 0 0 0 0 0 0 CLAIMS & OTHER POLICYHOLDERS' FUNDS 0 7,406 227 0 0 0 0 NOTES PAYABLE: L-TERM NOTES AND DEBENTURES 0 0 0 0 0 0 0 CMO 182,784 0 0 0 0 0 0 SECURED NOTES PAYABLE 0 0 0 0 0 0 0 BANK NOTES 0 0 0 0 0 524 0 REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 0 0 SUBORDINATED DEBENTURES 0 0 0 0 0 0 0 SEPARATE ACCOUNT LIABILITIES 0 3,284,507 8,836 0 0 0 0 DUE TO/FROM AFFILIATES (2,123) 21,121 229 353 16,495 484 0 OTHER LIABILITIES 788,055 356,706 33,625 20,076 5,549 399,247 0 FEDERAL INCOME TAXES: CURRENT (11,969) (8,459) 609 2,298 (11,817) 1,654 0 DEFERRED 12,561 13,548 (835) (1,067) 19,212 82 0 --------- --------- --------- --------- --------- --------- --------- TOTAL LIABILITIES 6,055,122 5,410,394 102,091 21,660 29,439 401,991 0 --------- --------- --------- --------- --------- --------- --------- SHAREHOLDERS' EQUITY: PREFERRED STOCK 0 0 0 0 0 0 0 NON-TRANSFER CLASS B STOCK 0 0 0 0 0 0 0 COMMON STOCK 5,636 3,511 3,000 1 56 700 (7,267) CONTRIBUTED CAPITAL 267,670 252,876 14,428 16,249 46,738 19,415 (338,956) URCG (L) 2,675 (2,385) 0 0 0 0 2,385 URCG (L) K&B WARRANTS 6,142 0 0 0 0 0 0 RETAINED EARNINGS 414,275 68,149 3,494 43 18,301 2,473 (66,281) --------- --------- --------- --------- --------- --------- --------- TOTAL SHAREHOLDERS' EQUITY 696,398 322,151 20,922 16,293 65,095 22,588 (410,119) --------- --------- --------- --------- --------- --------- --------- TOTAL LIAB. & SH EQUITY 6,751,520 5,732,545 123,013 37,953 94,534 424,579 (410,119) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- CONSOL NON- SUNAMERICA IDATED REGULATED ELIM- CORP BROAD INC. ELIM- BROAD INC. REGULATED CONSOL INATIONS CONSOL (PARENT) INATIONS CONSOL ASSETS: BONDS, NOTES AND REDEM PREF STOCK 5,102,501 15,194 (17,870) 5,099,825 273,481 (269,254) 5,104,052 SENIOR SECURED BANK LOANS 465,111 0 0 465,111 230,432 0 695,543 COMMON STOCKS, AT MARKET VALUE 32,498 134 0 32,632 1,038 0 33,670 KBHC WARRANTS, AT MARKET VALUE 7,330 0 0 7,330 0 0 7,330 SHORT-TERM INVESTMENTS 1,222,372 13,006 0 1,235,378 139,536 0 1,374,914 CASH 121,756 4 0 121,760 14,692 0 136,452 MORTGAGE LOANS 1,263,476 0 0 1,263,476 1,981 0 1,265,457 POLICY LOANS 41,391 0 0 41,391 0 0 41,391 REAL ESTATE 193,705 0 0 193,705 (29,530) 0 164,175 OTHER INVESTED ASSETS 394,908 5,850 0 400,758 198,756 0 599,514 ---------- --------- --------- ---------- --------- --------- ---------- TOTAL INVESTMENTS 8,845,048 34,188 (17,870) 8,861,366 830,386 (269,254) 9,422,498 INVESTMENTS IN AFFILIATES (19,572) 671,104 (632,899) 18,633 700,428 (719,061) 0 ACCRUED INVESTMENT INCOME 104,047 494 0 104,541 8,631 0 113,172 DAC AND PVFP 435,257 0 0 435,257 952 0 436,209 SEPARATE ACCOUNT ASSETS 3,293,343 0 0 3,293,343 0 0 3,293,343 INVESTMENT IN DISCONT. OPERATIONS 0 0 0 0 0 0 0 OTHER ASSETS 95,902 15,847 0 111,749 8,383 12,529 132,661 ---------- --------- --------- ---------- --------- --------- ---------- TOTAL ASSETS 12,754,025 721,633 (650,769) 12,824,889 1,548,780 (975,786) 13,397,883 ---------- --------- --------- ---------- --------- --------- ---------- ---------- --------- --------- ---------- --------- --------- ---------- LIABILITIES RES. FOR FUTURE POLICYHOLDER BEN.: ANNUITIES AND SPL 5,141,096 0 0 5,141,096 0 0 5,141,096 GICs 1,739,683 0 0 1,739,683 283,365 0 2,023,048 CLAIMS & OTHER POLICYHOLDERS' FUNDS 7,633 0 0 7,633 0 0 7,633 NOTES PAYABLE: L-TERM NOTES AND DEBENTURES 0 0 0 0 225,000 0 225,000 CMO 182,784 0 0 182,784 264,988 (264,988) 182,784 SECURED NOTES PAYABLE 0 0 0 0 0 0 0 BANK NOTES 524 25,919 0 26,443 0 0 26,443 REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 0 0 SUBORDINATED DEBENTURES 0 0 0 0 0 0 0 SEPARATE ACCOUNT LIABILITIES 3,293,343 0 0 3,293,343 0 0 3,293,343 DUE TO/FROM AFFILIATES 36,559 (13,072) 18 23,505 (19,239) (4,266) 0 OTHER LIABILITIES 1,603,258 24,882 (27) 1,628,113 92,101 0 1,720,214 FEDERAL INCOME TAXES: CURRENT (27,684) 8,175 0 (19,509) 18,077 12,529 11,097 DEFERRED 43,501 (8,688) 0 34,813 2,344 0 37,157 ---------- --------- --------- ---------- --------- --------- ---------- TOTAL LIABILITIES 12,020,697 37,216 (9) 12,057,904 866,636 (256,725) 12,667,815 ---------- --------- --------- ---------- --------- --------- ---------- SHAREHOLDERS' EQUITY: PREFERRED STOCK 0 48,700 0 47,700 218,500 0 267,200 NON-TRANSFER CLASS B STOCK 0 0 0 0 6,834 0 6,834 COMMON STOCK 5,637 0 (5,637) 0 25,179 (4) 25,179 CONTRIBUTED CAPITAL 278,420 366,935 (278,420) 366,935 98,051 (367,711) 97,275 URCG (L) 2,675 2,673 (2,675) 2,673 2,211 (2,673) 2,211 URCG (L) K&B WARRANTS 6,142 6,142 (6,142) 6,142 6,142 (6,142) 6,142 RETAINED EARNINGS 440,454 259,963 (357,886) 342,531 325,227 (342,531) 325,227 ---------- --------- --------- ---------- --------- --------- ---------- TOTAL SHAREHOLDERS' EQUITY 733,328 684,417 (650,760) 766,985 682,144 (719,061) 730,068 ---------- --------- --------- ---------- --------- --------- ---------- TOTAL LIAB. & SH EQUITY 12,754,025 721,633 (650,769) 12,824,889 1,548,780 (975,786) 13,397,883 ---------- --------- --------- ---------- --------- --------- ---------- ---------- --------- --------- ---------- --------- --------- ----------
1-37 BROAD INC. CONSOLIDATING INCOME STATEMENT September 30, 1992 (IN THOUSANDS)
SUN FIRST BROKER/ ASSSET LIFE ANLIC SUN DEALER MANAGER TRUST ELIM- CONSOL CONSOL AMERICA CONSOL CONSOL COMPANY INATIONS INVESTMENT SPREAD Investment income 525,518 158,436 6,472 620 742 8,972 (3,112) Less: Credit losses 6,000 0 0 0 0 0 0 -------------------------------------------------------------------------------------- Subtotal investment income 519,518 158,436 6,472 620 742 8,972 (3,112) Less: Interest - senior debt 17,867 1,452 0 0 0 45 (3,112) Interest - subordinated de 0 0 0 0 0 0 0 Interest - accumulated val 363,204 119,781 4,104 0 0 0 0 Interest - trust deposits 0 0 0 0 0 4,256 0 Preferred dividends 0 0 0 0 0 0 0 -------------------------------------------------------------------------------------- NET INVESTMENT SPREAD 138,447 37,203 2,368 620 742 4,671 0 OTHER REVENUE Net Realized gains (losses 17,881 (23,364 3,489 0 615 (209) 0 Elimination gains (losses) 15 (7,708) 0 0 0 0 0 Equity in earnings of aff. 0 0 0 0 0 0 0 Net Retained Commissions (87) (215) (40) 19,508 300 0 0 Variable annuity fees 0 57,626 40 0 0 0 0 Asset management fees 0 0 0 0 25,269 0 0 Trust fees 0 0 0 0 0 11,041 0 Surrender charges 7,063 7,201 27 0 0 0 0 Other income (expenses), n (8,320) (1,830) 574 3,638 993 1,803 0 -------------------------------------------------------------------------------------- TOTAL OTHER REVENUE 16,552 31,710 4,090 23,146 27,177 