UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTER ENDED MARCH 31, 2012
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 814-00736
PENNANTPARK INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND | 20-8250744 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
590 Madison Avenue, 15th Floor New York, N.Y. |
10022 | |
(Address of principal executive offices) | (Zip Code) |
(212)-905-1000
(Registrants Telephone Number, Including Area Code)
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 and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | x | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares of the issuers common stock, $0.001 par value, outstanding as of May 2, 2012 was 56,367,339.
PENNANTPARK INVESTMENT CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2012
TABLE OF CONTENTS
PART ICONSOLIDATED FINANCIAL INFORMATION
We are filing this Form 10-Q, or the Report, in compliance with Rule 13a-13 promulgated by the Securities and Exchange Commission, or the SEC. In this Report, we, our or us refers to PennantPark Investment Corporation and its consolidated subsidiaries unless the context suggests otherwise. PennantPark Investment refers to only PennantPark Investment Corporation; SBIC LP or our SBIC refers to our wholly owned consolidated small business investment company, or SBIC, subsidiary, PennantPark SBIC LP, and its general partner PennantPark SBIC GP, LLC, or SBIC GP; PennantPark Investment Advisers or Investment Adviser refers to PennantPark Investment Advisers, LLC; PennantPark Investment Administration or Administrator refers to PennantPark Investment Administration, LLC. References to our portfolio or investments include investments we make through all our consolidated subsidiaries. References to our Subsidiaries, refers to SBIC LP, SBIC GP and the Taxable Subsidiaries.
Item 1. | Consolidated Financial Statements |
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
March
31, 2012 (unaudited) |
September 30, 2011 |
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Assets |
||||||||
Investments at fair value |
||||||||
Non-controlled, non-affiliated investments, at fair value (cost$850,864,770 and $816,078,311, respectively) |
$ | 838,697,179 | $ | 773,375,381 | ||||
Non-controlled, affiliated investments, at fair value (cost$31,457,826 and $36,744,425, respectively) |
35,656,110 | 40,673,133 | ||||||
Controlled, affiliated investments, at fair value (cost$14,500,100 and $13,500,100, respectively) |
14,500,002 | 13,500,001 | ||||||
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Total Investments, at fair value (cost$896,822,696 and $866,322,836, respectively) |
888,853,291 | 827,548,515 | ||||||
Cash equivalents (See Note 8) |
26,964,225 | 71,604,519 | ||||||
Interest receivable |
11,013,869 | 10,878,236 | ||||||
Receivable for investments sold |
4,179,031 | 13,118,967 | ||||||
Prepaid expenses and other assets |
4,895,013 | 5,587,977 | ||||||
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|
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Total assets |
935,905,429 | 928,738,214 | ||||||
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Liabilities |
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Distributions payable |
15,737,924 | 12,336,241 | ||||||
Payable for investments purchased |
3,528,707 | 18,572,499 | ||||||
Unfunded investments |
16,980,269 | 37,132,151 | ||||||
Credit facility payable (cost$158,500,000 and $240,900,000, respectively) |
157,757,500 | 238,792,125 | ||||||
SBA debentures payable (cost$150,000,000) (See Notes 5 and 10) |
150,000,000 | 150,000,000 | ||||||
Interest payable on credit facility and SBA debentures |
937,416 | 687,362 | ||||||
Management fee payable (See Note 3) |
4,176,894 | 4,008,054 | ||||||
Performance-based incentive fee payable (See Note 3) |
2,374,706 | 3,773,829 | ||||||
Accrued other expenses |
1,104,368 | 778,757 | ||||||
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Total liabilities |
352,597,784 | 466,081,018 | ||||||
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Net assets |
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Common stock, 56,206,873 and 45,689,781 shares issued and outstanding, respectively. Par value $0.001 per share and 100,000,000 shares authorized. |
56,207 | 45,690 | ||||||
Paid-in capital in excess of par value |
647,530,381 | 540,603,020 | ||||||
Undistributed net investment income |
4,551,894 | 8,326,854 | ||||||
Accumulated net realized loss on investments |
(61,603,932 | ) | (49,651,922 | ) | ||||
Net unrealized depreciation on investments |
(7,969,405 | ) | (38,774,321 | ) | ||||
Net unrealized depreciation on credit facility |
742,500 | 2,107,875 | ||||||
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|
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Total net assets |
$ | 583,307,645 | $ | 462,657,196 | ||||
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Total liabilities and net assets |
$ | 935,905,429 | $ | 928,738,214 | ||||
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Net asset value per share |
$ | 10.38 | $ | 10.13 | ||||
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended March 31, | Six months ended March 31, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Investment income: |
||||||||||||||||
From non-controlled, non-affiliated investments: |
||||||||||||||||
Interest |
$ | 24,310,488 | $ | 20,836,197 | $ | 48,330,912 | $ | 39,395,362 | ||||||||
Other |
1,084,688 | 1,233,863 | 2,955,202 | 2,080,447 | ||||||||||||
From non-controlled, affiliated investments: |
||||||||||||||||
Interest |
549,594 | 381,222 | 1,122,525 | 744,654 | ||||||||||||
From controlled, affiliated investments: |
||||||||||||||||
Interest |
416,889 | 260,167 | 791,778 | 470,167 | ||||||||||||
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|
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Total investment income |
26,361,659 | 22,711,449 | 53,200,417 | 42,690,630 | ||||||||||||
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|
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Expenses: |
||||||||||||||||
Base management fee (See Note 3) |
4,178,151 | 3,589,342 | 8,221,432 | 7,087,936 | ||||||||||||
Performance-based incentive fee (See Note 3) |
2,374,842 | 3,338,434 | 6,123,970 | 6,131,428 | ||||||||||||
Interest and expenses on the credit facility and SBA debentures (See Note 10) |
2,736,619 | 1,086,523 | 5,111,742 | 2,221,950 | ||||||||||||
Administrative services expenses (See Note 3) |
808,303 | 650,662 | 1,605,656 | 1,229,717 | ||||||||||||
Other general and administrative expenses |
897,849 | 847,668 | 1,740,194 | 1,531,027 | ||||||||||||
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Expenses before taxes and debt issuance costs |
10,995,764 | 9,512,629 | 22,802,994 | 18,202,058 | ||||||||||||
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Excise tax (See Note 2) |
245,000 | 39,857 | 280,000 | 158,824 | ||||||||||||
Debt issuance costs (See Note 5) |
5,361,319 | | 5,361,319 | | ||||||||||||
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Total expenses |
16,602,083 | 9,552,486 | 28,444,313 | 18,360,882 | ||||||||||||
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Net investment income |
9,759,576 | 13,158,963 | 24,756,104 | 24,329,748 | ||||||||||||
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Realized and unrealized (loss) gain on investments and credit facility: |
||||||||||||||||
Net realized (loss) gain on investments |
(3,922,455 | ) | 286,452 | (11,952,011 | ) | 2,579,813 | ||||||||||
Net change in unrealized appreciation (depreciation) on: |
||||||||||||||||
Non-controlled, non-affiliated investments |
22,470,558 | 4,711,487 | 30,535,339 | 23,464,360 | ||||||||||||
Controlled & non-controlled, affiliated investments |
(1,692,070 | ) | 128,906 | 269,576 | 38,735 | |||||||||||
Credit facility unrealized (appreciation) (See Notes 5 and 10) |
(217,500 | ) | (4,698,821 | ) | (1,365,375 | ) | (11,303,446 | ) | ||||||||
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Net change in unrealized appreciation |
20,560,988 | 141,572 | 29,439,540 | 12,199,649 | ||||||||||||
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Net realized and unrealized gain from investments and credit facility |
16,638,533 | 428,024 | 17,487,529 | 14,779,462 | ||||||||||||
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Net increase in net assets resulting from operations |
$ | 26,398,109 | $ | 13,586,987 | $ | 42,243,633 | $ | 39,109,210 | ||||||||
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Net increase in net assets resulting from operations per common share (See Note 7) |
$ | 0.50 | $ | 0.33 | $ | 0.85 | $ | 1.01 | ||||||||
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Net investment income per common share |
$ | 0.18 | $ | 0.32 | $ | 0.50 | $ | 0.63 | ||||||||
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
Six Months
Ended March 31, |
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2012 | 2011 | |||||||
Net increase in net assets from operations: |
||||||||
Net investment income |
$ | 24,756,104 | $ | 24,329,748 | ||||
Net realized (loss) gain on investments |
(11,952,011 | ) | 2,579,813 | |||||
Net change in unrealized appreciation on investments |
30,804,915 | 23,503,095 | ||||||
Net change in unrealized appreciation on credit facility |
(1,365,375 | ) | (11,303,446 | ) | ||||
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Net increase in net assets resulting from operations |
42,243,633 | 39,109,210 | ||||||
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Distributions to stockholders: |
||||||||
Distributions from net investment income |
(28,531,062 | ) | (21,704,559 | ) | ||||
Capital share transactions: |
||||||||
Public offering |
109,192,500 | 114,080,000 | ||||||
Offering costs relating to public offering |
(3,979,000 | ) | (5,743,800 | ) | ||||
Reinvestment of dividends |
1,724,378 | 1,703,764 | ||||||
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|
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Total increase in net assets |
120,650,449 | 127,444,615 | ||||||
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Net assets: |
||||||||
Beginning of period |
462,657,196 | 386,575,223 | ||||||
End of period |
$ | 583,307,645 | $ | 514,019,838 | ||||
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Undistributed net investment income, at period end |
$ | 4,551,894 | $ | 4,584,659 | ||||
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Capital share activity: |
||||||||
Public offering |
10,350,000 | 9,200,000 | ||||||
Shares issued from reinvestment of dividends |
167,092 | 146,160 | ||||||
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Total shares issued |
10,517,092 | 9,346,160 | ||||||
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months
Ended March 31, |
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2012 | 2011 | |||||||
Cash flows from operating activities: |
||||||||
Net increase in net assets resulting from operations |
$ | 42,243,633 | $ | 39,109,210 | ||||
Adjustments to reconcile net increase in net assets resulting from operations to net cash (used) by operating activities: |
||||||||
Net change in unrealized appreciation on investments |
(30,804,915 | ) | (23,503,095 | ) | ||||
Net change in unrealized appreciation on credit facility |
1,365,375 | 11,303,446 | ||||||
Net realized loss (gain) on investments |
11,952,011 | (2,579,813 | ) | |||||
Net accretion of discount and amortization of premium |
(5,784,489 | ) | (3,219,842 | ) | ||||
Purchase of investments |
(153,884,038 | ) | (196,549,024 | ) | ||||
Payment-in-kind income |
(6,136,921 | ) | (5,181,586 | ) | ||||
Proceeds from dispositions of investments |
118,544,142 | 137,107,533 | ||||||
(Increase) Decrease in interest receivable |
(135,633 | ) | 1,237,227 | |||||
Decrease in receivables for investments sold |
8,939,936 | 30,254,774 | ||||||
Decrease in prepaid expenses and other assets |
692,964 | 502,446 | ||||||
(Decrease) in payables for investments purchased |
(15,043,792 | ) | (40,410,000 | ) | ||||
(Decrease) in unfunded investments |
(15,342,447 | ) | (3,569,562 | ) | ||||
Increase in interest payable on credit facility and SBA debentures |
250,054 | 77,379 | ||||||
Increase in management fee payable |
168,840 | 302,526 | ||||||
(Decrease) Increase in performance-based incentive fee payable |
(1,399,124 | ) | 1,099,423 | |||||
Increase (Decrease) in accrued other expenses |
325,610 | (452,070 | ) | |||||
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Net cash (used) by operating activities |
(44,048,794 | ) | (54,471,028 | ) | ||||
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Cash flows from financing activities: |
||||||||
Public offering |
109,192,500 | 114,080,000 | ||||||
Offering costs related to public offering |
(3,979,000 | ) | (5,743,800 | ) | ||||
Distributions paid to stockholders, net of dividends reinvested |
(23,405,000 | ) | (17,115,744 | ) | ||||
Borrowings under SBA debentures (See Note 10) |
| 45,000,000 | ||||||
Capitalized borrowing costs |
| (1,756,250 | ) | |||||
Borrowings under credit facility (See Note 10) |
695,500,000 | 200,300,000 | ||||||
Repayments under credit facility (See Note 10) |
(777,900,000 | ) | (280,561,200 | ) | ||||
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Net cash (used) provided by financing activities |
(591,500 | ) | 54,203,006 | |||||
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Net (decrease) in cash equivalents |
(44,640,294 | ) | (268,022 | ) | ||||
Cash equivalents, beginning of period |
71,604,519 | 1,814,451 | ||||||
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Cash equivalents, end of period |
$ | 26,964,225 | $ | 1,546,429 | ||||
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Supplemental disclosure of cash flow information and non-cash financing activity (See Note 5): |
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Interest paid |
$ | 4,285,855 | $ | 1,826,073 | ||||
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Income taxes paid |
$ | 258,550 | $ | 123,824 | ||||
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Dividends reinvested |
$ | 1,724,378 | $ | 1,703,764 | ||||
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
MARCH 31, 2012
(Unaudited)
Issuer Name |
Maturity | Industry |
Current Coupon |
Basis Point Spread Above Index (4) |
Par/ Shares |
Cost | Fair Value (3) | |||||||||||||||||
Investments in Non-Controlled, Non-Affiliated Portfolio Companies143.8% (1),(2) |
|
|||||||||||||||||||||||
First Lien Secured Debt45.2% |
||||||||||||||||||||||||
American Surgical Holdings, Inc. |
03/23/2015 | Healthcare, Education and Childcare | 14.00 | % | L+1,000 | (7) | 19,250,000 | $ | 18,783,191 | $ | 19,250,000 | |||||||||||||
Brand Energy and Infrastructure Services, Inc. |
02/07/2014 | Energy / Utilities | 3.76 | % | L+325 | 2,000,000 | 1,677,320 | 1,851,000 | ||||||||||||||||
CEVA Group PLC (5),(9) |
10/01/2016 | Logistics | 11.63 | % | | 7,500,000 | 7,341,591 | 7,950,000 | ||||||||||||||||
CEVA Group PLC (5),(9) |
04/01/2018 | Logistics | 11.50 | % | | 1,000,000 | 989,464 | 990,000 | ||||||||||||||||
Columbus International, Inc. (5), (9) |
11/20/2014 | Communications | 11.50 | % | | 10,000,000 | 10,000,000 | 11,095,000 | ||||||||||||||||
Good Sam Enterprises, LLC (5) |
12/01/2016 | Consumer Products | 11.50 | % | | 12,000,000 | 11,777,014 | 12,360,000 | ||||||||||||||||
Hanley-Wood, L.L.C. |
01/13/2017 | Other Media | 8.00 | % | L+650 | (7) | 1,761,727 | 1,761,727 | 1,761,727 | |||||||||||||||
IDQ Holdings, Inc. (5) |
04/01/2017 | Auto Sector | 11.50 | % | | 11,500,000 | 11,270,580 | 11,787,500 | ||||||||||||||||
Instant Web, Inc. |
08/07/2014 | Printing and Publishing | 14.50 | % | |
L+950 |
(7) |
24,500,000 | 24,015,996 | 24,990,000 | ||||||||||||||
Interactive Health Solutions, Inc. |
10/04/2016 | Healthcare, Education and Childcare | 11.50 | % | L+950 | (7) | 18,762,500 | 18,353,870 | 18,921,981 | |||||||||||||||
Jacuzzi Brands Corp. |
02/07/2014 | Home and Office Furnishings, Housewares and Durable Consumer Products | 2.61 | % | L+225 | 9,635,135 | 9,635,135 | 5,331,438 | ||||||||||||||||
K2 Pure Solutions NoCal, L.P. |
09/10/2015 | Chemicals, Plastics and Rubber | 10.00 | % | |
P+675 |
(7) |
18,952,500 | 18,097,866 | 18,762,975 | ||||||||||||||
Kadmon Pharmaceuticals, LLC |
10/31/2012 | Healthcare, Education and Childcare | 15.00 | % | L+1,300 | (7) | 4,981,188 | 4,965,097 | 5,055,906 | |||||||||||||||
Learning Care Group, Inc. |
04/27/2016 | Education | 12.00 | % | | 26,052,632 | 25,600,462 | 25,466,448 | ||||||||||||||||
Penton Media, Inc. |
08/01/2014 | Other Media |
|
5.00 (PIK 1.00 |
% %) |
|
L+400 |
(7) |
37,772,126 | 33,106,023 | 29,950,160 | |||||||||||||
Pre-Paid Legal Services, Inc., Tranche A |
12/30/2016 | Personal, Food and Miscellaneous Services | 7.50 | % | L+600 | (7) | 1,796,748 | 1,771,633 | 1,733,862 | |||||||||||||||
Pre-Paid Legal Services, Inc., Tranche B |
12/30/2016 | Personal, Food and Miscellaneous Services | 11.00 | % | L+950 | (7) | 35,000,000 | 34,053,237 | 33,950,000 | |||||||||||||||
Questex Media Group LLC (8) |
12/16/2012 | Other Media | | | 133,603 | 133,603 | 133,603 | |||||||||||||||||
Tekelec Global Inc. (First Out) |
01/29/2018 | Telecommunications | 9.00 | % | L+750 | (7) | 4,250,000 | 4,187,709 | 4,250,000 | |||||||||||||||
Tekelec Global Inc. (Second Out) |
01/29/2018 | Telecommunications | 13.50 | % | L+1,200 | (7) | 10,625,000 | 10,320,982 | 10,625,000 | |||||||||||||||
UP Support Servives, Inc. |
02/08/2013 | Oil and Gas |
|
9.50 (PIK 0.75 |
% %) |
L+800 | (7) | 14,319,391 | 11,201,685 | 11,127,896 | ||||||||||||||
UP Support Services, Inc. (8) |
02/08/2013 | Oil and Gas | | | (7) | 1,916,666 | 1,532,977 | 1,489,481 | ||||||||||||||||
Yonkers Racing Corp. (5) |
07/15/2016 | Hotels, Motels, Inns and Gaming |
11.38 | % | | 4,500,000 | 4,396,222 | 4,826,250 | ||||||||||||||||
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Total First Lien Secured Debt |
264,973,384 | 263,660,227 | ||||||||||||||||||||||
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)
MARCH 31, 2012
(Unaudited)
Issuer Name |
Maturity | Industry |
Current Coupon |
Basis
Point Spread Above Index (4) |
Par/ Shares |
Cost | Fair Value (3) | |||||||||||||||||
Second Lien Secured Debt26.8% |
||||||||||||||||||||||||
Brand Energy and Infrastructure Services, Inc. |
02/07/2015 | Energy/Utilities | 6.58 | % | L+600 | 13,600,000 | $ | 13,333,203 | $ | 11,356,000 | ||||||||||||||
Brand Energy and Infrastructure Services, Inc. |
02/07/2015 | Energy/Utilities | 7.55 | % | L+700 | 12,000,000 | 11,837,896 | 10,392,000 | ||||||||||||||||
DirectBuy Holdings, Inc.(5), (6) |
02/01/2017 | Consumer Products | 12.00 | % | | 34,000,000 | 31,964,124 | 6,460,000 | ||||||||||||||||
Eureka Hunter Pipeline, LLC |
08/16/2018 | Energy/Utilities |
|
12.50 (PIK 2.75 |
% %) |
| 46,000,000 | 45,629,410 | 47,495,000 | |||||||||||||||
Eureka Hunter Pipeline, LLC (8) |
08/16/2012 | Energy/Utilities | | | 4,000,000 | 3,900,000 | 4,130,000 | |||||||||||||||||
Greatwide Logistics Services, L.L.C. |
03/01/2014 | Cargo Transport |
|
11.00 (PIK 11.00 |
% %) |
L+700 | (7) | 3,018,217 | 3,018,220 | 2,822,033 | ||||||||||||||
Paradigm Management Services, LLC |
07/31/2017 | Healthcare, Education and Childcare | 12.50 | % | L+1,000 | (7) | 20,512,821 | 20,013,680 | 20,512,821 | |||||||||||||||
Questex Media Group LLC, Term Loan A |
12/15/2014 | Other Media | 9.50 | % | L+650 | (7) | 2,955,232 | 2,955,232 | 2,742,455 | |||||||||||||||
Questex Media Group LLC, Term Loan B |
12/15/2015 | Other Media |
|
11.50 (PIK 11.50 |
% %) |
L+750 | (7) | 2,107,105 | 2,107,105 | 1,860,574 | ||||||||||||||
Realogy Corp. |
10/15/2017 | Buildings and Real Estate | 13.50 | % | | 10,000,000 | 10,000,000 | 10,260,710 | ||||||||||||||||
ROC Finance LLC and ROC Finance 1 Corp. |
09/01/2018 | Hotels, Motels, Inns and Gaming | 12.13 | % | | 16,000,000 | 15,741,814 | 17,840,000 | ||||||||||||||||
Sheridan Holdings, Inc. |
06/15/2015 | Healthcare, Education and Childcare | 5.99 | % | L+575 | 13,500,000 | 12,046,148 | 13,083,755 | ||||||||||||||||
TransFirst Holdings, Inc. |
06/15/2015 | Financial Services | 6.25 | % | L+600 | 7,811,488 | 7,468,552 | 7,303,741 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Second Lien Secured Debt |
180,015,384 | 156,259,089 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Subordinated Debt/Corporate Notes60.6% |
||||||||||||||||||||||||
Acentia, LLC |
10/02/2017 | Electronics | 13.75 | % | | 19,000,000 | 18,525,557 | 18,525,000 | ||||||||||||||||
Affinion Group Holdings, Inc. |
11/15/2015 | Consumer Products | 11.63 | % | | 35,552,000 | 34,084,352 | 32,174,560 | ||||||||||||||||
Diversitech Corporation |
01/29/2017 | Manufacturing/Basic Industry |
|
13.50 (PIK 2.00 |
% %) |
| 11,000,000 | 10,792,285 | 11,192,500 | |||||||||||||||
Escort, Inc. |
06/01/2016 | Electronics |
|
14.75 (PIK 2.75 |
% %) |
| 24,904,672 | 24,350,195 | 24,904,672 | |||||||||||||||
Galls, LLC; Quartermaster Inc. |
03/31/2017 | Distribution | 13.00 | % | | 21,580,914 | 21,152,375 | 21,580,914 | ||||||||||||||||
JF Acquisition, LLC |
12/30/2017 | Distribution |
|
14.00 (PIK 2.00 |
% %) |
| 17,000,000 | 16,545,371 | 16,575,000 | |||||||||||||||
Last Mile Funding, Corp. |
06/30/2016 | Cargo Transport |
|
14.50 (PIK 2.50 |
% %) |
| 45,023,152 | 44,045,590 | 44,482,874 | |||||||||||||||
Learning Care Group (US) Inc. |
06/30/2016 | Education |
|
15.00 (PIK 15.00 |
% %) |
| 4,909,506 | 4,278,793 | 4,455,377 | |||||||||||||||
LTI Flexible Products, Inc. |
01/26/2017 | Chemical, Plastic and Rubber |
|
13.88 (PIK 1.88 |
% %) |
| 34,262,227 | 33,469,743 | 34,947,472 | |||||||||||||||
Mailsouth, Inc. |
06/15/2017 | Printing and Publishing |
|
14.50 (PIK 2.00 |
% %) |
| 15,000,000 | 14,609,296 | 15,000,000 | |||||||||||||||
MedQuist, Inc. |
10/14/2016 | Business Services |
|
13.00 (PIK 2.00 |
% %) |
| 19,000,000 | 18,526,226 | 19,997,500 | |||||||||||||||
PAS Technologies, Inc. |
05/12/2017 | Aerospace and Defense |
|
15.02 (PIK 2.02 |
% %) |
| 17,123,218 | 16,758,032 | 16,849,247 | |||||||||||||||
Prince Mineral Holdings Corp. |
12/03/2016 | Mining, Steel, Iron and Non-Precious Metals |
|
13.50 (PIK 2.00 |
% %) |
| 26,431,541 | 25,961,026 | 26,431,541 | |||||||||||||||
Realogy Corp. |
04/15/2018 | Buildings and Real Estate | 11.00 | % | | 10,000,000 | 9,201,906 | 8,000,000 | ||||||||||||||||
TRAK Acquisition Corp. |
12/29/2015 | Business Services |
|
15.00 (PIK 2.50 |
% %) |
| 12,020,950 | 11,685,601 | 12,020,950 | |||||||||||||||
UP Support Services Inc. |
02/08/2015 | Oil and Gas |
|
19.50 (PIK 19.50 |
% %) |
| 29,152,826 | 29,114,234 | 19,532,393 | |||||||||||||||
Veritext Corp. |
12/31/2015 | Business Services |
|
14.00 (PIK 3.00 |
% %) |
| 16,200,000 | 15,883,636 | 16,200,000 | |||||||||||||||
Veritext Corp. (8) |
12/31/2012 | Business Services | | | 10,800,000 | 10,530,000 | 10,800,000 | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Subordinated Debt/Corporate Notes |
359,514,218 | 353,670,000 | ||||||||||||||||||||||
|
|
|
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)
MARCH 31, 2012
(Unaudited)
Issuer Name |
Maturity |
Industry |
Current Coupon |
Basis
Point Spread Above Index (4) |
Par/ Shares |
Cost | Fair Value (3) | |||||||||||||||||
Preferred Equity/Partnership Interests 1.3% (7) |
||||||||||||||||||||||||
AH Holdings, Inc. |
| Healthcare, Education and Childcare | 6.00 | % | | 211 | $ | 500,000 | $ | 623,379 | ||||||||||||||
AHC Mezzanine, LLC (Advanstar, Inc.) |
| Other Media | | | 7,505 | 318,896 | | |||||||||||||||||
HW Topco, Inc. (Hanley-Wood, LLC) |
| Other Media | 8.00 | % | | 3,591 | 24,177 | 25,868 | ||||||||||||||||
CI (IHS) Investment Holdings, LLC |
| Healthcare, Education and Childcare | 8.00 | % | | 76,357 | 765,307 | 980,762 | ||||||||||||||||
CI (IHS) Investment Holdings, LLC (8) |
| Healthcare, Education and Childcare | | | 38,179 | 382,654 | | |||||||||||||||||
PAS Tech Holdings, Inc., Series A-1 |
| Aerospace and Defense | 8.00 | % | | 20,000 | 1,980,000 | 1,421,407 | ||||||||||||||||
TZ Holdings, L.P., Series A |
| Insurance | | | 686 | 685,820 | 685,820 | |||||||||||||||||
TZ Holdings, L.P., Series B |
| Insurance | 6.50 | % | | 1,312 | 1,312,006 | 1,623,922 | ||||||||||||||||
Universal Pegasus International, Inc. |
| Oil and Gas | 8.00 | % | | 101,175 | 2,738,050 | | ||||||||||||||||
Verde Parent Holdings, Inc. |
| Personal Transportation | 8.00 | % | | 1,824,167 | 1,824,167 | 2,061,678 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Preferred Equity/Partnership Interests |
10,531,077 | 7,422,836 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Common Equity/Warrants/Partnership Interests9.9%(7) |
||||||||||||||||||||||||
Acentia, LLC, Class A Units (12) |
| Electronics | | | 1,998 | 2,000,000 | 2,000,000 | |||||||||||||||||
AH Holdings, Inc. |
03/23/2021 | Healthcare, Education and Childcare | | | 753 | | 2,092,725 | |||||||||||||||||
CEA Autumn Management, L.L.C. |
| Broadcasting and Entertainment | | | 1,333 | 3,000,000 | | |||||||||||||||||
CI (Galls) Prime Investment Holdings, LLC |
| Distribution | | | 1,505,000 | 1,505,000 | 1,505,000 | |||||||||||||||||
CI (IHS) Investment Holdings, LLC |
| Healthcare, Education and Childcare | | | 23,416 | 234,693 | 300,781 | |||||||||||||||||
CI (IHS) Investment Holdings, LLC (8) |
| Healthcare, Education and Childcare | | | 11,708 | 117,346 | | |||||||||||||||||
CT Technologies Holdings, LLC |
| Business Services | | | 5,556 | 2,277,209 | 6,456,840 | |||||||||||||||||
DirectBuy Investors, L.P. |
| Consumer Products | | | 30,000 | 1,350,000 | | |||||||||||||||||
HW Topco, Inc. (Hanley-Wood, LLC) |
| Other Media | | | 348,912 | 2,443,050 | 2,394,070 | |||||||||||||||||
Kadmon Holdings, LLC, Class A |
| Healthcare, Education and Childcare | | | 1,079,920 | 1,236,832 | 10,802,578 | |||||||||||||||||
Kadmon Holdings, LLC, Class D |
| Healthcare, Education and Childcare | | | 1,079,920 | 1,028,807 | 1,028,807 | |||||||||||||||||
Learning Care Group (US) Inc. (Warrants) |
04/27/2020 | Education | | | 1,267 | 779,920 | | |||||||||||||||||
Magnum Hunter Resources Corporation |
| Oil and Gas | | | 1,221,932 | 3,239,999 | 7,832,584 | |||||||||||||||||
Magnum Hunter Resources Corporation (Warrants) |
10/14/2013 | Oil and Gas | | | 122,193 | 105,697 | 129,209 | |||||||||||||||||
MidOcean JF Holdings Corp. |
| Distribution | | | 1,700 | 1,700,000 | 1,515,631 | |||||||||||||||||
MidOcean PPL Holdings, Inc. |
| Personal, Food and Miscellaneous Services | | | 3,000 | 3,000,000 | 3,898,882 | |||||||||||||||||
Paradigm Acquisition Corp. |
| Healthcare, Education and Childcare | | | 20,000 | 2,000,000 | 2,000,000 | |||||||||||||||||
PAS Tech Holdings, Inc. |
| Aerospace and Defense | | | 20,000 | 20,000 | | |||||||||||||||||
QMG HoldCo, LLC, Class A |
| Other Media | | | 4,325 | 1,306,167 | 2,349,899 | |||||||||||||||||
QMG HoldCo, LLC, Class B |
| Other Media | | | 531 | | 288,508 | |||||||||||||||||
Titan Private Holdings I, LLC Class A |
| Telecommunications | | | 2,276,847 | 2,274,883 | 2,276,847 | |||||||||||||||||
TRAK Acquisition Corp. (Warrants) |
12/29/2019 | Business Services | | | 3,500 | 29,400 | 863,190 | |||||||||||||||||
Transportation 100 Holdco, L.L.C. (10) |
| Cargo Transport | | | 137,923 | 2,111,588 | | |||||||||||||||||
TZ Holdings, L.P. |
| Insurance | | | 2 | 9,843 | 1,768,884 | |||||||||||||||||
Universal Pegasus International, Inc. |
| Oil and Gas | | | 110,742 | 1,107 | | |||||||||||||||||
Verde Parent Holdings, Inc. |
| Personal Transportation | | | 9,166 | 9,166 | 10,359 | |||||||||||||||||
VText Holdings, Inc. (Veritext Corp.) |
| Business Services | | | 35,526 | 4,050,000 | 8,170,233 | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Common Equity/Warrants/Partnership Interests |
35,830,707 | 57,685,027 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies |
850,864,770 | 838,697,179 | ||||||||||||||||||||||
|
|
|
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)
MARCH 31, 2012
(Unaudited)
Issuer Name |
Maturity | Industry |
Current Coupon |
Basis Point Spread Above Index (4) |
Par / Shares |
Cost | Fair Value (3) | |||||||||||||||||
Investments in Non-Controlled, Affiliated Portfolio Companies6.1% (1),(2) |
| |||||||||||||||||||||||
Second Lien Secured Debt2.0% |
| |||||||||||||||||||||||
EnviroSolutions, Inc. |
07/29/2014 | Environmental Services | 8.00 | % | L+600 | (7) | 4,402,812 | $ | 4,402,812 | $ | 4,402,812 | |||||||||||||
Performance, Inc. |
01/16/2015 | Leisure, Amusement Motion Pictures and Entertainment | 7.25 | % | L+625 | (7) | 8,000,000 | 8,000,000 | 7,424,000 | |||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Second Lien Secured Debt |
|
12,402,812 | 11,826,812 | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Subordinated Debt/Corporate Notes1.2% |
| |||||||||||||||||||||||
Performance Holdings, Inc. |
07/16/2015 | Leisure, Amusement, | 15.00 | % | | 7,293,719 | 7,148,244 | 6,965,502 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Motion Pictures and Entertainment | (PIK 15.00 | %) | ||||||||||||||||||||||
Common Equity/Partnership Interest2.9% (6) |
| |||||||||||||||||||||||
EnviroSolutions, Inc. |
| Environmental Services | | | 103,450 | 8,156,770 | 15,546,685 | |||||||||||||||||
NCP-Performance (Performance Holdings, Inc.) |
| Leisure, Amusement, Motion Pictures and Entertainment | | | 375,000 | 3,750,000 | 1,317,111 | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Common Equity/Partnership Interest |
|
11,906,770 | 16,863,796 | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Investments in Non-Controlled, Affiliated Portfolio Companies |
|
31,457,826 | 35,656,110 | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Investments in Controlled, Affiliated Portfolio Companies2.5% (1),(2) |
|
|||||||||||||||||||||||
First Lien Secured Debt1.8% |
|
|||||||||||||||||||||||
SuttonPark Holdings, Inc. |
06/30/2020 | Business Services | 14.00 | % | | 10,000,000 | 10,000,000 | 10,501,510 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Subordinated Debt/Corporate Notes0.4% |
|
|||||||||||||||||||||||
SuttonPark Holdings, Inc. |
06/30/2020 | Business Services | 14.00 | % | | 2,500,000 | 2,500,000 | 2,273,155 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Preferred Equity0.3% (6) |
|
|||||||||||||||||||||||
SuttonPark Holdings, Inc. |
| Business Services | 14.00 | % | | 2,000 | 2,000,000 | 1,725,337 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Common Equity0.0% (6) |
|
|||||||||||||||||||||||
SuttonPark Holdings, Inc. |
| Business Services | | | 100 | 100 | | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Investments in Controlled, Affiliated Portfolio Companies |
|
14,500,100 | 14,500,002 | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Investments152.4% |
|
896,822,696 | 888,853,291 | |||||||||||||||||||||
Cash Equivalents4.6% |
|
26,964,225 | 26,964,225 | 26,964,225 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Investments and Cash Equivalents157.0% |
|
$ | 923,786,921 | $ | 915,817,516 | |||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Liabilities in Excess of Other Assets(57.0%) |
|
(332,509,871 | ) | |||||||||||||||||||||
Net Assets100.0% |
|
$ | 583,307,645 | |||||||||||||||||||||
|
|
(1) | The provisions of the Investment Company Act of 1940, as amended, or the 1940 Act, classify investments based on the level of control that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is deemed as non-controlled when we own less than 25% of a portfolio companys voting securities and controlled when we own 25% or more of a portfolio companys voting securities. |
(2) | The provisions of the 1940 Act classify investments further based on the level of ownership that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is deemed as non-affiliated when we own less than 5% of a portfolio companys voting securities and affiliated when we own 5% or more of a portfolio companys voting securities. |
(3) | Valued based on our accounting policy (see Note 2). |
(4) | Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable London Interbank Offered Rate, or LIBOR or L, or Prime Rate, or Prime or P. |
(5) | Security is exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended, or the Securities Act. The security may be resold in transactions that are exempt from registration, usually to qualified institutional buyers. |
(6) | Non-income producing securities. |
(7) | Coupon is subject to a LIBOR or Prime rate floor. |
(8) | Represents the purchase of a security with delayed settlement (unfunded investment). This security does not have a basis point spread above an index. |
(9) | Non-U.S. company or principal place of business outside the United States. |
(10) | Investment is held through PNNT Transportation 100 Holdco, LLC, a consolidated subsidiary. |
(11) | Investment is held through PNNT CI (GALLS) Prime Investments Holdings, LLC, a consolidated subsidiary. |
(12) | Investment is held through PNNT Acentia, LLC, a consolidated subsidiary. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2011
Issuer Name |
Maturity | Industry | Current Coupon |
Basis Point Spread Above Index (4) |
Par/ Shares |
Cost | Fair Value (3) | |||||||||||||||||
Investments in Non-Controlled, Non-Affiliated Portfolio Companies167.2%(1),(2) |
|
|||||||||||||||||||||||
First Lien Secured Debt60.6% |
|
|||||||||||||||||||||||
American Surgical Holdings, Inc. |
03/23/2015 | Healthcare, Education and Childcare |
14.00 | % | L+1,000 | (8) | 20,300,000 | $ | 19,748,930 | $ | 20,300,000 | |||||||||||||
CEVA Group PLC (5), (10) |
10/01/2016 | Logistics | 11.63 | % | | 7,500,000 | 7,328,729 | 7,331,250 | ||||||||||||||||
CEVA Group PLC (5), (10) |
04/01/2018 | Logistics | 11.50 | % | | 1,000,000 | 988,872 | 920,000 | ||||||||||||||||
Chester Downs and Marina, LLC |
07/29/2016 | Hotels, Motels, Inns and Gaming |
12.38 | % | L+988 | (8) | 11,358,254 | 11,024,166 | 11,310,924 | |||||||||||||||
Columbus International, Inc.(5), (10) |
11/20/2014 | Communications | 11.50 | % | | 10,000,000 | 10,000,000 | 9,800,000 | ||||||||||||||||
Covad Communications Group, Inc.(5) |
11/03/2015 | Telecommunications | 12.00 | % | L+1,000 | (8) | 6,475,000 | 6,362,696 | 6,345,500 | |||||||||||||||
Good Sam Enterprises, LLC (5) |
12/01/2016 | Consumer Products | 11.50 | % | | 12,000,000 | 11,759,625 | 11,220,000 | ||||||||||||||||
Hanley-Wood, L.L.C. |
03/10/2014 | Other Media | 2.56 | % | L+225 | 8,662,500 | 8,662,500 | 4,222,969 | ||||||||||||||||
Instant Web, Inc. |
08/07/2014 | Printing and Publishing |
14.50 | % | |
L+950 |
(8) |
24,625,000 | 24,227,464 | 25,683,875 | ||||||||||||||
Interactive Health Solutions, Inc. |
10/04/2016 | Healthcare, Education and Childcare |
11.50 | % | |
L+950 |
(8) |
19,000,000 | 18,572,500 | 18,572,500 | ||||||||||||||
Jacuzzi Brands Corp. |
02/07/2014 | Home and Office Furnishings, Housewares and Durable Consumer Products |
2.51 | % | L+225 | 9,671,622 | 9,671,622 | 6,866,851 | ||||||||||||||||
K2 Pure Solutions NoCal, L.P. |
09/10/2015 | Chemicals, Plastics and Rubber |
10.00 | % | |
P+675 |
(8) |
18,952,500 | 18,002,959 | 18,004,875 | ||||||||||||||
Kadmon Pharmaceuticals, LLC |
10/22/2011 | Healthcare, Education and Childcare |
15.00 | % | |
L+1,300 |
(8) |
29,066,987 | 27,940,332 | 30,811,006 | ||||||||||||||
Learning Care Group, Inc. |
04/27/2016 | Education | 12.00 | % | | 26,052,632 | 25,555,967 | 25,401,316 | ||||||||||||||||
Penton Media, Inc. |
08/01/2014 | Other Media | 5.00 | %(6) | L+400 | (8) | 37,779,699 | 32,241,162 | 26,130,971 | |||||||||||||||
Prepaid Legal Services, Inc., Tranche A |
12/30/2016 | Personal, Food and Miscellaneous Services |
|
7.50 |
% (6) |
L+600 | (8) | 2,000,000 | 1,970,966 | 1,900,000 | ||||||||||||||
Prepaid Legal Services, Inc., Tranche B |
12/30/2016 | Personal, Food and Miscellaneous Services |
11.00 | % (6) | L+950 | (8) | 35,000,000 | 33,978,263 | 33,250,000 | |||||||||||||||
Questex Media Group LLC |
12/16/2012 | Other Media | 10.50 | % | L+550 | (8) | 26,721 | 26,721 | 26,721 | |||||||||||||||
Questex Media Group LLC (9) |
12/16/2012 | Other Media | | | 240,485 | 240,485 | 240,485 | |||||||||||||||||
VPSI, Inc. |
12/23/2015 | Personal Transportation |
12.00 | % | |
L+1,000 |
(8) |
17,302,083 | 17,047,133 | 17,215,572 | ||||||||||||||
Yonkers Racing Corp. (5) |
07/15/2016 | Hotels, Motels, Inns and Gaming |
11.38 | % | | 4,500,000 | 4,391,231 | 4,590,000 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total First Lien Secured Debt |
289,742,323 | 280,144,815 | ||||||||||||||||||||||
|
|
|
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)
SEPTEMBER 30, 2011
Issuer Name |
Maturity | Industry | Current Coupon |
Basis Point Spread Above Index (4) |
Par/ Shares |
Cost | Fair Value (3) | |||||||||||||||||
Second Lien Secured Debt32.9% |
||||||||||||||||||||||||
Brand Energy and Infrastructure Services, Inc. |
02/07/2015 | Energy/Utilities | 6.30 | % | L+600 | 13,600,000 | $ | 13,300,431 | $ | 11,832,000 | ||||||||||||||
Brand Energy and Infrastructure Services, Inc. |
02/07/2015 | Energy/Utilities | 7.33 | % | L+700 | 12,000,000 | 11,821,275 | 10,680,000 | ||||||||||||||||
DirectBuy Holdings, Inc.(5) |
02/01/2017 | Consumer Products | 12.00 | % | | 34,000,000 | 31,944,865 | 10,710,000 | ||||||||||||||||
Eureka Hunter Pipeline, LLC |
08/16/2018 | Energy / Utilities | 12.50 | %(6) | | 31,000,000 | 31,000,000 | 31,000,000 | ||||||||||||||||
Eureka Hunter Pipeline, LLC (9) |
08/15/2012 | Energy / Utilities | | | 19,000,000 | 18,525,000 | 18,525,000 | |||||||||||||||||
Greatwide Logistics Services, L.L.C. |
03/01/2014 | Cargo Transport | 11.00 | %(6) | L+700 | (8) | 2,860,871 | 2,860,871 | 2,860,871 | |||||||||||||||
Questex Media Group LLC, Term Loan A |
12/15/2014 | Other Media | 9.50 | % | L+650 | (8) | 2,971,450 | 2,971,450 | 2,692,134 | |||||||||||||||
Questex Media Group LLC, Term Loan B |
12/15/2015 | Other Media | 11.50 | % (6) | L+750 | (8) | 1,990,370 | 1,990,370 | 1,737,593 | |||||||||||||||
RAM Energy Resources, Inc. |
09/13/2016 | Oil and Gas | 11.00 | % | L+900 | (8) | 17,000,000 | 16,672,749 | 16,830,000 | |||||||||||||||
Realogy Corp. |
10/15/2017 | Buildings and Real Estate | 13.50 | % | | 10,000,000 | 10,000,000 | 9,760,000 | ||||||||||||||||
ROC Finance LLC and ROC Finance 1 Corp. |
09/01/2018 | Hotels, Motels, Inns and Gaming |
12.13 | % | | 16,000,000 | 15,726,668 | 16,160,000 | ||||||||||||||||
Sheridan Holdings, Inc. |
06/15/2015 | Healthcare, Education and Childcare |
6.07 | % (6) | L+575 | 13,500,000 | 11,856,253 | 12,521,250 | ||||||||||||||||
TransFirst Holdings, Inc. |
06/15/2015 | Financial Services | 6.24 | % (6) | L+600 | 7,811,488 | 7,422,480 | 6,756,937 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Second Lien Secured Debt |
$ | 176,092,412 | 152,065,785 | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Subordinated Debt/Corporate Notes65.0% |
||||||||||||||||||||||||
Affinion Group Holdings, Inc. (5) |
11/15/2015 | Consumer Products | 11.63 | % | | 26,345,000 | 26,391,240 | 20,285,650 | ||||||||||||||||
Aquilex Holdings, LLC (5) |
12/15/2016 | Diversified / Conglomerate Services |
11.13 | % | | 18,885,000 | 18,440,262 | 8,309,400 | ||||||||||||||||
Consolidated Foundries, Inc. |
04/17/2015 | Aerospace and Defense | 14.25 | % (6) | | 8,109,468 | 7,997,216 | 8,109,468 | ||||||||||||||||
Diversitech Corporation |
01/29/2017 | Manufacturing / Basic Industry |
13.50 | % (6) | | 11,000,000 | 10,783,491 | 10,780,000 | ||||||||||||||||
Escort, Inc. |
06/01/2016 | Electronics | 14.75 | % (6) | | 24,560,142 | 23,964,150 | 24,314,541 | ||||||||||||||||
Last Mile Funding, Corp. |
06/30/2016 | Cargo Transport | 14.50 | % (6) | | 44,456,391 | 43,380,579 | 43,344,981 | ||||||||||||||||
Learning Care Group (US) Inc. |
06/30/2016 | Education | 15.00 | % (6) | | 4,566,982 | 3,891,689 | 4,133,119 | ||||||||||||||||
LTI Flexible Products, Inc. |
01/26/2017 | Chemical, Plastic and Rubber |
13.88 | % (6) | | 33,937,985 | 33,119,280 | 33,768,295 | ||||||||||||||||
Mailsouth, Inc. |
06/15/2017 | Printing and Publishing | 14.50 | % (6) | | 15,000,000 | 14,579,991 | 14,640,000 | ||||||||||||||||
MedQuist, Inc. |
10/14/2016 | Business Services | 13.00 | % (6) | | 19,000,000 | 18,492,685 | 19,950,000 | ||||||||||||||||
PAS Technologies, Inc. |
05/12/2017 | Aerospace and Defense | 14.02 | % (6) | | 16,785,000 | 16,400,403 | 16,600,365 | ||||||||||||||||
Prince Mineral Holdings Corp. |
12/03/2016 | Mining, Steel, Iron and Non-Precious Metals |
13.50 | %(6) | | 26,169,195 | 25,667,843 | 25,645,811 | ||||||||||||||||
Realogy Corp. |
04/15/2018 | Buildings and Real Estate | 11.00 | % | | 10,000,000 | 9,159,259 | 7,800,000 | ||||||||||||||||
TRAK Acquisition Corp. |
12/29/2015 | Business Services | 15.00 | % (6) | | 12,020,950 | 11,683,548 | 11,984,887 | ||||||||||||||||
UP Support Services Inc. |
02/08/2015 | Oil and Gas | 19.00 | % (6) | | 26,276,070 | 26,063,224 | 24,173,984 | ||||||||||||||||
Veritext Corp. |
12/31/2015 | Business Services | 14.00 | % (6) | | 15,000,000 | 14,686,238 | 15,000,000 | ||||||||||||||||
Veritext Corp. (9) |
12/31/2012 | Business Services | | | 12,000,000 | 11,700,000 | 12,000,000 | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Subordinated Debt/Corporate Notes |
316,401,098 | 300,840,501 | ||||||||||||||||||||||
|
|
|
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)
SEPTEMBER 30, 2011
Issuer Name |
Maturity | Industry | Current Coupon |
Basis Point Spread Above Index (4) |
Par / Shares |
Cost | Fair Value
(3) |
|||||||||||||||||
Preferred Equity/Partnership Interests 1.7% (7) |
|
|||||||||||||||||||||||
AH Holdings, Inc. |
| Healthcare, Education and Childcare |
6.00 | % | | 211 | $ | 500,000 | $ | 491,004 | ||||||||||||||
AHC Mezzanine, LLC (Advanstar Inc.) |
| Other Media | | | 7505 | 318,896 | | |||||||||||||||||
CFHC Holdings, Inc., Class A |
| Aerospace and Defense | 12.00 | % | | 909 | 909,248 | 1,328,977 | ||||||||||||||||
PAS Tech Holdings, Inc., Series A-1 |
| Aerospace and Defense | 8.00 | % | | 20,000 | 1,980,000 | 2,026,969 | ||||||||||||||||
TZ Holdings, L.P., Series A (Trizetto Group, Inc.) |
| Insurance | | | 686 | 685,820 | 685,820 | |||||||||||||||||
TZ Holdings, L.P., Series B (Trizetto Group, Inc.) |
| Insurance | 6.50 | % | | 1,312 | 1,312,006 | 1,581,165 | ||||||||||||||||
Universal Pegasus International, Inc. |
| Oil and Gas | 8.00 | % | | 101,175 | 2,738,050 | | ||||||||||||||||
Verde Parent Holdings, Inc. (VPSI, Inc.) |
| Personal Transportation | 8.00 | % | | 1,824,167 | 1,824,167 | 1,911,003 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Preferred Equity/Partnership Interests |
10,268,187 | 8,024,938 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Common Equity/Warrants/Partnership Interests7.0%(7) |
||||||||||||||||||||||||
AH Holdings, Inc. |
03/23/2021 | Healthcare, Education and Childcare |
| | 753 | | | |||||||||||||||||
CEA Autumn Management, L.L.C. |
| Broadcasting and Entertainment |
| | 1,333 | 3,000,000 | 280,176 | |||||||||||||||||
CFHC Holdings, Inc. (Consolidated Foundries, Inc.) |
| Aerospace and Defense | | | 1,856 | 18,556 | 1,443,556 | |||||||||||||||||
CT Technologies Holdings, LLC |
| Business Services | | | 5,556 | 2,277,209 | 8,431,871 | |||||||||||||||||
DirectBuy Investors, L.P. |
| Consumer Products | | | 30,000 | 1,350,000 | 469,500 | |||||||||||||||||
Kadmon Corporation, LLC, Class A |
| Healthcare, Education and Childcare |
| | 1,079,920 | 1,236,832 | 295,205 | |||||||||||||||||
Kadmon Corporation, LLC, Class D |
| Healthcare, Education and Childcare |
| | 1,079,920 | 1,028,807 | 1,028,807 | |||||||||||||||||
Learning Care Group (US) Inc. (Warrants) |
04/27/2020 | Education | | | 1,267 | 779,920 | 112,064 | |||||||||||||||||
Magnum Hunter Resources Corporation |
| Oil and Gas | | | 1,221,932 | 3,239,999 | 4,044,595 | |||||||||||||||||
Magnum Hunter Resources Corporation (Warrants) |
10/14/2013 | Oil and Gas | | | 122,193 | 105,697 | 61,091 | |||||||||||||||||
MidOcean PPL Holdings, Inc. |
| Personal, Food and Miscellaneous Services |
| | 3,000 | 3,000,000 | 3,320,146 | |||||||||||||||||
PAS Tech Holdings, Inc. (PAS Technologies, Inc.) |
| Aerospace and Defense | | | 20,000 | 20,000 | 101,931 | |||||||||||||||||
QMG HoldCo, LLC, Class A |
| Other Media | | | 4,325 | 1,306,167 | 1,352,585 | |||||||||||||||||
QMG HoldCo, LLC, Class B |
| Other Media | | | 531 | | 166,063 | |||||||||||||||||
TRAK Acquisition Corp. (Warrants) |
12/29/2019 | Business Services | | | 3,500 | 29,400 | 577,061 | |||||||||||||||||
Transportation 100 Holdco, L.L.C. |
| Cargo Transport | | | 137,923 | 2,111,588 | 1,521,406 | |||||||||||||||||
TZ Holdings, L.P. |
| Insurance | | | 2 | 9,843 | 1,591,505 | |||||||||||||||||
Universal Pegasus International, Inc. |
| Oil and Gas | | | 110,742 | 1,107 | | |||||||||||||||||
Verde Parent Holdings, Inc. (VPSI, Inc.) |
| Personal Transportation | | | 9,166 | 9,166 | | |||||||||||||||||
Vtext Holdings, Inc. (Veritext Corp.) |
| Business Services | | | 35,526 | 4,050,000 | 7,501,780 | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Common Equity/Warrants/Partnership Interests |
23,574,291 | 32,299,342 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies |
816,078,311 | 773,375,381 | ||||||||||||||||||||||
|
|
|
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)
SEPTEMBER 30, 2011
Issuer Name |
Maturity | Industry | Current Coupon |
Basis Point Spread Above Index (4) |
Par / Shares |
Cost | Fair Value (3) | |||||||||||||||||
Investments in Non-Controlled, Affiliated Portfolio Companies8.8% (1),(2) |
| |||||||||||||||||||||||
First Lien Secured Debt 1.4% |
||||||||||||||||||||||||
EnviroSolutions, Inc. (9) |
07/29/2013 | Environmental Services | | 6,666,666 | $ | 6,666,666 | $ | 6,666,666 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Second Lien Secured Debt2.9% |
||||||||||||||||||||||||
EnviroSolutions, Inc. |
07/29/2014 | Environmental Services | 8.00 | % | L+600 | (8) | 5,870,416 | 5,870,416 | 5,870,416 | |||||||||||||||
Performance, Inc. |
01/16/2015 | Leisure, Amusement Motion Pictures and Entertainment |
7.25 | % | L+625 | (8) | 8,000,000 | 8,000,000 | 7,336,000 | |||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Second Lien Secured Debt |
13,870,416 | 13,206,416 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Subordinated Debt/Corporate Notes1.4% |
|
|||||||||||||||||||||||
Performance Holdings, Inc. |
07/16/2015 | Leisure, Amusement, | 15.00 | % (6) | | 6,775,991 | 6,617,860 | 6,403,311 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Motion Pictures and Entertainment |
||||||||||||||||||||||||
Common Equity/Partnership Interest3.1% (7) |
|
|||||||||||||||||||||||
EnviroSolutions, Inc. |
| Environmental Services | | | 37,382 | 2,710,036 | 5,641,925 | |||||||||||||||||
EnviroSolutions, Inc. (Warrants) |
| Environmental Services | | | 50,102 | 3,129,447 | 7,561,205 | |||||||||||||||||
NCP-Performance (Performance Holdings, Inc.) |
| Leisure, Amusement, | | | 375,000 | 3,750,000 | 1,193,610 | |||||||||||||||||
Motion Pictures and Entertainment |
||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Common Equity/Partnership Interest |
|
9,589,483 | 14,396,740 | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Investments in Non-Controlled, Affiliated Portfolio Companies |
|
36,744,425 | 40,673,133 | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Investments in Controlled, Affiliated Portfolio Companies2.9% (1),(2) |
|
|||||||||||||||||||||||
First Lien Secured Debt2.1% |
|
|||||||||||||||||||||||
SuttonPark Holdings, Inc. |
06/30/2020 | Business Services | 14.00 | % (6) | | 9,200,000 | 9,200,000 | 9,676,650 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Subordinated Debt/Corporate Notes0.5% |
|
|||||||||||||||||||||||
SuttonPark Holdings, Inc. |
06/30/2020 | Business Services | 14.00 | % (6) | | 2,300,,000 | 2,300,000 | 2,085,357 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Preferred Equity0.4% (7) |
|
|||||||||||||||||||||||
SuttonPark Holdings, Inc. |
| Business Services | 14.00 | % | | 2,000 | 2,000,000 | 1,737.994 | ||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Common Equity0.0% (7) |
|
|||||||||||||||||||||||
SuttonPark Holdings, Inc. |
| Business Services | | | 100 | 100 | | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Investments in Controlled, Affiliated Portfolio Companies |
|
13,500,100 | 13,500,001 | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Investments178.9% |
|
866,322,836 | 827,548,515 | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Cash Equivalents15.5% |
|
71,604,519 | 71,604,519 | 71,604,519 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total Investments and Cash Equivalents194.3% |
|
$ | 937,927,355 | $ | 899,153,034 | |||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Liabilities in Excess of Other Assets(94.3%) |
|
(436,495,838 | ) | |||||||||||||||||||||
Net Assets100.0% |
|
$ | 462,657,196 | |||||||||||||||||||||
|
|
(1) | The provisions of the 1940 Act classify investments based on the level of control that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is deemed as non-controlled when we own less than 25% of a portfolio companys voting securities and controlled when we own 25% or more of a portfolio companys voting securities. |
(2) | The provisions of the 1940 Act classify investments further based on the level of ownership that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is deemed as non-affiliated when we own less than 5% of a portfolio companys voting securities and affiliated when we own 5% or more of a portfolio companys voting securities. |
(3) | Valued based on our accounting policy (see Note 2). |
(4) | Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR or Prime rate. |
(5) | Security is exempt from registration under Rule 144A promulgated under the Securities Act. The security may be resold in transactions that are exempt from registration, usually to qualified institutional buyers. |
(6) | Coupon is payable in cash and/or through PIK. |
(7) | Non-income producing securities. |
(8) | Coupon is subject to a LIBOR or Prime rate floor. |
(9) | Represents the purchase of a security with delayed settlement (unfunded investment). This security does not have a basis point spread above an index. |
(10) | Non-U.S. company or principal place of business outside the United States. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(Unaudited)
1. ORGANIZATION
PennantPark Investment Corporation was organized as a Maryland corporation on January 11, 2007. PennantPark Investment is a closed-end, externally managed, non-diversified investment company that has elected to be treated as a business development company, or BDC, under the 1940 Act. PennantPark Investments objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in U.S. middle-market companies in the form of senior secured loans, mezzanine debt and equity investments.
