EXHIBIT 10(a)
NASD
SUBORDINATED LOAN AGREEMENT
FOR EQUITY CAPITAL
SL-5
AGREEMENT BETWEEN:
Lender: SunAmerica Inc.
(Name)
1 SunAmerica Center,
1999 Avenue of the Stars, 38th Floor (Street Address)
Los Angeles California 90067-6022
(City) (State) (Zip)
AND
Borrower: Capital Services Inc.
(Name)
733 Third Avenue
(Street Address)
New York New York 10017
(City) (State) (Zip)
NASD ID NO: 13158
Date Filed: August 23, 1999
NASD ________________
Received August 24, 1999
NASD Regulation, Inc.
District 10
SUBORDINATED LOAN AGREEMENT
FOR EQUITY CAPITAL
AGREEMENT DATED August 9, 1999 to be effective August 31, 1999 between
SunAmerica, Inc. (the "Lender") and SunAmerica Capital Services, Inc. (the
"Broker-Dealer").
In consideration of the sum of $7,570,000 and subject to the terms and
conditions hereinafter set forth, the Broker-Dealer promises to pay to the
Lender or assigns on September 30, 2002 (the "Scheduled Maturity Date") (the
last day of the month at least three years from the effective date of this
Agreement) at the principal office of the Broker-Dealer the afore described sum
and interest thereon payable at the rate of 8* % per annum from the effective
date of this Agreement, which date shall be the date so agreed upon by the
Lender and the Broker-Dealer unless otherwise determined by the National
Association of Securities Dealers, Inc. (the "NASD"). This agreement shall not
be considered a satisfactory subordination agreement pursuant to the provisions
of 17 CFR 240.15c3-d unless and until the NASD has found the Agreement
acceptable and such Agreement has become effective in the form found acceptable.
The cash proceeds covered by this Agreement shall be used and dealt with by
the Broker-Dealer as part of its capital and shall be subject to the risks of
the business. The Broker-Dealer shall have the right to deposit any cash
proceeds of the Subordinated Loan Agreement in an account or accounts in its own
name in any bank or trust company.
The Lender irrevocably agrees that the obligations of the Broker-Dealer
under this Agreement with respect to the payment of principal and interest shall
be and are subordinate in right of payment and subject to the prior payments or
provision for payment in full of all claims of all other present and future
creditors of the Broker-Dealer arising out of any matter occurring prior to the
date on which the related Payment Obligation (as defined herein) matures
consistent with the provisions of 17 CFR 240.15c3-1 and 240.15c3-1d, except for
claims which are the subject of subordination agreements which rank on the same
priority as or are junior to the claim of the Lender under such subordination
agreements.
I. PERMISSIVE PREPAYMENTS (OPTIONAL)
At the option of the Broker-Dealer, but not at the option of the Lender,
payment of all or any part of the "Payment Obligation" amount hereof prior to
the maturity date may be made by the Broker-Dealer, but in no event may any
prepayment be made before the expiration of one year from the date this
Agreement Became effective. No prepayment shall be made if, after giving effect
thereto (and to all payments for Payment Obligations under any other
subordination agreements then outstanding, the maturity of which are scheduled
to fall due either within six months after the date such prepayment is to occur
or on or prior to the date on which the Payment Obligation hereof is scheduled
to mature, whichever date is earlier), without reference to any projected profit
or loss of the Broker-Dealer, either aggregate indebtedness of the Broker-Dealer
would exceed 1000 percent of its net capital or such lesser percent as may be
made applicable to the Broker-Dealer from time to time by a governmental agency
or self-regulatory body having appropriate authority, or if the Broker-Dealer
is
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operating pursuant to paragraph (a)(1)(ii) of 17 CFR 240.15c3-1, its net capital
would be less than five percent of aggregate debit items computed in accordance
with 17 CFR 240.15c3-3a, or if registered as a futures commission merchant, 7
percent of the funds required to be segregated pursuant to the Commodity
Exchange Act and the regulations thereunder (less the market value of commodity
options purchased by option customers on or subject to the rules of a contract
market, provided, however, the deduction for each option customer shall be
limited to the amount of customer funds in such option customer's account), if
greater, or its net capital would be less than 120 percent of the minimum dollar
amount required by 17 CFR 240.15c3-1 including paragraph (a)(1)(ii), if
applicable, or such greater dollar amount as may be made applicable to the
Broker-Dealer by the NASD, or governmental agency or self-regulatory body having
appropriate authority.
