UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
 
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
 
 
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2020
OR
 
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
 
 
OF THE SECURITIES EXCHANGE ACT OF 1934
 
COMMISSION FILE NUMBER: 1-33901
Oaktree Specialty Lending Corporation

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
DELAWARE
(State or jurisdiction of
incorporation or organization)
 
26-1219283
(I.R.S. Employer
Identification No.)
 
 
 
333 South Grand Avenue, 28th Floor
Los Angeles, CA
(Address of principal executive office)
 
90071
(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(213) 830-6300


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 
 
 
 
 
Title of Each Class
 
Trading Symbol(s)
 
Name of Each Exchange
on Which Registered
Common Stock, par value $0.01 per share
 
OCSL
 
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES   þ     NO   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    YES   ¨   NO   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ¨
 
Accelerated filer  þ
 
Non-accelerated filer  ¨
 
Smaller reporting company  ¨
 
 
 
 
 
 
 
Emerging growth company  ¨

 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    YES  ¨     NO  þ
The registrant had 140,960,651 shares of common stock outstanding as of May 5, 2020.



OAKTREE SPECIALTY LENDING CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2020



TABLE OF CONTENTS


 
 
 
 
 
 
 
 
 
 
 
 
 
 
1
 
 
2
 
 
3
 
 
4
 
 
5
 
 
17
 
 
28
72
97
100
 
 
 
101
101
102
Item 3.
102
Item 4.
102
Item 5.
102
103
103

 




 






 




 


PART I — FINANCIAL INFORMATION

Item 1.
Consolidated Financial Statements.

Oaktree Specialty Lending Corporation
Consolidated Statements of Assets and Liabilities
(in thousands, except per share amounts)
 
 
March 31, 2020 (unaudited)
 
September 30, 2019
ASSETS
Investments at fair value:
 
 
 
 
Control investments (cost March 31, 2020: $255,739; cost September 30, 2019: $224,255)
 
$
187,267

 
$
209,178

Affiliate investments (cost March 31, 2020: $10,487; cost September 30, 2019: $8,449)
 
9,414

 
9,170

Non-control/Non-affiliate investments (cost March 31, 2020: $1,362,354; cost September 30, 2019: $1,280,310)
 
1,195,506

 
1,219,694

Total investments at fair value (cost March 31, 2020: $1,628,580; cost September 30, 2019: $1,513,014)
 
1,392,187

 
1,438,042

Cash and cash equivalents
 
89,509

 
15,406

Interest, dividends and fees receivable
 
6,217

 
11,167

Due from portfolio companies
 
1,774

 
2,616

Receivables from unsettled transactions
 
1,868

 
4,586

Deferred financing costs
 
5,671

 
6,396

Deferred offering costs
 
45

 
—

Deferred tax asset, net
 
821

 
—

Derivative assets at fair value
 
1,268

 
490

Other assets
 
2,267

 
2,335

Total assets
 
$
1,501,627

 
$
1,481,038

LIABILITIES AND NET ASSETS
Liabilities:
 

 
 
Accounts payable, accrued expenses and other liabilities
 
$
1,750

 
$
1,589

Base management fee and incentive fee payable
 
8,739

 
10,167

Due to affiliate
 
2,651

 
2,689

Interest payable
 
1,681

 
2,296

Payables from unsettled transactions
 
35,896

 
59,596

Deferred tax liability
 
—

 
704

Credit facility payable
 
404,825

 
314,825

Unsecured notes payable (net of $3,645 and $2,708 of unamortized financing costs as of March 31, 2020 and September 30, 2019, respectively)
 
293,861

 
158,542

Total liabilities
 
749,403

 
550,408

Commitments and contingencies (Note 14)
 

 
 
Net assets:
 
 
 
 
Common stock, $0.01 par value per share, 250,000 shares authorized; 140,961 shares issued and outstanding as of March 31, 2020 and September 30, 2019
 
1,409

 
1,409

Additional paid-in-capital
 
1,487,774

 
1,487,774

Accumulated overdistributed earnings
 
(736,959
)
 
(558,553
)
Total net assets (equivalent to $5.34 and $6.60 per common share as of March 31, 2020 and September 30, 2019, respectively) (Note 12)
 
752,224

 
930,630

Total liabilities and net assets
 
$
1,501,627

 
$
1,481,038


See notes to Consolidated Financial Statements.

1

Oaktree Specialty Lending Corporation
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
 
Three months ended
March 31, 2020
 
Three months ended
March 31, 2019
 
Six months ended March 31, 2020
 
Six months ended
March 31, 2019
Interest income:
 
 
 
 
 
 
 
 
Control investments
 
$
2,393

 
$
2,852

 
$
4,944

 
$
6,191

Affiliate investments
 
138

 
22

 
252

 
35

Non-control/Non-affiliate investments
 
27,149

 
31,231

 
52,808

 
63,398

Interest on cash and cash equivalents
 
218

 
204

 
299

 
474

Total interest income
 
29,898

 
34,309

 
58,303

 
70,098

PIK interest income:
 
 
 
 
 
 
 
 
Control investments
 
—

 
—

 
—

 
67

Non-control/Non-affiliate investments
 
1,946

 
2,280

 
3,107

 
3,045

Total PIK interest income
 
1,946

 
2,280

 
3,107

 
3,112

Fee income:
 
 
 
 
 
 
 
 
Control investments
 
8

 
7

 
14

 
13

Affiliate investments
 
5

 
5

 
10

 
9

Non-control/Non-affiliate investments
 
2,037

 
1,120

 
3,097

 
2,312

Total fee income
 
2,050

 
1,132

 
3,121

 
2,334

Dividend income:
 
 
 
 
 
 
 
 
Control investments
 
277

 
523

 
600

 
976

Total dividend income
 
277

 
523

 
600

 
976

Total investment income
 
34,171

 
38,244

 
65,131

 
76,520

Expenses:
 
 
 
 
 
 
 
 
Base management fee
 
5,295

 
5,731

 
10,902

 
11,299

Part I incentive fee
 
3,444

 
3,813

 
6,432

 
7,541

Part II incentive fee
 
(6,608
)
 
8,170

 
(5,557
)
 
9,990

Professional fees
 
669

 
499

 
1,309

 
1,465

Directors fees
 
142

 
142

 
285

 
285

Interest expense
 
7,215

 
8,970

 
13,750

 
17,874

Administrator expense
 
393

 
406

 
821

 
1,169

General and administrative expenses
 
780

 
705

 
1,312

 
1,336

Total expenses
 
11,330

 
28,436

 
29,254

 
50,959

Reversal of fees waived / (fees waived)
 
—

 
(7,901
)
 
5,200

 
(9,465
)
Net expenses
 
11,330

 
20,535

 
34,454

 
41,494

Net investment income
 
22,841

 
17,709

 
30,677

 
35,026

Unrealized appreciation (depreciation):
 
 
 
 
 
 
 
 
Control investments
 
(55,392
)
 
3,868

 
(53,395
)
 
(1,952
)
Affiliate investments
 
(1,730
)
 
(181
)
 
(1,794
)
 
(181
)
Non-control/Non-affiliate investments
 
(108,651
)
 
17,108

 
(106,243
)
 
16,324

Secured borrowings
 
—

 
(76
)
 
—

 
(95
)
Foreign currency forward contracts
 
2,240

 
753

 
778

 
401

Net unrealized appreciation (depreciation)
 
(163,533
)
 
21,472

 
(160,654
)
 
14,497

Realized gains (losses):
 
 
 
 
 
 
 
 
Control investments
 
777

 
—

 
777

 
—

Non-control/Non-affiliate investments
 
(24,777
)
 
25,899

 
(20,938
)
 
42,660

Extinguishment of unsecured notes payable
 
(2,541
)
 
—

 
(2,541
)
 
—

Foreign currency forward contracts
 
61

 
(686
)
 
(490
)
 
515

Net realized gains (losses)
 
(26,480
)
 
25,213

 
(23,192
)
 
43,175

Provision for income tax (expense) benefit
 
1,705

 
91

 
1,545

 
(495
)
Net realized and unrealized gains (losses), net of taxes
 
(188,308
)
 
46,776

 
(182,301
)
 
57,177

Net increase (decrease) in net assets resulting from operations
 
$
(165,467
)
 
$
64,485

 
$
(151,624
)
 
$
92,203

Net investment income per common share — basic and diluted
 
$
0.16

 
$
0.13

 
$
0.22

 
$
0.25

Earnings (loss) per common share — basic and diluted (Note 5)
 
$
(1.17
)
 
$
0.46

 
$
(1.08
)
 
$
0.65

Weighted average common shares outstanding — basic and diluted
 
140,961

 
140,961

 
140,961

 
140,961


See notes to Consolidated Financial Statements.

2


Oaktree Specialty Lending Corporation
Consolidated Statements of Changes in Net Assets
(in thousands, except per share amounts)
(unaudited)

 
 
Three months ended
March 31, 2020
 
Three months ended
March 31, 2019
 
Six months ended
March 31, 2020
 
Six months ended
March 31, 2019
Operations:
 
 
 
 
 
 
 
 
Net investment income
 
$
22,841

 
$
17,709

 
$
30,677

 
$
35,026

Net unrealized appreciation (depreciation)
 
(163,533
)
 
21,472

 
(160,654
)
 
14,497

Net realized gains (losses)
 
(26,480
)
 
25,213

 
(23,192
)
 
43,175

Provision for income tax (expense) benefit

 
1,705

 
91

 
1,545

 
(495
)
Net increase (decrease) in net assets resulting from operations
 
(165,467
)
 
64,485

 
(151,624
)
 
92,203

Stockholder transactions:
 
 
 
 
 
 
 
 
Distributions to stockholders
 
(13,391
)
 
(13,391
)
 
(26,782
)
 
(26,782
)
Net increase (decrease) in net assets from stockholder transactions
 
(13,391
)
 
(13,391
)
 
(26,782
)
 
(26,782
)
Capital share transactions:
 
 
 
 
 
 
 
 
Issuance of common stock under dividend reinvestment plan
 
506

 
312

 
987

 
696

Repurchases of common stock under dividend reinvestment plan
 
(506
)
 
(312
)
 
(987
)
 
(696
)
Net increase (decrease) in net assets from capital share transactions
 
—

 
—

 
—

 
—

Total increase (decrease) in net assets
 
(178,858
)
 
51,094

 
(178,406
)
 
65,421

Net assets at beginning of period
 
931,082

 
872,362

 
930,630

 
858,035

Net assets at end of period
 
$
752,224

 
$
923,456

 
$
752,224

 
$
923,456

Net asset value per common share
 
$
5.34

 
$
6.55

 
$
5.34

 
$
6.55

Common shares outstanding at end of period
 
140,961

 
140,961

 
140,961

 
140,961




See notes to Consolidated Financial Statements.

3
Oaktree Specialty Lending Corporation
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)





 
 
Six months ended
March 31, 2020
 
Six months ended
March 31, 2019
Operating activities:
 
 
 
 
Net increase (decrease) in net assets resulting from operations
 
$
(151,624
)
 
$
92,203

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
 
 
 
 
Net unrealized (appreciation) depreciation
 
160,654

 
(14,497
)
Net realized (gains) losses
 
23,192

 
(43,175
)
PIK interest income
 
(3,107
)
 
(3,112
)
Accretion of original issue discount on investments
 
(5,454
)
 
(13,224
)
Accretion of original issue discount on unsecured notes payable
 
48

 
107

Amortization of deferred financing costs
 
968

 
1,545

Deferred taxes
 
(1,525
)
 
291

Purchases of investments
 
(379,169
)
 
(270,266
)
Proceeds from the sales and repayments of investments
 
251,499

 
329,035

Changes in operating assets and liabilities:
 
 
 
 
(Increase) decrease in interest, dividends and fees receivable
 
4,950

 
1,575

(Increase) decrease in due from portfolio companies
 
842

 
(50
)
(Increase) decrease in receivables from unsettled transactions
 
2,718

 
24,942

(Increase) decrease in other assets
 
68

 
189

Increase (decrease) in accounts payable, accrued expenses and other liabilities
 
163

 
(2,076
)
Increase (decrease) in base management fee and incentive fee payable
 
(1,428
)
 
699

Increase (decrease) in due to affiliate
 
(38
)
 
(1,334
)
Increase (decrease) in interest payable
 
(615
)
 
(1,248
)
Increase (decrease) in payables from unsettled transactions
 
(23,700
)
 
(27,336
)
Increase (decrease) in amounts payable to syndication partners
 
—

 
477

Net cash provided by (used in) operating activities
 
(121,558
)
 
74,745

Financing activities:
 
 
 
 
Distributions paid in cash
 
(25,795
)
 
(26,086
)
Borrowings under credit facilities
 
224,000

 
228,825

Repayments of borrowings under credit facilities
 
(134,000
)
 
(45,000
)
Repayments of unsecured notes
 
(161,250
)
 
(228,825
)
Issuance of unsecured notes
 
297,459

 
—

Repayments of secured borrowings
 
—

 
(692
)
Repurchases of common stock under dividend reinvestment plan
 
(987
)
 
(696
)
Deferred financing costs paid
 
(3,715
)
 
(2,608
)
Deferred offering costs paid
 
(45
)
 
—

Net cash provided by (used in) financing activities
 
195,667

 
(75,082
)
Effect of exchange rate changes on foreign currency
 
(6
)
 
—

Net increase (decrease) in cash and cash equivalents and restricted cash
 
74,103

 
(337
)
Cash and cash equivalents and restricted cash, beginning of period
 
15,406

 
13,489

Cash and cash equivalents and restricted cash, end of period
 
$
89,509

 
$
13,152

Supplemental information:
 
 
 
 
Cash paid for interest
 
$
13,349

 
$
17,472

Non-cash financing activities:
 
 
 
 
Issuance of shares of common stock under dividend reinvestment plan
 
$
987

 
$
696


See notes to Consolidated Financial Statements.

4
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Control Investments
 
 
 
 
 
 
 
 
(8)(9)
C5 Technology Holdings, LLC
 
Data Processing & Outsourced Services
 
 
 
 
 
 
 
829 Common Units
 
 
 
 
$
—

 
$
—

 
(20)
34,984,460.37 Preferred Units
 
 
 
 
34,984

 
27,638

 
(20)
 
 
 
 
 
34,984

 
27,638

 
 
Dominion Diagnostics, LLC
 
Health Care Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 2/28/2024
6.46
%
 
$
27,799

 
27,799

 
27,799

 
(6)(20)
First Lien Revolver, LIBOR+5.00% cash due 2/28/2024
6.46
%
 
5,260

 
5,260

 
5,260

 
(6)(19)(20)
30,030.8 Common Units in DD Healthcare Services Holdings, LLC
 
 
 
 
18,626

 
10,115

 
(20)
 
 
 
 
 
51,685

 
43,174

 
 
First Star Speir Aviation Limited
 
Airlines
 
 
 
 
 
 
(10)
First Lien Term Loan, 9.00% cash due 12/15/2020
 
 
11,510

 
2,097

 
11,510

 
(11)(20)
100% equity interest
 
 
 
 
8,500

 
3,165

 
(11)(12)(20)
 
 
 
 
 
10,597

 
14,675

 
 
New IPT, Inc.
 
Oil & Gas Equipment & Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
6.45
%
 
2,605

 
2,605

 
2,605

 
 (6)(20)
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021
6.45
%
 
1,009

 
1,009

 
1,009

 
 (6)(19)(20)
50.087 Class A Common Units in New IPT Holdings, LLC
 
 
 
 
—

 
1,596

 
(20)
 
 
 
 
 
3,614

 
5,210

 
 
Senior Loan Fund JV I, LLC
 
Multi-Sector Holdings
 
 
 
 
 
 
(14)
Subordinated Debt, LIBOR+7.00% cash due 12/29/2028
8.73
%
 
96,250

 
96,250

 
92,171

 
(6)(11)(20)
87.5% LLC equity interest
 
 
 
 
49,322

 
—

 
(11)(16)(19)
 
 
 
 
 
145,572

 
92,171

 
 
Thruline Marketing, Inc.
 
Advertising
 
 
 
 
 
 

9,073 Class A Units in FS AVI Holdco, LLC
 
 
 
 
9,287

 
4,399

 
(20)
 
 
 
 
 
9,287

 
4,399

 
 
 Total Control Investments (24.9% of net assets)
 
 
 
 
$
255,739

 
$
187,267

 
 
 
 
 
 
 
 
 
 
 
 
 Affiliate Investments
 
 
 
 
 
 
 
 
(17)
Assembled Brands Capital LLC
 
Specialized Finance
 
 
 
 
 
 
 
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 10/17/2023
6.99
%
 
$
7,623

 
$
7,623

 
$
6,115

 
(6)(19)(20)
1,609,201 Class A Units
 
 
 
 
765

 
917

 
(20)
1,019,168.80 Preferred Units, 6%
 
 
 
 
1,019

 
1,050

 
(20)
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029
 
 
 
 
—

 
—

 
(20)
 
 
 
 
 
9,407

 
8,082

 
 
Caregiver Services, Inc.
 
Health Care Services
 
 
 
 
 
 
 
1,080,399 shares of Series A Preferred Stock, 10%
 
 
 
 
1,080

 
1,332

 
(20)
 
 
 
 
 
1,080

 
1,332

 
 
 Total Affiliate Investments (1.3% of net assets)
 
 
 
 
$
10,487

 
$
9,414

 
 
 
 
 
 
 
 
 
 
 
 
 Non-Control/Non-Affiliate Investments
 
 
 
 
 
 
 
 
(18)
4 Over International, LLC
 
Commercial Printing
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 6/7/2022
7.45
%
 
$
5,738

 
$
5,710

 
$
5,528

 
(6)(20)
First Lien Revolver, LIBOR+6.00% cash due 6/7/2021
7.45
%
 
2,232

 
2,214

 
2,150

 
(6)(20)
 
 
 
 
 
7,924

 
7,678

 
 
99 Cents Only Stores LLC
 
General Merchandise Stores
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash 1.50% PIK due 1/13/2022
6.07
%
 
19,380

 
19,085

 
13,889

 
(6)
 
 
 
 
 
19,085

 
13,889

 
 

5
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Access CIG, LLC
 
Diversified Support Services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.75% cash due 2/27/2026
9.53
%
 
$
15,000

 
$
14,900

 
$
12,863

 
(6)
 
 
 
 
 
14,900

 
12,863

 
 
Accupac, Inc.
 
Personal Products
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 1/17/2026
7.84
%
 
12,550

 
12,338

 
12,330

 
(6)(20)
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 1/17/2026
 
 
—

 
(39
)
 
(41
)
 
(6)(19)(20)
First Lien Revolver, LIBOR+6.00% cash due 1/17/2026
7.05
%
 
1,564

 
1,537

 
1,536

 
(6)(20)
 
 
 
 
 
13,836

 
13,825

 
 
Acquia Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 10/31/2025
8.58
%
 
20,950

 
20,559

 
19,961

 
(6)(20)
First Lien Revolver, LIBOR+7.00% cash due 10/31/2025
 
 
—

 
(43
)
 
(106
)
 
(6)(19)(20)
 
 
 
 
 
20,516

 
19,855

 
 
Aden & Anais Merger Sub, Inc.
 
Apparel, Accessories & Luxury Goods
 
 
 
 
 
 
 
51,645 Common Units in Aden & Anais Holdings, Inc.
 
 
 
 
5,165

 
—

 
(20)
 
 
 
 
 
5,165

 
—

 
 
AdVenture Interactive, Corp.
 
Advertising
 
 
 
 
 
 
 
9,073 shares of common stock
 
 
 
 
13,611

 
12,845

 
(20)
 
 
 
 
 
13,611

 
12,845

 
 
AI Ladder (Luxembourg) Subco S.a.r.l.
 
Electrical Components & Equipment
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025
5.49
%
 
21,563

 
21,072

 
18,185

 
(6)(11)
 
 
 
 
 
21,072

 
18,185

 
 
AI Sirona (Luxembourg) Acquisition S.a.r.l.
 
Pharmaceuticals
 
 
 
 
 
 
 
Second Lien Term Loan, EURIBOR+7.25% cash due 9/28/2026
7.25
%
 
€
17,500

 
20,035

 
14,977

 
(6)(11)(20)
 
 
 
 
 
20,035

 
14,977

 
 
AirStrip Technologies, Inc.
 
Application Software
 
 
 
 
 
 
 
5,715 Common Stock Warrants (exercise price $139.99) expiration date 5/11/2025
 
 
 
 
90

 
—

 
(20)
 
 
 
 
 
90

 
—

 
 
Aldevron, L.L.C.
 
Biotechnology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 10/12/2026
5.70
%
 
$
8,000

 
7,920

 
7,560

 
(6)
 
 
 
 
 
7,920

 
7,560

 
 
Algeco Scotsman Global Finance Plc
 
Construction & Engineering
 
 
 
 
 
 
 
Fixed Rate Bond, 8.00% cash due 2/15/2023
 
 
13,524

 
13,232

 
10,447

 
(11)
 
 
 
 
 
13,232

 
10,447

 
 
Altice France S.A.
 
Integrated Telecommunication Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026
4.70
%
 
1,378

 
1,202

 
1,319

 
(6)(11)
 
 
 
 
 
1,202

 
1,319

 
 
Alvotech Holdings S.A.
 
Biotechnology
 
 
 
 
 
 
(13)
Fixed Rate Bond 15% PIK Note A due 12/13/2023
 
 
14,800

 
17,538

 
18,425

 
(11)(20)
Fixed Rate Bond 15% PIK Note B due 12/13/2023
 
 
14,800

 
17,538

 
17,997

 
(11)(20)
 
 
 
 
 
35,076

 
36,422

 
 
Ancile Solutions, Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 6/30/2021
8.45
%
 
8,429

 
8,371

 
8,218

 
 (6)(20)
 
 
 
 
 
8,371

 
8,218

 
 
Apptio, Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025
8.25
%
 
23,764

 
23,380

 
22,647

 
(6)(20)
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025
 
 
—

 
(24
)
 
(72
)
 
(6)(19)(20)
 
 
 
 
 
23,356

 
22,575

 
 

6
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
 
 
 
 
 
 
 
 
 
 
Associated Asphalt Partners, LLC
 
Construction Materials
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.25% cash due 4/5/2024
6.25
%
 
$
2,569

 
$
2,113

 
$
1,863

 
(6)
 
 
 
 
 
2,113

 
1,863

 
 
Asurion, LLC
 
Property & Casualty Insurance
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.00% cash due 11/3/2024
3.99
%
 
2,098

 
1,769

 
2,024

 
(6)
Second Lien Term Loan, LIBOR+6.50% cash due 8/4/2025
7.49
%
 
21,274

 
21,234

 
19,718

 
(6)
 
 
 
 
 
23,003

 
21,742

 
 
Atlas Senior Loan Fund XV, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class E Notes, LIBOR+7.54% cash due 10/23/2032
9.46
%
 
741

 
474

 
468

 
(6)(11)
 
 
 
 
 
474

 
468

 
 
Aurora Lux Finco S.À.R.L.
 
Airport Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026
7.00
%
 
23,000

 
22,447

 
21,623

 
(6)(11)(20)
 
 
 
 
 
22,447

 
21,623

 
 
Avantor Inc.
 
Health Care Distributors
 
 
 
 
 
 
 
Fixed Rate Bond, 9.00% cash due 10/1/2025
 
 
3,000

 
2,976

 
3,177

 
 
 
 
 
 
 
2,976

 
3,177

 
 
Avoca Capital CLO X Designated Activity Company
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class ER Notes, EURIBOR+6.05% cash due 1/15/2030
6.05
%
 
€
741

 
552

 
627

 
(6)(11)
 
 
 
 
 
552

 
627

 
 
Blackhawk Network Holdings, Inc.
 
Data Processing & Outsourced Services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.00% cash due 6/15/2026
7.81
%
 
$
26,250

 
26,031

 
21,613

 
(6)
 
 
 
 
 
26,031

 
21,613

 
 
Boxer Parent Company Inc.
 
Systems Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025
5.24
%
 
13,845

 
13,732

 
11,642

 
(6)
 
 
 
 
 
13,732

 
11,642

 
 
California Pizza Kitchen, Inc.
 
Restaurants
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 8/23/2022
 
 
3,106

 
3,081

 
1,571

 
(6)(21)
 
 
 
 
 
3,081

 
1,571

 
 
Carlyle US CLO 2019-3, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 

Class D Notes, LIBOR+7.03% cash due 10/20/2032
9.11
%
 
504

 
315

 
343

 
(6)(11)
 
 
 
 
 
315

 
343

 
 
Chief Power Finance II, LLC
 
Independent Power Producers & Energy Traders
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.50% cash due 12/31/2022
7.95
%
 
22,425

 
21,938

 
21,151

 
(6)(20)
 
 
 
 
 
21,938

 
21,151

 
 
CITGO Holding, Inc.
 
Oil & Gas Refining & Marketing
 
 
 
 
 
 
 
Fixed Rate Bond, 9.25% cash due 8/1/2024
 
 
10,672

 
10,672

 
8,778

 
 
First Lien Term Loan, LIBOR+7.00% cash due 8/1/2023
8.00
%
 
9,950

 
9,825

 
8,225

 
(6)
 
 
 
 
 
20,497

 
17,003

 
 
CITGO Petroleum Corp.
 
Oil & Gas Refining & Marketing
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024
6.00
%
 
9,900

 
9,801

 
8,762

 
(6)
 
 
 
 
 
9,801

 
8,762

 
 
Commscope, Inc.
 
Communications Equipment
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.25% cash due 4/6/2026
4.24
%
 
1,532

 
1,325

 
1,456

 
(6)(11)
 
 
 
 
 
1,325

 
1,456

 
 

7
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Connect U.S. Finco LLC
 
Alternative Carriers
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 12/11/2026
5.49
%
 
$
31,378

 
$
30,608

 
$
25,299

 
(6)(11)
 
 
 
 
 
30,608

 
25,299

 
 
Continental Intermodal Group LP
 
Oil & Gas Storage & Transportation
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+8.50% PIK due 1/28/2025
 
 
31,599

 
31,599

 
29,545

 
(6)(15)(20)
 
 
 
 
 
31,599

 
29,545

 
 
Convergeone Holdings, Inc.
 
IT Consulting & Other Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 1/4/2026
5.99
%
 
14,696

 
14,197

 
11,573

 
(6)
 
 
 
 
 
14,197

 
11,573

 
 
Conviva Inc.
 
Application Software
 
 
 
 
 
 
 
417,851 Series D Preferred Stock Warrants (exercise price $1.1966) expiration date 2/28/2021
 
 
 
 
105

 
395

 
(20)
 
 
 
 
 
105

 
395

 
 
Corrona, LLC
 
Health Care Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.75% cash due 12/13/2025
6.75
%
 
10,352

 
10,180

 
10,041

 
(6)(20)
First Lien Delayed Draw Term Loan, LIBOR+5.75% cash due 12/13/2025
 
 
—

 
(32
)
 
(110
)
 
(6)(19)(20)
First Lien Revolver, PRIME + 4.75% cash due 12/13/2025
8.00
%
 
1,221

 
1,190

 
1,166

 
(6)(19)(20)
1,099 Class A2 Common Units in Corrona Group Holdings, L.P.
 
 
 
 
1,099

 
1,099

 
(20)
 
 
 
 
 
12,437

 
12,196

 
 
Covia Holdings Corporation
 
Oil & Gas Equipment & Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 6/1/2025
 
 
7,860

 
7,860

 
3,720

 
(6)(11)(21)
 
 
 
 
 
7,860

 
3,720

 
 
Coyote Buyer, LLC
 
Specialty Chemicals
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 2/6/2026
7.74
%
 
13,189

 
13,057

 
13,057

 
(6)(20)
First Lien Revolver, LIBOR+6.00% cash due 2/6/2025
7.74
%
 
39

 
35

 
35

 
(6)(19)(20)
 
 
 
 
 
13,092

 
13,092

 
 
Crown Point CLO 7 Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 

Class E Notes, LIBOR+6.30% cash due 10/20/2031
8.12
%
 
2,745

 
1,969

 
1,561

 
(6)(11)
 
 
 
 
 
1,969

 
1,561

 
 
CTOS, LLC
 
Trading Companies & Distributors
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 4/18/2025
5.00
%
 
10,190

 
10,290

 
8,789

 
(6)
 
 
 
 
 
10,290

 
8,789

 
 
Dealer Tire, LLC
 
Distributors
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 12/12/2025
5.24
%
 
4,010

 
3,498

 
3,335

 
(6)
 
 
 
 
 
3,498

 
3,335

 
 
The Dun & Bradstreet Corporation
 
Research & Consulting Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 2/6/2026
4.96
%
 
10,000

 
9,831

 
9,088

 
(6)
Fixed Rate Bond 6.875% cash due 8/15/2026
 
 
5,000

 
5,000

 
5,228

 
 
 
 
 
 
 
14,831

 
14,316

 
 
Eagleview Technology Corporation
 
Application Software
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.50% cash due 8/14/2026
8.57
%
 
12,000

 
11,880

 
10,320

 
(6)(20)
 
 
 
 
 
11,880

 
10,320

 
 
EHR Canada, LLC
 
Food Retail
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+8.00% cash due 9/28/2020
9.45
%
 
6,861

 
6,829

 
6,909

 
(6)(20)
 
 
 
 
 
6,829

 
6,909

 
 

8
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Elevation CLO 2013-1, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class D1R2 Notes, LIBOR+7.65% cash due 8/15/2032
9.34
%
 
$
1,418

 
$
1,096

 
$
949

 
(6)(11)
 
 
 
 
 
1,096

 
949

 
 
Elevation CLO 2017-6, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class E Notes, LIBOR+6.60% cash due 7/15/2029
8.43
%
 
500

 
392

 
310

 
(6)(11)
 
 
 
 
 
392

 
310

 
 
Elevation CLO 2018-10, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class E Notes, LIBOR+6.29% cash due 10/20/2031
8.12
%
 
1,411

 
1,070

 
816

 
(6)(11)
 
 
 
 
 
1,070

 
816

 
 
Elevation CLO 2018-9, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class E Notes, LIBOR+6.30% cash due 7/15/2031
8.13
%
 
1,275

 
792

 
751

 
(6)(11)
 
 
 
 
 
792

 
751

 
 
EOS Fitness Opco Holdings, LLC
 
Leisure Facilities
 
 
 
 
 
 
 
487.5 Class A Preferred Units, 12%
 
 
 
 
488

 
907

 
(20)
12,500 Class B Common Units
 
 
 
 
—

 
492

 
(20)
 
 
 
 
 
488

 
1,399

 
 
ExamSoft Worldwide, Inc.
 