12,635 0 -------------------------------------------------------------------------------------- EXPENSES General and administrative 53,696 28,754 1,584 21,170 13,768 12,497 0 Amortization of DAC 27,676 14,267 2,356 0 3,957 0 0 -------------------------------------------------------------------------------------- 81,372 43,021 3,940 21,170 17,725 12,497 0 INCOME BEFORE INCOME TAXES 73,627 25,892 2,518 2,596 10,194 4,809 0 INCOME TAXES (BENEFIT): Current 21,628 5,106 2,140 2,315 (10,560) 1,860 0 Deferred (828) 1,494 (1,290) (494) 14,883 40 0 -------------------------------------------------------------------------------------- *******NET INCOME******* 52,827 19,292 1,668 775 5,871 2,909 0 -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- CONSOL NON- SUNAMERICA IDATED REGULATED ELIM- CORP BROAD INC. ELIM- BROAD INC. REGULATED CONSOL INATIONS CONSOL (PARENT) INATIONS CONSOL INVESTMENT SPREAD Investment income 697,648 4,377 0 702,025 79,992 (13,004) 769,013 Less: Credit losses 6,000 0 0 6,000 0 0 6,000 -------------------------------------------------------------------------------------- Subtotal investment income 691,648 4,377 0 696,025 79,992 (13,004) 763,013 Less: Interest - senior debt 16,252 1,584 0 17,836 28,392 (13,004) 33,224 Interest - subordinated de 0 0 0 0 3,941 0 3,941 Interest - accumulated val 487,089 0 0 487,089 15,119 0 502,208 Interest - trust deposits 4,256 0 0 4,256 0 0 4,256 Preferred dividends 0 4,630 0 4,630 0 0 4,630 -------------------------------------------------------------------------------------- NET INVESTMENT SPREAD 184,051 (1,837) 0 182,214 32,540 0 214,754 OTHER REVENUE Net Realized gains (losses (1,588) (7,506) 0 (9,094) (39,577) 0 (48,671) Elimination gains (losses) (7,693) 0 0 (7,693) 0 0 (7,693) Equity in earnings of aff. 0 0 0 0 79,894 (79,894) (0) Net Retained Commissions 19,466 0 0 19,466 (611) 0 18,855 Variable annuity fees 57,666 0 0 57,666 0 0 57,666 Asset management fees 25,269 0 0 25,269 0 0 25,269 Trust fees 11,041 0 0 11,041 0 0 11,041 Surrender charges 14,291 0 0 14,291 0 0 14,291 Other income (expenses), n (3,142) 2,040 0 (1,102) 3,484 0 2,382 -------------------------------------------------------------------------------------- TOTAL OTHER REVENUE 115,310 (5,466) 0 109,844 43,190 (79,894) 73,140 -------------------------------------------------------------------------------------- EXPENSES General and administrative 131,469 445 0 131,914 1,144 0 133,058 Amortization of DAC 48,256 0 0 48,256 119 0 48,375 -------------------------------------------------------------------------------------- 179,725 445 0 180,170 1,263 0 181,433 INCOME BEFORE INCOME TAXES 119,636 (7,748) 0 111,888 74,467 (79,894) 106,461 INCOME TAXES (BENEFIT): Current 22,489 2,566 0 25,055 25,813 0 50,868 Deferred 13,805 (6,866) 0 6,939 (23,507) 0 (16,568) -------------------------------------------------------------------------------------- *******NET INCOME******* 83,342 (3,448) 0 79,894 72,161 (79,894) 72,161 -------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------
1-38 BROAD INC. (PARENT) & NON-REGULATED AFFILIATES CONSOLIDATED 10/22/92 LEGAL CONSOLIDATING BALANCE SHEET 01:57 PM September 30, 1992 (IN THOUSANDS)
SUN SUN SUN BROAD INC. AMERICA SLG AMERICA AMERICA ALIGP (PARENT) CORP. FINANCIAL ADV CORP ASSETS: BONDS, NOTES AND REDEM PREF STOCK 213,981 2,501 0 12,693 0 0 SENIOR SECURED BANK LOANS 0 0 0 0 0 0 COMMON STOCKS, AT MARKET VALUE 1,038 0 0 134 0 0 KBHC WARRANTS, AT MARKET VALUE 0 0 0 0 0 0 SHORT-TERM INVESTMENTS 91,397 11,441 0 1,565 0 0 CASH 13,801 0 0 4 0 0 MORTGAGE LOANS 1,981 0 0 0 0 0 POLICY LOANS 0 0 0 0 0 0 REAL ESTATE (29,530) 0 0 0 0 0 OTHER INVESTED ASSETS 278,894 0 0 5,824 0 26 --------- --------- --------- --------- --------- --------- TOTAL INVESTMENTS 571,562 13,942 0 20,220 0 26 INVESTMENTS IN AFFILIATES 700,430 790,951 0 17,176 0 776 ACCRUED INVESTMENT INCOME 5,448 0 0 494 0 0 DAC AND PVFP 952 0 0 0 0 0 SEPARATE ACCOUNT ASSETS 0 0 0 0 0 0 INVESTMENT IN DISCONTINUED OPERATIONS 0 0 0 0 0 0 OTHER ASSETS 8,383 726 0 7,198 0 2,000 --------- --------- --------- --------- --------- --------- TOTAL ASSETS 1,286,775 805,619 0 45,088 0 2,802 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- LIABILITIES: RES. FOR FUTURE POLICYHOLDER BEN.: ANNUITIES AND SPL 0 0 0 0 0 0 GICs 283,365 0 0 0 0 0 CLAIMS & OTHER POLICYHOLDERS' FUNDS 0 0 0 0 0 0 NOTES PAYABLE: LONG-TERM NOTES AND DEBENTURES 225,000 0 0 0 0 0 COLLATERALIZED MORTGAGE OBLIGATION 0 0 0 0 0 0 SECURED NOTES PAYABLE 0 0 0 0 0 0 BANK NOTES 0 25,919 0 0 0 0 REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 0 SUBORDINATED DEBENTURES 0 0 0 0 0 0 SEPARATE ACCOUNT LIABILITIES 0 0 0 0 0 0 DUE TO/FROM AFFILIATES (19,321) 0 0 (13,072) 0 0 OTHER LIABILITIES 95,944 2,859 0 22,023 0 0 FEDERAL INCOME TAXES: CURRENT 9,619 5,842 0 3,051 0 46 DEFERRED 10,802 (1,837) 0 (6,383) 0 0 --------- --------- --------- --------- --------- --------- TOTAL LIABILITIES 605,409 32,783 0 5,619 0 46 --------- --------- --------- --------- --------- --------- SHAREHOLDERS' EQUITY: PREFERRED STOCK 218,500 48,700 0 0 0 0 NON-TRANSFER CLASS B STOCK 6,834 0 0 0 0 0 COMMON STOCK 25,179 4 0 0 0 0 CONTRIBUTED CAPITAL 97,275 366,935 0 76,564 0 2,756 URCG (L) ON OTHER EQUITY SECURITIES 2,211 2,673 0 (2) 0 0 URCG (L) ON KBHC WARRANTS 6,142 6,142 0 0 0 0 RETAINED EARNINGS 325,225 348,382 0 (37,093) 0 0 --------- --------- --------- --------- --------- --------- TOTAL SHAREHOLDERS' EQUITY 681,366 772,836 0 39,469 0 2,756 --------- --------- --------- --------- --------- --------- TOTAL LIAB. & SH EQUITY 1,286,775 805,619 0 45,088 0 2,802 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- BROAD INC. (PARENT) & NON-REG 1401 KBHS N/A ELIM- AFFILIATES SEPULVEDA (OLDCO) INATIONS CONSOLIDATED ASSETS: BONDS, NOTES AND REDEM PREF STOCK 0 0 0 0 229,175 SENIOR SECURED BANK LOANS 0 0 0 0 0 COMMON STOCKS, AT MARKET VALUE 0 0 0 0 1,172 KBHC WARRANTS, AT MARKET VALUE 0 0 0 0 0 SHORT-TERM INVESTMENTS 0 0 0 0 104,403 CASH 0 0 0 0 13,805 MORTGAGE LOANS 0 0 0 0 1,981 POLICY LOANS 0 0 0 0 0 REAL ESTATE 0 0 0 0 (29,530) OTHER INVESTED ASSETS 0 0 0 0 284,744 ------------------------------------------------------------- TOTAL INVESTMENTS 0 0 0 0 605,750 INVESTMENTS IN AFFILIATES 0 0 0 (773,521) 735,812 ACCRUED INVESTMENT INCOME 0 0 0 0 5,942 DAC AND PVFP 0 0 0 0 952 SEPARATE ACCOUNT ASSETS 0 0 0 0 0 INVESTMENT IN DISCONTINUED OPERATIONS 0 0 0 0 0 OTHER ASSETS 1,412 4,511 0 0 24,230 --------- --------- --------- --------- --------- TOTAL ASSETS 1,412 4,511 0 (773,521) 1,372,686 