* Interest to be paid quarterly from the effective date of this Agreement.
II. SUSPENDED REPAYMENTS
(a) The Payment Obligation of the Broker-Dealer shall be suspended and
shall not mature if after giving effect to such payment (together with the
payment of any Payment Obligation, of the Broker-Dealer under any other
subordination agreement scheduled to mature on or before such Payment
Obligation) the aggregate indebtedness of the Broker-Dealer would exceed 1200
percent of its net capital or such lesser percent as may be made applicable to
the Broker-Dealer from time to time by the NASD, or a governmental agency or
self-regulatory body having appropriate authority, or if the Broker-Dealer is
operating pursuant to paragraph (f) of 17 CFR 240.15c3-1, its net capital would
be less than 5 percent of aggregate debit items computed in accordance with 17
CFR 240.15c3-3a, or if registered as a futures commission merchant, 6 percent of
the funds required to be segregated pursuant to the Commodity Exchange Act and
the regulations thereunder, (less the market value of commodity options
purchased by option customers on or subject to the rules of a contract market,
provided, however, the deduction for each option customer shall be limited to
the amount of customer funds in such option customer's account), if greater, or
its net capital would be less than 120 percent of the minimum dollar amount
required by 17 CFR 240.15c3-1 including paragraph (a)(1)(ii), if applicable, or
such greater dollar amount as may be made applicable to the Broker-Dealer by the
NASD, or a governmental agency or self-regulatory body having appropriate
authority.
III. NOTICE OF MATURITY
The Broker-Dealer shall immediately notify the NASD if, after giving effect
to all payments of Payment Obligations under subordination agreements then
outstanding which are then due or mature within six months without reference to
any projected profit or loss of the Broker-Dealer, either the aggregate
indebtedness of the Broker-Dealer would exceed 1200 percent of its net capital,
or in the case of a Broker-Dealer operating pursuant to paragraph (a)(1)(ii) of
17 CFR 240.15c3-1, its net capital would be less than 5 percent of aggregate
debit items computed in accordance with 17 CFR 240.15c3-3a, or if registered as
a futures commission merchant 6 percent of the funds required to be segregated
pursuant to the Commodity Exchange Act and the regulations thereunder,
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(less the market value of commodity options purchased by option customers on or
subject to the rules of a contract market, provided, however, the deduction for
each option customer shall be limited to the amount of customer funds in such
option customer's account,) if greater, and in either case, if its net capital
would be less than 120 percent of the minimum dollar amount required by 17 CFR
240.15c3-1 including paragraph (a)(1)(ii), if applicable, or such greater dollar
amount as may be made applicable to the Broker-Dealer by the NASD, or a
governmental agency or self-regulatory body having appropriate authority.
IV. BROKER-DEALERS CARRYING THE ACCOUNTS OF
SPECIALISTS AND MARKET MAKERS IN LISTED OPTIONS
A Broker-Dealer who guarantees, endorses, carries or clears specialist or
market-maker transactions in options listed on a national securities exchange or
facility of a national securities association shall not permit a reduction,
prepayment, or repayment of the unpaid principal amount if the effect would
cause the equity required in such specialist or market-maker accounts to exceed
1000 percent of the Broker-Dealer's net capital or such percent as may be made
applicable to the Broker-Dealer from time to time by the NASD, or a governmental
agency or self-regulatory body having appropriate authority.