Application Software
 
 
 
 
 
 
 
180,707 Class C Units in ExamSoft Investor LLC
 
 
 
 
181

 
—

 
(20)
 
 
 
 
 
181

 
—

 
 
GI Chill Acquisition LLC
 
Managed Health Care
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 8/6/2025
5.45
%
 
17,730

 
17,641

 
15,336

 
(6)(20)
Second Lien Term Loan, LIBOR+7.50% cash due 8/6/2026
8.95
%
 
10,000

 
9,921

 
8,700

 
(6)(20)
 
 
 
 
 
27,562

 
24,036

 
 
Global Medical Response
 
Health Care Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 3/14/2025
5.86
%
 
6,289

 
6,172

 
5,675

 
(6)
 
 
 
 
 
6,172

 
5,675

 
 
GKD Index Partners, LLC
 
Specialized Finance
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 6/29/2023
8.45
%
 
21,781

 
21,640

 
21,389

 
(6)(20)
First Lien Revolver, LIBOR+7.00% cash due 6/29/2023
8.12
%
 
924

 
914

 
902

 
(6)(19)(20)
 
 
 
 
 
22,554

 
22,291

 
 
Guidehouse LLP
 
Research & Consulting Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 5/1/2025
5.49
%
 
4,975

 
4,927

 
4,079

 
(6)
Second Lien Term Loan, LIBOR+8.00% cash due 5/1/2026
8.99
%
 
20,000

 
19,924

 
17,300

 
(6)(20)
 
 
 
 
 
24,851

 
21,379

 
 
HealthEdge Software, Inc.
 
Application Software
 
 
 
 
 
 
 
482,453 Series A-3 Preferred Stock Warrants (exercise price $1.450918) expiration date 9/30/2023
 
 
 
 
213

 
1,891

 
(20)
 
 
 
 
 
213

 
1,891

 
 
HNC Holdings, Inc.
 
Building Products
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 10/5/2023
5.00
%
 
1,734

 
1,621

 
1,570

 
(6)
 
 
 
 
 
1,621

 
1,570

 
 
Houghton Mifflin Harcourt Publishers Inc.
 
Education Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.25% cash due 11/22/2024
7.24
%
 
6,913

 
6,649

 
6,187

 
(6)(11)
 
 
 
 
 
6,649

 
6,187

 
 
Hyland Software, Inc.
 
Systems Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.25% cash due 7/1/2024
4.24
%
 
836

 
749

 
785

 
(6)
 
 
 
 
 
749

 
785

 
 
I Drive Safely, LLC
 
Education Services
 
 
 
 
 
 
 
125,079 Class A Common Units of IDS Investments, LLC
 
 
 
 
1,000

 
200

 
(20)
 
 
 
 
 
1,000

 
200

 
 
IBG Borrower LLC
 
Apparel, Accessories & Luxury Goods
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 8/2/2022
8.50
%
 
13,284

 
12,374

 
11,424

 
(6)(20)
 
 
 
 
 
12,374

 
11,424

 
 

9
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
iCIMs, Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.50% cash due 9/12/2024
7.50
%
 
$
16,718

 
$
16,464

 
$
16,024

 
(6)(20)
First Lien Revolver, LIBOR+6.50% cash due 9/12/2024
 
 
—

 
(17
)
 
(37
)
 
(6)(19)(20)
 
 
 
 
 
16,447

 
15,987

 
 
Integral Development Corporation
 
Other Diversified Financial Services
 
 
 
 
 
 
 
1,078,284 Common Stock Warrants (exercise price $0.9274) expiration date 7/10/2024
 
 
 
 
113

 
—

 
(20)
 
 
 
 
 
113

 
—

 
 
Intelsat Jackson Holdings S.A.
 
Alternative Carriers
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 1/2/2024
6.43
%
 
769

 
696

 
717

 
(6)(11)
 
 
 
 
 
696

 
717

 
 
L Squared Capital Partners LLC
 
Multi-Sector Holdings
 
 
 
 
 
 
 
2.00% limited partnership interest
 
 
 
 
864

 
2,462

 
(11)(16)
 
 
 
 
 
864

 
2,462

 
 
Lanai Holdings III, Inc.
 
Health Care Distributors
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.75% cash due 8/29/2022
6.53
%
 
13,016

 
12,840

 
9,580

 
(6)
 
 
 
 
 
12,840

 
9,580

 
 
Lannett Company, Inc.
 
Pharmaceuticals
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 11/25/2020
6.00
%
 
611

 
611

 
544

 
(6)(11)
 
 
 
 
 
611

 
544

 
 
Lift Brands Holdings, Inc.
 
Leisure Facilities
 
 
 
 
 
 
 
2,000,000 Class A Common Units in Snap Investments, LLC
 
 
 
 
1,399

 
1,644

 
(20)
 
 
 
 
 
1,399

 
1,644

 
 
Lightbox Intermediate, L.P.
 
Real Estate Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 5/9/2026
5.80
%
 
39,700

 
39,178

 
34,738

 
(6)(20)
 
 
 
 
 
39,178

 
34,738

 
 
LTI Holdings, Inc.
 
Auto Parts & Equipment
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.75% cash due 7/24/2026
5.74
%
 
1,317

 
1,139

 
997

 
(6)
First Lien Term Loan, LIBOR+3.50% cash due 9/6/2025
4.49
%
 
17,815

 
14,646

 
13,398

 
(6)
Second Lien Term Loan, LIBOR+6.75% cash due 9/6/2026
7.74
%
 
9,000

 
9,000

 
4,878

 
(6)
 
 
 
 
 
24,785

 
19,273

 
 
Maravai Intermediate Holdings, LLC
 
Biotechnology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 8/1/2025
5.75
%
 
11,820

 
11,702

 
10,343

 
(6)(20)
 
 
 
 
 
11,702

 
10,343

 
 
Mayfield Agency Borrower Inc.
 
Property & Casualty Insurance
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 2/28/2025
5.49
%
 
28,970

 
28,100

 
23,611

 
(6)
 
 
 
 
 
28,100

 
23,611

 
 
McAfee, LLC
 
Systems Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.75% cash due 9/30/2024
4.69
%
 
12,433

 
12,200

 
11,750

 
(6)
Second Lien Term Loan, LIBOR+8.50% cash due 9/29/2025
9.44
%
 
7,000

 
7,031

 
6,650

 
(6)
 
 
 
 
 
19,231

 
18,400

 
 
MHE Intermediate Holdings, LLC
 
Diversified Support Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/8/2024
6.07
%
 
2,917

 
2,900

 
2,839

 
(6)(20)
 
 
 
 
 
2,900

 
2,839

 
 
Mindbody, Inc.
 
Internet Services & Infrastructure
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025
8.00
%
 
28,952

 
28,482

 
26,781

 
(6)(20)
First Lien Revolver, LIBOR+7.00% cash due 2/14/2025
8.07
%
 
3,048

 
2,998

 
2,819

 
(6)(20)
 
 
 
 
 
31,480

 
29,600

 
 

10
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
 
 
 
 
 
 
 
 
 
 
Ministry Brands, LLC
 
Application Software
 
 
 
 
 
 
 
First Lien Revolver, LIBOR+5.00% cash due 12/2/2022
6.00
%
 
$
575

 
$
566

 
$
568

 
(6)(19)(20)
Second Lien Term Loan, LIBOR+9.25% cash due 6/2/2023
10.51
%
 
7,056

 
7,005

 
7,004

 
(6)(20)
Second Lien Delayed Draw Term Loan, LIBOR+9.25% cash due 6/2/2023
10.51
%
 
1,944

 
1,917

 
1,929

 
(6)(20)
 
 
 
 
 
9,488

 
9,501

 
 
Mountain View CLO XIV Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class E Notes, LIBOR+6.71% cash due 4/15/2029
8.54
%
 
593

 
365

 
407

 
(6)(11)
 
 
 
 
 
365

 
407

 
 
MRI Software LLC
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026
6.57
%
 
12,798

 
12,676

 
11,327

 
(6)(20)
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026
 
 
—

 
(13
)
 
(255
)
 
(6)(19)(20)
First Lien Revolver, LIBOR+5.50% cash due 2/10/2026
6.57
%
 
636

 
623

 
490

 
(6)(19)(20)
 
 
 
 
 
13,286

 
11,562

 
 
Olaplex, Inc.
 
Personal Products
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.50% cash due 1/8/2026
7.50
%
 
35,500

 
34,817

 
33,192

 
(6)(20)
First Lien Revolver, LIBOR+6.50% cash due 1/8/2025
7.50
%
 
3,834

 
3,761

 
3,585

 
(6)(20)
 
 
 
 
 
38,578

 
36,777

 
 
OmniSYS Acquisition Corporation
 
Diversified Support Services
 
 
 
 
 
 
 
100,000 Common Units in OSYS Holdings, LLC
 
 
 
 
1,000

 
660

 
(20)
 
 
 
 
 
1,000

 
660

 
 
Onvoy, LLC
 
Integrated Telecommunication Services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+10.50% cash due 2/10/2025
11.50
%
 
16,750

 
16,750

 
12,228

 
(6)(20)
19,666.67 Class A Units in GTCR Onvoy Holdings, LLC
 
 
 
 
1,967

 
—

 
(20)
13,664.73 Series 3 Class B Units in GTCR Onvoy Holdings, LLC
 
 
 
 
—

 
—

 
(20)
 
 
 
 
 
18,717

 
12,228

 
 
OZLM Funding III, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class DR Notes, LIBOR+7.77% cash due 1/22/2029
9.58
%
 
4,517

 
3,360

 
2,597

 
(6)(11)

 
 
 
 
3,360

 
2,597

 
 
PaySimple, Inc.
 
Data Processing & Outsourced Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.50% cash due 8/23/2025
6.46
%
 
37,561

 
36,882

 
34,181

 
(6)(20)
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 8/23/2025
6.48
%
 
8,256

 
8,022

 
7,154

 
(6)(19)(20)
 
 
 
 
 
44,904

 
41,335

 
 
Petsmart, Inc.
 
Specialty Stores
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 3/11/2022
5.00
%
 
1,629

 
1,466

 
1,566

 
(6)
 
 
 
 
 
1,466

 
1,566

 
 
Pingora MSR Opportunity Fund I-A, LP
 
Thrifts & Mortgage Finance
 
 
 
 
 
 
 
1.86% limited partnership interest
 
 
 
 
938

 
355

 
(11)(16)(19)
 
 
 
 
 
938

 
355

 
 
PLATO Learning Inc.
 
Education Services
 
 
 
 
 
 
 
Unsecured Senior PIK Note, 8.50% PIK due 12/9/2021
 
 
2,970

 
2,434

 
—

 
(20)(22)
Unsecured Junior PIK Note, 10.00% PIK due 12/9/2021
 
 
14,279

 
10,227

 
—

 
(20)(22)
Unsecured Revolver, 5.00% cash due 12/9/2021
 
 
2,865

 
2,631

 
573

 
(20)(21)
126,127.80 Class A Common Units of Edmentum
 
 
 
 
126

 
—

 
(20)
 
 
 
 
 
15,418

 
573

 
 

11
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
ProFrac Services, LLC
 
Industrial Machinery
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.25% cash due 9/15/2023
8.14
%
 
$
16,175

 
$
16,063

 
$
14,153

 
(6)(20)
 
 
 
 
 
16,063

 
14,153

 
 
Project Boost Purchaser, LLC
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.50% cash due 6/1/2026
4.49
%
 
6,965

 
6,895

 
5,874

 
(6)
Second Lien Term Loan, LIBOR+8.00% cash due 5/9/2027
8.99
%
 
3,750

 
3,750

 
2,906

 
(6)(20)
 
 
 
 
 
10,645

 
8,780

 
 
QuorumLabs, Inc.
 
Application Software
 
 
 
 
 
 
 
64,887,669 Junior-2 Preferred Stock
 
 
 
 
375

 
—

 
(20)
 
 
 
 
 
375

 
—

 
 
Refac Optical Group
 
Specialty Stores
 
 
 
 
 
 
 
1,550.9435 Shares of Common Stock in Refac Holdings, Inc.
 
 
 
 
1

 
—

 
(20)
550.9435 Series A-2 Preferred Stock in Refac Holdings, Inc., 10%
 
 
 
 
305

 
—

 
(20)
1,000 Series A-1 Preferred Stock in Refac Holdings, Inc., 10%
 
 
 
 
999

 
—

 
(20)
 
 
 
 
 
1,305

 
—

 
 
Salient CRGT, Inc.
 
Aerospace & Defense
 
 


 


 

First Lien Term Loan, LIBOR+6.50% cash due 2/28/2022
7.57
%
 
3,043

 
3,019

 
2,510

 
(6)(20)
 
 
 
 
 
3,019

 
2,510

 
 
Scilex Pharmaceuticals Inc.
 
Pharmaceuticals
 
 
 
 
 
 
 
Fixed Rate Zero Coupon Bond due 8/15/2026
 
 
15,716

 
11,602

 
11,394

 
(20)
 
 
 
 
 
11,602

 
11,394

 
 
Shackleton 2018-XII CLO, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class E Notes, LIBOR+5.90% cash due 7/20/2031
7.72
%
 
1,443

 
1,028

 
824

 
(6)(11)
 
 
 
 
 
1,028

 
824

 
 
Shackleton 2019-XIV CLO, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class D Notes, LIBOR+6.48% cash due 7/20/2030
8.30
%
 
1,097

 
666

 
579

 
(6)(11)
 
 
 
 
 
666

 
579

 
 
ShareThis, Inc.
 
Application Software
 
 
 
 
 
 
 
345,452 Series C Preferred Stock Warrants (exercise price $3.0395) expiration date 3/4/2024
 
 
 
 
367

 
—

 
(20)
 
 
 
 
 
367

 
—

 
 
Sorrento Therapeutics, Inc.
 
Biotechnology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 11/7/2023
8.50
%
 
16,116

 
15,235

 
15,955

 
(6)(11)(20)
1,572,246 Common Stock Warrants (exercise price $3.28) expiration date 5/7/2029
 
 
 
 
1,750

 
1,384

 
(11)(20)
333,326 Common Stock Warrants (exercise price $3.94) expiration date 11/3/2029
 
 
 
 
—

 
280

 
(11)(20)
500,000 Common Stock Warrants (exercise price $3.26) expiration date 6/6/2030
 
 
 
 
—

 
415

 
(11)(20)

 
 
 
 
16,985

 
18,034

 
 
Sunshine Luxembourg VII SARL
 
Personal Products
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 10/1/2026
5.32
%
 
1,040

 
949

 
947

 
(6)(11)
 
 
 
 
 
949

 
947

 
 
Supermoose Borrower, LLC
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025
5.20
%
 
7,066

 
6,331

 
5,695

 
(6)
 
 
 
 
 
6,331

 
5,695

 
 
Surgery Center Holdings, Inc.
 
Health Care Facilities
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.25% cash due 9/2/2024
4.25
%
 
4,350

 
3,552

 
3,373

 
(6)(11)
 
 
 
 
 
3,552

 
3,373

 
 
Swordfish Merger Sub LLC
 
Auto Parts & Equipment
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+6.75% cash due 2/2/2026
7.75
%
 
12,500

 
12,454

 
9,844

 
(6)(20)
 
 
 
 
 
12,454

 
9,844

 
 

12
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Tacala, LLC
 
Restaurants
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.50% cash due 2/4/2028
8.49
%
 
$
6,196

 
$
6,181

 
$
4,848

 
(6)
 
 
 
 
 
6,181

 
4,848

 
 
TerSera Therapeutics LLC
 
Pharmaceuticals
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+9.25% cash due 3/30/2024
10.70
%
 
29,663

 
29,175

 
29,241

 
(6)(20)
668,879 Common Units of TerSera Holdings LLC
 
 
 
 
1,961

 
2,859

 
(20)

 
 
 
 
31,136

 
32,100

 
 
Thunder Finco (US), LLC
 
Movies & Entertainment
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+8.00% cash due 11/26/2027
8.99
%
 
12,500

 
12,188

 
9,250

 
(6)(11)(20)
 
 
 
 
 
12,188

 
9,250

 
 
TIBCO Software Inc.
 
Application Software
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.25% cash due 3/3/2028
8.24
%
 
15,000

 
14,925

 
14,325

 
(6)
 
 
 
 
 
14,925

 
14,325

 
 
TigerConnect, Inc.
 
Application Software
 
 
 
 
 
 
 
299,110 Series B Preferred Stock Warrants (exercise price $1.3373) expiration date 12/8/2024
 
 
 
 
60

 
525

 
(20)
 
 
 
 
 
60

 
525

 
 
Transact Holdings Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.75% cash due 4/30/2026
5.74
%
 
6,965

 
6,861

 
5,398

 
(6)(20)
 
 
 
 
 
6,861

 
5,398

 
 
Truck Hero, Inc.
 
Auto Parts & Equipment
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+8.25% cash due 4/21/2025
9.25
%
 
21,500

 
21,191

 
16,663

 
(6)(20)
 
 
 
 
 
21,191

 
16,663

 
 
Turbocombustor Technology, Inc.
 
Aerospace & Defense
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 12/2/2020
5.50
%
 
3,490

 
3,140

 
3,071

 
(6)
 
 
 
 
 
3,140

 
3,071

 
 
Uber Technologies, Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025
5.00
%
 
5,661

 
5,626

 
5,326

 
(6)(11)
 
 
 
 
 
5,626

 
5,326

 
 
UFC Holdings, LLC
 
Movies & Entertainment
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026
4.25
%
 
1,374

 
1,210

 
1,225

 
(6)
 
 
 
 
 
1,210

 
1,225

 
 
Uniti Fiber Holdings Inc.
 
Specialized REITs
 
 
 
 
 
 
 
Fixed Rate Bond, 8.25% cash due 10/15/2023
 
 
5,026

 
4,779

 
3,908

 
(11)
Fixed Rate Bond, 7.88% cash due 2/15/2025
 
 
19,685

 
19,685

 
18,454

 
(11)
 
 
 
 
 
24,464

 
22,362

 
 
U.S. Renal Care, Inc.
 
Health Care Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 6/26/2026
6.00
%
 
1,127

 
924

 
997

 
(6)
 
 
 
 
 
924

 
997

 
 
Veritas US Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023
5.95
%
 
31,805

 
32,017

 
27,551

 
(6)
 
 
 
 
 
32,017

 
27,551

 
 
Verscend Holding Corp.
 
Health Care Technology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025
5.49
%
 
24,625

 
24,506

 
23,394

 
(6)
Fixed Rate Bond, 9.75% cash due 8/15/2026
 
 
12,000

 
12,021

 
12,068

 
 
 
 
 
 
 
36,527

 
35,462

 
 
Vertex Aerospace Services Corp.
 
Aerospace & Defense
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 6/29/2025
5.49
%
 
15,720

 
15,661

 
13,657

 
(6)
 
 
 
 
 
15,661

 
13,657

 
 
Vitalyst Holdings, Inc.
 
IT Consulting & Other Services
 
 
 
 
 
 
 
675 Series A Preferred Stock Units
 
 
 
 
675

 
440

 
(20)
7,500 Class A Common Stock Units
 
 
 
 
75

 
—

 
(20)
 
 
 
 
 
750

 
440

 
 

13
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Windstream Services, LLC
 
Integrated Telecommunication Services
 
 
 
 
 
 
 
Fixed Rate Bond, 8.63% cash due 10/31/2025
 
 
$
1,460

 
$
1,420

 
$
1,029

 
(11)(20)
 
 
 
 
 
1,420

 
1,029

 
 
WP CPP Holdings, LLC
 
Aerospace & Defense
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026
9.53
%
 
15,000

 
14,884

 
10,300

 
(6)(20)
 
 
 
 
 
14,884

 
10,300

 
 
WPEngine, Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.50% cash due 3/27/2026
7.77
%
 
14,188

 
13,834

 
13,833

 
(6)(20)
First Lien Delayed Draw Term Loan, LIBOR+6.50% cash due 3/27/2026
 
 
—

 
(657
)
 
(659
)
 
(6)(19)(20)
 
 
 
 
 
13,177

 
13,174

 
 
xMatters, Inc.
 
Application Software
 
 
 
 
 
 
 
600,000 Common Stock Warrants (exercise price $0.593333) expiration date 2/26/2025
 
 
 
 
709

 
269

 
(20)
 
 
 
 
 
709

 
269

 
 
Zep Inc.
 
Specialty Chemicals
 
 


 


 
 
First Lien Term Loan, LIBOR+4.00% cash due 8/12/2024
5.07
%
 
1,965

 
1,897

 
1,326

 
(6)
Second Lien Term Loan, LIBOR+8.25% cash due 8/11/2025
9.32
%
 
30,000

 
29,898

 
19,170

 
(6)(20)
 
 
 
 
 
31,795

 
20,496

 
 
Zephyr Bidco Limited
 
Specialized Finance
 
 
 
 
 
 
 
Second Lien Term Loan, UK LIBOR+7.50% cash due 7/23/2026
7.74
%
 
£
18,000

 
23,666

 
19,194

 
(6)(11)
 
 
 
 
 
23,666

 
19,194

 
 
Total Non-Control/Non-Affiliate Investments (158.9% of net assets)
 
 
 
 
$
1,362,354

 
$
1,195,506

 
 
Total Portfolio Investments (185.1% of net assets)
 
 
 
 
$
1,628,580

 
$
1,392,187

 
 
Cash and Cash Equivalents
 
 
 
 
 
 
 
 
 
JP Morgan Prime Money Market Fund, Institutional Shares
 
 
 
 
$
82,928

 
$
82,928

 
 
Other cash accounts
 
 
 
 
6,581

 
6,581

 
 
Total Cash and Cash Equivalents (11.9% of net assets)
 
 
 
 
$
89,509

 
$
89,509

 
 
Total Portfolio Investments and Cash and Cash Equivalents (197.0% of net assets)
 
 
 
 
$
1,718,089

 
$
1,481,696

 
 



Derivative Instrument
 
Notional Amount to be Purchased
 
Notional Amount to be Sold
 
Maturity Date
 
Counterparty
 
Cumulative Unrealized Appreciation /(Depreciation)
Foreign currency forward contract
 
$
19,756

 
£
14,850

 
8/18/2020
 
JPMorgan Chase Bank, N.A.
 
$
1,310

Foreign currency forward contract
 
$
14,532

 
€
13,213

 
8/31/2020
 
JPMorgan Chase Bank, N.A.
 
(42
)
 
 
 
 
 
 
 
 
 
 
$
1,268



14
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


(1)
All debt investments are income producing unless otherwise noted. All equity investments are non-income producing unless otherwise noted.
(2)
See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition by geographic region.
(3)
Equity ownership may be held in shares or units of companies related to the portfolio companies.
(4)
Interest rates may be adjusted from period to period on certain term loans and revolvers. These rate adjustments may be either temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements or permanent in nature per loan amendment or waiver documents.
(5)
Each of the Company's investments is pledged as collateral under the Credit Facility (as defined in Note 6 to the accompanying notes to the Consolidated Financial Statements).
(6)
The interest rate on the principal balance outstanding for all floating rate loans is indexed to the London Interbank Offered Rate ("LIBOR") and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars unless otherwise noted. As of March 31, 2020, the reference rates for the Company's variable rate loans were the 30-day LIBOR at 0.99%, the 60-day LIBOR at 1.26%, the 90-day LIBOR at 1.45%, the 180-day LIBOR at 1.07%, the PRIME at 3.25%, the 30-day UK LIBOR at 0.24% and the 30-day EURIBOR at (0.40)%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(7)
Principal includes accumulated payment in kind ("PIK") interest and is net of repayments, if any. “£” signifies the investment is denominated in British Pounds. "€" signifies the investment is denominated in Euros. All other investments are denominated in U.S. dollars.
(8)
Control Investments generally are defined by the Investment Company Act of 1940, as amended (the "Investment Company Act"), as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.
(9)
As defined in the Investment Company Act, the Company is deemed to be both an "Affiliated Person" of and to "Control" these portfolio companies as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Schedule 12-14 in the accompanying notes to the Consolidated Financial Statements for transactions during the six months ended March 31, 2020 in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to control.
(10)
First Star Speir Aviation 1 Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with Accounting Standards Update ("ASU") 2013-08, the Company has deemed the holding company to be an investment company under accounting principles generally accepted in the United States ("GAAP") and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding company are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities.
(11)
Investment is not a "qualifying asset" as defined under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of March 31, 2020, qualifying assets represented 77.2% of the Company's total assets and non-qualifying assets represented 22.8% of the Company's total assets.
(12)
Income producing through payment of dividends or distributions.
(13)
PIK interest income for this investment accrues at an annualized rate of 15%, however, the PIK interest is not contractually capitalized on the investment. As a result, the principal amount of the investment does not increase over time for accumulated PIK interest. As of March 31, 2020, the accumulated PIK interest balance for each of the A notes and the B notes was $3.0 million. The fair value of this investment is inclusive of PIK.
(14)
See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition.
(15)
During the quarter ended March 31, 2020, this portfolio company modified its scheduled interest payment to PIK.
(16)
This investment was valued using net asset value as a practical expedient for fair value. Consistent with Financial Accounting Standards Board ("FASB") guidance under Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures ("ASC 820"), these investments are excluded from the hierarchical levels.
(17)
Affiliate Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.
(18)
Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.
(19)
Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
(20)
As of March 31, 2020, these investments were categorized as Level 3 within the fair value hierarchy established by ASC 820.



15
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


(21)
This investment was on cash non-accrual status as of March 31, 2020. Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.
(22)
This investment was on PIK non-accrual status as of March 31, 2020. PIK non-accrual status is inclusive of other non-cash income, where applicable.


See notes to Consolidated Financial Statements.

16
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Control Investments
 
 
 
 
 
 
 
 
(8)(9)
C5 Technology Holdings, LLC
 
Data processing & outsourced services
 
 
 
 
 
 
 
829 Common Units
 
 
 
 
$
—

 
$
—

 
(20)
34,984,460.37 Preferred Units
 
 
 
 
34,984

 
34,984

 
(20)
 
 
 
 
 
34,984

 
34,984

 
 
First Star Speir Aviation Limited
 
Airlines
 
 
 
 
 
 
(10)
First Lien Term Loan, 9.00% cash due 12/15/2020
 
 
$
11,510

 
2,140

 
11,510

 
(11)(20)
100% equity interest
 
 
 
 
8,500

 
4,630

 
(11)(12)(20)
 
 
 
 
 
10,640

 
16,140

 
 
New IPT, Inc.
 
Oil & gas equipment services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
7.10
%
 
3,256

 
3,256

 
3,256

 
 (6)(20)
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021
7.10
%
 
1,009

 
1,009

 
1,009

 
 (6)(19)(20)
50.087 Class A Common Units in New IPT Holdings, LLC
 
 
 
 
—

 
2,903

 
(20)
 
 
 
 
 
4,265

 
7,168

 
 
Senior Loan Fund JV I, LLC
 
Multi-sector holdings
 
 
 
 
 
 
(14)(15)
Subordinated Debt, LIBOR+7.00% cash due 12/29/2028
9.39
%
 
96,250

 
96,250

 
96,250

 
(6)(11)(20)
87.5% LLC equity interest
 
 
 
 
49,322

 
30,052

 
(11)(16)(19)
 
 
 
 
 
145,572

 
126,302

 
 
Thruline Marketing, Inc.
 
Advertising
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022
9.10
%
 
18,146

 
18,146

 
18,146

 
(6)(20)
First Lien Revolver, LIBOR+7.75% cash due 4/3/2022
 
 
—

 
—

 
—

 
(6)(19)(20)
9,073 Class A Units in FS AVI Holdco, LLC
 
 
 
 
10,648

 
6,438

 
(20)
 
 
 
 
 
28,794

 
24,584

 
 
 Total Control Investments (22.5% of net assets)
 
 
 
 
$
224,255

 
$
209,178

 
 
 
 
 
 
 
 
 
 
 
 
 Affiliate Investments
 
 
 
 
 
 
 
 
(17)
Assembled Brands Capital LLC
 
Specialized finance
 
 
 
 
 
 
 
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 10/17/2023
8.10
%
 
$
5,585

 
$
5,585

 
$
5,585

 
(6)(19)(20)
1,609,201 Class A Units
 
 
 
 
765

 
782

 
(20)
1,019,168.80 Preferred Units, 6%
 
 
 
 
1,019

 
1,019

 
(20)
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029
 
 
 
 
—

 
—

 
(20)
 
 
 
 
 
7,369

 
7,386

 
 
Caregiver Services, Inc.
 