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- LIABILITIES: RES. FOR FUTURE POLICYHOLDER BEN.: ANNUITIES AND SPL 0 0 0 0 0 GICs 0 0 0 0 283,365 CLAIMS & OTHER POLICYHOLDERS' FUNDS 0 0 0 0 0 NOTES PAYABLE: LONG-TERM NOTES AND DEBENTURES 0 0 0 0 225,000 COLLATERALIZED MORTGAGE OBLIGATION 0 0 0 0 0 SECURED NOTES PAYABLE 0 0 0 0 0 BANK NOTES 0 0 0 0 25,919 REVERSE REPURCHASE AGREEMENTS 0 0 0 0 0 SUBORDINATED DEBENTURES 0 0 0 0 0 SEPARATE ACCOUNT LIABILITIES 0 0 0 0 0 DUE TO/FROM AFFILIATES 0 0 0 0 (32,393) OTHER LIABILITIES 0 0 0 (5) 120,821 FEDERAL INCOME TAXES: CURRENT 0 (764) 0 0 17,794 DEFERRED 0 (468) 0 0 2,114 --------- --------- --------- --------- --------- TOTAL LIABILITIES 0 (1,232) 0 (5) 642,620 --------- --------- --------- --------- --------- SHAREHOLDERS' EQUITY: PREFERRED STOCK 0 0 0 0 267,200 NON-TRANSFER CLASS B STOCK 0 0 0 0 6,834 COMMON STOCK 0 0 0 (4) 25,179 CONTRIBUTED CAPITAL 1,412 8,907 0 (456,574) 97,275 URCG (L) ON OTHER EQUITY SECURITIES 0 0 0 (2,671) 2,211 URCG (L) ON KBHC WARRANTS 0 0 0 (6,142) 6,142 RETAINED EARNINGS 0 (3,164) 0 (308,125) 325,225 --------- --------- --------- --------- --------- TOTAL SHAREHOLDERS' EQUITY 1,412 5,743 0 (773,516) 730,066 --------- --------- --------- --------- --------- TOTAL LIAB. & SH EQUITY 1,412 4,511 0 (773,521) 1,372,686 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Other liabilities includes SAF's cash overdraft of $14.2 million. 9-22 BROAD INC. (PARENT) & NON-REGULATED AFFILIATES CONSOLIDATED 10/22/92 LEGAL CONSOLIDATING INCOME STATEMENT 01:58 PM September 30, 1992 (IN THOUSANDS)
SUN SUN SUN BROAD INC. AMERICA SLG AMERICA AMERICA ALIGP (PARENT) CORP. FINANCIAL ADV CORP INVESTMENT SPREAD Investment income 63,945 864 0 3,468 0 45 Less: Credit losses 0 0 0 0 0 0 -------------------------------------------------------------------------- Subtotal investment income 63,945 864 0 3,468 0 45 Less: Interest on senior debt 15,388 1,584 0 0 0 0 Interest on subordinated deb 3,941 0 0 0 0 0 Interest on accumulated valu 15,119 0 0 0 0 0 Interest on trust deposits 0 0 0 0 0 0 Preferred dividends 0 4,630 0 0 0 0 -------------------------------------------------------------------------- NET INVESTMENT SPREAD 29,497 (5,350) 0 3,468 0 45 OTHER REVENUE Net Realized gains (losses) (39,577) (59) 0 (6,651) 0 0 Elimination gains (losses) 0 0 0 0 0 0 Equity in earnings of aff. 54,629 90,143 0 (1,319) 0 0 Net Retained Commissions (611) 0 0 0 0 0 Variable annuity fees 0 0 0 0 0 0 Asset management fees 0 0 0 0 0 0 Trust fees 0 0 0 0 0 0 Surrender charges 0 0 0 0 0 0 Other income (expenses), net 5,550 (2) 0 1,952 0 90 -------------------------------------------------------------------------- TOTAL OTHER REVENUE 19,991 90,082 0 (6,018) 0 90 -------------------------------------------------------------------------- EXPENSES General and administrative 167 32 0 413 0 0 Amortization of DAC 119 0 0 0 0 0 -------------------------------------------------------------------------- 286 32 0 413 0 0 -------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 49,202 84,700 0 (2,963) 0 135 INCOME TAXES (BENEFIT): Current 17,355 (270) 0 2,783 0 46 Deferred (15,049) 0 0 (6,847) 0 0 -------------------------------------------------------------------------- *******NET INCOME******* 46,896 84,970 0 1,101 0 89 -------------------------------------------------------------------------- -------------------------------------------------------------------------- BROAD INC. (PARENT) & NON-REG 1401 KBHS N/A ELIM- AFFILIATES SEPULVEDA (OLDCO) INATIONS CONSOLIDATED INVESTMENT SPREAD Investment income 0 0 0 0 68,322 Less: Credit losses 0 0 0 0 0 -------------------------------------------------------------- Subtotal investment income 0 0 0 0 68,322 Less: Interest on senior debt 0 0 0 0 16,972 Interest on subordinated deb 0 0 0 0 3,941 Interest on accumulated valu 0 0 0 0 15,119 Interest on trust deposits 0 0 0 0 0 Preferred dividends 0 0 0 0 4,630 -------------------------------------------------------------- NET INVESTMENT SPREAD 0 0 0 0 27,660 OTHER REVENUE Net Realized gains (losses) 0 (796) 0 0 (47,083) Elimination gains (losses) 0 0 0 0 0 Equity in earnings of aff. 0 0 0 (85,375) 58,078 Net Retained Commissions 0 0 0 0 (611) Variable annuity fees 0 0 0 0 0 Asset management fees 0 0 0 0 0 Trust fees 0 0 0 0 0 Surrender charges 0 0 0 0 0 Other income (expenses), net 0 0 0 0 7,590 -------------------------------------------------------------- TOTAL OTHER REVENUE 0 (796) 0 (85,375) 17,974 -------------------------------------------------------------- EXPENSES General and administrative 0 0 0 0 612 Amortization of DAC 0 0 0 0 119 -------------------------------------------------------------- 0 0 0 0 731 -------------------------------------------------------------- INCOME BEFORE INCOME TAXES 0 (796) 0 (85,375) 44,903 INCOME TAXES (BENEFIT): Current 0 7 0 0 19,921 Deferred 0 (19) 0 0 (21,915) -------------------------------------------------------------- *******NET INCOME******* 0 (784) 0 (85,375) 46,896 -------------------------------------------------------------- --------------------------------------------------------------
9-23 EX-10.(M) 5 EXHIBIT 10 (M) EXHIBIT 10(m) FIRST AMENDMENT TO CREDIT AGREEMENT FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of January 30, 1994, among SUNAMERICA INC., a Maryland corporation ("SunAmerica"), and SUNAMERICA FINANCIAL, INC., a Georgia corporation (together with SunAmerica, the "Borrowers"), the banks listed on the signature pages hereof (the "Lenders") and CITIBANK, N.A., as agent (the "Agent") for the Lenders. WHEREAS, the parties hereto are parties to the Credit Agreement, dated as of February 1, 1993, originally providing for a $90,000,000 revolving credit facility (the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings specified in the Credit Agreement); WHEREAS, on August 31, 1993, SunAmerica Corporation, a Borrower under the Credit Agreement, merged into SunAmerica; and WHEREAS, the parties hereto desire to amend the Credit Agreement as described below. NOW, THEREFORE, the parties hereto agree was follows: 1. AMENDMENT. On the effective date hereof, the Credit Agreement shall be amended as follows: (a) SECTION 1.01. (i) The definitions of "Level I Status", "Level II Status" and "Level III Status" contained in Section 1.01 of the Credit Agreement are amended and restated in their entirety to read as follows: "LEVEL I STATUS" means that, at 8:30 a.m., New York City time, at any date of determination, SunAmerica's senior unsecured long term