On April 24, 2007, we closed our initial public offering and our common stock trades on the NASDAQ Global Select Market under the symbol PNNT. We completed our initial public offering of common stock in 2007 and issued 21.0 million shares raising $294.1 million in net proceeds. Since our initial public offering, we have sold 34.6 million shares of common stock through follow-on public offerings, resulting in net proceeds of $347.7 million. During the three months ended March 31, 2012, we sold approximately 10.4 million shares in a follow-on public offering, resulting in net proceeds of $105.2 million, after estimated offering costs.
We are externally managed by PennantPark Investment Advisers. PennantPark Investment Administration provides the administrative services necessary for us to operate.
SBIC LP and its general partner, SBIC GP, were organized in Delaware as a limited partnership and a limited liability company, respectively, in May 2010 and began operations in June 2010. SBIC LP received a license from the Small Business Administration, or SBA, to operate as an SBIC effective July 30, 2010 under Section 301(c) of the Small Business Investment Act of 1958, or the 1958 Act. Both SBIC LP and SBIC GP are consolidated wholly owned subsidiaries of PennantPark Investment. SBIC LPs objective is to generate both current income and capital appreciation through debt and equity investments generally, investing with us in SBA eligible businesses that meet the investment criteria used by PennantPark Investment.
PennantPark Investment, through the Investment Adviser, manages day-to-day operations of and provides investment advisory services to SBIC LP under a separate investment management agreement. PennantPark Investment, through the Administrator, also provides similar services to SBIC LP and our controlled affiliate SuttonPark Holdings, Inc. and its subsidiaries, or SPH, under separate administration agreements. See Note 3.
We have formed and expect to continue to form certain taxable subsidiaries, or the Taxable Subsidiaries, which are taxed as corporations for federal income tax purposes. These Taxable Subsidiaries allow us to hold portfolio companies organized as pass-through entities and still satisfy the requirements of regulated investment companies, or RICs, under the Internal Revenue Code of 1986, as amended, or the Code.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reported period. Actual results could differ from these estimates. We have eliminated all intercompany balances and transactions, if any. References to the Accounting Standards Codification, or ASC, serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated Financial Statements are issued.
Our Consolidated Financial Statements are prepared in accordance with GAAP and pursuant to the requirements for reporting on Form 10-Q and Article 6 or 10 of Regulation S-X, as appropriate. In accordance with Article 6-09 of Regulation S-X, we have provided a Consolidated Statement of Changes in Net Assets in lieu of a Consolidated Statement of Changes in Stockholders Equity.
Our significant accounting policies consistently applied are as follows:
(a) Investment Valuations
Our board of directors generally uses market quotations to assess the value of our investments for which market quotations are readily available. We obtain these market values from independent pricing services or at the bid prices obtained from at least two broker/dealers if available, or otherwise by a principal market maker or a primary market dealer. If the board of directors has a bona fide reason to believe any such market quote does not reflect the fair value of an investment, it may independently value such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available. Investments of sufficient credit quality purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value.
14
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2012
(Unaudited)
We expect that there will not be readily available market values for many of our investments which are or will be in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our board of directors using a documented valuation policy, described herein, and a consistently applied valuation process. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio companys ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and the difference may be material. See Note 5.
With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, our board of directors undertakes a multi-step valuation process each quarter, as described below:
(1) | Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of our Investment Adviser responsible for the portfolio investment; |
(2) | Preliminary valuation conclusions are then documented and discussed with the management of our Investment Adviser; |
(3) | Our board of directors also engages independent valuation firms to conduct independent appraisals of our investments for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment. The independent valuation firms review managements preliminary valuations in light of their own independent assessment and also in light of any market quotations obtained from an independent pricing service, broker, dealer or market maker; |
(4) | The audit committee of our board of directors reviews the preliminary valuations of our Investment Adviser and those of the independent valuation firms and responds and supplements the valuation recommendations of the independent valuation firms to reflect any comments; and |
(5) | Our board of directors discusses these valuations and determines the fair value of each investment in our portfolio in good faith based on the input of our Investment Adviser, the respective independent valuation firms and the audit committee. |
(b) Security Transactions, Revenue Recognition, and Realized / Unrealized Gains or Losses
Security transactions are recorded on a trade-date basis. We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investments and our senior secured revolving credit facility, or the Credit Facility, values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.
We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt investments with contractual PIK interest, which represents interest accrued and added to the loan balance that generally becomes due at maturity, we will generally not accrue PIK interest when the portfolio company valuation indicates that such PIK interest is not collectable. We do not accrue as a receivable interest on loans and debt investments if we have reason to doubt our ability to collect such interest. Loan origination fees, original issue discount, market discount or premium and deferred financing costs are capitalized and we then accrete or amortize such amounts using the effective interest method as interest income or interest expense as it relates to our deferred financing costs. We record prepayment penalties on loans and debt investments as income. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts.
Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and/or when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon managements judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in managements judgment, are likely to remain current.
(c) Income Taxes
Since May 1, 2007, PennantPark Investment has complied with the requirements of Subchapter M of the Code and expects to be subject to tax as a RIC. As a result, PennantPark Investment accounts for income taxes using the asset liability method prescribed by ASC 740, Income Taxes. Under this method, income taxes are provided for amounts currently payable and for amounts deferred as tax assets and liabilities based on differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Based upon PennantPark Investments qualification and election to be subject to tax as a RIC, we do not anticipate paying any material level of federal income taxes in the future. Although we are not subject to tax as a RIC, we have elected to retain a portion of our calendar year income and recorded an excise tax of approximately $0.3 million and $0.2 million for the six months ended March 31, 2012 and 2011, respectively.
PennantPark Investment recognizes in its Consolidated Financial Statements the effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. We did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25 nor did we have any unrecognized tax benefits as of the periods presented herein. Although we file federal and state tax returns, our major tax jurisdiction is federal. Our tax returns for each of our federal tax years from 2008 to date remain subject to examination by the Internal Revenue Service and the state department of revenue.
Book and tax basis differences relating to permanent book and tax differences are reclassified among PennantPark Investments capital accounts, as appropriate. Additionally, the tax character of distributions is determined in accordance with income tax regulations that may differ from GAAP.
We do not consolidate the Taxable Subsidiaries for income tax purposes, but we do consolidate the results of these Taxable Subsidiaries for financial reporting purposes.
15
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2012
(Unaudited)
(d) Dividends, Distributions, and Capital Transactions
Dividends and distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid, if any, as a dividend or distributions determined by the board of directors each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are distributed at least annually.
Capital transactions, in connection with our dividend reinvestment plan or through offerings of our common stock, are recorded when issued and offering costs are charged as a reduction of capital upon issuance of our common stock.
(e) Consolidation
As permitted under Regulation S-X and as explained by ASC 946-810-45, PennantPark Investment will generally not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to us. Accordingly, we have consolidated the results of the Subsidiaries in our Consolidated Financial Statements.
(f) New Accounting Pronouncement
In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, or ASU 2011-04. ASU 2011-04 amends ASC 820, Fair Value Measurements, or ASC 820, by: (1) clarifying that certain concepts related to measuring the fair value apply only to non-financial assets; (2) allowing a reporting entity to measure the fair value of a net asset or net liability position in a manner consistent with how market participants would price the position; (3) providing a framework for selecting a premium or discount that may be applied in a fair value measurement; (4) providing that an instrument classified in a reporting entitys shareholders equity may be fair valued based on how a market participant would price the identical instrument; and (5) expanding the qualitative and quantitative fair value disclosure requirements. These amendments are effective for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years. The amendments of ASU 2011-04, as adopted, did not have a material impact on our Consolidated Financial Statements. See Note 5.
3. AGREEMENTS
PennantPark Investments investment management agreement, or the Investment Management Agreement, with the Investment Adviser was re-approved by our board of directors, including a majority of our directors who are not interested persons of PennantPark Investment, in February 2012. Under the Investment Management Agreement, the Investment Adviser, subject to the overall supervision of PennantPark Investments board of directors, manages the day-to-day operations of and provides investment advisory services to PennantPark Investment. SBIC LPs investment management agreement does not affect the management or incentive fees that we pay to the Investment Adviser on a consolidated basis. For providing these services, the Investment Adviser receives a fee from us consisting of two componentsa base management fee and an incentive fee.
The base management fee is calculated at an annual rate of 2.00% of our average adjusted gross assets (net of U.S. Treasury Bills and/or temporary draws, if any, on the Credit Facility). The base management fee is payable quarterly in arrears. The base management fee is calculated based on the average adjusted gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. For the three and six months ended March 31, 2012, the Investment Adviser earned a base management fee of $4.2 million and $8.2 million, respectively, from us. For the three and six months ended March 31, 2011, the Investment Adviser earned a base management fee of $3.6 million and $7.1 million, respectively, from us.
The incentive fee has two parts, as follows:
One part is calculated and payable quarterly in arrears based on our Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter. For this purpose, Pre-Incentive Fee Net Investment Income means interest income, distribution income and any other income, including any other fees other than fees for providing managerial assistance, such as commitment, origination, structuring, diligence and consulting fees or other fees received from portfolio companies accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement, and any interest expense and distribution paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Pre-Incentive Fee Net Investment Income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7.00% annualized). We pay the Investment Adviser an incentive fee with respect to our Pre-Incentive Fee Net Investment Income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which our Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of 1.75%, (2) 100% of our Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter (8.75% annualized), and (3) 20% of the amount of our Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.1875% in any calendar quarter. These calculations are adjusted for any share issuances or repurchases during the applicable quarter. For the three and six months ended March 31, 2012, the Investment Adviser earned an incentive fee of $2.4 million and $6.1 million, respectively, from us. For the three and six months ended March 31, 2011, the Investment Adviser earned an incentive fee of $3.3 million and $6.1 million, respectively, from us.
The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement, as of the termination date) and equals 20.0% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. The performance based incentive fee on capital gains due to our Investment Adviser as calculated under the Investment Management Agreement (as described above) for the three and six months ended March 31, 2012 and March 31, 2011 resulted in no accrual.
16
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2012
(Unaudited)
In calculating the capital gains incentive fee accrual we considered the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the Investment Management Agreement. This accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital appreciation. If such amount is positive at the end of a period, then we record a capital gains incentive fee equal to 20.0% of such amount, less the aggregate amount of actual capital gains related incentive fees paid in all prior years. If such amount is negative, then there is no accrual for such year. There can be no assurance that such unrealized capital appreciation will be realized in the future.
PennantPark Investments Administration Agreement with the Administrator was reapproved by our board of directors, including a majority of our directors who are not interested persons of PennantPark Investment, in February 2012. Under the Administration Agreement, PennantPark Investment Administration provides administrative services for PennantPark Investment. The Administrator provides similar services to SBIC LP under its administration agreement with PennantPark Investment. For providing these services, facilities and personnel, PennantPark Investment reimburses the Administrator for its allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent, technology systems, insurance and PennantPark Investments allocable portion of the costs of compensation and related expenses for its chief compliance officer, chief financial officer and their respective staffs. The Administrator also offers, on PennantPark Investments behalf, managerial assistance to portfolio companies to which PennantPark Investment is required to offer such assistance. Reimbursement for certain of these costs is included in administrative services expenses in the Consolidated Statement of Operations. For the three and six months ended March 31, 2012, the Investment Adviser and Administrator, collectively, were reimbursed $1.7 million and $2.4 million, respectively, from us, including expenses incurred by the Investment Advisor on behalf of the Administrator, for the services described above. For the three and six months ended March 31, 2011, the Investment Adviser and Administrator, collectively, were reimbursed $1.3 million and $1.9 million, respectively, from us, including expenses incurred by the Investment Advisor on behalf of the Administrator, for the services described above.
PennantPark Investment entered into an administration agreement with its controlled affiliate, Sutton Park Holdings, or SPH. Under the administration agreement with SPH, or the SPH Administration Agreement, PennantPark Investment through the Administrator furnishes SPH with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Additionally, the Administrator performs or oversees the performance of SPHs required administrative services, which include, among other things, maintaining financial records, preparing financial reports and filing of tax returns. Payments under the SPH Administration Agreement are equal to an amount based upon SPHs allocable portion of the Administrators overhead in performing its obligations under the SPH Administration Agreement, including rent and allocable portion of the cost of compensation and related expenses of our chief financial officer and his respective staffs. For the three and six months ended March 31, 2012, PennantPark Investment was reimbursed $0.3 million and $0.5 million, respectively, for the services described above. For the three and six months ended March 31, 2011, PennantPark Investment was reimbursed $0.3 million and $0.4 million, respectively, for the services described above.
17
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2012
(Unaudited)
4. INVESTMENTS
Purchases of long-term investments including PIK for the three and six months ended March 31, 2012 totaled $114.0 million and $160.0 million, respectively. For the same period in the prior year, purchases of long-term investments including PIK totaled $98.8 million and $201.7 million, respectively. Sales and repayments of long-term investments for the three and six months ended March 31, 2012 totaled $49.3 million and $118.5 million, respectively. For the same period in the prior year, sales and repayments of long-term investments totaled $51.6 million and $137.1 million, respectively. Investments and cash equivalents consisted of the following:
March 31, 2012 | September 30, 2011 | |||||||||||||||
Cost | Fair Value | Cost | Fair Value | |||||||||||||
First lien |
$ | 274,973,384 | $ | 274,161,737 | $ | 305,608,989 | $ | 296,488,131 | ||||||||
Second lien |
192,418,196 | 168,085,901 | 189,962,828 | 165,272,201 | ||||||||||||
Subordinated debt / corporate notes |
369,162,462 | 362,908,657 | 325,318,958 | 309,329,169 | ||||||||||||
Preferred equity |
12,531,077 | 9,148,173 | 12,268,187 | 9,762,932 | ||||||||||||
Common equity |
47,737,577 | 74,548,823 | 33,163,874 | 46,696,082 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total investments |
896,822,696 | 888,853,291 | 866,322,836 | 827,548,515 | ||||||||||||
Cash equivalents |
26,964,225 | 26,964,225 | 71,604,519 | 71,604,519 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total investments and cash equivalents |
$ | 923,786,921 | $ | 915,817,516 | $ | 937,927,355 | $ | 899,153,034 | ||||||||
|
|
|
|
|
|
|
|
The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets (excluding cash equivalents) in such industries as of March 31, 2012 and September 30, 2011.
Industry Classification |
March 31, 2012 |
September 30, 2011 |
||||||
Healthcare, Education and Childcare |
11 | % | 10 | % | ||||
Business Services |
10 | 11 | ||||||
Energy / Utilities |
8 | 9 | ||||||
Chemicals, Plastics and Rubber |
6 | 6 | ||||||
Consumer Products |
6 | 5 | ||||||
Cargo Transport |
5 | 6 | ||||||
Distribution |
5 | | ||||||
Electronics |
5 | 3 | ||||||
Oil and Gas |
5 | 5 | ||||||
Other Media |
5 | 4 | ||||||
Personal, Food and Miscellaneous Services |
4 | 5 | ||||||
Printing and Publishing |
4 | 5 | ||||||
Education |
3 | 4 | ||||||
Hotels, Motels, Inns and Gaming |
3 | 4 | ||||||
Mining, Steel, Iron and Non-Precious Metals |
3 | 3 | ||||||
Aerospace and Defense |
2 | 4 | ||||||
Buildings and Real Estate |
2 | 2 | ||||||
Environmental Services |
2 | 3 | ||||||
Leisure, Amusement, Motion Pictures, Entertainment |
2 | 2 | ||||||
Telecommunications |
2 | | ||||||
Communication |
1 | 1 | ||||||
Home and Office Furnishings, Housewares and Durable Consumer Products |
1 | 1 | ||||||
Logistics |
1 | 1 | ||||||
Manufacturing / Basic Industry |
1 | 1 | ||||||
Other |
3 | 5 | ||||||
|
|
|
|
|||||
Total |
100 | % | 100 | % | ||||
|
|
|
|
18
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2012
(Unaudited)
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value, as defined under ASC 820, is the price that we would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment or liability. ASC 820 emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing an asset or liability based on market data obtained from sources independent of us. Unobservable inputs reflect the assumptions market participants would use in pricing an asset or liability based on the best information available to us on the reporting period date.
ASC 820 classifies the inputs used to measure these fair values into the following hierarchies:
Level 1: | Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date. | |
Level 2: | Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument. | |
Level 3: | Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability. |
A financial instruments categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments and our Credit Facility are classified as Level 3. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.
The inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data is available, such information may be the result of consensus pricing information or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence was available. Corroborating evidence that would result in classifying these non-binding brokers/dealer bids as a Level 2 asset includes observable market-based transactions for the same or similar assets or other relevant observable market based inputs that may be used in pricing an asset.
Our investments are generally structured as debt and equity investments in the form of senior secured loans, mezzanine debt and equity co-investments. The transaction price, excluding transaction costs, is typically the best estimate of fair value at inception. Within our fair value hierarchy table, our investments are generally categorized as first lien, second lien, subordinated debt and preferred and common equity investments. The companies in which we invest are typically highly leveraged, and, in most cases, are not rated by national rating agencies. If such companies were rated, we believe that they would typically receive a rating below investment grade (between BB and CCC under the Standard & Poors system) from the national rating agencies.
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in our ability to observe valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or out of the Level 3 category as of the end of the quarter in which the reclassifications occur. During the six months ended March 31, 2012, our ability to observe valuation inputs has resulted in no reclassification of assets from Level 3 to 2. There were no investments transferred between Levels 1 and 2 for the same period.
In addition to using the above inputs in cash equivalents, investments and our Credit Facility valuations, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value. See Note 2.
In accordance with ASU 2011-04 and as outlined in the table below, our investments using a market approach valuation technique are valued using the average of the bids from brokers or dealers. The bids include a disclaimer, have no corroborating evidence and may be the result of consensus pricing. We do not adjust the bids.
The remainder of our portfolio was valued using a market comparable or enterprise valuation technique and our long-term Credit Facility used an income approach valuation technique. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio companys ability to make payments, its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the pricing indicated by the external event is used to corroborate the valuation. When using earnings multiples to value a portfolio company, the multiple used requires the use of judgment and estimates in determining how a market participant would price such an asset. Generally, the sensitivity of unobservable inputs or combination of inputs such as industry comparable companies, market outlook, consistency, discount rates and reliability of earnings and prospects for growth, or lack thereof, affects the multiple used in pricing an investment. As a result, any change in any one of those factors may have a significant impact on the valuation of an investment.
Asset Category |
Fair Value | Valuation Techniques |
Unobservable Inputs |
Range of Values/Input | ||||
First lien, second lien, subordinated debt/corporate notes and preferred and common equity | 23% | Market approach | Broker/Dealer bids | 1 - 9 | ||||
First lien, second lien, subordinated debt/corporate notes and preferred and common equity | 77% | Market comparable / Enterprise value | EBITDA multiples | 8.0x | ||||
Long-Term Credit Facility |
100% | Market comparable / Income approach | Discount rate | 3.9% |
19
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2012
(Unaudited)
On March 31, 2012 and September 30, 2011, our cash equivalents, investments and our Credit Facility were categorized as follows in the fair value hierarchy for ASC 820 purposes.
Fair Value at March 31, 2012 | ||||||||||||||||
Description |
Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Loan and debt investments |
$ | 805,156,295 | $ | | $ | 43,269,560 | $ | 761,886,735 | ||||||||
Equity investments |
83,696,996 | 7,832,584 | 129,209 | 75,735,203 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total investments |
888,853,291 | 7,832,584 | 43,398,769 | 837,621,938 | ||||||||||||
Cash equivalents |
26,964,225 | 26,964,225 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total investments and cash equivalents |
$ | 915,817,516 | $ | 34,796,809 | $ | 43,398,769 | $ | 837,621,938 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Credit Facility |
$ | 147,757,500 | $ | | $ | | $ | 147,757,500 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Fair Value at September 30, 2011 | ||||||||||||||||
Description |
Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Loan and debt investments |
$ | 771,089,501 | $ | | $ | 38,395,050 | $ | 732,694,451 | ||||||||
Equity investments |
56,459,014 | 4,044,595 | 61,091 | 52,353,328 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total investments |
827,548,515 | 4,044,595 | 38,456,141 | 785,047,779 | ||||||||||||
Cash equivalents |
71,604,519 | 71,604,519 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total investments and cash equivalents |
$ | 899,153,034 | $ | 75,649,114 | $ | 38,456,141 | $ | 785,047,779 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Credit Facility |
$ | 238,792,125 | $ | | $ | | $ | 238,792,125 | ||||||||
|
|
|
|
|
|
|
|
The following tables show a reconciliation of the beginning and ending balances for fair valued investments measured using significant unobservable inputs (Level 3) for the six months ended March 31, 2012 and 2011:
For the six months ended March 31, 2012 | ||||||||||||
Description |
Loan and debt investments |
Equity investments |
Totals | |||||||||
Beginning Balance, September 30, 2011 |
$ | 732,694,451 | $ | 52,353,328 | $ | 785,047,779 | ||||||
Realized gains (losses) |
(4,447,450 | ) | 2,534,403 | (1,913,047 | ) | |||||||
Unrealized appreciation |
2,781,866 | 8,545,282 | 11,327,148 | |||||||||
Purchases, PIK and net discount accretion |
144,094,844 | 16,005,789 | 160,100,633 | |||||||||
Sales / repayments |
(111,542,433 | ) | (5,398,142 | ) | (116,940,575 | ) | ||||||
Exchanges |
(1,694,543 | ) | 1,694,543 | | ||||||||
Transfers in or out of Level 3 |
| | | |||||||||
|
|
|
|
|
|
|||||||
Ending Balance, March 31, 2012 |
$ | 761,886,735 | $ | 75,735,203 | $ | 837,621,938 | ||||||
|
|
|
|
|
|
|||||||
Net change in unrealized appreciation for the period reported within the net change in unrealized appreciation on investments in our Consolidated Statement of Operations attributable to our Level 3 assets still held at the reporting date | $ | 6,191,605 | $ | 10,390,011 | $ | 16,581,616 | ||||||
|
|
|
|
|
|
For the six months ended March 31, 2011 | ||||||||||||
Description |
Loan and debt investments |
Equity investments |
Totals | |||||||||
Beginning Balance, September 30, 2010 |
$ | 615,236,138 | $ | 45,137,828 | $ | 660,373,966 | ||||||
Realized gains |
2,579,813 | | 2,579,813 | |||||||||
Unrealized appreciation |
11,465,652 | 4,550,239 | 16,015,891 | |||||||||
Purchases, PIK and net discount accretion |
199,248,180 | 5,664,360 | 204,912,540 | |||||||||
Sales / repayments |
(136,343,315 | ) | (764,218 | ) | (137,107,533 | ) | ||||||
Transfers in or out of Level 3 |
(28,646,063 | ) | | (28,646,063 | ) | |||||||
|
|
|
|
|
|
|||||||
Ending Balance, March 31, 2011 |
$ | 663,540,405 | $ | 54,588,209 | $ | 718,128,614 | ||||||
|
|
|
|
|
|
|||||||
Net change in unrealized appreciation for the period reported within the net change in unrealized depreciation on investments in our Consolidated Statement of Operations attributable to our Level 3 assets still held at the reporting date | $ | 12,379,569 | $ | 4,550,239 | $ | 16,929,808 | ||||||
|
|
|
|
|
|
20
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2012
(Unaudited)
The following tables show a reconciliation of the beginning and ending balances for fair valued liabilities measured using significant unobservable inputs (Level 3) for the six months ended March 31, 2012 and 2011.
Six months ended March 31, 2012 | ||||
Credit Facility | Carrying / Fair Value |
|||
Beginning balance, September 30, 2011 (Cost $240,900,000) |
$ | 238,792,125 | ||
Total unrealized appreciation included in earnings |
1,365,375 | |||
Borrowings (1) |
437,800,000 | |||
Repayments (1) |
(530,200,000 | ) | ||
Transfers in and/or out of Level 3 |
| |||
|
|
|||
Ending Balance, March 31, 2012 (Cost $148,500,000) |
147,757,500 | |||
Temporary draw outstanding, at cost |
10,000,000 | |||
|
|
|||
Total Credit Facility, March 31, 2012 (Cost $158,500,000) |
$ | 157,757,500 | ||
|
|
Six months ended March 31, 2011 | ||||
Credit Facility | Carrying / Fair Value |
|||
Beginning balance, September 30, 2010 (Cost $227,900,000) |
$ | 213,941,125 | ||
Total unrealized appreciation included in earnings |
11,303,446 | |||
Borrowings (1) |
128,900,000 | |||
Repayments (1) |
(205,061,200 | ) | ||
Transfers in and/or out of Level 3 |
| |||
|
|
|||
Ending Balance, March 31, 2011 (Cost $151,738,800) |
149,083,371 | |||
Temporary draw outstanding, at cost |
1,100,000 | |||
|
|
|||
Total Credit Facility, March 31, 2011 (Cost $152,838,800) |
$ | 150,183,371 | ||
|
|
|||
(1) Excludes temporary draws. |
We adopted ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to our Credit Facility. We elected to use the fair value option for the Credit Facility to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we incurred non-recurring expenses of $5.4 million, which represents the upfront fees and expenses related to the Credit Facility. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a companys choice to use fair value on its earnings. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statement of Assets and Liabilities and changes in fair value of the Credit Facility are recorded in the Consolidated Statement of Operations. We elected not to apply ASC 825-10 to any other financial assets or liabilities, including the SBA debentures. For the three and six months ended March 31, 2012, our Credit Facility had a net change in unrealized appreciation of $0.2 million and $1.4 million, respectively. For the three and six months ended March 31, 2011, our Credit Facility had a net change in unrealized appreciation of $4.7 million and $11.3 million, respectively. On March 31, 2012 and September 30, 2011, net unrealized depreciation on our long-term Credit Facility totaled $0.7 million and $2.1 million, respectively. PennantPark Investment uses a nationally recognized independent valuation service to measure the fair value of its Credit Facility in a manner consistent with the valuation process that the board of directors uses to value investments.
21
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2012
(Unaudited)
6. TRANSACTIONS WITH AFFILIATED COMPANIES
An affiliated company is a company in which we have ownership of 5% or more of the portfolio companys voting securities. A controlled affiliate is a company in which we own 25% or more of a portfolio companys voting securities. Advances to and distributions from affiliates are included in the Consolidated Statements of Cash Flow under purchases and sales. Transactions related to our investments with both controlled and non-controlled affiliates for the six months ended March 31, 2012 were as follows:
Name of Investment |
Fair Value at September 30, 2011 |
Advances to Affiliates |
Distributions from Affiliates |
Income Received |
Fair Value at March 31, 2012 |
Capital Gains / (Losses) |
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Controlled Affiliates |
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SuttonPark Holdings, Inc. |
$ | 13,500,001 | $ | 4,500,000 | $ | (3,500,000 | ) | $ | 792,744 | $ | 14,500,002 | | ||||||||||||
Non-Controlled Affiliates |
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Envirosolutions, Inc. |
25,740,212 | 4,253,222 | (4,066,676 | ) | 303,014 | 19,949,497 | 663,137 | |||||||||||||||||
Performance Holdings, Inc. |
14,932,921 | | | 807,728 | 15,706,613 | | ||||||||||||||||||
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Total Controlled and Non-Controlled Affiliates |
$ | 54,173,134 | $ | 8,753,222 | $ | (7,566,676 | ) | $ | 1,903,486 | $ | 50,156,112 | $ | 663,137 | |||||||||||
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7. CHANGE IN NET ASSETS FROM OPERATIONS PER COMMON SHARE
The following information sets forth the computation of basic and diluted per share net increase in net assets resulting from operations.
Three months ended March 31, | Six months ended March 31, | |||||||||||||||
Class and Year |
2012 | 2011 | 2012 | 2011 | ||||||||||||
Numerator for net increase in net assets resulting from operations |
$ | 26,398,109 | $ | 13,586,987 | $ | 42,243,633 | $ | 39,109,210 | ||||||||
Denominator for basic and diluted weighted average shares |
53,053,201 | 41,312,021 | 49,351,372 | 38,737,522 | ||||||||||||
Basic and diluted net increase in net assets per share resulting from operations |
$ | 0.50 | $ | 0.33 | $ | 0.85 | $ | 1.01 |
8. CASH EQUIVALENTS
Cash equivalents represent cash pending investment in longer-term portfolio holdings. Our portfolio may consist of temporary investments in U.S. Treasury Bills (of varying maturities), repurchase agreements, money market funds or repurchase agreement-like treasury securities. These temporary investments with maturities of 90 days or less are deemed cash equivalents and are included in the Consolidated Schedules of Investments. At the end of each fiscal quarter, we may take proactive steps to preserve investment flexibility for the next quarter by investing in cash equivalents, which is dependent upon the composition of our total assets at quarter end. We may accomplish this in several ways, including purchasing U.S. Treasury Bills and closing out positions on a net cash basis after quarter-end, temporarily drawing down on the Credit Facility, or utilizing repurchase agreements or other balance sheet transactions as are deemed appropriate for this purpose. These amounts are excluded from adjusted gross assets for purposes of computing the Investment Advisers management fee. U.S. Treasury Bills with maturities greater than 60 days from the time of purchase are valued consistent with our valuation policy. As of March 31, 2012 and September 30, 2011, cash equivalents consisted of $27.0 million and $71.6 million, including amounts in money market funds, respectively.
22
PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2012
(Unaudited)
9. FINANCIAL HIGHLIGHTS
Our net assets and net asset value per share on March 31, 2012 and 2011 were $583.3 million and $514.0 million, respectively, and $10.38 and $11.30, respectively. Below are the financial highlights for the six months ended March 31, 2012 and 2011.
Six Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
Per Share Data: |
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Net asset value, beginning of period |
$ | 10.13 | $ | 10.69 | ||||
Net investment income (1) |
0.50 | 0.63 | ||||||
Net change in realized and unrealized gain (1) |
0.35 | 0.38 | ||||||
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Net increase in net assets resulting from operations (1) |
0.85 | 1.01 | ||||||
Dividends to stockholders (1) (2) |
(0.58 | ) | (0.56 | ) | ||||
Accretive effect of common stock issuance |
0.06 | 0.31 | ||||||
(Dilutive) effect of offering costs |
(0.08 | ) | (0.15 | ) | ||||
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Net asset value, end of period |
$ | 10.38 | $ | 11.30 | ||||
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Per share market value, end of period |
$ | 10.40 | $ | 11.92 | ||||
Total return* (3) |
22.89 | % | 17.33 | % | ||||
Shares outstanding at end of period |
56,206,873 | 45,504,932 | ||||||
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Ratios ** / Supplemental Data: |
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Ratio of operating expenses to average net assets |
6.97 | % | 7.46 | % | ||||
Ratio of Credit Facility and SBA debentures expenses to average net assets |
3.00 | % | 1.03 | % | ||||
Ratio of total expenses to average net assets |
9.98 | % | 8.49 | % | ||||
Ratio of net investment income to average net assets |
9.61 | % | 11.25 | % | ||||
Net assets at end of period |
$ | 583,307,644 | $ | 514,019,838 | ||||
Average debt outstanding |
$ | 335,854,645 | $ | 275,352,204 | ||||
Average debt per share |
$ | 6.81 | $ | 7.11 | ||||
Portfolio turnover ratio |
28.48 | % | 38.63 | % |
* | Not annualized for periods less than one year. |
** | Annualized for periods less than one year. |
(1) | Per share data are calculated based on the weighted average shares outstanding for the respective periods. |
(2) | Dividends and distributions are determined based on taxable income calculated in accordance with income tax regulations, which may differ from amounts determined under GAAP. |
(3) | Total return is based on the change in market price per share during the period and takes into account dividends and distributions, if any, reinvested in accordance with our dividend reinvestment plan. |
10. CREDIT FACILITY AND SBA DEBENTURES
Credit Facility
On February 21, 2012, we amended and restated our multi-currency Credit Facility, which increased the size of the Credit Facility from $315.0 million to $380.0 million, with certain lenders and SunTrust Bank, acting as administrative agent and JPMorgan Chase Bank, N.A., as syndication agent for the lenders. As of March 31, 2012 and September 30, 2011, there was $158.5 million (including a temporary draw of $10.0 million) and $240.9 million, respectively, in outstanding borrowings under the Credit Facility, with a weighted average interest rate at the time of 3.19% and 1.27%, exclusive of the fee on undrawn commitments of 0.50% and 0.20%, respectively. The Credit Facility is a four-year revolving facility, with a stated maturity date of February 21, 2016, with a one-year term out period following its third year and pricing is set at 275 basis points over LIBOR. The Credit Facility is secured by substantially all of the assets of the Company excluding assets held by our SBIC.
In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, is at least 200% after such borrowing, excluding SBA debentures, pursuant to exemptive relief from the Securities and Exchange Commission, or SEC. For a complete list of covenants contained in the Credit Facility, see our form 8-K filed on February 22, 2012 and the Credit Facility agreement filed as an exhibit to this form 10-Q filed on May 2, 2012. As of March 31, 2012 we were in compliance with our covenants relating to our Credit Facility.
SBA Debentures
SBIC LP is able to borrow funds from the SBA against regulatory capital (which approximates equity capital) that is paid-in and is subject to customary regulatory requirements including but not limited to an examination by the SBA. We have funded SBIC LP with $75.0 million of equity capital, and had SBA debentures outstanding of $150.0 million. SBA debentures are non-recourse to us, have a 10-year maturity, and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over 10-year U.S. Treasury Notes. SBA current regulations limit the amount that SBIC LP may borrow to a maximum of $150.0 million, which is up to twice its potential regulatory capital. SBIC LP has accessed the maximum borrowing with its $75.0 million in regulatory capital.
As of March 31, 2012, $150.0 million in debt commitments were fully drawn with a weighted average interest rate of 3.70% exclusive of the 3.43% in upfront fees (4.04% after upfront fees). The SBA debentures upfront fees of 3.43% consist of a commitment fee of 1.00% and an issuance at a 2.43% discount to face. Both fees are amortized over the lives of the loans. Our fixed rate SBA debentures as of March 31, 2012 and September 30, 2011 were as follows:
Issuance Dates |
Maturity |
Fixed All-in Coupon Rate (1) |
Principal Balance |
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September 22, 2010 |
September 1, 2020 | 3.50 | % | $ | 500,000 | |||||
March 29, 2011 |
March 1, 2021 | 4.46 | 44,500,000 | |||||||
September 21, 2011 |
September 1, 2021 | 3.38 | 105,000,000 | |||||||
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Weighted average rate/total |
3.70 | % | $ | 150,000,000 | ||||||
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(1) | Excluding 3.43% of upfront fees. |
Under SBA regulations, SBIC LP is subject to regulatory requirements, including making investments in SBA eligible businesses, investing at least 25% of regulatory capital in eligible smaller businesses, as defined under the 1958 Act, placing certain limitations on the financing terms of investments, prohibiting investing in certain industries, requiring capitalization thresholds and being subject to periodic audits and examinations of its financial statements that are prepared on a basis of accounting other than GAAP (for example, fair value, as defined under ASC 820, is not required to be used for assets or liabilities for such compliance reporting). If our SBIC subsidiary fails to comply with applicable SBA regulations the SBA could, depending on the severity of the violation, limit or prohibit its use of debentures, declare outstanding debentures immediately due and payable and/or limit it from making new investments. These actions by the SBA would, in turn, negatively affect us because SBIC LP is wholly owned by us. As of March 31, 2012, SBIC LP was in compliance with our requirements relating to our SBA debentures.
On June 1, 2011, we received exemptive relief from the SEC allowing us to modify the asset coverage requirement to exclude the SBA debentures from the calculation. Accordingly, our ratio of total assets on a consolidated basis to outstanding indebtedness may be less than 200%, which while providing increased investment flexibility, would also increase our exposure to risks associated with leverage.
Our net asset value may decline as a result of economic conditions in the United States. Our continued compliance with the covenants under our Credit Facility and SBA debentures depend on many factors, some of which are beyond our control. Material net asset devaluation could have a material adverse effect on our operations and could require us to reduce our borrowings under our Credit Facility and SBA debentures in order to comply with certain covenants including the ratio of total assets to total indebtedness.
11. COMMITMENTS AND CONTINGENCIES
From time to time, we, the Investment Adviser or the Administrator may be a party to legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations. Unfunded debt investments described in the Consolidated Statement of Assets and Liabilities represent unfunded delayed draws on investments.
23
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
PennantPark Investment Corporation and Subsidiaries
We have reviewed the accompanying consolidated statement of assets and liabilities of PennantPark Investment Corporation and Subsidiaries (the Company), including the consolidated schedules of investments, as of March 31, 2012, and the consolidated statements of operations for the three and six months ended March 31, 2012 and 2011, changes in net assets, and cash flows for the six months ended March 31, 2012 and 2011. These interim consolidated financial statements are the responsibility of the Companys management.
We conducted our review in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquires of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of assets and liabilities of PennantPark Investment Corporation and Subsidiaries, including the consolidated schedule of investments, as of September 30, 2011; and in our report dated November 16, 2011, we expressed an unqualified opinion on that financial statement and schedule.