Healthcare services
 
 
 
 
 
 
 
1,080,399 shares of Series A Preferred Stock, 10%
 
 
 
 
1,080

 
1,784

 
(20)
 
 
 
 
 
1,080

 
1,784

 
 
 Total Affiliate Investments (1.0% of net assets)
 
 
 
 
$
8,449

 
$
9,170

 
 
 
 
 
 
 
 
 
 
 
 
 Non-Control/Non-Affiliate Investments
 
 
 
 
 
 
 
 
(18)
4 Over International, LLC
 
Commercial printing
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 6/7/2022
8.04
%
 
$
5,799

 
$
5,764

 
$
5,688

 
(6)(20)
First Lien Revolver, PRIME+5.00% cash due 6/7/2021
10.00
%
 
255

 
238

 
212

 
(6)(19)(20)
 
 
 
 
 
6,002

 
5,900

 
 
99 Cents Only Stores LLC
 
General merchandise stores
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash 1.50% PIK due 1/13/2022
7.10
%
 
19,326

 
18,946

 
16,934

 
(6)
 
 
 
 
 
18,946

 
16,934

 
 
Access CIG, LLC
 
Diversified support services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.75% cash due 2/27/2026
10.07
%
 
15,000

 
14,892

 
15,000

 
(6)(20)
 
 
 
 
 
14,892

 
15,000

 
 

17
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Aden & Anais Merger Sub, Inc.
 
Apparel, accessories & luxury goods
 
 
 
 
 
 
 
51,645 Common Units in Aden & Anais Holdings, Inc.
 
 
 
 
$
5,165

 
$
—

 
(20)
 
 
 
 
 
5,165

 
—

 
 
AdVenture Interactive, Corp.
 
Advertising
 
 
 
 
 
 
 
9,073 shares of common stock
 
 
 
 
13,611

 
12,677

 
(20)
 
 
 
 
 
13,611

 
12,677

 
 
AI Ladder (Luxembourg) Subco S.a.r.l.
 
Electrical components & equipment
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025
6.60
%
 
$
21,752

 
21,210

 
20,032

 
(6)(11)
 
 
 
 
 
21,210

 
20,032

 
 
AI Sirona (Luxembourg) Acquisition S.a.r.l.
 
Pharmaceuticals
 
 
 
 
 
 
 
Second Lien Term Loan, EURIBOR+7.25% cash due 7/10/2026
7.25
%
 
€
17,500

 
20,035

 
18,673

 
(6)(11)
 
 
 
 
 
20,035

 
18,673

 
 
Air Medical Group Holdings, Inc.
 
Healthcare services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 3/14/2025
6.29
%
 
$
6,321

 
6,192

 
5,936

 
(6)
 
 
 
 
 
6,192

 
5,936

 
 
AirStrip Technologies, Inc.
 
Application software
 
 
 
 
 
 
 
22,858.71 Series C-1 Preferred Stock Warrants (exercise price $34.99757) expiration date 5/11/2025
 
 
 
 
90

 
—

 
(20)
 
 
 
 
 
90

 
—

 
 
Airxcel, Inc.
 
Household appliances
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 4/28/2025
6.54
%
 
7,900

 
7,837

 
7,614

 
(6)
 
 
 
 
 
7,837

 
7,614

 
 
Aldevron, L.L.C.
 
Biotechnology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 9/20/2026
6.36
%
 
8,000

 
7,920

 
8,040

 
(6)
 
 
 
 
 
7,920

 
8,040

 
 
Algeco Scotsman Global Finance Plc
 
Construction & engineering
 
 
 
 
 
 
 
Fixed Rate Bond, 8.00% cash due 2/15/2023
 
 
23,915

 
23,443

 
23,982

 
(11)
 
 
 
 
 
23,443

 
23,982

 
 
Allen Media, LLC
 
Movies & entertainment
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.50% cash due 8/30/2023
8.60
%
 
19,238

 
18,858

 
18,613

 
(6)(20)
 
 
 
 
 
18,858

 
18,613

 
 
Altice France S.A.
 
Integrated telecommunication services
 
 
 
 
 
 
 
Fixed Rate Bond, 8.13% cash due 1/15/2024
 
 
3,000

 
3,045

 
3,113

 
(11)
Fixed Rate Bond, 7.63% cash due 2/15/2025
 
 
2,000

 
2,012

 
2,083

 
(11)
 
 
 
 
 
5,057

 
5,196

 
 
Alvotech Holdings S.A.
 
Biotechnology
 
 
 
 
 
 
 
Fixed Rate Bond 15% PIK Note A due 12/13/2023
 
 
14,800

 
16,304

 
18,089

 
(11)(13)(20)
Fixed Rate Bond 15% PIK Note B due 12/13/2023
 
 
14,800

 
16,304

 
16,609

 
(11)(13)(20)
 
 
 
 
 
32,608

 
34,698

 
 
Ancile Solutions, Inc.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 6/30/2021
9.10
%
 
8,677

 
8,591

 
8,504

 
 (6)(20)
 
 
 
 
 
8,591

 
8,504

 
 
Apptio, Inc.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025
9.56
%
 
23,764

 
23,340

 
23,325

 
(6)(20)
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025
 
 
—

 
(27
)
 
(28
)
 
(6)(19)(20)
 
 
 
 
 
23,313

 
23,297

 
 
Asurion, LLC
 
Property & casualty insurance
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+6.50% cash due 8/4/2025
8.54
%
 
22,000

 
21,954

 
22,382

 
(6)
 
 
 
 
 
21,954

 
22,382

 
 

18
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Avantor Inc.
 
Healthcare distributors
 
 
 
 
 
 
 
Fixed Rate Bond, 9.00% cash due 10/1/2025
 
 
$
3,000

 
$
2,975

 
$
3,379

 
 
 
 
 
 
 
2,975

 
3,379

 
 
Belk Inc.
 
Department stores
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.75% cash due 12/12/2022
6.80
%
 
653

 
585

 
480

 
(6)
 
 
 
 
 
585

 
480

 
 
Blackhawk Network Holdings, Inc.
 
Data processing & outsourced services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.00% cash due 6/15/2026
9.06
%
 
26,250

 
26,013

 
26,283

 
(6)
 
 
 
 
 
26,013

 
26,283

 
 
Boxer Parent Company Inc.
 
Systems software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025
6.29
%
 
13,915

 
13,798

 
13,416

 
(6)
 
 
 
 
 
13,798

 
13,416

 
 
California Pizza Kitchen, Inc.
 
Restaurants
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 8/23/2022
8.53
%
 
3,122

 
3,097

 
2,800

 
(6)
 
 
 
 
 
3,097

 
2,800

 
 
Cenegenics, LLC
 
Healthcare services
 
 
 
 
 
 
(23)
First Lien Term Loan, 9.75% cash 2.00% PIK due 9/30/2019
 
 
29,781

 
27,738

 
—

 
(20)(21)
First Lien Revolver, 15.00% cash due 9/30/2019
 
 
2,203

 
2,203

 
—

 
(20)(21)
452,914.87 Common Units in Cenegenics, LLC
 
 
 
 
598

 
—

 
(20)
345,380.141 Preferred Units in Cenegenics, LLC
 
 
 
 
300

 
—

 
(20)
 
 
 
 
 
30,839

 
—

 
 
CITGO Holding, Inc.
 
Oil & gas refining & marketing
 
 
 
 
 
 
 
Fixed Rate Bond, 9.25% cash due 8/1/2024
 
 
10,672

 
10,672

 
11,366

 
 
First Lien Term Loan, LIBOR+7.00% cash due 8/1/2023
 
 
10,000

 
9,855

 
10,219

 
(6)
 
 
 
 
 
20,527

 
21,585

 
 
CITGO Petroleum Corp.
 
Oil & gas refining & marketing
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024
7.10
%
 
9,950

 
9,851

 
10,012

 
(6)
 
 
 
 
 
9,851

 
10,012

 
 
Connect U.S. Finco LLC
 
Alternative carriers
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 9/23/2026
7.10
%
 
30,000

 
29,400

 
29,580

 
(6)(11)
 
 
 
 
 
29,400

 
29,580

 
 
Convergeone Holdings, Inc.
 
IT consulting & other services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 1/4/2026
7.04
%
 
14,770

 
14,225

 
13,352

 
(6)
 
 
 
 
 
14,225

 
13,352

 
 
Conviva Inc.
 
Application software
 
 
 
 
 
 
 
417,851 Series D Preferred Stock Warrants (exercise price $1.1966) expiration date 2/28/2021
 
 
 
 
105

 
411

 
(20)
 
 
 
 
 
105

 
411

 
 
Covia Holdings Corporation
 
Oil & gas equipment services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 6/1/2025
6.31
%
 
7,900

 
7,900

 
6,484

 
(6)(11)
 
 
 
 
 
7,900

 
6,484

 
 
DigiCert, Inc.
 
Internet services & infrastructure
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 10/31/2024
6.04
%
 
4,222

 
4,184

 
4,221

 
(6)
 
 
 
 
 
4,184

 
4,221

 
 
Dominion Diagnostics, LLC
 
Healthcare services
 
 
 
 
 
 
(23)
Subordinated Term Loan, 11.00% cash 1.00% PIK due 10/18/2019
 
 
20,273

 
14,281

 
2,890

 
(20)(21)
First Lien Term Loan, PRIME+4.00% cash due 4/8/2019
9.00
%
 
45,691

 
45,691

 
45,691

 
(6)(20)
First Lien Revolver, PRIME+4.00% cash due 4/8/2019
9.00
%
 
2,090

 
2,090

 
2,090

 
(6)(20)
 
 
 
 
 
62,062

 
50,671

 
 

19
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
The Dun & Bradstreet Corporation
 
Research & consulting services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 2/6/2026
7.05
%
 
$
10,000

 
$
9,817

 
$
10,074

 
(6)
Fixed Rate Bond 6.875% cash due 8/15/2026
 
 
5,000

 
5,000

 
5,459

 
 
 
 
 
 
 
14,817

 
15,533

 
 
Eagleview Technology Corporation
 
Application software
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.50% cash due 8/14/2026
9.55
%
 
12,000

 
11,880

 
11,520

 
(6)(20)
 
 
 
 
 
11,880

 
11,520

 
 
EHR Canada, LLC
 
Food retail
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+8.00% cash due 9/28/2020
10.10
%
 
14,611

 
14,473

 
14,903

 
(6)(20)
 
 
 
 
 
14,473

 
14,903

 
 
EOS Fitness Opco Holdings, LLC
 
Leisure facilities
 
 
 
 
 
 
 
487.5 Class A Preferred Units, 12%
 
 
 
 
488

 
855

 
(20)
12,500 Class B Common Units
 
 
 
 
—

 
934

 
(20)
 
 
 
 
 
488

 
1,789

 
 
Equitrans Midstream Corp.
 
Oil & gas storage & transportation
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 1/31/2024
6.55
%
 
11,910

 
11,603

 
11,926

 
(6)(11)
 
 
 
 
 
11,603

 
11,926

 
 
ExamSoft Worldwide, Inc.
 
Application software
 
 
 
 
 
 
 
180,707 Class C Units in ExamSoft Investor LLC
 
 
 
 
181

 
—

 
(20)
 
 
 
 
 
181

 
—

 
 
GI Chill Acquisition LLC
 
Managed healthcare
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 8/6/2025
6.10
%
 
17,820

 
17,731

 
17,775

 
(6)(20)
Second Lien Term Loan, LIBOR+7.50% cash due 8/6/2026
9.60
%
 
10,000

 
9,914

 
10,000

 
(6)(20)
 
 
 
 
 
27,645

 
27,775

 
 
GKD Index Partners, LLC
 
Specialized finance
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.25% cash due 6/29/2023
9.35
%
 
22,402

 
22,235

 
22,108

 
(6)(20)
First Lien Revolver, LIBOR+7.25% cash due 6/29/2023
 
 
—

 
(9
)
 
(15
)
 
(6)(19)(20)
 
 
 
 
 
22,226

 
22,093

 
 
GoodRx, Inc.
 
Interactive media & services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.50% cash due 10/12/2026
9.54
%
 
22,222

 
21,805

 
22,500

 
(6)(20)
 
 
 
 
 
21,805

 
22,500

 
 
Guidehouse LLP
 
Research & consulting services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.50% cash due 5/1/2026
9.54
%
 
20,000

 
19,917

 
19,750

 
(6)
 
 
 
 
 
19,917

 
19,750

 
 
HealthEdge Software, Inc.
 
Application software
 
 
 
 
 
 
 
482,453 Series A-3 Preferred Stock Warrants (exercise price $1.450918) expiration date 9/30/2023
 
 
 
 
213

 
757

 
(20)
 
 
 
 
 
213

 
757

 
 
I Drive Safely, LLC
 
Education services
 
 
 
 
 
 
 
125,079 Class A Common Units of IDS Investments, LLC
 
 
 
 
1,000

 
200

 
(20)
 
 
 
 
 
1,000

 
200

 
 
IBG Borrower LLC
 
Apparel, accessories & luxury goods
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 8/2/2022
9.13
%
 
14,209

 
13,027

 
13,286

 
(6)(20)
 
 
 
 
 
13,027

 
13,286

 
 
iCIMs, Inc.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.50% cash due 9/12/2024
8.56
%
 
16,718

 
16,436

 
16,438

 
(6)(20)
First Lien Revolver, LIBOR+6.50% cash due 9/12/2024
 
 
—

 
(15
)
 
(15
)
 
(6)(19)(20)
 
 
 
 
 
16,421

 
16,423

 
 

20
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
 
 
 
 
 
 
 
 
 
 
Integral Development Corporation
 
Other diversified financial services
 
 
 
 
 
 
 
1,078,284 Common Stock Warrants (exercise price $0.9274) expiration date 7/10/2024
 
 
 
 
$
113

 
$
—

 
(20)
 
 
 
 
 
113

 
—

 
 
Kellermeyer Bergensons Services, LLC
 
Environmental & facilities services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+8.50% cash due 4/29/2022
10.77
%
 
$
6,105

 
5,940

 
5,937

 
(6)(20)
 
 
 
 
 
5,940

 
5,937

 
 
L Squared Capital Partners LLC
 
Multi-sector holdings
 
 
 
 
 
 
 
2.00% limited partnership interest
 
 
 
 
864

 
2,237

 
(11)(16)
 
 
 
 
 
864

 
2,237

 
 
Lanai Holdings III, Inc.
 
Healthcare distributors
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.75% cash due 8/29/2022
7.01
%
 
19,892

 
19,586

 
18,583

 
(6)
 
 
 
 
 
19,586

 
18,583

 
 
Lannett Company, Inc.
 
Pharmaceuticals
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 11/25/2020
7.04
%
 
762

 
762

 
759

 
(6)(11)
 
 
 
 
 
762

 
759

 
 
Lift Brands Holdings, Inc.
 
Leisure facilities
 
 
 
 
 
 
 
2,000,000 Class A Common Units in Snap Investments, LLC
 
 
 
 
1,399

 
3,020

 
(20)
 
 
 
 
 
1,399

 
3,020

 
 
Lightbox Intermediate, L.P.
 
Real estate services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 5/9/2026
7.05
%
 
39,900

 
39,332

 
39,501

 
(6)(20)
 
 
 
 
 
39,332

 
39,501

 
 
Long's Drugs Incorporated
 
Pharmaceuticals
 
 
 
 
 
 
 
50 Series A Preferred Shares in Long's Drugs Incorporated
 
 
 
 
385

 
924

 
(20)
25 Series B Preferred Shares in Long's Drugs Incorporated
 
 
 
 
210

 
572

 
(20)
 
 
 
 
 
595

 
1,496

 
 
LTI Holdings, Inc.
 
Auto parts & equipment
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+6.75% cash due 9/6/2026
8.79
%
 
9,000

 
9,000

 
8,246

 
(6)
 
 
 
 
 
9,000

 
8,246

 
 
Lytx Holdings, LLC
 
Research & consulting services
 
 
 
 
 
 
 
3,500 Class B Units
 
 
 
 
—

 
2,053

 
(20)
 
 
 
 
 
—

 
2,053

 
 
Maravai Intermediate Holdings, LLC
 
Biotechnology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 8/2/2025
6.31
%
 
11,880

 
11,761

 
11,813

 
(6)(20)
 
 
 
 
 
11,761

 
11,813

 
 
Mayfield Agency Borrower Inc.
 
Property & casualty insurance
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 2/28/2025
6.54
%
 
15,892

 
15,630

 
15,481

 
(6)
Second Lien Term Loan, LIBOR+8.50% cash due 3/2/2026
10.54
%
 
35,925

 
35,492

 
36,285

 
(6)(20)
 
 
 
 
 
51,122

 
51,766

 
 
McAfee, LLC
 
Systems software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.75% cash due 9/30/2024
5.79
%
 
10,957

 
10,884

 
10,995

 
(6)
Second Lien Term Loan, LIBOR+8.50% cash due 9/29/2025
10.54
%
 
7,000

 
7,034

 
7,093

 
(6)
 
 
 
 
 
17,918

 
18,088

 
 

21
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
MHE Intermediate Holdings, LLC
 
Diversified support services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/8/2024
7.10
%
 
$
2,932

 
$
2,913

 
$
2,874

 
(6)(20)
 
 
 
 
 
2,913

 
2,874

 
 
Mindbody, Inc.
 
Internet services & infrastructure
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025
9.06
%
 
28,952

 
28,434

 
28,402

 
(6)(20)
First Lien Revolver, LIBOR+7.00% cash due 2/15/2025
 
 
—

 
(55
)
 
(58
)
 
(6)(19)(20)
 
 
 
 
 
28,379

 
28,344

 
 
Ministry Brands, LLC
 
Application software
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+9.25% cash due 6/2/2023
11.34
%
 
7,056

 
6,997

 
7,056

 
(6)(20)
Second Lien Delayed Draw Term Loan, LIBOR+9.25% cash due 6/2/2023
11.34
%
 
1,944

 
1,927

 
1,944

 
(6)(20)
First Lien Revolver, LIBOR+5.00% cash due 12/2/2022
7.04
%
 
200

 
191

 
200

 
(6)(19)(20)
 
 
 
 
 
9,115

 
9,200

 
 
Navicure, Inc.
 
Healthcare technology
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.50% cash due 10/31/2025
9.54
%
 
14,500

 
14,389

 
14,573

 
(6)(20)
 
 
 
 
 
14,389

 
14,573

 
 
Numericable SFR SA
 
Integrated telecommunication services
 
 
 
 
 
 
 
Fixed Rate Bond, 7.38% cash due 5/1/2026
 
 
5,000

 
5,104

 
5,380

 
(11)
 
 
 
 
 
5,104

 
5,380

 
 
OmniSYS Acquisition Corporation
 
Diversified support services
 
 
 
 
 
 
 
100,000 Common Units in OSYS Holdings, LLC
 
 
 
 
1,000

 
750

 
(20)
 
 
 
 
 
1,000

 
750

 
 
Onvoy, LLC
 
Integrated telecommunication services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+10.50% cash due 2/10/2025
12.54
%
 
16,750

 
16,750

 
13,187

 
(6)(20)
19,666.67 Class A Units in GTCR Onvoy Holdings, LLC
 
 
 
 
1,967

 
—

 
(20)
13,664.73 Series 3 Class B Units in GTCR Onvoy Holdings, LLC
 
 
 
 
—

 
—

 
(20)
 
 
 
 
 
18,717

 
13,187

 
 
P2 Upstream Acquisition Co.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 10/30/2020
6.19
%
 
2,976

 
2,936

 
2,950

 
(6)
First Lien Revolver, LIBOR+4.00% cash due 2/1/2020
 
 
—

 
—

 
(79
)
 
(6)(19)
 
 
 
 
 
2,936

 
2,871

 
 
PaySimple, Inc.
 
Data processing & outsourced services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.50% cash due 8/23/2025
7.55
%
 
37,750

 
37,004

 
37,184

 
(6)(20)
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 8/23/2025
 
 
—

 
(242
)
 
(184
)
 
(6)(19)(20)
 
 
 
 
 
36,762

 
37,000

 
 
Pingora MSR Opportunity Fund I-A, LP
 
Thrift & mortgage finance
 
 
 
 
 
 
 
1.86% limited partnership interest
 
 
 
 
1,217

 
691

 
(11)(16)(19)
 
 
 
 
 
1,217

 
691

 
 
PLATO Learning Inc.
 
Education services
 
 
 
 
 
 
 
Unsecured Senior PIK Note, 8.5% PIK due 12/9/2021
 
 
2,845

 
2,434

 
—

 
(20)(22)
Unsecured Junior PIK Note, 10% PIK due 12/9/2021
 
 
13,577

 
10,227

 
—

 
(20)(22)
Unsecured Revolver, 5.00% cash due 12/9/2021
 
 
2,064

 
1,885

 
(184
)
 
(19)(20)(21)
126,127.80 Class A Common Units of Edmentum
 
 
 
 
126

 
—

 
(20)
 
 
 
 
 
14,672

 
(184
)
 
 

22
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
 
 
 
 
 
 
 
 
 
 
Project Boost Purchaser, LLC
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.50% cash due 6/1/2026
5.54
%
 
$
7,000

 
$
6,930

 
$
6,964

 
(6)
Second Lien Term Loan, LIBOR+8.00% cash due 5/9/2027
10.14
%
 
3,750

 
3,750

 
3,750

 
(6)(20)
 
 
 
 
 
10,680

 
10,714

 
 
ProFrac Services, LLC
 
Industrial machinery
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.25% cash due 9/15/2023
8.66
%
 
17,192

 
17,055

 
16,848

 
(6)(20)
 
 
 
 
 
17,055

 
16,848

 
 
QuorumLabs, Inc.
 
Application software
 
 
 
 
 
 
 
64,887,669 Junior-2 Preferred Stock
 
 
 
 
375

 
—

 
(20)
 
 
 
 
 
375

 
—

 
 
Refac Optical Group
 
Specialty stores
 
 
 
 
 
 
 
1,550.9435 Shares of Common Stock in Refac Holdings, Inc.
 
 
 
 
1

 
—

 
(20)
550.9435 Series A-2 Preferred Stock in Refac Holdings, Inc., 10%
 
 
 
 
305

 
—

 
(20)
1,000 Series A-1 Preferred Stock in Refac Holdings, Inc., 10%
 
 
 
 
999

 
—

 
(20)
 
 
 
 
 
1,305

 
—

 
 
Salient CRGT, Inc.
 
Aerospace & defense
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 2/28/2022
8.05
%
 
3,086

 
3,056

 
2,932

 
(6)(20)
 
 
 
 
 
3,056

 
2,932

 
 
Scilex Pharmaceuticals Inc.
 
Pharmaceuticals
 
 
 
 
 
 
 
Fixed Rate Zero Coupon Bond due 8/15/2026
 
 
15,879

 
11,146

 
11,353

 
(20)
 
 
 
 
 
11,146

 
11,353

 
 
ShareThis, Inc.
 
Application software
 
 
 
 
 
 
 
345,452 Series C Preferred Stock Warrants (exercise price $3.0395) expiration date 3/4/2024
 
 
 
 
367

 
2

 
(20)
 
 
 
 
 
367

 
2

 
 
Sorrento Therapeutics, Inc.
 
Biotechnology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 11/7/2023
9.13
%
 
30,000

 
28,132

 
29,250

 
(6)(11)(20)
First Lien Delayed Draw Term Loan, LIBOR+7.00% cash due 11/7/2023
 
 
 
 
(62
)
 
(69
)
 
(6)(11)(19)(20)
Stock Warrants Strike (exercise price $3.28) expiration date 5/7/2029
 
 
 
 
1,750

 
1,667

 
(11)(20)
Stock Warrants Strike (exercise price $3.94) expiration date 11/3/2029
 
 
 
 
—

 
320

 
(11)(20)
 
 
 
 
 
29,820

 
31,168

 
 
Swordfish Merger Sub LLC
 
Auto parts & equipment
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+6.75% cash due 2/2/2026
8.79
%
 
12,500

 
12,450

 
12,135

 
(6)(20)
 
 
 
 
 
12,450

 
12,135

 
 
TerSera Therapeutics, LLC
 
Pharmaceuticals
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+9.25% cash due 3/30/2024
11.35
%
 
25,463

 
25,025

 
25,192

 
(6)(20)
Second Lien Delayed Draw Term Loan, LIBOR+9.25% cash due 12/31/2020
 
 
 
 
—

 
(45
)
 
(6)(19)(20)
668,879 Common Units of TerSera Holdings LLC
 
 
 
 
1,731

 
2,629

 
(20)
 
 
 
 
 
26,756

 
27,776

 
 
TigerText, Inc.
 
Application software
 
 
 
 
 
 
 
299,110 Series B Preferred Stock Warrants (exercise price $1.3373) expiration date 12/8/2024
 
 
 
 
60

 
560

 
(20)
 
 
 
 
 
60

 
560

 
 
Transact Holdings Inc.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.75% cash due 4/30/2026
7.01
%
 
7,000

 
6,895

 
6,965

 
(6)
 
 
 
 
 
6,895

 
6,965

 
 

23
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Tribe Buyer LLC
 
Human resource & employment services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 2/16/2024
6.54
%
 
$
830

 
$
830

 
$
775

 
(6)(20)
 
 
 
 
 
830

 
775

 
 
Truck Hero, Inc.
 
Auto parts & equipment
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+8.25% cash due 4/21/2025
10.29
%
 
21,500

 
21,191

 
20,103

 
(6)(20)
 
 
 
 
 
21,191

 
20,103

 
 
Uber Technologies, Inc.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025
6.03
%
 
5,689

 
5,652

 
5,667

 
(6)
 
 
 
 
 
5,652

 
5,667

 
 
Uniti Group LP
 
Specialized REITs
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 10/24/2022
7.04
%
 
8,403

 
8,264

 
8,213

 
(6)(11)
 
 
 
 
 
8,264

 
8,213

 
 
UOS, LLC
 
Trading companies & distributors
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.50% cash due 4/18/2023
7.54
%
 
10,242

 
10,357

 
10,370

 
(6)
 
 
 
 
 
10,357

 
10,370

 
 
Veritas US Inc.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023
6.60
%
 
34,200

 
34,468

 
32,413

 
(6)
 
 
 
 
 
34,468

 
32,413

 
 
Verscend Holding Corp.
 
Healthcare technology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025
6.54
%
 
24,750

 
24,633

 
24,879

 
(6)
Fixed Rate Bond, 9.75% cash due 8/15/2026
 
 
12,000

 
12,022

 
12,823

 
 
 
 
 
 
 
36,655

 
37,702

 
 
Vertex Aerospace Services Corp.
 
Aerospace & defense
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 6/29/2025
6.54
%
 
15,800

 
15,735

 
15,869

 
(6)
 
 
 
 
 
15,735

 
15,869

 
 
Vitalyst Holdings, Inc.
 
IT consulting & other services
 
 
 
 
 
 
 
675 Series A Preferred Stock Units
 
 
 
 
675

 
440

 
(20)
7,500 Class A Common Stock Units
 
 
 
 
75

 
—

 
(20)
 
 
 
 
 
750

 
440

 
 
Windstream Services, LLC
 
Integrated telecommunication services
 
 
 
 
 
 
 
Fixed Rate Bond, 8.63% cash due 10/31/2025
 
 
5,000

 
4,863

 
5,113

 
(11)
 
 
 
 
 
4,863

 
5,113

 
 
WP CPP Holdings, LLC
 
Aerospace & defense
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026
10.01
%
 
15,000

 
14,874

 
14,937

 
(6)
 
 
 
 
 
14,874

 
14,937

 
 
xMatters, Inc.
 
Application software
 
 
 
 
 
 
 
600,000 Common Stock Warrants (exercise price $0.593333) expiration date 2/26/2025
 
 
 
 
709

 
273

 
(20)
 
 
 
 
 
709

 
273

 
 
Yeti Holdings, Inc.
 
Leisure products
 
 
 
 
 
 
 
537,629 Shares Yeti Holdings, Inc. Common Stock
 
 
 
 
—

 
15,054

 
 
 
 
 
 
 
—

 
15,054

 
 
Zep Inc.
 