debt is rated "AA-" or better by Standard & Poor's and "A2" or better by Moody's. "LEVEL II STATUS" means that, at 8:30 a.m., New York City time, at any date of determination, SunAmerica's senior unsecured long term debt is rated "A" or better by Standard & Poor's and "Baa1" or better by Moody's, but Level I Status does not exist. "LEVEL III STATUS" means that, at 8:30 a.m., New York City time, at any date of determination, SunAmerica's senior long term debt is rated "A-" or better by Standard & Poor's and "Baa2" or better by Moody's, but neither Level I Status nor Level II Status exists. (ii) Section 1.01 of the Credit Agreement is amended by inserting in alphabetical order the definition of "Level IV Status" to read in its entirety as follows: "LEVEL IV STATUS" means that, at 8:30 a.m., New York City time, at any date of determination, SunAmerica's senior unsecured long term debt is rated "BBB+" or below by Standard & Poor's or "Baa3" or below by Moody's or is not rated as of such date by Standard & Poor's or Moody's. (iii) The definition of "Commitment" contained in Section 1.01 of the Credit Agreement is amended by replacing the phrase "the signature pages hereof" with the phrase "Schedule 1 hereto". (iv) The definition of "Other Agreement" contained in Section 1.01 of the Credit Agreement is amended by replacing by phrase "providing a $60,000,000 revolving credit facility with the phrase ", as amended by the First Amendment to Credit Agreement dated as of January 30, 1994, providing a $160,000,000 revolving credit facility, as the same may be further amended from time to time". (b) SECTION 2.02. Clause (d) of Section 2.02 of the Credit Agreement is amended by replacing the words "or Level III Status" with the words ", Level III Status or Level IV Status". (c) SECTION 2.07. (i) Section 2.07(b) of the Credit Agreement is amended by replacing the second paragraph thereof with the following: "CD Margin" means (i) 0.43% for any day on which Level I Status exists, (ii) 0.575% for any day on which Level II Status or Level III Status exists and (iii) 0.675% for any day on which Level IV Status exists. (ii) Section 2.07(c) of the Credit Agreement is amended by replacing the second paragraph of subsection (i) thereof with the following: "Eurodollar Margin" means (1) 0.305% for any day on which Level I Status exists, (2) 0.45% for any day on which Level II Status, and (3) 0.55% for any day on which Level III Status or Level IV Status exists. (iii) Section 2.07(e) of the Credit Agreement is amended by (A) replacing the phrase "'Level I Status', 'Level II 2 Status' or 'Level III Status'" where it appears in the last sentence thereof with the phrase "'Level I Status', 'Level II Status', 'Level III Status' or 'Level IV Status'", and (B) replacing the phrase "'Level I Status', 'Level II Status' and 'Level III Status'" where it appears in the last sentence thereof with the phrase "'Level I Status', 'Level II Status', 'Level III Status' and 'Level IV Status'". (d) SECTION 2.08. (i) Section 2.08(a) of the Credit Agreement is amended by replacing the first sentence thereof with the following: "The Borrowers shall pay to the Agent for the account of the Lenders ratably in proportion to their respective Commitments a commitment fee at the following rates per annum: (i) 0.0675% for any day on which Level I Status or Level II Status exists, (ii) 0.075% for any day on which Level II Status exists, (iii) 0.15% for any day on which Level III Status exists and (iv) 0.25% for any day on which Level IV Status exists." (ii) Section 2.08(b) of the Credit Agreement is amended by replacing the first sentence thereof with the following: "The Borrowers shall pay to the Agent for the account of the Lenders ratably a facility fee at the following rates per annum: (i) 0.12% for any day on which Level I Status exists, (ii) 0.15% for any day on which Level II Status or Level III Status exists and (iii) 0.25% for any day on which Level IV Status exists." (e) SECTION 5.06. (i) Section 5.06(a) of the Credit Agreement is amended (A) by replacing the phrase "and 1991" where it appears in the first sentence of subsection (i) thereof with the phrase ", 1991 and 1992", and (B) inserting at the end of subsection (ii) thereof the following: "As of September 30, 1993, the Risk-Based Capital Ratio of Anchor and Sun Life were, respectively, 188% and 232%, and as of the effective date of the First Amendment to Credit Agreement dated as of January 30, 1994 there has been no material reduction in the Risk-Based Capital Ratio of Anchor or Sun Life." (ii) Section 5.06(b) of the Credit Agreement is amended by (A) inserting after the words "(the 'Information Memorandum')," in the first sentence of subsection (ii) thereof the following: "and the projected financial statements of SunAmerica and its Subsidiaries for the fiscal year ending September 30, 1994 set forth in the materials titled 'SunAmerica Inc. Bank Meeting, dated November 18, 1993' prepared for use in 3 connection with the First Amendment to Credit Agreement dated as of January 30, 1994 (the "Bank Presentation Materials")", (B) inserting after the words "Effective Date" in the second sentence of subsection (ii) thereof the following: ", in the case of the projections contained in the Information Memorandum, and as of the effective date of the First Amendment to Credit Agreement dated as of January 30, 1994, in the case of the projections contained in the Bank Presentation Materials,". (f) SIGNATURE PAGES. The signature pages of the Credit Agreement are amended by deleting the references to each Lender's Commitment. (g) SCHEDULE 1. A new Schedule 1 is hereby added to the Credit Agreement to read in its entirety as set forth in Exhibit A hereto. (h) EXHIBITS B, C, D, E AND G. Exhibits B, C, D, E and G to the Credit Agreement are each amended by inserting before the words "the 'Credit Agreement'" in the first parenthetical of the first paragraph of each such exhibit the following: "as amended by the First Amendment to Credit Agreement, dated as of January 30, 1994, and as the same may be further amended from time to time,". Exhibit B is further amended by inserting after the word "[III]" in clause (iv) of the first paragraph thereof the following: "[IV]". 