New York, New York
May 2, 2012
24
Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
FORWARD-LOOKING STATEMENTS
This Report, including Managements Discussion and Analysis of Financial Condition and Results of Operations, contains statements that constitute forward-looking statements, which relate to future events or our future performance or financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. The forward-looking statements contained in this Report involve risks and uncertainties, including statements as to:
| our future operating results; |
| our business prospects and the prospects of our prospective portfolio companies; |
| the dependence of our future success on the general economy and its impact on the industries in which we invest; |
| the impact of a protracted decline in the liquidity of credit markets on our business; |
| the impact of investments that we expect to make; |
| the impact of fluctuations in interest rates on our business; |
| our contractual arrangements and relationships with third parties; |
| the valuation of our investments in portfolio companies, particularly those having no liquid trading market; |
| the ability of our prospective portfolio companies to achieve their objectives; |
| our expected financings and investments; |
| the adequacy of our cash resources and working capital; |
| the timing of cash flows, if any, from the operations of our prospective portfolio companies; and |
| the ability of our Investment Adviser to locate suitable investments for us and to monitor and administer our investments. |
We use words such as anticipates, believes, expects, intends, seeks, plans, estimates and similar expressions to identify forward-looking statements. You should not place undue influence on the forward looking statements as our actual results could differ materially from those projected in the forward-looking statements for any reason.
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Report should not be regarded as a representation by us that our plans and objectives will be achieved.
We have based the forward-looking statements included in this Report on information available to us on the date of this Report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements in this Report, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the Securities and Exchange Commission, or SEC, including reports on Form 10-Q/K and current reports on Form 8-K.
You should understand that under Section 27A(b)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 do not apply to statements made in periodic reports we file under the Exchange Act.
The following analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related notes thereto contained elsewhere in this Report.
Overview
PennantPark Investment Corporation is a business development company, or BDC, whose objectives are to generate both current income and capital appreciation through debt and equity investments primarily in U.S. middle-market companies in the form of senior secured loans, mezzanine debt and equity investments.
We believe the middle-market offers attractive risk-reward to investors due to the limited amount of capital available for such companies. We seek to create a diversified portfolio that includes senior secured loans, mezzanine debt and equity investments by investing approximately $10 to $50 million of capital, on average, in the securities of middle-market companies. We use the term middle-market to refer to companies with annual revenues between $50 million and $1 billion. We expect this investment size to vary proportionately with the size of our capital base. The companies in which we invest are typically highly leveraged, and, in most cases, are not rated by national rating agencies. If such companies were rated, we believe that they would typically receive a rating below investment grade (between BB and CCC under the Standard & Poors system) from the national rating agencies. In addition, we expect our debt investments to generally range in maturity from three to ten years.
Our investment activity depends on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make. Turmoil in the credit markets has adversely affected each of these factors and has resulted in a broad-based reduction in the demand for, and valuation of, middle-market debt instruments. These conditions have presented us with and may continue to offer attractive investment opportunities, as we believe that there are many middle-market companies that need senior secured and mezzanine debt financing. We have used, and expect to continue to use, our senior secured revolving credit facility, or the Credit Facility, the SBA debentures, proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives.
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Organization and Structure of PennantPark Investment Corporation
PennantPark Investment Corporation was organized under the Maryland General Corporation Law in January 2007. We are a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the Investment Company Act of 1940, as amended, or the 1940 Act. As such, we are required to comply with certain regulatory requirements. For instance, we generally have to hold at least 70% of our total assets in qualifying assets, including securities of U.S. private companies or thinly traded public companies, public companies with a market capitalization of less than $250 million, cash, cash equivalents, U.S. government securities and high quality debt investments that mature in one year or less. In addition, for tax purposes we intend to continue to be treated as a regulated investment company, or RIC, and qualify annually under the Internal Revenue Code of 1986, as amended, or the Code.
Our wholly owned subsidiary, SBIC LP, was organized as a Delaware limited partnership in May 2010 and received a license from the Small Business Administration, or the SBA, to operate as a small business investment company, or SBIC, under Section 301(c) of the Small Business Investment Company Act of 1958, as amended, or the 1958 Act, in July 2010. SBIC LPs objective is to generate both current income and capital appreciation through debt and equity investments generally, investing with us in SBA eligible businesses that meet the investment criteria used by PennantPark Investment.
Our investment activities are managed by the Investment Adviser. Under our investment management agreement with the Investment Adviser, or the Investment Management Agreement, we have agreed to pay our Investment Adviser an annual base management fee based on our average adjusted gross total assets as well as an incentive fee based on our investment performance. PennantPark Investment, through the Investment Adviser, provides similar services to SBIC LP under its investment management agreement. The SBIC LP investment management agreement does not affect the management and incentive fees on a consolidated basis. We have also entered into an administration agreement, or the Administration Agreement, with PennantPark Investment Administration LLC, or the Administrator. Under our Administration Agreement, we have agreed to reimburse the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our chief compliance officer, chief financial officer and their respective staffs. PennantPark Investment, through the Administrator, provides similar services to SBIC LP under its administration agreement with us. Our board of directors, a majority of whom are independent of us, and the Investment Adviser, supervise our activities.
Revenues
We generate revenue in the form of interest income on the debt securities we hold and capital gains and distributions, if any, on investment securities that we may acquire in portfolio companies. Our debt investments, whether in the form of senior secured loans or mezzanine debt, typically have a term of three to ten years and bear interest at a fixed or floating rate. Interest on debt securities is generally payable quarterly or semiannually. In some cases, some of our investments provide for deferred interest payments or payment-in-kind, or PIK, interest. The principal amount of the debt securities and any accrued but unpaid interest generally becomes due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance and possibly consulting fees. Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts as income. We record prepayment penalties on loans and debt securities as income. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts.
Expenses
Our primary operating expenses include the payment of management fees to our Investment Adviser, our allocable portion of overhead under our Administration Agreement and other operating costs as detailed below. Our management fee compensates our Investment Adviser for its work in identifying, evaluating, negotiating, consummating and monitoring our investments. Additionally, we pay interest expense on the outstanding debt we accrue under our Credit Facility and SBA debentures. We bear all other direct or indirect costs and expenses of our operations and transactions, including:
| the cost of calculating our net asset value, including the cost of any third-party valuation services; |
| the cost of effecting sales and repurchases of shares of our common stock and other securities; |
| fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence and reviews of prospective investments or complimentary businesses; |
| expenses incurred by the Investment Adviser in performing due diligence and reviews of investments; |
| transfer agent and custodial fees; |
| fees and expenses associated with marketing efforts; |
| federal and state registration fees and any stock exchange listing fees; |
| federal, state and local taxes; |
| independent directors fees and expenses; |
| brokerage commissions; |
| fidelity bond, directors and officers/errors and omissions liability insurance and other insurance premiums; |
| direct costs such as printing, mailing, long distance telephone and staff; |
| fees and expenses associated with independent audits and outside legal costs; |
| costs associated with our reporting and compliance obligations under the 1940 Act, the 1958 Act and applicable federal and state securities laws; and |
| all other expenses incurred by either the Administrator or us in connection with administering our business, including payments under our Administration Agreement that will be based upon our allocable portion of overhead, and other expenses incurred by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our chief compliance officer, chief financial officer and their respective staffs. |
26
During periods of asset growth, we expect our general and administrative expenses to be relatively stable or to decline as a percentage of total assets and increase during periods of asset declines. Incentive fees, interest expense and costs relating to future offerings of securities would be additive to the expenses described above.
PORTFOLIO AND INVESTMENT ACTIVITY
As of March 31, 2012, our portfolio totaled $888.9 million and consisted of $274.2 million of senior secured loans, $168.1 million of second lien secured debt, $362.9 million of subordinated debt and $83.7 million of preferred and common equity investments. Our portfolio consisted of 66% fixed-rate and 34% variable-rate investments (including 27% with a London Interbank Offered Rate, or LIBOR, or prime floor). On March 31, 2012, we had one non-accrual debt investment, representing 1% of our overall portfolio on a market value basis and 4% of our overall portfolio on a cost basis. Our overall portfolio consisted of 49 companies with an average investment size of $18.1 million, had a weighted average yield on debt investments of 13.3%, and was invested 31% in senior secured loans, 19% in second lien secured debt, 41% in subordinated debt and 9% in preferred and common equity investments.
As of September 30, 2011, our portfolio totaled $827.5 million and consisted of $296.5 million of senior secured loans, $165.3 million of second lien secured debt, $309.3 million of subordinated debt and $56.4 million of preferred and common equity investments. Our portfolio consisted of 61% fixed-rate investments and 39% variable-rate investments (including 31% with a LIBOR or prime floor). Our overall portfolio consisted of 48 companies with an average investment size of $17.2 million, had a weighted average yield on debt investments of 13.3%, and was invested 36% in senior secured loans, 20% in second lien secured debt, 37% in subordinated debt and 7% in preferred and common equity investments.
For the three months ended March 31, 2012, we invested $110.9 million in five new and four existing portfolio companies with a weighted average yield on debt investments of 13.2%. Sales and repayments of long-term investments for the three months ended March 31, 2012 totaled $49.3 million. For the six months ended March 31, 2012, we invested approximately $153.9 million in six new and eleven existing portfolio companies with a weighted average yield of 14.2% on debt investments. Sales and repayments of long-term investments totaled $118.5 million for the same period.
For the three months ended March 31, 2011, we invested $96.6 million in four new and two existing portfolio companies with a weighted average yield on debt investments of 13.6%. Sales and repayments of long-term investments for the three months ended March 31, 2011 totaled $51.6 million. For the six months ended March 31, 2011, we invested approximately $196.5 million in ten new and three existing portfolio companies with a weighted average yield of 14.3% on debt investments. Sales and repayments of long-term investments totaled $137.1 million for the same period.
CRITICAL ACCOUNTING POLICIES
The discussion of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or GAAP. The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual results could differ from these estimates. We have eliminated all intercompany balances and transactions. References to the Accounting Standards Codification, or ASC, serve as a single source of literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated Financial Statements are issued. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we describe our critical accounting policies in the notes to our Consolidated Financial Statements.
Valuation of Portfolio Investments
Our investments generally consist of illiquid securities including debt and equity investments. Our board of directors generally uses market quotations to assess the value of our investments for which market quotations are readily available. We obtain these market values from independent pricing services or at the bid prices obtained from at least two brokers or dealers, if available, or otherwise by a principal market maker or a primary market dealer. If our board of directors has a bona fide reason to believe any such market quote does not reflect the fair value of an investment, it may independently value such investments by using the valuation procedures that it uses with respect to assets for which market quotations are not readily available. Investments of sufficient credit quality purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value.
We expect that there may not be readily available market values for many of our investments which are or will be in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our board of directors using a documented valuation policy described in this Report and a consistently applied valuation process. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio companys ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may differ from our valuation and the differences could be material.
With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, our board of directors undertakes a multi-step valuation process each quarter, as described below:
(1) | Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of our Investment Adviser responsible for the portfolio investment; |
(2) | Preliminary valuation conclusions are then documented and discussed with the management of our Investment Adviser; |
(3) | Our board of directors also engages independent valuation firms to conduct independent appraisals of our investments for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of an investment. The independent valuation firms review managements preliminary valuations in light of its own independent assessment and also in light of any market quotations obtained from an independent pricing service, broker, dealer or market maker; |
(4) | The audit committee of our board of directors reviews the preliminary valuations of our Investment Adviser and those of the independent valuation firms and responds and supplements the valuation recommendations of the independent valuation firms to reflect any comments; and |
(5) | Our board of directors discusses the valuations and determines the fair value of each investment in our portfolio in good faith, based on the input of our Investment Adviser, the independent valuation firms and the audit committee. |
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Fair value, as defined under ASC 820, is the price that we would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment or liability. ASC 820 emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing an asset or liability based on market data obtained from sources independent of us. Unobservable inputs reflect the assumptions market participants would use in pricing an asset or liability based on the best information available to us on the reporting period date.
ASC 820 classifies the inputs used to measure these fair values into the following hierarchies:
Level 1: | Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date. | |
Level 2: | Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument. | |
Level 3: | Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability. |
A financial instruments categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments and our Credit Facility are classified as Level 3. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.
The inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data is available, such information may be the result of consensus pricing information or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence was available. Corroborating evidence that would result in classifying these non-binding brokers/dealer bids as a Level 2 asset includes observable market-based transactions for the same or similar assets or other relevant observable market based inputs that may be used in pricing an asset.
Our investments are generally structured as debt and equity investments in the form of senior secured loans, mezzanine debt and equity co-investments. The transaction price, excluding transaction costs, is typically the best estimate of fair value at inception. Within our fair value hierarchy table, our investments are generally categorized as first lien, second lien, subordinated debt and preferred and common equity investments. The companies in which we invest are typically highly leveraged, and, in most cases, are not rated by national rating agencies. If such companies were rated, we believe that they would typically receive a rating below investment grade (between BB and CCC under the Standard & Poors system) from the national rating agencies.
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in our ability to observe valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or out of the Level 3 category as of the end of the quarter in which the reclassifications occur. During the six months ended March 31, 2012, our ability to observe valuation inputs has resulted in no reclassification of assets from Level 3 to 2. There were no investments transferred between Levels 1 and 2 for the same period.
In addition to using the above inputs in cash equivalents, investments and our Credit Facility valuations, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value. See Note 2.
In accordance with ASU 2011-04 and as outlined in the table below, our investments using a market approach valuation technique are valued using the average of the bids from brokers or dealers. The bids include a disclaimer, have no corroborating evidence and may be the result of consensus pricing. We do not adjust the bids.
The remainder of our portfolio was valued using a market comparable or enterprise valuation technique and our long-term Credit Facility used an income approach valuation technique. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio companys ability to make payments, its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the pricing indicated by the external event is used to corroborate the valuation. When using earnings multiples to value a portfolio company, the multiple used requires the use of judgment and estimates in determining how a market participant would price such an asset. Generally, the sensitivity of unobservable inputs or combination of inputs such as industry comparable companies, market outlook, consistency, discount rates and reliability of earnings and prospects for growth, or lack thereof, affects the multiple used in pricing an investment. As a result, any change in any one of those factors may have a significant impact on the valuation of an investment.
Asset Category |
Fair Value | Valuation Techniques |
Unobservable Inputs |
Range of Values/Input | ||||
First lien, second lien, subordinated debt/corporate notes and preferred and common equity |
23% | Market approach | Broker/Dealer bids | 1 - 9 | ||||
First lien, second lien, subordinated debt/corporate notes and preferred and common equity |
77% | Market comparable / Enterprise value | EBITDA multiples | 8.0x | ||||
Long-Term Credit Facility |
100% | Market comparable / Income approach | Discount rate | 3.9% |
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The carrying value of our selected financial liabilities approximates fair value. We adopted ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to our Credit Facility. We elected to use the fair value option for the Credit Facility to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a companys choice to use fair value on its earnings. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statement of Assets and Liabilities and changes in fair value of the Credit Facility are recorded in the Consolidated Statement of Operations. We elected not to apply ASC 825-10 to any other financial assets or liabilities including the SBA debentures. For the three and six months ended March 31, 2012 and 2011, our Credit Facility had a net change in unrealized appreciation of $0.2 million and $1.4 million and $4.7 million and $11.3 million, respectively. As of March 31, 2012 and September 30, 2011, net unrealized depreciation on our Credit Facility totaled $0.7 million and $2.1 million, respectively. We use a nationally recognized independent valuation service to measure the fair value of our Credit Facility in a manner consistent with the valuation process that the board of directors uses to value investments.
Revenue Recognition
We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt investments with contractual PIK interest which represents contractual interest accrued and added to the loan balance that generally becomes due at maturity, we will generally not accrue PIK interest if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt investments if we determine that it is probable that we will not be able to collect such interest. Loan origination fees, original issue discount, market discount or premium and deferred financing costs on our debt are capitalized, and we then amortize such amounts as interest income or expense as applicable. We record contractual prepayment premiums on loans and debt investments as income. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts.
Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation
We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.
Payment-in-Kind Interest
We have investments in our portfolio which contain a PIK interest provision. PIK interest is added to the principal balance of the investment and is recorded as income. For us to maintain our status as a RIC, substantially all of this income must be paid out to stockholders in the form of dividends, even though we have not collected any cash with respect to PIK securities.
Federal Income Taxes
We operate so as to qualify to maintain our election to be taxed as a RIC under Subchapter M of the Code and intend to continue to do so. To maintain RIC tax benefits, we must, among other requirements, meet certain source-of-income and quarterly asset diversification requirements (as described below). We also must annually distribute dividends of at least 90% of the sum of our ordinary income and realized net short-term capital gains, if any, out of the assets legally available for distribution. Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we may distribute during each calendar year an amount at least equal to the sum of (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our realized net capital gains for the one-year period ending on October 31 of the calendar year and (3) any ordinary income and net capital gains for preceding years that were not distributed during such years. In addition, although we may distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we have retained and may continue to retain such net capital gains or ordinary income to provide us with additional liquidity.
Because federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the Consolidated Financial Statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
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RESULTS OF OPERATIONS
Set forth below are the results of operations for the three and six months ended March 31, 2012 and 2011, respectively.
Investment Income
Investment income for the three and six months ended March 31, 2012 was $26.4 million and $53.2 million, respectively, and was attributable to $9.4 million and $20.7 million from senior secured loans, $4.4 million and $8.5 million from second lien secured debt investments, and $12.6 million and $24.0 million from subordinated debt investments, respectively. This compares to investment income for the three and six months ended March 31, 2011, which was $22.7 million and $42.7 million, respectively, and was primarily attributable to $8.0 million and $15.1 million from senior secured loans, $2.8 million and $6.0 million from second lien secured debt investments and $8.6 million and $16.3 million from subordinated debt investments, respectively. The increase in investment income compared with the same period in the prior year is due to the growth of our portfolio, which is the result of deploying both equity from our follow-on offering and debt capital raised during the period.
Expenses
Expenses for the three and six months ended March 31, 2012, totaled $16.6 million and $28.4 million, respectively. Base management fee for the same respective periods totaled $4.2 million and $8.2 million, performance-based incentive fees totaled $2.4 million and $6.1 million, Credit Facility and SBA debentures expenses (excluding the $5.4 million upfront fees associated with amending and extending our Credit Facility) totaled $2.7 million and $5.1 million, general and administrative expenses totaled $1.7 million and $3.3 million and excise taxes totaled $0.2 million and $0.3 million. This compares to expenses for the three and six months ended March 31, 2011, which totaled $9.6 million and $18.4 million, respectively. Base management fee for the same respective periods totaled $3.6 million and $7.1 million, performance-based incentive fees totaled $3.3 million and $6.1 million, Credit Facility and SBA debentures expense totaled $1.1 million and $2.2 million, and general and administrative expenses totaled $1.5 million and $2.8 million, respectively, and excise tax for the six months ended March 31, 2011 totaled $0.2 million. The increase in expenses compared with the same period in the prior year is due to the growth of the portfolio and net investment income as well as the costs associated with amending and extended our Credit Facility. We expect the interest expense associated with our amended Credit Facility to be higher going forward resulting from an increase in the spread on the Credit Facility.
Net Investment Income
Net investment income totaled $9.8 million and $24.8 million, or $0.18 and $0.50 per share, for the three and six months ended March 31, 2012, respectively. For the same respective periods in the prior year, net investment income totaled $13.2 million and $24.3 million, or $0.32 and $0.63 per share. The decrease in per share net investment income over the periods was primarily the result of upfront expenses associated with amending our Credit Facility.
Net Realized Gains or Losses
Sales and repayments of long-term investments for the three and six months ended March 31, 2012 totaled $49.3 million and $118.5 million and realized losses totaled $3.9 million and $12.0 million, respectively, due to sales and refinancing of our debt investments. Sales and repayments of long-term investments for the three and six months ended March 31, 2011 totaled $51.6 million and $137.1 million and realized gains totaled $0.3 million and $2.6 million, respectively, due to sales of lower yielding investments and refinancing of our debt investments.
Unrealized Appreciation or Depreciation on Investments and Credit Facility
For the three and six months ended March 31, 2012, we reported unrealized appreciation on investments of $20.8 million and $30.8 million, respectively. For the three and six months ended March 31, 2011, we reported unrealized appreciation on investments of $4.8 million and $23.5 million, respectively. The change in unrealized appreciation for current periods compared to the prior periods is the result of changes in the leveraged credit markets. On March 31, 2012 and September 30, 2011, our net unrealized depreciation on investments totaled $8.0 million and $38.8 million, respectively.
For the three and six months ended March 31, 2012, our long-term Credit Facility payable increased in value due to unrealized appreciation of $0.2 million and $1.4 million, respectively. For the three and six months ended March 31, 2011, our long-term Credit Facility balance increased in value due to unrealized appreciation of $4.7 million and $11.3 million, respectively. The change in unrealized appreciation for current periods compared to the prior periods is the result of our Credit Facility approaching maturity. On March 31, 2012 and September 30, 2011, net unrealized depreciation on our long-term Credit Facility totaled $0.7 million and $2.1 million, respectively.
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Net Increase in Net Assets Resulting from Operations
Net increase in net assets resulting from operations totaled $26.4 million and $42.2 million or $0.50 per share and $0.85 per share, respectively, for the three and six months ended March 31, 2012. This compares to a net increase in net assets resulting from operations which totaled $13.6 million and $39.1 million, respectively, or $0.33 per share and $1.01 per share, respectively, for the three and six months ended March 31, 2011. This increase in net assets from operations is due to both unrealized appreciation on investments and net investment income, which was offset by upfront fees on our Credit Facility of $5.4 million.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital resources are derived from our Credit Facility, SBA debentures and cash flows from operations, including investment sales and repayments, and income earned. Our primary use of funds from operations includes investments in portfolio companies and payments of fees and other operating expenses we incur. We have used, and expect to continue to use, our Credit Facility, the SBA debentures, proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives.
On February 21, 2012, we amended and restated our multi-currency Credit Facility, which increased the size of the Credit Facility from $315.0 million to $380.0 million, with certain lenders and SunTrust Bank, acting as administrative agent and JPMorgan Chase Bank, N.A., as syndication agent for the lenders. As of March 31, 2012 and September 30, 2011, there was $158.5 million (including a temporary draw of $10.0 million) and $240.9 million, respectively, in outstanding borrowings under the Credit Facility, with a weighted average interest rate at the time of 3.19% and 1.27%, exclusive of the fee on undrawn commitments of 0.50% and 0.20%, respectively. The Credit Facility is a four-year revolving facility, with a stated maturity date of February 21, 2016, with a one-year term out period following its third year and pricing is set at 275 basis points over LIBOR. The Credit Facility is secured by substantially all of the assets of the Company excluding assets held by our SBIC.
The Credit Facility contains customary affirmative and restrictive covenants, including maintenance of a minimum shareholders equity of the sum of (a) $220,000,000 plus (b) 25% of the net proceeds from the sale of equity interests in us and our subsidiaries after the closing date of the Credit Facility and maintenance of a ratio of total assets (less total liabilities other than indebtedness) to total indebtedness of not less than 2.0:1.0 (before any exemptive relief granted by the SEC with respect to the indebtedness of our SBIC subsidiary). In addition to the asset coverage ratio described in the preceding sentence, borrowings under our Credit Facility (and the incurrence of certain other permitted debt) are subject to compliance with a borrowing base that will apply different advance rates to different types of assets in the Companys portfolio. For a complete list of covenants contained in the Credit Facility, see our form 8-K filed on February 22, 2012 and the Credit Facility agreement filed as an exhibit to this form 10-Q. As of March 31, 2012, we were in compliance with the terms of our Credit Facility.
We may raise additional equity or debt capital through both registered offerings off a shelf registration and private offerings of securities, by securitizing a portion of our investments or borrowing from the SBA, among other sources. Any future additional debt capital we incur, to the extent it is available under current credit market conditions, may be issued at a higher cost and on less favorable terms and conditions than our current Credit Facility. Furthermore, our Credit Facility availability depends on various covenants and restrictions as discussed below. The primary use of existing funds and any funds raised in the future is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our shareholders or for other general corporate purposes.
In accordance with the 1940 Act, with certain limited exceptions, PennantPark Investment is only allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 200% after such borrowing. As of March 31, 2012, we have excluded the SBA debentures from our asset coverage ratio pursuant to SEC exemptive relief.
For the six months ended March 31, 2012, we sold 10.4 million shares of common stock at a price of $10.55 per share resulting in net proceeds of $105.2 million. This compares to selling 9.2 million shares of our common stock at a price of $12.40 per share resulting in net proceeds of $108.3 million for the six months ended March 31, 2011. In February 2012, we received approval from our shareholders to issue shares below the then current net asset value per share for a 12-month period. Any decision to sell shares below the then current net asset value per share of our common stock in one or more offerings is subject to shareholder approval and the determination by our board of directors that such issuance and sale is in our and our stockholders best interests. Any sale or other issuance of shares of our common stock at a price below net asset value per share has resulted and will continue to result in an immediate dilution to our stockholders interest in our common stock and a reduction of our net asset value per share.
SBIC LP has borrowed funds from the SBA against regulatory capital (which approximates equity capital) that is paid-in and is subject to customary regulatory requirements including but not limited to an examination by the SBA. We have committed and funded SBIC LP with $75.0 million of equity capital, and had SBA debentures outstanding of $150.0 million. SBA debentures are non-recourse to us, have a 10-year maturity, and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over 10-year U.S. Treasury Notes. SBA current regulations limit the amount that SBIC LP may borrow to a maximum of $150.0 million, which is up to twice its potential regulatory capital. SBIC LP has accessed the maximum borrowing with its $75.0 million in regulatory capital.
As of March 31, 2012, $150.0 million in debt commitments were fully drawn with a weighted average interest rate of 3.70% exclusive of the 3.43% in upfront fees (4.04% after upfront fees). The SBA debentures upfront fees of 3.43% consist of a commitment fee of 1.00% and an issuance at a 2.43% discount to face. Both fees are amortized over the lives of the loans. Our fixed rate SBA debentures as of March 31, 2012 and September 30, 2011 were as follows:
Issuance Dates |
Maturity |
Fixed All-in Coupon Rate (1) |
Principal Balance |
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September 22, 2010 |
September 1, 2020 | 3.50 | % | $ | 500,000 | |||||
March 29, 2011 |
March 1, 2021 | 4.46 | 44,500,000 | |||||||
September 21, 2011 |
September 1, 2021 | 3.38 | 105,000,000 | |||||||
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Weighted average rate / Total |
3.70 | % | $ | 150,000,000 | ||||||
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(1) Excludes 3.43% of upfront fees. |
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The SBIC program is designed to stimulate the flow of capital into eligible businesses. Under SBA regulations, SBIC LP is subject to regulatory requirements, including making investments in SBA eligible businesses, investing at least 25% of regulatory capital in eligible smaller businesses, as defined under the 1958 Act, placing certain limitations on the financing terms of investments, prohibiting investment in certain industries and requiring capitalization thresholds that limit distributions to us, and is subject to periodic audits and examinations of its financial statements that are prepared on a basis of accounting other than GAAP (for example, fair value, as defined under ASC 820, is not required to be used for assets or liabilities for such compliance reporting). As of March 31, 2012, SBIC LP was in compliance with its regulatory requirements.
On June 1, 2011, we received exemptive relief from the SEC allowing us to modify the asset coverage ratio requirement to exclude the SBA debentures from our asset coverage calculation. Accordingly, our ratio of total assets on a consolidated basis to outstanding indebtedness may be less than 200%, which while providing increased investment flexibility, also increases our exposure to risks associated with leverage.
Our net asset value may decline as a result of economic conditions in the United States. Our continued compliance with the covenants under our Credit Facility and SBA debentures depend on many factors, some of which are beyond our control. Material net asset devaluation could have a material adverse effect on our operations and could require us to reduce our borrowings under our Credit Facility and SBA debentures in order to comply with certain covenants, including the ratio of total assets to total indebtedness.
Our operating activities used cash of $44.0 million for the six months ended March 31, 2012, primarily due to investing and offset by sales and repayments on our investments, and our financing activities used cash of $0.6 million for the same period, primarily from proceeds from our common stock offering and net repayments under our Credit Facility.
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Our operating activities used cash of $54.5 million for the six months ended March 31, 2011, and our financing activities provided cash of $54.2 million for the same period, primarily from net repayments under our Credit Facility, SBA debentures issued, and our common stock offering.
Contractual Obligations
A summary of our significant contractual payment obligations as of March 31, 2012 including, borrowings under our multi-currency Credit Facility and other contractual obligations, are as follows:
Payments due by period (in millions) | ||||||||||||||||||||
Total | Less than 1 year |
1-3 years |
3-5 years |
More than 5 years |
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Credit Facility (1) |
$ | 158.5 | $ | | $ | | $ | 158.5 | $ | | ||||||||||
SBA debentures |
150.0 | | | | 150.0 | |||||||||||||||
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Subtotal debt outstanding (2) |
308.5 | | | 158.5 | 150.0 | |||||||||||||||
Unfunded investments (3) |
17.0 | 16.5 | | 0.5 | | |||||||||||||||
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Total contractual obligations |
$ | 325.5 | $ | 16.5 | $ | | $ | 159.0 | $ | 150.0 | ||||||||||
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(1) | As of March 31, 2012, we had $221.5 million of unused borrowing capacity under our Credit Facility, subject to various restrictions and covenants. |
(2) | The weighted average interest rate on the total debt outstanding as of March 31, 2012 was 3.44% exclusive of the fee on the undrawn commitment of 0.50% on the Credit Facility and 3.43% of upfront fees on SBIC LPs SBA debentures. |
(3) | Unfunded debt investments described in the Consolidated Statement of Assets and Liabilities represent unfunded delayed draws on investments. |
We have entered into certain contracts under which we have material future commitments. Under our Investment Management Agreement, which was renewed in February 2012, PennantPark Investment Advisers serves as our Investment Adviser in accordance with the terms of that Investment Management Agreement. PennantPark Investment, through the Investment Adviser, provides similar services to SBIC LP under its investment management agreement with us. The SBIC LP investment management agreement does not affect the management or incentive fees that we pay to the Investment Adviser on a consolidated basis. Payments under our Investment Management Agreement in each reporting period are equal to (1) a management fee equal to a percentage of the value of our gross assets and (2) an incentive fee based on our performance. See Note 3 to the Consolidated Financial Statements.
Under our Administration Agreement, which was renewed in February 2012, PennantPark Investment Administration furnishes us with office facilities and administrative services necessary to conduct our day-to-day operations. PennantPark Investment, through the Administrator, provides similar services to SBIC LP under its administration agreement, which is intended to have no effect on the consolidated administration fee. If requested to provide managerial assistance to our portfolio companies, we or PennantPark Investment Administration will be paid an additional amount based on the services provided, which amount will not in any case exceed the amount we receive from the portfolio companies for such services. Payment under our Administration Agreement is based upon our allocable portion of the Administrators overhead in performing its obligations under our Administration Agreement, including rent, technology systems, insurance and our allocable portion of the costs of our chief compliance officer, chief financial officer and their respective staffs. See Note 3 to the Consolidated Financial Statements.
If any of our contractual obligations discussed above are terminated, our costs under new agreements that we enter into may increase. In addition, we will likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under our Investment Management Agreement and our Administration Agreement. Any new investment management agreement would also be subject to approval by our stockholders.
Off-Balance Sheet Arrangements
We currently engage in no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.
Dividends and Distributions
During the three and six months ended March 31, 2012, we declared dividends of $0.28 and $0.56 per share, respectively, for total dividends of $15.7 million and $28.5 million, respectively. For the same periods in the prior year, we declared dividends of 0.27 and $0.53 per share, respectively, for total dividends of $12.3 million and $21.7 million, respectively. We monitor available net investment income to determine if a tax return of capital may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, a portion of those distributions may be deemed to be a tax return of capital to our common stockholders. Tax characteristics of all distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year.
We intend to continue to make quarterly dividends to our stockholders. Our quarterly dividends, if any, are determined by our board of directors.
In order to qualify as a RIC and to not be subject to corporate-level tax on income, we are required, under Subchapter M of the Code, to distribute annually dividends of at least 90% of the sum of our ordinary income and realized net short-term capital gains, if any, out of the assets legally available for distribution. Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we may distribute during each calendar year an amount at least equal to the sum of (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our realized net capital gains for the one-year period ending on October 31 of the calendar year and (3) any ordinary income and net capital gains for preceding years that were not distributed during such years. In addition, although we may distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may retain such net capital gains or ordinary income to provide us with additional liquidity. For the six months ended March 31, 2012 and 2011, we elected to retain a portion of our calendar year income and incur an excise tax of approximately $0.3 million and $0.2 million, respectively.
We maintain an opt out dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend, then stockholders cash dividends will be automatically reinvested in additional shares of our common stock, unless they specifically opt out of the dividend reinvestment plan so as to receive cash dividends.
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We may not be able to achieve operating results that will allow us to make dividends and distributions at a specific level or to increase the amount of these dividends and distributions from time to time. In addition, we may be limited in our ability to make dividends and distributions due to the asset coverage test for borrowings applicable to us as a BDC under the 1940 Act and/or due to provisions in future credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of RIC status. We cannot assure stockholders that they will receive any dividends and distributions at a particular level.
We may distribute our common stock as a dividend of our taxable income and a shareholder could receive a portion of the dividends declared and distributed by us in shares of our common stock with the remaining amount in cash. A shareholder will be considered to have recognized dividend income equal to the fair market value of the stock paid by us plus cash received with respect to such dividend. We have not elected to distribute stock as a dividend but reserve the right to do so.
Item 3. | Quantitative And Qualitative Disclosures About Market Risk |
We are subject to financial market risks, including changes in interest rates. As of March 31, 2012, our portfolio consisted of 66% fixed- rate and 34% variable-rate investments (including 27% with a LIBOR, or prime floor). The variable-rate loans are usually based on a floating LIBOR rate and typically have durations of three months after which they reset to current market interest rates. Variable-rate investments subject to a floor generally reset by reference to the current market index after one to six months only if the index exceeds the floor. In regards to variable-rate instruments with a floor, we do not benefit from increases in interest rates until such rates exceed the floor and thereafter benefit from market rates above any such floor.
Assuming that the current balance sheet was to remain constant, and no actions were taken to alter the existing interest rate sensitivity, a hypothetical immediate 1% change in interest rates may affect net income by more than 1% over a one-year horizon. Although management believes that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in the credit market, credit quality, size and composition of the assets on the balance sheet and other business developments that could affect net increase in net assets resulting from operations, or net income. Accordingly, no assurances can be given that actual results would not differ materially from the statement above.
Because we borrow money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. In periods of declining interest rates, our cost of funds would decrease, which may reduce our net investment income. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. During the periods covered by this Report, we did not engage in interest rate hedging activities.
Item 4. | Controls and Procedures |
As of the period covered by this Report, we, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based on that evaluation, our management, including the chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic filings with the SEC are recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.
There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
33
Item 1. | Legal Proceedings |
Neither we nor our Investment Adviser nor our Administrator is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against our Investment Adviser or Administrator. From time to time, we, our Investment Adviser or Administrator may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.
Item 1A. | Risk Factors |
In addition to the other information set forth in this Report, you should consider carefully the factors discussed in Part I Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K are not the only risks facing PennantPark Investment. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Reserved. |
None.
Item 5. | Other Information |
None.
34
Item 6. | Exhibits |
Unless specifically indicated otherwise, the following exhibits are incorporated by reference to exhibits previously filed with the SEC:
3.1 | Articles of Incorporation (Incorporated by reference to the Registrants Pre-Effective Amendment No.1 to the Registration Statement on Form N-2/A (File No. 333-140092), filed on March 5, 2007). | |
3.2 | Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrants Annual Report on Form 10-K (File No. 814-00736), filed on November 16, 2011). | |
4.1 | Form of Share Certificate (Incorporated by reference to Exhibit 99(d)(1) to the Registrants Registration Statement on Form N-2 (File No. 333-150033), filed on April 2, 2008). | |
10.1* | Amended and Restated Senior Secured Revolving Credit Agreement, dated as of February 21, 2012, among PennantPark Investment Corporation, as the borrower, the Lenders party hereto, SunTrust Bank, as administrative agent and JPMorgan Chase Bank, N.A., as syndication agent. | |
11 | Computation of Per Share Earnings (included in the notes to the Consolidated Financial Statements contained in this Report). | |
31.1 * | Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended. | |
31.2 * | Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended. | |
32.1 * | Certification of Chief Executive Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002. | |
32.2 * | Certification of Chief Financial Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002. | |
99.1 | Privacy Policy of the Registrant (Incorporated by reference to Exhibit 99.1 to the Registrants Annual Report on Form 10-K (File No. 814-00736), filed on December 13, 2007). |
* | Filed herewith. |
35
Pursuant to the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
PENNANTPARK INVESTMENT CORPORATION | ||||
Date: May 2, 2012 | By: | /s/ Arthur H. Penn | ||
Arthur H. Penn | ||||
Chief Executive Officer | ||||
Date: May 2, 2012 | By: | /s/ Aviv Efrat | ||
Aviv Efrat | ||||
Chief Financial Officer (Principal Accounting and Financial Officer) |
36
Exhibit 10.1
EXECUTION COPY
AMENDED AND RESTATED
SENIOR SECURED
REVOLVING CREDIT AGREEMENT
dated as of
February 21, 2012
among
PENNANTPARK INVESTMENT CORPORATION
as Borrower
The LENDERS Party Hereto
and
SUNTRUST BANK
as Administrative Agent
JPMORGAN CHASE BANK, N.A.
as Syndication Agent
$380,000,000
SUNTRUST ROBINSON HUMPHREY, INC.
J.P. MORGAN SECURITIES LLC
as Joint Lead Arrangers and Joint Book Runners
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TABLE OF CONTENTS
Page | ||||||
ARTICLE I DEFINITIONS | 1 | |||||
SECTION 1.01. |
Defined Terms | 1 | ||||
SECTION 1.02. |
Classification of Loans and Borrowings | 29 | ||||
SECTION 1.03. |
Terms Generally | 29 | ||||
SECTION 1.04. |
Accounting Terms; GAAP | 29 | ||||
SECTION 1.05. |
Currencies; Currency Equivalents | 30 | ||||
ARTICLE II THE CREDITS | 31 | |||||
SECTION 2.01. |
The Commitments | 31 | ||||
SECTION 2.02. |
Loans and Borrowings | 32 | ||||
SECTION 2.03. |
Requests for Syndicated Borrowings | 32 | ||||
SECTION 2.04. |
Swingline Loans | 34 | ||||
SECTION 2.05. |
Letters of Credit | 36 | ||||
SECTION 2.06. |
Funding of Borrowings | 40 | ||||
SECTION 2.07. |
Interest Elections | 40 | ||||
SECTION 2.08. |
Termination, Reduction or Increase of the Commitments | 42 | ||||
SECTION 2.09. |
Repayment of Loans; Evidence of Debt | 45 | ||||
SECTION 2.10. |
Prepayment of Loans | 46 | ||||
SECTION 2.11. |
Fees | 49 | ||||
SECTION 2.12. |
Interest | 51 | ||||
SECTION 2.13. |
Alternate Rate of Interest | 52 | ||||
SECTION 2.14. |
Increased Costs | 52 | ||||
SECTION 2.15. |
Break Funding Payments | 53 | ||||
SECTION 2.16. |
Taxes | 54 | ||||
SECTION 2.17. |
Payments Generally; Pro Rata Treatment: Sharing of Set-offs | 57 | ||||
SECTION 2.18. |
Mitigation Obligations; Replacement of Lenders | 60 | ||||
SECTION 2.19. |
Defaulting Lenders | 61 | ||||
ARTICLE III REPRESENTATIONS AND WARRANTIES | 64 | |||||
SECTION 3.01. |
Organization; Powers | 64 | ||||
SECTION 3.02. |
Authorization; Enforceability | 64 |
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TABLE OF CONTENTS
(continued)
Page | ||||||
SECTION 3.03. |
Governmental Approvals; No Conflicts | 65 | ||||
SECTION 3.04. |
Financial Condition; No Material Adverse Change | 65 | ||||
SECTION 3.05. |
Litigation | 65 | ||||
SECTION 3.06. |
Compliance with Laws and Agreements | 66 | ||||
SECTION 3.07. |
Taxes | 66 | ||||
SECTION 3.08. |
ERISA | 66 | ||||
SECTION 3.09. |
Disclosure | 66 | ||||
SECTION 3.10. |
Investment Company Act; Margin Regulations | 66 | ||||
SECTION 3.11. |
Material Agreements and Liens | 67 | ||||
SECTION 3.12. |
Subsidiaries and Investments | 67 | ||||
SECTION 3.13. |
Properties | 67 | ||||
SECTION 3.14. |
Affiliate Agreements | 68 | ||||
SECTION 3.15. |
OFAC | 68 | ||||
SECTION 3.16. |
Patriot Act | 68 | ||||
SECTION 3.17. |
Collateral Documents | 68 | ||||
ARTICLE IV CONDITIONS |
69 | |||||
SECTION 4.01. |
Effective Date | 69 | ||||
SECTION 4.02. |
Each Credit Event | 70 | ||||
ARTICLE V AFFIRMATIVE COVENANTS |
71 | |||||
SECTION 5.01. |
Financial Statements and Other Information | 71 | ||||
SECTION 5.02. |
Notices of Material Events | 73 | ||||
SECTION 5.03. |
Existence: Conduct of Business | 73 | ||||
SECTION 5.04. |
Payment of Obligations | 73 | ||||
SECTION 5.05. |
Maintenance of Properties; Insurance | 73 | ||||
SECTION 5.06. |
Books and Records; Inspection and Audit Rights | 74 | ||||
SECTION 5.07. |
Compliance with Laws | 74 | ||||
SECTION 5.08. |
Certain Obligations Respecting Subsidiaries; Further Assurances | 74 | ||||
SECTION 5.09. |
Use of Proceeds | 76 | ||||
SECTION 5.10. |
Status of RIC and BDC | 76 |
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TABLE OF CONTENTS
(continued)
Page | ||||||
SECTION 5.11. |
Investment Policies | 76 | ||||
SECTION 5.12. |
Portfolio Valuation and Diversification Etc | 76 | ||||
SECTION 5.13. |
Calculation of Borrowing Base | 81 | ||||
ARTICLE VI NEGATIVE COVENANTS |
85 | |||||
SECTION 6.01. |
Indebtedness | 85 | ||||
SECTION 6.02. |
Liens | 86 | ||||
SECTION 6.03. |
Fundamental Changes | 87 | ||||
SECTION 6.04. |
Investments | 88 | ||||
SECTION 6.05. |
Restricted Payments | 89 | ||||
SECTION 6.06. |
Certain Restrictions on Subsidiaries | 90 | ||||
SECTION 6.07. |
Certain Financial Covenants | 90 | ||||
SECTION 6.08. |
Transactions with Affiliates | 91 | ||||
SECTION 6.09. |
Lines of Business | 91 | ||||
SECTION 6.10. |
No Further Negative Pledge | 91 | ||||
SECTION 6.11. |
Modifications of Longer-Term Indebtedness Documents | 92 | ||||
SECTION 6.12. |
Payments of Longer-Term Indebtedness | 92 | ||||
SECTION 6.13. |
Accounting Changes | 93 | ||||
SECTION 6.14. |
SBIC Guarantee | 93 | ||||
ARTICLE VII EVENTS OF DEFAULT |
93 | |||||
ARTICLE VIII THE ADMINISTRATIVE AGENT |
97 | |||||
SECTION 8.01. |
Appointment of the Administrative Agent | 97 | ||||
SECTION 8.02. |
Capacity as Lender | 97 | ||||
SECTION 8.03. |
Limitation of Duties; Exculpation | 97 | ||||
SECTION 8.04. |
Reliance | 98 | ||||
SECTION 8.05. |
Sub-Agents | 98 | ||||
SECTION 8.06. |
Resignation; Successor Administrative Agent | 98 | ||||
SECTION 8.07. |
Reliance by Lenders | 99 | ||||
SECTION 8.08. |
Modifications to Loan Documents | 99 | ||||
ARTICLE IX MISCELLANEOUS |
100 | |||||
SECTION 9.01. |
Notices; Electronic Communications | 100 |
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TABLE OF CONTENTS
(continued)
Page | ||||||
SECTION 9.02. |
Waivers; Amendments | 102 | ||||
SECTION 9.03. |
Expenses; Indemnity; Damage Waiver | 104 | ||||
SECTION 9.04. |
Successors and Assigns | 106 | ||||
SECTION 9.05. |
Survival | 111 | ||||
SECTION 9.06. |
Counterparts; Integration; Effectiveness; Electronic Execution | 111 | ||||
SECTION 9.07. |
Severability | 112 | ||||
SECTION 9.08. |
Right of Setoff | 112 | ||||
SECTION 9.09. |
Governing Law; Jurisdiction; Etc | 113 | ||||
SECTION 9.10. |
WAIVER OF JURY TRIAL | 113 | ||||
SECTION 9.11. |
Judgment Currency | 114 | ||||
SECTION 9.12. |
Headings | 114 | ||||
SECTION 9.13. |
Treatment of Certain Information; No Fiduciary Duty; Confidentiality | 114 | ||||
SECTION 9.14. |
USA PATRIOT Act | 116 | ||||
SECTION 9.15. |
Effect of Amendment and Restatement of the Existing Agreement | 116 |
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-iv- |
SCHEDULE 1.01(a) |
- | Approved Dealers and Approved Pricing Services | ||
SCHEDULE 1.01(b) |
- | Commitments | ||
SCHEDULE 1.01(c) |
- | Industry Classification Group List | ||
SCHEDULE 3.11 |
- | Material Agreements and Liens | ||
SCHEDULE 3.12(a) |
- | Subsidiaries | ||
SCHEDULE 3.12(b) |
- | Investments | ||
SCHEDULE 6.08 |
- | Transactions with Affiliates | ||
EXHIBIT A |
- | Form of Assignment and Assumption | ||
EXHIBIT B |
- | Form of Borrowing Base Certificate |
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AMENDED AND RESTATED SENIOR SECURED REVOLVING CREDIT AGREEMENT dated as of February 21, 2012 (this Agreement), among PENNANTPARK INVESTMENT CORPORATION, a Maryland corporation (the Borrower), the LENDERS party hereto, and SUNTRUST BANK, as Administrative Agent.
Pursuant to the Senior Secured Revolving Credit Agreement dated as of June 25, 2007 (as amended, supplemented or otherwise modified prior to the Effective Date, the Existing Credit Agreement), among the Borrower, the lenders party thereto (collectively, the Existing Lenders) and the Administrative Agent, the Existing Lenders agreed to make extensions of credit to the Borrower on the terms and conditions set forth therein, including making loans (the Existing Loans) to the Borrower.
The Borrower has requested that the Existing Credit Agreement be amended and restated in its entirety to become effective and binding on the Borrower pursuant to the terms of this Agreement, and the Lenders (including certain of the Existing Lenders) have agreed (subject to the terms of this Agreement) to amend and restate the Existing Credit Agreement in its entirety to read as set forth in this Agreement, and it has been agreed by the parties to the Existing Credit Agreement that (a) the commitments which the Existing Lenders have agreed to extend to the Borrower under the Existing Credit Agreement shall be extended or advanced upon the amended and restated terms and conditions contained in this Agreement; and (b) the Existing Loans and other obligations outstanding under the Existing Credit Agreement shall be governed by and deemed to be outstanding under the amended and restated terms and conditions contained in this Agreement on and after the date hereof, with the intent that the terms of this Agreement shall supersede the terms of the Existing Credit Agreement (each of which shall hereafter have no further effect upon the parties thereto, other than for accrued and unpaid fees and expenses, and indemnification provisions accrued and owing, under the terms of the Existing Credit Agreement on or prior to the Effective Date or arising (in the case of indemnification) under the terms of the Existing Credit Agreement).