V. LIMITATION ON WITHDRAWAL OF EQUITY CAPITAL
The proceeds covered by this Agreement shall in all respects be subject to
the provisions of paragraph (e) of 17 CFR 240.15c3-1. Pursuant thereto no equity
capital of the Broker-Dealer or a subsidiary or affiliate consolidated pursuant
to 17 CFR 240.15c3-1c, whether in the form of capital contributions by partners,
par or stated value of capital stock, paid-in capital in excess of par, retained
earnings or other capital accounts, may be withdrawn by action of a stockholder
or partner, or by redemption or repurchase of shares of stock by any of the
consolidated entities or through the payment of dividends or any similar
distribution, nor may any unsecured advance or loan be made to a stockholder,
partner, sole proprietor, or employee if, after giving effect thereto and to any
other such withdrawals, advances or loans and any payments of Payment
Obligations under satisfactory subordination agreements which are scheduled to
occur within six months following such withdrawals, advances or loans, either
aggregate indebtedness of any of the consolidated entities exceeds 1000 percent
of its net capital, or in the case of a Broker-Dealer operating pursuant to
paragraph (a)(1)(ii) of 17 CFR 240.15c3-1, its net capital would be less than 5
percent of aggregate debit items computed in accordance with 17 CFR 240.15c3-3a,
or if registered as a futures commission merchant, 7 percent of the funds
required to be segregated pursuant to the Commodity Exchange Act, and the
regulations thereunder (less the market value of commodity options purchased by
option customers on or subject to the rules of a contract market, provided,
however, the deduction for each option customer shall be limited to the amount
of customer funds in such option customer's account), if greater, and in either
case, if its net capital would be less than 120 percent of the minimum dollar
amount required by 17 CFR 240.15c3-1 including paragraph (a)(1)(ii), if
applicable, or such greater dollar amount as may be made applicable to the
Broker-Dealer by the NASD, or a governmental agency or self-regulatory body
having appropriate authority; or should the Broker-
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Dealer be included within such consolidation, if the total outstanding principal
amounts of satisfactory subordination agreements of the Broker-Dealer (other
than such agreements which qualify as equity under paragraph (d) of 17 CFR
240.15c3-1) would exceed 70 percent of its debt/equity total, as this term is
defined in paragraph (d) of 17 CFR 240.15c3-1, for a period in excess of 90
days, or for such longer period which the Commission may upon application of the
Broker-Dealer grant in the public interest or for the protection of investors.
VI. BROKER-DEALERS REGISTERED WITH CFTC
If the Broker-Dealer is a futures commission merchant or introductory
broker as that term is defined in the Commodity Exchange Act, the Broker-Dealer
agrees, consistent with the requirements of Section 1.17(h) of the regulations
of the CFTC (17 CFR 1.17(h)), that:
(a) Whenever prior written notice by the Broker-Dealer to the NASD is
required pursuant to the provisions of this Agreement, the same prior written
notice shall be given by the Broker-Dealer to (i) the CFTC at its principal
office in Washington, D.C., attention Chief Account of Division of Trading and
Markets, and/or (ii) the commodity exchange of which the Organization is a
member and which is then designated by the CFTC as the Organization's designated
self-regulatory organization (the DSRO);
(b) Whenever prior written consent, permission or approval of the NASD is
required pursuant to the provisions of this Agreement, the Broker-Dealer shall
also obtain the prior written consent, permission or approval of the CFTC and/or
of the DSRO.
(c) Whenever the Broker-Dealer receives written notice of acceleration of
maturity pursuant to the provisions of this Agreement, the Broker-Dealer shall
promptly give written notice thereof to the CFTC at the address above stated
and/or to the DSRO.