2. CONDITIONS PRECEDENT TO EFFECTIVENESS. This First Amendment to Credit Agreement shall become effective on January 30, 1994, PROVIDED that as of such date this First Amendment to Credit Agreement has been executed and delivered by each of the parties hereto and the following conditions precedent shall have been satisfied (or waived in accordance with Section 11.01 of the Credit Agreement): (a) receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any Lender as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such Lender of execution of a counterpart hereof by such Lender); (b) receipt by the Agent of an opinion of Susan L. Harris, the Secretary and Associate General Counsel of SunAmerica, dated January 30, 1994, covering such matters relating to the transactions contemplated hereby as the Agent may reasonably request; 4 (c) receipt by the Agent of a certificate of a Responsible Officer of each Borrower, dated as of January 30, 1994, to the effect that (i) the representations and warranties of such Borrower contained in Article V of the Credit Agreement (as amended by this First Amendment to Credit Agreement) are true and correct in all material respects on the date of such certificate with the same effect as though made on and as of the date of such certificate except to the extent they expressly relate to a prior date and (ii) no Default exists or results from the execution and delivery by such Borrower of this First Amendment to Credit Agreement; and (d) receipt by the Agent of all documents reasonably requested by the Agent relating to the existence and good standing of the Borrowers, the corporate authority for and validity of the Credit Agreement as amended by this First Amendment to Credit Agreement, and any other matters relevant hereto, all in form and substance satisfactory to the Agent and the Agent's counsel. 3. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers jointly and severally represents and warrants to the Agent and each of the Lenders that: (i) the representations and warranties of the Borrowers contained in Article V of the Credit Agreement (as amended by this First Amendment to Credit Agreement) are true and correct in all material respects on the date hereof with the same effect as though made on and as of the date hereof except to the extent they expressly relate to a prior date and (ii) no Default exists or results from the execution and delivery by the Borrowers of this First Amendment to Credit Agreement. 4. FULL FORCE AND EFFECT. All of the terms and provisions of the Credit Agreement, as amended hereby, are and shall continue to be in full force and effect and the Agent and the Lenders shall be entitled to all the benefits thereof. 5. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. 6. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 5 IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Credit Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. SUNAMERICA INC. By: JAMES R. BELARDI ------------------------ James R. Belardi Senior Vice President and Treasurer SUNAMERICA FINANCIAL, INC. By: JAMES R. BELARDI ------------------------ James R. Belardi Authorized Agent CITIBANK, N.A., in its capacity as Agent and Lender By: KELLEY T. HEBERT ------------------------ Kelley T. Hebert Vice President 6 LENDERS BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION By: DENNIS V. ARRIOLA ------------------------ Dennis V. Arriola Vice President CHEMICAL BANK By: BRIAN J. TURRENTINE ------------------------ Brian J. Turrentine Vice President FIRST INTERSTATE BANK OF CALIFORNIA By: ROBERT C. MEYER ------------------------ Robert C. Meyer Vice President By: MARGOT ANDERSON ------------------------ Margot Anderson Vice President THE FIRST NATIONAL BANK OF CHICAGO By: MARCIA SAPER ------------------------ Marcia Saper Vice President THE INDUSTRIAL BANK OF JAPAN, LIMITED By: SHU TAMARU ------------------------ Shu Tamaru Joint General Manager THE CHASE MANHATTAN BANK, N.A. By: DANA L. RAGIEL ------------------------ Dana L. Ragiel Vice President 7 THE BANK OF NEW YORK By: STRATTON R. HEATH ------------------------ Stratton R. Heath Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: JOSEPH T. WILSON, JR. ------------------------ Joseph T. Wilson, Jr. Vice President WESTDEUTSCHE LANDESBANK GIROZENTRALE New York and Cayman Islands Branches By: ELIE B. KHOURY ------------------------ Elie B. Khoury Vice President By: MATTHEW F. TALLO ------------------------ Matthew F. Tallo Associate 8 EXHIBIT A TO FIRST AMENDMENT TO CREDIT AGREEMENT SCHEDULE 1 TO CREDIT AGREEMENT NAME OF LENDER COMMITMENT CITIBANK, N.A. $9,630,000 BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION $9,630,000 CHEMICAL BANK $9,630,000 FIRST INTERSTATE BANK OF CALIFORNIA $9,630,000 THE FIRST NATIONAL BANK OF CALIFORNIA $9,630,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED $9,630,000 THE CHASE MANHATTAN BANK, N.A. $9,630,000 THE BANK OF NEW YORK $9,630,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK $6,480,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE NEW YORK AND CAYMAN ISLANDS BRANCHES $6,480,000 9 EX-10.(N) 6 EXHIBIT 10 (N) EXHIBIT 10(n) FIRST AMENDMENT TO CREDIT AGREEMENT FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of January 30, 1994, among SUNAMERICA INC., a Maryland corporation ("SunAmerica"), and SUNAMERICA FINANCIAL, INC., a Georgia corporation (together with SunAmerica, the "Borrowers"), the banks listed on the signature pages hereof (the "Lenders") and CITIBANK, N.A., as agent (the "Agent") for the Lenders. WHEREAS, the parties hereto are parties to the Credit Agreement, dated as of February 1, 1993, originally providing for a $60,000,000 revolving credit facility (the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings specified in the Credit Agreement); WHEREAS, on August 31, 1993, SunAmerica Corporation, a Borrower under the Credit Agreement, merged into SunAmerica; and WHEREAS, the parties hereto desire to amend the Credit Agreement as described below. NOW, THEREFORE, the parties hereto agree was follows: 1. AMENDMENT. On the effective date hereof, the Credit Agreement shall be amended as follows: (a) SECTION 1.01. (i) The definition of "Commitment", "Level I Status", "Level II Status" and "Level III Status" contained in Section 1.01 of the Credit Agreement are amended and restated in their entirety to read as follows: "COMMITMENT" means the amount set forth opposite each Lender's name on Schedule 1 hereto (or in an Assignment and Acceptance entered into by it) as its Commitment (which shall be $160,000,000 in the aggregate for all Lenders as of January 30, 1994), as such amount may be adjusted from time to time to give effect to Money Market Reductions pursuant to Section 2.01 or reduced from time to time pursuant