The parties hereto hereby agree to amend and restate the Existing Credit Agreement, and the Existing Credit Agreement is hereby amended and restated in its entirety as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:
ABR, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are denominated in Dollars and bearing interest at a rate determined by reference to the Alternate Base Rate.
Adjusted Borrowing Base means the Borrowing Base minus the aggregate amount of Cash and Cash Equivalents included in the Portfolio Investments held by the Obligors (provided that Cash Collateral for outstanding Letters of Credit shall not be treated as a portion of the Portfolio Investments).
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Revolving Credit Agreement |
Adjusted Covered Debt Balance means, on any date, the aggregate Covered Debt Amount on such date minus the aggregate amount of Cash and Cash Equivalents included in the Portfolio Investments held by the Obligors (provided that Cash Collateral for outstanding Letters of Credit shall not be treated as a portion of the Portfolio Investments).
Adjusted LIBO Rate means, for the Interest Period for any Eurocurrency Borrowing, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate for such Interest Period.
Administrative Agent means SunTrust, in its capacity as administrative agent for the Lenders hereunder.
Administrative Agent Appraisal Testing Month has the meaning assigned to such term in Section 5.12(b)(ii)(E)(z).
Administrative Agents Account means, for each Currency, an account in respect of such Currency designated by the Administrative Agent in a notice to the Borrower and the Lenders.
Administrative Questionnaire means an administrative questionnaire in a form supplied by the Administrative Agent.
Advance Rate has the meaning assigned to such term in Section 5.13.
Affected Currency has the meaning assigned to such term in Section 2.13.
Affiliate means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. Anything herein to the contrary notwithstanding, the term Affiliate shall not include any Person that constitutes an Investment held by any Obligor in the ordinary course of business.
Affiliate Agreements means, collectively, (a) the Administration Agreement dated June 11, 2010 by and among the Borrower, PennantPark SBIC LP and PennantPark SBIC GP, LLC, (b) the Investment Advisory Agreement dated June 11, 2010 by and among the Borrower, PennantPark SBIC LP and PennantPark SBIC GP, LLC, (c) the Investment Advisory Management Agreement dated as of April 17, 2007, between the Borrower and Pennant Investment Advisers, LLC, (d) the Administration Agreement dated as of April 17, 2007, between the Borrower and PennantPark Investment Administration, LLC, and (e) the Trademark License Agreement dated as of April 15, 2007, between the Borrower and Pennant Investment Advisers, LLC.
Agreed Foreign Currency means, at any time, any of Canadian Dollars, English Pounds Sterling, Euros and, with the agreement of each Multicurrency Lender, any other Foreign
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2 | Revolving Credit Agreement |
Currency, so long as, in respect of any such specified Foreign Currency or other Foreign Currency, at such time (a) such Foreign Currency is dealt with in the London interbank deposit market, (b) such Foreign Currency is freely transferable and convertible into Dollars in the London foreign exchange market and (c) no central bank or other governmental authorization in the country of issue of such Foreign Currency (including, in the case of the Euro, any authorization by the European Central Bank) is required to permit use of such Foreign Currency by any Multicurrency Lender for making any Loan hereunder and/or to permit the Borrower to borrow and repay the principal thereof and to pay the interest thereon, unless such authorization has been obtained and is in full force and effect.
Agreement has the meaning assigned to such term in the preamble to this Agreement
Alternate Base Rate means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate for such day plus 1/2 of 1% and (c) the rate per annum equal to 1% plus the rate appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page of such service, or any successor to such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent in its reasonable discretion from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, on such day (or, if such day is not a Business Day, the immediately preceding Business Day), for Dollar deposits with a term of one month. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the rate appearing on Reuters Screen LIBOR01 Page (or successor therefor) as set forth above shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or such rate appearing on Reuters Screen LIBOR01 Page (or successor therefor), respectively.
Applicable Dollar Percentage means, with respect to any Dollar Lender, the percentage of the total Dollar Commitments represented by such Dollar Lenders Dollar Commitment. If the Dollar Commitments have terminated or expired, the Applicable Dollar Percentages shall be determined based upon the Dollar Commitments most recently in effect, giving effect to any assignments.
Applicable Financial Statements means, as at any date, the most-recent audited financial statements of the Borrower delivered to the Lenders; provided that if immediately prior to the delivery to the Lenders of new audited financial statements of the Borrower a Material Adverse Change (the Pre-existing MAC) shall exist (regardless of when it occurred), then the Applicable Financial Statements as at said date means the Applicable Financial Statements in effect immediately prior to such delivery until such time as the Pre-existing MAC shall no longer exist.
Applicable Margin means: (a) with respect to any ABR Loan, 1.75% per annum; and (b) with respect to any Eurocurrency Loan, 2.75% per annum.
Applicable Multicurrency Percentage means, with respect to any Multicurrency Lender, the percentage of the total Multicurrency Commitments represented by such
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3 | Revolving Credit Agreement |
Multicurrency Lenders Multicurrency Commitment. If the Multicurrency Commitments have terminated or expired, the Applicable Multicurrency Percentages shall be determined based upon the Multicurrency Commitments most recently in effect, giving effect to any assignments.
Applicable Percentage means, with respect to any Lender, the percentage of the total Commitments represented by such Lenders Commitments. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.
Approved Dealer means (a) in the case of any Portfolio Investment that is not a U.S. Government Security, a bank or a broker-dealer registered under the Securities Exchange Act of 1934 of nationally recognized standing or an Affiliate thereof, (b) in the case of a U.S. Government Security, any primary dealer in U.S. Government Securities, and (c) in the case of any foreign Portfolio Investment, any foreign broker-dealer of internationally recognized standing or an Affiliate thereof, in the case of each of clauses (a), (b) and (c) above, as set forth on Schedule 1.01(a) or any other bank or broker-dealer acceptable to the Administrative Agent in its reasonable determination.
Approved Pricing Service means a pricing or quotation service as set forth in Schedule 1.01(a) or any other pricing or quotation service approved by the Board of Directors of the Borrower and designated in writing to the Administrative Agent (which designation shall be accompanied by a copy of a resolution of the Board of Directors of the Borrower that such pricing or quotation service has been approved by the Borrower).
Approved Third-Party Appraiser means any Independent nationally recognized third-party appraisal firm (a) designated by the Borrower in writing to the Administrative Agent (which designation shall be accompanied by a copy of a resolution of the Board of Directors of the Borrower that such firm has been approved by the Borrower for purposes of assisting the Board of Directors of the Borrower in making valuations of portfolio assets to determine the Borrowers compliance with the applicable provisions of the Investment Company Act) and (b) acceptable to the Administrative Agent. It is understood and agreed that Houlihan Lokey Howard & Zukin Capital, Inc., Duff & Phelps LLC, Murray, Devine and Company, Lincoln Advisors and Valuation Research Corporation are acceptable to the Administrative Agent. As used in Section 5.12 hereof, an Approved Third-Party Appraiser selected by the Administrative Agent shall mean any of the firms identified in the preceding sentence and any other Independent nationally recognized third-party appraisal firm identified by the Administrative Agent and consented to by the Borrower (such consent not to be unreasonably withheld).
Asset Coverage Ratio means the ratio, determined on a consolidated basis for Borrower and its Subsidiaries, without duplication, (a) the value of total assets of the Borrower and its Subsidiaries, less all liabilities and indebtedness not represented by senior securities to (b) to the aggregate amount of senior securities representing indebtedness of Borrower and its Subsidiaries, in each case as determined pursuant to the Investment Company Act and any orders of the Securities and Exchange Commission issued to or with respect to Borrower thereunder, including any exemptive relief granted by the Securities and Exchange Commission with respect to the indebtedness of any SBIC Subsidiary.
701007202 11262547 |
4 | Revolving Credit Agreement |
Assignment and Assumption means an Assignment and Assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.
Assuming Lender has the meaning assigned to such term in Section 2.08(e).
Availability Period means the period from and including the Effective Date to but excluding the earlier of the Commitment Termination Date and the date of termination of the Commitments.
Board means the Board of Governors of the Federal Reserve System of the United States of America.
Borrower has the meaning assigned to such term in the preamble to this Agreement.
Borrowing means (a) all Syndicated ABR Loans of the same Class made, converted or continued on the same date, (b) all Eurocurrency Loans of the same Class denominated in the same Currency that have the same Interest Period or (c) a Swingline Loan.
Borrowing Base has the meaning assigned to such term in Section 5.13.
Borrowing Base Certificate means a certificate of a Financial Officer of the Borrower, substantially in the form of Exhibit B and appropriately completed.
Borrowing Base Deficiency means, at any date on which the same is determined, the amount, if any, that (a) the aggregate Covered Debt Amount as of such date exceeds (b) the Borrowing Base as of such date.
Borrowing Request means a request by the Borrower for a Syndicated Borrowing in accordance with Section 2.03.
Business Day means any day (a) that is not a Saturday, Sunday or other day on which commercial banks in Atlanta, Georgia are authorized or required by law to remain closed, (b) if such day relates to a borrowing of, a payment or prepayment of principal of or interest on, a continuation or conversion of or into, or the Interest Period for, a Eurocurrency Borrowing denominated in Dollars, or to a notice by the Borrower with respect to any such borrowing, payment, prepayment, continuation, conversion, or Interest Period, that is also a day on which dealings in deposits denominated in Dollars are carried out in the London interbank market and (c) if such day relates to a borrowing or continuation of, a payment or prepayment of principal of or interest on, or the Interest Period for, any Borrowing denominated in any Foreign Currency, or to a notice by the Borrower with respect to any such borrowing, continuation, payment, prepayment or Interest Period, that is also a day on which commercial banks and the London foreign exchange market settle payments in the Principal Financial Center for such Foreign Currency.
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5 | Revolving Credit Agreement |
Calculation Value shall mean the sum of (a) the Value, as determined at the end of the fiscal quarter immediately preceding the Testing Quarter (as defined in Section 5.12(b)(ii)(E)), of all Unquoted Investments (as defined in Section 5.12(b)(ii)(E)) held by the Obligors at the time of determination and (b) the Value of all Unquoted Investments held by the Obligors at the time of determination that were acquired by the Obligors during the Testing Quarter, with the value of any Unquoted Investment pursuant to this clause (b) being equal to the lower of (i) the cost of such investment and (ii) the internal value of such investment.
CAM Exchange means the exchange of the Lenders interests provided for in Article VII.
CAM Exchange Date means the date on which any Event of Default referred to in clause (j) of Article VII shall occur or the date on which the Company receives written notice from the Administrative Agent that any Event of Default referred to in clause (i) of Article VII has occurred.
CAM Percentage means, as to each Lender, a fraction, expressed as a decimal, of which (a) the numerator shall be the aggregate Dollar Equivalent of the Designated Obligations owed to such Lender (whether or not at the time due and payable) immediately prior to the CAM Exchange Date and (b) the denominator shall be the aggregate Dollar Equivalent amount of the Designated Obligations owed to all the Lenders (whether or not at the time due and payable) immediately prior to the CAM Exchange Date.
Capital Lease Obligations of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.
Cash means any immediately available funds in Dollars or in any currency other than Dollars (measured in terms of the Dollar Equivalent thereof) which is a freely convertible currency.
Cash Collateralize means, in respect of a Letter of Credit or any obligation hereunder, to provide and pledge cash collateral pursuant to Section 2.05(k), at a location and pursuant to documentation in form and substance reasonably satisfactory to Administrative Agent and the Issuing Bank. Cash Collateral shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.
Cash Equivalents means investments (other than Cash) that are one or more of the following obligations:
(a) U.S. Government Securities, in each case maturing within three months from the date of acquisition thereof;
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(b) investments in commercial paper maturing within 180 days from the date of acquisition thereof and having, at such date of acquisition, a credit rating of at least A-1 from S&P and at least P-1 from Moodys;
(c) investments in certificates of deposit, bankers acceptances and time deposits maturing within 180 days from the date of acquisition thereof (i) issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof or under the laws of the jurisdiction or any constituent jurisdiction thereof of any Agreed Foreign Currency; provided that such certificates of deposit, bankers acceptances and time deposits are held in a securities account (as defined in the Uniform Commercial Code) through which the Collateral Agent can perfect a security interest therein and (ii) having, at such date of acquisition, a credit rating of at least A-1 from S&P and at least P-1 from Moodys; and
(d) fully collateralized repurchase agreements with a term of not more than 30 days from the date of acquisition thereof for U.S. Government Securities and entered into with (i) a financial institution satisfying the criteria described in clause (c) of this definition or (ii) an Approved Dealer having (or being a member of a consolidated group having) at such date of acquisition, a credit rating of at least A-1 from S&P and at least P-1 from Moodys;
provided that (i) in no event shall Cash Equivalents include any obligation that provides for the payment of interest alone (for example, interest-only securities or IOs); (ii) if any of Moodys or S&P changes its rating system, then any ratings included in this definition shall be deemed to be an equivalent rating in a successor rating category of Moodys or S&P, as the case may be; (iii) Cash Equivalents (other than U.S. Government Securities or repurchase agreements) shall not include any such investment of more than 10% of total assets of the Borrower and its Subsidiaries in any single issuer; and (iv) in no event shall Cash Equivalents include any obligation that is not denominated in Dollars or an Agreed Foreign Currency.
Change in Control means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of shares representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the requisite members of the board of directors of the Borrower nor (ii) appointed by a majority of the directors so nominated; or (c) the acquisition of direct or indirect Control of the Borrower by any Person or group other than PennantPark Investment Advisers, LLC.
Change in Law means the occurrence, after the date of this Agreement, of (a) the adoption of any law, treaty or governmental rule or regulation or any change in any law, treaty or governmental rule or regulation or in the interpretation, administration or application thereof (regardless of whether the underlying law, treaty or governmental rule or regulation was issued or enacted prior to the date hereof), but excluding proposals thereof, or any determination
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of a court or Governmental Authority, (b) any guideline, request or directive by any Governmental Authority (whether or not having the force of law) or any implementation rules or interpretations of previously issued guidelines, requests or directives, in each case that is issued or made after the date hereof or (c) compliance by any Lender (or its applicable lending office) or any company controlling such Lender with any guideline, request or directive regarding capital adequacy or liquidity (whether or not having the force of law) of any such Governmental Authority, in each case adopted after the date hereof. For the avoidance of doubt, all requests, rules, guidelines or directives concerning liquidity and capital adequacy issued by any United States regulatory authority (i) under or in connection with the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and (ii) in connection with the implementation of the recommendations of the Bank for International Settlements or the Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority), in each case pursuant to Basel III, shall in each case be deemed to be a Change in Law, regardless of the date adopted, issued, promulgated or implemented.
Class, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are Syndicated Dollar Loans, Syndicated Multicurrency Loans or Swingline Loans; when used in reference to any Lender, refers to whether such Lender is a Dollar Lender or a Multicurrency Lender; and, when used in reference to any Commitment, refers to whether such Commitment is a Dollar Commitment or a Multicurrency Commitment. The Class of a Letter of Credit refers to whether such Letter of Credit is a Dollar Letter of Credit or a Multicurrency Letter of Credit.
Code means the Internal Revenue Code of 1986, as amended from time to time.
Collateral has the meaning assigned to such term in the Guarantee and Security Agreement.
Collateral Agent means SunTrust in its capacity as Collateral Agent under the Guarantee and Security Agreement, and includes any successor Collateral Agent thereunder.
Commitments means, collectively, the Dollar Commitments and the Multicurrency Commitments.
Commitment Increase has the meaning assigned to such term in Section 2.08(e).
Commitment Increase Date has the meaning assigned to such term in Section 2.08(e).
Commitment Termination Date means February 21, 2015, as such date may be extended upon the consent of each affected Lender.
Consolidated Group has the meaning assigned to such term in Section 5.13(a).
Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. Controlling and Controlled have meanings correlative thereto.
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Covered Debt Amount means, on any date, the sum of (x) all of the Revolving Credit Exposures of all Lenders on such date plus (y) the aggregate amount of Other Covered Indebtedness on such date minus (z) the LC Exposures fully Cash Collateralized on such date pursuant to Section 2.05(k) and the last paragraph of Section 2.09(a).
Currency means Dollars or any Foreign Currency.
Default means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
Defaulting Lender means, subject to Section 2.19(b), any Lender that (a) has failed to (i) fund all or any portion of its Loans or participations in Letters of Credit within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lenders reasonable determination that one or more conditions precedent to funding (each of which conditions precedent, together with the applicable default, if any, shall be specifically identified in detail in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, Issuing Bank, Swingline Lender or any Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swingline Loans) within two Business Days of the date when due, (b) has notified the Borrower, the Administrative Agent, Issuing Bank or Swingline Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lenders obligation to fund a Loan hereunder and states that such position is based on such Lenders reasonable determination that a condition precedent to funding (which condition precedent, together with the applicable default, if any, shall be specifically identified in detail in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by Administrative Agent and Borrower), or (d) Administrative Agent has received notification that such Lender has, or has a direct or indirect parent company that is (i) insolvent, or is generally unable to pay its debts as they become due, or admits in writing its inability to pay its debts as they become due, or makes a general assignment for the benefit of its creditors or (ii) other than via an Undisclosed Administration, the subject of a bankruptcy, insolvency, reorganization, liquidation or similar proceeding, or a receiver, trustee, conservator, intervenor or sequestrator or the like has been appointed for such Lender or its direct or indirect parent company, or such Lender or its direct or indirect parent company has taken any action in furtherance of or indicating its consent to or acquiescence in any such proceeding or appointment; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority or instrumentality so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts
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within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.19(b)) upon such determination (and the Administrative Agent shall deliver written notice of such determination to the Borrower, each Issuing Bank and each Lender and the Swingline Lender).
Designated Obligations means all obligations of the Borrower with respect to (a) principal of and interest on the Loans and (b) accrued and unpaid fees under the Loan Documents.
Disposition or Dispose means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith; provided that the term Disposition or Dispose shall not include the disposition of Portfolio Investments originated by the Borrower and immediately transferred to a Financing Subsidiary pursuant to a transaction not prohibited hereunder.
Dollar Commitment means, with respect to each Dollar Lender, the commitment of such Dollar Lender to make Syndicated Loans, and to acquire participations in Letters of Credit and Swingline Loans, denominated in Dollars hereunder, expressed as an amount representing the maximum aggregate amount of such Lenders Revolving Dollar Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lenders Dollar Commitment is set forth on Schedule 1.01(b), or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Dollar Commitment, as applicable. The initial aggregate amount of the Lenders Dollar Commitments is $40,000,000.
Dollar Equivalent means, on any date of determination, with respect to an amount denominated in any Foreign Currency, the amount of Dollars that would be required to purchase such amount of such Foreign Currency on the date two Business Days prior to such date, based upon the spot selling rate at which the Administrative Agent offers to sell such Foreign Currency for Dollars in the London foreign exchange market at approximately 11:00 a.m., London time, for delivery two Business Days later.
Dollar LC Exposure means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Dollar Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements in respect of such Letters of Credit that have not yet been reimbursed by or on behalf of the Borrower at such time. The Dollar LC Exposure of any Lender at any time shall be its Applicable Dollar Percentage of the total Dollar LC Exposure at such time.
Dollar Lender means the Persons listed on Schedule 1.01(b) as having Dollar Commitments and any other Person that shall have become a party hereto pursuant to an
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Assignment and Assumption that provides for it to assume a Dollar Commitment or to acquire Revolving Dollar Credit Exposure, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.
Dollar Letters of Credit means Letters of Credit that utilize the Dollar Commitments.
Dollar Loan means a Loan denominated in Dollars.
Dollars or $ refers to lawful money of the United States of America.
Effective Date means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).
Equity Interests means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time.
ERISA Affiliate means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
ERISA Event means (a) any reportable event, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) any failure by any Plan to satisfy the minimum funding standard (within the meaning of Section 412 of the Code or Section 302 of ERISA) applicable to such Plan; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
Euro means a single currency of the Participating Member States.
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Eurocurrency, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.
Event of Default has the meaning assigned to such term in Article VII.
Excluded Taxes means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income, corporate, franchise or other similar taxes imposed on (or measured by) its net income by the United States of America (or any state or political subdivision thereof), or by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located, (c) in the case of a Lender, any U.S. withholding tax imposed on amounts payable to such Lender (i) at the time such Lender (other than an assignee pursuant to a request by the Borrower under Section 2.18(b)) becomes a party to this Agreement or designates a new lending office, except to the extent that such Lenders assignor or such Lender was entitled to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.16, at the time of such assignment or designation (other than to the extent such withholding is as a result of a CAM Exchange), or (ii) that is attributable to such Lenders failure or inability (other than as a result of a Change in Law occurring after the date such Lender becomes a party to this Agreement) to comply with Section 2.16(f), (d) any U.S. federal, state or local backup withholding Taxes imposed on payments made under any Loan Document, and (e) any U.S. federal withholding tax that is imposed pursuant to FATCA.
Existing Credit Agreement has the meaning assigned to such term in the preamble to this Agreement.
Existing Lenders has the meaning assigned to such term in the preamble to this Agreement.
Existing Loans has the meaning assigned to such term in the preamble to this Agreement.
Extraordinary Receipts means any cash received by or paid to any Obligor on account of any foreign, United States, state or local tax refunds, pension plan reversions, judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action, condemnation awards (and payments in lieu thereof), indemnity payments received not in the ordinary course of business and any purchase price adjustment received not in the ordinary course of business in connection with any purchase agreement and proceeds of insurance (excluding, however, for the avoidance of doubt, proceeds of any issuance of Equity Interests and issuances of Indebtedness by any Obligor); provided that Extraordinary Receipts shall not include any (x) amounts that the Borrower receives from the Administrative Agent or any Lender pursuant to Section 2.16(f), or (y) cash receipts to the extent received from proceeds of insurance, condemnation awards (or payments in lieu thereof), indemnity payments or payments in respect of judgments or settlements of claims, litigation or proceedings to the extent
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that such proceeds, awards or payments are received by any Person in respect of any unaffiliated third party claim against or loss by such Person and promptly applied to pay (or to reimburse such Person for its prior payment of) such claim or loss and the costs and expenses of such Person with respect thereto.
FATCA means Section 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any regulations or official interpretations thereof.
Federal Funds Effective Rate means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
Final Maturity Date means February 21, 2016.
Financial Officer means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower.
Financing Subsidiary means an SPE Subsidiary or an SBIC Subsidiary.
Foreign Currency means at any time any Currency other than Dollars.
Foreign Currency Equivalent means, with respect to any amount in Dollars, the amount of any Foreign Currency that could be purchased with such amount of Dollars using the reciprocal of the foreign exchange rate(s) specified in the definition of the term Dollar Equivalent, as determined by the Administrative Agent.
Foreign Lender means any Lender that is not a United States person as defined under Section 7701(a)(30) of the Code.
Foreign Subsidiary means any (a) direct or indirect Subsidiary of the Borrower that is organized under the laws of any jurisdiction other than the United States or its territories or possessions and that is treated as a corporation for United States federal income tax purposes, (b) direct or indirect Subsidiary of a direct or indirect Subsidiary of the Borrower which is a controlled foreign subsidiary within the meaning of the Code and (c) direct or indirect Subsidiary that is disregarded as an entity that is separate from its owner for United States federal income tax purposes and substantially all of its assets consist of the Capital Stock of one or more direct or indirect Foreign Subsidiaries.
Fronting Exposure means, at any time there is a Defaulting Lender, with respect to any Issuing Bank, such Defaulting Lenders Applicable Percentage of the outstanding LC Exposure with respect to Letters of Credit issued by such Issuing Bank other than LC Exposure as to which such Defaulting Lenders participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.
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GAAP means generally accepted accounting principles in the United States of America.
Governmental Authority means the government of the United States of America, or of any other nation, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
Guarantee of or by any Person (the guarantor) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the primary obligor) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term Guarantee shall not include (i) endorsements for collection or deposit in the ordinary course of business or (ii) customary indemnification agreements entered into in the ordinary course of business, provided that such indemnification obligations are unsecured, such Person has determined that any liability thereunder is remote and such indemnification obligations are not the functional equivalent of the guaranty of a payment obligation of the primary obligor.
Guarantee and Security Agreement means that certain Amended and Restated Guarantee and Security Agreement dated as of February 21, 2012 among the Borrower, the Administrative Agent, each Subsidiary of the Borrower from time to time party thereto, each holder (or a representative or trustee therefor) from time to time of any Secured Longer-Term Indebtedness, and the Collateral Agent, as the same shall be modified and supplemented and in effect from time to time.
Guarantee Assumption Agreement means a Guarantee Assumption Agreement substantially in the form of Exhibit B to the Guarantee and Security Agreement between the Collateral Agent and an entity that pursuant to Section 5.08 is required to become a Subsidiary Guarantor under the Guarantee and Security Agreement (with such changes as the Administrative Agent shall request consistent with the requirements of Section 5.08).
Hedging Agreement means any interest rate protection agreement, foreign currency exchange protection agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.
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Immaterial Subsidiaries means those Subsidiaries of the Borrower that are designated as Immaterial Subsidiaries by the Borrower from time to time (it being understood that the Borrower may at any time change any such designation); provided that such designated Immaterial Subsidiaries shall collectively meet all of the following criteria as of the date of the most recent balance sheet required to be delivered pursuant to Section 5.01: (a) the aggregate assets of such Subsidiaries and their Subsidiaries (on a consolidated basis) as of such date do not exceed an amount equal to 3% of the consolidated assets of the Borrower and its Subsidiaries as of such date; and (b) the aggregate revenues of such Subsidiaries and their Subsidiaries (on a consolidated basis) for the fiscal quarter ending on such date do not exceed an amount equal to 3% of the consolidated revenues of the Borrower and its Subsidiaries for such period.
Increasing Lender has the meaning assigned to such term in Section 2.08(e).
Indebtedness of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding accounts payable and accrued expenses incurred in the ordinary course of business), (e) all Indebtedness of others secured by any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed (with the value of such debt being the lower of the outstanding amount of such debt and the fair market value of the property subject to such Lien), (f) all Guarantees by such Person of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (i) all obligations, contingent or otherwise, of such Person in respect of bankers acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Persons ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. Notwithstanding the foregoing, Indebtedness shall not include (x) purchase price holdbacks arising in the ordinary course of business in respect of a portion of the purchase price of an asset or Investment to satisfy unperformed obligations of the seller of such asset or Investment or (y) a commitment arising in the ordinary course of business to make a future Portfolio Investment.
Indemnified Taxes means Taxes other than Excluded Taxes.
Independent when used with respect to any specified Person means that such Person (a) does not have any direct financial interest or any material indirect financial interest in the Borrower or any of its Subsidiaries or Affiliates (including its investment advisor or any Affiliate thereof) and (b) is not connected with the Borrower or of its Subsidiaries or Affiliates (including its investment advisor or any Affiliate thereof) as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions.
Industry Classification Group means (a) any of the classification groups set forth in Schedule 1.01(c) hereto, together with any such classification groups that may be
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subsequently established by Moodys and provided by the Borrower to the Lenders, and (b) up to three additional industry group classifications established by the Borrower pursuant to Section 5.12.
Interest Election Request means a request by the Borrower to convert or continue a Syndicated Borrowing in accordance with Section 2.07.
Interest Payment Date means (a) with respect to any Syndicated ABR Loan, each Quarterly Date, (b) with respect to any Eurocurrency Loan, the last day of each Interest Period therefor and, in the case of any Interest Period of more than three months duration, each day prior to the last day of such Interest Period that occurs at three-month intervals after the first day of such Interest Period and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid.
Interest Period means, for any Eurocurrency Loan or Borrowing, the period commencing on the date of such Loan or Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter or, with respect to such portion of any Eurocurrency Loan or Borrowing denominated in a Foreign Currency that is scheduled to be repaid on the Final Maturity Date, a period of less than one months duration commencing on the date of such Loan or Borrowing and ending on the Final Maturity Date, as specified in the applicable Borrowing Request or Interest Election Request; provided that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (ii) any Interest Period (other than an Interest Period pertaining to a Eurocurrency Borrowing denominated in a Foreign Currency that ends on the Final Maturity Date that is permitted to be of less than one months duration as provided in this definition) that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Loan initially shall be the date on which such Loan is made and thereafter shall be the effective date of the most recent conversion or continuation of such Loan, and the date of a Syndicated Borrowing comprising Loans that have been converted or continued shall be the effective date of the most recent conversion or continuation of such Loans.
Investment means, for any Person: (a) Equity Interests, bonds, notes, debentures or other securities of any other Person or any agreement to acquire any Equity Interests, bonds, notes, debentures or other securities of any other Person (including any short sale or any sale of any securities at a time when such securities are not owned by the Person entering into such sale); (b) deposits, advances, loans or other extensions of credit made to any other Person (including purchases of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such Person); or (c) Hedging Agreements.
Investment Company Act means the Investment Company Act of 1940, as amended from time to time.
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Investment Policies means the investment objectives, policies, restrictions and limitations set forth in the BUSINESS section of its Registration Statement, and as the same may be changed, altered, expanded, amended, modified, terminated or restated from time to time.
IRS means the United States Internal Revenue Service.
Issuing Bank means SunTrust, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(j). In the case of any Letter of Credit to be issued in an Agreed Foreign Currency, SunTrust may designate any of its affiliates as the Issuing Bank for purposes of such Letter of Credit.
LC Disbursement means a payment made by the Issuing Bank pursuant to a Letter of Credit.
LC Exposure means, at any time, the sum of the Dollar LC Exposure and the Multicurrency LC Exposure.
Lenders means, collectively, the Dollar Lenders and the Multicurrency Lenders. Unless the context otherwise requires, the term Lenders includes the Swingline Lender.
Letter of Credit means any letter of credit issued pursuant to this Agreement.
Letter of Credit Collateral Account has the meaning assigned to such term in Section 2.05(k).
Letter of Credit Documents means, with respect to any Letter of Credit, collectively, any application therefor and any other agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk with respect to such Letter of Credit or (b) any collateral security for any of such obligations, each as the same may be modified and supplemented and in effect from time to time.
LIBO Rate means, for any Interest Period, the British Bankers Association Interest Settlement Rate per annum for deposits in U.S. dollars for a period equal to the Interest Period appearing on the display designated as Reuters Screen LIBOR01 Page (or such other page on that service or such other service designated by the British Bankers Association for the display of such Associations Interest Settlement Rates for Dollar deposits) as of 11:00 a.m., London time on the day that is two Business Days prior to the first day of the Interest Period (or if such Reuters Screen LIBOR01 Page is unavailable for any reason at such time, the rate which appears on the Reuters Screen ISDA Page as of such date and such time); provided, that if the Administrative Agent determines that the relevant foregoing sources are unavailable for the relevant Interest Period, LIBO Rate shall mean the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the nearest 1/100th of 1%) of the rates per annum at which deposits in U.S. dollars are offered to the Administrative Agent two (2) business days preceding the first day of such Interest Period by leading banks in the London interbank market as of 11:00 a.m. for delivery on the first day of such Interest Period, for the number of days comprised therein and in an amount comparable to the amount of the Administrative Agents portion of the relevant Eurocurrency Borrowing.
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Lien means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities, except in favor of the issuer thereof (and in the case of Investments that are securities, excluding customary drag-along, tag-along, right of first refusal and other similar rights in favor of the equity holders of the same issuer).
Loan Documents means, collectively, this Agreement, the Letter of Credit Documents and the Security Documents.
Loans means the loans made by the Lenders to the Borrower pursuant to this Agreement.
Margin Stock means margin stock within the meaning of Regulations T, U and X.
Material Adverse Change has the meaning assigned to such term in Section 3.04(b).
Material Adverse Effect means a material adverse effect on (a) the business, Portfolio Investments and other assets, liabilities and financial condition of the Borrower or the Borrower and its Subsidiaries (other than Financing Subsidiaries) taken as a whole (excluding in any case a decline in the net asset value of the Borrower or a change in general market conditions or values of the Portfolio Investments), or (b) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Administrative Agent and the Lenders thereunder.
Material Indebtedness means (a) Indebtedness (other than the Loans, Letters of Credit and Hedging Agreements), of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $10,000,000 and (b) obligations in respect of one or more Hedging Agreements under which the maximum aggregate amount (giving effect to any netting agreements) that the Borrower and its Subsidiaries would be required to pay if such Hedging Agreement(s) were terminated at such time would exceed $10,000,000.
Minimum Collateral Amount means, at any time, with respect to Cash Collateral consisting of Cash or deposit account balances, an amount equal to 100% of the Fronting Exposure of Issuing Bank with respect to Letters of Credit issued and outstanding at such time.
Moodys means Moodys Investors Service, Inc. or any successor thereto.
Multicurrency Commitment means, with respect to each Multicurrency Lender, the commitment of such Multicurrency Lender to make Syndicated Loans, and to acquire
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participations in Letters of Credit and Swingline Loans, denominated in Dollars and in Agreed Foreign Currencies hereunder, expressed as an amount representing the maximum aggregate amount of such Lenders Revolving Multicurrency Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lenders Multicurrency Commitment is set forth on Schedule 1.01(b), or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Multicurrency commitment, as applicable. The initial aggregate amount of the Lenders Multicurrency Commitments is $340,000,000.
Multicurrency LC Exposure means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Multicurrency Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements in respect of such Letters of Credit that have not yet been reimbursed by or on behalf of the Borrower at such time. The Multicurrency LC Exposure of any Lender at any time shall be its Applicable Multicurrency Percentage of the total Multicurrency LC Exposure at such time.
Multicurrency Lender means the Persons listed on Schedule 1.01(b) as having Multicurrency Commitments and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption that provides for it to assume a Multicurrency Commitment or to acquire Revolving Multicurrency Credit Exposure, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.
Multicurrency Letters of Credit means Letters of Credit that utilize the Multicurrency Commitments.
Multicurrency Loan means a Loan denominated in an Agreed Foreign Currency.
Multiemployer Plan means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
National Currency means the currency, other than the Euro, of a Participating Member State.
Net Cash Proceeds means:
(a) with respect to any Disposition by the Borrower or any of its Subsidiaries (other than Financing Subsidiaries), or any Extraordinary Receipt received or paid to the account of the Borrower or any of its Subsidiaries (other than Financing Subsidiaries) (in each case, which requires a payment of the Loans under Section 2.10(e)), an amount equal to (a) the sum of cash and Cash Equivalents received in connection with such transaction (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) minus (b) the sum of (i) the principal amount of any Indebtedness that is secured by the applicable asset and that is required to be repaid in connection with such transaction (other than Indebtedness under the Loan Documents), (ii) the reasonable out-of-pocket fees, costs and expenses incurred by the Borrower or such Subsidiary in connection with such transaction, (iii) the taxes paid or reasonably estimated to be
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actually payable within two years of the date of the relevant transaction in connection with such transaction; provided that, if the amount of any estimated taxes pursuant to clause (iii) exceeds the amount of taxes actually required to be paid in cash in respect of such Disposition, the aggregate amount of such excess shall constitute Net Cash Proceeds (as of the date the Borrower determines such excess exists) and (iv) any reasonable costs, fees, commissions, premiums and expenses incurred by the Borrower or any of its Subsidiaries in connection with such Disposition; and
(b) with respect to the sale or issuance of any Equity Interest by the Borrower or any of its Subsidiaries (other than any Financing Subsidiary) (including, for the avoidance of doubt, cash received by the Borrower or any of its Subsidiaries (other than any Financing Subsidiaries) for the sale by the Borrower or such Subsidiary of any Equity Interest of a Financing Subsidiary but specifically excluding any sale of any Equity Interest by a Financing Subsidiary or cash received by a Financing Subsidiary in connection with the sale of any Equity Interest), or the incurrence or issuance of any Indebtedness by the Borrower or any of its Subsidiaries (other than Financing Subsidiaries) (in each case, which requires a payment of the Loans under Section 2.10(e)), an amount equal to (i) the sum of the cash and Cash Equivalents received in connection with such transaction minus (ii) the sum of (1) reasonable out-of-pocket fees, costs and expenses, incurred by the Borrower or such Subsidiary in connection therewith plus (2) any reasonable costs, fees, commissions, premiums, expenses, or underwriting discounts or commissions incurred by the Borrower or any of its Subsidiaries in connection with such sale or issuance.
Non-Defaulting Lender means, at any time, a Lender that is not a Defaulting Lender at such time.
Non-Public Information means material non-public information (within the meaning of United States federal, state or other applicable securities laws) with respect to Borrower or its Affiliates or their Securities.
Obligor means, collectively, the Borrower and the Subsidiary Guarantors.
Other Covered Indebtedness means, collectively, Secured Longer-Term Indebtedness, Secured Shorter-Term Indebtedness and Unsecured Shorter-Term Indebtedness.
Other Permitted Indebtedness means (a) accrued expenses and current trade accounts payable incurred in the ordinary course of the Borrowers business which are not overdue for a period of more than 90 days or which are being contested in good faith by appropriate proceedings, (b) Indebtedness (other than Indebtedness for borrowed money) arising in connection with transactions in the ordinary course of the Borrowers business in connection with its purchasing of securities, derivatives transactions, reverse repurchase agreements or dollar rolls to the extent such transactions are permitted under the Investment Company Act and the Borrowers Investment Policies, provided that such Indebtedness does not arise in connection with the purchase of Portfolio Investments other than Cash Equivalents and U.S. Government Securities and (c) Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as such judgments or awards do not constitute an Event of Default under clause (l) of Article VII.
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Other Taxes means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document, excluding any such taxes, charges or similar levies resulting from an assignment by any Lender in accordance with Section 9.04 hereof (unless such assignment is made pursuant to Section 2.18(b))
Parent Company means, with respect to a Lender, the bank holding company (as defined in Federal Reserve Board Regulation Y), if any, of such Lender, and/or any Person owning, beneficially or of record, directly or indirectly, a majority of the shares of such Lender.
Participant has the meaning assigned to such term in Section 9.04.
Participant Register has the meaning assigned to such term in Section 9.04.
Participating Member State means any member state of the European Community that adopts or has adopted the Euro as its lawful currency in accordance with the legislation of the European Union relating to the European Monetary Union.
PBGC means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
Permitted Liens means (a) Liens imposed by any Governmental Authority for taxes, assessments or charges not yet due or that are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Borrower in accordance with GAAP; (b) Liens of clearing agencies, broker-dealers and similar Liens incurred in the ordinary course of business, provided that such Liens (i) attach only to the securities (or proceeds) being purchased or sold and (ii) secure only obligations incurred in connection with such purchase or sale, and not any obligation in connection with margin financing; (c) Liens imposed by law, such as materialmens, mechanics, carriers, workmens, storage and repairmens Liens and other similar Liens arising in the ordinary course of business and securing obligations (other than Indebtedness for borrowed money) not yet due or that are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Borrower in accordance with GAAP; (d) Liens incurred or pledges or deposits made to secure obligations incurred in the ordinary course of business under workers compensation laws, unemployment insurance or other similar social security legislation (other than in respect of employee benefit plans subject to ERISA) or to secure public or statutory obligations; (e) Liens securing the performance of, or payment in respect of, bids, insurance premiums, deductibles or co-insured amounts, tenders, government or utility contracts (other than for the repayment of borrowed money), surety, stay, customs and appeal bonds and other obligations of a similar nature incurred in the ordinary course of business; (f) Liens arising out of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as such judgments or awards do not constitute an Event of Default under clause (l) of Article VII; (g) customary rights of setoff and liens upon (i) deposits of cash in favor of banks or other depository institutions in which such cash is maintained in the ordinary course of business, (ii) cash and financial assets held in securities accounts in favor of banks and other financial institutions with which such accounts are
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maintained in the ordinary course of business and (iii) assets held by a custodian in favor of such custodian in the ordinary course of business securing payment of fees, indemnities and other similar obligations; (h) Liens arising solely from precautionary filings of financing statements under the Uniform Commercial Code of the applicable jurisdictions in respect of operating leases entered into by the Borrower or any of its Subsidiaries in the ordinary course of business; and (i) deposits of money securing leases to which Borrower is a party as lessee made in the ordinary course of business.
Permitted Policy Amendment means any change, alteration, expansion, amendment, modification, termination or restatement of the Investment Policies, that is either (a) approved in writing by the Administrative Agent (with the consent of the Required Lenders), (b) required by applicable law, rule, regulation or Governmental Authority, or (c) not material (for the avoidance of doubt, no change, alteration, expansion, amendment, modification, termination or restatement of the Investment Policies shall be deemed material if (i) investment size proportionately increases as the size of the Borrowers capital base changes or (ii) the Borrower and its Subsidiaries, taken as a whole, invest up to 30% of their assets in non-U.S. companies).
Permitted SBIC Guarantee means a guarantee by the Borrower of Indebtedness of an SBIC Subsidiary on SBAs then applicable form, provided that the recourse to the Borrower thereunder is expressly limited only to periods after the occurrence of an event or condition that is an impermissible change in the control of such SBIC Subsidiary (it being understood that, as provided in clause (s) of Article VII, it shall be an event of Default hereunder if any such event or condition giving rise to such recourse occurs).
Person means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
PFPC means PFPC Trust Company.
Plan means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an employer as defined in Section 3(5) of ERISA.
Platform means has the meaning set forth in Section 5.01(i).
Portfolio Investment means any Investment held by the Obligors in their asset portfolio (and solely for purposes of determining the Borrowing Base, Cash).
Prime Rate means the rate which SunTrust announces from time to time as its prime lending rate, as in effect from time to time.
Principal Financial Center means, in the case of any Currency, the principal financial center where such Currency is cleared and settled, as determined by the Administrative Agent.
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Public Lender means Lenders that do not wish to receive Non-Public Information with respect to the Borrower or any of its Subsidiaries or their Securities.
Quarterly Dates means the last Business Day of March, June, September and December in each year, commencing on March 31, 2012.
Quoted Investments has the meaning assigned to such term in Section 5.12(b)(ii)(E)(x).
Register has the meaning set forth in Section 9.04.
Registration Statement means the Registration Statement filed by the Borrower with the Securities and Exchange Commission on April 19, 2007.
Regulations D, T, U and X means, respectively, Regulations D, T, U and X of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time.
Related Parties means, with respect to any specified Person, such Persons Affiliates and the respective partners, directors, officers, employees, agents and advisors of such Person and such Persons Affiliates.
Required Lenders means, at any time, Lenders having Revolving Credit Exposures and unused Commitments representing more than 50% of the sum of the total Revolving Credit Exposures and unused Commitments at such time; provided that the Revolving Credit Exposures and unused Commitments of any Defaulting Lender shall be disregarded in the determination of Required Lenders. The Required Lenders of a Class (which shall include the terms Required Dollar Lenders and Required Multicurrency Lenders) means Lenders having Revolving Credit Exposures and unused Commitments of such Class representing more than 50% of the sum of the total Revolving Credit Exposures and unused Commitments of such Class at such time.
Restricted Payment means any dividend or other distribution (whether in cash, securities or other property) with respect to any shares of any class of capital stock of the Borrower or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such shares of capital stock of the Borrower or any option, warrant or other right to acquire any such shares of capital stock of the Borrower (it being understood that none of: (w) the conversion features under convertible notes; (x) the triggering and/or settlement thereof; or (y) any cash payment made by the Borrower in respect thereof , shall constitute a Restricted Payment hereunder).
Return of Capital means (a) any cash amount (and net cash proceeds of any noncash amount) received by any Obligor in respect of the outstanding principal of any Portfolio Investment (whether at stated maturity, by acceleration or otherwise), (b) without duplication of amounts received under clause (a), any net cash proceeds (including net cash proceeds of any noncash consideration) received by any Obligor from the sale of any property or assets pledged as collateral in respect of any Portfolio Investment to the extent such net cash proceeds are less
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than or equal to the outstanding principal balance of such Portfolio Investment, (c) any net cash amount (and net cash proceeds of any noncash amount) received by any Obligor in respect of any Portfolio Investment that is an Equity Interest (x) upon the liquidation or dissolution of the issuer of such Portfolio Investment, (y) as a distribution of capital made on or in respect of such Portfolio Investment, or (z) pursuant to the recapitalization or reclassification of the capital of the issuer of such Portfolio Investment or pursuant to the reorganization of such issuer or (d) any similar return of capital (net of any fees, costs and expenses) received by any Obligor in cash (and net cash proceeds of any noncash amount) in respect of any Portfolio Investment.
Revolving Credit Exposure means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lenders Revolving Dollar Credit Exposure and Revolving Multicurrency Credit Exposure at such time.
Revolving Dollar Credit Exposure means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lenders Syndicated Loans, and its LC Exposure and Swingline Exposure, at such time made or incurred under the Dollar Commitments.
Revolving Multicurrency Credit Exposure means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lenders Syndicated Loans, and its LC Exposure and Swingline Exposure, at such time made or incurred under the Multicurrency Commitments.
Revolving Percentage means, as of any date of determination, the result, expressed as a percentage, of the Revolving Credit Exposure on such date divided by the aggregate outstanding Covered Debt Amount on such date.
RIC means a person qualifying for treatment as a regulated investment company under the Code.
S&P means Standard & Poors Ratings Services, a division of The McGraw Hill Companies, Inc., a New York corporation, or any successor thereto.
SBA means the United States Small Business Administration.
SBIC Equity Commitment means a commitment by the Borrower to make one or more capital contributions to an SBIC Subsidiary.
SBIC Subsidiary means any direct or indirect Subsidiary (including such Subsidiarys general partner or managing entity to the extent that the only material asset of such general partner or managing entity is its equity interest in the SBIC Subsidiary) of the Borrower licensed as a small business investment company under the Small Business Investment Act of 1958, as amended, and which is designated by the Borrower (as provided below) as an SBIC Subsidiary, so long as (a) no portion of the Indebtedness or any other obligations (contingent or otherwise) of such Subsidiary: (i) is Guaranteed by any Obligor (other than a Permitted SBIC Guarantee), (ii) is recourse to or obligates any Obligor in any way (other than in respect of any SBIC Equity Commitment or Permitted SBIC Guarantee), or (iii) subjects any property of any Obligor, directly or indirectly, contingently or otherwise, to the satisfaction thereof, and (b) no
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Obligor has any obligation to maintain or preserve such Subsidiarys financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Borrower shall be effected pursuant to a certificate of a Financial Officer delivered to the Administrative Agent, which certificate shall include a statement to the effect that, to the best of such officers knowledge, such designation complied with the foregoing conditions.
Secured Debt Amount means, on any date, the aggregate amount of all Secured Longer-Term Indebtedness and Secured Shorter-Term Indebtedness on such date (other than the obligations owed under the Loan Documents, including the Revolving Credit Exposure).