Specialty chemicals
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+8.25% cash due 8/11/2025
10.35
%
 
30,000

 
29,889

 
21,950

 
(6)(20)
First Lien Term Loan, LIBOR+4.00% cash due 8/12/2024
6.04
%
 
1,975

 
1,899

 
1,564

 
(6)
 
 
 
 
 
31,788

 
23,514

 
 
Zephyr Bidco Limited
 
Specialized finance
 
 
 
 
 
 
 
Second Lien Term Loan, UK LIBOR+7.50% cash due 7/23/2026
8.21
%
 
£
18,000

 
23,632

 
22,006

 
(6)(11)
 
 
 
 
 
23,632

 
22,006

 
 

24
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Total Non-Control/Non-Affiliate Investments (131.1% of net assets)
 
 
 
 
$
1,280,310

 
$
1,219,694

 
 
Total Portfolio Investments (154.5% of net assets)
 
 
 
 
$
1,513,014

 
$
1,438,042

 
 
Cash and Cash Equivalents
 
 
 
 
 
 
 
 
 
JP Morgan Prime Money Market Fund, Institutional Shares
 
 
 
 
$
9,611

 
$
9,611

 
 
Other cash accounts
 
 
 
 
5,795

 
5,795

 
 
Total Cash and Cash Equivalents (1.7% of net assets)
 
 
 
 
$
15,406

 
$
15,406

 
 
Total Portfolio Investments and Cash and Cash Equivalents (156.2% of net assets)
 
 
 
 
$
1,528,420

 
$
1,453,448

 
 

Derivative Instrument
 
Notional Amount to be Purchased
 
Notional Amount to be Sold
 
Maturity Date
 
Counterparty
 
Cumulative Unrealized Appreciation /(Depreciation)
Foreign currency forward contract
 
$
22,161

 
£
17,910

 
10/15/2019
 
JPMorgan Chase Bank, N.A.
 
$
76

Foreign currency forward contract
 
$
19,193

 
€
17,150

 
11/29/2019
 
JPMorgan Chase Bank, N.A.
 
414

 
 
 
 
 
 
 
 
 
 
$
490





25
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


(1)
All debt investments are income producing unless otherwise noted. All equity investments are non-income producing unless otherwise noted.
(2)
See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition by geographic region.
(3)
Equity ownership may be held in shares or units of companies related to the portfolio companies.
(4)
Interest rates may be adjusted from period to period on certain term loans and revolvers. These rate adjustments may be either temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements or permanent in nature per loan amendment or waiver documents.
(5)
With the exception of investments held by the Company’s wholly-owned subsidiaries that each formerly held a license from the SBA to operate as an SBIC, each of the Company's investments is pledged as collateral under the Credit Facility (as defined in Note 6 to the accompanying notes to the Consolidated Financial Statements).
(6)
The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars unless otherwise noted. As of September 30, 2019, the reference rates for the Company's variable rate loans were the 30-day LIBOR at 2.04%, the 60-day LIBOR at 2.09%, the 90-day LIBOR at 2.10%, the 180-day LIBOR at 2.06%, the PRIME at 5.00%, the 30-day UK LIBOR at 0.71% and the 30-day EURIBOR at (0.51)%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(7)
Principal includes accumulated PIK interest and is net of repayments, if any. “£” signifies the investment is denominated in British Pounds. "€" signifies the investment is denominated in Euros. All other investments are denominated in U.S. dollars.
(8)
Control Investments generally are defined by the Investment Company Act, as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.
(9)
As defined in the Investment Company Act, the Company is deemed to be both an "Affiliated Person" of and to "Control" this portfolio company as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Schedule 12-14 in the Company's annual report on Form 10-K for the year ended September 30, 2019 for transactions in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to control.
(10)
First Star Speir Aviation 1 Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding company to be an investment company under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding company are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities.
(11)
Investment is not a "qualifying asset" as defined under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of September 30, 2019, qualifying assets represented 75.0% of the Company's total assets and non-qualifying assets represented 25.0% of the Company's total assets.
(12)
Income producing through payment of dividends or distributions.
(13)
PIK interest income for this investment accrues at an annualized rate of 15%, however, the PIK interest is not contractually capitalized on the investment. As a result, the principal amount of the investment does not increase over time for accumulated PIK interest. As of September 30, 2019, the accumulated PIK interest balance for each of the A notes and the B notes was $1.8 million. The fair value of this investment is inclusive of PIK.
(14)
See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition.
(15)
On December 28, 2018, the mezzanine notes issued by SLF Repack Issuer 2016, LLC, a wholly-owned, special purpose issuer subsidiary of Senior Loan Fund JV I, LLC ("SLF JV I"), were redeemed and the Company purchased subordinated notes and LLC equity interests issued by SLF JV I. Prior to December 28, 2018, the mezzanine notes issued by SLF Repack Issuer 2016, LLC consisted of Class A mezzanine secured deferrable floating rate notes and Class B mezzanine secured deferrable fixed rate notes.
(16)
This investment was valued using net asset value as a practical expedient for fair value. Consistent with ASC 820, these investments are excluded from the hierarchical levels.
(17)
Affiliate Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.
(18)
Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.
(19)
Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
(20)
As of September 30, 2019, these investments were categorized as Level 3 within the fair value hierarchy established by ASC 820.
(21)
This investment was on cash non-accrual status as of September 30, 2019. Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.

26
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


(22)
This investment was on PIK non-accrual status as of September 30, 2019. PIK non-accrual status is inclusive of other non-cash income, where applicable.
(23)
Payments on this investment were past due as of September 30, 2019.


 

See notes to Consolidated Financial Statements.





























27
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 1. Organization
Oaktree Specialty Lending Corporation (together with its consolidated subsidiaries, the "Company") is a specialty finance company that looks to provide customized, one-stop credit solutions to companies with limited access to public or syndicated capital markets. The Company was formed in late 2007 and operates as a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a Business Development Company under the Investment Company Act. The Company has qualified and elected to be treated as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"), for tax purposes.
The Company seeks to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, bonds, preferred equity and certain equity co-investments. The Company may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions.
As of March 31, 2020, the Company is externally managed by Oaktree Capital Management, L.P. (“Oaktree”), a subsidiary of Oaktree Capital Group, LLC (“OCG”), pursuant to an investment advisory agreement between the Company and Oaktree, as amended from time to time (the “Investment Advisory Agreement”). Oaktree Fund Administration, LLC (“Oaktree Administrator”), a subsidiary of Oaktree, provides certain administrative and other services necessary for the Company to operate pursuant to an administration agreement between the Company and Oaktree Administrator, as amended from time to time (the “Administration Agreement”). See Note 11. In 2019, Brookfield Asset Management Inc. ("Brookfield") acquired a majority economic interest in OCG. OCG operates as an independent business within Brookfield, with its own product offerings and investment, marketing and support teams.

Note 2. Significant Accounting Policies
Basis of Presentation:
The Consolidated Financial Statements of the Company have been prepared in accordance with GAAP and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair presentation of the Consolidated Financial Statements have been made. All intercompany balances and transactions have been eliminated. Certain prior-period financial information has been reclassified to conform to current period presentation. The Company is an investment company following the accounting and reporting guidance in ASC Topic 946, Financial Services - Investment Companies ("ASC 946").
Use of Estimates:
The preparation of the financial statements in conformity with GAAP requires management to make certain estimates and assumptions affecting amounts reported in the financial statements and accompanying notes. These estimates are based on the information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Changes in the economic and political environments, financial markets and any other parameters used in determining these estimates could cause actual results to differ and such differences could be material. Significant estimates include the valuation of investments and revenue recognition.
Consolidation:
The accompanying Consolidated Financial Statements include the accounts of Oaktree Specialty Lending Corporation and its consolidated subsidiaries. Each consolidated subsidiary is wholly-owned and, as such, consolidated into the Consolidated Financial Statements. Certain subsidiaries that hold investments are treated as pass through entities for tax purposes. The assets of certain of the consolidated subsidiaries are not directly available to satisfy the claims of the creditors of Oaktree Specialty Lending Corporation or any of its other subsidiaries. As of March 31, 2020, the consolidated subsidiaries were Fifth Street Fund of Funds LLC ("Fund of Funds"), Fifth Street Mezzanine Partners IV, L.P. ("FSMP IV"), Fifth Street Mezzanine Partners V, L.P. ("FSMP V" and together with FSMP IV, the "Excluded Subsidiaries"), FSMP IV GP, LLC, FSMP V GP, LLC, OCSL SRNE, LLC, OCSL AB Blocker, LLC and FSFC Holdings, Inc. ("Holdings"). In addition, the Company consolidates various holding companies held in connection with its equity investments in certain portfolio investments.
As an investment company, portfolio investments held by the Company are not consolidated into the Consolidated Financial Statements but rather are included on the Statements of Assets and Liabilities as investments at fair value.

Fair Value Measurements:
The Company values its investments in accordance with ASC 820, which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability's

28
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. ASC 820 prioritizes the use of observable market prices over entity-specific inputs. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments' complexity.
Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
 
•
Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
•
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.
•
Level 3 — Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
If inputs used to measure fair value fall into different levels of the fair value hierarchy, an investment's level is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. This includes investment securities that are valued using "bid" and "ask" prices obtained from independent third party pricing services or directly from brokers. These investments may be classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustments for investment-specific factors or restrictions.
Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, Oaktree obtains and analyzes readily available market quotations provided by pricing vendors and brokers for all of the Company's investments for which quotations are available. In determining the fair value of a particular investment, pricing vendors and brokers use observable market information, including both binding and non-binding indicative quotations.
The Company seeks to obtain at least two quotations for the subject or similar securities, typically from pricing vendors. If the Company is unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within the Company's set threshold, the Company seeks to obtain a quote directly from a broker making a market for the asset. Oaktree evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Oaktree also performs back-testing of valuation information obtained from pricing vendors and brokers against actual prices received in transactions. In addition to ongoing monitoring and back-testing, Oaktree performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process. Generally, the Company does not adjust any of the prices received from these sources.
If the quotations obtained from pricing vendors or brokers are determined to not be reliable or are not readily available, the Company values such investments using any of three different valuation techniques. The first valuation technique is the transaction precedent technique, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value ("EV") of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine (i) the value of equity investments, (ii) whether there is credit impairment for debt investments and (iii) the value for debt investments that the Company is deemed to control under the Investment Company Act. To estimate the EV of a portfolio company, Oaktree analyzes various factors, including the portfolio company’s historical and projected financial results, macroeconomic impacts on the company and competitive dynamics in the company’s industry. Oaktree also utilizes some or all of the following information based on the individual circumstances of the portfolio company: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase prices as a multiple of their earnings or cash flow, (iv) the portfolio company’s ability to meet its forecasts and its business prospects, (v) a discounted cash flow analysis, (vi) estimated liquidation or collateral value of the portfolio company's assets and (vii) offers from third parties to buy the portfolio company. The Company may probability weight potential sale outcomes with respect to a portfolio company when uncertainty exists as of the valuation date. The third valuation technique is a market yield technique, which is typically performed for non-credit impaired debt investments. In the market yield technique, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk, and the Company considers the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key

29
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by the Company are substantially illiquid with no active transaction market, the Company depends on primary market data, including newly funded transactions and industry specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.
In accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. These investments are generally not redeemable.
The Company estimates the fair value of privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions, including the current stock price (by using an EV analysis as described above), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.
The Company's Board of Directors undertakes a multi-step valuation process each quarter in connection with determining the fair value of the Company's investments:
•
The quarterly valuation process begins with each portfolio company or investment being initially valued by Oaktree's valuation team in conjunction with Oaktree's portfolio management team and investment professionals responsible for each portfolio investment;
•Preliminary valuations are then reviewed and discussed with management of Oaktree;
•
Separately, independent valuation firms engaged by the Board of Directors prepare valuations of the Company's investments, on a selected basis, for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment, and submit the reports to the Company and provide such reports to Oaktree and the Audit Committee of the Board of Directors;
•
Oaktree compares and contrasts its preliminary valuations to the valuations of the independent valuation firms and prepares a valuation report for the Audit Committee;
•
The Audit Committee reviews the preliminary valuations with Oaktree, and Oaktree responds and supplements the preliminary valuations to reflect any discussions between Oaktree and the Audit Committee;
•
The Audit Committee makes a recommendation to the full Board of Directors regarding the fair value of the investments in the Company's portfolio; and
•
The Board of Directors discusses valuations and determines the fair value of each investment in the Company's portfolio.
The fair value of the Company's investments as of March 31, 2020 and September 30, 2019 was determined in good faith by the Board of Directors. The Board of Directors has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of a portion of the Company's portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board of Directors may reasonably rely on that assistance. However, the Board of Directors is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to the Company's valuation policy and a consistently applied valuation process.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
With the exception of the line items entitled "deferred financing costs," "deferred offering costs," "other assets," "deferred tax asset, net," "deferred tax liability," "credit facility payable" and "unsecured notes payable," which are reported at amortized cost, all assets and liabilities approximate fair value on the Consolidated Statements of Assets and Liabilities. The carrying value of the line items titled "interest, dividends and fees receivable," "due from portfolio companies," "receivables from unsettled transactions," "accounts payable, accrued expenses and other liabilities," "base management fee and incentive fee payable," "due to affiliate," "interest payable," "payable to syndication partners" and "payables from unsettled transactions" approximate fair value due to their short maturities.

30
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Foreign Currency Translation:
The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the prevailing foreign exchange rate on the reporting date. The Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. The Company’s investments in foreign securities may involve certain risks, including foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.
Derivative Instruments:
The Company does not utilize hedge accounting and as such values its derivative instruments at fair value with the unrealized gains or losses recorded in “net unrealized appreciation (depreciation)” in the Company’s Consolidated Statements of Operations.
Investment Income:
Interest Income
Interest income, adjusted for accretion of original issue discount ("OID"), is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on investments when it is determined that interest is no longer collectible. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management’s judgment. A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash and the portfolio company, in management’s judgment, is likely to continue timely payment of its remaining obligations.
In connection with its investment in a portfolio company, the Company sometimes receives nominal cost equity that is valued as part of the negotiation process with the portfolio company. When the Company receives nominal cost equity, the Company allocates its cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.
For the Company's secured borrowings, the interest earned on the entire loan balance is recorded within interest income and the interest earned by the buyer from the partial sales is recorded within interest expense in the Consolidated Statements of Operations.
PIK Interest Income
The Company's investments in debt securities may contain PIK interest provisions. PIK interest, which generally represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. The Company generally ceases accruing PIK interest if there is insufficient value to support the accrual or if the Company does not expect the portfolio company to be able to pay all principal and interest due. The Company's decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; the Company's assessment of the portfolio company's business development success; information obtained by the Company in connection with periodic formal update interviews with the portfolio company's management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. The Company's determination to cease accruing PIK interest is generally made well before the Company's full write-down of a loan or debt security. In addition, if it is subsequently determined that the Company will not be able to collect any previously accrued PIK interest, the fair value of the loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on the Company’s debt investments increases the recorded cost bases of these investments in the Consolidated Financial Statements including for purposes of computing the capital gains incentive fee payable by the Company to Oaktree. To maintain its status as a RIC, certain income from PIK interest may be required to be distributed to the Company’s stockholders, even though the Company has not yet collected the cash and may never do so.

31
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Fee Income
Oaktree may provide financial advisory services to portfolio companies and, in return, the Company may receive fees for capital structuring services. These fees are generally nonrecurring and are recognized by the Company upon the investment closing date. The Company may also receive additional fees in the ordinary course of business, including servicing, amendment and prepayment fees, which are classified as fee income and recognized as they are earned or the services are rendered.
The Company has also structured exit fees across certain of its portfolio investments to be received upon the future exit of those investments. These fees are typically paid to the Company upon the earliest to occur of (i) a sale of the borrower or substantially all of the assets of the borrower, (ii) the maturity date of the loan or (iii) the date when full prepayment of the loan occurs. The receipt of such fees is contingent upon the occurrence of one of the events listed above for each of the investments. These fees are included in net investment income over the life of the loan.
Dividend Income
The Company generally recognizes dividend income on the record date. Distributions received from equity investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.
Cash and Cash Equivalents and Restricted Cash:
Cash and cash equivalents and restricted cash consist of demand deposits and highly liquid investments with maturities of three months or less when acquired. The Company places its cash and cash equivalents and restricted cash with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limit. Cash and cash equivalents and restricted cash are included on the Company's Consolidated Schedule of Investments and cash equivalents are classified as Level 1 assets.
Due from Portfolio Companies:
Due from portfolio companies consists of amounts payable to the Company from its portfolio companies, including proceeds from the sale of portfolio companies not yet received or being held in escrow, and excluding those amounts attributable to interest, dividends or fees receivable. These amounts are recognized as they become payable to the Company (e.g., principal payments on the scheduled amortization payment date).
Receivables/Payables from Unsettled Transactions:
Receivables/payables from unsettled transactions consist of amounts receivable to or payable by the Company for transactions that have not settled at the reporting date.
Deferred Financing Costs:
Deferred financing costs consist of fees and expenses paid in connection with the closing or amending of credit facilities and debt offerings. Deferred financing costs in connection with credit facilities are capitalized as an asset when incurred. Deferred financing costs in connection with all other debt arrangements are a direct deduction from the related debt liability when incurred. Deferred financing costs are amortized using the effective interest method over the term of the respective debt arrangement. This amortization expense is included in interest expense in the Company's Consolidated Statements of Operations. Upon early termination or modification of a credit facility, all or a portion of unamortized fees related to such facility may be accelerated into interest expense. For extinguishments of the Company’s unsecured notes payable, any unamortized deferred financing costs are deducted from the carrying amount of the debt in determining the gain or loss from the extinguishment.
Deferred Offering Costs:
Legal fees and other costs incurred in connection with the Company’s shelf registration statement are capitalized as deferred offering costs in the Consolidated Statements of Assets and Liabilities. To the extent any such costs relate to equity offerings, these costs are charged as a reduction of capital upon utilization. To the extent any such costs relate to debt offerings, these costs are treated as deferred financing costs and are amortized over the term of the respective debt arrangement. Any deferred offering costs that remain at the expiration of the shelf registration statement or when it becomes probable that an offering will not be completed are expensed.


32
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Income Taxes:
The Company has elected to be subject to tax as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to be subject to tax as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute dividends to its stockholders of an amount generally at least equal to 90% of investment company taxable income, as defined by the Code and determined without regard to any deduction for dividends paid, for each taxable year. As a RIC, the Company is not subject to federal income tax on the portion of its taxable income and gains distributed currently to stockholders as a dividend. Depending on the level of taxable income earned during a taxable year, the Company may choose to retain taxable income in excess of current year dividend distributions and would distribute such taxable income in the next taxable year. The Company would then incur a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income, determined on a calendar year basis, could exceed estimated current calendar year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. The Company anticipates timely distribution of its taxable income within the tax rules under Subchapter M of the Code. The Company did not incur a U.S. federal excise tax for calendar years 2018 and 2019.
The Company holds certain portfolio investments through taxable subsidiaries, including Fund of Funds and Holdings. The purpose of the Company's taxable subsidiaries is to permit the Company to hold equity investments in portfolio companies which are "pass through" entities for U.S. federal income tax purposes in order to comply with the RIC tax requirements. The taxable subsidiaries are consolidated for financial reporting purposes, and portfolio investments held by them are included in the Company’s Consolidated Financial Statements as portfolio investments and recorded at fair value. The taxable subsidiaries are not consolidated with the Company for U.S. federal income tax purposes and may generate income tax expense, or benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. This income tax expense, if any, would be reflected in the Company's Consolidated Statements of Operations. The Company uses the liability method to account for its taxable subsidiaries' income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net operating loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.
FASB ASC Topic 740, Accounting for Uncertainty in Income Taxes ("ASC 740"), provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the Company's Consolidated Financial Statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Management's determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including an ongoing analysis of tax laws, regulations and interpretations thereof. The Company recognizes the tax benefits of uncertain tax positions only where the position is "more-likely-than-not" to be sustained assuming examination by tax authorities. Management has analyzed the Company's tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years 2017, 2018 or 2019. The Company identifies its major tax jurisdictions as U.S. Federal and California, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.    
Recent Accounting Pronouncements:
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting if certain criteria are met. The guidance is effective from March 12, 2020 through December 31, 2022. As of March 31, 2020, the guidance did not have a material impact on the Consolidated Financial Statements.


33
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 3. Portfolio Investments
As of March 31, 2020, 185.1% of net assets at fair value, or $1.4 billion, was invested in 128 portfolio companies, including $92.2 million in subordinated notes and limited liability company ("LLC") equity interests of SLF JV I. As of March 31, 2020, 11.9% of net assets at fair value, or $89.5 million, was invested in cash and cash equivalents. In comparison, as of September 30, 2019, 154.5% of net assets at fair value, or $1.4 billion, was invested in 104 portfolio investments, including $126.3 million in subordinated notes and LLC equity interests of SLF JV I, and 1.7% of net assets at fair value, or $15.4 million, was invested in cash and cash equivalents. As of March 31, 2020, 81.9% of the Company's portfolio at fair value consisted of senior secured debt investments and 12.4% consisted of subordinated notes, including debt investments in SLF JV I. As of September 30, 2019, 78.6% of the Company's portfolio at fair value consisted of senior secured debt investments and 12.3% consisted of subordinated notes, including debt investments in SLF JV I.
The Company also held equity investments in certain of its portfolio companies consisting of common stock, preferred stock, warrants, limited partnership interests or LLC equity interests. These instruments generally do not produce a current return but are held for potential investment appreciation and capital gain.
During the three and six months ended March 31, 2020, the Company recorded net realized gains (losses) of $(26.5) million and $(23.2) million, respectively. During the three and six months ended March 31, 2019, the Company recorded net realized gains (losses) of $25.2 million and $43.2 million, respectively. During the three and six months ended March 31, 2020, the Company recorded net unrealized appreciation (depreciation) of $(163.5) million and $(160.7) million, respectively. During the three and six months ended March 31, 2019, the Company recorded net unrealized appreciation (depreciation) of $21.5 million and $14.5 million, respectively.
The composition of the Company's investments as of March 31, 2020 and September 30, 2019 at cost and fair value was as follows:
 
 
March 31, 2020
 
September 30, 2019
 
 
Cost
 
Fair Value
 
Cost
 
Fair Value
Investments in debt securities
 
$
1,373,111

 
$
1,220,682

 
$
1,274,367

 
$
1,212,174

Investments in equity securities
 
109,897

 
79,334

 
93,075

 
99,566

Debt investments in SLF JV I
 
96,250

 
92,171

 
96,250

 
96,250

Equity investment in SLF JV I
 
49,322

 
—

 
49,322

 
30,052

Total
 
$
1,628,580

 
$
1,392,187

 
$
1,513,014

 
$
1,438,042

The following table presents the composition of the Company's debt investments as of March 31, 2020 and September 30, 2019 at fixed rates and floating rates:
 
 
 
March 31, 2020
 
September 30, 2019
 
 
Fair Value
 
% of Debt
Portfolio
 
Fair Value
 
% of Debt
Portfolio
Fixed rate debt securities
 
$
122,988

 
9.37
%
 
$
132,965

 
10.16
%
Floating rate debt securities, including debt investments in SLF JV I
 
1,189,865

 
90.63

 
1,175,459

 
89.84

Total
 
$
1,312,853

 
100.00
%
 
$
1,308,424

 
100.00
%

34
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





The following table presents the financial instruments carried at fair value as of March 31, 2020 on the Company's Consolidated Statement of Assets and Liabilities for each of the three levels of hierarchy established by ASC 820:
 
 
Level 1
 
Level 2
 
Level 3
 
Measured at Net Asset Value (a)
 
Total
Investments in debt securities (senior secured)
 
$
—

 
$
420,512

 
$
720,110

 
$
—

 
$
1,140,622

Investments in debt securities (subordinated, including debt investments in SLF JV I)
 
—

 
67,064

 
105,167

 
—

 
172,231

Investments in equity securities (preferred)
 
—

 
—

 
31,367

 
—

 
31,367

Investments in equity securities (common and warrants, including LLC equity interests of SLF JV I)
 
—

 
—

 
45,150

 
2,817

 
47,967

Total investments at fair value
 
—

 
487,576

 
901,794

 
2,817

 
1,392,187

Cash equivalents
 
82,928

 
—

 
—

 
—

 
82,928

Derivative asset
 
—

 
1,268

 
—

 
—

 
1,268

Total assets at fair value

$
82,928

 
$
488,844

 
$
901,794

 
$
2,817

 
$
1,476,383

__________ 
(a)
In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. These investments are generally not redeemable. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.
The following table presents the financial instruments carried at fair value as of September 30, 2019 on the Company's Consolidated Statement of Assets and Liabilities for each of the three levels of hierarchy established by ASC 820:
 
 
Level 1
 
Level 2
 
Level 3
 
Measured at Net Asset Value (a)
 
Total
Investments in debt securities (senior secured)
 
$
—

 
$
477,542

 
$
653,334

 
$
—

 
$
1,130,876

Investments in debt securities (subordinated, including debt investments in SLF JV I)
 
—

 
67,239

 
110,309

 
—

 
177,548

Investments in equity securities (preferred)
 
—

 
—

 
40,578

 
—

 
40,578

Investments in equity securities (common and warrants, including LLC equity interests of SLF JV I)
 
15,054

 
—

 
41,006

 
32,980

 
89,040

Total investments at fair value
 
15,054

 
544,781

 
845,227

 
32,980

 
1,438,042

Cash equivalents
 
9,611

 
—

 
—

 
—

 
9,611

Derivative assets
 
—

 
490

 
—

 
—

 
490

Total assets at fair value
 
$
24,665

 
$
545,271

 
$
845,227

 
$
32,980

 
$
1,448,143

__________ 
(a)
In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. These investments are generally not redeemable. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.
When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the fact that the unobservable factors are significant to the overall fair value measurement. However, Level 3 financial instruments typically have both unobservable or Level 3 components and observable components (i.e. components that are actively quoted and can be validated by external sources). Accordingly, the appreciation (depreciation) in the tables below includes changes in fair value due in part to observable factors that are part of the valuation methodology. Transfers between levels are recognized at the beginning of the reporting period.

35
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





The following table provides a roll-forward in the changes in fair value from December 31, 2019 to March 31, 2020 for all investments for which the Company determined fair value using unobservable (Level 3) factors:
 
 
Investments
 
 
Senior Secured Debt
 
Subordinated
Debt (including debt investments in SLF JV I)
 
Preferred
Equity
 
Common
Equity and Warrants
 
Total
Fair value as of December 31, 2019
 
$
697,632

 
$
108,348

 
$
38,909

 
$
44,645

 
$
889,534

Purchases 
 
142,790

 
106

 
—

 
—

 
142,896

Sales and repayments
 
(81,656
)
 
(117
)
 
—

 
(6,535
)
 
(88,308
)
Transfers in (a)(b)
 
34,522

 
1,405

 
—

 
18,625

 
54,552

Transfers out (a)(b)
 
(18,625
)
 
—

 
—

 
—

 
(18,625
)
PIK interest income
 
1,841

 
—

 
—

 
—

 
1,841

Accretion of OID
 
2,139

 
313

 
—

 
—

 
2,452

Net unrealized appreciation (depreciation)
 
(29,696
)
 
9,393

 
(7,242
)
 
(16,160
)
 
(43,705
)
Net realized gains (losses)
 
(28,837
)
 
(14,281
)
 
(300
)
 
4,575

 
(38,843
)
Fair value as of March 31, 2020
 
$
720,110

 
$
105,167

 
$
31,367

 
$
45,150

 
$
901,794

Net unrealized appreciation (depreciation) relating to Level 3 investments still held as of March 31, 2020 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the three months ended March 31, 2020
 
$
(60,406
)
 
$
(4,888
)
 
$
(7,542
)
 
$
(14,708
)
 
$
(87,544
)
__________
(a) There were transfers into Level 3 from Level 2 for certain investments during the three months ended March 31, 2020 as a result of a decreased number of market quotes available and/or decreased market liquidity.
(b) There was one transfer from senior secured debt to common equity and warrants during the three months ended March 31, 2020 as a result of an investment restructuring, in which $46.5 million of senior secured debt was exchanged for new senior secured debt of $27.9 million and common equity of $18.6 million.

The following table provides a roll-forward in the changes in fair value from December 31, 2018 to March 31, 2019 for all investments and secured borrowings for which the Company determined fair value using unobservable (Level 3) factors:
 
 
Investments
 
Liabilities
 
 
Senior Secured Debt
 
Subordinated
Debt (including debt investments in SLF JV I)
 
Preferred
Equity
 
Common
Equity and Warrants
 
Total
 
Secured Borrowings
Fair value as of December 31, 2018
 
$
741,372

 
$
119,953

 
$
4,988

 
$
34,107

 
$
900,420

 
$
9,302

Purchases 
 
60,800

 
1,978

 
—

 
—

 
62,778

 
—

Sales and repayments
 
(95,212
)
 
(394
)
 
—

 
(9,995
)
 
(105,601
)
 
(367
)
Transfers in (a)
 
19,780

 
—

 
—

 
—

 
19,780

 
—

PIK interest income
 
420

 
26

 
—

 
—

 
446

 
—

Accretion of OID
 
5,486

 
292

 
—

 
—

 
5,778

 
—

Net unrealized appreciation (depreciation)
 
(13,190
)
 
(1,420
)
 
25

 
7,073

 
(7,512
)
 
76

Net realized gains (losses)
 
17,499

 
—

 
—

 
7,937

 
25,436

 
—

Fair value as of March 31, 2019
 
$
736,955

 
$
120,435

 
$
5,013

 
$
39,122

 
$
901,525

 
$
9,011

Net unrealized appreciation (depreciation) relating to Level 3 assets & liabilities still held as of March 31, 2019 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the three months ended March 31, 2019
 
$
(8,658
)
 
$
(1,420
)
 
$
25

 
$
7,876

 
$
(2,177
)
 
$
76

__________
(a) There were transfers into Level 3 from Level 2 for certain investments during the three months ended March 31, 2019 as a result of a decreased number of market quotes available and/or decreased market liquidity.