to Section 2.10. "LEVEL I STATUS" means that, at 8:30 a.m., New York City time, at any date of determination, SunAmerica's senior unsecured long term debt is rated "AA-" or better by Standard & Poor's and "A2" or better by Moody's. "LEVEL II STATUS" means that, at 8:30 a.m., New York City time, at any date of determination, SunAmerica's senior unsecured long term debt is rated "A" or better by Standard & Poor's and "Baa1" or better by Moody's, but Level I Status does not exist. "LEVEL III STATUS" means that, at 8:30 a.m., New York City time, at any date of determination, SunAmerica's senior long term debt is rated "A-" or better by Standard & Poor's and "Baa2" or better by Moody's, but neither Level I Status nor Level II Status exists. (ii) Section 1.01 of the Credit Agreement is amended by inserting in alphabetical order the definition of "Level IV Status" to read in its entirety as follows: "LEVEL IV STATUS" means that, at 8:30 a.m., New York City time, at any date of determination, SunAmerica's senior unsecured long term debt is rated "BBB+" or below by Standard & Poor's or "Baa3" or below by Moody's or is not rated as of such date by Standard & Poor's or Moody's. (iii) The definition of "Other Agreement" contained in Section 1.01 of the Credit Agreement is amended by inserting at the end thereof the following: ", as amended January 30, 1994, and as the same day be further amended from time to time". (iv) The definition of "Termination Date" contained in Section 1.01 of the Credit Agreement is amended by replacing the phrase "January 30, 1994" with the phrase "January 28, 1995". (b) SECTION 2.02. Clause (d) of Section 2.02 of the Credit Agreement is amended by replacing the words "or Level III Status" with the words ", Level III Status or Level IV Status". (c) SECTION 2.07. (i) Section 2.07(b) of the Credit Agreement is amended by replacing the second paragraph thereof with the following: "CD Margin" means (i) 0.425% for any day on which Level I Status exists, (ii) 0.525% for any day on which Level II Status or Level III Status exists and (iii) 0.625% for any day on which Level IV Status exists. (ii) Section 2.07(c) of the Credit Agreement is amended by replacing the second paragraph of subsection (i) thereof with the following: 2 "Eurodollar Margin" means (1) 0.30% for any day on which Level I Status exists, (2) 0.40% for any day on which Level II Status or Level III Status exists, and (3) 0.50% for any day on which Level IV Status exists. (iii) Section 2.07(e) of the Credit Agreement is amended by (A) replacing the phrase "'Level I Status', 'Level II Status' or 'Level III Status'" where it appears in the last sentence thereof with the phrase "'Level I Status', 'Level II Status', 'Level III Status' or 'Level IV Status'", and (B) replacing the phrase "'Level I Status', 'Level II Status', 'Level III Status'" where it appears in the last sentence thereof with the phrase "'Level I Status', 'Level II Status', 'Level III Status' and 'Level IV Status'". (d) SECTION 2.08. (i) Section 2.08(a) of the Credit Agreement is amended by replacing the first sentence thereof with the following: "The Borrowers shall pay to the Agent for the account of the Lenders ratably in proportion to their respective Commitments a commitment fee at the following rates per annum: (i) 0.025% for any day on which Level I Status or Level II Status exists, (ii) 0.0625% for any day on which Level II Status exists and (iii) 0.10% for any day on which Level IV Status exists." (ii) Section 2.08(b) of the Credit Agreement is amended by replacing the first sentence thereof with the following: "The Borrowers shall pay to the Agent for the account of the Lenders ratably a facility fee at the following rates per annum: (i) 0.075% for any day on which Level I Status exists, (ii) 0.10% for any day on which Level II Status exists, (iii) 0.125% for any day on which Level III Status exists and (iv) 0.175% for any day on which level IV Status exists." (e) SECTION 5.06. (i) Section 5.06(a) of the Credit Agreement is amended (A) by replacing the phrase "and 1991" where it appears in the first sentence of subsection (i) thereof with the phrase ", 1991 and 1992", and (B) inserting at the end of subsection (ii) thereof the following: "As of September 30, 1993, the Risk-Based Capital Ratio of Anchor and Sun Life were, respectively, 188% and 232%, and as of the effective date of the First Amendment to Credit Agreement dated as of January 30, 1994 there has been no material reduction in the Risk-Based Capital Ratio of Anchor or Sun Life." 3 (ii) Section 5.06(b) of the Credit Agreement is amended by (A) inserting after the words "(the 'Information Memorandum')," in the first sentence of subsection (ii) thereof the following: "and the projected financial statements of SunAmerica and its Subsidiaries for the fiscal year ending September 30, 1994 set forth in the materials titled 'SunAmerica Inc. Bank Meeting, dated November 18, 1993' prepared for use in connection with the First Amendment to Credit Agreement dated as of January 30, 1994 (the "Bank Presentation Materials")", (B) inserting after the words "Effective Date" in the second sentence of subsection (ii) thereof the following: ", in the case of the projections contained in the Information Memorandum, and as of the effective date of the First Amendment to Credit Agreement dated as of January 30, 1994, in the case of the projections contained in the Bank Presentation Materials,". (f) SIGNATURE PAGES. The signature pages of the Credit Agreement are amended by deleting the references to each Lender's Commitment. (g) SCHEDULE 1. A new Schedule 1 is hereby added to the Credit Agreement to read in its entirety as set forth in Exhibit A hereto. (h) EXHIBITS B, C, D, E, F AND H. Exhibits B, C, D, E, F and H to the Credit Agreement are each amended by (i) replacing the word "$60,000,000" in the first paragraph of each such exhibit with the word "$160,000,000", and (ii) inserting before the words "the 'Credit Agreement'" in the first parenthetical of the first paragraph of each such exhibit the following: "as amended by the First Amendment to Credit Agreement, dated as of January 30, 1994, and as the same may be further amended from time to time,". Exhibit B is further amended by inserting after the words "[III]" in clause (iv) of the first paragraph thereof the following: "[IV]". 