Secured Longer-Term Indebtedness means, as at any date, Indebtedness (other than Indebtedness hereunder) of the Borrower (which may be Guaranteed by Subsidiary Guarantors) that (a) has no scheduled amortization prior to, and a final maturity date not earlier than, six months after February 21, 2016 (it being understood that none of: (w) the conversion features under convertible notes; (x) the triggering and/or settlement thereof; or (y) any cash payment made in respect thereof , shall constitute amortization for purposes of this clause (a)), (b) is incurred pursuant to documentation that is substantially comparable to market terms for substantially similar debt of other similarly situated borrowers as reasonably determined in good faith by the Borrower (other than financial covenants, covenants regarding the borrowing base, if any, and portfolio valuations, and events of default which shall be no more restrictive upon the Borrower and its Subsidiaries than those set forth in this Agreement) and (c) is not secured by any assets of any Obligor other than pursuant to this Agreement or the Security Documents and the holders of which have either executed (i) a joinder agreement to the Guarantee and Security Agreement or (ii) such other document or agreement, in a form reasonably satisfactory to the Administrative Agent and the Collateral Agent, pursuant to which the holders of such Secured Longer-Term Indebtedness shall have become a party to the Guarantee and Security Agreement and assumed the obligations of a Financing Agent or Designated Indebtedness Holder (in each case, as defined in the Guarantee and Security Agreement).
Secured Shorter-Term Indebtedness means, collectively, (a) any Indebtedness of the Borrower or any Subsidiary (other than a Financing Subsidiary) that is secured by any assets of any Obligor and that does not constitute Secured Longer-Term Indebtedness and (b) any Indebtedness that is designated as Secured Shorter-Term Indebtedness pursuant to Section 6.11(a).
Security Documents means, collectively, the Guarantee and Security Agreement, all Uniform Commercial Code financing statements filed with respect to the security interests in personal property created pursuant to the Guarantee and Security Agreement and all other assignments, pledge agreements, security agreements, control agreements and other instruments executed and delivered on or after the date hereof by any of the Obligors pursuant to the Guarantee and Security Agreement or otherwise providing or relating to any collateral security for any of the Secured Obligations under and as defined in the Guarantee and Security Agreement.
Shareholders Equity means, at any date, the amount determined on a consolidated basis, without duplication, in accordance with GAAP, of shareholders equity for the Borrower and its Subsidiaries at such date.
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SPE Subsidiary means a direct or indirect Subsidiary of the Borrower to which any Obligor sells, conveys or otherwise transfers (whether directly or indirectly) Portfolio Investments, which engages in no material activities other than in connection with the purchase or financing of such assets and which is designated by the Borrower (as provided below) as an SPE Subsidiary:
(a) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is Guaranteed by any Obligor (other than Guarantees in respect of Standard Securitization Undertakings), (ii) is recourse to or obligates any Obligor in any way other than pursuant to Standard Securitization Undertakings or (iii) subjects any property of any Obligor, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings or any Guarantee thereof,
(b) with which no Obligor has any material contract, agreement, arrangement or understanding other than on terms no less favorable to such Obligor than those that might be obtained at the time from Persons that are not Affiliates of any Obligor, other than fees payable in the ordinary course of business in connection with servicing receivables, and
(c) to which no Obligor has any obligation to maintain or preserve such entitys financial condition or cause such entity to achieve certain levels of operating results.
Any such designation by the Borrower shall be effected pursuant to a certificate of a Financial Officer delivered to the Administrative Agent, which certificate shall include a statement to the effect that, to the best of such officers knowledge, such designation complied with the foregoing conditions. Each Subsidiary of an SPE Subsidiary shall be deemed to be an SPE Subsidiary and shall comply with the foregoing requirements of this definition.
Special Equity Interest means any Equity Interest that is subject to a Lien in favor of creditors of the issuer of such Equity Interest provided that (a) such Lien was created to secure Indebtedness owing by such issuer to such creditors, (b) such Indebtedness was (i) in existence at the time the Obligors acquired such Equity Interest, (ii) incurred or assumed by such issuer substantially contemporaneously with such acquisition or (iii) already subject to a Lien granted to such creditors and (c) unless such Equity Interest is not intended to be included in the Collateral, the documentation creating or governing such Lien does not prohibit the inclusion of such Equity Interest in the Collateral.
Standard Securitization Undertakings means, collectively, (a) customary arms-length servicing obligations (together with any related performance guarantees), (b) obligations (together with any related performance guarantees) to refund the purchase price or grant purchase price credits for dilutive events or misrepresentations (in each case unrelated to the collectibility of the assets sold or the creditworthiness of the associated account debtors) and (c) representations, warranties, covenants and indemnities (together with any related performance guarantees) of a type that are reasonably customary in accounts receivable securitizations.
Statutory Reserve Rate means, for the Interest Period for any Eurocurrency Borrowing, a fraction (expressed as a decimal), the numerator of which is the number one and
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the denominator of which is the number one minus the arithmetic mean, taken over each day in such Interest Period, of the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject for eurocurrency funding (currently referred to as Eurocurrency liabilities in Regulation D). Such reserve percentages shall include those imposed pursuant to Regulation D. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
Subsidiary means, with respect to any Person (the parent) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parents consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Anything herein to the contrary notwithstanding, the term Subsidiary shall not include any Person that constitutes an Investment held by the Borrower in the ordinary course of business and that is not, under GAAP, consolidated on the financial statements of the Borrower and its Subsidiaries. Unless otherwise specified, Subsidiary means a Subsidiary of the Borrower.
Subsidiary Guarantor means any Subsidiary that is a Guarantor under the Guarantee and Security Agreement. It is understood and agreed that no Financing Subsidiary or Foreign Subsidiary shall be a Subsidiary Guarantor.
SunTrust means SunTrust Bank.
Swingline Exposure means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be the sum of (i) its Applicable Dollar Percentage of the total Swingline Exposure incurred under the Dollar Commitments and (ii) its Applicable Multicurrency Percentage of the total Swingline Exposure at such time incurred under the Multicurrency Commitments.
Swingline Lender means SunTrust, in its capacity as lender of Swingline Loans hereunder, and its successors in such capacity as provided in Section 2.04(d).
Swingline Loan means a Loan made pursuant to Section 2.04.
Syndicated, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are made pursuant to Section 2.01.
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Taxes means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings (including backup withholding), assessments, fees, or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
Termination Date means the earliest to occur of (i) the Final Maturity Date, (ii) the date of the termination of the Commitments in full pursuant to Section 2.08(c), or (iii) the date on which the Commitments are terminated pursuant to Article VII.
Testing Quarter has the meaning assigned to such term in Section 5.12(b)(ii)(E)(x).
Transactions means the execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder.
Type, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans constituting such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.
Undisclosed Administration means, in relation to a Lender, the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official by a supervisory authority or regulator under or based on the law in the country where such Lender is subject to home jurisdiction supervision if applicable law requires that such appointment is not to be publicly disclosed.
Uniform Commercial Code means the Uniform Commercial Code as in effect from time to time in the State of New York.
Unsecured Longer-Term Indebtedness means any Indebtedness of the Borrower (which may be Guaranteed by Subsidiary Guarantors) that (a) has no amortization prior to, and a final maturity date not earlier than, six months after February 21, 2016 (it being understood that none of : (w) the conversion features under convertible notes; (x) the triggering and/or settlement thereof or (y) any cash payment made in respect thereof, shall constitute amortization for purposes of this clause (a)), (b) is incurred pursuant to documentation that is substantially comparable to market terms for substantially similar debt of other similarly situated borrowers as reasonably determined in good faith by the Borrower (other than financial covenants, covenants regarding the borrowing base, if any, and portfolio valuations, and events of default which shall be no more restrictive upon the Borrower and its Subsidiaries than those set forth in this Agreement) and (c) is not secured by any assets of any Obligor.
Unsecured Shorter-Term Indebtedness means, collectively, (a) any Indebtedness of the Borrower or any Subsidiary (other than a Financing Subsidiary) that is not secured by any assets of any Obligor and that does not constitute Unsecured Longer-Term Indebtedness and (b) any Indebtedness that is designated as Unsecured Shorter-Term Indebtedness pursuant to Section 6.11(a).
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Unquoted Investments has the meaning assigned to such term in Section 5.12(b)(ii)(E)(x).
U.S. Government Securities means securities that are direct obligations of, and obligations the timely payment of principal and interest on which is fully guaranteed by, the United States or any agency or instrumentality of the United States the obligations of which are backed by the full faith and credit of the United States and in the form of conventional bills, bonds, and notes.
U.S. Person means any Person that is a United States Person as defined in Section 7701(a)(30) of the Code.
Value has the meaning assigned to such term in Section 5.13.
Withdrawal Liability means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a Syndicated Dollar Loan or Syndicated Multicurrency Loan), by Type (e.g., an ABR Loan) or by Class and Type (e.g., a Syndicated Multicurrency LIBOR Loan). Borrowings also may be classified and referred to by Class (e.g., a Dollar Borrowing, Multicurrency Borrowing or Syndicated Borrowing), by Type (e.g., an ABR Borrowing) or by Class and Type (e.g., a Syndicated ABR Borrowing or Syndicated Multicurrency LIBOR Borrowing). Loans and Borrowings may also be identified by Currency.
SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include, includes and including shall be deemed to be followed by the phrase without limitation. The word will shall be construed to have the same meaning and effect as the word shall. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Persons successors and assigns, (c) the words herein, hereof and hereunder, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words asset and property shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance
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with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. The Borrower covenants and agrees with the Lenders that whether or not the Borrower may at any time adopt Financial Accounting Standard No. 159 (or successor standard solely as it relates to fair valuing liabilities) or accounts for liabilities acquired in an acquisition on a fair value basis pursuant to Financial Accounting Standard No. 141(R) (or successor standard solely as it relates to fair valuing liabilities), all determinations of compliance with the terms and conditions of this Agreement shall be made on the basis that the Borrower has not adopted Financial Accounting Standard No. 159 (or such successor standard solely as it relates to fair valuing liabilities) or, in the case of liabilities acquired in an acquisition, Financial Accounting Standard No. 141(R) (or such successor standard solely as it relates to fair valuing liabilities).
SECTION 1.05. Currencies; Currency Equivalents.
(a) Currencies Generally. At any time, any reference in the definition of the term Agreed Foreign Currency or in any other provision of this Agreement to the Currency of any particular nation means the lawful currency of such nation at such time whether or not the name of such Currency is the same as it was on the date hereof. Except as provided in Section 2.10(b) and the last sentence of Section 2.17(a), for purposes of determining (i) whether the amount of any Borrowing or Letter of Credit under the Multicurrency Commitments, together with all other Borrowings and Letters of Credit under the Multicurrency Commitments then outstanding or to be borrowed at the same time as such Borrowing, would exceed the aggregate amount of the Multicurrency Commitments, (ii) the aggregate unutilized amount of the Multicurrency Commitments, (iii) the Revolving Credit Exposure, (iv) the Multicurrency LC Exposure, (v) the Covered Debt Amount and (vi) the Borrowing Base or the Value or the fair market value of any Portfolio Investment, the outstanding principal amount of any Borrowing or Letter of Credit that is denominated in any Foreign Currency or the Value or the fair market value of any Portfolio Investment that is denominated in any Foreign Currency shall be deemed to be the Dollar Equivalent of the amount of the Foreign Currency of such Borrowing, Letter of Credit or Portfolio Investment, as the case may be, determined as of the date of such Borrowing or Letter of Credit (determined in accordance with the last sentence of the definition of the term Interest Period) or the date of valuation of such Portfolio Investment, as the case may be. Wherever in this Agreement in connection with a Borrowing or Loan an amount, such as a required minimum or multiple amount, is expressed in Dollars, but such Borrowing or Loan is denominated in a Foreign Currency, such amount shall be the relevant Foreign Currency Equivalent of such Dollar amount (rounded to the nearest 1,000 units of such Foreign Currency).
(b) Special Provisions Relating to Euro. Each obligation hereunder of any party hereto that is denominated in the National Currency of a state that is not a Participating Member State on the date hereof shall, effective from the date on which such state becomes a
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Participating Member State, be redenominated in Euro in accordance with the legislation of the European Union applicable to the European Monetary Union; provided that, if and to the extent that any such legislation provides that any such obligation of any such party payable within such Participating Member State by crediting an account of the creditor can be paid by the debtor either in Euros or such National Currency, such party shall be entitled to pay or repay such amount either in Euros or in such National Currency. If the basis of accrual of interest or fees expressed in this Agreement with respect to an Agreed Foreign Currency of any country that becomes a Participating Member State after the date on which such currency becomes an Agreed Foreign Currency shall be inconsistent with any convention or practice in the interbank market for the basis of accrual of interest or fees in respect of the Euro, such convention or practice shall replace such expressed basis effective as of and from the date on which such state becomes a Participating Member State; provided that, with respect to any Borrowing denominated in such currency that is outstanding immediately prior to such date, such replacement shall take effect at the end of the Interest Period therefor.
Without prejudice to the respective liabilities of the Borrower to the Lenders and the Lenders to the Borrower under or pursuant to this Agreement, each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time, in consultation with the Borrower, reasonably specify to be necessary or appropriate to reflect the introduction or changeover to the Euro in any country that becomes a Participating Member State after the date hereof; provided that the Administrative Agent shall provide the Borrower and the Lenders with prior notice of the proposed change with an explanation of such change in sufficient time to permit the Borrower and the Lenders an opportunity to respond to such proposed change.
ARTICLE II
THE CREDITS
SECTION 2.01. The Commitments. Subject to the terms and conditions set forth herein:
(a) each Dollar Lender agrees to make Syndicated Loans in Dollars to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lenders Revolving Dollar Credit Exposure exceeding such Lenders Dollar Commitment, (ii) the aggregate Revolving Dollar Credit Exposure of all of the Dollar Lenders exceeding the aggregate Dollar Commitments or (iii) the total Covered Debt Amount exceeding the Borrowing Base then in effect; and
(b) each Multicurrency Lender agrees to make Syndicated Loans in Dollars and in Agreed Foreign Currencies to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lenders Revolving Multicurrency Credit Exposure exceeding such Lenders Multicurrency Commitment, (ii) the aggregate Revolving Multicurrency Credit Exposure of all of the Multicurrency Lenders exceeding the aggregate Multicurrency Commitments or (iii) the total Covered Debt Amount exceeding the Borrowing Base then in effect.
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Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Syndicated Loans.
SECTION 2.02. Loans and Borrowings.
(a) Obligations of Lenders. Each Syndicated Loan shall be made as part of a Borrowing consisting of Loans of the same Class, Currency and Type made by the applicable Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lenders failure to make Loans as required.
(b) Type of Loans. Subject to Section 2.13, each Syndicated Borrowing of a Class shall be constituted entirely of ABR Loans or of Eurocurrency Loans of such Class denominated in a single Currency as the Borrower may request in accordance herewith. Each ABR Loan shall be denominated in Dollars. Each Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.
(c) Minimum Amounts. Each Eurocurrency Borrowing shall be in an aggregate amount of $1,000,000 or a larger multiple of $1,000,000, and each ABR Borrowing (whether Syndicated or Swingline) shall be in an aggregate amount of $1,000,000 or a larger multiple of $100,000; provided that a Syndicated ABR Borrowing of a Class may be in an aggregate amount that is equal to the entire unused balance of the total Commitments of such Class or that is required to finance the reimbursement of an LC Disbursement of such Class as contemplated by Section 2.05(f). Borrowings of more than one Class, Currency and Type may be outstanding at the same time.
(d) Limitations on Interest Periods. Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request (or to elect to convert to or continue as a Eurocurrency Borrowing) any Borrowing if the Interest Period requested therefor would end after the Final Maturity Date.
(e) Treatment of Classes. Notwithstanding anything to the contrary contained herein, with respect to each Syndicated Loan, Swingline Loan or Letter of Credit designated in Dollars, the Administrative Agent shall deem the Borrower to have requested that such Syndicated Loan, Swingline Loan or Letter of Credit be applied ratably to each of the Dollar Commitments and the Multicurrency Commitments, based upon the percentage of the aggregate Commitments represented by the Dollar Commitments and the Multicurrency Commitments, respectively.
SECTION 2.03. Requests for Syndicated Borrowings.
(a) Notice by the Borrower. To request a Syndicated Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (i) in the case of a Eurocurrency Borrowing denominated in Dollars, not later than 11:00 a.m., Atlanta, Georgia time, three Business Days before the date of the proposed Borrowing, (ii) in the case of a
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Eurocurrency Borrowing denominated in a Foreign Currency, not later than 11:00 a.m., Atlanta, Georgia time, four Business Days before the date of the proposed Borrowing or (iii) in the case of a Syndicated ABR Borrowing, not later than 11:00 a.m., Atlanta, Georgia time, one Business Day before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower.
(b) Content of Borrowing Requests. Each telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:
(i) whether such Borrowing is to be made under the Dollar Commitments or the Multicurrency Commitments;
(ii) the aggregate amount and Currency of the requested Borrowing;
(iii) the date of such Borrowing, which shall be a Business Day;
(iv) in the case of a Syndicated Borrowing denominated in Dollars, whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing;
(v) in the case of a Eurocurrency Borrowing, the Interest Period therefor, which shall be a period contemplated by the definition of the term Interest Period and permitted under Section 2.02(d); and
(vi) the location and number of the Borrowers account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06.
(c) Notice by the Administrative Agent to the Lenders. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each applicable Lender of the details thereof and of the amounts of such Lenders Loan to be made as part of the requested Borrowing.
(d) Failure to Elect. If no election as to the Class of a Syndicated Borrowing is specified, then the requested Syndicated Borrowing shall be deemed to be under the Multicurrency Commitments. If no election as to the Currency of a Syndicated Borrowing is specified, then the requested Syndicated Borrowing shall be denominated in Dollars. If no election as to the Type of a Syndicated Borrowing is specified, then the requested Borrowing shall be a Eurocurrency Borrowing having an Interest Period of one month and, if an Agreed Foreign Currency has been specified, the requested Syndicated Borrowing shall be a Eurocurrency Borrowing denominated in such Agreed Foreign Currency and having an Interest Period of one month. If a Eurocurrency Borrowing is requested but no Interest Period is specified, (i) if the Currency specified for such Borrowing is Dollars (or if no Currency has been so specified), the requested Borrowing shall be a Eurocurrency Borrowing denominated in Dollars having an Interest Period of one months duration, and (ii) if the Currency specified for such Borrowing is an Agreed Foreign Currency, the Borrower shall be deemed to have selected an Interest Period of one months duration.
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SECTION 2.04. Swingline Loans.
(a) Agreement to Make Swingline Loans. Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans under each Commitment to the Borrower from time to time during the Availability Period in Dollars, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans of both Classes exceeding $40,000,000, (ii) the total Revolving Dollar Credit Exposures exceeding the aggregate Dollar Commitments, (iii) the total Revolving Multicurrency Credit Exposures exceeding the aggregate Multicurrency Commitments or (iv) the total Covered Debt Amount exceeding the Borrowing Base then in effect; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans.
(b) Notice of Swingline Loans by the Borrower. To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy) not later than 2:00 p.m., Atlanta, Georgia time, on the day of such proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day), the amount of the requested Swingline Loan and whether such Swingline Loan is to be made under the Dollar Commitments or the Multicurrency Commitments. The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the general deposit account of the Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(f), by remittance to the Issuing Bank) by 3:00 p.m., Atlanta, Georgia time, on the requested date of such Swingline Loan.
(c) Participations by Lenders in Swingline Loans. The Swingline Lender may by written notice given to the Administrative Agent not later than 10:00 a.m., Atlanta, Georgia time on any Business Day, require the Lenders of the applicable Class to acquire participations on such Business Day in all or a portion of the Swingline Loans of such Class outstanding. Such notice to the Administrative Agent shall specify the aggregate amount of Swingline Loans in which the applicable Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each applicable Lender, specifying in such notice such Lenders Applicable Dollar Percentage or Applicable Multicurrency Percentage of such Swingline Loan or Loans. Each Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above in this paragraph, to pay to the Administrative Agent, for account of the Swingline Lender, such Lenders Applicable Dollar Percentage or Applicable Multicurrency Percentage, as the case may be, of such Swingline Loan or Loans; provided that no Lender shall be required to purchase a participation in a Swingline Loan pursuant to this Section 2.04(c) if (x) the conditions set forth in Section 4.02 would not be satisfied in respect of a Borrowing at the time such Swingline Loan was made and (y) the Required Lenders of the respective Class shall have so notified the Swingline Lender in writing and shall not have subsequently determined that the circumstances giving rise to such conditions not being satisfied no longer exist.
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Subject to the foregoing, each Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph (c) is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments of the respective Class, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.
(d) Resignation and Replacement of Swingline Lender. The Swingline Lender may resign and be replaced at any time by written agreement among the Borrower, the Administrative Agent, the resigning Swingline Lender and the successor Swingline Lender. The Administrative Agent shall notify the Lenders of any such resignation and replacement of the Swingline Lender. In addition to the foregoing, if a Lender becomes, and during the period it remains, a Defaulting Lender, and if any Default has arisen from a failure of the Borrower to comply with Section 2.19(a), then the Swingline Lender may, upon prior written notice to the Borrower and the Administrative Agent, resign as Swingline Lender, effective at the close of business Atlanta, Georgia time on a date specified in such notice (which date may not be less than five (5) Business Days after the date of such notice). On or after the effective date of any such resignation, the Borrower and the Administrative Agent may, by written agreement, appoint a successor Swingline Lender. The Administrative Agent shall notify the Lenders of any such appointment of a successor Swingline Lender. Upon the effectiveness of any resignation of the Swingline Lender, the Borrower shall repay in full all outstanding Swingline Loans together with all accrued interest thereon. From and after the effective date of the appointment of a successor Swingline Lender, (i) the successor Swingline Lender shall have all the rights and obligations of the replaced Swingline Lender under this Agreement with respect to Swingline Loans to be made thereafter and (ii) references herein to the term Swingline Lender shall be deemed to refer to such successor or to any previous Swingline Lender, or to such successor and all previous Swingline Lenders, as the context shall require. After the replacement of the Swingline Lender hereunder, the replaced Swingline Lender shall have no obligation to make additional Swingline Loans.
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SECTION 2.05. Letters of Credit.
(a) General. Subject to the terms and conditions set forth herein, in addition to the Loans provided for in Section 2.01, the Borrower may request the Issuing Bank to issue, at any time and from time to time during the Availability Period and under either the Dollar Commitments or Multicurrency Commitments, Letters of Credit denominated in Dollars or (in the case of Letters of Credit under the Multicurrency Commitments) in any Agreed Foreign Currency for its own account in such form as is acceptable to the Issuing Bank in its reasonable determination. Letters of Credit issued hereunder shall constitute utilization of the Commitments up to the aggregate amount available to be drawn thereunder.
(b) Notice of Issuance, Amendment, Renewal or Extension. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (d) of this Section), the amount and Currency of such Letter of Credit, whether such Letter of Credit is to be issued under the Dollar Commitments or the Multicurrency Commitments, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Banks standard form in connection with any request for a Letter of Credit. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.
(c) Limitations on Amounts. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the aggregate LC Exposure of the Issuing Bank (determined for these purposes without giving effect to the participations therein of the Lenders pursuant to paragraph (e) of this Section) shall not exceed $40,000,000, (ii) the total Revolving Dollar Credit Exposures shall not exceed the aggregate Dollar Commitments, (iii) the total Revolving Multicurrency Credit Exposures shall not exceed the aggregate Multicurrency Commitments and (iv) the total Covered Debt Amount shall not exceed the Borrowing Base then in effect.
(d) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the date twelve months after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, twelve months after the then-current expiration date of such Letter of Credit, so long as such renewal or extension occurs within three months of such then-current expiration date); provided that any Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods. No Letter of Credit may be renewed following the earlier to occur of the Commitment Termination Date and the Termination Date.
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(e) Participations. By the issuance of a Letter of Credit of a Class (or an amendment to a Letter of Credit increasing the amount thereof) by the Issuing Bank, and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender of such Class, and each Lender of such Class hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lenders Applicable Dollar Percentage or Applicable Multicurrency Percentage, as the case may be, of the aggregate amount available to be drawn under such Letter of Credit. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the applicable Commitments; provided that no Lender shall be required to purchase a participation in a Letter of Credit pursuant to this Section 2.05(e) if (x) the conditions set forth in Section 4.02 would not be satisfied in respect of a Borrowing at the time such Letter of Credit was issued and (y) the Required Lenders of the respective Class shall have so notified the Issuing Bank in writing and shall not have subsequently determined that the circumstances giving rise to such conditions not being satisfied no longer exist.
In consideration and in furtherance of the foregoing, each Lender of a Class hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for account of the Issuing Bank, such Lenders Applicable Dollar Percentage or Applicable Multicurrency Percentage, as the case may be, of each LC Disbursement made by the Issuing Bank in respect of Letters of Credit of such Class promptly upon the request of the Issuing Bank at any time from the time of such LC Disbursement until such LC Disbursement is reimbursed by the Borrower or at any time after any reimbursement payment is required to be refunded to the Borrower for any reason. Such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each such payment shall be made in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to the next following paragraph, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that the Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.
(f) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse the Issuing Bank in respect of such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 11:00 a.m., Atlanta, Georgia time, on (i) the Business Day that the Borrower receives notice of such LC Disbursement, if such notice is received prior to 10:00 a.m., Atlanta, Georgia time, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time; provided that, if such LC
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Disbursement is not less than $1,000,000 and is denominated in Dollars, the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.04 that such payment be financed with a Syndicated ABR Borrowing or a Swingline Loan of the respective Class in an equivalent amount and, to the extent so financed, the Borrowers obligation to make such payment shall be discharged and replaced by the resulting Syndicated ABR Borrowing or Swingline Loan.
If the Borrower fails to make such payment when due, the Administrative Agent shall notify each applicable Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lenders Applicable Dollar Percentage or Applicable Multicurrency Percentage, as the case may be, thereof.
(g) Obligations Absolute. The Borrowers obligation to reimburse LC Disbursements as provided in paragraph (f) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply strictly with the terms of such Letter of Credit, and (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrowers obligations hereunder.
Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit by the Issuing Bank or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Banks gross negligence or willful misconduct when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that:
(i) the Issuing Bank may accept documents that appear on their face to be in substantial compliance with the terms of a Letter of Credit without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit;
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(ii) the Issuing Bank shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit and
(iii) this sentence shall establish the standard of care to be exercised by the Issuing Bank when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof (and the parties hereto hereby waive, to the extent permitted by applicable law, any standard of care inconsistent with the foregoing).
(h) Disbursement Procedures. The Issuing Bank shall, within a reasonable time following its receipt thereof examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly after such examination notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the applicable Lenders with respect to any such LC Disbursement.
(i) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to Syndicated ABR Loans; provided that, if the Borrower fails to reimburse such LC Disbursement within two Business Days following the date when due pursuant to paragraph (f) of this Section, then the provisions of Section 2.12(c) shall apply. Interest accrued pursuant to this paragraph shall be for account of the Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (f) of this Section to reimburse the Issuing Bank shall be for account of such Lender to the extent of such payment.
(j) Resignation and/or Replacement of Issuing Bank. The Issuing Bank may resign and be replaced at any time by written agreement among the Borrower, the Administrative Agent, the resigning Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such resignation and replacement of the Issuing Bank. Upon the effectiveness of any resignation of the Issuing Bank, the Borrower shall pay all unpaid fees accrued for account of the resigning Issuing Bank pursuant to Section 2.11(b). From and after the effective date of the appointment of a successor Issuing Bank, (i) the successor Issuing Bank shall have all the rights and obligations of the replaced Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term Issuing Bank shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the effective resignation of the Issuing Bank hereunder, the resigning Issuing Bank, as the case may be, shall remain a party hereto and shall continue to have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such resignation, but shall not be required to issue additional Letters of Credit.
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(k) Cash Collateralization. If the Borrower shall be required to provide Cash Collateral for LC Exposure pursuant to Section 2.09(a), Section 2.10(b) or (c) or the last paragraph of Article VII, the Borrower shall immediately deposit into a segregated collateral account or accounts (herein, collectively, the Letter of Credit Collateral Account) in the name and under the dominion and control of the Administrative Agent Cash denominated in the Currency of the Letter of Credit under which such LC Exposure arises in an amount equal to the amount required under Section 2.09(a), Section 2.10(b) or (c) or the last paragraph of Article VII, as applicable. Such deposit shall be held by the Administrative Agent as collateral in the first instance for the LC Exposure under this Agreement and thereafter for the payment of the Secured Obligations under and as defined in the Guarantee and Security Agreement, and for these purposes the Borrower hereby grants a security interest to the Administrative Agent for the benefit of the Lenders in the Letter of Credit Collateral Account and in any financial assets (as defined in the Uniform Commercial Code) or other property held therein.
SECTION 2.06. Funding of Borrowings.
(a) Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 11:00 a.m., Atlanta, Georgia time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.04. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower designated by the Borrower in the applicable Borrowing Request; provided that Syndicated ABR Borrowings made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(f) shall be remitted by the Administrative Agent to the Issuing Bank.
(b) Presumption by the Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lenders share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lenders Loan included in such Borrowing.
SECTION 2.07. Interest Elections.
(a) Elections by the Borrower for Syndicated Borrowings. Subject to Section 2.03(d), the Loans constituting each Syndicated Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Borrowing, shall have the Interest Period specified in such Borrowing Request. Thereafter, the Borrower
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may elect to convert such Borrowing to a Borrowing of a different Type or to continue such Borrowing as a Borrowing of the same Type and, in the case of a Eurocurrency Borrowing, may elect the Interest Period therefor, all as provided in this Section; provided, however, that (i) a Syndicated Borrowing of a Class may only be continued or converted into a Syndicated Borrowing of the same Class, (ii) a Syndicated Borrowing denominated in one Currency may not be continued as, or converted to, a Syndicated Borrowing in a different Currency, (iii) no Eurocurrency Borrowing denominated in a Foreign Currency may be continued if, after giving effect thereto, the aggregate Revolving Multicurrency Credit Exposures would exceed the aggregate Multicurrency Commitments, and (iv) a Eurocurrency Borrowing denominated in a Foreign Currency may not be converted to a Borrowing of a different Type. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders of the respective Class holding the Loans constituting such Borrowing, and the Loans constituting each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued.
(b) Notice of Elections. To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Syndicated Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly (but no later than the close of business on the date of such request) by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower.
(c) Content of Interest Election Requests. Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:
(i) the Borrowing (including the Class) to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) of this paragraph shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
(iii) whether, in the case of a Borrowing denominated in Dollars, the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; and
(iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period therefor after giving effect to such election, which shall be a period contemplated by the definition of the term Interest Period and permitted under Section 2.02(d).
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(d) Notice by the Administrative Agent to the Lenders. Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each applicable Lender of the details thereof and of such Lenders portion of each resulting Borrowing.
(e) Failure to Elect; Events of Default. If the Borrower fails to deliver a timely and complete Interest Election Request with respect to a Eurocurrency Borrowing prior to the end of the Interest Period therefor, then, unless such Borrowing is repaid as provided herein, (i) if such Borrowing is denominated in Dollars, at the end of such Interest Period such Borrowing shall be converted to a Syndicated Eurocurrency Borrowing of the same Class having an Interest Period of one month, and (ii) if such Borrowing is denominated in a Foreign Currency, the Borrower shall be deemed to have selected an Interest Period of one months duration. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, (i) any Eurocurrency Borrowing denominated in Dollars shall, at the end of the applicable Interest Period for such Eurocurrency Borrowing, be automatically converted to an ABR Borrowing and (ii) any Eurocurrency Borrowing denominated in a Foreign Currency shall not have an Interest Period of more than one months duration.
SECTION 2.08. Termination, Reduction or Increase of the Commitments.
(a) Scheduled Termination. Unless previously terminated, the Commitments of each Class shall terminate on the Commitment Termination Date.
(b) Voluntary Termination or Reduction. The Borrower may at any time terminate, or from time to time reduce, the Commitments of either Class; provided that (i) each reduction of the Commitments of a Class shall be in an amount that is $25,000,000 or a larger multiple of $5,000,000 in excess thereof and (ii) the Borrower shall not terminate or reduce the Commitments of either Class if, after giving effect to any concurrent prepayment of the Syndicated Loans of such Class in accordance with Section 2.10, the total Revolving Credit Exposures of such Class would exceed the total Commitments of such Class. Any such reduction of the Commitments below the principal amount of the Swingline Loans permitted under Section 2.04(a)(i) and the Letters of Credit permitted under Section 2.05(c)(i) shall result in a dollar-for-dollar reduction of such amounts as applicable.
(c) Notice of Voluntary Termination or Reduction. The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the applicable Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments of a Class delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.
(d) Effect of Termination or Reduction. Any termination or reduction of the Commitments of a Class shall be permanent. Each reduction of the Commitments of a Class shall be made ratably among the Lenders of such Class in accordance with their respective Commitments.
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(e) Increase of the Commitments.
(i) Requests for Increase by Borrower. The Borrower may, at any time, request that the Commitments hereunder of a Class be increased (each such proposed increase being a Commitment Increase), upon notice to the Administrative Agent (who shall promptly notify the Lenders), which notice shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Lenders). Any Lender not responding within such time period shall be deemed to have declined to increase its Commitment. The Borrower shall provide notice to the Administrative Agent specifying each existing Lender (each an Increasing Lender) and/or each additional lender (each an Assuming Lender) that shall have agreed to an additional Commitment and the date on which such increase is to be effective (the Commitment Increase Date), which shall be a Business Day at least three Business Days after delivery of such notice and 30 days prior to the Commitment Termination Date; provided that:
(A) the minimum amount of the Commitment of any Assuming Lender, and the minimum amount of the increase of the Commitment of any Increasing Lender, as part of such commitment Increase shall be $10,000,000 or a larger multiple of $5,000,000 in excess thereof;
(B) immediately after giving effect to such Commitment Increase, the total Commitments of all of the Lenders hereunder shall not exceed $600,000,000;
(C) each Assuming Lender shall be consented to by the Administrative Agent and the Issuing Bank;
(D) no Default shall have occurred and be continuing on such Commitment Increase Date or shall result from the proposed Commitment Increase; and
(E) the representations and warranties contained in this Agreement shall be true and correct on and as of the Commitment Increase Date as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).
(ii) Effectiveness of Commitment Increase by Borrower. An Assuming Lender, if any, shall become a Lender hereunder as of such Commitment Increase Date and the Commitment of the respective Class of any Increasing Lender and such Assuming Lender shall be increased as of such Commitment Increase Date; provided that:
(x) the Administrative Agent shall have received on or prior to 11:00 a.m., Atlanta, Georgia time, on such Commitment Increase Date (or on or
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prior to a time on an earlier date specified by the Administrative Agent) a certificate of a duly authorized officer of the Borrower stating that each of the applicable conditions to such commitment Increase set forth in the foregoing paragraph (i) has been satisfied; and
(y) each Assuming Lender or Increasing Lender shall have delivered to the Administrative Agent, on or prior to 11:00 a.m., Atlanta, Georgia time on such commitment Increase Date (or on or prior to a time on an earlier date specified by the Administrative Agent), an agreement, in form and substance satisfactory to the Borrower and the Administrative Agent, pursuant to which such Lender shall, effective as of such Commitment Increase Date, undertake a Commitment or an increase of Commitment in each case of the respective Class, duly executed by such Assuming Lender and the Borrower and acknowledged by the Administrative Agent.
Promptly following satisfaction of such conditions, the Administrative Agent shall notify the Lenders of such Class (including any Assuming Lenders) thereof and of the occurrence of the Commitment Increase Date by facsimile transmission or electronic messaging system.
(iii) Recordation into Register. Upon its receipt of an agreement referred to in clause (ii)(y) above executed by an Assuming Lender or any Increasing Lender, together with the certificate referred to in clause (ii)(x) above, the Administrative Agent shall, if such agreement has been completed, (x) accept such agreement, (y) record the information contained therein in the Register and (z) give prompt notice thereof to the Borrower.
(iv) Adjustments of Borrowings upon Effectiveness of Increase. On the Commitment Increase Date, the Borrower shall (A) prepay the outstanding Loans (if any) of the affected Class in full, (B) simultaneously borrow new Loans of such Class hereunder in an amount equal to such prepayment; provided that with respect to subclauses (A) and (B), (x) the prepayment to, and borrowing from, any existing Lender shall be effected by book entry to the extent that any portion of the amount prepaid to such Lender will be subsequently borrowed from such Lender and (y) the existing Lenders, the Increasing Lenders and the Assuming Lenders shall make and receive payments among themselves, in a manner acceptable to the Administrative Agent, so that, after giving effect thereto, the Loans of such Class are held ratably by the Lenders of such Class in accordance with the respective Commitments of such Class of such Lenders (after giving effect to such Commitment Increase) and (C) pay to the Lenders of such Class the amounts, if any, payable under Section 2.15 as a result of any such prepayment. Concurrently therewith, the Lenders of such Class shall be deemed to have adjusted their participation interests in any outstanding Letters of Credit of such Class so that such interests are held ratably in accordance with their commitments of such Class as so increased.
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SECTION 2.09. Repayment of Loans; Evidence of Debt.
(a) Repayment. The Borrower hereby unconditionally promises to pay the Loans of each Class as follows:
(i) to the Administrative Agent for account of the Lenders of such Class the outstanding principal amount of the Syndicated Loans of such Class on the Final Maturity Date; and
(ii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan of such Class denominated in Dollars, on the earlier of the Commitment Termination Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least ten Business Days after such Swingline Loan is made; provided that on each date that a Syndicated Borrowing of such Class is made, the Borrower shall repay all Swingline Loans of such Class then outstanding.
In addition, on the Commitment Termination Date, the Borrower shall deposit into the Letter of Credit Collateral Account Cash (denominated in the Currency of the Letter of Credit under which such LC Exposure arises) in an amount equal to 100% of the undrawn face amount of all Letters of Credit outstanding on the close of business on the Commitment Termination Date, such deposit to be held by the Administrative Agent as collateral security for the LC Exposure under this Agreement in respect of the undrawn portion of such Letters of Credit.
(b) Manner of Payment. Prior to any repayment or prepayment of any Borrowings of any Class hereunder, the Borrower shall select the Borrowing or Borrowings of such Class to be paid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than the time set forth in Section 2.10(f) prior to the scheduled date of such repayment; provided that each repayment of Borrowings of a Class shall be applied to repay any outstanding ABR Borrowings of such Class before any other Borrowings of such Class. If the Borrower fails to make a timely selection of the Borrowing or Borrowings to be repaid or prepaid, such payment shall be applied, first, to pay any outstanding ABR Borrowings of the applicable Class and, second, to other Borrowings of such Class in the order of the remaining duration of their respective Interest Periods (the Borrowing with the shortest remaining Interest Period to be repaid first). Each payment of a Syndicated Borrowing shall be applied ratably to the Loans included in such Borrowing.
(c) Maintenance of Records by Lenders. Each Lender shall maintain in accordance with its usual practice records evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts and Currency of principal and interest payable and paid to such Lender from time to time hereunder.
(d) Maintenance of Records by the Administrative Agent. The Administrative Agent shall maintain records in which it shall record (i) the amount and Currency of each Loan made hereunder, the Class and Type thereof and each Interest Period therefor, (ii) the amount and Currency of any principal or interest due and payable or to become due and payable from the Borrower to each Lender of such Class hereunder and (iii) the amount and Currency of any sum received by the Administrative Agent hereunder for account of the Lenders and each Lenders share thereof.
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(e) Effect of Entries. The entries made in the records maintained pursuant to paragraph (c) or (d) of this Section shall be prima facie evidence, absent obvious error, of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such records or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.
(f) Promissory Notes. Any Lender may request that Loans of any Class made by it be evidenced by a promissory note; in such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).
SECTION 2.10. Prepayment of Loans.
(a) Optional Prepayments. The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, without premium or penalty except for payments under Section 2.15, subject to the requirements of this Section.
(b) Mandatory Prepayments due to Changes in Exchange Rates.
(i) Determination of Amount Outstanding. On each Quarterly Date and, in addition, promptly upon the receipt by the Administrative Agent of a Currency Valuation Notice (as defined below), the Administrative Agent shall determine the aggregate Revolving Multicurrency Credit Exposure. For the purpose of this determination, the outstanding principal amount of any Loan that is denominated in any Foreign Currency shall be deemed to be the Dollar Equivalent of the amount in the Foreign Currency of such Loan, determined as of such Quarterly Date or, in the case of a Currency Valuation Notice received by the Administrative Agent prior to 11:00 a.m., Atlanta, Georgia time, on a Business Day, on such Business Day or, in the case of a Currency Valuation Notice otherwise received, on the first Business Day after such Currency Valuation Notice is received. Upon making such determination, the Administrative Agent shall promptly notify the Multicurrency Lenders and the Borrower thereof.
(ii) Prepayment. If on the date of such determination the aggregate Revolving Multicurrency Credit Exposure minus the Multicurrency LC Exposure fully Cash Collateralized on such date exceeds 105% of the aggregate amount of the Multicurrency Commitments as then in effect, the Borrower shall, if requested by the Required Multicurrency Lenders (through the Administrative Agent), prepay the Syndicated Multicurrency Loans and Swingline Multicurrency Loans (and/or provide Cash Collateral for Multicurrency LC Exposure as specified in Section 2.05(k)) within 15 Business Days
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following the Borrowers receipt of such request in such amounts as shall be necessary so that after giving effect thereto the aggregate Revolving Multicurrency Credit Exposure does not exceed the Multicurrency Commitments.
For purposes hereof Currency Valuation Notice means a notice given by the Required Multicurrency Lenders to the Administrative Agent stating that such notice is a Currency Valuation Notice and requesting that the Administrative Agent determine the aggregate Revolving Multicurrency Credit Exposure. The Administrative Agent shall not be required to make more than one valuation determination pursuant to Currency Valuation Notices within any rolling three month period.
Any prepayment pursuant to this paragraph shall be applied, first to Swingline Multicurrency Loans outstanding, second, to Syndicated Multicurrency Loans outstanding and third, as cover for Multicurrency LC Exposure.
(c) Mandatory Prepayments due to Borrowing Base Deficiency. In the event that at any time any Borrowing Base Deficiency shall exist, the Borrower shall, within two Business Days, prepay the Loans (or provide Cash Collateral for Letters of Credit as contemplated by Section 2.05(k)) or reduce Other Covered Indebtedness in such amounts as shall be necessary so that such Borrowing Base Deficiency is immediately cured; provided that (i) the aggregate amount of such prepayment of Loans (and Cash Collateral for Letters of Credit) shall be at least equal to the Revolving Percentage times the aggregate prepayment of the Covered Debt Amount, and (ii) if, within five Business Days after delivery of a Borrowing Base Certificate demonstrating such Borrowing Base Deficiency (and/or at such other times as the Borrower has knowledge of such Borrowing Base Deficiency), the Borrower shall present the Administrative Agent a reasonably feasible plan acceptable to the Administrative Agent in its sole discretion to enable such Borrowing Base Deficiency to be cured within 30 Business Days (which 30-Business Day period shall include the five Business Days permitted for delivery of such plan), then such prepayment or reduction shall not be required to be effected immediately but may be effected in accordance with such plan (with such modifications as the Borrower may reasonably determine), so long as such Borrowing Base Deficiency is cured within such 30-Business Day period.
(d) Mandatory Prepayments Due to Change in Investment Policies. In the event that at any time the Borrower or any of its Subsidiaries (other than Immaterial Subsidiaries) shall change or modify in any material respect the Investment Policies without the consent of the Required Lenders (other than a Permitted Policy Amendment), the Borrower shall prepay the Loans and Cash Collateralize the LC Exposure then outstanding in full, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder.
(e) Mandatory Prepayments During Amortization Period. During the period commencing on the date immediately following the Commitment Termination Date and ending on the Final Maturity Date:
(i) Asset Disposition. If the Borrower or any of its Subsidiaries (other than a Financing Subsidiary) Disposes of any property which results in the receipt by such Person of Net Cash Proceeds in excess of $2,000,000 in the aggregate since the
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Commitment Termination Date, the Borrower shall prepay an aggregate principal amount of Loans equal to 100% of such Net Cash Proceeds no later than the fifth Business Day following the receipt of such Net Cash Proceeds (such prepayments to be applied as set forth in Section 2.09(a)); provided that if the Loans to be prepaid are Eurocurrency Loans, the Borrower may defer such prepayment until the last day of the Interest Period applicable to such Loans, so long as the Borrower deposits an amount equal to such Net Cash Proceeds, no later than the fifth Business Day following the receipt of such Net Cash Proceeds, into a segregated collateral account in the name and under the dominion and control of the Administrative Agent, pending application of such amount to the prepayment of the Loans on the last day of such Interest Period; provided, further, that the Administrative Agent may direct the application of such deposits as set forth in Section 2.09(b) at any time and if the Administrative Agent does so, no amounts will be payable by the Borrower pursuant to Section 2.15.
(ii) Equity Issuance. Upon the sale or issuance by the Borrower or any of its Subsidiaries (other than a Financing Subsidiary) of any of its Equity Interests (other than any sales or issuances of Equity Interests to the Borrower or any Subsidiary Guarantor), the Borrower shall prepay an aggregate principal amount of Loans equal to 75% of all Net Cash Proceeds received therefrom no later than the fifth Business Day following the receipt of such Net Cash Proceeds (such prepayments to be applied as set forth in Section 2.09(b)).
(iii) Indebtedness. Upon the incurrence or issuance by the Borrower or any of its Subsidiaries (other than a Financing Subsidiary) of any Indebtedness, the Borrower shall prepay an aggregate principal amount of Loans equal to 100% of all Net Cash Proceeds received therefrom no later than the fifth Business Day following the receipt of such Net Cash Proceeds (such prepayments to be applied as set forth in Section 2.09(b)).
(iv) Extraordinary Receipt. Upon any Extraordinary Receipt (which, when taken with all other Extraordinary Receipts received after the Commitment Termination Date, exceeds $5,000,000 in the aggregate) received by or paid to or for the account of the Borrower or any of its Subsidiaries (other than a Financing Subsidiary), and not otherwise included in clauses (i), (ii) or (iii) of this Section 2.10(e), the Borrower shall prepay an aggregate principal amount of Loans equal to 100% of all Net Cash Proceeds received therefrom no later than the fifth Business Day following the receipt of such Net Cash Proceeds (such prepayments to be applied as set forth in Section 2.09(b)).
(v) Return of Capital. If any Obligor shall receive any Return of Capital, the Borrower shall prepay an aggregate principal amount of Loans equal to 90% of such Return of Capital (excluding amounts payable by the Borrower pursuant to Section 2.15) no later than the fifth Business Day following the receipt of such Return of Capital (such prepayments to be applied as set forth in Section 2.09(b)).
Notwithstanding the foregoing, Net Cash Proceeds required to be applied to the prepayment of the Loans pursuant to this Section 2.10(e) shall (A) be applied in accordance with the Guarantee and Security Agreement or intercreditor arrangement acceptable to the Administrative Agent in its sole discretion, as applicable, and (B) exclude the amount necessary
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for the Borrower to make all required distributions (which shall be no less than the amount estimated in good faith by Borrower under Section 6.05(b) herein) to maintain the status of a RIC under the Code and a business development company under the Investment Company Act for so long as the Borrower retains such status.