36
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





The following table provides a roll-forward in the changes in fair value from September 30, 2019 to March 31, 2020 for all investments for which the Company determined fair value using unobservable (Level 3) factors:
 
 
Investments
 
 
Senior Secured Debt
 
Subordinated
Debt (including debt investments in SLF JV I)
 
Preferred
Equity
 
Common
Equity and Warrants
 
Total
Fair value as of September 30, 2019
 
$
653,334

 
$
110,309

 
$
40,578

 
$
41,006

 
$
845,227

Purchases 
 
239,185

 
1,065

 
—

 
1,328

 
241,578

Sales and repayments
 
(154,948
)
 
(3,863
)
 
(1,388
)
 
(6,574
)
 
(166,773
)
Transfers in (a)(b)
 
67,939

 
5,113

 
—

 
18,625

 
91,677

Transfers out (a)(b)
 
(33,625
)
 
—

 
—

 
—

 
(33,625
)
PIK interest income
 
2,960

 
—

 
—

 
—

 
2,960

Accretion of OID
 
3,565

 
617

 
—

 
—

 
4,182

Net unrealized appreciation (depreciation)
 
(29,397
)
 
6,268

 
(8,318
)
 
(13,850
)
 
(45,297
)
Net realized gains (losses)
 
(28,903
)
 
(14,342
)
 
495

 
4,615

 
(38,135
)
Fair value as of March 31, 2020
 
$
720,110

 
$
105,167

 
$
31,367

 
$
45,150

 
$
901,794

Net unrealized appreciation (depreciation) relating to Level 3 investments still held as of March 31, 2020 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the six months ended March 31, 2020
 
$
(58,203
)
 
$
(5,123
)
 
$
(7,716
)
 
$
(12,397
)
 
$
(83,439
)
__________
(a) There were transfers into/out of Level 3 from/to Level 2 for certain investments during the six months ended March 31, 2020 as a result of a change in the number of market quotes available and/or a change in market liquidity.
(b) There was one transfer from senior secured debt to common equity and warrants during the six months ended March 31, 2020 as a result of an investment restructuring, in which $46.5 million of senior secured debt was exchanged for new senior secured debt of $27.9 million and common equity of $18.6 million.

The following table provides a roll-forward in the changes in fair value from September 30, 2018 to March 31, 2019 for all investments and secured borrowings for which the Company determined fair value using unobservable (Level 3) factors:
 
 
Investments
 
Liabilities
 
 
Senior Secured Debt
 
Subordinated
Debt (including debt investments in SLF JV I)
 
Preferred
Equity
 
Common
Equity and Warrants
 
Total
 
Secured Borrowings
Fair value as of September 30, 2018
 
$
638,971

 
$
158,859

 
$
4,918

 
$
61,134

 
$
863,882

 
$
9,728

Purchases 
 
150,799

 
2,511

 
—

 
2,514

 
155,824

 
—

Sales and repayments
 
(128,235
)
 
(16,143
)
 
—

 
(31,286
)
 
(175,664
)
 
(812
)
Transfers in (a)
 
23,446

 
—

 
—

 
—

 
23,446

 
—

Transfers out (b)
 
—

 
(33,150
)
 
—

 
(12,073
)
 
(45,223
)
 
—

PIK interest income
 
1,065

 
121

 
—

 
—

 
1,186

 
—

Accretion of OID
 
12,080

 
663

 
—

 
—

 
12,743

 
—

Net unrealized appreciation (depreciation)
 
21,908

 
7,574

 
590

 
(4,391
)
 
25,681

 
95

Net realized gains (losses)
 
16,921

 
—

 
(495
)
 
23,224

 
39,650

 
—

Fair value as of March 31, 2019
 
$
736,955

 
$
120,435

 
$
5,013

 
$
39,122

 
$
901,525

 
$
9,011

Net unrealized appreciation (depreciation) relating to Level 3 assets & liabilities still held as of March 31, 2019 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the six months ended March 31, 2019
 
$
(16,071
)
 
$
7,577

 
$
95

 
$
8,733

 
$
334

 
$
95

__________
(a) There were transfers into Level 3 from Level 2 for certain investments during the six months ended March 31, 2019 as a result of a decreased number of market quotes available and/or decreased market liquidity.
(b) There was one transfer from Level 3 to Level 1 during the six months ended March 31, 2019 as a result of an initial public offering of a portfolio company. There was also one transfer out of Level 3 during the six months ended March 31, 2019 as a result of an investment restructuring in which debt investments were exchanged for equity investments that are valued using net asset value as a practical expedient.

37
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)






Significant Unobservable Inputs for Level 3 Investments
The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, which are carried at fair value, as of March 31, 2020:
Asset
 
Fair Value
 
Valuation Technique
 
Unobservable Input
 
Range
 
Weighted
Average (a)
Senior Secured Debt
 
$
419,433

 
Market Yield
 
Market Yield
 
(b)
6.6%
-
22.0%
 
11.4%
 
 
15,842

 
Enterprise Value
 
EBITDA Multiple
 
(c)
1.8x
-
5.9x
 
5.0x
 
 
11,510

 
Enterprise Value
 
Asset Multiple
 
(c)
0.9x
-
1.1x
 
1.0x
 
 
26,266

 
Transactions Precedent
 
Transaction Price
 
(d)
N/A
-
N/A
 
N/A
 
 
247,059

 
Broker Quotations
 
Broker Quoted Price
 
(e)
N/A
-
N/A
 
N/A
Subordinated Debt
 
11,394

 
Market Yield
 
Market Yield
 
(b)
15.0%
-
17.0%
 
16.0%
 
 
1,602

 
Enterprise Value
 
EBITDA Multiple
 
(c)
7.7x
-
7.9x
 
7.8x
SLF JV I Debt Investments
 
92,171

 
Enterprise Value
 
N/A
 
(f)
N/A
-
N/A
 
N/A
Preferred & Common Equity
 
16,201

 
Enterprise Value
 
Revenue Multiple
 
(c)
0.8x
-
8.0x
 
3.1x
 
 
50,861

 
Enterprise Value
 
EBITDA Multiple
 
(c)
1.8x
-
19.0x
 
7.2x
 
 
3,165

 
Enterprise Value
 
Asset Multiple
 
(c)
0.9x
-
1.1x
 
1.0x
 
 
6,290

 
Transactions Precedent
 
Transaction Price
 
(d)
N/A
-
N/A
 
N/A
Total
 
$
901,794

 
 
 
 
 
 
 
 
 
 
 
__________ 
(a)
Weighted averages are calculated based on fair value of investments.
(b)
Used when market participants would take into account market yield when pricing the investment.
(c)
Used when market participants would use such multiples when pricing the investment.
(d)
Used when there is an observable transaction or pending event for the investment.
(e)
The Company generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. The Company evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Each quoted price is evaluated by the Audit Committee of the Company's Board of Directors in conjunction with additional information compiled by Oaktree.
(f)
The Company determined the value of its subordinated notes of SLF JV I based on the total assets less the total liabilities senior to the subordinated notes held at SLF JV I in an amount not exceeding par under the EV technique.
The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, which are carried at fair value, as of September 30, 2019:
Asset
 
Fair Value
 
Valuation Technique
 
Unobservable Input
 
Range
 
Weighted
Average (a)
Senior Secured Debt
 
$
314,026

 
Market Yield
 
Market Yield
 
(b)
6.7%
-
18.0%
 
11.2%
 
 
17,452

 
Enterprise Value
 
EBITDA Multiple
 
(c)
1.8x
-
6.0x
 
5.0x
 
 
11,510

 
Enterprise Value
 
Asset Multiple
 
(c)
0.9x
 
1.1x
 
1.0x
 
 
3,750

 
Transactions Precedent
 
Transaction Price
 
(d)
N/A
-
N/A
 
N/A
 
 
306,596

 
Broker Quotations
 
Broker Quoted Price
 
(e)
N/A
-
N/A
 
N/A
Subordinated Debt
 
11,353

 
Market Yield
 
Market Yield
 
(b)
13.0%
-
15.0%
 
14.0%
 
 
2,706

 
Enterprise Value
 
EBITDA Multiple
 
(c)
6.5x
-
8.5x
 
7.5x
SLF JV I Debt Investments
 
96,250

 
Enterprise Value
 
N/A
 
(f)
N/A
-
N/A
 
N/A
Preferred & Common Equity
 
4,004

 
Enterprise Value
 
Revenue Multiple
 
(c)
0.8x
-
8.9x
 
3.3x
 
 
72,950

 
Enterprise Value
 
EBITDA Multiple
 
(c)
1.8x
-
17.0x
 
6.9x
 
 
4,630

 
Enterprise Value
 
Asset Multiple
 
(c)
0.9x
-
1.1x
 
1.0x
Total
 
$
845,227

 
 
 
 
 
 
 
 
 
 
 
__________ 
(a)
Weighted averages are calculated based on fair value of investments.
(b)
Used when market participants would take into account market yield when pricing the investment.
(c)
Used when market participants would use such multiples when pricing the investment.
(d)
Used when there is an observable transaction or pending event for the investment.
(e)
The Company generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. The Company evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Each quoted price is evaluated by the Audit Committee of the Company's Board of Directors in conjunction with additional information compiled by Oaktree.

38
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





(f)
The Company determined the value of its subordinated notes of SLF JV I based on the total assets less the total liabilities senior to the subordinated notes held at SLF JV I in an amount not exceeding par under the EV technique.

Under the market yield technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt securities is the market yield. Increases or decreases in the market yield may result in a lower or higher fair value measurement, respectively.
Under the EV technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt or equity securities is the earnings before interest, taxes, depreciation and amortization ("EBITDA"), revenue or asset multiple, as applicable. Increases or decreases in the valuation multiples in isolation may result in a higher or lower fair value measurement, respectively.
 
Financial Instruments Disclosed, But Not Carried, At Fair Value
The following table presents the carrying value and fair value of the Company's financial liabilities disclosed, but not carried, at fair value as of March 31, 2020 and the level of each financial liability within the fair value hierarchy:
 
 
 
Carrying
Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Credit facility payable
 
$
404,825

 
$
404,825

 
$
—

 
$
—

 
$
404,825

Unsecured notes payable (net of unamortized financing costs and unaccreted discount)
 
293,861

 
274,500

 
—

 
274,500

 
—

Total
 
$
698,686

 
$
679,325

 
$
—

 
$
274,500

 
$
404,825

The following table presents the carrying value and fair value of the Company's financial liabilities disclosed, but not carried, at fair value as of September 30, 2019 and the level of each financial liability within the fair value hierarchy:
 
 
 
Carrying
Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Credit facility payable
 
$
314,825

 
$
314,825

 
$
—

 
$
—

 
$
314,825

Unsecured notes payable (net of unamortized financing costs)
 
158,542

 
164,966

 
—

 
164,966

 
—

Total
 
$
473,367

 
$
479,791

 
$
—

 
$
164,966

 
$
314,825

The principal value of the credit facility payable approximates fair value due to its variable interest rate and is included in Level 3 of the hierarchy. As of March 31, 2020, unsecured notes payable included the 3.500% unsecured notes due 2025 ("2025 Notes"). The Company used market quotes as of the valuation date to estimate the fair value of the 2025 Notes, which are included in Level 2 of the hierarchy. As of September 30, 2019, unsecured notes payable included the 5.875% unsecured notes due 2024 ("2024 Notes") and the 6.125% unsecured notes due 2028 ("2028 Notes"). The Company used the unadjusted quoted price as of the valuation date to calculate the fair value of the 2024 Notes and the 2028 Notes. Although these securities were publicly traded, the market was relatively inactive, and accordingly, these securities were included in Level 2 of the hierarchy.

Portfolio Composition
Summaries of the composition of the Company's portfolio at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets are shown in the following tables:
 
 
March 31, 2020
 
September 30, 2019
Cost:
 
 
 
 % of Total Investments
 
 
 
 % of Total Investments
Senior secured debt
 
$
1,269,353

 
77.94
%
 
$
1,170,258

 
77.35
%
Subordinated debt
 
103,758

 
6.37
%
 
104,109

 
6.88
%
Debt investments in SLF JV I
 
96,250

 
5.91
%
 
96,250

 
6.36
%
Common equity and warrants
 
70,347

 
4.32
%
 
52,630

 
3.48
%
LLC equity interests of SLF JV I
 
49,322

 
3.03
%
 
49,322

 
3.26
%
Preferred equity
 
39,550

 
2.43
%
 
40,445

 
2.67
%
Total
 
$
1,628,580

 
100.00
%
 
$
1,513,014

 
100.00
%

39
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





 
 
March 31, 2020
 
September 30, 2019
Fair Value:
 
 
 
 % of Total Investments
 
% of Net Assets
 
 
 
 % of Total Investments
 
% of Net Assets
Senior secured debt
 
$
1,140,622

 
81.93
%
 
151.64
%
 
$
1,130,876

 
78.64
%
 
121.51
%
Debt investments in SLF JV I
 
92,171

 
6.62
%
 
12.25
%
 
96,250

 
6.69
%
 
10.34
%
Subordinated debt
 
80,060

 
5.75
%
 
10.64
%
 
81,298

 
5.65
%
 
8.74
%
Common equity and warrants
 
47,967

 
3.45
%
 
6.38
%
 
58,988

 
4.10
%
 
6.34
%
Preferred equity
 
31,367

 
2.25
%
 
4.17
%
 
40,578

 
2.82
%
 
4.36
%
LLC equity interests of SLF JV I
 
—

 
—

 
—

 
30,052

 
2.10
%
 
3.23
%
Total
 
$
1,392,187

 
100.00
%
 
185.08
%
 
$
1,438,042

 
100.00
%
 
154.52
%

The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company's business. The following tables show the composition of the Company's portfolio by geographic region at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets:
 
 
March 31, 2020
 
September 30, 2019
Cost:
 
 
 
 % of Total Investments
 
 
 
 % of Total Investments
Northeast
 
$
497,883

 
30.58
%
 
$
394,130

 
26.05
%
West
 
342,353

 
21.02
%
 
377,810

 
24.97
%
Midwest
 
286,867

 
17.61
%
 
322,651

 
21.33
%
International
 
191,624

 
11.77
%
 
171,129

 
11.31
%
Southeast
 
159,921

 
9.82
%
 
131,522

 
8.69
%
Southwest
 
69,365

 
4.26
%
 
66,781

 
4.41
%
South
 
45,331

 
2.78
%
 
13,798

 
0.91
%
Northwest
 
35,236

 
2.16
%
 
35,193

 
2.33
%
Total
 
$
1,628,580

 
100.00
%
 
$
1,513,014

 
100.00
%
 
 
March 31, 2020
 
September 30, 2019
Fair Value:
 
 
 
 % of Total Investments
 
% of Net Assets
 
 
 
 % of Total Investments
 
% of Net Assets
Northeast
 
$
409,356

 
29.41
%
 
54.43
%
 
$
358,328

 
24.93
%
 
38.50
%
West
 
308,880

 
22.19
%
 
41.06
%
 
350,660

 
24.38
%
 
37.68
%
Midwest
 
227,951

 
16.37
%
 
30.30
%
 
297,433

 
20.68
%
 
31.97
%
International
 
172,965

 
12.42
%
 
22.99
%
 
175,687

 
12.22
%
 
18.88
%
Southeast
 
136,601

 
9.81
%
 
18.16
%
 
125,306

 
8.71
%
 
13.46
%
Southwest
 
62,352

 
4.48
%
 
8.29
%
 
82,395

 
5.73
%
 
8.85
%
South
 
41,187

 
2.96
%
 
5.48
%
 
13,416

 
0.93
%
 
1.44
%
Northwest
 
32,895

 
2.36
%
 
4.37
%
 
34,817

 
2.42
%
 
3.74
%
Total
 
$
1,392,187

 
100.00
%
 
185.08
%
 
$
1,438,042

 
100.00
%
 
154.52
%
 
The following tables show the composition of the Company's portfolio by industry at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets as of March 31, 2020 and September 30, 2019:

40
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





 
 
March 31, 2020
 
September 30, 2019
Cost:
 
 
 
 % of Total Investments
 
 
 
 % of Total Investments
Application Software
 
$
195,026

 
11.97
%
 
$
132,051

 
8.73
%
Multi-Sector Holdings (1)
 
158,515

 
9.73

 
146,436

 
9.67

Data Processing & Outsourced Services
 
105,919

 
6.50

 
97,759

 
6.46

Health Care Services
 
72,298

 
4.44

 
100,173

 
6.62

Biotechnology
 
71,683

 
4.40

 
82,109

 
5.43

Pharmaceuticals
 
63,384

 
3.89

 
59,294

 
3.92

Auto Parts & Equipment
 
58,430

 
3.59

 
42,641

 
2.82

Specialized Finance
 
55,627

 
3.42

 
53,227

 
3.52

Personal Products
 
53,363

 
3.28

 
—

 
—

Property & Casualty Insurance
 
51,103

 
3.14

 
73,076

 
4.83

Specialty Chemicals
 
44,887

 
2.76

 
31,788

 
2.10

Research & Consulting Services
 
39,682

 
2.44

 
34,734

 
2.30

Real Estate Services
 
39,178

 
2.41

 
39,332

 
2.60

Aerospace & Defense
 
36,704

 
2.25

 
33,665

 
2.23

Health Care Technology
 
36,527

 
2.24

 
51,044

 
3.37

Systems Software
 
33,712

 
2.07

 
31,716

 
2.10

Oil & Gas Storage & Transportation
 
31,599

 
1.94

 
11,603

 
0.77

Internet Services & Infrastructure
 
31,480

 
1.93

 
32,563

 
2.15

Alternative Carriers
 
31,304

 
1.92

 
29,400

 
1.94

Oil & Gas Refining & Marketing
 
30,298

 
1.86

 
30,378

 
2.01

Managed Health Care
 
27,562

 
1.69

 
27,645

 
1.83

Specialized REITs
 
24,464

 
1.50

 
8,264

 
0.55

Education Services
 
23,067

 
1.42

 
15,672

 
1.04

Advertising
 
22,898

 
1.41

 
42,405

 
2.80

Airport Services
 
22,447

 
1.38

 
—

 
—

Independent Power Producers & Energy Traders
 
21,938

 
1.35

 
—

 
—

Integrated Telecommunication Services
 
21,339

 
1.31

 
33,741

 
2.23

Electrical Components & Equipment
 
21,072

 
1.29

 
21,210

 
1.40

General Merchandise Stores
 
19,085

 
1.17

 
18,946

 
1.25

Diversified Support Services
 
18,800

 
1.15

 
18,805

 
1.24

Apparel, Accessories & Luxury Goods
 
17,539

 
1.08

 
18,192

 
1.20

Industrial Machinery
 
16,063

 
0.99

 
17,055

 
1.13

Health Care Distributors
 
15,816

 
0.97

 
22,561

 
1.49

IT Consulting & Other Services
 
14,947

 
0.92

 
14,975

 
0.99

Movies & Entertainment
 
13,398

 
0.82

 
18,858

 
1.25

Construction & Engineering
 
13,232

 
0.81

 
23,443

 
1.55

Oil & Gas Equipment & Services
 
11,474

 
0.70

 
12,165

 
0.80

Airlines
 
10,597

 
0.65

 
10,640

 
0.70

Trading Companies & Distributors
 
10,290

 
0.63

 
10,357

 
0.68

Restaurants
 
9,262

 
0.57

 
3,097

 
0.20

Commercial Printing
 
7,924

 
0.49

 
6,002

 
0.40

Food Retail
 
6,829

 
0.42

 
14,473

 
0.96

Health Care Facilities
 
3,552

 
0.22

 
—

 
—

Distributors
 
3,498

 
0.21

 
—

 
—

Specialty Stores
 
2,771

 
0.17

 
1,305

 
0.09

Construction Materials
 
2,113

 
0.13

 
—

 
—

Leisure Facilities
 
1,887

 
0.12

 
1,887

 
0.12

Building Products
 
1,621

 
0.10

 
—

 
—

Communications Equipment
 
1,325

 
0.08

 
—

 
—

Thrifts & Mortgage Finance
 
938

 
0.06

 
1,217

 
0.08

Other Diversified Financial Services
 
113

 
0.01

 
113

 
0.01

Interactive Media & Services
 
—

 
—

 
21,805

 
1.44

Household Appliances
 
—

 
—

 
7,837

 
0.52

Environmental & Facilities Services
 
—

 
—

 
5,940

 
0.39

Human Resource & Employment Services
 
—

 
—

 
830

 
0.05

Department Stores
 
—

 
—

 
585

 
0.04

Total
 
$
1,628,580

 
100.00
%
 
$
1,513,014

 
100.00
%

41
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





 
 
March 31, 2020
 
September 30, 2019
Fair Value:
 
 
 
 % of Total Investments
 
% of Net Assets
 
 
 
 % of Total Investments
 
% of Net Assets
Application Software
 
$
181,347

 
13.02
%
 
24.08
%
 
$
129,577

 
9.00
%
 
13.94
%
Multi-Sector Holdings (1)
 
104,865

 
7.53

 
13.94

 
128,539

 
8.94

 
13.81

Data Processing & Outsourced Services
 
90,586

 
6.51

 
12.04

 
98,267

 
6.83

 
10.56

Biotechnology
 
72,359

 
5.20

 
9.62

 
85,719

 
5.96

 
9.21

Health Care Services
 
63,374

 
4.55

 
8.42

 
58,391

 
4.06

 
6.27

Pharmaceuticals
 
59,015

 
4.24

 
7.85

 
60,057

 
4.18

 
6.45

Personal Products
 
51,549

 
3.70

 
6.85

 
—

 
—

 
—

Specialized Finance
 
49,567

 
3.56

 
6.59

 
51,485

 
3.58

 
5.53

Auto Parts & Equipment
 
45,780

 
3.29

 
6.09

 
40,484

 
2.82

 
4.35

Property & Casualty Insurance
 
45,353

 
3.26

 
6.03

 
74,148

 
5.16

 
7.97

Research & Consulting Services
 
35,695

 
2.56

 
4.75

 
37,336

 
2.60

 
4.01

Health Care Technology
 
35,462

 
2.55

 
4.71

 
52,275

 
3.64

 
5.62

Real Estate Services
 
34,738

 
2.50

 
4.62

 
39,501

 
2.75

 
4.24

Specialty Chemicals
 
33,588

 
2.41

 
4.47

 
23,514

 
1.64

 
2.53

Systems Software
 
30,827

 
2.21

 
4.10

 
31,504

 
2.19

 
3.39

Internet Services & Infrastructure
 
29,600

 
2.13

 
3.93

 
32,565

 
2.26

 
3.50

Oil & Gas Storage & Transportation
 
29,545

 
2.12

 
3.93

 
11,926

 
0.83

 
1.28

Aerospace & Defense
 
29,538

 
2.12

 
3.93

 
33,738

 
2.35

 
3.63

Alternative Carriers
 
26,016

 
1.87

 
3.46

 
29,580

 
2.06

 
3.18

Oil & Gas Refining & Marketing
 
25,765

 
1.85

 
3.43

 
31,597

 
2.20

 
3.40

Managed Health Care
 
24,036

 
1.73

 
3.20

 
27,775

 
1.93

 
2.98

Specialized REITs
 
22,362

 
1.61

 
2.97

 
8,213

 
0.57

 
0.88

Airport Services
 
21,623

 
1.55

 
2.87

 
—

 
—

 
—

Independent Power Producers & Energy Traders
 
21,151

 
1.52

 
2.81

 
—

 
—

 
—

Electrical Components & Equipment
 
18,185

 
1.31

 
2.42

 
20,032

 
1.39

 
2.15

Advertising
 
17,244

 
1.24

 
2.29

 
37,261

 
2.59

 
4.00

Diversified Support Services
 
16,362

 
1.18

 
2.18

 
18,624

 
1.30

 
2.00

Airlines
 
14,675

 
1.05

 
1.95

 
16,140

 
1.12

 
1.73

Integrated Telecommunication Services
 
14,576

 
1.05

 
1.94

 
28,876

 
2.01

 
3.10

Industrial Machinery
 
14,153

 
1.02

 
1.88

 
16,848

 
1.17

 
1.81

General Merchandise Stores
 
13,889

 
1.00

 
1.85

 
16,934

 
1.18

 
1.82

Health Care Distributors
 
12,757

 
0.92

 
1.70

 
21,962

 
1.53

 
2.36

IT Consulting & Other Services
 
12,013

 
0.86

 
1.60

 
13,792

 
0.96

 
1.48

Apparel, Accessories & Luxury Goods
 
11,424

 
0.82

 
1.52

 
13,286

 
0.92

 
1.43

Movies & Entertainment
 
10,475

 
0.75

 
1.39

 
18,613

 
1.29

 
2.00

Construction & Engineering
 
10,447

 
0.75

 
1.39

 
23,982

 
1.67

 
2.58

Oil & Gas Equipment & Services
 
8,930

 
0.64

 
1.19

 
13,652

 
0.95

 
1.47

Trading Companies & Distributors
 
8,789

 
0.63

 
1.17

 
10,370

 
0.72

 
1.11

Commercial Printing
 
7,678

 
0.55

 
1.02

 
5,900

 
0.41

 
0.63

Education Services
 
6,960

 
0.50

 
0.93

 
16

 
—

 
—

Food Retail
 
6,909

 
0.50

 
0.92

 
14,903

 
1.04

 
1.60

Restaurants
 
6,419

 
0.46

 
0.85

 
2,800

 
0.19

 
0.30

Health Care Facilities
 
3,373

 
0.24

 
0.45

 
—

 
—

 
—

Distributors
 
3,335

 
0.24

 
0.44

 
—

 
—

 
—

Leisure Facilities
 
3,043

 
0.22

 
0.40

 
4,809

 
0.33

 
0.52

Construction Materials
 
1,863

 
0.13

 
0.25

 
—

 
—

 
—

Building Products
 
1,570

 
0.11

 
0.21

 
—

 
—

 
—

Specialty Stores
 
1,566

 
0.11

 
0.21

 
—

 
—

 
—

Communications Equipment
 
1,456

 
0.10

 
0.19

 
—

 
—

 
—

Thrifts & Mortgage Finance
 
355

 
0.03

 
0.05

 
691

 
0.05

 
0.07

Interactive Media & Services
 
—

 
—

 
—

 
22,500

 
1.56

 
2.42

Leisure Products
 
—

 
—

 
—

 
15,054

 
1.05

 
1.62

Household Appliances
 
—

 
—

 
—

 
7,614

 
0.53

 
0.82

Environmental & Facilities Services
 
—

 
—

 
—

 
5,937

 
0.41

 
0.64

Human Resource & Employment Services
 
—

 
—

 
—

 
775

 
0.05

 
0.08

Department Stores
 
—

 
—

 
—

 
480

 
0.03

 
0.05

Total
 
$
1,392,187

 
100.00
%
 
185.08
%
 
$
1,438,042

 
100.00
%
 
154.52
%
___________________

(1)
This industry includes the Company's investments in SLF JV I, collateral loan obligations and certain limited partnership interests.


42
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





As of March 31, 2020 and September 30, 2019, the Company had no single investment that represented greater than 10% of the total investment portfolio at fair value. Income, consisting of interest, dividends, fees, other investment income and realization of gains or losses, may fluctuate and in any given period can be highly concentrated among several investments.