VII. GENERAL
In the event of the appointment of a receiver or trustee of the
Broker-Dealer or in the event of its insolvency, liquidation pursuant to the
Securities Investor Protection Act of 1970 or otherwise, bankruptcy, assignment
for the benefit of creditors, reorganizations whether or not pursuant to
bankruptcy laws, or any other marshaling of the assets and liabilities of the
Broker-Dealer, the Payment Obligation of the Broker-Dealer shall mature, and the
holder hereof shall not be entitled to participate or share, ratably or
otherwise, in the distribution of the assets of the Broker-Dealer until all
claims of all other present and future creditors of the Broker-Dealer, whose
claims are senior hereto, have been fully satisfied.
This Agreement shall not be subject to cancellation by either the Lender or
the Broker-Dealer, and no payment shall be made, nor the Agreement terminated,
rescinded or modified by mutual consent or otherwise if the effect thereof would
be inconsistent with the requirements of 17 CFR 240.15c3-1 and 240.15c3-d.
The Agreement may not be transferred, sold, assigned, pledged, or
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otherwise encumbered or otherwise disposed of, and no lien, charge, or other
encumbrance may be created or permitted to be created thereof without the prior
written consent of the NASD.
The Lender irrevocably agrees that the loan evidenced hereby is not being
made in reliance upon the standing of the Broker-Dealer as a member organization
of the NASD or upon the NASD surveillance of the Broker-Dealer's financial
position or its compliance with the By-laws, rule and practices of the NASD.
The Lender has made such investigation of the Broker-Dealer and its partners,
officers, directors, and stockholders as the Lender deems necessary and
appropriate under the circumstances.
The Lender is not relying upon the NASD to provide any information
concerning or relating to the Broker-Dealer and agrees that the NASD has no
responsibility to disclose to the Lender any information concerning or relating
to the Broker-Dealer which it may now, or at any future time, have.
The term "Broker-Dealer," as used in this Agreement, shall include the
Broker-Dealer, its heirs, executors, administrators, successors and assigns.
The term "Payment Obligation" shall mean the obligation of the Borrower to
repay cash loaned to it pursuant to this Subordinated Loan Agreement.
The provisions of this Agreement shall be binding upon the Broker-Dealer
and the Lender, and their respective heirs, executors, administrators,
successors, and assigns.
Any controversy arising out of or relating to this Agreement may be
submitted to and settled by arbitration pursuant to the By-Laws and rules of the
NASD. The Broker-Dealer and the Lender shall be conclusively bound by such
arbitration.
This instrument embodies the entire agreement between the Broker-Dealer and
the Lender and no other evidence of such agreement has been or will be executed
without prior written consent of the NASD.
This Agreement shall be deemed to have been made under, and shall be
governed by, the laws of the State of California in all respects.
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IN WITNESS WHEREOF the parties have set their hands and seal this 9th day
of August, 1999.
BROKER-DEALER: SunAmerica Capital Services, Inc.
(SEAL)
By: /s/ Debbi Potash-Turner
Chief Financial Officer
LENDER SunAmerica, Inc.
(SEAL)
By: /s/ James R. Belardi
Executive Vice President
FOR NASD USE ONLY
ACCEPTED BY: /s/ Gerald Dougherty
Name
Assistant Director
Title
EFFECTIVE DATE: 8/31/99
LOAN NUMBER: 10-E-SLA-11035
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SUBORDINATED LOAN AGREEMENT
LOAN ATTESTATION
It is recommended that you discuss the merits of this investment with an
attorney, accountant or some other person who has knowledge and experience in
financial and business matters prior to executing this Agreement.
1. I have received and reviewed NASD Form SLD, which is a reprint of 17
CFR 240.15c3-1, and am familiar with its provisions.
2. I am aware that the funds or securities subject to this Agreement
are not covered by the Securities Investor Protection Act of 1970.
3. I understand that I will be furnished financial statements pursuant
to SEC Rule 17a-5(c).
4. On the date this Agreement was entered into, the Broker-Dealer
carried funds or securities for my account. (State Yes or No) No.