(f) Notices, Etc. The Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurocurrency Borrowing denominated in Dollars (other than in the case of a prepayment pursuant to Section 2.10(e)), not later than 11:00 a.m., Atlanta, Georgia time, three Business Days before the date of prepayment, (ii) in the case of prepayment of a Eurocurrency Borrowing denominated in a Foreign Currency (other than in the case of a prepayment pursuant to Section 2.10(e)), not later than 11:00 a.m., London time, four Business Days before the date of prepayment, (iii) in the case of prepayment of a Syndicated ABR Borrowing (other than in the case of a prepayment pursuant to Section 2.10(e)), not later than 11:00 a.m., Atlanta, Georgia time, one Business Day before the date of prepayment, (iv) in the case of prepayment of a Swingline Loan, not later than 11:00 a.m., Atlanta, Georgia time, on the date of prepayment, or (v) in the case of any prepayment pursuant to Section 2.10(e), not later than 11:00 a.m., Atlanta, Georgia time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment; provided that, if (i) a notice of prepayment is given in connection with a conditional notice of termination of the Commitments of a Class as contemplated by Section 2.08, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.08 and (ii) any notice given in connection with Section 2.10(e) may be conditioned on the consummation of the applicable transaction contemplated by such Section and the receipt by the Borrower or any such Subsidiary (other than a Financing Subsidiary) of Net Cash Proceeds. Promptly following receipt of any such notice relating to a Syndicated Borrowing, the Administrative Agent shall advise the affected Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of a Borrowing of the same Type as provided in Section 2.02 or in the case of a Swingline Loan, as provided in Section 2.04, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Syndicated Borrowing of a Class shall be applied ratably to the Loans of such Class included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12 and shall be made in the manner specified in Section 2.09(b).
SECTION 2.11. Fees.
(a) Commitment Fee. The Borrower agrees to pay to the Administrative Agent for account of each Lender a commitment fee, which shall accrue at a rate per annum equal to 0.50% on the average daily unused amount of the Dollar Commitment and Multicurrency Commitment, as applicable, of such Lender during the period from and including the date hereof to but excluding the earlier of the date such commitment terminates and the Commitment Termination Date. Accrued commitment fees shall be payable within one Business Day after each Quarterly Date and on the earlier of the date the Commitments of the respective Class terminate and the Commitment Termination Date, commencing on the first such date to
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occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing commitment fees, the Commitment of any Class of a Lender shall be deemed to be used to the extent of the outstanding Syndicated Loans and LC Exposure of such Class of such Lender (and the Swingline Exposure of such Class of such Lender shall be disregarded for such purpose).
(b) Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative Agent for account of each Lender a participation fee with respect to its participations in Letters of Credit of each Class, which shall accrue at a rate per annum equal to the Applicable Margin applicable to interest on Eurocurrency Loans on the average daily amount of such Lenders LC Exposure of such Class (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lenders Commitment of such Class terminates and the date on which such Lender ceases to have any LC Exposure of such Class, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Banks standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including each Quarterly Date shall be payable on the third Business Day following such Quarterly Date, commencing on the first such date to occur after the Effective Date; provided that all such fees with respect to the Letters of Credit shall be payable on the Termination Date and the Borrower shall pay any such fees that have accrued and that are unpaid on the Termination Date and, in the event any Letters of Credit shall be outstanding that have expiration dates after the Termination Date, the Borrower shall prepay on the Termination Date the full amount of the participation and fronting fees that will accrue on such Letters of Credit subsequent to the Termination Date through but not including the date such outstanding Letters of Credit are scheduled to expire (and, in that connection, the Lenders agree not later than the date two Business Days after the date upon which the last such Letter of Credit shall expire or be terminated to rebate to the Borrower the excess, if any, of the aggregate participation and fronting fees that have been prepaid by the Borrower over the sum of the amount of such fees that ultimately accrue through the date of such expiration or termination and the aggregate amount of all other unpaid obligations hereunder at such time). Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
(c) Administrative Agent Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent.
(d) Payment of Fees. All fees payable hereunder shall be paid on the dates due, in Dollars (or, at the election of the Borrower with respect to any fees payable to the Issuing Bank on account of Letters of Credit issued in any Foreign Currency, in such Foreign Currency)
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and immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of facility fees and participation fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances absent obvious error.
SECTION 2.12. Interest.
(a) ABR Loans. The Loans constituting each ABR Borrowing (including each Swingline Loan) shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin.
(b) Eurocurrency Loans. The Loans constituting each Eurocurrency Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the related Interest Period for such Borrowing plus the Applicable Margin.
(c) Default Interest. Notwithstanding the foregoing, if any Event of Default has occurred and is continuing, the interest rates applicable to Loans and any fee or other amount payable by the Borrower hereunder shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided above, (ii) in the case of any Letter of Credit, 2% plus the fee otherwise applicable to such Letter of Credit as provided in Section 2.11(b)(i), or (iii) in the case of any fee or other amount, 2% plus the rate applicable to ABR Revolving Loans as provided in paragraph (a) of this Section.
(d) Payment of Interest. Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan in the Currency in which such Loan is denominated and, in the case of Syndicated Loans, upon the Termination Date; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of a Syndicated ABR Loan prior to the Final Maturity Date), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Borrowing denominated in Dollars prior to the end of the Interest Period therefor, accrued interest on such Borrowing shall be payable on the effective date of such conversion.
(e) Computation. All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed (i) by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate and (ii) on Multicurrency Loans denominated in Canadian Dollars or Pounds Sterling shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent and such determination shall be conclusive absent manifest error.
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SECTION 2.13. Alternate Rate of Interest. If prior to the commencement of the Interest Period for any Eurocurrency Borrowing of a Class (the Currency of such Borrowing herein called the Affected Currency):
(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for the Affected Currency for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders of such Class that the Adjusted LIBO Rate for the Affected Currency for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their respective Loans included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the affected Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and such Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Syndicated Borrowing to, or the continuation of any Syndicated Borrowing as, a Eurocurrency Borrowing denominated in the Affected Currency shall be ineffective and, if the Affected Currency is Dollars, such Syndicated Borrowing (unless prepaid) shall be continued as, or converted to, a Syndicated ABR Borrowing, (ii) if the Affected Currency is Dollars and any Borrowing Request requests a Eurocurrency Borrowing denominated in Dollars, such Borrowing shall be made as a Syndicated ABR Borrowing and (iii) if the Affected Currency is a Foreign Currency, any Borrowing Request that requests a Eurocurrency Borrowing denominated in the Affected Currency shall be ineffective.
SECTION 2.14. Increased Costs.
(a) Increased Costs Generally. If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Eurocurrency Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such Lenders of making, converting to, continuing or maintaining any Eurocurrency Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or the Issuing Bank, as the case may be, in Dollars, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.
(b) Capital or Liquidity Requirements. If any Lender or the Issuing Bank determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lenders or the Issuing Banks capital or on the capital of such Lenders or the Issuing Banks holding company, if any, as a consequence of this
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Agreement or the Loans made by, or participations in Swingline Loans and Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lenders or the Issuing Banks holding company could have achieved but for such Change in Law (taking into consideration such Lenders or the Issuing Banks policies and the policies of such Lenders or the Issuing Banks holding company with respect to capital adequacy), by an amount deemed to be material by such Lender or Issuing Bank, then from time to time the Borrower will pay to such Lender or the Issuing Bank, as the case may be, in Dollars, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lenders or the Issuing Banks holding company for any such reduction suffered.
(c) Certificates from Lenders. A certificate of a Lender or the Issuing Bank setting forth the amount or amounts, in Dollars, necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be promptly delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.
(d) Delay in Requests. Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lenders or the Issuing Banks right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than six months prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lenders or the Issuing Banks intention to claim compensation therefor; provided, further, that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof.
SECTION 2.15. Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency Loan other than on the last day of an Interest Period therefor (including as a result of the occurrence of any Commitment Increase Date or an Event of Default), (b) the conversion of any Eurocurrency Loan other than on the last day of an Interest Period therefor, (c) the failure to borrow, convert, continue or prepay any Syndicated Loan on the date specified in any notice delivered pursuant hereto (including, in connection with any Commitment Increase Date, and regardless of whether such notice is permitted to be revocable under Section 2.10(f) and is revoked in accordance herewith), or (d) the assignment as a result of a request by the Borrower pursuant to Section 2.18(b) of any Eurocurrency Loan other than on the last day of an Interest Period therefor, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, the loss to any Lender attributable to any such event shall be deemed to include an amount determined by such Lender to be equal to the excess, if any, of
(i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan denominated in the Currency of such Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow,
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convert or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted LIBO Rate for such Currency for such Interest Period, over
(ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for deposits denominated in such Currency from other banks in the Eurocurrency market at the commencement of such period.
Payment under this Section shall be made upon request of a Lender delivered not later than five Business Days following the payment, conversion, or failure to borrow, convert, continue or prepay that gives rise to a claim under this Section accompanied by a certificate of such Lender setting forth the amount or amounts that such Lender is entitled to receive pursuant to this Section, which certificate shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.
SECTION 2.16. Taxes.
(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Taxes, except as required by applicable law; provided that if the Borrower shall be required to deduct any Taxes from such payments, then (i) if such Taxes are Indemnified Taxes, the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.
(b) Payment of Other Taxes by the Borrower. In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank for and, within 10 Business Days after written demand therefor, pay the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority, except to the extent that any such Indemnified Taxes or Other Taxes arise as the result of the gross negligence or willful misconduct of the Administrative Agent, such Lender or the Issuing Bank. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error.
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(d) Indemnification by the Lenders. Each Lender shall severally indemnify the Administrative Agent, within 10 Business Days after written demand therefor, for (i) any Indemnified Taxes or Other Taxes attributable to such Lender (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (ii) any Taxes attributable to such Lenders failure to comply with the provisions of Section 9.04(f) relating to the maintenance of a Participant Register, and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (d).
(e) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(f) Tax Documentation. (i) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.16(f)(ii) below) shall not be required if in the Lenders reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
(ii) Without limiting the generality of the foregoing:
(A) any Lender that is a United States person (as defined under Section 7701(a)(30) of the Code) shall deliver to the Borrower and the Administrative Agent (and such additional copies as shall be reasonably requested by the recipient) on or prior to the date on which such Lender become a Lender under this Agreement (and from time to time thereafter upon the reasonable
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request of the Borrower or the Administrative Agent), duly completed and executed copies of Internal Revenue Service Form W-9 or any successor form certifying that such Lender is exempt from U.S. federal backup withholding tax; and
(B) each Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:
(w) duly completed and executed copies of Internal Revenue Service Form W-8BEN or any successor form claiming eligibility for benefits of an income tax treaty to which the United States is a party,
(x) duly completed copies of Internal Revenue Service Form W-8ECI or any successor form certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States,
(y) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (1) a certificate to the effect that such Foreign Lender is not (1) a bank within the meaning of Section 881(c)(3)(A) of the Code, (2) a 10 percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or (3) a controlled foreign corporation described in Section 881(c)(3)(C) of the Code and (2) duly completed and executed copies of Internal Revenue Service Form W-8BEN (or any successor form) certifying that the Foreign Lender is not a United States Person, or
(z) any other form including Internal Revenue Service Form W-8IMY as applicable prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.
(iii) In addition, each Lender shall deliver such forms promptly upon the obsolescence, expiration or invalidity of any form previously delivered by such Lender; provided it is legally able to do so at the time. Each Lender shall promptly notify the Borrower and the Administrative Agent at any time the chief tax officer of such Lender becomes aware that it no longer satisfies the legal requirements to provide any previously delivered form or certificate to the Borrower (or any other form of certification adopted by the U.S. or other taxing authorities for such purpose).
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(g) Documentation Required by FATCA. If a payment made to a Lender under this Agreement would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent, at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent, such document prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their respective obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 2.16(g), FATCA shall include any amendments made to FATCA after the date of this Agreement.
(h) Treatment of Certain Refunds. If the Administrative Agent, any Lender or an Issuing Bank determines, in its sole discretion, that it has received a refund or credit (in lieu of such refund) of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses of the Administrative Agent, any Lender or an Issuing Bank, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that the Borrower, upon the request of the Administrative Agent, any Lender or an Issuing Bank, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, any Lender or an Issuing Bank in the event the Administrative Agent, any Lender or an Issuing Bank is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this clause (h), in no event will the Administrative Agent, any Lender or an Issuing Bank be required to pay any amount to Borrower pursuant to this clause (h), the payment of which would place such Person in a less favorable net after-Tax position than such Person would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This subsection shall not be construed to require the Administrative Agent, any Lender or an Issuing Bank to make available its tax returns or its books or records (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.
SECTION 2.17. Payments Generally; Pro Rata Treatment: Sharing of Set-offs.
(a) Payments by the Borrower. The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or under Section 2.14, 2.15 or 2.16, or otherwise) or under any other Loan Document (except to the extent otherwise provided therein) prior to 12:00 noon, Atlanta, Georgia time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative
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Agent at the Administrative Agents Account, except as otherwise expressly provided in the relevant Loan Document and except payments to be made directly to the Issuing Bank or the Swingline Lender as expressly provided herein and payments pursuant to Sections 2.14, 2.15, 2.16 and 9.03, which shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.
All amounts owing under this Agreement (including commitment fees, payments required under Section 2.14, and payments required under Section 2.15 relating to any Loan denominated in Dollars, but not including principal of and interest on any Loan denominated in any Foreign Currency or payments relating to any such Loan required under Section 2.15, which are payable in such Foreign Currency) or under any other Loan Document (except to the extent otherwise provided therein) are payable in Dollars. Notwithstanding the foregoing, if the Borrower shall fail to pay any principal of any Loan when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), the unpaid portion of such Loan shall, if such Loan is not denominated in Dollars, automatically be redenominated in Dollars on the due date thereof (or, if such due date is a day other than the last day of the Interest Period therefor, on the last day of such Interest Period) in an amount equal to the Dollar Equivalent thereof on the date of such redenomination and such principal shall be payable on demand; and if the Borrower shall fail to pay any interest on any Loan that is not denominated in Dollars, such interest shall automatically be redenominated in Dollars on the due date therefor (or, if such due date is a day other than the last day of the Interest Period therefor, on the last day of such Interest Period) in an amount equal to the Dollar Equivalent thereof on the date of such redenomination and such interest shall be payable on demand.
(b) Application of Insufficient Payments. If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees of a Class then due hereunder, such funds shall be applied (i) first, to pay interest and fees of such Class then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees of such Class then due to such parties, and (ii) second, to pay principal and unreimbursed LC Disbursements of such Class then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements of such Class then due to such parties.
(c) Pro Rata Treatment. Except to the extent otherwise provided herein: (i) each Syndicated Borrowing of a Class shall be made from the Lenders of such Class, each payment of commitment fee under Section 2.11 shall be made for account of the Lenders of the applicable Class, and each termination or reduction of the amount of the Commitments of a Class under Section 2.08 shall be applied to the respective Commitments of the Lenders of such Class, pro rata according to the amounts of their respective Commitments of such Class; (ii) each Syndicated Borrowing of a Class shall be allocated pro rata among the Lenders of such Class according to the amounts of their respective Commitments of such Class (in the case of the making of Syndicated Loans) or their respective Loans of such Class that are to be included in such Borrowing (in the case of conversions and continuations of Loans); (iii) each payment or
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prepayment of principal of Syndicated Loans of a Class by the Borrower shall be made for account of the Lenders of such Class pro rata in accordance with the respective unpaid principal amounts of the Syndicated Loans of such Class held by them; and (iv) each payment of interest on Syndicated Loans of a Class by the Borrower shall be made for account of the Lenders of such Class pro rata in accordance with the amounts of interest on such Loans of such Class then due and payable to the respective Lenders.
(d) Sharing of Payments by Lenders. If any Lender of any Class shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Syndicated Loans, or participations in LC Disbursements or Swingline Loans, of such Class resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Syndicated Loans, and participations in LC Disbursements and Swingline Loans, and accrued interest thereon of such Class then due than the proportion received by any other Lender of such Class, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Syndicated Loans, and participations in LC Disbursements amid Swingline Loans, of other Lenders of such Class to the extent necessary so that the benefit of all such payments shall be shared by the Lenders of such Class ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Syndicated Loans, and participations in LC Disbursements and Swingline Loans, of such Class; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.
(e) Presumptions of Payment. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent at the Federal Funds Effective Rate.
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(f) Certain Deductions by the Administrative Agent. If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(e), 2.06(a) or (b) or 2.17(e), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for account of such Lender to satisfy such Lenders obligations under such Sections until all such unsatisfied obligations are fully paid.
SECTION 2.18. Mitigation Obligations; Replacement of Lenders.
(a) Designation of a Different Lending Office. If any Lender requests compensation under Section 2.14, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.14 or 2.16, as the case may be, in the future and (ii) would not subject such Lender to any cost or expense not required to be reimbursed by the Borrower and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b) Replacement of Lenders. If any Lender requests compensation under Section 2.14, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for account of any Lender pursuant to Section 2.16, or if any Lender becomes a Defaulting Lender or is a Non-Consenting Lender (as provided in Section 9.02(d)), then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Commitment is being assigned, the Issuing Bank and the Swingline Lender), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.14 or payments required to be made pursuant to Section 2.16, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
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SECTION 2.19. Defaulting Lenders.
(a) Defaulting Lender Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable law:
(i) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VII or otherwise) or received by Administrative Agent from a Defaulting Lender pursuant to Section 9.08 shall be applied at such time or times as may be determined by Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to Issuing Bank or Swingline Lender hereunder; third, to Cash Collateralize Issuing Banks Fronting Exposure with respect to such Defaulting Lender in the manner described in Section 2.09(a); fourth, as Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by Administrative Agent; fifth, if so determined by Administrative Agent and Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lenders potential future funding obligations with respect to Loans under this Agreement and (y) Cash Collateralize Issuing Banks future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in the manner described in Section 2.09(a); sixth, to the payment of any amounts owing to the Lenders, Issuing Bank or Swingline Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, Issuing Bank or Swingline Lender against such Defaulting Lender as a result of such Defaulting Lenders breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to Borrower as a result of any judgment of a court of competent jurisdiction obtained by Borrower against such Defaulting Lender as a result of such Defaulting Lenders breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or reimbursement obligations in respect of any LC Disbursement for which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 4.02 were satisfied and waived, such payment shall be applied solely to pay the Loans of, and reimbursement obligations in respect of any LC Disbursement that is owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or reimbursement obligations in respect of any LC Disbursement that is owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in Letters of Credit and Swingline Loans are held by the Lenders pro rata in accordance with the applicable Commitments without giving effect to Section 2.19(a)(iii). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.19(a)(i) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
(ii) Certain Fees.
(A) No Defaulting Lender shall be entitled to receive any fee pursuant to Sections 2.11(a) and (b) for any period during which that Lender is a
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Defaulting Lender (and Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender); provided that such Defaulting Lender shall be entitled to receive fees pursuant to Section 2.11(b) for any period during which that Lender is a Defaulting Lender only to extent allocable to its Applicable Percentage of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 2.19(d).
(B) With respect to any Section 2.11(b) fees not required to be paid to any Defaulting Lender pursuant to clause (A) above, Borrower shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lenders participation in Letters of Credit or Swingline Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (iii) below, (y) pay to Issuing Bank the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to Issuing Banks Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.
(iii) Reallocation of Participations to Reduce Fronting Exposure. All or any part of such Defaulting Lenders participation in Letters of Credit and Swingline Loans shall be reallocated (effective no later than one (1) Business Day after the Administrative Agent has actual knowledge that such Lender has become a Defaulting Lender) among the Non-Defaulting Lenders in accordance with their respective Applicable Percentages (calculated without regard to such Defaulting Lenders Commitment) but only to the extent that (x) the conditions set forth in Section 4.02 are satisfied at the time of such reallocation (and, unless Borrower shall have otherwise notified Administrative Agent at such time, Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the aggregate Revolving Credit Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lenders Commitment. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lenders increased exposure following such reallocation.
(iv) Cash Collateral; Repayment of Swingline Loans. If the reallocation described in clause (iii) above cannot, or can only partially, be effected, the Borrower shall not later than two (2) Business Days after demand by the Administrative Agent (at the direction of the Issuing Bank and/or the Swingline Lender), without prejudice to any right or remedy available to it hereunder or under law, (x) first, prepay Swingline Loans in an amount equal to the Swingline Lenders Swingline Exposure (which exposure shall be deemed equal to the applicable Defaulting Lenders Applicable Percentage of the total outstanding Swingline Exposure (other than Swingline Exposure as to which such Defaulting Lenders participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof)) and (y) second, Cash Collateralize the Issuing Banks Fronting Exposure in accordance with the procedures set forth in Section 2.19(d) or (z) make other arrangements reasonably satisfactory to the Administrative Agent, the Issuing Bank and the Swingline Lender in their sole discretion to protect them against the risk of non-payment by such Defaulting Lender.
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(b) Defaulting Lender Cure. If the Borrower, the Administrative Agent, the Swingline Lender and the Issuing Bank agree in writing that a Lender is no longer a Defaulting Lender, Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that such former Defaulting Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as Administrative Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit and Swingline Loans to be held pro rata by the Lenders in accordance with the applicable Commitments (without giving effect to Section 2.19(a)(iii)), and if Cash Collateral has been posted with respect to such Defaulting Lender, the Administrative Agent will promptly return or release such Cash Collateral to the Borrower, whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender having been a Defaulting Lender.
(c) New Swingline Loans/Letters of Credit. So long as any Lender is a Defaulting Lender, (i) the Swingline Lender shall not be required to fund any Swingline Loans unless it is satisfied that the participations therein will be fully allocated among Non-Defaulting Lenders in a manner consistent with clause (a)(iii) above and the Defaulting Lender shall not participate therein and (ii) the Issuing Bank shall not be required to issue, extend, renew or increase any Letter of Credit unless it is satisfied that the participations in any existing Letters of Credit as well as the new, extended, renewed or increased Letter of Credit has been or will be fully allocated among the Non-Defaulting Lenders in a manner consistent with clause (a)(iii) above and such Defaulting Lender shall not participate therein except to the extent such Defaulting Lenders participation has been or will be fully Cash Collateralized in accordance with Section 2.19(d).
(d) Cash Collateral. At any time that there shall exist a Defaulting Lender, promptly following the written request of Administrative Agent or Issuing Bank (with a copy to Administrative Agent) Borrower shall Cash Collateralize Issuing Banks Fronting Exposure with respect to such Defaulting Lender (determined after giving effect to Section 2.19(a)(iii) and any Cash Collateral provided by such Defaulting Lender) in an amount not less than the Minimum Collateral Amount.
(i) Grant of Security Interest. Borrower, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants to (and subjects to the control of) Administrative Agent, for the benefit of Issuing Bank, and agrees to maintain, a first priority security interest in all such Cash Collateral as security for the Defaulting Lenders obligation to fund participations in respect of Letters of Credit, to be applied pursuant to clause (ii) below. If at any time Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than Administrative Agent
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and Issuing Bank as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, Borrower will, promptly upon demand by Administrative Agent, pay or provide to Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency (after giving effect to any Cash Collateral provided by the Defaulting Lender). All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be maintained in blocked, non-interest bearing deposit accounts at SunTrust. Borrower shall pay on demand therefor from time to time all reasonable and customary account opening, activity and other administrative fees and charges in connection with the maintenance and disbursement of Cash Collateral.
(ii) Application. Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under this Section 2.19 in respect of Letters of Credit shall be applied to the satisfaction of the Defaulting Lenders obligation to fund participations in respect of Letters of Credit (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.
(iii) Termination of Requirement. Cash Collateral (or the appropriate portion thereof) provided to reduce Issuing Banks Fronting Exposure shall no longer be required to be held as Cash Collateral pursuant to this Section 2.19 following (i) the elimination of the applicable Fronting Exposure (including by the termination of Defaulting Lender status of the applicable Lender) or (ii) the determination by Administrative Agent and Issuing Bank that there exists excess Cash Collateral; provided that, subject to the other provisions of this Section 2.19, the Person providing Cash Collateral and Issuing Bank may agree that Cash Collateral shall be held to support future anticipated Fronting Exposure; provided, further, that to the extent that such Cash Collateral was provided by Borrower, such Cash Collateral shall remain subject to the security interest granted pursuant to the Loan Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
SECTION 3.01. Organization; Powers. Each of the Borrower and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required of the Borrower or such Subsidiary, as applicable.
SECTION 3.02. Authorization; Enforceability. The Transactions are within the Borrowers corporate powers and have been duly authorized by all necessary corporate and, if
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required, by all necessary shareholder action. This Agreement has been duly executed and delivered by the Borrower and constitutes, and each of the other Loan Documents when executed and delivered will constitute, a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except for (i) such as have been or will be obtained or made and are in full force and effect and (ii) filings and recordings in respect of the Liens created pursuant to this Agreement or the Security Documents, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default in any material respect under any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or assets, or give rise to a right thereunder to require any payment to be made by any such Person, and (d) except for the Liens created pursuant to this Agreement or the Security Documents, will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.
SECTION 3.04. Financial Condition; No Material Adverse Change.
(a) Financial Statements. The Borrower has heretofore delivered to the Lenders the audited consolidated balance sheet and statements of assets and liabilities, operations, changes in net assets and cash flows of the Borrower and its Subsidiaries as of and for the year ended September 30, 2011, certified by a Financial Officer of the Borrower. Such financial statements present fairly, in all material respects, the consolidated financial position and results of operations and cash flows of the Borrower and its Subsidiaries as of such date and for such period in accordance with GAAP.
(b) No Material Adverse Change. Since the date of the most recent Applicable Financial Statements, there has not been any event, development or circumstance (herein, a Material Adverse Change) that has had or could reasonably be expected to have a material adverse effect on (i) the business, Portfolio Investments and other assets, liabilities and financial condition of the Borrower and its Subsidiaries (other than any Financing Subsidiary) taken as a whole (excluding in any case a decline in the net asset value of the Borrower or a change in general market conditions or values of the Borrowers Portfolio Investments), or (ii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Administrative Agent and the Lenders thereunder.
SECTION 3.05. Litigation. There are no actions, suits, investigations or proceedings by or before any arbitrator or Governmental Authority now pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Agreement or the Transactions.
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SECTION 3.06. Compliance with Laws and Agreements. Each of the Borrower and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries is subject to any contract or other arrangement, the performance of which by the Borrower or its Subsidiaries could reasonably be expected to result in a Material Adverse Effect.
SECTION 3.07. Taxes. Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all material Tax returns and reports required to have been filed and has paid or caused to be paid all material Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which such Person has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.08. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect.
SECTION 3.09. Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other written information (other than projected financial information, other forward looking information relating to third parties and information of a general economic or general industry nature) furnished by or on behalf of the Borrower to the Administrative Agent in connection with the negotiation of this Agreement and the other Loan Documents or delivered hereunder or thereunder (as modified or supplemented by other information so furnished) when taken as a whole (and after giving effect to all updates, modifications and supplements) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.
SECTION 3.10. Investment Company Act; Margin Regulations.
(a) Status as Business Development Company. The Borrower is an investment company that has elected to be regulated as a business development company within the meaning of the Investment Company Act and qualifies as a RIC.
(b) Compliance with Investment Company Act. The business and other activities of the Borrower and its Subsidiaries, including the making of the Loans hereunder, the application of the proceeds and repayment thereof by the Borrower and the consummation of the Transactions contemplated by the Loan Documents do not result in a violation or breach in any material respect of the provisions of the Investment Company Act or any rules, regulations or orders issued by the Securities and Exchange Commission thereunder.
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(c) Investment Policies. The Borrower is in compliance in all material respects with the Investment Policies.
(d) Use of Credit. Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of any extension of credit hereunder will be used to buy or carry any Margin Stock.
SECTION 3.11. Material Agreements and Liens.
(a) Material Agreements. Part A of Schedule 3.11 is a complete and correct list of each credit agreement, loan agreement, indenture, purchase agreement, guarantee, letter of credit or other arrangement providing for or otherwise relating to any Indebtedness or any extension of credit (or commitment for any extension of credit) to, or guarantee by, the Borrower or any of its Subsidiaries outstanding on the date hereof, and the aggregate principal or face amount outstanding or that is, or may become, outstanding under each such arrangement is correctly described in Part A of Schedule 3.11.
(b) Liens. Part B of Schedule 3.11 is a complete and correct list of each Lien securing Indebtedness of any Person outstanding on the date hereof covering any property of the Borrower or any of its Subsidiaries, and the aggregate Indebtedness secured (or that may be secured) by each such Lien and the property covered by each such Lien is correctly described in Part B of Schedule 3.11.
SECTION 3.12. Subsidiaries and Investments.
(a) Subsidiaries. Set forth on Schedule 3.12(a) is a list of the Borrowers Subsidiaries as of the date hereof.
(b) Investments. Set forth in Schedule 3.12(b) is a complete and correct list of all Investments (other than Investments of the types referred to in clauses (b), (c) and (d) of Section 6.04) held by the Borrower or any of its Subsidiaries (other than any Financing Subsidiary) in any Person on the date hereof and, for each such Investment, (x) the identity of the Person or Persons holding such Investment and (y) the nature of such Investment. Except as disclosed in Schedule 3.12, each of the Borrower and its Subsidiaries (other than any Financing Subsidiary) owns, free and clear of all Liens (other than Liens created pursuant to this Agreement or the Security Documents), all such Investments.
SECTION 3.13. Properties.
(a) Title Generally. Each of the Borrower and its Subsidiaries (other than any Financing Subsidiary) has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes.
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(b) Intellectual Property. Each of the Borrower and its Subsidiaries (other than any Financing Subsidiary) owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries (other than any Financing Subsidiary) does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.14. Affiliate Agreements. As of the date hereof, the Borrower has heretofore delivered to each of the Lenders true and complete copies of each of the Affiliate Agreements (including and schedules and exhibits thereto, and any amendments, supplements or waivers executed and delivered thereunder). As of the date of hereof, each of the Affiliate Agreements is in full force and effect.
SECTION 3.15. OFAC. Neither the Borrower nor any of its Subsidiaries (a) is a person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (b) engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such person in any manner violative of Section 2 of such executive order, or (c) is a person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasurys Office of Foreign Assets Control regulation or executive order.
SECTION 3.16. Patriot Act. Each of the Borrower and its Subsidiaries is in compliance with (a) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (b) the Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001). No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
SECTION 3.17. Collateral Documents. The provisions of the Security Documents are effective to create in favor of the Collateral Agent a legal, valid and enforceable first priority Lien (subject to Liens permitted by Section 6.02) on all right, title and interest of the Borrower and each Subsidiary Guarantor in the Collateral described therein. Except for filings completed prior to the Effective Date and as contemplated hereby and by the Security Documents, no filing or other action will be necessary to perfect such Liens.
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CONDITIONS
SECTION 4.01. Effective Date. The effectiveness of this Agreement and of the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until completion of each of the following conditions precedent (unless a condition shall have been waived in accordance with Section 9.02):
(a) Documents. Administrative Agent shall have received each of the following documents, each of which shall be satisfactory to the Administrative Agent (and to the extent specified below to each Lender) in form and substance:
(i) Executed Counterparts. From each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page to this Agreement) that such party has signed a counterpart of this Agreement.
(ii) Opinion of Counsel to the Borrower. A favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of Dechert LLP, New York counsel for the Borrower and of Venable LLP, Maryland counsel for the Borrower, each in form and substance reasonably acceptable to the Administrative Agent (and the Borrower hereby instructs such counsel to deliver such opinion to the Lenders and the Administrative Agent).
(iii) Corporate Documents. Such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the Transactions and any other legal matters relating to the Borrower, this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel.
(iv) Officers Certificate. A certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in the lettered clauses of the first sentence of Section 4.02.
(v) Guarantee and Security Agreement. The Guarantee and Security Agreement, duly executed and delivered by each of the parties to the Guarantee and Security Agreement.
(vi) Control Agreement. An Amended and Restated Custody and Securities Account Control Agreement, duly executed and delivered by the Borrower, the Administrative Agent and PFPC.
(vii) Borrowing Base Certificate. A Borrowing Base Certificate showing a calculation of the Borrowing Base as of January 31, 2012.
(b) Liens. The Administrative Agent shall have received results of a recent lien search in each relevant jurisdiction with respect to the Borrower and its Subsidiaries (other than Financing Subsidiaries), confirming the priority of the Liens in favor of the Collateral Agent created pursuant to the Security Documents and revealing no liens on any of the assets of the Borrower or its Subsidiaries (other than Financing Subsidiaries) except for liens permitted under
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Section 6.02 or liens to be discharged on or prior to the Effective Date pursuant to documentation satisfactory to the Administrative Agent. All UCC financing statements and similar documents required to be filed in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a first priority perfected security interest in the Collateral (to the extent that such a security interest may be perfected by a filing under the Uniform Commercial Code) shall have been properly filed in each jurisdiction required.
(c) Consents. The Borrower shall have obtained and delivered to the Administrative Agent certified copies of all consents, approvals, authorizations, registrations, or filings required to be made or obtained by the Borrower and all guarantors in connection with the Transactions and any transaction being financed with the proceeds of the Loans, and such consents, approvals, authorizations, registrations, filings and orders shall be in full force and effect and all applicable waiting periods shall have expired and no investigation or inquiry by any Governmental Authority regarding the Transactions or any transaction being financed with the proceeds of the Loans shall be ongoing.
(d) Fees and Expenses. The Borrower shall have paid in full to the Administrative Agent all fees and expenses related to this Agreement owing on the Effective Date.
(e) Other Documents. The Administrative Agent shall have received such other documents as the Administrative Agent or any Lender may reasonably request in form and substance satisfactory to the Administrative Agent.
SECTION 4.02. Each Credit Event. The obligation of each Lender to make any Loan, and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit, is additionally subject to the satisfaction of the following conditions:
(a) the representations and warranties of the Borrower set forth in this Agreement and in the other Loan Documents shall be true and correct (or, in the case of the representations and warranties in Sections 3.03, 3.05 and 3.13 of this Agreement, and in Section 2.03 of the Guarantee and Security Agreement, true and correct in all material respects) on and as of the date of such Loan or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, or, as to any such representation or warranty that refers to a specific date, as of such specific date;
(b) at the time of and immediately after giving effect to such Loan or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing; and
(c) either (i) the aggregate Covered Debt Amount (after giving effect to such extension of credit) shall not exceed the Borrowing Base reflected on the Borrowing Base Certificate most recently delivered to the Administrative Agent or (ii) the Borrower shall have delivered an updated Borrowing Base Certificate demonstrating that the Covered Debt Amount (after giving effect to such extension of credit) shall not exceed the Borrowing Base after giving effect to such extension of credit as well as any concurrent acquisitions of Portfolio Investments or payment of outstanding Loans or Other Covered Indebtedness.
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Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in the preceding sentence.
ARTICLE V
AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired, been terminated, Cash Collateralized or backstopped and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year of the Borrower, the audited consolidated statements of assets and liabilities, operations, changes in net assets and cash flows of the Borrower and its Subsidiaries as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by KPMG or other independent public accountants of recognized national standing to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; provided that the requirements set forth in this clause (a) may be fulfilled by providing to the Administrative Agent and the Lenders the report of the Borrower to the SEC on Form 10-K for the applicable fiscal year;
(b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, the consolidated statements of assets and liabilities, operations, changes in net assets and cash flows of the Borrower and its Subsidiaries as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for (or, in the case of the statements of assets and liabilities, operations, changes in net assets and cash flows, as of the end of) the corresponding period or periods of the previous fiscal year, all certified by a Financial Officer of the Borrower as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; provided that the requirements set forth in this clause (b) may be fulfilled by providing to the Lenders the report of the Borrower to the SEC on Form 10-Q for the applicable quarterly period;
(c) concurrently with any delivery of financial statements under clause (a) or (b) of this Section, a certificate of a Financial Officer of the Borrower (i) certifying that such statements are consistent with the financial statements filed by the Borrower with the Securities and Exchange Commission, (ii) certifying as to whether the Borrower has knowledge that a Default has occurred during the applicable period and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (iii) setting
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forth reasonably detailed calculations demonstrating compliance with Sections 6.01, 6.02, 6.04 and 6.07 and (iv) stating whether any change in GAAP as applied by (or in the application of GAAP by) the Borrower has occurred since the Effective Date and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;
(d) as soon as available and in any event not later than 20 days after the end of each monthly accounting period (ending on the last day of each calendar month) of the Borrower and its Subsidiaries, a Borrowing Base Certificate as at the last day of such accounting period;
(e) promptly but no later than five Business Days after the Borrower shall at any time have knowledge that there is a Borrowing Base Deficiency, a Borrowing Base Certificate as at the date the Borrower has knowledge of such Borrowing Base Deficiency indicating the amount of the Borrowing Base Deficiency as at the date the Borrower obtained knowledge of such deficiency and the amount of the Borrowing Base Deficiency as of the date not earlier than one Business Day prior to the date the Borrowing Base Certificate is delivered pursuant to this paragraph;
(f) promptly upon receipt thereof copies of all significant reports submitted by the Borrowers independent public accountants in connection with each annual, interim or special audit or review of any type of the financial statements or related internal control systems of the Borrower or any of its Subsidiaries delivered by such accountants to the management or board of directors of the Borrower;
(g) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any of its Subsidiaries with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, as the case may be; and
(h) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any of its Subsidiaries, or compliance with the terms of this Agreement and the other Loan Documents, as the Administrative Agent or any Lender may reasonably request.
(i) Borrower and each Lender acknowledge that certain of the Lenders may be Public Lenders and, if documents or notices required to be delivered pursuant to this Section 5.01 or otherwise are being distributed through IntraLinks/IntraAgency, SyndTrak or another relevant website or other information platform (the Platform), any document or notice that Borrower has indicated contains Non-Public Information shall not be posted by Administrative Agent on that portion of the Platform designated for such Public Lenders. Borrower agrees to clearly designate all information provided to Administrative Agent by or on behalf of Borrower or any of its Subsidiaries which is suitable to make available to Public Lenders. If Borrower has not indicated whether a document or notice delivered pursuant to this Section 5.01 contains Non-Public Information, the Administrative Agent reserves the right to post such document or notice solely on that portion of the Platform designated for Lenders who wish to receive material Non-Public Information with respect to Borrower, its Subsidiaries and their Securities (as such term is defined in Section 5.13 of this Agreement).
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SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any of its Affiliates that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $5,000,000; and
(d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
SECTION 5.03. Existence: Conduct of Business. The Borrower will, and will cause each of its Subsidiaries (other than Immaterial Subsidiaries) to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03.
SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each of its Subsidiaries to, pay its obligations, including income tax and other material tax liabilities and material contractual obligations, that, if not paid, could reasonably be expected to result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Subsidiaries (other than Immaterial Subsidiaries) to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations.
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SECTION 5.06. Books and Records; Inspection and Audit Rights.
(a) Books and Records; Inspection Rights. The Borrower will, and will cause each of its Subsidiaries to, keep books of record and account in accordance with GAAP. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested; provided that the Borrower or such Subsidiary shall be entitled to have its representatives and advisors present during any inspection of its books and records.
(b) Audit Rights. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by Administrative Agent (including any consultants, accountants, lawyers and appraisers retained by the Administrative Agent) to conduct evaluations and appraisals of the Borrowers computation of the Borrowing Base and the assets included in the Borrowing Base, all at such reasonable times and as often as reasonably requested. The Borrower shall pay the reasonable fees and expenses of any representatives retained by the Administrative Agent to conduct any such evaluation or appraisal; provided that the Borrower shall not be required to pay such fees and expenses for more than one such evaluation or appraisal during any calendar year unless an Event of Default has occurred and is continuing at the time of any subsequent evaluation or appraisal during such calendar year. The Borrower also agrees to modify or adjust the computation of the Borrowing Base to the extent required by the Administrative Agent or the Required Lenders as a result of any such evaluation or appraisal; provided that if the Borrower demonstrates that such evaluation or appraisal is incorrect, the Borrower shall be permitted to re-adjust its computation of the Borrowing Base.
SECTION 5.07. Compliance with Laws. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations, including the Investment Company Act, and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. Without limiting the generality of the foregoing, the Borrower will, and will cause its Subsidiaries to, conduct its business and other activities in compliance in all material respects with the provisions of the Investment Company Act and any applicable rules, regulations or orders issued by the Securities and Exchange Commission thereunder.
SECTION 5.08. Certain Obligations Respecting Subsidiaries; Further Assurances.
(a) Subsidiary Guarantors. In the event that the Borrower or any of its Subsidiaries shall form or acquire any new Subsidiary (other than a Financing Subsidiary or a Foreign Subsidiary) the Borrower will cause such new Subsidiary to become a Subsidiary Guarantor (and, thereby, an Obligor) under the Guarantee and Security Agreement pursuant to a Guarantee Assumption Agreement and to deliver such proof of corporate or other action, incumbency of officers, opinions of counsel and other documents as is consistent with those delivered by the Borrower pursuant to Section 4.01 upon the Effective Date or as the Administrative Agent shall have requested.
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(b) Ownership of Subsidiaries. The Borrower will, and will cause each of its Subsidiaries to, take such action from time to time as shall be necessary to ensure that each of its Subsidiaries is a wholly owned Subsidiary.
(c) Further Assurances. The Borrower will, and will cause each of the Subsidiary Guarantors to, take such action from time to time as shall reasonably be requested by the Administrative Agent to effectuate the purposes and objectives of this Agreement. Without limiting the generality of the foregoing, the Borrower will, and will cause each of the Subsidiary Guarantors to, take such action from time to time (including filing appropriate Uniform Commercial Code financing statements and executing and delivering such assignments, security agreements and other instruments) as shall be reasonably requested by the Administrative Agent: (i) to create, in favor of the Collateral Agent for the benefit of the Lenders (and any affiliate thereof that is a party to any Hedging Agreement entered into with the Borrower) and the holders of any Secured Longer-Term Indebtedness, perfected security interests and Liens in the Collateral; provided that any such security interest or Lien shall be subject to the relevant requirements of the Security Documents, (ii) to cause any bank or securities intermediary (within the meaning of the Uniform Commercial Code) to enter into such arrangements with the Collateral Agent as shall be appropriate in order that the Collateral Agent has control (within the meaning of the Uniform Commercial Code) over each bank account or securities account of the Obligors, and in that connection, the Borrower agrees to cause all cash and other proceeds of Portfolio Investments received by any Obligor to be promptly deposited into such an account (or otherwise delivered to, or registered in the name of, the Collateral Agent) and, until such deposit, delivery or registration such cash and other proceeds shall be held in trust by the Borrower for and as the property of the Collateral Agent and shall not be commingled with any other finds or property of such Obligor, (iii) in the case of any Portfolio Investment consisting of a Bank Loan (as defined in Section 5.13) that does not constitute all of the credit extended to the underlying borrower under the relevant underlying loan documents and a Financing Subsidiary holds any interest in the loans or other extensions of credit under such loan documents, (x) to cause such Financing Subsidiary to be party to such underlying loan documents as a lender having a direct interest (or a participation not acquired from an Obligor) in such underlying loan documents and the extensions of credit thereunder and (y) to ensure that all amounts owing to such Obligor or Financing Subsidiary by the underlying borrower or other obligated party are remitted by such borrower or obligated party directly to separate accounts of such Obligor and such Financing Subsidiary, (iv) in the event that any Obligor is acting as an agent or administrative agent under any loan documents with respect to any Bank Loan that does not constitute all of the credit extended to the underlying borrower under the relevant underlying loan documents, to ensure that all funds held by such Obligor in such capacity as agent or administrative agent is segregated from all other funds of such Obligor and clearly identified as being held in an agency capacity and (v) to cause the closing sets and all executed amendments, consents, forbearances and other modifications and assignment agreements relating to any Portfolio Investment and any other documents relating to any Portfolio Investment requested by the Collateral Agent, in each case to be held by the Collateral Agent or a custodian pursuant to the terms of a custodian agreement reasonably satisfactory to the Collateral Agent.
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SECTION 5.09. Use of Proceeds. The Borrower will use the proceeds of the Loans only for general corporate purposes of the Borrower in the ordinary course of business, including the acquisition and funding (either directly or through one or more wholly-owned Subsidiaries) of leveraged loans, mezzanine loans, high-yield securities, convertible securities, preferred stock, common stock and other Portfolio Investments; provided that neither the Administrative Agent nor any Lender shall have any responsibility as to the use of any of such proceeds. No part of the proceeds of any Loan will be used in violation of applicable law or, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any Margin Stock. Margin Stock shall be purchased by the Obligors only with the proceeds of Indebtedness not directly or indirectly secured by Margin Stock, or with the proceeds of equity capital of the Borrower.
SECTION 5.10. Status of RIC and BDC. The Borrower shall at all times maintain its status as a RIC under the Code, and as a business development company under the Investment Company Act.
SECTION 5.11. Investment Policies. The Borrower shall at all times be in compliance in all material respects with its Investment Policies; provided that it shall not be deemed a material change in the Investment Policies if (i) investment size (which as of the Effective Date is to normally range from between $5,000,000 and $50,000,000) proportionately increases as the size of the Borrowers capital base changes or (ii) the Borrower and its Subsidiaries, taken as a whole, invest up to 30% of their assets in non-U.S. companies.
SECTION 5.12. Portfolio Valuation and Diversification Etc.
(a) Industry Classification Groups. For purposes of this Agreement, the Borrower shall assign each Portfolio Investment to an Industry Classification Group. To the extent that any Portfolio Investment is not correlated with the risks of other Portfolio Investments in an Industry Classification Group, such Portfolio Investment may be assigned by the Borrower to an Industry Classification Group that is more closely correlated to such Portfolio Investment. In the absence of any correlation, the Borrower shall be permitted, upon prior notice to the Administrative Agent and each Lender, to create up to three additional industry classification groups for purposes of this Agreement.
(b) Portfolio Valuation Etc.
(i) Settlement Date Basis. For purposes of this Agreement, all determinations of whether an investment is to be included as a Portfolio Investment shall be determined on a settlement-date basis (meaning that any investment that has been purchased will not be treated as a Portfolio Investment until such purchase has settled, and any Portfolio Investment which has been sold will not be excluded as a Portfolio Investment until such sale has settled); provided that no such investment shall be included as a Portfolio Investment to the extent it has not been paid for in full.
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(ii) Determination of Values. The Borrower will conduct reviews of the value to be assigned to each of its Portfolio Investments as follows:
(A) Quoted Investments - External Review. With respect to Portfolio Investments (including Cash Equivalents) for which market quotations are readily available, the Borrower shall, not less frequently than once each calendar week, determine the market value of such Portfolio Investments which shall, in each case, be determined in accordance with one of the following methodologies (as selected by the Borrower):
(w) in the case of public and 144A securities, the average of the bid prices as determined by two Approved Dealers selected by the Borrower,
(x) in the case of bank loans, the bid price as determined by one Approved Dealer selected by the Borrower,
(y) in the case of any Portfolio Investment traded on an exchange, the closing price for such Portfolio Investment most recently posted on such exchange, and
(z) in the case of any other Portfolio Investment, the fair market value thereof as determined by an Approved Pricing Service; and
(B) Unquoted Investments- External Review. With respect to Portfolio Investments for which market quotations are not readily available, the Borrower shall request an Approved Third-Party Appraiser to assist the Board of Directors of the Borrower in determining the fair market value of such Portfolio Investments, as at the last day of each fiscal quarter; provided that
(x) the Value of any such Portfolio Investment (i.e., a Portfolio Investment for which market quotations are not readily available) acquired during a fiscal quarter shall be deemed to be equal to the cost of such Portfolio Investment until such time as the fair market value of such Portfolio Investment is determined in accordance with the foregoing provisions of this sub-clause (B) as at the last day of such fiscal quarter; and
(y) notwithstanding the foregoing, the Board of Directors of the Borrower may, without the assistance of an Approved Third-Party Appraiser, determine the fair market value of such unquoted Portfolio Investments so long as the aggregate Value thereof so determined does not at any time exceed 10% of the aggregate Borrowing Base, except that the fair market value of any Portfolio Investment that has been determined without the assistance of an Approved Third-Party Appraiser as at the last day of any fiscal quarter shall be deemed to be zero as at the last day of the immediately succeeding fiscal quarter (but effective upon the date upon which the Borrowing Base Certificate for such last day is required to be delivered hereunder) if an Approved Third-Party Appraiser has not assisted the Board of Directors of the Borrower in determining the fair market value of such Portfolio Investments, as at such date.