Senior Loan Fund JV I, LLC
In May 2014, the Company entered into an LLC agreement with Trinity Universal Insurance Company, a subsidiary of Kemper Corporation ("Kemper"), to form SLF JV I. The Company co-invests in senior secured loans of middle-market companies and other corporate debt securities with Kemper through its investment in SLF JV I. SLF JV I is managed by a four person Board of Directors, two of whom are selected by the Company and two of whom are selected by Kemper. All portfolio decisions and investment decisions in respect of SLF JV I must be approved by the SLF JV I investment committee, which consists of one representative selected by the Company and one representative selected by Kemper (with approval from a representative of each required). Since the Company does not have a controlling financial interest in SLF JV I, the Company does not consolidate SLF JV I.
SLF JV I is capitalized pro rata with LLC equity interests as transactions are completed and may be capitalized with additional subordinated notes issued to the Company and Kemper by SLF JV I. On December 28, 2018, the Company and Kemper directed the redemption of their holdings of mezzanine notes issued by SLF Repack Issuer 2016, LLC, a wholly-owned, special purpose issuer subsidiary of SLF JV I. Upon such redemption, the assets collateralizing the mezzanine notes, which consisted of equity interests of SLF JV I Funding LLC (the "Equity Interests"), were distributed in-kind to each of the Company and Kemper, based upon their respective holdings of mezzanine notes. Upon such distribution, the Company and Kemper each then directed that a portion of their respective Equity Interests holdings be contributed to SLF JV I in exchange for LLC equity interests of SLF JV I and the remainder be applied as payment for the subordinated notes of SLF JV I.  SLF Repack Issuer 2016, LLC was dissolved following the foregoing redemption and liquidation. The subordinated notes issued by SLF JV I (the "SLF JV 1 Subordinated Notes") and the mezzanine notes issued by SLF Repack Issuer 2016, LLC (the "SLF Repack Notes") collectively are referred to as the SLF JV I Notes. Prior to the redemption on December 28, 2018, the SLF Repack Notes consisted of Class A mezzanine secured deferrable floating rate notes and Class B mezzanine secured deferrable fixed rate notes. The SLF JV I Subordinated Notes are (and the SLF Repack Notes were, prior to their redemption) senior in right of payment to SLF JV I LLC equity interests and subordinated in right of payment to SLF JV I’s secured debt. As of March 31, 2020 and September 30, 2019, the Company and Kemper owned, in the aggregate, 87.5% and 12.5%, respectively, of the LLC equity interests of SLF JV I and the outstanding SLF JV I Subordinated Notes.
SLF JV I has a senior revolving credit facility with Deutsche Bank AG, New York Branch (as amended, the "Deutsche Bank I Facility"), which permitted up to $250.0 million of borrowings (subject to borrowing base and other limitations) as of March 31, 2020 and September 30, 2019. Borrowings under the Deutsche Bank I Facility are secured by all of the assets of SLF JV I Funding LLC, a special purpose financing subsidiary of SLF JV I. As of March 31, 2020, the reinvestment period of the Deutsche Bank I Facility was scheduled to expire June 28, 2021 and the maturity date for the Deutsche Bank I Facility was June 29, 2026. As of March 31, 2020, borrowings under the Deutsche Bank I Facility accrued interest at a rate equal to 3-month LIBOR plus 1.85% per annum during the reinvestment period and 3-month LIBOR plus 2.00% per annum during the amortization period. Under the Deutsche Bank I Facility, $193.9 million and $170.2 million of borrowings were outstanding as of March 31, 2020 and September 30, 2019, respectively.
As of March 31, 2020 and September 30, 2019, SLF JV I had total assets of $329.6 million and $360.9 million, respectively. SLF JV I's portfolio primarily consisted of senior secured loans to 53 and 51 portfolio companies, as of March 31, 2020 and September 30, 2019, respectively. The portfolio companies in SLF JV I are in industries similar to those in which the Company may invest directly. As of March 31, 2020, the Company's investment in SLF JV I consisted of LLC equity interests and Subordinated Notes of $92.2 million, at fair value. As of September 30, 2019, the Company's investment in SLF JV I consisted of LLC equity interests and Subordinated Notes of $126.3 million, at fair value.
As of each of March 31, 2020 and September 30, 2019, the Company and Kemper had funded approximately $165.5 million to SLF JV I, of which $144.8 million was from the Company. As of March 31, 2020 and September 30, 2019, the Company and Kemper had the option to fund additional SLF JV I Notes, subject to additional equity funding to SLF JV I. As of each of March 31, 2020 and September 30, 2019, the Company had commitments to fund LLC equity interests in SLF JV I of $17.5 million, of which $1.3 million was unfunded.

43
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Below is a summary of SLF JV I's portfolio, followed by a listing of the individual loans in SLF JV I's portfolio as of March 31, 2020 and September 30, 2019:
 
 
March 31, 2020
 
September 30, 2019
Senior secured loans (1)
 
$337,016
 
$340,960
Weighted average interest rate on senior secured loans (2)
 
5.54%
 
6.57%
Number of borrowers in SLF JV I
 
53
 
51
Largest exposure to a single borrower (1)
 
$10,686
 
$10,835
Total of five largest loan exposures to borrowers (1)
 
$51,441
 
$50,510
__________
(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans at fair value.


44
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





SLF JV I Portfolio as of March 31, 2020
Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Access CIG, LLC
First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025
5.53
%
Diversified Support Services
$
9,253

 
$
9,213

 
$
7,622

 
AdVenture Interactive, Corp.
927 shares of common stock
 
Advertising
 
 
1,390

 
1,312

(4)
AI Convoy (Luxembourg) S.À.R.L.
First Lien Term Loan, LIBOR+3.50% cash due 1/18/2027
5.34
%
Aerospace & Defense
9,200

 
9,154

 
8,257

 
AI Ladder (Luxembourg) Subco S.a.r.l.
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025
5.49
%
Electrical Components & Equipment
6,092

 
5,953

 
5,137

(4)
Altice France S.A.
First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026
4.70
%
Integrated Telecommunication Services
9,709

 
9,398

 
9,296

(4)
Alvogen Pharma US, Inc.
First Lien Term Loan, LIBOR+5.25% cash due 12/31/2023
6.32
%
Pharmaceuticals
9,879

 
9,586

 
8,594

 
Anastasia Parent, LLC
First Lien Term Loan, LIBOR+3.75% cash due 8/11/2025
5.20
%
Personal Products
2,843

 
2,360

 
1,658

 
Apptio, Inc.
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025
8.25
%
Application Software
4,615

 
4,542

 
4,398

(4)
 
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025
 
Application Software
—

 
(6
)
 
(18
)
(4)(5)
Total Apptio, Inc.
 
 
 
 
 
4,536

 
4,380

 
Aurora Lux Finco S.À.R.L.
First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026
7.00
%
Airport Services
6,500

 
6,344

 
6,111

(4)
Blackhawk Network Holdings, Inc.
First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025
3.99
%
Data Processing & Outsourced Services
9,825

 
9,807

 
8,134

 
Boxer Parent Company Inc.
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025
5.24
%
Systems Software
7,571

 
7,483

 
6,366

(4)
Brazos Delaware II, LLC
First Lien Term Loan, LIBOR+4.00% cash due 5/21/2025
4.92
%
Oil & Gas Equipment & Services
7,369

 
7,342

 
3,887

 
C5 Technology Holdings, LLC
171 Common Units
 
Data Processing & Outsourced Services
 
 
—

 
—

(4)
 
7,193,539.63 Preferred Units
 
Data Processing & Outsourced Services
 
 
7,194

 
5,683

(4)
Total C5 Technology Holdings, LLC
 
 
 
 
 
7,194

 
5,683

 
CITGO Petroleum Corp.
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024
6.00
%
Oil & Gas Refining & Marketing
7,920

 
7,841

 
7,009

(4)
Connect U.S. Finco LLC
First Lien Term Loan, LIBOR+4.50% cash due 12/11/2026
5.49
%
Alternative Carriers
8,367

 
8,162

 
6,746

(4)
Curium Bidco S.à.r.l.
First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026
5.07
%
Biotechnology
5,970

 
5,925

 
5,672

 
Dcert Buyer, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 10/16/2026
4.99
%
Internet Services & Infrastructure
8,000

 
7,980

 
7,193

 
Dealer Tire, LLC
First Lien Term Loan, LIBOR+4.25% cash due 12/12/2025
5.24
%
Distributors
948

 
904

 
788

(4)
Delta 2 (Lux) S.à.r.l.
First Lien Term Loan, LIBOR+2.50% cash due 2/1/2024
3.50
%
Movies & Entertainment
5,167

 
4,649

 
4,665

 
Ellie Mae, Inc.
First Lien Term Loan, LIBOR+3.75% cash due 4/17/2026
5.20
%
Application Software
4,974

 
4,950

 
4,372

 
eResearch Technology, Inc.
First Lien Term Loan, LIBOR+4.50% cash due 2/4/2027
5.95
%
Application Software
7,500

 
7,425

 
6,653

 
Frontier Communications Corporation
First Lien Term Loan, LIBOR+3.75% cash due 6/15/2024
5.21
%
Integrated Telecommunication Services
7,162

 
7,068

 
6,846

 
GFL Environmental, Inc.
First Lien Term Loan, LIBOR+3.00% cash due 5/30/2025
4.00
%
Environmental & Facilities Services
718

 
663

 
700

 
Gigamon, Inc.
First Lien Term Loan, LIBOR+4.25% cash due 12/27/2024
5.25
%
Systems Software
7,820

 
7,767

 
6,726

 

45
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
GoodRx, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 10/10/2025
3.74
%
Interactive Media & Services
$
8,592

 
$
8,470

 
$
8,119

 
Guidehouse LLP
Second Lien Term Loan, LIBOR+8.00% cash due 5/1/2026
8.99
%
Research & Consulting Services
6,000

 
5,977

 
5,190

(4)
Helios Software Holdings, Inc.
First Lien Term Loan, LIBOR+4.25% cash due 10/24/2025
5.32
%
Systems Software
3,990

 
3,950

 
3,438

 
Intelsat Jackson Holdings S.A.
First Lien Term Loan, LIBOR+3.75% cash due 11/27/2023
5.68
%
Alternative Carriers
10,686

 
10,563

 
9,905

 
KIK Custom Products Inc.
First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023
5.00
%
Household Products
8,000

 
7,976

 
7,237

 
Mindbody, Inc.
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025
8.00
%
Internet Services & Infrastructure
4,524

 
4,450

 
4,185

(4)
 
First Lien Revolver, LIBOR+7.00% cash due 2/14/2025
8.07
%
Internet Services & Infrastructure
476

 
468

 
440

(4)
Total Mindbody, Inc.
 
 
 
 
 
4,918

 
4,625

 
MRI Software LLC
First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026
6.57
%
Application Software
3,411

 
3,379

 
3,019

(4)
 
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026
 
Application Software
—

 
(4
)
 
(68
)
(4)(5)
 
First Lien Revolver, LIBOR+5.50% cash due 2/10/2026
6.57
%
Application Software
169

 
166

 
130

(4)(5)
Total MRI Software LLC
 
 
 
 
 
3,541

 
3,081

 
Navicure, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 10/22/2026
4.99
%
Health Care Technology
6,000

 
5,970

 
5,565

 
New IPT, Inc.
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
6.45
%
Oil & Gas Equipment & Services
1,138

 
1,138

 
1,138

(4)
 
21.876 Class A Common Units in New IPT Holdings, LLC
 
Oil & Gas Equipment & Services
 
 
—

 
697

(4)
Total New IPT, Inc.
 
 
 
 
 
1,138

 
1,835

 
Northern Star Industries Inc.
First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025
5.57
%
Electrical Components & Equipment
6,860

 
6,835

 
5,831

 
Novetta Solutions, LLC
First Lien Term Loan, LIBOR+5.00% cash due 10/17/2022
6.00
%
Application Software
5,962

 
5,935

 
5,315

 
OEConnection LLC
First Lien Term Loan, LIBOR+4.00% cash due 9/25/2026
5.45
%
Application Software
7,271

 
7,234

 
5,871

 
 
First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/25/2026
 
Application software
—

 
(3
)
 
(133
)
(5)
Total OEConnection LLC
 
 
 
 
 
7,231

 
5,738

 
Olaplex, Inc.
First Lien Term Loan, LIBOR+6.50% cash due 1/8/2026
7.50
%
Personal Products
5,000

 
4,904

 
4,675

(4)
 
First Lien Revolver, LIBOR+6.50% cash due 1/8/2025
7.50
%
Personal Products
540

 
530

 
505

(4)
Total Olaplex, Inc.
 
 
 
 
 
5,434

 
5,180

 
Quikrete Holdings, Inc.
First Lien Term Loan, LIBOR+2.50% cash due 2/1/2027
3.49
%
Construction Materials
2,280

 
2,106

 
2,109

 
Sabert Corporation
First Lien Term Loan, LIBOR+4.50% cash due 12/10/2026
5.50
%
Metal & Glass Containers
4,350

 
4,307

 
4,046

 
Salient CRGT, Inc.
First Lien Term Loan, LIBOR+6.50% cash due 2/28/2022
7.57
%
Aerospace & Defense
2,173

 
2,156

 
1,793

(4)
Scientific Games International, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 8/14/2024
3.74
%
Casinos & Gaming
6,483

 
6,461

 
5,262

 
SHO Holding I Corporation
First Lien Term Loan, LIBOR+5.00% cash due 10/27/2022
6.78
%
Footwear
8,376

 
8,362

 
6,575

 
Signify Health, LLC
First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024
5.95
%
Health Care Services
9,800

 
9,732

 
8,232

 
Sirva Worldwide, Inc.
First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025
6.49
%
Diversified Support Services
4,844

 
4,771

 
3,633

 
Star US Bidco LLC
First Lien Term Loan, LIBOR+4.25% cash due 3/17/2027
5.94
%
Industrial Machinery
2,973

 
2,943

 
2,587

 

46
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Sunshine Luxembourg VII SARL
First Lien Term Loan, LIBOR+4.25% cash due 10/1/2026
5.32
%
Personal Products
$
7,980

 
$
7,940

 
$
7,262

(4)
Supermoose Borrower, LLC
First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025
5.20
%
Application Software
4,913

 
4,566

 
3,960

(4)
Surgery Center Holdings, Inc.
First Lien Term Loan, LIBOR+3.25% cash due 9/2/2024
4.25
%
Health Care Facilities
4,987

 
4,966

 
3,868

(4)
Thruline Marketing, Inc.
927 Class A Units in FS AVI Holdco, LLC
 
Advertising
 
 
949

 
449

(4)
Thunder Finco (US), LLC
First Lien Term Loan, LIBOR+4.25% cash due 11/26/2026
5.24
%
Movies & Entertainment
8,000

 
7,920

 
6,260

 
Uber Technologies, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025
5.00
%
Application Software
10,509

 
10,440

 
9,887

(4)
UFC Holdings, LLC
First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026
4.25
%
Movies & Entertainment
4,831

 
4,787

 
4,306

(4)
Veritas US Inc.
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023
5.95
%
Application Software
6,859

 
6,826

 
5,941

(4)
Verscend Holding Corp.
First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025
5.49
%
Health Care Technology
4,133

 
4,099

 
3,926


VM Consolidated, Inc.
First Lien Term Loan, LIBOR+3.25% cash due 2/28/2025
4.24
%
Data Processing & Outsourced Services
10,542

 
10,554

 
9,593

(4)
WideOpenWest Finance, LLC
First Lien Term Loan, LIBOR+3.25% cash due 8/18/2023
4.25
%
Cable & Satellite
962

 
867

 
897

 
WP CPP Holdings, LLC
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026
9.53
%
Aerospace & Defense
6,000

 
5,953

 
4,120

(4)
 
 
 
 
$
337,016

 
$
341,737

 
$
299,572

 
__________
(1) Represents the interest rate as of March 31, 2020. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of March 31, 2020, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 0.99%, the 60-day LIBOR at 1.26%, the 90-day LIBOR at 1.45% and the 180-day LIBOR at 1.07%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(3) Represents the current determination of fair value as of March 31, 2020 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.
(4) This investment was held by both the Company and SLF JV I as of March 31, 2020.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
 



47
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





SLF JV I Portfolio as of September 30, 2019
Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Access CIG, LLC
First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025
6.07
%
Diversified support services
$
9,300

 
$
9,256

 
$
9,201

 
AdVenture Interactive, Corp.
927 shares of common stock
 
Advertising
 
 
1,390

 
1,295

(4)
AI Ladder (Luxembourg) Subco S.a.r.l.
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025
6.60
%
Electrical components & equipment
6,145

 
5,992

 
5,659

(4)
Air Newco LP
First Lien Term Loan, LIBOR+4.75% cash due 5/31/2024
6.79
%
IT consulting & other services
9,900

 
9,875

 
9,916

 
AL Midcoast Holdings LLC
First Lien Term Loan, LIBOR+5.50% cash due 8/1/2025
7.60
%
Oil & gas storage & transportation
9,900

 
9,801

 
9,764

 
Altice France S.A.
First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026
6.03
%
Integrated telecommunication services
7,444

 
7,282

 
7,439

 
Alvogen Pharma US, Inc.
First Lien Term Loan, LIBOR+4.75% cash due 4/1/2022
6.79
%
Pharmaceuticals
7,656

 
7,656

 
6,963

 
Apptio, Inc.
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025
9.56
%
Application software
4,615

 
4,534

 
4,530

(4)
 
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025
 
Application software
—

 
(7
)
 
(7
)
(4)(5)
Total Apptio, Inc.
 
 
 
 
 
4,527

 
4,523

 
Blackhawk Network Holdings, Inc.
First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025
5.04
%
Data processing & outsourced services
9,875

 
9,855

 
9,858

 
Boxer Parent Company Inc.
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025
6.29
%
Systems software
7,609

 
7,518

 
7,336

(4)
Brazos Delaware II, LLC
First Lien Term Loan, LIBOR+4.00% cash due 5/21/2025
6.05
%
Oil & gas equipment & services
7,406

 
7,376

 
6,855

 
C5 Technology Holdings, LLC
171 Common Units
 
Data Processing & Outsourced Services
 
 
—

 
—

(4)
 
7,193,539.63 Preferred Units
 
Data Processing & Outsourced Services
 
 
7,194

 
7,194

(4)
Total C5 Technology Holdings, LLC
 
 
 
 
 
7,194

 
7,194

 
Cast & Crew Payroll, LLC
First Lien Term Loan, LIBOR+4.00% cash due 2/9/2026
6.05
%
Application software
4,975

 
4,925

 
5,018

 
CITGO Petroleum Corp.
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024
7.10
%
Oil & gas refining & marketing
7,960

 
7,880

 
8,010

(4)
Connect U.S. Finco LLC
First Lien Term Loan, LIBOR+4.50% cash due 9/23/2026
7.10
%
Alternative Carriers
8,000

 
7,840

 
7,888

(4)
Curium Bidco S.à r.l.
First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026
6.10
%
Biotechnology
6,000

 
5,955

 
6,030

 
Dcert Buyer, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 8/8/2026
6.26
%
Internet services & infrastructure
8,000

 
7,980

 
7,985

 
DigiCert, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 10/31/2024
6.04
%
Internet services & infrastructure
8,250

 
8,148

 
8,249

(4)
Ellie Mae, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 4/17/2026
6.04
%
Application software
5,000

 
4,975

 
5,015

 
Everi Payments Inc.
First Lien Term Loan, LIBOR+3.00% cash due 5/9/2024
5.04
%
Casinos & gaming
4,764

 
4,742

 
4,776

 
Falmouth Group Holdings Corp.
First Lien Term Loan, LIBOR+6.75% cash due 12/14/2021
8.95
%
Specialty chemicals
4,938

 
4,909

 
4,910

 
Frontier Communications Corporation
First Lien Term Loan, LIBOR+3.75% cash due 6/15/2024
5.80
%
Integrated telecommunication services
6,473

 
6,400

 
6,471

 
Gentiva Health Services, Inc.
First Lien Term Loan, LIBOR+3.75% cash due 7/2/2025
5.81
%
Healthcare services
7,920

 
7,801

 
7,974

 
Gigamon, Inc.
First Lien Term Loan, LIBOR+4.25% cash due 12/27/2024
6.29
%
Systems software
7,860

 
7,801

 
7,644

 
GoodRx, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 10/10/2025
4.81
%
Interactive media & services
7,852

 
7,835

 
7,862

 
Guidehouse LLP
Second Lien Term Loan, LIBOR+7.50% cash due 5/1/2026
9.54
%
Research & consulting services
6,000

 
5,975

 
5,925

(4)

48
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Indivior Finance S.a.r.l.
First Lien Term Loan, LIBOR+4.50% cash due 12/19/2022
6.76
%
Pharmaceuticals
$
7,898

 
$
7,797

 
$
7,272

 
Intelsat Jackson Holdings S.A.
First Lien Term Loan, LIBOR+3.75% cash due 11/27/2023
5.80
%
Alternative Carriers
10,000

 
9,891

 
10,042

 
KIK Custom Products Inc.
First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023
6.26
%
Household products
8,000

 
7,972

 
7,610

 
McDermott Technology (Americas), Inc.
First Lien Term Loan, LIBOR+5.00% cash due 5/9/2025
7.10
%
Oil & gas equipment & services
4,187

 
4,119

 
2,676

 
Mindbody, Inc.
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025
9.06
%
Internet services & infrastructure
4,524

 
4,443

 
4,438

(4)
 
First Lien Revolver, LIBOR+7.00% cash due 2/15/2025
 
Internet services & infrastructure
—

 
(9
)
 
(9
)
(4)(5)
Total Mindbody, Inc.
 
 
 
 
 
4,434

 
4,429

 
Navicure, Inc.
First Lien Term Loan, LIBOR+3.75% cash due 9/18/2026
6.13
%
Healthcare technology
6,000

 
5,970

 
6,008

 
New IPT, Inc.
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
7.10
%
Oil & gas equipment & services
1,422

 
1,422

 
1,422

(4)
 
21.876 Class A Common Units in New IPT Holdings, LLC
 
Oil & gas equipment & services
 
 
—

 
1,268

(4)
Total New IPT, Inc.
 
 
 
 
 
1,422

 
2,690

 
Northern Star Industries Inc.
First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025
6.56
%
Electrical components & equipment
6,895

 
6,868

 
6,792

 
Novetta Solutions, LLC
First Lien Term Loan, LIBOR+5.00% cash due 10/17/2022
7.05
%
Application software
5,993

 
5,961

 
5,882

 
OCI Beaumont LLC
First Lien Term Loan, LIBOR+4.00% cash due 3/13/2025
6.10
%
Commodity chemicals
7,880

 
7,872

 
7,890

 
OEConnection LLC
First Lien Term Loan, LIBOR+4.00% cash due 9/24/2026
6.13
%
Application software
7,312

 
7,275

 
7,298

 
 
First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/24/2026
 
Application software
—

 
(3
)
 
(1
)
(5)
Total OEConnection LLC
 
 
 
 
 
7,272

 
7,297

 
Red Ventures, LLC
First Lien Term Loan, LIBOR+3.00% cash due 11/8/2024
5.04
%
Interactive media & services
3,990

 
3,971

 
4,011

 
Salient CRGT, Inc.
First Lien Term Loan, LIBOR+6.00% cash due 2/28/2022
8.05
%
Aerospace & defense
2,205

 
2,183

 
2,094

(4)
Scientific Games International, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 8/14/2024
4.79
%
Casinos & gaming
6,516

 
6,491

 
6,470

 
SHO Holding I Corporation
First Lien Term Loan, LIBOR+5.00% cash due 10/27/2022
7.26
%
Footwear
8,420

 
8,403

 
7,999

 
Signify Health, LLC
First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024
6.60
%
Healthcare services
9,850

 
9,775

 
9,838

 
Sirva Worldwide, Inc.
First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025
7.54
%
Diversified support services
4,906

 
4,833

 
4,759

 
Sunshine Luxembourg VII SARL
First Lien Term Loan, LIBOR+4.25% cash due 9/25/2026
6.59
%
Personal products
8,000

 
7,960

 
8,048

 
Thruline Marketing, Inc.
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022
9.10
%
Advertising
1,854

 
1,851

 
1,854

(4)
 
927 Class A Units in FS AVI Holdco, LLC
 
Advertising
 
 
1,088

 
658

(4)
Total Thruline Marketing, Inc.
 
 
 
 
 
2,939

 
2,512

 
Triple Royalty Sub LLC
Fixed Rate Bond 144A 9.0% Toggle PIK cash due 4/15/2033
 
Pharmaceuticals
5,000

 
5,000

 
5,175

 
Uber Technologies, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025
6.03
%
Application software
9,875

 
9,836

 
9,836

(4)
UFC Holdings, LLC
First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026
5.30
%
Movies & entertainment
4,489

 
4,489

 
4,506

 
Uniti Group LP
First Lien Term Loan, LIBOR+5.00% cash due 10/24/2022
7.04
%
Specialized REITs
6,401

 
6,221

 
6,256

(4)
Valeant Pharmaceuticals International Inc.
First Lien Term Loan, LIBOR+2.75% cash due 11/27/2025
4.79
%
Pharmaceuticals
1,772

 
1,764

 
1,778

 

49
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Veritas US Inc.
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023
6.60
%
Application software
$
6,894

 
$
6,856

 
$
6,534

(4)
Verra Mobility, Corp.
First Lien Term Loan, LIBOR+3.75% cash due 2/28/2025
5.79
%
Data processing & outsourced services
10,835

 
10,849

 
10,894

 
WP CPP Holdings, LLC
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026
10.01
%
Aerospace & defense
6,000

 
5,949

 
5,974

(4)
 
 
 
 
$
340,960

 
$
347,985

 
$
345,032

 
__________
(1) Represents the interest rate as of September 30, 2019. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of September 30, 2019, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 2.04%, the 60-day LIBOR at 2.09%, the 90-day LIBOR at 2.10%, the 180-day LIBOR at 2.06%, and the PRIME at 5.00%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(3) Represents the current determination of fair value as of September 30, 2019 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.
(4) This investment was held by both the Company and SLF JV I as of September 30, 2019.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.

The cost and fair value of the Company's debt investment in SLF JV I were $96.3 million and $92.2 million, respectively, as of March 31, 2020. Both the cost and fair value of the Company's debt investment in SLF JV I were $96.3 million as of September 30, 2019. The Company earned interest income of $2.1 million and $4.3 million on its debt investment in the SLF JV I for the three and six months ended March 31, 2020, respectively. The Company earned interest income of $2.3 million and $5.1 million on its investments in the SLF JV I Notes for the three and six months ended March 31, 2019, respectively. The Company's debt investment in SLF JV I bears interest at a rate of one-month LIBOR plus 7.0% per annum and matures on December 29, 2028.
The cost and fair value of the LLC equity interests in SLF JV I held by the Company were $49.3 million and $0.0 million, respectively, as of March 31, 2020, and $49.3 million and $30.1 million, respectively, as of September 30, 2019. The Company did not earn dividend income for the three and six months ended March 31, 2020 and 2019, with respect to its investment in the LLC equity interests of SLF JV I. The LLC equity interests of SLF JV I are generally dividend producing to the extent SLF JV I has residual cash to be distributed on a quarterly basis.
Below is certain summarized financial information for SLF JV I as of March 31, 2020 and September 30, 2019 and for the three and six months ended March 31, 2020 and 2019:
 
 
March 31, 2020
 
September 30, 2019
Selected Balance Sheet Information:
 
 
 
 
Investments at fair value (cost March 31, 2020: $341,737; cost September 30, 2019: $347,985)
 
$
299,572

 
$
345,032

Cash and cash equivalents
 
14,039

 
3,674

Restricted cash
 
5,242

 
5,242

Other assets
 
10,783

 
6,912

Total assets
 
$
329,636

 
$
360,860

 
 
 
 
 
Senior credit facility payable
 
$
193,910

 
$
170,210

Debt securities payable at fair value (proceeds March 31, 2020: $110,000; proceeds September 30, 2019: $110,000)
 
105,339

 
110,000

Other liabilities
 
30,387

 
46,303

Total liabilities
 
$
329,636

 
$
326,513

Members' equity
 
—

 
34,347

Total liabilities and members' equity
 
$
329,636

 
$
360,860



50
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





 
 
Three months ended March 31, 2020
 
Three months ended March 31, 2019
 
Six months ended March 31, 2020
 
Six months ended March 31, 2019
Selected Statements of Operations Information:
 
 
 
 
 
 
 
 
Interest income
 
$
5,546

 
$
5,551

 
$
10,939

 
$
10,989

Other income
 
291

 
80

 
297

 
89

Total investment income
 
5,837

 
5,631

 
11,236

 
11,078

Interest expense
 
4,493

 
4,709

 
9,134

 
9,863

Other expenses
 
64

 
276

 
131

 
326

Total expenses (1)
 
4,557

 
4,985

 
9,265

 
10,189

Net unrealized appreciation (depreciation)
 
(37,491
)
 
4,576

 
(34,550
)
 
1,120

Net realized gains (losses)
 
(615
)
 
19

 
(1,767
)
 
(4,986
)
Net income (loss)
 
$
(36,826
)
 
$
5,241

 
$
(34,346
)
 
$
(2,977
)
 __________
(1) There are no management fees or incentive fees charged at SLF JV I.
SLF JV I has elected to fair value the debt securities issued to the Company and Kemper under FASB ASC Topic 825, Financial Instruments - Fair Value Option. The debt securities are valued based on the total assets less the total liabilities senior to the subordinated notes of SLF JV I in an amount not exceeding par under the EV technique.
During the six months ended March 31, 2020 and 2019, the Company did not sell any debt investments to SLF JV I.

Note 4. Fee Income
For the three and six months ended March 31, 2020 the Company recorded total fee income of $2.1 million and $3.1 million, respectively, of which $0.2 million and $0.4 million, respectively, was recurring in nature. For the three and six months ended March 31, 2019, the Company recorded total fee income of $1.1 million and $2.3 million, respectively, of which $0.1 million and $0.3 million, respectively, was recurring in nature. Recurring fee income primarily consisted of servicing fees and exit fees.