5. Lender's business relationship to the Broker-Dealer is: Lender is
an intermediate holding company of Broker-Dealer and continuously to monitor the
fiscal status and reports of the Broker-Dealer.
6. If the a partner or stockholder is not actively engaged in the
business of the Broker-Dealer, acknowledge receipt of the following:
(a) Certified audit and accountant's certificate dated ____.
(b) Disclosure of financial and/or operational problems since the last
certified audit which required reporting pursuant to SEC Rule 17a-11. (If no
such reporting was required, state "none") ________________________.
(c) Balance sheet and statement of ownership equity dated
_________________________________________.
(d) Most recent computation of net capital and aggregate indebtedness
or aggregate debit items dated _________________, reflecting a net capital of
$________________ and a ratio of _______________.
(e) Debt/equity ratio as of ______________ of ________________.
(f) Other disclosures:________________
Dated: August 9, 1999
SunAmerica Inc.
Lender
By: /s/ James R. Belardi
Executive Vice President
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CERTIFICATE OF SECRETARY
I, Susan L. Harris, the duly appointed, qualified and acting Secretary of
SunAmerica Inc., a Delaware corporation (the "Corporation"), do hereby certify
that the following is a true and correct copy of the resolutions duly adopted by
the Executive Committee of the Board of Directors of the Corporation, effective
March 10, 1999, and that such resolutions are in full force and effect as of the
date hereof:
WHEREAS, this Corporation, from time to time, reviews the net capital
infusion needs of its wholly-owned subsidiaries which are broker-dealers
registered with the Securities and Exchange Commission and members of the
National Association of Securities Dealers, Inc., including SunAmerica Capital
Services, Inc., Advantage Capital Corporation, SunAmerica Securities, Inc. and
Royal Alliance Associates, Inc., and in conjunction with such review, has
provided subordinated loans to such subsidiaries pursuant to Subordinated Loan
Agreements for Equity Capital;
WHEREAS, it is in the best interests of this Corporation to provide blanket
authorization for such subordinated loan transactions;
NOW, THEREFORE, BE IT RESOLVED that the Chairman, any Vice Chairman, any
Executive Vice President, or the Treasurer (the "Designated Officers"), acting
alone, be, and each hereby is authorized to effect subordinated loans to the
wholly-owned broker-dealer subsidiaries of the Corporation, in an aggregate
principal amount not to exceed Fifty Million Dollars ($50,000,000), and to make,
execute and deliver such loan agreements and other documents evidencing such
loans, including any Subordinated Loan Agreement for Equity Capital, as deemed
necessary or appropriate;
RESOLVED FURTHER that each of the Designated Officers are hereby authorized
to make such changes in the terms and conditions of such Subordinated Loan
Agreements as may be necessary to conform to the requirements of Title 17 CFR
Section 240.15c 3-1d and the rules of the National Association of Securities
Dealers; and
RESOLVED FURTHER that the Executive Committee hereby ratifies any and all
action that may have been taken by the officers of this Corporation in
connection with the foregoing resolutions and authorizes the officers of this
Corporation to take any and all such further actions as may be deemed
appropriate to reflect these resolutions and to carry out their tenor, effect
and intent.
IN WITNESS WHEREOF, the undersigned has executed this Certificate and affixed
the seal of this corporation this 12th day of August, 1999.
/s/ Susan L. Harris
SUSAN L. HARRIS
[SEAL]
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OFFICER'S CERTIFICATE
I, James R. Belardi, Executive Vice President of SunAmerica Inc., a
Delaware corporation (this "Corporation"), do hereby certify that the $7,560,000
subordinated loan made by this Corporation to SunAmerica Capital Services, Inc.,
effective August 31, 1999, does not cause the aggregate principal amount of all
outstanding loans made by this Corporation to its broker-dealer subsidiaries to
exceed $50 million.
/s/James R. Belardi
JAMES R. BELARDI
Executive Vice President
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