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(C) Internal Review. The Borrower shall conduct internal reviews of all Portfolio Investments at least once each calendar week which shall take into account any events of which the Borrower has knowledge that adversely affect the value of the Portfolio Investments. If the value of any Portfolio Investment as most recently determined by the Borrower pursuant to this Section 5.12(b)(ii)(C) is lower than the value of such Portfolio Investment as most recently determined pursuant to Section 5.12(b)(ii)(A) and (B), such lower value shall be deemed to be the Value of such Portfolio Investment for purposes hereof; provided that the Value of any Portfolio Investment of the Borrower and its Subsidiaries shall be increased by the net unrealized gain as at the date such Value is determined of any Hedging Agreement entered into to hedge risks associated with such Portfolio Investment and reduced by the net unrealized loss as at such date of any such Hedging Agreement (such net unrealized gain or net unrealized loss, on any date, to be equal to the aggregate amount receivable or payable under the related Hedging Agreement if the same were terminated on such date).
(D) Failure to Determine Values. If the Borrower shall fail to determine the value of any Portfolio Investment as at any date pursuant to the requirements of the foregoing sub-clauses (A), (B) or (C), then the Value of such Portfolio Investment as at such date shall be deemed to be zero.
(E) Testing of Values.
(x) For the second calendar month immediately following the end of each fiscal quarter (the last such fiscal quarter is referred to herein as, the Testing Quarter), the Administrative Agent shall cause an Approved Third-Party Appraiser selected by the Administrative Agent to value such number of Unquoted Investments (as defined below) (selected by the Administrative Agent) that collectively have an aggregate Calculation Value equal to at least 10% of the Calculation Value of all Unquoted Investments at the end of such Testing Quarter; provided, however, that
(i) if the difference between (xx) 125% of the Covered Debt Amount (net of any Cash Collateral) and (yy) the aggregate value of all Portfolio Investments that have been assigned a value pursuant to Section 5.12(b)(ii)(A) (Quoted Investments) minus
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(ii) any Cash Collateral is greater than 10% of the Calculation Value of all Portfolio Investments assigned a value pursuant to Section 5.12(b)(ii)(B) (Unquoted Investments), then the Administrative Agent shall cause an Approved Third-Party Appraiser selected by the Administrative Agent to value the lesser of:
(1) such number of additional Unquoted Investments (selected by the Administrative Agent) that collectively have an aggregate Calculation Value equal to at least 15% of the Calculation Value of all Unquoted Investments; and
(2) such number of additional Unquoted Investments that have a Calculation Value equal to 125% of the Covered Debt Amount (net of any Cash Collateral) when added to the sum of (xx) the aggregate value of all Quoted Investments plus (yy) the aggregate value of all Unquoted Investments valued by an Approved Third-Party Appraiser selected by the Administrative Agent.
(y) If the aggregate value of all Quoted Investments plus Unquoted Investments valued by an Approved Third-Party Appraiser selected by the Administrative Agent is not at least 125% of the Covered Debt Amount (net of any Cash Collateral), then, with respect to any Unquoted Investment currently held by the Borrower that was last valued by the Approved Third-Party Appraiser selected by the Administrative Agent in the most recent Administrative Agent Appraisal Testing Month (as defined below), the Borrower has the option to (a) value such Unquoted Investment at the lower of (i) the value established by the Approved Third-Party Appraiser selected by the Administrative Agent as of the last Administrative Agent Appraisal Testing Month, applied to the current principal balance or (ii) the Board of Directors current value; and/or (b) request that the Approved Third-Party Appraiser selected by the Administrative Agent re-value such Unquoted Investment (and then value such Unquoted Investment at such re-valued value). If the Borrower complies with the foregoing, the Administrative Agent shall not cause the valuation of any further Unquoted Investments for the relevant quarter.
(z) For the avoidance of doubt, the valuation of any Approved Third-Party Appraiser selected by the Administrative Agent would not be as of, or delivered at, the end of any fiscal quarter. Any such valuation would be as of the end of the second month immediately following any fiscal quarter (the Administrative Agent Appraisal Testing Month) and would be reflected in the Borrowing Base Certificate for such month (provided that such Approved Third-Party Appraiser delivers such valuation at least seven (7) Business Days before the 20th day after the end of the applicable monthly accounting period and, if such valuation is delivered after such time, it shall be included in the Borrowing Base Certificate for the following monthly period and applied to the then applicable balance of the related Portfolio Investment). For illustrative purposes, if the given fiscal quarter is the fourth quarter ending on December 31, 2011, then (A) the Administrative Agent would initiate the testing of Values (using the December 31, 2011 Calculation Values for purposes of determining the scope of the testing under clauses (E)(x) and
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(E)(y)) during the month of February with the anticipation of receiving the valuations from the applicable Approved Third-Party Appraiser(s) on or after February 28, 2012 and (B)(xx) if such valuations were received before the 7th Business Day before March 20, 2012, such valuations would be included in the March 20, 2012 Borrowing Base Certificate covering the month of February, or (yy) if such valuations were received after such time, they would be included in the April 20, 2012 Borrowing Base Certificate for the month of March.
For the avoidance of doubt, all calculations of value pursuant to this Section 5.12(b)(ii)(E) shall be determined without application of the Advance Rates.
(F) Valuation Dispute Resolution. Notwithstanding the foregoing, the Administrative Agent shall at any time have the right to request any Portfolio Investment with a value assigned by the Borrower pursuant to Section 5.12(b)(ii)(B) be independently valued by an Approved Third-Party Appraiser retained by the Administrative Agent. There shall be no limit on the number of such appraisals requested by the Administrative Agent and the reasonable and documented out-of-pocket costs of any such valuation shall be at the expense of the Borrower. If the difference between the Borrowers valuation pursuant to Section 5.12(b)(ii)(B) and the valuation of any Approved Third-Party Appraiser retained by the Administrative Agent pursuant to Section 5.12(b)(ii)(E) or (F) is (1) less than 5% of the value thereof, then the Borrowers valuation shall be used, (2) between 5% and 20% of the value thereof, then the valuation of such Portfolio Investment shall be the average of the value determined by the Borrower and the value determined by the Approved Third-Party Appraiser retained by the Administrative Agent and (3) greater than 20% of the value thereof, then the Borrower and the Administrative Agent shall retain an additional Approved Third-Party Appraiser and the valuation of such Portfolio Investment shall be the average of the three valuations (with the Administrative Agents Approved Third-Party Appraisers valuation to be used until the third valuation is obtained).
(c) Investment Company Diversification and Tax Requirements. The Borrower will, and will cause its Subsidiaries (other than Financing Subsidiaries that are exempt from the Investment Company Act) at all times to (i) comply in all material respects with the portfolio diversification and similar requirements set forth in the Investment Company Act applicable to business development companies and (ii) subject to applicable grace periods set forth in the Code, comply with the portfolio diversification and similar requirements set forth in the Code applicable to RICs.
(d) Commitments under Portfolio Investments. The Borrower will, and will cause its Subsidiaries to, acquire Portfolio Investments (it being understood that neither (x) the receipt of Portfolio Investments as part of a restructuring or workout nor (y) any new or additional borrowing under an existing Portfolio Investment shall constitute an acquisition of such Portfolio Investments) constituting revolving credit facilities or delayed draw term loans with revolving or future commitments only if the aggregate commitments or future commitments
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under such revolving credit facilities or delayed draw term loans (excluding discretionary future commitments, such as accordions and commitment increase options) does not exceed (i) prior to the Commitment Termination Date, 20% of the aggregate Commitment amount at the time of acquisition and (ii) following the Commitment Termination Date, 20% of the Revolving Credit Exposure at the time of acquisition.
SECTION 5.13. Calculation of Borrowing Base. For purposes of this Agreement, the Borrowing Base shall be determined, as at any date of determination, as the sum of the Advance Rates of the Value of each Portfolio Investment (excluding any Cash Collateral held by the Administrative Agent pursuant to Section 2.05(k) or the last paragraph of Section 2.09(a)); provided that:
(a) the Advance Rate applicable to that portion of the aggregate Value of the Portfolio Investments in a consolidated group of corporations or other entities (collectively, a Consolidated Group), in accordance with GAAP, that exceeds 10% of Shareholders Equity of the Borrower (which, for purposes of this calculation shall exclude the aggregate amount of investments in, and advances to, Financing Subsidiaries) shall be 50% of the Advance Rate otherwise applicable; provided that, with respect to the Portfolio Investments in a single Consolidated Group designated by the Borrower to the Administrative Agent such 10% figure shall be increased to 12.5%;
(b) the Advance Rate applicable to that portion of the aggregate Value of the Portfolio Investments of all issuers in a Consolidated Group exceeding 20% of Shareholders Equity of the Borrower (which, for purposes of this calculation shall exclude the aggregate amount of investments in, and advances to, Financing Subsidiaries) shall be 0%;
(c) the Advance Rate applicable to that portion of the aggregate Value of the Portfolio Investments in any single Industry Classification Group that exceeds 20% of Shareholders Equity of the Borrower (which for purposes of this calculation shall exclude the aggregate amount of investments in, and advances to, Financing Subsidiaries) shall be 0%; provided that, with respect to the Portfolio Investments in a single Industry Classification Group from time to time designated by the Borrower to the Administrative Agent such 20% figure shall be increased to 30% and, accordingly, only to the extent that the Value for such single Industry Classification Group exceeds 30% of the Shareholders Equity shall the Advance Rate applicable to such excess Value be 0%;
(d) no Portfolio Investment may be included in the Borrowing Base unless the Collateral Agent maintains a first priority, perfected Lien (subject to Permitted Liens) on such Portfolio Investment and such Portfolio Investment has been Delivered (as defined in the Guarantee and Security Agreement) to the Collateral Agent, and then only for so long as such Portfolio Investment continues to be Delivered as contemplated therein;
(e) the portion of the Borrowing Base attributable to Performing Non-Cash Pay High Yield Securities, Performing Non-Cash Pay Mezzanine Investments, Equity Interests and Non-Performing Portfolio Investments shall not exceed 25%;
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(f) the portion of the Borrowing Base attributable to Equity Interests shall not exceed 15% (it being understood that in no event shall Equity Interests of Financing Subsidiaries be included in the Borrowing Base);
(g) the portion of the Borrowing Base attributable to Non-Performing Portfolio Investments shall not exceed 15% and the portion of the Borrowing Base attributable to Portfolio Investments that were Non-Performing Portfolio Investments at the time such Portfolio Investments were acquired shall not exceed 5%; and
(h) the portion of the Borrowing Base attributable to Portfolio Investments invested outside the United States, Canada, the United Kingdom, Australia, Germany, France, Belgium, the Netherlands, Luxembourg, Switzerland, Denmark, Finland, Norway and Sweden shall not exceed 5% without the consent of the Administrative Agent.
As used herein, the following terms have the following meanings:
Advance Rate means, as to any Portfolio Investment and subject to adjustment as provided in Section 5.13(a), (b) and (c), the following percentages with respect to such Portfolio Investment:
Portfolio Investment |
Quoted | Unquoted | ||||||
Cash, Cash Equivalents and Short-Term U.S. Government Securities |
100 | % | n.a. | |||||
Long-Term U.S. Government Securities |
95 | % | n.a. | |||||
Performing First Lien Bank Loans |
85 | % | 75 | % | ||||
Performing Second Lien Bank Loans |
75 | % | 65 | % | ||||
Performing Cash Pay High Yield Securities |
70 | % | 60 | % | ||||
Performing Cash Pay Mezzanine Investments |
65 | % | 55 | % | ||||
Performing Non-Cash Pay High Yield Securities |
60 | % | 50 | % | ||||
Performing Non-Cash Pay Mezzanine Investments |
55 | % | 45 | % | ||||
Non-Performing First Lien Bank Loans |
45 | % | 45 | % | ||||
Non-Performing Second Lien Bank Loans |
40 | % | 35 | % | ||||
Non-Performing High Yield Securities |
30 | % | 30 | % | ||||
Non-Performing Mezzanine Investments |
30 | % | 25 | % | ||||
Performing Common Equity |
30 | % | 20 | % | ||||
Non-Performing Common Equity |
0 | % | 0 | % | ||||
Structured Finance Obligations and Finance Leases |
0 | % | 0 | % |
Bank Loans means debt obligations (including term loans, revolving loans, debtor-in-possession financings, the funded and unfunded portion of revolving credit lines and letter of credit facilities and other similar loans and investments including interim loans and senior subordinated loans) which are generally under a syndicated loan or credit facility.
Capital Stock of any Person means any and all shares of corporate stock (however designated) of and any and all other Equity Interests and participations representing ownership interests (including membership interests and limited liability company interests) in, such Person.
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Cash has the meaning assigned to such term in Section 1.01 of the Credit Agreement.
Cash Equivalents has the meaning assigned to such term in Section 1.01 of the Credit Agreement.
First Lien Bank Loan means a Bank Loan that is entitled to the benefit of a first lien and first priority perfected security interest on a substantial portion of the assets of the respective borrower and guarantors obligated in respect thereof.
High Yield Securities means debt Securities and Preferred Stock, in each case (a) issued by public or private issuers, (b) issued pursuant to an effective registration statement or pursuant to Rule 144A under the Securities Act (or any successor provision thereunder) and (c) that are not Cash Equivalents, Mezzanine Investments or Bank Loans.
Long-Term U.S. Government Securities means U.S. Government Securities maturing more than one year from the applicable date of determination.
Mezzanine Investments means debt Securities (including convertible debt Securities (other than the in-the-money equity component thereof)) and Preferred Stock in each case (a) issued by public or private issuers, (b) issued without registration under the Securities Act, (c) not issued pursuant to Rule 144A under the Securities Act (or any successor provision thereunder), (d) that are not Cash Equivalents and (e) contractually subordinated in right of payment to other debt of the same issuer.
Non-Performing Common Equity means Capital Stock (other than Preferred Stock) and warrants of an issuer having any debt outstanding that is non-Performing.
Non-Performing First Lien Bank Loans means First Lien Bank Loans other than Performing First Lien Bank Loans.
Non-Performing High Yield Securities means High Yield Securities other than Performing High Yield Securities.
Non-Performing Mezzanine Investments means Mezzanine Investments other than Performing Mezzanine Investments.
Non-Performing Portfolio Investment means Portfolio Investments for which the issuer is in default of any payment obligations of principal or interest in respect thereof after the expiration of any applicable grace period.
Non-Performing Second Lien Bank Loans means Second Lien Bank Loans other than Performing Second Lien Bank Loans.
Performing means (a) with respect to any Portfolio Investment that is debt (or any other debt), the issuer of such Portfolio Investment (or other debt) is not in default of any payment obligations of principal or interest in respect thereof after the expiration of any applicable grace period and (b) with respect to any Portfolio Investment that is Preferred Stock, the issuer of such Portfolio Investment has not failed to meet any scheduled redemption obligations or to pay its latest declared cash dividend, after the expiration of any applicable grace period.
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Performing Cash Pay High Yield Securities means High Yield Securities (a) as to which, at the time of determination, not less than 2/3rds of the interest (including accretions and pay-in-kind interest) for the current monthly, quarterly, semiannual or annual period (as applicable) is payable in cash and (b) which are Performing.
Performing Cash Pay Mezzanine Investments means Mezzanine Investments (a) as to which, at the time of determination, not less than 2/3rds of the interest (including accretions and pay-in-kind interest) for the current monthly, quarterly, semi-annual or annual period (as applicable) is payable in cash and (b) which are Performing.
Performing Common Equity means Capital Stock (other than Preferred Stock) and warrants of an issuer all of whose outstanding debt is Performing.
Performing First Lien Bank Loans means First Lien Bank Loans which are Performing.
Performing Non-Cash Pay High Yield Securities means Performing High Yield Securities other than Performing Cash Pay High Yield Securities.
Performing Non-Cash Pay Mezzanine Investments means Performing Mezzanine Investments other than Performing Cash Pay Mezzanine Investments.
Performing Second Lien Bank Loans means Second Lien Bank Loans which are Performing.
Preferred Stock, as applied to the Capital Stock of any Person, means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to any shares (or other interests) of other Capital Stock of such Person, and shall include, without limitation, cumulative preferred, non-cumulative preferred, participating preferred and convertible preferred Capital Stock.
Second Lien Bank Loan means a Bank Loan that is entitled to the benefit of a second lien and second priority perfected security interest on a substantial portion of the assets of the respective Borrower and guarantors obligated in respect thereof.
Securities means common and preferred stock, units and participations. Member interests in limited liability companies, partnership interests in partnerships, notes, bonds, debentures, trust receipts and other obligations. instruments or evidences of indebtedness, including debt instruments of public and private issuers and tax-exempt securities (including warrants, rights, put and call options and other options relating thereto, representing rights, or any combination thereof) and other property or interests commonly regarded as securities or any form of interest or participation therein, but not including Bank Loans.
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Securities Act means the United States Securities Act of 1933, as amended.
Short-Term U.S. Government Securities means U.S. Government Securities maturing within one year of the applicable date of determination.
Structured Finance Obligation means any obligation issued by a special purpose vehicle and secured directly by, referenced to, or representing ownership of, a pool of receivables or other financial assets of any obligor, including collateralized debt obligations and mortgaged-backed securities. For the avoidance of doubt, if an obligation satisfies the definition of Structured Finance Obligation, such obligation shall not (a) qualify as any other category of Portfolio Investment and (b) be included in the Borrowing Base.
U.S. Government Securities has the meaning assigned to such term in Section 1.01.
Value means, with respect to any Portfolio Investment, the lower of:
(i) the most recent internal market value as determined pursuant to Section 5.12(b)(ii)(C) and
(ii) the most recent external market value as determined pursuant to Section 5.12(b)(ii)(A) and (B).
ARTICLE VI
NEGATIVE COVENANTS
Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired, been terminated, Cash Collateralized or backstopped and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:
SECTION 6.01. Indebtedness. Subject to the last sentence of this Section 6.01, the Borrower will not nor will it permit any of its Subsidiaries to, create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness created hereunder;
(b) Secured Longer-Term Indebtedness and Unsecured Longer-Term Indebtedness so long as (i) no Default or Event of Default exists at the time of the incurrence thereof, (ii) the aggregate amount of such Secured Longer-Term Indebtedness and Unsecured Longer-Term Indebtedness, taken together with other then-outstanding Indebtedness, does not exceed the amount required to comply with the provisions of Section 6.07(b), and (iii) prior to and immediately after giving effect to the incurrence of any Secured Longer-Term Indebtedness, the Covered Debt Amount does not or would not exceed the Borrowing Base then in effect;
(c) Other Permitted Indebtedness;
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(d) Indebtedness of Financing Subsidiaries;
(e) repurchase obligations arising in the ordinary course of business with respect to U.S. Government Securities;
(f) obligations payable to clearing agencies, brokers or dealers in connection with the purchase or sale of securities in the ordinary course of business;
(g) Secured Shorter-Term Indebtedness and Unsecured Shorter-Term Indebtedness so long as (i) no Default or Event of Default exists at the time of the incurrence thereof, (ii) the aggregate amount (determined at the time of the incurrence of such Indebtedness) of such Indebtedness does not exceed 5% of Shareholders Equity, (iii) the aggregate amount of such Indebtedness, taken together with other then-outstanding Indebtedness, does not exceed the amount required to comply with the provisions of Sections 6.07(b) and (d), and (iv) prior to and immediately after giving effect to the incurrence of any such Indebtedness, the Covered Debt Amount does not or would not exceed the Borrowing Base then in effect;
(h) obligations (including Guarantees) in respect of Standard Securitization Undertakings;
(i) Permitted SBIC Guarantees; and
(j) other Indebtedness not to exceed $1,000,000 at any time.
Notwithstanding the foregoing provisions of this Section, the Borrower will not nor will it permit any of its Subsidiaries to, create, incur, assume or permit to exist any additional Indebtedness (other than Indebtedness permitted under clauses (c), (e), (f), (h) and (i)) unless, after giving effect to such Indebtedness, (x) Shareholders Equity plus Secured Longer-Term Indebtedness plus Unsecured Longer Term Indebtedness plus aggregate undrawn commitments with terms in excess of sixth months exceeds (y) the Value of the Portfolio Investments that cannot be converted to Cash in fewer than 10 Business Days without more than a 5% change in price.
SECTION 6.02. Liens. The Borrower will not, nor will it permit any of its Subsidiaries to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof except:
(a) any Lien on any property or asset of the Borrower existing on the date hereof and set forth in Part B of Schedule 3.11; provided that (i) no such Lien shall extend to any other property or asset of the Borrower or any of its Subsidiaries, and (ii) any such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;
(b) Liens created pursuant to this Agreement (including Section 2.19) or any of the Security Documents (including Liens in favor of the Designated Indebtedness Holders (as defined in the Guarantee and Security Agreement));
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(c) Liens on the assets of a Financing Subsidiary securing obligations of such Financing Subsidiary;
(d) Liens on Special Equity Interests included in the Portfolio Investments of the Borrower but only to the extent securing obligations in the manner provided in the definition of Special Equity Interests in Section 1.01;
(e) Liens securing Indebtedness or other obligations in an aggregate principal amount not exceeding $10,000,000 at any one time outstanding (which may cover Portfolio Investments, but only to the extent released from the Lien in favor of the Collateral Agent in accordance with the requirements of Section 10.03 of the Guarantee and Security Agreement), so long as at the time of incurrence of such Indebtedness or other obligations, the aggregate amount of Indebtedness permitted under clauses (a), (b) and (g) of Section 6.01, does not exceed the lesser of (i) the Borrowing Base and (ii) the amount required to comply with the provisions of Section 6.07(b);
(f) Permitted Liens; and
(g) Liens on Equity Interests in any SBIC Subsidiary created in favor of the SBA.
SECTION 6.03. Fundamental Changes. The Borrower will not, nor will it permit any of its Subsidiaries (other than Financing Subsidiaries or Immaterial Subsidiaries) to, enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution). The Borrower will not, nor will it permit any of its Subsidiaries (other than Financing Subsidiaries) to, acquire any business or property from, or capital stock of, or be a party to any acquisition of, any Person, except for purchases or acquisitions of Portfolio Investments and other assets in the normal course of the day-to-day business activities of the Borrower and its Subsidiaries and not in violation of the terms and conditions of this Agreement or any other Loan Document. The Borrower will not, nor will it permit any of its Subsidiaries (other than Financing Subsidiaries or Immaterial Subsidiaries) to, convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, any part of its assets, whether now owned or hereafter acquired, but excluding (x) assets (other than Portfolio Investments) sold or disposed of in the ordinary course of business (including to make expenditures of cash in the normal course of the day-to-day business activities of the Borrower and its Subsidiaries) and (y) subject to the provisions of clauses (d) and (e) below, Portfolio Investments.
Notwithstanding the foregoing provisions of this Section:
(a) any Subsidiary Guarantor of the Borrower may be merged or consolidated with or into the Borrower or any other Subsidiary Guarantor; provided that if any such transaction shall be between a Subsidiary Guarantor and a wholly owned Subsidiary Guarantor, the wholly owned Subsidiary Guarantor shall be the continuing or surviving corporation;
(b) any Subsidiary of the Borrower may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any wholly owned Subsidiary Guarantor of the Borrower;
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(c) the capital stock of any Subsidiary of the Borrower may be sold, transferred or otherwise disposed of to the Borrower or any wholly owned Subsidiary Guarantor of the Borrower;
(d) the Obligors may sell, transfer or otherwise dispose of Portfolio Investments (other than to a Financing Subsidiary) so long as after giving effect to such sale, transfer or other disposition (and any concurrent acquisitions of Portfolio Investments or payment of outstanding Loans or Other Covered Indebtedness) the Covered Debt Amount does not exceed the Borrowing Base;
(e) the Obligors may sell, transfer or otherwise dispose of Portfolio Investments to a Financing Subsidiary so long as (i) after giving effect to such sale, transfer or other disposition (and any concurrent acquisitions of Portfolio Investments or payment of outstanding Loans or Other Covered Indebtedness) the Covered Debt Amount does not exceed the Borrowing Base and the Borrower delivers to the Administrative Agent a certificate of a Financial Officer to such effect and (ii) either (x) the amount by which the Borrowing Base exceeds the Covered Debt Amount immediately prior to such release is not diminished as a result of such release or (y) the Borrowing Base immediately after giving effect to such release is at least 110% of the Covered Debt Amount;
(f) the Borrower may merge or consolidate with any other Person so long as (i) the Borrower is the continuing or surviving entity in such transaction and (ii) at the time thereof and after giving effect thereto, no Default shall have occurred or be continuing; and
(g) the Borrower and its Subsidiaries may sell, lease, transfer or otherwise dispose of equipment or other property or assets that do not consist of Portfolio Investments so long as the aggregate amount of all such sales, leases, transfer and dispositions does not exceed $5,000,000 in any fiscal year.
SECTION 6.04. Investments. The Borrower will not, nor will it permit any of its Subsidiaries to, acquire, make or enter into, or hold, any Investments except:
(a) operating deposit accounts with banks;
(b) Investments by the Borrower and the Subsidiary Guarantors in the Borrower and the Subsidiary Guarantors;
(c) Hedging Agreements entered into in the ordinary course of the Borrowers financial planning and not for speculative purposes;
(d) Portfolio Investments by the Borrower and its Subsidiaries to the extent such Portfolio Investments are permitted under the Investment Company Act and the Borrowers Investment Policies;
(e) Investments in Financing Subsidiaries so long as, (i) after giving effect to such Investment, the Covered Debt Amount does not exceed the Borrowing Base and (ii) the sum of (x) all Investments under this clause (e) that occur after the Commitment Termination Date and (y) all Investments under clause (f) below that occur after the Commitment Termination Date, shall not exceed $5,000,000 in the aggregate;
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(f) additional Investments up to but not exceeding $50,000,000 in the aggregate; provided that the sum of (x) all Investments under this clause (f) that occur after the Commitment Termination Date and (y) all Investments under clause (e) above that occur after the Commitment Termination Date, shall not exceed $5,000,000 in the aggregate;
(g) Investments in Cash and Cash Equivalents;
(h) Investments described on Schedule 3.12(b); and
(i) Investments by a Financing Subsidiary.
For purposes of clause (f) of this Section, the aggregate amount of an Investment at any time shall be deemed to be equal to (A) the aggregate amount of cash, together with the aggregate fair market value of property, loaned, advanced, contributed, transferred or otherwise invested that gives rise to such Investment minus (B) the aggregate amount of dividends, distributions or other payments received in cash in respect of such Investment; provided that in no event shall the aggregate amount of such Investment be deemed to be less than zero; the amount of an Investment shall not in any event be reduced by reason of any write-off of such Investment nor increased by any increase in the amount of earnings retained in the Person in which such Investment is made that have not been dividended, distributed or otherwise paid out.
SECTION 6.05. Restricted Payments. The Borrower will not, nor will it permit any of its Subsidiaries (other than Financing Subsidiaries) to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except that the Borrower may declare and pay:
(a) dividends with respect to the capital stock of the Borrower payable solely in additional shares of the Borrowers common stock;
(b) dividends and distributions in either case in cash or other property (excluding for this purpose the Borrowers common stock) in any taxable year of the Borrower in amounts not to exceed the amount that is estimated in good faith by the Borrower to be required to (i) reduce to zero for such taxable year or for the previous taxable year, its investment company taxable income (within the meaning of Section 852(b)(2) of the Code) and reduce to zero the tax imposed by Section 852(b)(3) of the Code, and (ii) avoid federal excise taxes for such taxable year imposed by Section 4982 of the Code;
(c) dividends and distributions in each case in cash or other property (excluding for this purpose the Borrowers common stock) in addition to the dividends and distributions permitted under the foregoing clauses (a) and (b), so long as on the date of such Restricted Payment and after giving effect thereto:
(i) no Default shall have occurred and be continuing; and
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(ii) the aggregate amount of Restricted Payments made during any taxable year of the Borrower after the date hereof under this clause (c) shall not exceed the sum of (x) an amount equal to 10% of the taxable income of the Borrower for such taxable year determined under section 852(b)(2) of the Code, but without regard to subparagraphs (A), (B) or (D) thereof, minus (y) the amount, if any, by which dividends and distributions made during such taxable year pursuant to the foregoing clause (b) (whether in respect of such taxable year or the previous taxable year) based upon the Borrowers estimate of taxable income exceeded the actual amounts specified in subclauses (i) and (ii) of such foregoing clause (b) for such taxable year.
(d) other Restricted Payments so long as (i) on the date of such other Restricted Payment and after giving effect thereto (x) the Covered Debt Amount does not exceed 90% of the Borrowing Base and (y) no Default shall have occurred and be continuing and (ii) on the date of such other Restricted Payment the Borrower delivers to the Administrative Agent and each Lender a Borrowing Base Certificate as at such date demonstrating compliance with subclause (x) after giving effect to such Restricted Payment. For purposes of preparing such Borrowing Base Certificate, (A) the fair market value of Portfolio Investments for which market quotations are readily available shall be the most recent quotation available for such Portfolio Investment and (B) the fair market value of Portfolio Investments for which market quotations are not readily available shall be the Value set forth in the Borrowing Base Certificate most recently delivered by the Borrower to the Administrative Agent and the Lenders pursuant to Section 5.01(d); provided that the Borrower shall reduce the Value of any Portfolio Investment referred to in this sub-clause (B) to the extent necessary to take into account any events of which the Borrower has knowledge that adversely affect the value of such Portfolio Investment.
Nothing herein shall be deemed to prohibit the payment of Restricted Payments by any Subsidiary of the Borrower to the Borrower or to any other Subsidiary Guarantor.
SECTION 6.06. Certain Restrictions on Subsidiaries. The Borrower will not permit any of its Subsidiaries (other than Financing Subsidiaries) to enter into or suffer to exist any indenture, agreement, instrument or other arrangement that prohibits or restrains, in each case in any material respect, or imposes materially adverse conditions upon, the incurrence or payment of Indebtedness, the granting of Liens, the declaration or payment of dividends, the making of loans, advances, guarantees or Investments or the sale, assignment, transfer or other disposition of property except for any prohibitions or restraints contained in (i) any Indebtedness permitted under Section 6.01(b) or (g); provided that any such prohibition or reservation set forth therein does not prohibit the performance by the Borrower or its Subsidiaries of their obligations under this Agreement, (ii) any Indebtedness permitted under Section 6.01(c) secured by a Lien permitted under Section 6.02 provided that such prohibitions and restraints are applicable by their terms only to the assets that are subject to such Lien and (iii) any Indebtedness permitted under Section 6.01(e) or (f) secured by a Permitted Lien provided that such prohibitions and restraints are applicable by their terms only to the assets that are subject to such Lien.
SECTION 6.07. Certain Financial Covenants.
(a) Minimum Shareholders Equity. The Borrower will not permit Shareholders Equity at the last day of any fiscal quarter of the Borrower to be less
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than $220,000,000 plus 25% of the net proceeds of the sale of Equity Interests by the Borrower and its Subsidiaries after the Effective Date (other than proceeds of sales of Equity Interests by and among the Borrower and its Subsidiaries).
(b) Asset Coverage Ratio. The Borrower will not permit the Asset Coverage Ratio to be less than 2.00 to 1 at any time.
(c) Liquidity Test. The Borrower will not permit the aggregate Value of the Portfolio Investments that are Cash (excluding Cash Collateral for outstanding Letters of Credit) or that can be converted to Cash in fewer than 10 Business Days without more than a 5% change in price to be less than 15% of the Covered Debt Amount for more than 30 Business Days during any period when the Adjusted Covered Debt Balance is greater than 85% of the Adjusted Borrowing Base.
(d) Debt to Total Assets Ratio. Prior to the Commitment Termination Date, the Borrower will not permit the Secured Debt Amount to exceed 40% of the Value of all assets (including Portfolio Investments prepayments of the Borrower), determined on an unconsolidated basis, in accordance with GAAP.
SECTION 6.08. Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to enter into any transactions with any of its Affiliates, even if otherwise permitted under this Agreement, except (a) transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary (other than a SBIC Subsidiary) than could be obtained on an arms-length basis from unrelated third parties, (b) transactions between or among the Borrower and its Subsidiaries not involving any other Affiliate, (c) Restricted Payments permitted by Section 6.05, (d) the transactions provided in the Affiliate Agreements, (e) transactions described on Schedule 6.08, (f) any Investment that results in the creation of an Affiliate or (g) transactions between or among the Obligors and any SBIC Subsidiary or any downstream affiliate (as such term is used under the rules promulgated under the Investment Company Act) company of an Obligor at prices and on terms and conditions not less favorable to the Obligors than could be obtained at the time on an arms-length basis from unrelated third parties.
SECTION 6.09. Lines of Business. The Borrower will not, nor will it permit any of its Subsidiaries (other than Immaterial Subsidiaries) to, engage to any material extent in any business other than in accordance with its Investment Policies. The Borrower will not, nor will it permit any of its Subsidiaries to amend or modify the Investment Policies (other than a Permitted Policy Amendment).
SECTION 6.10. No Further Negative Pledge. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any agreement, instrument, deed or lease which prohibits or limits the ability of any Obligor to create, incur, assume or suffer to exist any Lien upon any of its properties, assets or revenues, whether now owned or hereafter acquired, or which requires the grant of any security for an obligation if security is granted for another obligation, except the following: (a) this Agreement, the other Loan Documents and documents with respect to Indebtedness permitted under Section 6.01(b) or (g); (b) covenants in documents creating Liens permitted by Section 6.02 (including covenants with respect to the Designated
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Indebtedness Obligations or Designated Indebtedness Holders under (and, in each case, as defined in) the Security Documents) prohibiting further Liens on the assets encumbered thereby; (c) customary restrictions contained in leases not subject to a waiver; and (d) any other agreement that does not restrict in any manner (directly or indirectly) Liens created pursuant to the Loan Documents on any Collateral securing the Secured Obligations under and as defined in the Guarantee and Security Agreement and does not require the direct or indirect granting of any Lien securing any Indebtedness or other obligation by virtue of the granting of Liens on or pledge of property of any Obligor to secure the Loans or any Hedging Agreement.
SECTION 6.11. Modifications of Longer-Term Indebtedness Documents. The Borrower will not consent to any modification, supplement or waiver of:
(a) any of the provisions of any agreement, instrument or other document evidencing or relating to any Secured Longer-Term Indebtedness or Unsecured Longer-Term Indebtedness that would result in such Indebtedness not meeting the requirements of the definition of Secured Longer-Term Secured Indebtedness and Unsecured Longer-Term Indebtedness, as applicable, set forth in Section 1.01 of this Agreement, unless (i) in the case of Secured Longer Term Indebtedness, such Indebtedness would have been permitted to be incurred as Secured Shorter-Term Indebtedness at the time of such modification, supplement or waiver and the Borrower so designates such Indebtedness as Secured Shorter-Term Indebtedness (whereupon such Indebtedness shall be deemed to constitute Secured Shorter-Term Indebtedness for all purposes of this Agreement) and (ii) in the case of Unsecured Longer-Term Indebtedness, such Indebtedness would have been permitted to be incurred as Unsecured Shorter-Term Indebtedness at the time of such modification, supplement or waiver and the Borrower so designates such Indebtedness as Unsecured Shorter-Term Indebtedness (whereupon such Indebtedness shall be deemed to constitute Unsecured Shorter-Term Indebtedness for all purposes of this Agreement); or
(b) any of the Affiliate Agreements, unless such modification, supplement or waiver is not materially less favorable to the Borrower than could be obtained on an arms-length basis from unrelated third parties, in each case, without the prior consent of the Administrative Agent (with the approval of the Required Lenders).
SECTION 6.12. Payments of Longer-Term Indebtedness. The Borrower will not, nor will it permit any of its Subsidiaries (other than Financing Subsidiaries) to, purchase, redeem, retire or otherwise acquire for value, or set apart any money for a sinking, defeasance or other analogous fund for the purchase, redemption, retirement or other acquisition of or make any voluntary payment or prepayment of the principal of or interest on, or any other amount owing in respect of, any Secured Longer-Term Indebtedness or Unsecured Longer-Term Indebtedness (other than the refinancing of Secured Longer-Term Indebtedness or Unsecured Longer-Term Indebtedness with Indebtedness permitted under Section 6.01), except for (a) regularly scheduled payments, prepayments or redemptions of principal and interest in respect thereof required pursuant to the instruments evidencing such Indebtedness (it being understood that none of: (w) the conversion features under convertible notes; (x) the triggering and/or settlement thereof; or (y) any cash payment made in respect thereof, shall constitute a regularly scheduled payment, prepayment or redemption of principal and interest within the meaning of this clause (a)), or (b) voluntary payments or prepayments of Secured Longer-Term
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Indebtedness, so long as both before and after giving effect to such voluntary payment or prepayment (i) the Borrower is in pro forma compliance with the financial covenants set forth in Section 6.07 and (ii) no Default or Event of Default shall exist or be continuing.
SECTION 6.13. Accounting Changes. The Borrower will not, nor will it permit any of its Subsidiaries to, make any change in (a) accounting policies or reporting practices, except as permitted under GAAP or required by law or rule or regulation of any Governmental Authority, or (b) fiscal year.
SECTION 6.14. SBIC Guarantee. The Borrower will not, nor will it permit any of its Subsidiaries to, cause or permit the occurrence of any event or condition that would result in any recourse to any Obligor under any Permitted SBIC Guarantee.
ARTICLE VII
EVENTS OF DEFAULT
If any of the following events (Events of Default) shall occur and be continuing:
(a) the Borrower shall (i) fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise or (ii) fail to deposit any amount into the Letter of Credit Collateral Account as required by Section 2.09(a) on the Commitment Termination Date;
(b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or under any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five or more Business Days;
(c) any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries in or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof, shall prove to have been incorrect when made or deemed made in any material respect;
(d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in (i) Section 5.03 (with respect to the Borrowers existence) or Sections 5.08(a) and (b) or in Article VI or any Obligor shall default in the performance of any of its obligations contained in Section 7 of the Guarantee and Security Agreement or (ii) Sections 5.01(e) and (f) or 5.02 and such failure shall continue unremedied for a period of five or more days after notice thereof by the Administrative Agent (given at the request of any Lender) to the Borrower;
(e) a Borrowing Base Deficiency shall occur and continue unremedied for a period of five or more Business Days after delivery of a Borrowing Base Certificate
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demonstrating such Borrowing Base Deficiency pursuant to Section 5.01(e); provided that it shall not be an Event of Default hereunder if the Borrower shall present the Administrative Agent with a reasonably feasible plan acceptable to the Administrative Agent in its sole discretion to enable such Borrowing Base Deficiency to be cured within 30 Business Days (which 30-Business Day period shall include the five Business Days permitted for delivery of such plan), so long as such Borrowing Base Deficiency is cured within such 30-Business Day period;
(f) the Borrower or any Obligor, as applicable, shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b), (d), (e) or (r) of this Article) or any other Loan Document and such failure shall continue unremedied for a period of 30 or more days after notice thereof from the Administrative Agent (given at the request of any Lender) to the Borrower;
(g) the Borrower or any of its Subsidiaries shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable, taking into account any applicable grace period;
(h) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (h) shall not apply to (1) secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; or (2) convertible debt that becomes due as a result of a conversion or redemption event, other than as a result of an event of default (as defined in the documents governing such convertible Material Indebtedness);
(i) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any of its Subsidiaries (other than Immaterial Subsidiaries) or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of its Subsidiaries (other than Immaterial Subsidiaries) or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed and unstayed for a period of 60 or more days or an order or decree approving or ordering any of the foregoing shall be entered;
(j) the Borrower or any of its Subsidiaries (other than Immaterial Subsidiaries) shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (i) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of its Subsidiaries
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(other than Immaterial Subsidiaries) or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;
(k) the Borrower or any of its Subsidiaries (other than Immaterial Subsidiaries) shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;
(l) one or more judgments for the payment of money in an aggregate amount in excess of $10,000,000 shall be rendered against the Borrower or any of its Subsidiaries (other than Immaterial Subsidiaries) or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any of its Subsidiaries (other than Immaterial Subsidiaries) to enforce any such judgment;
(m) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;
(n) a Change in Control shall occur;
(o) PennantPark Investment Advisers, LLC or an Affiliate thereof shall cease to be the investment advisor for the Borrower;
(p) the Liens created by the Security Documents shall, at any time with respect to Portfolio Investments having an aggregate Value in excess of 5% of the aggregate Value of all Portfolio Investments, not be valid and perfected (to the extent perfection by filing, registration, recordation, possession or control is required herein or therein) in favor of the Administrative Agent, free and clear of all other Liens (other than Liens permitted under Section 6.02 or under the respective Security Documents) except to the extent that any such loss of perfection results from the failure of the Collateral Agent to maintain possession of the certificates representing the securities pledged under the Loan Documents;
(q) except for expiration in accordance with its terms, any of the Security Documents shall for whatever reason be terminated or cease to be in full force and effect in any material respect, or the enforceability thereof shall be contested by the Borrower;
(r) the Obligors shall at any time, without the consent of the Required Lenders fail to comply with the covenant contained in Section 5.11, and such failure shall continue unremedied for a period of 30 or more days after the earlier of notice thereof by the Administrative Agent (given at the request of any Lender) to the Borrower or knowledge thereof by a Financial Officer; or
(s) the Borrower or any of its Subsidiaries shall cause or permit the occurrence of any condition or event that would result in any recourse to any Obligor under any Permitted SBIC Guarantee;
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then, and in every such event (other than an event with respect to the Borrower described in clause (i) or (j) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder and under the other Loan Documents, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (i) or (j) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder and under the other Loan Documents, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.
In the event that the Loans shall be declared, or shall become, due and payable pursuant to the immediately preceding paragraph then, upon notice from the Administrative Agent or Lenders with LC Exposure representing more than 50% of the total LC Exposure demanding the deposit of Cash Collateral pursuant to this paragraph, the Borrower shall immediately deposit into the Letter of Credit Collateral Account cash in an amount equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (i) or (j) of this Article.
Notwithstanding anything to the contrary contained herein, on the CAM Exchange Date, to the extent not otherwise prohibited by law, (a) the Lenders shall automatically and without further act be deemed to have exchanged interests in the Designated Obligations such that, in lieu of the interests of each Lender in the Designated Obligations under each Loan in which it shall participate as of such date, such Lender shall own an interest equal to such Lenders CAM Percentage in the Designated Obligations under each of the Loans and (b) simultaneously with the deemed exchange of interests pursuant to clause (a) above, the interests in the Designated Obligations to be received in such deemed exchange shall, automatically and with no further action required, be converted into the Dollar Equivalent of such amount (as of the Business Day immediately prior to the CAM Exchange Date) and on and after such date all amounts accruing and owed to the Lenders in respect of such Designated Obligations shall accrue and be payable in Dollars at the rate otherwise applicable hereunder. Each Lender, each Person acquiring a participation from any Lender as contemplated by Section 9.04 and the Borrower hereby consents and agrees to the CAM Exchange. The Borrower and the Lenders agree from time to time to execute and deliver to the Administrative Agent all such promissory notes and other instruments and documents as the Administrative Agent shall reasonably request to evidence and confirm the respective interests and obligations of the Lenders after giving effect to the CAM Exchange, and each Lender agrees to surrender any promissory notes originally
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received by it in connection with its Loans hereunder to the Administrative Agent against delivery of any promissory notes so executed and delivered; provided that the failure of the Borrower to execute or deliver or of any Lender to accept any such promissory note, instrument or document shall not affect the validity or effectiveness of the CAM Exchange. As a result of the CAM Exchange, on and after the CAM Exchange Date, each payment received by the Administrative Agent pursuant to any Loan Document in respect of the Designated Obligations shall be distributed to the Lenders pro rata in accordance with their respective CAM Percentages (to be redetermined as of each such date of payment).
ARTICLE VIII
THE ADMINISTRATIVE AGENT
SECTION 8.01. Appointment of the Administrative Agent. Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent as its agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Collateral Agent as its agent hereunder and under the other Loan Documents and authorizes the Collateral Agent to take such actions on its behalf and to exercise such powers as are delegated to the Collateral Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.
SECTION 8.02. Capacity as Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such Person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.
SECTION 8.03. Limitation of Duties; Exculpation. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders, and (c) except as expressly set forth herein and in the other Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative
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Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein or therein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
SECTION 8.04. Reliance. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
SECTION 8.05. Sub-Agents. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such subagent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a count of competent jurisdiction determines in a final and non-appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.
SECTION 8.06. Resignation; Successor Administrative Agent. The Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right, with the consent of the Borrower not to be unreasonably withheld (or, if an Event of Default has occurred and is continuing in consultation with the Borrower), to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agents resignation shall nonetheless become effective and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and (2) the Required Lenders shall perform the duties of the Administrative Agent (and all payments and communications provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly) until such time as the Required Lenders appoint a successor agent as provided for above in this paragraph. Upon the acceptance of its appointment
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as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder (if not already discharged therefrom as provided above in this paragraph). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agents resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent.
Any resignation by SunTrust as Administrative Agent pursuant to this Section shall also constitute its resignation as Issuing Bank and Swingline Lender. Upon the acceptance of a successors appointment as Administrative Agent hereunder, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Issuing Bank and Swingline Lender, (b) the retiring Issuing Bank and Swingline Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor Issuing Bank shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to the retiring Issuing Bank to effectively assume the obligations of the retiring Issuing Bank with respect to such Letters of Credit.
SECTION 8.07. Reliance by Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such 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 Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. The Administrative Agent shall have no duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and the Administrative Agent shall have no responsibility with respect to the accuracy of or the completeness of any information provided to Lenders.
Each Lender, by delivering its signature page to this Agreement or any Assignment and Assumption and funding any Loan shall be deemed to have acknowledged receipt of, and consented to and approved, each Loan Document and each other document required to be approved by the Administrative Agent, Required Lenders or Lenders.
SECTION 8.08. Modifications to Loan Documents. Except as otherwise provided in Section 9.02(b) or (c) of this Agreement or the Security Documents with respect to this Agreement, the Administrative Agent may, with the prior consent of the Required Lenders (but not otherwise), consent to any modification, supplement or waiver under any of the Loan Documents; provided that, without the prior consent of each Lender, the Administrative Agent shall not (except as provided herein or in the Security Documents) release all or substantially all
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of the Collateral or otherwise terminate all or substantially all of the Liens under any Security Document providing for collateral security, agree to additional obligations being secured by all or substantially all of such collateral security, or alter the relative priorities of the obligations entitled to the benefits of the Liens created under the Security Documents with respect to all or substantially all of the Collateral, except that no such consent shall be required, and the Administrative Agent is hereby authorized, to release any Lien covering property that is the subject of either a disposition of property permitted hereunder or a disposition to which the Required Lenders have consented.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices; Electronic Communications.