Note 5. Share Data and Net Assets
Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share, pursuant to ASC Topic 260-10, Earnings per Share, for the three and six months ended March 31, 2020 and 2019:
(Share amounts in thousands)
 
Three months ended
March 31, 2020
 
Three months ended
March 31, 2019
 
Six months ended
March 31, 2020
 
Six months
ended
March 31, 2019
Earnings (loss) per common share — basic and diluted:
 
 
 
 
 
 
 
 
Net increase (decrease) in net assets resulting from operations
 
$
(165,467
)
 
$
64,485

 
$
(151,624
)
 
$
92,203

Weighted average common shares outstanding — basic and diluted
 
140,961

 
140,961

 
140,961

 
140,961

Earnings (loss) per common share — basic and diluted
 
$
(1.17
)
 
$
0.46

 
$
(1.08
)
 
$
0.65


51
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Changes in Net Assets

The following table presents the changes in net assets for the three and six months ended March 31, 2020:
 
 
Common Stock
 
 
 
 
 
 
 
 
Shares
 
Par Value
 
Additional paid-in-capital
 
Accumulated Overdistributed Earnings
 
Total Net Assets
Balance at September 30, 2019
 
140,961

 
$
1,409

 
$
1,487,774

 
$
(558,553
)
 
$
930,630

Net investment income
 
—

 
—

 
—

 
7,836

 
7,836

Net unrealized appreciation (depreciation)
 
—

 
—

 
—

 
2,879

 
2,879

Net realized gains (losses)
 
—

 
—

 
—

 
3,288

 
3,288

Provision for income tax (expense) benefit
 
—

 
—

 
—

 
(160
)
 
(160
)
Distributions to stockholders
 
—

 
—

 
—

 
(13,391
)
 
(13,391
)
Issuance of common stock under dividend reinvestment plan
 
88

 
1

 
480

 
—

 
481

Repurchases of common stock under dividend reinvestment plan
 
(88
)
 
(1
)
 
(480
)
 
—

 
(481
)
Balance at December 31, 2019
 
140,961

 
$
1,409

 
$
1,487,774

 
$
(558,101
)
 
$
931,082

Net investment income
 
—

 
$
—

 
$
—

 
$
22,841

 
$
22,841

Net unrealized appreciation (depreciation)
 
—

 
—

 
—

 
(163,533
)
 
(163,533
)
Net realized gains (losses)
 
—

 
—

 
—

 
(26,480
)
 
(26,480
)
Provision for income tax (expense) benefit
 
—

 
—

 
—

 
1,705

 
1,705

Distributions to stockholders
 
—

 
—

 
—

 
(13,391
)
 
(13,391
)
Issuance of common stock under dividend reinvestment plan
 
158

 
2

 
504

 
—

 
506

Repurchases of common stock under dividend reinvestment plan
 
(158
)
 
(2
)
 
(504
)
 
—

 
(506
)
Balance at March 31, 2020
 
140,961

 
$
1,409

 
$
1,487,774

 
$
(736,959
)
 
$
752,224


The following table presents the changes in net assets for the three and six months ended March 31, 2019:
 
 
Common Stock
 
 
 
 
 
 
 
 
Shares
 
Par Value
 
Additional paid-in-capital
 
Accumulated Overdistributed Earnings
 
Total Net Assets
Balance at September 30, 2018
 
140,961

 
$
1,409

 
$
1,492,739

 
$
(636,113
)
 
$
858,035

Net investment income
 
—

 
—

 
—

 
17,317

 
17,317

Net unrealized appreciation (depreciation)
 
—

 
—

 
—

 
(6,975
)
 
(6,975
)
Net realized gains (losses)
 
—

 
—

 
—

 
17,962

 
17,962

Provision for income tax (expense) benefit
 
—

 
—

 
—

 
(586
)
 
(586
)
Distributions to stockholders
 
—

 
—

 
—

 
(13,391
)
 
(13,391
)
Issuance of common stock under dividend reinvestment plan
 
87

 
1

 
383

 
—

 
384

Repurchases of common stock under dividend reinvestment plan
 
(87
)
 
(1
)
 
(383
)
 
—

 
(384
)
Balance at December 31, 2018
 
140,961

 
$
1,409

 
$
1,492,739

 
$
(621,786
)
 
$
872,362

Net investment income
 
—

 
$
—

 
$
—

 
$
17,709

 
$
17,709

Net unrealized appreciation (depreciation)
 
—

 
—

 
—

 
21,472

 
21,472

Net realized gains (losses)
 
—

 
—

 
—

 
25,213

 
25,213

Provision for income tax (expense) benefit
 
—

 
—

 
—

 
91

 
91

Distributions to stockholders
 
—

 
—

 
—

 
(13,391
)
 
(13,391
)
Issuance of common stock under dividend reinvestment plan
 
60

 
1

 
311

 
—

 
312

Repurchases of common stock under dividend reinvestment plan
 
(60
)
 
(1
)
 
(311
)
 
—

 
(312
)
Balance at March 31, 2019
 
140,961

 
$
1,409

 
$
1,492,739

 
$
(570,692
)
 
$
923,456



52
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Distributions
Distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by the Board of Directors and is based on management’s estimate of the Company’s annual taxable income. Net realized capital gains, if any, may be distributed to stockholders or retained for reinvestment.
The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of any distributions the Company declares in cash on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, if the Company’s Board of Directors declares a cash distribution, then the Company’s stockholders who have not “opted out” of the Company’s DRIP will have their cash distribution automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution. If the Company’s shares are trading at a premium to net asset value, the Company typically issues new shares to implement the DRIP with such shares issued at the greater of the most recently computed net asset value per share of common stock or 95% of the current market price per share of common stock on the payment date for such distribution. If the Company’s shares are trading at a discount to net asset value, the Company typically purchases shares in the open market in connection with the Company’s obligations under the DRIP.
For income tax purposes, the Company has reported its distributions for the 2019 calendar year as ordinary income. The character of such distributions was appropriately reported to the Internal Revenue Service and stockholders for the 2019 calendar year. To the extent the Company’s taxable earnings for a fiscal and taxable year fall below the amount of distributions paid for the fiscal and taxable year, a portion of the total amount of the Company’s distributions for the fiscal and taxable year is deemed a return of capital for tax purposes to the Company’s stockholders.
The following table reflects the distributions per share that the Company has paid, including shares issued under the DRIP, on its common stock during the six months ended March 31, 2020 and 2019:
Date Declared
 
Record Date
 
Payment Date
 
Amount
per Share
 
Cash
Distribution
 
DRIP Shares
Issued (1)
 
DRIP Shares
Value
November 12, 2019
 
December 13, 2019
 
December 31, 2019
 
$
0.095

 
$ 12.9 million
 
87,747

 
$ 0.5 million
January 31, 2020
 
March 13, 2020
 
March 31, 2020
 
0.095

 
12.9 million
 
157,523

 
0.5 million
Total for the six months ended March 31, 2020
 
$
0.190

 
$ 25.8 million
 
245,270

 
$ 1.0 million
Date Declared
 
Record Date
 
Payment Date
 
Amount
per Share
 
Cash
Distribution
 
DRIP Shares
Issued (1)
 
DRIP Shares
Value
November 19, 2018
 
December 17, 2018
 
December 28, 2018
 
$
0.095

 
$ 13.0 million
 
87,429

 
$ 0.4 million
February 1, 2019
 
March 15, 2019
 
March 29, 2019
 
0.095

 
13.1 million
 
59,603

 
 0.3 million
Total for the six months ended March 31, 2019
 
$
0.190

 
$ 26.1 million
 
147,032

 
$ 0.7 million
 __________
(1) Shares were purchased on the open market and distributed.

Common Stock Offering
There were no common stock offerings during the six months ended March 31, 2020 and 2019.

Note 6. Borrowings
Credit Facility

On November 30, 2017, the Company entered into a senior secured revolving credit facility (as amended and restated, the “Credit Facility”) pursuant to a Senior Secured Revolving Credit Agreement with the lenders party thereto, ING Capital LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents. The Credit Facility provides that the Company may use the proceeds of the loans and issuances of letters of credit under the Credit Facility for general corporate purposes, including acquiring and funding leveraged loans, mezzanine loans, high-yield securities, convertible securities, preferred stock, common stock and other investments. The Credit Facility further allows the Company to request letters of credit from ING Capital LLC, as the issuing bank.


53
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





As of March 31, 2020 and September 30, 2019, (i) the size of the Credit Facility was $700 million (with an “accordion” feature that permits the Company, under certain circumstances, to increase the size of the facility up to $1.02 billion), (ii) the period during which the Company may make drawings will expire on February 25, 2023 and the maturity date is February 25, 2024 and (iii) the interest rate margin for (a) LIBOR loans (which may be 1-, 2-, 3- or 6-month, at the Company’s option) was 2.00% (which can be increased up to 2.25%) and (b) alternate base rate loans was 1.00% (which can be increased up to 1.25%), each depending on the Company’s senior debt coverage ratio.

On December 13, 2019, the Company amended the Credit Facility to (1) reduce the required ratio of total assets (less total liabilities) to total indebtedness of the Company and its subsidiaries (subject to certain exceptions), from 1.65 to 1.00 to 1.50 to 1.00 and (2) modify the definition of Advance Rate to reference asset coverage of 1.50 to 1.00, rather than 1.65 to 1.00.

The Credit Facility is secured by substantially all of the Company’s assets (excluding, among other things, investments held in and by certain subsidiaries of the Company or investments in certain portfolio companies of the Company) and guaranteed by certain subsidiaries of the Company. As of March 31, 2020, except for assets that were held by the Excluded Subsidiaries and certain other immaterial subsidiaries, substantially all of the Company's assets are pledged as collateral under the Credit Facility.

The Credit Facility requires the Company to, among other things, (i) make representations and warranties regarding the collateral as well as each of the Company’s portfolio companies’ businesses, (ii) agree to certain indemnification obligations, and (iii) comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar revolving credit facilities, including covenants related to: (A) limitations on the incurrence of additional indebtedness and liens, (B) limitations on certain investments, (C) limitations on certain asset transfers and restricted payments, (D) maintaining a certain minimum stockholders’ equity, (E) maintaining a ratio of total assets (less total liabilities) to total indebtedness, of the Company and its subsidiaries (subject to certain exceptions), of not less than 1.50 to 1.00, (F) maintaining a ratio of consolidated EBITDA to consolidated interest expense, of the Company and its subsidiaries (subject to certain exceptions), of not less than 2.25 to 1.00, (G) maintaining a minimum liquidity and net worth, and (H) limitations on the creation or existence of agreements that prohibit liens on certain properties of the Company and certain of its subsidiaries. The Credit Facility also includes usual and customary default provisions such as the failure to make timely payments under the facility, the occurrence of a change in control, and the failure by the Company to materially perform under the agreements governing the facility, which, if not complied with, could accelerate repayment under the facility. As of March 31, 2020, the Company was in compliance with all financial covenants under the Credit Facility. In addition to the asset coverage ratio described above, borrowings under the 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 Company’s portfolio. Each loan or letter of credit originated or assumed under the Credit Facility is subject to the satisfaction of certain conditions.

As of March 31, 2020 and September 30, 2019, the Company had $404.8 million and $314.8 million of borrowings outstanding under the Credit Facility, respectively, which had a fair value of $404.8 million and $314.8 million, respectively. The Company's borrowings under the Credit Facility bore interest at a weighted average interest rate of 3.806% and 4.688% for the six months ended March 31, 2020 and 2019, respectively. For the three and six months ended March 31, 2020, the Company recorded interest expense (inclusive of fees) of $4.2 million and $8.2 million, respectively, related to the Credit Facility. For the three and six months ended March 31, 2019, the Company recorded interest expense (inclusive of fees) of $4.3 million and $7.5 million in the aggregate, related to the Credit Facility.

2025 Notes
On February 25, 2020, the Company issued $300.0 million in aggregate principal amount of the 2025 Notes for net proceeds of $293.8 million after deducting OID of $2.5 million, underwriting commissions and discounts of $3.0 million and offering costs of $0.7 million. The OID on the 2025 Notes is amortized based on the effective interest method over the term of the 2025 Notes.
The 2025 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the fifth supplemental indenture, dated February 25, 2020 (collectively, the "2025 Notes Indenture"), between the Company and Deutsche Bank Trust Company Americas (the "Trustee"). The 2025 Notes are the Company's general unsecured obligations that rank senior in right of payment to all of the Company's existing and future indebtedness that is expressly subordinated in right of payment to the 2025 Notes. The 2025 Notes rank equally in right of payment with all of the Company's existing and future liabilities that are not so subordinated. The 2025 Notes effectively rank junior to any of the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness. The 2025 Notes rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries, financing vehicles or similar facilities. 

54
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Interest on the 2025 Notes is paid semi-annually on February 25 and August 25 at a rate of 3.500% per annum. The 2025 Notes mature on February 25, 2025 and may be redeemed in whole or in part at any time or from time to time at the Company's option prior to maturity at par plus a “make-whole” premium, if applicable.
The 2025 Notes Indenture contains certain covenants, including covenants requiring the Company's compliance with the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the Investment Company Act or any successor provisions (but giving effect to any exemptive relief granted to the Company by the U.S. Securities and Exchange Commission ("SEC"), as well as covenants requiring the Company to provide financial information to the holders of the 2025 Notes and the Trustee if the Company ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended. These covenants are subject to limitations and exceptions that are described in the 2025 Notes Indenture. The Company may repurchase the 2025 Notes in accordance with the Investment Company Act and the rules promulgated thereunder. In addition, holders of the 2025 Notes can require the Company to repurchase the 2025 Notes at 100% of their principal amount upon the occurrence of certain change of control events as described in the 2025 Notes Indenture. The 2025 Notes were issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. During the three months ended March 31, 2020, the Company did not repurchase any of the 2025 Notes in the open market.
For each of the three and six months ended March 31, 2020, the Company recorded interest expense (inclusive of fees) of $1.1 million related to the 2025 Notes.
As of March 31, 2020, there were $300.0 million of 2025 Notes outstanding, which had a carrying value and fair value of $293.9 million and $274.5 million, respectively. The carrying value represents the aggregate principal amount outstanding less unamortized deferred financing costs and the unaccreted discount recorded upon the issuance of the 2025 Notes. As March 31, 2020, the total unamortized deferred financing costs and the net unaccreted discount were $3.6 million and $2.5 million, respectively.
2019 Notes
On February 26, 2014, the Company issued $250.0 million in aggregate principal amount of its 4.875% unsecured notes due 2019 (the "2019 Notes") for net proceeds of $244.4 million after deducting OID of $1.4 million, underwriting commissions and discounts of $3.7 million and offering costs of $0.5 million.  The OID on the 2019 Notes was amortized based on the effective interest method over the term of the notes. The 2019 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the third supplemental indenture, dated February 26, 2014, between the Company and the Trustee.
Interest on the 2019 Notes was paid semi-annually on March 1 and September 1 at a rate of 4.875% per annum. As of March 31, 2020 and September 30, 2019, there were no 2019 Notes outstanding. The 2019 Notes matured on March 1, 2019 and were fully repaid during the three months ended March 31, 2019. For the three and six months ended March 31, 2019, the Company recorded interest expense of $2.1 million and $5.1 million (inclusive of fees), respectively, related to the 2019 Notes.
2024 Notes
On October 18, 2012, the Company issued $75.0 million in aggregate principal amount of its 5.875% unsecured 2024 Notes for net proceeds of $72.5 million after deducting underwriting commissions of $2.2 million and offering costs of $0.3 million. The 2024 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the first supplemental indenture, dated October 18, 2012, between the Company and the Trustee.
Interest on the 2024 Notes was paid quarterly in arrears on January 30, April 30, July 30 and October 30 at a rate of 5.875% per annum. On March 2, 2020, the Company redeemed 100%, or $75.0 million aggregate principal amount, of the issued and outstanding 2024 Notes, following which they were delisted from the New York Stock Exchange. The redemption price per 2024 Note was $25 plus accrued and unpaid interest. The Company recognized a loss of $1.0 million in connection with the redemption of the 2024 Notes during each of the three and six months ended March 31, 2020.
For the three and six months ended March 31, 2020, the Company recorded interest expense of $0.8 million and $1.9 million (inclusive of fees), respectively, related to the 2024 Notes. For the three and six months ended March 31, 2019, the Company recorded interest expense of $1.2 million and $2.3 million (inclusive of fees), respectively, related to the 2024 Notes.
As of March 31, 2020, there were no 2024 Notes outstanding. As of September 30, 2019, there were $75.0 million of 2024 Notes outstanding, which had a carrying value and fair value of $73.9 million and $77.4 million, respectively.

55
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





2028 Notes
In April and May 2013, the Company issued $86.3 million in aggregate principal amount of its 6.125% unsecured 2028 Notes for net proceeds of $83.4 million after deducting underwriting commissions of $2.6 million and offering costs of $0.3 million. The 2028 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the second supplemental indenture, dated April 4, 2013, between the Company and the Trustee.
Interest on the 2028 Notes was paid quarterly in arrears on January 30, April 30, July 30 and October 30 at a rate of 6.125% per annum. On March 13, 2020, the Company redeemed 100%, or $86.3 million aggregate principal amount, of the issued and outstanding 2028 Notes, following which they were delisted from the Nasdaq Global Select Market. The redemption price per 2028 Note was $25 plus accrued and unpaid interest. The Company recognized a loss of $1.5 million in connection with the redemption of the 2028 Notes during each of the three and six months ended March 31, 2020.
For the three and six months ended March 31, 2020, the Company recorded interest expense of $1.1 million and $2.5 million (inclusive of fees), respectively, related to the 2028 Notes. For the three and six months ended March 31, 2019, the Company recorded interest expense of $1.4 million and $2.7 million (inclusive of fees), respectively, related to the 2028 Notes.
As of March 31, 2020, there were no 2028 Notes outstanding. As of September 30, 2019, there were $86.3 million of 2028 Notes outstanding, which had a carrying value and fair value of $84.6 million and $87.6 million, respectively.

Note 7. Interest and Dividend Income
 
As of each of March 31, 2020 and September 30, 2019, there were three investments on which the Company had stopped accruing cash and/or PIK interest or OID income. The percentages of the Company's debt investments at cost and fair value by accrual status as of March 31, 2020 and September 30, 2019 were as follows: 
 
 
March 31, 2020
 
September 30, 2019
 
 
Cost
 
% of Debt
Portfolio
 
Fair
Value
 
% of Debt
Portfolio
 
Cost
 
% of Debt
Portfolio
 
Fair
Value
 
% of Debt
Portfolio
Accrual
 
$
1,443,128

 
98.22
%
 
$
1,306,989

 
99.55
%
 
$
1,311,849

 
95.72
%
 
$
1,305,718

 
99.79
%
PIK non-accrual (1)
 
12,661

 
0.86

 
—

 
—

 
12,661

 
0.92

 
—

 
—

Cash non-accrual (2)
 
13,572

 
0.92

 
5,864

 
0.45

 
46,107

 
3.36

 
2,706

 
0.21

Total
 
$
1,469,361

 
100.00
%
 
$
1,312,853

 
100.00
%
 
$
1,370,617

 
100.00
%
 
$
1,308,424

 
100.00
%
 ___________________
(1)
PIK non-accrual status is inclusive of other non-cash income, where applicable.
(2)
Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.

 Note 8. Taxable/Distributable Income and Dividend Distributions
Taxable income differs from net increase (decrease) in net assets resulting from operations primarily due to: (1) unrealized appreciation (depreciation) on investments, secured borrowings and foreign currency, as gains and losses are not included in taxable income until they are realized; (2) origination and exit fees received in connection with investments in portfolio companies; (3) organizational costs; (4) income or loss recognition on exited investments; (5) recognition of interest income on certain loans; and (6) investments in controlled foreign corporations.
As of September 30, 2019, the Company had net capital loss carryforwards of $515.8 million to offset net capital gains that will not expire, to the extent available and permitted by U.S. federal income tax law, of which $109.2 million are available to offset future short-term capital gains and $406.6 million are available to offset future long-term capital gains.

56
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Listed below is a reconciliation of "net increase (decrease) in net assets resulting from operations" to taxable income for the three and six months ended March 31, 2020 and 2019.
 
 
Three months ended
March 31, 2020
 
Three months
ended
March 31, 2019
 
Six months ended
March 31, 2020
 
Six months
ended
March 31, 2019
Net increase (decrease) in net assets resulting from operations
 
$
(165,467
)
 
$
64,485

 
$
(151,624
)
 
$
92,203

Net unrealized (appreciation) depreciation
 
163,533

 
(21,472
)
 
160,654

 
(14,497
)
Book/tax difference due to organizational costs
 
(21
)
 
(11
)
 
(43
)
 
(21
)
Book/tax difference due to interest income on certain loans
 
—

 
—

 
—

 
878

Book/tax difference due to capital losses not recognized / (recognized)
 
23,958

 
(26,738
)
 
19,981

 
(44,440
)
Other book/tax differences
 
(8,002
)
 
(296
)
 
(2,858
)
 
290

Taxable/Distributable Income (1)
 
$
14,001

 
$
15,968

 
$
26,110

 
$
34,413

 __________
(1) The Company's taxable income for the three and six months ended March 31, 2020 is an estimate and will not be finally determined until the Company files its tax return for the fiscal year ending September 30, 2020. Therefore, the final taxable income may be different than the estimate.
The Company uses the liability method to account for its taxable subsidiaries' income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.
When assessing the realizability of deferred tax assets, the Company considers whether it is probable that some or all of the deferred tax assets will not be realized. In determining whether the deferred tax assets are realizable, the Company considers the period of expiration of the tax asset, historical and projected taxable income, and tax liabilities for the tax jurisdiction in which the tax asset is located. The deferred tax asset recognized by the Company, as it relates to the higher tax basis in the carrying value of certain assets compared to the book basis of those assets, will be recognized in future years by these taxable entities. Deferred tax assets are based on the amount of the tax benefit that the Company’s management has determined is more likely than not to be realized in future periods. In determining the realizability of this tax benefit, management considered numerous factors that will give rise to pre-tax income in future periods. Among these are the historical and expected future book and tax basis pre-tax income of the Company and unrealized gains in the Company’s assets at the determination date. Based on these and other factors, the Company determined that, as of March 31, 2020, $3.0 million of $3.8 million net deferred tax assets would not more likely than not be realized in future periods. As of March 31, 2020, the Company recorded a deferred tax asset of $0.8 million on the Consolidated Statements of Assets and Liabilities.
For the three months ended March 31, 2020, the Company recognized a total provision for income tax benefit of $1.7 million, which was comprised of (i) a current income tax expense of approximately $0.1 million primarily as a result of penalties and interest incurred, and (ii) a deferred income tax benefit of approximately $1.8 million, which resulted from unrealized depreciation on investments held by the Company’s wholly-owned taxable subsidiaries.
For the six months ended March 31, 2020, the Company recognized a total provision for income tax benefit of $1.5 million, which was comprised of (i) a current income tax benefit of approximately $0.1 million primarily as a result of a reversal of penalties and interest previously incurred, partially offset by current tax expense incurred from realized gains on investments held at the Company's wholly-owned taxable subsidiaries and (ii) a deferred income tax benefit of approximately $1.5 million, which resulted from unrealized depreciation on investments held by the Company’s wholly-owned taxable subsidiaries.
As of September 30, 2019, the Company's last tax year end, the components of accumulated overdistributed earnings on a tax basis were as follows:
Undistributed ordinary income, net
$
10,699

Net realized capital losses
(515,800
)
Unrealized losses, net
(53,451
)
The aggregate cost of investments for income tax purposes was $1.5 billion as of September 30, 2019. As of September 30, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over cost for income tax purposes was $202.2 million. As of September 30, 2019, the aggregate gross unrealized depreciation for all investments in which there was an

57
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





excess of cost for income tax purposes over value was $255.6 million. Net unrealized depreciation based on the aggregate cost of investments for income tax purposes was $53.4 million.
Note 9. Realized Gains or Losses and Net Unrealized Appreciation or Depreciation
Realized Gains or Losses
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption and the cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized, and include investments written-off during the period, net of recoveries. Realized losses may also be recorded in connection with the Company's determination that certain investments are considered worthless securities and/or meet the conditions for loss recognition per the applicable tax rules.
During the three months ended March 31, 2020, the Company recorded net realized losses of $26.5 million, which consisted of the following:
($ in millions)
 
Portfolio Company
Net Realized Gain (Loss)
 Cenegenics, LLC
$
(29.2
)
 Dominion Diagnostics, LLC
(15.6
)
 YETI Holdings, Inc.
14.2

 Lytx Holdings, LLC
5.2

 Other, net
(1.1
)
Total, net
$
(26.5
)
During the three months ended March 31, 2019, the Company recorded net realized gains of $25.2 million, which consisted of the following:
($ in millions)
 
Portfolio Company
Net Realized Gain (Loss)
 Maverick Healthcare Group, LLC
$
17.5

 Comprehensive Pharmacy Services LLC
7.5

 Other, net
0.2

Total, net
$
25.2


During the six months ended March 31, 2020, the Company recorded net realized losses of $23.2 million, which consisted of the following:
($ in millions)
 
Portfolio Company
Net Realized Gain (Loss)
 Cenegenics, LLC
$
(29.2
)
 Dominion Diagnostics, LLC
(15.6
)
 YETI Holdings, Inc.
17.6

 Lytx Holdings, LLC
5.2

 Other, net
(1.2
)
Total, net
$
(23.2
)






58
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





During the six months ended March 31, 2019, the Company recorded net realized gains of $43.2 million, which consisted of the following:
($ in millions)
 
Portfolio Company
Net Realized Gain (Loss)
 Maverick Healthcare Group, LLC
$
17.5

 BeyondTrust Holdings LLC
12.4

 Comprehensive Pharmacy Services LLC
7.5

 InMotion Entertainment Group, LLC
2.7

 YETI Holdings, Inc.
2.7

 Other, net
0.4

Total, net
$
43.2


Net Unrealized Appreciation or Depreciation
Net unrealized appreciation or depreciation reflects the net change in the valuation of the portfolio pursuant to the Company's valuation guidelines and the reclassification of any prior period unrealized appreciation or depreciation.
During the three months ended March 31, 2020 and 2019, the Company recorded net unrealized appreciation (depreciation) of $(163.5) million and $21.5 million, respectively. For the three months ended March 31, 2020, this consisted of $(139.8) million of net unrealized depreciation on debt investments and $(54.4) million of net unrealized depreciation on equity investments, partially offset by $28.4 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses) and $2.2 million of net unrealized appreciation of foreign currency forward contracts. For the three months ended March 31, 2019, this consisted of $22.3 million of net unrealized appreciation on equity investments, $3.6 million of net unrealized appreciation on debt investments and $0.8 million of net unrealized appreciation of foreign currency forward contracts, partially offset by $(5.2) million of net unrealized depreciation related to exited investments (a portion of which results in a reclassification to realized gains).
During the six months ended March 31, 2020 and 2019, the Company recorded net unrealized appreciation (depreciation) of $(160.7) million and $14.5 million, respectively. For the six months ended March 31, 2020, this consisted of $(134.0) million of net unrealized depreciation on debt investments and $(50.0) million of net unrealized depreciation on equity investments, partially offset by $22.5 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses) and $0.8 million of net unrealized appreciation of foreign currency forward contracts. For the six months ended March 31, 2019, this consisted of $24.2 million of net unrealized appreciation related to exited investments (a portion of which results in a reclassification to realized losses), $14.0 million of net unrealized appreciation on equity investments and $0.4 million of net unrealized appreciation of foreign currency forward contracts, partially offset by $(24.1) million of net unrealized depreciation on debt investments.
Note 10. Concentration of Credit Risks
The Company deposits its cash with financial institutions and at times such balances may be in excess of the FDIC insurance limit. The Company limits its exposure to credit loss by depositing its cash with high credit quality financial institutions and monitoring their financial stability.
Note 11. Related Party Transactions

As of March 31, 2020 and September 30, 2019, the Company had a liability on its Consolidated Statements of Assets and Liabilities in the amount of $8.7 million and $10.2 million, respectively, reflecting the unpaid portion of the base management fees and incentive fees payable to Oaktree. Oaktree has voluntarily deferred the payment of Part I incentive fees earned during the three months ended March 31, 2020.
Investment Advisory Agreement
The Company is party to the Investment Advisory Agreement. Under the Investment Advisory Agreement, the Company pays Oaktree a fee for its services under the Investment Advisory Agreement consisting of two components: a base management fee and an incentive fee. The cost of both the base management fee payable to Oaktree and any incentive fees earned by Oaktree is ultimately borne by common stockholders of the Company.

59
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Prior to October 17, 2017, the Company was externally managed by Fifth Street Management LLC (the "Former Adviser”), an indirect, partially-owned subsidiary of Fifth Street Asset Management Inc., pursuant to an investment advisory agreement between the Company and the Former Adviser (the "Former Investment Advisory Agreement"), which was terminated on October 17, 2017.
Unless earlier terminated as described below, the Investment Advisory Agreement will remain in effect until September 30, 2021 and thereafter from year-to-year if approved annually by the Board of Directors of the Company or by the affirmative vote of the holders of a majority of the Company’s outstanding voting securities, including, in either case, approval by a majority of the directors of the Company who are not interested persons. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. The Investment Advisory Agreement may also be terminated, without penalty, upon the vote of a majority of the outstanding voting securities of the Company.
Base Management Fee

Under the Investment Advisory Agreement, the base management fee is calculated at an annual rate of 1.50% of total gross assets, including any investment made with borrowings, but excluding cash and cash equivalents. The base management fee is payable quarterly in arrears and the fee for any partial month or quarter is appropriately prorated. Effective May 3, 2019, the base management fee on the Company’s gross assets, including any investments made with borrowings, but excluding any cash and cash equivalents, that exceed the product of (A) 200% and (B) the Company’s net asset value will be 1.00%. For the avoidance of doubt, the 200% will be calculated in accordance with the Investment Company Act and will give effect to exemptive relief the Company received from the SEC with respect to debentures issued by a small business investment company subsidiary.
For the three and six months ended March 31, 2020, the base management fee incurred under the Investment Advisory Agreement was $5.3 million and $10.9 million, respectively. For the three and six months ended March 31, 2019, the base management fee (net of waivers) incurred under the Investment Advisory Agreement was $5.7 million and $11.2 million, respectively.
Incentive Fee

The incentive fee consists of two parts. Under the Investment Advisory Agreement, the first part of the incentive fee (the “incentive fee on income” or "Part I incentive fee") is calculated and payable quarterly in arrears based upon the “pre-incentive fee net investment income” of the Company for the immediately preceding quarter. The payment of the incentive fee on income is subject to payment of a preferred return to investors each quarter (i.e., a “hurdle rate”), expressed as a rate of return on the value of the Company’s net assets at the end of the most recently completed quarter, of 1.50%, subject to a “catch up” feature.
For this purpose, “pre-incentive fee net investment income” means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies, other than fees for providing managerial assistance) accrued during the fiscal quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement and any interest expense and dividends 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 a deferred interest feature (such as OID debt, instruments with PIK interest and zero coupon securities), accrued income that the Company has 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.