2. CONDITIONS PRECEDENT TO EFFECTIVENESS. This First Amendment to Credit Agreement shall become effective on January 30, 1994, PROVIDED that as of such date this First Amendment to Credit Agreement has been executed and delivered by each of the parties hereto and the following conditions precedent shall have been satisfied (or waived in accordance with Section 11.01 of the Credit Agreement): (a) receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any Lender as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, 4 telex or other written confirmation from such Lender of execution of a counterpart hereof by such Lender); (b) receipt by the Agent of an opinion of Susan L. Harris, the Secretary and Associate General Counsel of SunAmerica, dated January 30, 1994, covering such matters relating to the transactions contemplated hereby as the Agent may reasonably request; (c) receipt by the Agent of a certificate of a Responsible Officer of each Borrower, dated as of January 30, 1994, to the effect that (i) the representations and warranties of such Borrower contained in Article V of the Credit Agreement (as amended by this First Amendment to Credit Agreement) are true and correct in all material respects on the date of such certificate with the same effect as though made on and as of the date of such certificate except to the extent they expressly relate to a prior date and (ii) no Default exists or results from the execution and delivery by such Borrower of this First Amendment to Credit Agreement; and (d) receipt by the Agent of all documents reasonably requested by the Agent relating to the existence and good standing of the Borrowers, the corporate authority for and validity of the Credit Agreement as amended by this First Amendment to Credit Agreement, and any other matters relevant hereto, all in form and substance satisfactory to the Agent and the Agent's counsel. 3. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers jointly and severally represents and warrants to the Agent and each of the Lenders that: (i) the representations and warranties of the Borrowers contained in Article V of the Credit Agreement (as amended by this First Amendment to Credit Agreement) are true and correct in all material respects on the date hereof with the same effect as though made on and as of the date hereof except to the extent they expressly relate to a prior date and (ii) no Default exists or results from the execution and delivery by the Borrowers of this First Amendment to Credit Agreement. 4. FULL FORCE AND EFFECT. All of the terms and provisions of the Credit Agreement, as amended hereby, are and shall continue to be in full force and effect and the Agent and the Lenders shall be entitled to all the benefits thereof. 5. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. 5 6. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Credit Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. SUNAMERICA INC. By: JAMES R. BELARDI ------------------------ James R. Belardi Senior Vice President and Treasurer SUNAMERICA FINANCIAL, INC. By: JAMES R. BELARDI ------------------------ James R. Belardi Authorized Agent CITIBANK, N.A., in its capacity as Agent and Lender By: KELLEY T. HEBERT ------------------------ Kelley T. Hebert Vice President 6 LENDERS BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION By: DENNIS V. ARRIOLA ------------------------ Dennis V. Arriola Vice President CHEMICAL BANK By: BRIAN J. TURRENTINE ------------------------ Brian J. Turrentine Vice President FIRST INTERSTATE BANK OF CALIFORNIA By: ROBERT C. MEYER ------------------------ Robert C. Meyer Vice President By: MARGOT ANDERSON ------------------------ Margot Anderson Vice President THE FIRST NATIONAL BANK OF CHICAGO By: MARCIA SAPER ------------------------ Marcia Saper Vice President THE INDUSTRIAL BANK OF JAPAN, LIMITED By: SHU TAMARU ------------------------ Shu Tamaru Joint General Manager THE CHASE MANHATTAN BANK, N.A. By: DANA L. RAGIEL ------------------------ Dana L. Ragiel Vice President 7 THE BANK OF NEW YORK By: STRATTON R. HEATH ------------------------ Stratton R. Heath Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: JOSEPH T. WILSON, JR. ------------------------ Joseph T. Wilson, Jr. Vice President WESTDEUTSCHE LANDESBANK GIROZENTRALE New York and Cayman Islands Branches By: ELIE B. KHOURY ------------------------ Elie B. Khoury Vice President By: MATTHEW F. TALLO ------------------------ Matthew F. Tallo Associate 8 EXHIBIT A TO FIRST AMENDMENT TO CREDIT AGREEMENT SCHEDULE 1 TO CREDIT AGREEMENT NAME OF LENDER COMMITMENT CITIBANK, N.A. $17,120,000 BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION $17,120,000 CHEMICAL BANK $17,120,000 FIRST INTERSTATE BANK OF CALIFORNIA $17,120,000 THE FIRST NATIONAL BANK OF CALIFORNIA $17,120,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED $17,120,000 THE CHASE MANHATTAN BANK, N.A. $17,120,000 THE BANK OF NEW YORK $17,120,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK $11,520,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE NEW YORK AND CAYMAN ISLANDS BRANCHES $11,520,000 9 EX-10.(O) 7 EXHIBIT 10 (O) EXHIBIT 10(o) LIST OF EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS Employment Agreement dated July 30, 1992, between the Company and Gary W. Krat - Exhibit 10(e) to the Company's 1992 Annual Report on Form 10-K, filed November 30, 1992. Employment Agreement, dated July 14, 1992, between the Company and Michael L. Fowler - Exhibit 10(f) to the Company's 1992 Annual Report on Form 10-K, filed November 30, 1992. 1988 Employee Stock Plan - Exhibit B to the Company's and Kaufman and Broad Home Corporation's Notice of and Joint Proxy Statement for Special Meeting of Shareholders held on February 21, 1989, filed January 24, 1989. Amended and Restated 1978 Employee Stock Option Program - Appendix A to the Company's Notice of 1987 Annual Meeting of Shareholders and Proxy Statement, filed March 24, 1987. Executive Deferred Compensation Plan - Exhibit 10(l) to the Company's 1985 Annual Report on Form 10-K, filed February 27, 1986. 1987 Restricted Stock Plan - Appendix A to the Company's Notice of 1988 Annual Meeting of Shareholders and Proxy Statement, filed March 22, 1988. SunAmerica Profit Sharing and Retirement Plan - Exhibit 10(l) to the Company's 1989 Annual Report on Form 10-K, filed December 20, 1989. Executive Deferred Compensation Plan dated as of October 1, 1989. SunAmerica Supplemental Deferral Plan - Exhibit 10(m) to the Company's 1989 Annual Report on Form 10-K, filed December 20, 1989. Five Year Incentive Plan (fiscal years 1989-1993) - Exhibit 10(n) to the Company's 1989 Annual Report on Form 10-K, filed December 20, 1989. Long-Term Performance-Based Incentive Plan - Appendix A to the Company's Notice of 1994 Annual Meeting of Shareholders and Proxy Statement, filed December 21, 1993. EX-12 8 EXHIBIT 12