(a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:
(i) if to the Borrower, to it at:
PennantPark Investment Corporation
590 Madison Avenue, 15th Floor
New York, New York 10022
Attention: Aviv Efrat, Chief Financial Officer
Telecopy Number: (212) 905-1075
Telephone: (212) 905-1000
(ii) if to the Administrative Agent or Swingline Lender, to it at:
SunTrust Bank
303 Peachtree Street, N. E.
Atlanta, Georgia 30308
Attention: Robert Ashcom
Telecopy Number: (404) 581-1775
with a copy to:
SunTrust Bank
Agency Services
303 Peachtree Street, N. E./ 25th Floor
Atlanta, Georgia 30308
Attention: Wanda Gregory
Telecopy Number: (404) 658-4906
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(iii) if to the Issuing Bank, to it at:
SunTrust Bank
303 Peachtree Street, N. E./ 25th Floor
Atlanta, Georgia 30308
Attention: Wanda Gregory
Telecopy Number: (404) 658-4906
(iv) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. Notices delivered through electronic communications to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).
(b) Electronic Communications. Notices and other communications to the Lenders and the Issuing Bank hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender or the Issuing Bank pursuant to Section 2.06 if such Lender or the Issuing Bank, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.
(i) Notices and other communications sent to an e-mail address shall be deemed received upon the senders receipt of an acknowledgement from the intended recipient (such as by the return receipt requested function, as available, return e-mail or other written acknowledgement); provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
Each party hereto understands that the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution and agrees and assumes the risks associated with such electronic distribution, except to the extent caused by the willful misconduct or gross negligence of Administrative Agent, any Lender or their respective Related Parties, as determined by a final, non-appealable judgment of a court of competent jurisdiction. The Platform and any electronic communications media approved by the Administrative Agent as provided herein are provided
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as is and as available. None of the Administrative Agent or its Related Parties warrant the accuracy, adequacy, or completeness of the such media or the Platform and each expressly disclaims liability for errors or omissions in the Platform and such media. No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects is made by the Administrative Agent and any of its Related Parties in connection with the Platform or the electronic communications media approved by the Administrative Agent as provided for herein.
(c) Private Side Information Contacts. Each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the Private Side Information or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lenders compliance procedures and applicable law, including United States federal and state securities laws, to make reference to information that is not made available through the Public Side Information portion of the Platform and that may contain Non-Public Information with respect to the Borrower, its Subsidiaries or their Securities for purposes of United States federal or state securities laws. In the event that any Public Lender has determined for itself to not access any information disclosed through the Platform or otherwise, such Public Lender acknowledges that (i) other Lenders may have availed themselves of such information and (ii) neither Borrower nor Administrative Agent has any responsibility for such Public Lenders decision to limit the scope of the information it has obtained in connection with this Agreement and the other Loan Documents.
(d) Documents to he Delivered under Sections 5.01 and 5.12(a). For so long as an Intralinks or equivalent website is available to each of the Lenders hereunder, the Borrower may satisfy its obligation to deliver documents to the Administrative Agent or the Lenders under Sections 5.01 and 5.12(a) by delivering one hard copy thereof to the Administrative Agent and either an electronic copy or a notice identifying the website where such information is located for posting by the Administrative Agent on Intralinks or such equivalent website; provided that the Administrative Agent shall have no responsibility to maintain access to Intralinks or an equivalent website.
SECTION 9.02. Waivers; Amendments.
(a) No Deemed Waivers Remedies Cumulative. No failure or delay by the Administrative Agent the Issuing Bank, the Swingline Lender or any Lender in exercising any right or power hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Bank, the Swingline Lender and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan, Swingline Loan or issuance of a Letter of Credit shall not
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be construed as a waiver of any Default, regardless of whether the Administrative Agent, the Swingline Lender, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time.
(b) Amendments to this Agreement. Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall
(i) increase the Commitment of any Lender without the written consent of such Lender,
(ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby,
(iv) change Section 2.17(b), (c) or (d) in a manner that would alter the pro rata sharing of payments, or making of disbursements, required thereby without the written consent of each Lender affected thereby, or
(v) change any of the provisions of this Section or the percentage in the definition of the term Required Lenders or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender affected thereby;
provided further that (x) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Issuing Bank or the Swingline Lender hereunder without the prior written consent of the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be and (y) the consent of Lenders holding not less than two-thirds of the Revolving Credit Exposure and unused Commitments will be required (A) for any adverse change affecting the provisions of this Agreement relating to the Borrowing Base (including the definitions used therein), or the provisions of Section 5.12(c)(ii), and (B) for any release of any material portion of the Collateral other than for fair value or as otherwise permitted hereunder or under the other Loan Documents.
Anything in this Agreement to the contrary notwithstanding, no waiver or modification of any provision of this Agreement or any other Loan Document that could reasonably be expected to adversely affect the Lenders of any Class in a manner that does not affect all Classes equally shall be effective against the Lenders of such Class unless the Required Lenders of such Class shall have concurred with such waiver or modification.
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(c) Amendments to Security Documents. No Security Document nor any provision thereof may be waived, amended or modified, nor may the Liens thereof be spread to secure any additional obligations (including any increase in Loans hereunder, but excluding any such increase pursuant to a Commitment Increase under Section 2.08(e) to an amount not greater than $600,000,000) except pursuant to an agreement or agreements in writing entered into by the Borrower, and by the Collateral Agent with the consent of the Required Lenders; provided that, (i) without the written consent of each Lender, no such agreement shall release all or substantially all of the Obligors from their respective obligations under the Security Documents and (ii) without the written consent of each Lender, no such agreement shall release all or substantially all of the collateral security or otherwise terminate all or substantially all of the Liens under the Security Documents, alter the relative priorities of the obligations entitled to the Liens created under the Security Documents (except in connection with securing additional obligations equally and ratably with the Loans and other obligations hereunder) with respect to all or substantially all of the collateral security provided thereby, or release all or substantially all of the guarantors under the Guarantee and Security Agreement from their guarantee obligations thereunder, except that no such consent shall be required, and the Administrative Agent is hereby authorized (and so agrees with the Borrower) to direct the Collateral Agent under the Guarantee and Security Agreement, to release any Lien covering property (and to release any such guarantor) that is the subject of either a disposition of property permitted hereunder or a disposition to which the Required Lenders have consented.
(d) Replacement of Non-Consenting Lender. If, in connection with any proposed change, waiver, discharge or termination to any of the provisions of this Agreement as contemplated by this Section 9.02, the consent of the Required Lenders shall have been obtained but the consent of one or more Lenders (each a Non-Consenting Lender) whose consent is required for such proposed change, waiver, discharge or termination is not obtained, then (so long as no Event of Default has occurred and is continuing) the Borrower shall have the right, at its sole cost and expense, to replace each such Non-Consenting Lender or Lenders with one or more replacement Lenders pursuant to Section 2.19(b) so long as at the time of such replacement, each such replacement Lender consents to the proposed change, waiver, discharge or termination.
SECTION 9.03. Expenses; Indemnity; Damage Waiver.
(a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket costs and expenses incurred by the Administrative Agent, the Collateral Agent and their Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and the Collateral Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement and the other Loan Documents and any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (iii) all out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank, the Swingline Lender or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent, the Issuing Bank, the Swingline Lender or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement
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and the other Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect thereof and (iv) and all costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated by any Security Document or any other document referred to therein.
(b) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, the Issuing Bank, the Swingline Lender and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an Indemnitee) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable and documented out-of-pocket fees and disbursements of one outside counsel for all Indemnitees (and, if reasonably necessary, of one local counsel in any relevant jurisdiction for all Indemnitees) unless, in the reasonable opinion of an Indemnitee, representation of all Indemnitees by such counsel would be inappropriate due to the existence of an actual or potential conflict of interest) in connection with any investigative, administrative or judicial proceeding or hearing commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and laws, statutes, rules or regulations relating to environmental, occupational safety and health or land use matters), on common law or equitable cause or on contract or otherwise and related expenses or disbursements of any kind (other than Taxes or Other Taxes which shall only be indemnified by the Borrower to the extent provided in Section 2.16), including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of; in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan, Swingline Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit) or (iii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and whether brought by the Borrower or a third party and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the willful misconduct or gross negligence of such Indemnitee. Notwithstanding the foregoing, it is understood and agreed that indemnification for Taxes is subject to the provisions of Section 2.16.
The Borrower shall not be liable to any Indemnitee for any special, indirect, consequential or punitive damages arising out of, in connection with, or as a result of the Transactions asserted by an Indemnitee against the Borrower or any other Obligor; provided that the foregoing limitation shall not be deemed to impair or affect the Obligations of the Borrower under the preceding provisions of this subsection.
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(c) Reimbursement by Lenders. To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be, such Lenders Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Issuing Bank or the Swingline Lender in its capacity as such.
(d) Waiver of Consequential Damages, Etc. To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of; this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby, except to the extent caused by the willful misconduct or gross negligence of such Indemnitee, as determined by a final, non-appealable judgment of a court of competent jurisdiction.
(e) Payments. All amounts due under this Section shall be payable promptly after written demand therefor.
SECTION 9.04. Successors and Assigns.
(a) Assignments Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) Assignments by Lenders.
(i) Assignments Generally. Subject to the conditions set forth in clause (ii) below, any Lender may assign to one or more assignees (other than natural persons or any Defaulting Lender) all or a portion of its rights and obligations under this Agreement
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(including all or a portion of its Commitments and the Loans and LC Exposure at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:
(A) the Borrower; provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, or, if an Event of Default has occurred and is continuing, any other assignee; provided, further, that the Borrower shall be deemed to have consented to any such assignment unless it shall have objected thereto by written notice to the Administrative Agent within five Business Days after having received notice thereof; and
(B) the Administrative Agent and the Issuing Bank.
(ii) Certain Conditions to Assignments. Assignments shall be subject to the following additional conditions:
(A) except in the case of an Assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lenders Commitment or Loans and LC Exposure of a Class, the amount of the Commitment or Loans and LC Exposure of such Class of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such Assignment is delivered to the Administrative Agent) shall not be less than U.S. $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent; provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing;
(B) each partial assignment of any Class of Commitments or Loans and LC Exposure shall be made as an assignment of a proportionate part of all the assigning Lenders rights and obligations under this Agreement in respect of such Class of Commitments, Loans and LC Exposure;
(C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption in substantially the form of Exhibit A hereto, together with a processing and recordation fee of U.S. $3,500 (which fee shall not be payable in connection with an assignment to a Lender or to an Affiliate of a Lender), for which the Borrower and the Guarantors shall not be obligated; and
(D) the assignee, if it shall not already be a Lender of the applicable Class, shall deliver to the Administrative Agent an Administrative Questionnaire.
(iii) Effectiveness of Assignments. Subject to acceptance and recording thereof pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an
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Assignment and Assumption covering all of the assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16 and 9.03 with respect to facts and circumstances occurring prior to the effective date of such assignment). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. Notwithstanding anything to the contrary herein, in connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions set forth in Section 9.04(b)(ii) or otherwise, the parties to the assignment shall make such additional payments to Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of Borrower and Administrative Agent, the Applicable Percentage of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to Administrative Agent, Issuing Bank, Swingline Lender and each Lender hereunder (and interest accrued thereon), and (y) acquire (and fund as appropriate) its full Applicable Percentage of all Loans and participations in Letters of Credit and Swingline Loans. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
(c) Maintenance of Registers by Administrative Agent. The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in New York City a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount (and stated interest) of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the Registers and each individually, a Register). The entries in the Registers shall be conclusive absent manifest error, and the Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Registers pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Registers shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(d) Acceptance of Assignments by Administrative Agent. Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignees completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
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(e) Special Purposes Vehicles. Notwithstanding anything to the contrary contained herein, any Lender (a Granting Lender) may grant to a special purpose funding vehicle (an SPC) owned or administered by such Granting Lender, identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide all or any part of any Loan that such Granting Lender would otherwise be obligated to make; provided that (i) nothing herein shall constitute a commitment to make any Loan by any SPC, (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall, subject to the terms of this Agreement, make such Loan pursuant to the terms hereof, (iii) the rights of any such SPC shall be derivative of the rights of the Granting Lender, and such SPC shall be subject to all of the restrictions upon the Granting Lender herein contained, and (iv) no SPC shall be entitled to the benefits of Sections 2.14 (or any other increased costs protection provision), 2.15 or 2.16. Each SPC shall be conclusively presumed to have made arrangements with its Granting Lender for the exercise of voting and other rights hereunder in a manner which is acceptable to the SPC, the Administrative Agent, the Lenders and the Borrower, and each of the Administrative Agent, the Lenders and the Obligors shall be entitled to rely upon and deal solely with the Granting Lender with respect to Loans made by or through its SPC. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by the Granting Lender.
Each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof, in respect of claims arising out of this Agreement; provided that the Granting Lender for each SPC hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage and expense arising out of their inability to institute any such proceeding against its SPC. In addition, notwithstanding anything to the contrary contained in this Section, any SPC may (i) without the prior written consent of the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to its Granting Lender or to any financial institutions providing liquidity and/or credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Loans (but nothing contained herein shall be construed in derogation of the obligation of the Granting Lender to make Loans hereunder); provided that neither the consent of the SPC or of any such assignee shall be required for amendments or waivers hereunder except for those amendments or waivers for which the consent of participants is required under paragraph (1) below, and (ii) disclose on a confidential basis (in the same manner described in Section 9.13(b)) any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of a surety, guarantee or credit or liquidity enhancement to such SPC.
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(f) Participations. Any Lender may, with the consent of the Borrower (such consent not to be unreasonably withheld or delayed), sell participations to one or more banks or other entities (a Participant) in all or a portion of such Lenders rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitments and the Loans and LC Disbursements owing to it); provided that (i) the consent of the Borrower shall not be required if such Participant does not have the right to receive any non-public information that may be provided pursuant to this Agreement (and the Lender selling such participation agrees with the Borrower at the time of the sale of such participation that it will not deliver such non-public information to the Participant), (ii) such Lenders obligations under this Agreement and the other Loan Documents shall remain unchanged, (iii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iv) the Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement and the other Loan Documents. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or any other Loan Document; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (g) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant shall not be entitled to receive any greater payment under Sections 2.14, 2.15 or 2.16, with respect to any participation, than its participating Lenders would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation; provided, further, that no Participant shall be entitled to the benefits of Section 2.16 unless the Borrower is notified of the participation granted to such Participant and such Participant shall have complied with the requirements of Section 2.16 as if such Participant is a Lender. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender; provided such Participant agrees to be subject to Section 2.17(d) as though it were a Lender hereunder. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest of each Participants interest in the loans or other obligations under the Loan Documents (the Participant Register); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any other information relating to a Participants interest in any commitments, loans, letters of credit or is other obligations under any Loan Document) to any person except to the extent that such disclosures are necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
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(g) Limitations on Rights of Participants. A Participant shall not be entitled to receive any greater payment under Section 2.14, 2.15 or 2.16 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrowers prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.16 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with paragraphs (e) and (f) of Section 2.16 as though it were a Lender and in the case of a Participant claiming exemption for portfolio interest under Section 871(h) or 881(c) of the Code, the applicable Lender shall provide the Borrower with satisfactory evidence that the participation is in registered form and shall permit the Borrower to review such register as reasonably needed for the Borrower to comply with its obligations under applicable laws and regulations.
(h) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any such pledge or assignment to a Federal Reserve Bank or any other central bank having jurisdiction over such Lender, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto.
(i) No Assignments to the Borrower or Affiliates. Anything in this Section to the contrary notwithstanding, no Lender may assign or participate any interest in any Loan or LC Exposure held by it hereunder to the Borrower or any of its Affiliates or Subsidiaries without the prior consent of each Lender.
SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.14, 2.15, 2.16 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination, Cash Collateralization or backstop of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness; Electronic Execution.
(a) Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single
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contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract between and among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page to this Agreement by telecopy electronically (e.g. pdf) shall be effective as delivery of a manually executed counterpart of this Agreement.
(b) Electronic Execution of Assignments. The words execution, signed, signature, and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates 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 and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to Administrative Agent for further application in accordance with the provisions of Sections 2.17(d) and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of Administrative Agent, the Issuing Bank, and the Lenders, and (y) the Defaulting Lender shall provide promptly to Administrative Agent a statement describing in reasonable detail the amounts owing to such Defaulting Lender hereunder as to which it exercised such right of setoff. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.
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SECTION 9.09. Governing Law; Jurisdiction; Etc.
(a) Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of New York.
(b) Submission to Jurisdiction. The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement and any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction.
(c) Waiver of Venue. The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(d) Service of Process. Each party to this Agreement (i) irrevocably consents to service of process in the manner provided for notices in Section 9.01 and (ii) agrees that service as provided in the manner provided for notices in Section 9.01 is sufficient to confer personal jurisdiction over such party in any proceeding in any court and otherwise constitutes effective and binding service in every respect. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS. THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
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SECTION 9.11. Judgment Currency. This is an international loan transaction in which the specification of Dollars or any Foreign Currency, as the case may be (the Specified Currency), and payment in New York City or the country of the Specified Currency, as the case may be (the Specified Place), is of the essence, and the Specified Currency shall be the currency of account in all events relating to Loans denominated in the Specified Currency. The payment obligations of the Borrower under this Agreement shall not be discharged or satisfied by an amount paid in another currency or in another place, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on conversion to the Specified Currency and transfer to the Specified Place under normal banking procedures does not yield the amount of the Specified Currency at the Specified Place due hereunder. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder in the Specified Currency into another currency (the Second Currency), the rate of exchange that shall be applied shall be the rate at which in accordance with normal banking procedures the Administrative Agent could purchase the Specified Currency with the Second Currency on the Business Day next preceding the day on which such judgment is rendered. The obligation of the Borrower in respect of any such sum due from it to the Administrative Agent or any Lender hereunder or under any other Loan Document (in this Section called an Entitled Person) shall, notwithstanding the rate of exchange actually applied in rendering such judgment be discharged only to the extent that on the Business Day following receipt by such Entitled Person of any sum adjudged to be due hereunder in the Second Currency such Entitled Person may in accordance with normal banking procedures purchase and transfer to the Specified Place the Specified Currency with the amount of the Second Currency so adjudged to be due; and the Borrower hereby, as a separate obligation and notwithstanding any such judgment, agrees to indemnify such Entitled Person against, and to pay such Entitled Person on demand, in the Specified Currency. the amount (if any) by which the sum originally due to such Entitled Person in the Specified Currency hereunder exceeds the amount of the Specified Currency so purchased and transferred.
SECTION 9.12. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.
SECTION 9.13. Treatment of Certain Information; No Fiduciary Duty; Confidentiality.
(a) Treatment of Certain Information. The Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to the Borrower or one or more of its Subsidiaries (in connection with this Agreement or otherwise) by any Lender or by one or more subsidiaries or affiliates of such Lender and the Borrower hereby authorizes each Lender to share any information delivered to such Lender by the Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such subsidiary or affiliate, it being understood that any such subsidiary or affiliate receiving such information shall be bound by the provisions of paragraph (b) of this Section as if it were a Lender hereunder. Such authorization shall survive the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. Each Lender shall use all information delivered to such Lender by the Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this
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Agreement, in connection with providing services to the Borrower. The Administrative Agent, each Lender and their Affiliates (collectively, solely for purposes of this paragraph, the Lenders), may have economic interests that conflict with those of the Borrower or any of its Subsidiaries, their stockholders and/or their affiliates. The Borrower, on behalf of itself and each of its Subsidiaries, agrees that nothing in the Loan Documents or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between any Lender, on the one hand, and the Borrower or any of its Subsidiaries, its stockholders or its affiliates, on the other. The Borrower and each of its Subsidiaries each acknowledge and agree that (i) the transactions contemplated by the Loan Documents (including the exercise of rights and remedies hereunder and thereunder) are arms-length commercial transactions between the Lenders, on the one hand, and the Borrower and its Subsidiaries, on the other, and (ii) in connection therewith and with the process leading thereto, (x) no Lender has assumed an advisory or fiduciary responsibility in favor of the Borrower or any of its Subsidiaries, any of their stockholders or affiliates with respect to the transactions contemplated hereby (or the exercise of rights or remedies with respect thereto) or the process leading thereto (irrespective of whether any Lender has advised, is currently advising or will advise the Borrower or any of its Subsidiaries, their stockholders or their affiliates on other matters) or any other obligation to the Borrower or any of its Subsidiaries except the obligations expressly set forth in the Loan Documents and (y) each Lender is acting solely as principal and not as the agent or fiduciary of the Borrower or any of its Subsidiaries, their management, stockholders, creditors or any other Person. The Borrower and each of its Subsidiaries each acknowledge and agree that it has consulted its own legal and financial advisors to the extent it deemed appropriate and that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto. The Borrower and each of its Subsidiaries each agree that it will not claim that any Lender has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Borrower or any of its Subsidiaries, in connection with such transaction or the process leading thereto.
(b) Confidentiality. Each of the Administrative Agent, the Lenders and the Issuing Bank agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to its Affiliates and to its and its Affiliates respective partners, directors, officers, employees, agents, advisors and other representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority), (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party hereto, (v) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section, to (x) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (y) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (vii) with the consent of the Borrower or (viii) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, any Lender, the Issuing Bank or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower.
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For purposes of this Section, information means all information received from the Borrower or any of its Subsidiaries relating to the Borrower or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to the Administrative Agent any Lender or the Issuing Bank on a nonconfidential basis prior to disclosure by the Borrower or any of its Subsidiaries; provided that, in the case of information received from the Borrower or any of its Subsidiaries after the date hereof; such information is dearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
SECTION 9.14. USA PATRIOT Act. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), it is required to obtain, verify and record information that identifies the Borrower and each other Obligor , which information includes the name and address of the Borrower and each other Obligor and other information that will allow such Lender to identify the Borrower and each other Obligor in accordance with said Act.
SECTION 9.15. Effect of Amendment and Restatement of the Existing Agreement. On the Effective Date, the Existing Credit Agreement shall be amended and restated in its entirety. The parties hereto acknowledge and agree that (a) this Agreement and the other Loan Documents, whether executed and delivered in connection herewith or otherwise, do not constitute a novation or termination of the obligations for principal, interest or fees of the Borrower under the Existing Agreement as in effect immediately prior to the Effective Date and which remain outstanding; and (b) except for any of the Borrowers obligations under the Existing Credit Agreement which are expressly contemplated to be repaid on the Effective Date and to the extent are in fact so repaid, the obligations of the Borrower under the Existing Credit Agreement (as amended and restated hereby and which are on and after the date hereof subject to the terms herein) are in all respects continuing, and shall continue to be secured as provided in the Security Documents.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year that above written.
PENNANTPARK INVESTMENT CORPORATION | ||
By: |
| |
Name: | ||
Title: |
701007202 11262547 |
Revolving Credit Agreement |
SUNTRUST BANK, as Administrative Agent, Swingline Lender, Issuing Bank and a Lender | ||
By: |
| |
Name: David T. Fournier | ||
Title: Vice President |
701007202 11262547 |
Revolving Credit Agreement |
JPMORGAN CHASE BANK, N.A., as a Lender | ||
By: |
| |
Name: Matthew Griffith | ||
Title: Executive Director | ||
JPMorgan |
701007202 11262547 |
Revolving Credit Agreement |
MORGAN STANLEY BANK, N.A., as a Lender | ||
By: |
| |
Name: Michael King | ||
Title: Authorized Signatory |
701007202 11262547 |
Revolving Credit Agreement |
GOLDMAN SACHS BANK USA, as a Lender | ||
By: |
| |
Name: Mark Walton | ||
Title: Authorized Signatory |
701007202 11262547 |
Revolving Credit Agreement |
ING Capital LLC, as a Lender | ||
By: |
| |
Name: Patrick Frisch | ||
Title: Managing Director |
701007202 11262547 |
Revolving Credit Agreement |
EVERBANK COMMERCIAL FINANCE, INC., as a Lender | ||
By: |
| |
Name: David DAntonio | ||
Title: Managing Director |
701007202 11262547 |
Revolving Credit Agreement |
Royal Bank of Canada, as a Lender | ||
By: |
| |
Name: Tim Stephens | ||
Title: Director |
701007202 11262547 |
Revolving Credit Agreement |
COMERICA BANK, as a Lender | ||||
By: |
| |||
Name: | CHRIS RICE | |||
Title: | AVP |
701007202 11262547 |
Revolving Credit Agreement |
Credit Suisse AG, Cayman Islands Branch, as a Lender | ||||
By: |
| |||
Name: | DOREEN BARR | |||
Title: | DIRECTOR | |||
By: |
| |||
Name: | Michael D. Spaight | |||
Title: | Associate |
701007202 11262547 |
Revolving Credit Agreement |
Stifel Bank & Trust, as a Lender | ||||
By: |
| |||
Name: | John D. Haffenreffer | |||
Title: | President |
701007202 11262547 |
Revolving Credit Agreement |
The Bank of New York Mellon, as a Lender | ||||
By: |
| |||
Name: | Jean Earley | |||
Title: | Vice President |
701007202 11262547 |
Revolving Credit Agreement |
Schedule 1.01(a)
Approved Dealers and Approved Pricing Services
Approved Dealers: | ||
1. |
ABN | |
2. |
Banc of America | |
3. |
Bank of Montreal | |
4. |
Barclays | |
5. |
BB&T | |
6. |
Bedrock Securities, LLC | |
7. |
Cantor Fitzgerald & Co. | |
8. |
Capital Source | |
9. |
Caylon/CL | |
10. |
Chapdelaine & Co. | |
11. |
Churchill Financial | |
12. |
CIBC | |
13. |
Citigroup | |
14. |
CommerzBank | |
15. |
Credit Suisse/CSFB | |
16. |
Deutsche Bank | |
17. |
Dresdner | |
18. |
Fortis | |
19. |
Friedman Billings Ramsey | |
20. |
GE | |
21. |
Gleacher & Company | |
22. |
Global Hunter Securities | |
23. |
Goldman Sachs | |
24. |
HSBC | |
25. |
Imperial Capital | |
26. |
ING | |
27. |
Jefferies & Company | |
28. |
JP Morgan | |
29. |
Keefe, Bruyette & Woods | |
30. |
Knight Libertas LLC | |
31. |
Lloyds | |
32. |
Madison Capital | |
33. |
Merrill Lynch | |
34. |
Miller Tabak | |
35. |
Morgan Stanley | |
36. |
New Star | |
37. |
Oppenheimer | |
38. |
Robert W. Baird & Co. | |
39. |
Royal Bank of Canada | |
40. |
Royal Bank of Scotland |
16981395.5.BUSINESS
41. |
RW Pressprich | |
42. |
Scotia | |
43. |
SunTrust Robinson Humphrey | |
44. |
The Bank of New York | |
45. |
Toronto Dominion | |
46. |
UBS | |
47. |
Unicredit/ HVB | |
48. |
VinsonForbes Capital LLC | |
49. |
Wachovia | |
50. |
Wells Fargo | |
51. |
WestLB | |
Approved Pricing Services: | ||
1. |
Bloomberg | |
2. |
FT Interactive Data Corporation | |
3. |
Loan Pricing Corporation | |
4. |
Muller Data Corporation | |
5. |
Markit Loan Pricing | |
6. |
Valuation Research Corporation | |
7. |
Murray Devine Valuation Advisers |
16981395.5.BUSINESS
Schedule 1.01(b)
Commitments
Name of Lender |
Dollar Commitment | Multicurrency Commitment |
Total Commitment | |||||
SunTrust Bank |
-$0- | $90,000,000 | $ | 90,000,000 | ||||
JP Morgan Chase Bank, N.A. |
-$0- | $75,000,000 | $ | 75,000,000 | ||||
Morgan Stanley Bank, N.A. |
-$0- | $50,000,000 | $ | 50,000,000 | ||||
Goldman Sachs Bank USA |
-$0- | $35,000,000 | $ | 35,000,000 | ||||
ING Capital LLC |
-$0- | $25,000,000 | $ | 25,000,000 | ||||
Everbank Commercial Finance |
$25,000,000 | -$0- | $ | 25,000,000 | ||||
Royal Bank of Canada |
-$0- | $20,000,000 | $ | 20,000,000 | ||||
Comerica Bank |
-$0- | $15,000,000 | $ | 15,000,000 | ||||
Credit Suisse AG |
-$0- | $15,000,000 | $ | 15,000,000 | ||||
Stifel Bank & Trust |
$15,000,000 | -$0- | $ | 15,000,000 | ||||
The Bank of New York Mellon |
-$0- | $15,000,000 | $ | 15,000,000 | ||||
Total |
$40,000,000 | $340,000,000.00 | $ | 380,000,000.00 |
16981395.5.BUSINESS
Schedule 1.01(c)
Industry Classification Group List
Industry Classification Groups: |
||||
Aerospace and Defense |
Diversified Natural Resources, Precious Metals and Minerals |
Machinery (Non-Agriculture, Non- Construction and Non-Electronic) | ||
Auto sector |
Ecological |
Manufacturing/ Basic industry | ||
Beverage, Food and Tobacco |
Education |
Media | ||
Broadcasting and entertainment |
Electronics |
Mining, Steel, Iron and Non-Precious Metals | ||
Building materials |
Energy/Utilities |
Oil and Gas | ||
Buildings and real estate |
Environmental services |
Other Media | ||
Business services |
Farming and Agriculture |
Packaging | ||
Cable television |
Finance |
Personal and Non-Durable Consumer Products (Manufacturing Only) | ||
Cargo Transport |
Financial services |
Personal, Food and Miscellaneous Services | ||
Chemicals, Plastics and Rubber |
Food |
Personal Transportation | ||
Communications |
Grocery |
Printing and Publishing | ||
Containers, packaging and glass |
Healthcare, Education and Childcare |
Restaurants | ||
Consumer products |
Home and Office Furnishings, Housewares and Durable Consumer Products |
Retail |
16981395.5.BUSINESS
Distribution |
Homebuilding |
Retail Store | ||
Diversified/ Conglomerate Manufacturing |
Hotels, Motels, Inns and Gaming |
Telecommunications | ||
Diversified/ Conglomerate Service |
Leisure, Amusement, Motion Pictures, Entertainment |
Textiles and Leather | ||
Utilities |
Lodging, Leisure, Resorts |
Transportation |
Additional Industry Classification Group Designated Pursuant to Section 5.12 as of the Effective Date:
None.
16981395.5.BUSINESS
Schedule 3.11
Material Agreements and Liens
Part A:
None.
Part B:
Holdings of PennantPark SBIC LP which are pledged to the U.S. Government Small Business Administration.
American Surgical Holdings, Inc.
Good Sam Enterprises, LLC
Interactive Health Solutions, Inc.
K2 Pure Solutions NoCal, L.P.
VPSI, Inc.
DirectBuy Holdings, Inc.
Eureka Hunter Pipeline, LLC
DiversiTech Corporation
JF Acquisition, LLC
LTI Flexible Products, Inc.
PAS Technologies, Inc.
Veritext Corp.
AH Holdings, Inc.
PAS Tech Holdings, Inc. Series A-1
Verde Parent Holdings, Inc.
Magnum Hunter Resources Corporation
MidOcean JF Holdings Corp.
PAS Tech Holdings, Inc.
VText Holdings, Inc.
16981395.5.BUSINESS
Schedule 3.12(a)
Subsidiaries
PNNT Alabama Holdings Inc.
PNNT CI (GALLS) Prime Investment Holdings, LLC
PNNT Transportation 100 Holdco, LLC
PennantPark SBIC GP, LLC
PennantPark SBIC LP
16981395.5.BUSINESS
Schedule 3.12(b)
Investments
Name of Investment |
Person or Persons Holding the Investment |
Nature of the Investment | ||
AMERICAN SURGICAL HOLDINGS, INC. | PENNANTPARK INVESTMENT CORP | First Lien | ||
BRAND ENERGY & INFRASTRUCTURE SERVICES, INC.2 | PENNANTPARK INVESTMENT CORP | First Lien | ||
CEVA GROUP PLC | PENNANTPARK INVESTMENT CORP | First Lien | ||
CHESTER DOWNS AND MARINA, LLC | PENNANTPARK INVESTMENT CORP | First Lien | ||
COLUMBUS INTERNATIONAL, INC. | PENNANTPARK INVESTMENT CORP | First Lien | ||
ENVIROSOLUTIONS, INC. (UNFUNDED) | PENNANTPARK INVESTMENT CORP | First Lien | ||
HANLEY-WOOD, L.L.C. | PENNANTPARK INVESTMENT CORP | First Lien | ||
INSTANT WEB, INC. | PENNANTPARK INVESTMENT CORP | First Lien | ||
JACUZZI BRANDS CORP. | PENNANTPARK INVESTMENT CORP | First Lien | ||
K2 PURE SOLUTIONS NOCAL, L.P. | PENNANTPARK INVESTMENT CORP | First Lien | ||
LEARNING CARE GROUP, INC. | PENNANTPARK INVESTMENT CORP | First Lien | ||
PRE-PAID LEGAL SERVICES, INC. - TRANCHE A | PENNANTPARK INVESTMENT CORP | First Lien | ||
PRE-PAID LEGAL SERVICES, INC -TRANCHE B | PENNANTPARK INVESTMENT CORP | First Lien |
16981395.5.BUSINESS
QUESTEX MEDIA GROUP LLC |
PENNANTPARK INVESTMENT CORP | First Lien | ||
QUESTEX MEDIA GROUP LLC(UNFD) |
PENNANTPARK INVESTMENT CORP | First Lien | ||
KADMON PHARMACEUTICALS, LLC |
PENNANTPARK INVESTMENT CORP | First Lien | ||
VPSI, INC. |
PENNANTPARK INVESTMENT CORP | First Lien | ||
YONKERS RACING CORP. |
PENNANTPARK INVESTMENT CORP | First Lien | ||
SUTTONPARK HOLDINGS, INC.4 |
PENNANTPARK INVESTMENT CORP | First Lien | ||
PENTON MEDIA (4.0% CASH / 1.0% PIK) |
PENNANTPARK INVESTMENT CORP | Second Lien | ||
EUREKA HUNTER PIPELINE |
PENNANTPARK INVESTMENT CORP | Second Lien | ||
RAM ENERGY RESOURCES |
PENNANTPARK INVESTMENT CORP | Second Lien | ||
GREATWIDE LOGISTICS SERVICES, L.L.C. |
PENNANTPARK INVESTMENT CORP | Second Lien | ||
QUESTEX MEDIA GROUP LLC - Term Loan B |
PENNANTPARK INVESTMENT CORP | Second Lien | ||
SHERIDAN HOLDINGS |
PENNANTPARK INVESTMENT CORP | Second Lien | ||
TRANSFIRST HOLDINGS |
PENNANTPARK INVESTMENT CORP | Second Lien | ||
BRAND ENERGY and INFRASTRUCTURE SERVICES, INC. |
PENNANTPARK INVESTMENT CORP | Second Lien | ||
DIRECTBUY HOLDINGS, INC. |
PENNANTPARK INVESTMENT CORP | Second Lien | ||
ENVIROSOLUTIONS, INC. |
PENNANTPARK INVESTMENT CORP | Second Lien |
16981395.5.BUSINESS
PERFORMANCE, INC. |
PENNANTPARK INVESTMENT CORP | Second Lien | ||
QUESTEX MEDIA GROUP LLC - Term Loan A |
PENNANTPARK INVESTMENT CORP | Second Lien | ||
REALOGY CORP. 2ND LIEN |
PENNANTPARK INVESTMENT CORP | Second Lien | ||
ROC FINANCE LLC AND ROC FINANCE 1 CORP. |
PENNANTPARK INVESTMENT CORP | Second Lien | ||
ESCORT, INC. |
PENNANTPARK INVESTMENT CORP | Subordinate Debt | ||
LAST MILE FUNDING CORP. (3PD, INC.) |
PENNANTPARK INVESTMENT CORP | Subordinate Debt | ||
LTI FLEXIBLE PRODUCTS, INC. |
PENNANTPARK INVESTMENT CORP | Subordinate Debt | ||
MAILSOUTH, INC. |
PENNANTPARK INVESTMENT CORP | Subordinate Debt | ||
MEDQUIST, INC. |
PENNANTPARK INVESTMENT CORP | Subordinate Debt | ||
PAS TECHNOLOGIES, INC. |
PENNANTPARK INVESTMENT CORP | Subordinate Debt | ||
PRINCE MINERAL HOLDING CORP |
PENNANTPARK INVESTMENT CORP | Subordinate Debt | ||
TRAK ACQUISITION CORP |
PENNANTPARK INVESTMENT CORP | Subordinate Debt | ||
VERITEXT CORP. |
PENNANTPARK INVESTMENT CORP | Subordinate Debt | ||
AFFINION GROUP HOLDINGS, INC. |
PENNANTPARK INVESTMENT CORP | Subordinate Debt | ||
REALOGY CORP. |
PENNANTPARK INVESTMENT CORP | Subordinate Debt | ||
LEARNING CARE GROUP (US) INC. |
PENNANTPARK INVESTMENT CORP | Subordinate Debt | ||
PERFORMANCE HOLDINGS, INC. |
PENNANTPARK INVESTMENT CORP | Subordinate Debt |
16981395.5.BUSINESS
UP SUPPORT SERVICES, INC. | PENNANTPARK INVESTMENT CORP | Subordinate Debt | ||
AHC MEZZANINE, LLC. (ADVANSTAR, INC.) | PENNANTPARK INVESTMENT CORP | Equity/Preferred Cumulative | ||
AH HOLDINGS, INC. (AMERICAN SURGICAL) | PENNANTPARK INVESTMENT CORP | Equity/Preferred Cumulative | ||
CI (IHS) Investment Holdings, LLC (Interactive Health Solutions) | PENNANTPARK INVESTMENT CORP | Equity/Preferred Cumulative | ||
CI (IHS) Investment Holdings, LLC (Unfunded) (Interactive Health Solutions) | PENNANTPARK INVESTMENT CORP | Equity/Preferred Cumulative | ||
PAS TECH HOLDINGS, INC. (SERIES A-1) | PENNANTPARK INVESTMENT CORP | Equity/Preferred Cumulative | ||
SUTTONPARK HOLDINGS, INC. | PENNANTPARK INVESTMENT CORP | Equity/Preferred Cumulative | ||
TZ HOLDINGS, L.P., SERIES B | PENNANTPARK INVESTMENT CORP | Equity/Preferred Cumulative | ||
TZ HOLDINGS, L.P., SERIES A (TRIZETTO GROUP, INC.) | PENNANTPARK INVESTMENT CORP | Equity/Preferred - Non-Accrual | ||
CEA AUTUMN MANAGEMENT, L.L.C. | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
CI (IHS) Investment Holdings, LLC (Interactive Health Solutions) | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
CI (IHS) Investment Holdings, LLC (Unfunded) (Interactive Health Solutions) | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
CT TECHNOLOGIES HOLDINGS, LLC | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
(CT TECHNOLOGIES INTERMEDIATE HOLDINGS, INC.) | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
DIRECTBUY CO-INVESTORS, L.P. | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
DIRECTBUY INVESTORS, L.P. | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
ENVIROSOLUTIONS, INC. | PENNANTPARK INVESTMENT CORP | Equity/Common |
16981395.5.BUSINESS
KADMON HOLDINGS, L.L.C., CLASS A | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
MIDOCEAN PPL HOLDINGS, INC. (Pre-Paid Legal) | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
NCP-PERFORMANCE (PERFORMANCE HOLDINGS, INC.) | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
PAS TECH HOLDINGS, INC. | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
QMG HOLDCO, LLC, CLASS A (QUESTEX MEDIA GROUP, INC.) | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
QMG HOLDCO, LLC, CLASS B (QUESTEX MEDIA GROUP, INC.) | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
SUTTONPARK HOLDINGS, INC.2 | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
TRANSPORTATION 100 HOLDCO, L.L.C. (GREATWIDE LOGISTICS SERVICES, L.L.C.) | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
TZ HOLDINGS, L.P. (TRIZETTO GROUP, INC.) | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
UNIVERSAL PEGASUS INTERNATIONAL, INC.(FORMERLY UP HOLDINGS INC.) | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
VERDE PARENT HOLDINGS, INC. (VPSI, Inc.) | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
VTEXT HOLDINGS, INC. (VERITEXT CORP.) | PENNANTPARK INVESTMENT CORP | Equity/Common | ||
AH HOLDINGS, INC. (AMERICAN SURGICAL) | PENNANTPARK INVESTMENT CORP | Equity/Warrants | ||
LEARNING CARE GROUP (US) INC. | PENNANTPARK INVESTMENT CORP | Equity/Warrants | ||
MAGNUM HUNTER RESOURCES CORPORATION | PENNANTPARK INVESTMENT CORP | Equity/Warrants | ||
TRAK ACQUISITION CORP.W | PENNANTPARK INVESTMENT CORP | Equity/Warrants |
16981395.5.BUSINESS
Schedule 6.08
Transactions with Affiliates
1. We hold the debt and equity of EnviroSolutions, Inc., Performance Holdings, Inc. and SuttonPark Holdings Inc. and we enter into certain transactions with such Persons (including receiving and making distributions).
2. We entered into an administration agreement with our controlled affiliate, SuttonPark Holdings Inc.(SPH). Under the administration agreement with SPH (the SPH Administration Agreement), PennantPark Investment Corporation through the Administrator furnishes SPH with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Additionally, the Administrator performs or oversees the performance of SPHs required administrative services, which include, among other things, maintaining financial records, preparing financial reports and filing of tax returns. Payments under the SPH Administration Agreement are equal to an amount based upon SPHs allocable portion of the Administrators overhead in performing its obligations under the SPH Administration Agreement, including rent and allocable portion of the cost of compensation and related expenses of our chief financial officer and their respective staffs.
16981395.5.BUSINESS
EXHIBIT A
ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the Assignment and Assumption) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the Assignor) and [Insert name of Assignee] (the Assignee). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex I attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below: (i) all of the Assignors rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any letters of credit, guarantees, and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the Assigned Interest). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.
1. |
Assignor: |
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2. |
Assignee: |
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[and is an Affiliate of [identify Lender]1 ] | ||||||
3. |
Borrower: | PennantPark Investment Corporation | ||||
4. |
Administrative Agent: SunTrust Bank, as the administrative agent under the Credit Agreement. |
1 | Select as applicable. |
5. | Credit Agreement: The $380,000,000 Amended and Restated Senior Secured Revolving Credit Agreement dated as of February 21, 2012, among PennantPark Investment Corporation, the Lenders parties thereto and SunTrust Bank, as Administrative Agent |
6. | Assigned Interest: |
Class Assigned2 |
Aggregate Amount of Commitment/Loans for all Lenders |
Amount of Commitment/Loans Assigned |
Percentage Assigned of Commitment/Loans3 |
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$ | $ | % | ||||||||||
$ | $ | % | ||||||||||
$ | $ | % |
Effective Date: , 201 [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR | ||
[NAME OF ASSIGNOR] | ||
By: |
| |
Title: | ||
ASSIGNEE | ||
[NAME OF ASSIGNEE] | ||
By: |
| |
Title: |
2 | Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g. Dollar Commitment, Multicurrency Commitment, etc.). |
3 | Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder. |
701067097.3 11262547 |
2 |
[Consented to and]4 Accepted: | ||
SUNTRUST BANK, as Administrative Agent | ||
By: |
| |
Title: | ||
SUNTRUST BANK, as Issuing Bank | ||
By: |
| |
Title: | ||
[Consented to:]5 | ||
PENNANTPARK INVESTMENT COMPANY | ||
By: |
| |
Title: |
4 | To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement. |
5 | To be added only when the consent of the Borrower is required by the terms of the Credit Agreement. |
701067097.3 11262547 |
3 |
ANNEX 1
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representative and Warranties.
1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.
1.2 Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, 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 Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative 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 Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued up to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.
701067097.3 11262547 |
3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy, email or other electronic method of transmission shall be effective as deliver of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.
701067097.3 11262547 |
EXHIBIT B
FORM OF BORROWING BASE CERTIFICATE
Monthly accounting period ended , 201
Reference is made to that certain Amended and Restated Senior Secured Revolving Credit Agreement, dated as of February 21, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement), by and among PENNANTPARK INVESTMENT CORPORATION, a Maryland corporation (the Borrower), the financial institutions party thereto as Lenders, and SunTrust Bank, as the Administrative Agent. Capitalized terms used herein without definition are so used as defined in the Credit Agreement.
Pursuant to Section 5.01(d) of the Credit Agreement, the undersigned, the of the Borrower, and as such a Financial Officer of the Borrower, hereby certifies, represents and warrants on behalf of the Borrower that (a) attached hereto as Annex 1 is (i) a complete and correct list as at the end of the monthly accounting period ended , 201 of all Portfolio Investments included in the Collateral and (ii) a true and correct calculation of the Borrowing Base as at the end of such monthly accounting period determined in accordance with the requirements of the Credit Agreement, and (b) without limiting the generality of the foregoing, all Portfolio Investments included in the calculation of the Borrowing Base herein have been Delivered (as defined in the Guarantee and Security Agreement) to the Collateral Agent.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly executed as of the day of , 201 .
PENNANTPARK INVESTMENT CORPORATION | ||
By: |
|
Name: |
||
Title: |
701067097.3 11262547 |
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Arthur H. Penn, Chief Executive Officer of PennantPark Investment Corporation, certify that:
1. I have reviewed this Report on Form 10-Q of PennantPark Investment Corporation;
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this Report;
4. The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; and
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles; and
c) Evaluated the effectiveness of the companys disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
d) Disclosed in this Report any change in the companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and
5. The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting.
Dated: May 2, 2012
/s/ Arthur H. Penn |
Arthur H. Penn |
Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Aviv Efrat, Chief Financial Officer of PennantPark Investment Corporation, certify that:
1. I have reviewed this Report on Form 10-Q of PennantPark Investment Corporation;
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this Report;
4. The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; and
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles; and
c) Evaluated the effectiveness of the companys disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
d) Disclosed in this Report any change in the companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and
5. The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting.
Dated: May 2, 2012
/s/ Aviv Efrat |
Aviv Efrat |
Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)
In connection with this Report on Form 10-Q for the three and six months ended March 31, 2012 (the Report) of PennantPark Investment Corporation (the Registrant), as filed with the Securities and Exchange Commission on the date hereof, I, Arthur H. Penn, Chief Executive Officer of the Registrant, hereby certify, to the best of my knowledge, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
/s/ Arthur H. Penn |
Arthur H. Penn |
May 2, 2012 |
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)
In connection with this Report on Form 10-Q for the three and six months ended March 31, 2012 (the Report) of PennantPark Investment Corporation (the Registrant), as filed with the Securities and Exchange Commission on the date hereof, I, Aviv Efrat, Chief Financial Officer of the Registrant, hereby certify, to the best of my knowledge, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
/s/ Aviv Efrat |
Aviv Efrat |
May 2, 2012 |