EXHIBIT 12 SUNAMERICA INC. COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES & PREFERRED STOCK DIVIDENDS (EXCLUDING INTEREST ON FIXED ANNUITIES, GUARANTEED INVESTMENT CONTRACTS & TRUST DEPOSITS) Years ended September 30, ---------------------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- (In thousands, except ratios) Earnings: Pretax income $ 240,001 $ 184,011 $ 111,091 $ 73,381 $ 60,867 ---------- ---------- ---------- ---------- ---------- Add: Interest incurred on: Senior indebtedness 50,292 36,246 33,224 33,072 31,436 Subordinated notes -- -- 3,941 10,473 13,003 ---------- ---------- ---------- ---------- ---------- Total interest incurred 50,292 36,246 37,165 43,545 44,439 ---------- ---------- ---------- ---------- ---------- Total earnings $ 290,293 $ 220,257 $ 148,256 $ 116,926 $ 105,306 ========== ========== ========== ========== ========== Combined Fixed Charges and Preferred Stock Dividends: Interest incurred on: Senior indebtedness $ 50,292 $ 36,246 $ 33,224 $ 33,072 $ 31,436 Subordinated notes -- -- 3,941 10,473 13,003 ---------- ---------- ---------- ---------- ---------- Total interest incurred 50,292 36,246 37,165 43,545 44,439 Tax equivalent basis of Preferred Stock dividends 54,528 42,675 17,733 8,369 8,362 ---------- ---------- ---------- ---------- ---------- Total combined fixed charges and preferred stock dividends $ 104,820 $ 78,921 $ 54,898 $ 51,914 $ 52,801 ========== ========== ========== ========== ========== Ratio of earnings to combined fixed charges and preferred stock dividends (excluding interest incurred on fixed annuities, guaranteed investment contracts and trust deposits) 2.8 2.8 2.7 2.3 2.0 ========== ========== ========== ========== ========== EXHIBIT 12 (CONTINUED) COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES & PREFERRED STOCK DIVIDENDS (INCLUDING INTEREST ON FIXED ANNUITIES, GUARANTEED INVESTMENT CONTRACTS & TRUST DEPOSITS) Years ended September 30, ---------------------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- (In thousands, except ratios) Earnings: Pretax income $ 240,001 $ 184,011 $ 111,091 $ 73,381 $ 60,867 ---------- ---------- ---------- ---------- ---------- Add: Interest incurred on: Fixed annuity contracts 254,464 308,910 362,094 411,084 403,775 Guaranteed investment contracts 150,424 136,984 140,114 124,381 87,280 Trust deposits 8,516 8,438 4,256 -- 2,909 Senior indebtedness 50,292 36,246 33,224 33,072 31,436 Subordinated notes -- -- 3,941 10,473 13,003 ---------- ---------- ---------- ---------- ---------- Total interest incurred 463,696 490,578 543,629 579,010 538,403 ---------- ---------- ---------- ---------- ---------- Total earnings $ 703,697 $ 674,589 $ 654,720 $ 652,391 $ 599,270 ========== ========== ========== ========== ========== Combined Fixed Charges and Preferred Stock Dividends: Interest incurred on: Fixed annuity contracts $ 254,464 $ 308,910 $ 362,094 $ 411,084 $ 403,775 Guaranteed investment contracts 150,424 136,984 140,114 124,381 87,280 Trust deposits 8,516 8,438 4,256 -- 2,909 Senior indebtedness 50,292 36,246 33,224 33,072 31,436 Subordinated notes -- -- 3,941 10,473 13,003 ---------- ---------- ---------- ---------- ---------- Total interest incurred 463,696 490,578 543,629 579,010 538,403 Tax equivalent basis of Preferred Stock dividends 54,528 42,675 17,733 8,369 8,362 ---------- ---------- ---------- ---------- ---------- Total combined fixed charges and preferred stock dividends $ 518,224 $ 533,253 $ 561,362 $ 587,379 $ 546,765 ========== ========== ========== ========== ========== Ratio of earnings to combined fixed charges and preferred stock dividends (including interest incurred on fixed annuities, guaranteed investment contracts and trust deposits) 1.4 1.3 1.2 1.1 1.1 ========== ========== ========== ========== ===========
EX-21 9 EXHIBIT 21 EXHIBIT 21 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES LIST OF SUBSIDIARIES List of subsidiaries and certain other affiliates with percentage of voting securities owned by SunAmerica Inc. or SunAmerica Inc.'s subsidiary which is the immediate parent. PERCENTAGE OF VOTING SECURITIES OWNED BY COMPANY OR COMPANY'S SUBSIDIARY WHICH IS THE NAME OF COMPANY IMMEDIATE PARENT ARIZONA CORPORATION: % Sun Life Insurance Company of America 100 CALIFORNIA CORPORATIONS: Anchor National Life Insurance Company 100 SunAmerica Premium Finance of California, Inc. 100 COLORADO CORPORATION: Resources Trust Company 100 DELAWARE CORPORATIONS: Capitol Life Mortgage Corp. 100 Royal Alliance Associates, Inc. 100 SunAmerica Asset Management Corp. 100 SunAmerica Capital Services, Inc. 100 SunAmerica Investments, Inc. 100 SunAmerica Premium Finance, Inc. 100 SunAmerica Securities, Inc. 100 GEORGIA CORPORATION: SunAmerica Financial, Inc. 100 MARYLAND CORPORATIONS: Anchor Investment Adviser, Incorporated 100 SunAmerica Marketing, Inc. 100 MASSACHUSETTS BUSINESS TRUSTS: Anchor Pathway Fund* 100 Anchor Series Trust* 100 SunAmerica Series Trust* 100 NEW YORK CORPORATION: First SunAmerica Life Insurance Company 100 VIRGINIA CORPORATION: Sun Mortgage Acceptance Corporation 100 *Shares of these entities are owned by a separate account of Anchor National Life Insurance Company. EX-23 10 EXHIBIT 23 EXHIBIT 23 SUNAMERICA INC. AND CONSOLIDATED SUBSIDIARIES CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-8 pertaining to the Amended and Restated 1978 Employee Stock Option Program (No. 2-53718) and the 1988 Employee Stock Plan (No. 33-28744) and Form S-3 pertaining to Debt Securities and Warrants to Purchase Debt Securities (No. 33-60940) of SunAmerica Inc. of our report dated November 9, 1994, appearing on page F-2 of this Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears on page S-2 of this Form 10-K. Price Waterhouse LLP Los Angeles, California November 30, 1994 EX-27 11 EXHIBIT 27
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND INCOME STATEMENT OF SUNAMERICA INC.'S FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR SEP-30-1994 SEP-30-1994 5,270,738 1,064,132 1,072,222 61,660 1,426,924 107,053 9,280,390 569,382 0 581,874 14,656,225 7,303,145 0 0 0 501,497 0 374,273 35,803 551,012 14,656,225 0 699,342 (21,124) 150,736 404,888 66,925 117,140 240,001 74,700 165,301 0 0 (33,500) 131,801 2.77 2.77 0 0 0 0 0 0 0
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