Under the Investment Advisory Agreement, the calculation of the incentive fee on income for each quarter is as follows:

•
No incentive fee is payable to Oaktree in any quarter in which the Company’s pre-incentive fee net investment income does not exceed the preferred return rate of 1.50% (the “preferred return”) on net assets;
•
100% of the Company’s pre-incentive fee net investment income, if any, that exceeds the preferred return but is less than or equal to 1.8182% in any fiscal quarter is payable to Oaktree. This portion of the incentive fee on income is referred to as the “catch-up” provision, and it is intended to provide Oaktree with an incentive fee of 17.5% on all of the Company’s pre-incentive fee net investment income when the Company’s pre-incentive fee net investment income exceeds 1.8182% on net assets in any fiscal quarter; and
•
For any quarter in which the Company’s pre-incentive fee net investment income exceeds 1.8182% on net assets, the incentive fee on income is equal to 17.5% of the amount of the Company’s pre-incentive fee net investment income, as the preferred return and catch-up will have been achieved.

60
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)






There is no accumulation of amounts on the hurdle rate from quarter to quarter and accordingly there is no clawback of amounts previously paid if subsequent quarters are below the quarterly hurdle.

For the three and six months ended March 31, 2020, the first part of the incentive fee (incentive fee on income) incurred under the Investment Advisory Agreement was $3.4 million and $6.4 million, respectively. For the three and six months ended March 31, 2019, the first part of the incentive fee (incentive fee on income) incurred under the Investment Advisory Agreement was $3.8 million and $7.5 million (prior to waivers), respectively. Oaktree has voluntarily deferred the payment of Part I incentive fees earned during the three months ended March 31, 2020.

Under the Investment Advisory Agreement, the second part of the incentive fee (the "capital gains incentive fee") is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Investment Advisory Agreement, as of the termination date) commencing with the fiscal year ended September 30, 2019 and equals 17.5% of the Company’s realized capital gains, if any, on a cumulative basis from the beginning of the fiscal year ended September 30, 2019 through the end of each subsequent fiscal 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 under the Investment Advisory Agreement. Any realized capital gains, realized capital losses, unrealized capital appreciation and unrealized capital depreciation with respect to the Company’s portfolio as of the end of the fiscal year ended September 30, 2018 are excluded from the calculations of the second part of the incentive fee. For the year ended September 30, 2019, the Company incurred $4.6 million of capital gains incentive fees under the Investment Advisory Agreement (prior to waivers).

GAAP requires that the capital gains incentive fee accrual consider 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 on a theoretical "liquidation basis." A fee so calculated and accrued would not be payable under applicable law and may never be paid based upon the computation of capital gains incentive fees in subsequent periods. Amounts ultimately paid under the Investment Advisory Agreement will be consistent with the formula reflected in the Investment Advisory Agreement. This GAAP accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital depreciation included in the calculation of the capital gains incentive fee plus the aggregate cumulative unrealized capital appreciation. Any realized capital gains and losses and cumulative unrealized capital appreciation and depreciation with respect to the Company’s portfolio as of the end of the fiscal year ended September 30, 2018 are excluded from the GAAP accrual. If such amount is positive at the end of a period, then GAAP requires the Company to record a capital gains incentive fee equal to 17.5% of such cumulative amount, less the aggregate amount of actual capital gains incentive fees payable or capital gains incentive fees accrued under GAAP in all prior periods. The resulting accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reversal of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. There can be no assurance that such unrealized capital appreciation will be realized in the future or any accrued capital gains incentive fee will become payable under the Investment Advisory Agreement. For the three and six months ended March 31, 2020, the Company reversed $6.6 million and $5.6 million of previously accrued capital gains incentive fees, respectively. For the three and six months ended March 31, 2019, the Company recorded a $8.2 million and $10.0 million capital gains incentive fee accrual (prior to waivers), respectively. The Company did not have any cumulative accrued capital gains incentive fees payable as of March 31, 2020.

To ensure compliance with Section 15(f) of the Investment Company Act, Oaktree entered into a two-year contractual fee waiver with the Company, which ended on October 17, 2019, pursuant to which Oaktree waived any management or incentive fees payable under the Investment Advisory Agreement that exceeded what would have been paid to the Former Adviser in the aggregate under the Former Investment Advisory Agreement. The contractual amount of fees permanently waived at the end of the two-year period was $3.9 million. Prior to the end of the two-year period, amounts potentially subject to waiver under the two-year contractual fee waiver were accrued quarterly based on a theoretical “liquidation basis.” As of September 30, 2019, the Company had accrued cumulative fee waivers of $9.1 million. During the three months ended December 31, 2019, the Company reversed $5.2 million of
previously accrued fee waivers since the two-year fee waiver period has ended.


61
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





The following table provides a roll-forward of the accrued waiver balance and illustrates the impact of the end of the two-year contractual fee waiver period:
($ in millions)
 
Accrued fee waivers as of September 30, 2019 (1)
$
9.1

Reversal of previously accrued fee waivers (2)
(5.2
)
Contractual fees waived under the Investment Advisory Agreement (3)
(3.9
)
Accrued fee waivers as of March 31, 2020
$
—

(1)
Calculated in accordance with GAAP as of September 30, 2019 and is based on a hypothetical liquidation basis.
(2)
Reflects the reversal of fee waivers that were previously accrued based on a hypothetical liquidation basis when the two-year contractual fee waiver was in effect. This reversal was recognized in connection with the expiration of the two-year contractual fee waiver, which ended on October 17, 2019, and is reflected in reversal of fees waived in the Consolidated Statement of Operations for the six months ended March 31, 2020.
(3)
Reflects the amount of fees permanently waived pursuant to the two-year contractual fee waiver.

As of September 30, 2019, the capital gains incentive fee payable under the Investment Advisory Agreement (net of waivers) was $0.8 million as shown below:
($ in millions)
 September 30, 2019 (1)
Capital gains incentive fee payable under the Investment Advisory Agreement (prior to waivers)
$
4.6

Contractual fees waived
(3.9
)
Capital gains incentive fee payable under the Investment Advisory Agreement (net of waivers)
$
0.8

(1)
Amounts may not sum due to rounding.
Indemnification

The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, Oaktree and its officers, managers, partners, members (and their members, including the owners of their members), agents, employees, controlling persons and any other person or entity affiliated with it, are entitled to indemnification from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) arising from the rendering of Oaktree's services under the Investment Advisory Agreement or otherwise as investment adviser.
Administrative Services
The Company is party to the Administration Agreement with Oaktree Administrator. Pursuant to the Administration Agreement, Oaktree Administrator provides administrative services to the Company necessary for the operations of the Company, which include providing office facilities, equipment, clerical, bookkeeping and record keeping services at such facilities and such other services as Oaktree Administrator, subject to review by the Company’s Board of Directors, shall from time to time deem to be necessary or useful to perform its obligations under the Administration Agreement. Oaktree Administrator may, on behalf of the Company, conduct relations and negotiate agreements with custodians, trustees, depositories, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable. Oaktree Administrator makes reports to the Company’s Board of Directors of its performance of obligations under the Administration Agreement and furnishes advice and recommendations with respect to such other aspects of the Company’s business and affairs, in each case, as it shall determine to be desirable or as reasonably required by the Company’s Board of Directors; provided that Oaktree Administrator shall not provide any investment advice or recommendation.
Oaktree Administrator also provides portfolio collection functions for interest income, fees and warrants and is responsible for the financial and other records that the Company is required to maintain and prepares, prints and disseminates reports to the Company’s stockholders and all other materials filed with the SEC. In addition, Oaktree Administrator assists the Company in determining and publishing the Company’s net asset value, overseeing the preparation and filing of the Company’s tax returns, and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. Oaktree Administrator may also offer to provide, on the Company’s behalf, managerial assistance to the Company’s portfolio companies.

62
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





For providing these services, facilities and personnel, the Company reimburses Oaktree Administrator the allocable portion of overhead and other expenses incurred by Oaktree Administrator in performing its obligations under the Administration Agreement, including the Company’s allocable portion of the rent of the Company’s principal executive offices (which are located in a building owned by a Brookfield affiliate) at market rates and the Company’s allocable portion of the costs of compensation and related expenses of its Chief Financial Officer, Chief Compliance Officer, their staffs and other non-investment professionals at Oaktree that perform duties for the Company. Such reimbursement is at cost, with no profit to, or markup by, Oaktree Administrator. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. The Administration Agreement may also be terminated, without penalty, upon the vote of a majority of the Company’s outstanding voting securities.
For the three months ended March 31, 2020, the Company accrued administrative expenses of $0.5 million, including $0.1 million of general and administrative expenses. For the six months ended March 31, 2020, the Company accrued administrative expenses of $1.0 million, including $0.1 million of general and administrative expenses. For the three months ended March 31, 2019, the Company accrued administrative expenses of $0.5 million, including $0.1 million of general and administrative expenses. For the six months ended March 31, 2019, the Company accrued administrative expenses of $1.3 million, including $0.2 million of general and administrative expenses.
As of each of March 31, 2020 and September 30, 2019, $2.7 million was included in “Due to affiliate” in the Consolidated Statements of Assets and Liabilities, reflecting the unpaid portion of administrative expenses and other reimbursable expenses payable to Oaktree Administrator.


63
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 12. Financial Highlights
(Share amounts in thousands)
 
Three months ended
March 31, 2020
 
Three months ended
March 31, 2019
 
 Six months ended
March 31, 2020
 
Six months ended
March 31, 2019
Net asset value per share at beginning of period
 
$6.61
 
$6.19
 
$6.60
 
$6.09
Net investment income (1)
 
0.16
 
0.13
 
0.22
 
0.25
Net unrealized appreciation (depreciation) (1)
 
(1.15)
 
0.15
 
(1.14)
 
0.10
Net realized gains (losses) (1)
 
(0.19)
 
0.18
 
(0.16)
 
0.30
Provision for income tax (expense) benefit (1)
 
0.01
 
—
 
0.01
 
—
Distributions to stockholders
 
(0.10)
 
(0.10)
 
(0.19)
 
(0.19)
Net asset value per share at end of period
 
$5.34
 
$6.55
 
$5.34
 
$6.55
Per share market value at beginning of period
 
$5.46
 
$4.23
 
$5.18
 
$4.96
Per share market value at end of period
 
$3.24
 
$5.18
 
$3.24
 
$5.18
Total return (2)
 
(38.91)%
 
24.68%
 
(34.49)%
 
8.63%
Common shares outstanding at beginning of period
 
140,961
 
140,961
 
140,961
 
140,961
Common shares outstanding at end of period
 
140,961
 
140,961
 
140,961
 
140,961
Net assets at beginning of period
 
$931,082
 
$872,362
 
$930,630
 
$858,035
Net assets at end of period
 
$752,224
 
$923,456
 
$752,224
 
$923,456
Average net assets (3)
 
$846,610
 
$901,507
 
$891,012
 
$885,507
Ratio of net investment income to average net assets (4)
 
10.82%
 
7.97%
 
6.87%
 
7.93%
Ratio of total expenses to average net assets (4)
 
5.37%
 
12.79%
 
6.55%
 
11.54%
Ratio of net expenses to average net assets (4)
 
5.37%
 
9.24%
 
7.71%
 
9.40%
Ratio of portfolio turnover to average investments at fair value
 
10.80%
 
7.26%
 
17.56%
 
18.18%
Weighted average outstanding debt (5)
 
$623,696
 
$610,891
 
$556,264
 
$612,649
Average debt per share (1)
 
$4.42
 
$4.33
 
$3.95
 
$4.35
Asset coverage ratio at end of period (6)
 
205.85%
 
254.12%
 
205.85%
 
254.12%
 __________
(1)
Calculated based upon weighted average shares outstanding for the period.
(2)
Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming dividend reinvestment prices obtained under the Company's DRIP.
(3)
Calculated based upon the weighted average net assets for the period.
(4)
Interim periods are annualized.
(5)
Calculated based upon the weighted average of debt outstanding for the period.
(6)
Based on outstanding senior securities of $704.8 million and $597.6 million as of March 31, 2020 and 2019, respectively.

Note 13. Derivative Instruments
The Company enters into forward currency contracts from time to time to help mitigate the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies.
In order to better define its contractual rights and to secure rights that will help the Company mitigate its counterparty risk, the Company entered into an International Swaps and Derivatives Association, Inc. Master Agreement ("ISDA Master Agreement") with its derivative counterparty, JPMorgan Chase Bank, N.A. The ISDA Master Agreement permits a single net payment in the event of a default or similar event. No cash collateral has been pledged to cover obligations and no cash collateral has been received from the counterparty with respect to the Company's forward currency contracts.
Net unrealized gains or losses on foreign currency contracts are included in “net unrealized appreciation (depreciation)” and net realized gains or losses on forward currency contracts are included in “net realized gains (losses)” in the accompanying Consolidated Statements of Operations. Forward currency contracts are considered undesignated derivative instruments.

64
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Certain information related to the Company’s foreign currency forward contracts is presented below as of March 31, 2020.
Description
 
Notional Amount to be Purchased
 
Notional Amount to be Sold
 
Maturity Date
 
Gross Amount of Recognized Assets
 
Gross Amount of Recognized Liabilities
 
Balance Sheet Location of Net Amounts
Foreign currency forward contract
 
$
19,756

 
£
14,850

 
8/18/2020
 
$
1,310

 
$
—

 
Derivative asset
Foreign currency forward contract
 
$
14,532

 
€
13,213

 
8/31/2020
 
$
—

 
$
(42
)
 
Derivative asset
 
 
 
 
 
 
 
 
$
1,310

 
$
(42
)
 
 
Certain information related to the Company’s foreign currency forward contracts is presented below as of September 30, 2019.
Description
 
Notional Amount to be Purchased
 
Notional Amount to be Sold
 
Maturity Date
 
Gross Amount of Recognized Assets
 
Gross Amount of Recognized Liabilities
 
Balance Sheet Location of Net Amounts
Foreign currency forward contract
 
$
22,161

 
£
17,910

 
10/15/2019
 
$
76

 
$
—

 
Derivative asset
Foreign currency forward contract
 
$
19,193

 
€
17,150

 
11/29/2019
 
$
414

 
$
—

 
Derivative asset
 
 
 
 
 
 
 
 
$
490

 
$
—

 
 

Note 14. Commitments and Contingencies
Off-Balance Sheet Arrangements
The Company may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its companies. As of March 31, 2020, the Company's only off-balance sheet arrangements consisted of $91.6 million of unfunded commitments, which was comprised of $86.7 million to provide debt financing to certain of its portfolio companies, $1.3 million to provide equity financing to SLF JV I and $3.5 million related to unfunded limited partnership interests. As of September 30, 2019, the Company's only off-balance sheet arrangements consisted of $88.3 million of unfunded commitments, which was comprised of $83.5 million to provide debt financing to certain of its portfolio companies, $1.3 million to provide equity financing to SLF JV I and $3.5 million related to unfunded limited partnership interests. Such commitments are subject to the portfolio companies' satisfaction of certain financial and nonfinancial covenants and may involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company's Consolidated Statements of Assets and Liabilities.

65
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





A list of unfunded commitments by investment (consisting of revolvers, term loans with delayed draw components, SLF JV I LLC subordinated notes and LLC equity interests and limited partnership interests) as of March 31, 2020 and September 30, 2019 is shown in the table below:
 
 
March 31, 2020
 
September 30, 2019
Assembled Brands Capital LLC
 
$
33,143

 
$
35,182

WPEngine, Inc.
 
26,348

 
—

Dominion Diagnostics, LLC
 
5,887

 
—

Corrona, LLC
 
4,273

 
—

PaySimple, Inc.
 
3,985

 
12,250

Pingora MSR Opportunity Fund I-A, LP
 
3,500

 
3,500

MRI Software LLC
 
2,857

 
—

Accupac, Inc.
 
2,346

 
—

Acquia Inc.
 
2,240

 
—

New IPT, Inc.
 
2,229

 
2,229

Apptio, Inc.
 
1,538

 
1,538

Senior Loan Fund JV I, LLC
 
1,328

 
1,328

iCIMs, Inc.
 
882

 
882

Ministry Brands, LLC
 
425

 
800

Coyote Buyer, LLC
 
352

 
—

GKD Index Partners, LLC
 
231

 
1,156

P2 Upstream Acquisition Co.
 
—

 
9,000

Sorrento Therapeutics, Inc.
 
—

 
7,500

4 Over International, LLC
 
—

 
1,977

Mindbody, Inc.
 
—

 
3,048

Thruline Marketing, Inc.
 
—

 
3,000

TerSera Therapeutics, LLC
 
—

 
4,200

PLATO Learning Inc. (1)
 
—

 
746

Total
 
$
91,564

 
$
88,336

 ___________ 
(1) This investment was on cash or PIK non-accrual status as of March 31, 2020 and September 30, 2019.

Note 15. Subsequent Events
The Company’s management evaluated subsequent events through the date of issuance of the Consolidated Financial Statements. There have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in the Consolidated Financial Statements as of and for the three and six months ended March 31, 2020, except as discussed below:
Distribution Declaration
On April 30, 2020, the Company’s Board of Directors declared a quarterly distribution of $0.095 per share, payable in cash on June 30, 2020 to stockholders of record on June 15, 2020.
Investment Advisory Agreement
On May 4, 2020, Oaktree effected the novation of the Investment Advisory Agreement to Oaktree Fund Advisors, LLC, a registered investment adviser under common control with Oaktree. Immediately following such novation, the Company and Oaktree Fund Advisors, LLC entered into a new investment advisory agreement with the same terms, including fee structure, as the Investment Advisory Agreement.





66
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Credit Facility Amendment
On May 6, 2020, the Company amended its revolving credit facility (i) to reduce the minimum shareholders' equity covenant from $700 million to $550 million, (ii) to increase the interest rate margin up to 2.75% on LIBOR loans or 1.75% on alternative base rate loans if the Company's minimum shareholders' equity is below $700 million depending on its senior coverage ratio and (iii) to reduce the maximum size of the facility under the "accordion" feature to the greater of $800 million or the Company's net worth on the date of such increase.


67

Schedule 12-14
Oaktree Specialty Lending Corporation
Schedule of Investments in and Advances to Affiliates
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Six months ended March 31, 2020
(unaudited)
Portfolio Company/Type of Investment (1)
 
 Cash Interest Rate
 
Industry
 
Principal
 
Net Realized Gain (Loss)
 
Amount of
Interest,
Fees or
Dividends
Credited in
Income (2)
 
Fair Value
at October 1,
2019
 
Gross
Additions (3)
 
Gross
Reductions (4)
 
Fair Value
at March 31, 2020
 
% of Total Net Assets
Control Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C5 Technology Holdings, LLC
 
 
 
Data Processing & Outsourced Services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
829 Common Units
 
 
 
 
 
 
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
—
%
34,984,460.37 Preferred Units
 
 
 
 
 
 
 
—

 
—

 
34,984

 
—

 
(7,346
)
 
27,638

 
3.7
%
Dominion Diagnostics, LLC
 
 
 
Health Care Services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 2/28/2024
 
6.46
%
 
 
 
$
27,799

 
—

 
172

 
—

 
27,869

 
(70
)
 
27,799

 
3.7
%
First Lien Revolver, LIBOR+5.00% cash due 2/28/2024
 
6.46
%
 
 
 
5,260

 
—

 
35

 
—

 
5,260

 
—

 
5,260

 
0.7
%
30,030.8 Common Units in DD Healthcare Services Holdings, LLC
 
 
 
 
 
—

 
—

 
—

 
—

 
18,626

 
(8,511
)
 
10,115

 
1.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 First Star Speir Aviation Limited (5)
 
 
 
Airlines
 
 
 
 
 
 
 
 
 
 
 
 
 


 


First Lien Term Loan, 9.00% cash due 12/15/2020
 
 
 
 
 
11,510

 
—

 
600

 
11,510

 
42

 
(42
)
 
11,510

 
1.5
%
100% equity interest
 
 
 
 
 
—

 
—

 
—

 
4,630

 
—

 
(1,465
)
 
3,165

 
0.4
%
New IPT, Inc.
 
 
 
Oil & Gas Equipment & Services
 
 
 
 
 
 
 
 
 
 
 
 
 


 


First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
 
6.45
%
 
 
 
2,605

 
—

 
112

 
3,256

 
—

 
(651
)
 
2,605

 
0.3
%
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021
 
6.45
%
 
 
 
1,009

 
—

 
40

 
1,009

 
—

 
—

 
1,009

 
0.1
%
50.087 Class A Common Units in New IPT Holdings, LLC
 
 
 
 
 
 
 
—

 
—

 
2,903

 
—

 
(1,307
)
 
1,596

 
0.2
%
 Senior Loan Fund JV I, LLC (6)
 
 
 
Multi-Sector Holdings
 
 
 
 
 
 
 
 
 
 
 
 
 


 


Subordinated Debt, LIBOR+7.00% cash due 12/29/2028
 
8.73
%
 
 
 
96,250

 
—

 
4,341

 
96,250

 
—

 
(4,079
)
 
92,171

 
12.3
%
87.5% LLC equity interest
 
 
 
 
 
 
 
—

 
—

 
30,052

 
—

 
(30,052
)
 
—

 
—
%
 Thruline Marketing, Inc.
 
 
 
Advertising
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
—
%
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022
 
 
 
 
 
—

 
—

 
257

 
18,146

 
—

 
(18,146
)
 
—

 
—
%
First Lien Revolver, LIBOR+7.75% cash due 4/3/2022
 
 
 
 
 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—
%
 9,073 Class A Units in FS AVI Holdco, LLC
 
 
 
 
 
 
 
—

 
—

 
6,438

 
—

 
(2,039
)
 
4,399

 
0.6
%
Total Control Investments
 
 
 
 
 
$
144,433

 
$
—

 
$
5,558

 
$
209,178

 
$
51,797

 
$
(73,708
)
 
$
187,267

 
24.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliate Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Assembled Brands Capital LLC
 
 
 
Specialized Finance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 10/17/2023
 
6.99
%
 
 
 
$
7,623

 
$
—

 
$
262

 
$
5,585

 
$
2,038

 
$
(1,508
)
 
$
6,115

 
0.8
%
1,609,201 Class A Units
 
 
 
 
 
 
 
—

 
—

 
782

 
135

 
—

 
917

 
0.1
%
1,019,168.80 Preferred Units, 6%
 
 
 
 
 
 
 
—

 
—

 
1,019

 
31

 
—

 
1,050

 
0.1
%
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029
 
 
 
 
 
 
 
—

 
—

 
—

 
—

 
—

 
—

 
—
%
Caregiver Services, Inc.
 
 
 
Health Care Services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


1,080,399 shares of Series A Preferred Stock, 10%
 
 
 
 
 
—

 
—

 
—

 
1,784

 
—

 
(452
)
 
1,332

 
0.2
%
Total Affiliate Investments
 
 
 
 
 
$
7,623

 
$
—

 
$
262

 
$
9,170

 
$
2,204

 
$
(1,960
)
 
$
9,414

 
1.3
%
Total Control & Affiliate Investments
 
 
 
 
 
$
152,056

 
$
—

 
$
5,820

 
$
218,348

 
$
54,001

 
$
(75,668
)
 
$
196,681

 
26.1
%

This schedule should be read in connection with the Company's Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements.

68

______________________
(1)
The principal amount and ownership detail are shown in the Company's Consolidated Schedules of Investments.
(2)
Represents the total amount of interest (net of non-accrual amounts), fees and dividends credited to income for the portion of the period an investment was included in the Control or Affiliate categories.
(3)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest (net of non-accrual amounts) and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category.
(4)
Gross reductions include decreases in the cost basis of investments resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
(5)
First Star Speir Aviation Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding company to be an investment company under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding company are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities.
(6)
Together with Kemper, the Company co-invests through SLF JV I. SLF JV I is capitalized as transactions are completed and all portfolio and investment decisions in respect to SLF JV I must be approved by the SLF JV I investment committee consisting of representatives of the Company and Kemper (with approval from a representative of each required).




69

Schedule 12-14
Oaktree Specialty Lending Corporation
Schedule of Investments in and Advances to Affiliates
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Six months ended March 31, 2019
(unaudited)
Portfolio Company/Type of Investment (1)
 
 Cash Interest Rate
 
Industry
 
Principal
 
Net Realized Gain (Loss)
 
Amount of
Interest,
Fees or
Dividends
Credited in
Income (2)
 
Fair Value
at October 1,
2018
 
Gross
Additions (3)
 
Gross
Reductions (4)
 
Fair Value
at March 31, 2019
 
% of Total Net Assets
Control Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 First Star Speir Aviation Limited (5)
 
 
 
Airlines
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 First Lien Term Loan, 9.00% cash due 12/15/2020
 
 
 
 
 
$
32,510

 
$
—

 
$
976

 
$
32,510

 
$
722

 
$
(722
)
 
$
32,510

 
3.5
%
 100% equity interest
 
 
 
 
 
—

 
—

 
—

 
—

 
967

 
(100
)
 
867

 
0.1
%
 New IPT, Inc.
 
 
 
 Oil & gas equipment services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
 
7.60
%
 
 
 
4,107

 
—

 
170

 
4,107

 
—

 
—

 
4,107

 
0.4
%
Second Lien Term Loan, LIBOR+5.10% cash due 9/17/2021
 
7.70
%
 
 
 
601

 
—

 
39

 
1,453

 
—

 
(851
)
 
602

 
0.1
%
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021
 
7.60
%
 
 
 
1,009

 
—

 
43

 
1,009

 
—

 
—

 
1,009

 
0.1
%
50.087 Class A Common Units in New IPT Holdings, LLC
 
 
 
 
 
—

 
—

 
—

 
2,291

 
612

 
—

 
2,903

 
0.3
%
 Senior Loan Fund JV I, LLC (6)
 
 
 
Multi-sector holdings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Class A Mezzanine Secured Deferrable Floating Rate Notes due 2036 in SLF Repack Issuer 2016 LLC
 
 
 
 
 
—

 
—

 
2,036

 
99,813

 
—

 
(99,813
)
 
—

 
—
%
Class B Mezzanine Secured Deferrable Fixed Rate Notes, 10.00% cash due 2036 in SLF Repack Issuer 2016 LLC
 
 
 
 
 
—

 
—

 
707

 
29,520

 
67

 
(29,587
)
 
—

 
—
%
 Subordinated Note, LIBOR+7.00% cash due 12/29/2028
 
9.51
%
 
 
 
96,250

 
—

 
2,388

 
—

 
96,250

 
—

 
96,250

 
10.4
%
 87.5% LLC equity interest
 
 
 
 
 
—

 
—

 
—

 
41

 
37,734

 
(7,191
)
 
30,584

 
3.3
%
 Thruline Marketing, Inc.
 
 
 
Advertising
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022
 
9.60
%
 
 
 
18,146

 
—

 
880

 
18,146

 
—

 
—

 
18,146

 
2.0
%
First Lien Revolver, LIBOR+7.75% cash due 4/3/2022
 
 
 
 
 
—

 
—

 
8

 
—

 
—

 
—

 
—

 
—
%
9,073 Class A Units in FS AVI Holdco, LLC
 
 
 
 
 
—

 
—

 
—

 
7,984

 
—

 
(1,546
)
 
6,438

 
0.7
%
Total Control Investments
 
 
 
 
 
$
152,623

 
$
—

 
$
7,247

 
$
196,874

 
$
136,352

 
$
(139,810
)
 
$
193,416

 
20.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliate Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Assembled Brands Capital LLC
 
 
 
Specialized finance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Lien Delayed Draw Term Loan LIBOR+6.00% cash due 10/17/2023
 
8.60
%
 
 
 
$
1,835

 
$
—

 
$
44

 
$
—

 
$
1,835

 
$
—

 
$
1,835

 
0.2
%
764,376.60 Class A Units
 
 
 
 
 
—

 
—

 
—

 
—

 
764

 
—

 
764

 
0.1
%
583,190.81 Class B Units
 
 
 
 
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—
%
 Caregiver Services, Inc.
 
 
 
Healthcare services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,080,399 shares of Series A Preferred Stock, 10.00%
 
 
 
 
 
—

 
—

 
—

 
2,161

 
—

 
(182
)
 
1,979

 
0.2
%
Total Affiliate Investments
 
 
 
 
 
$
1,835

 
$
—

 
$
44

 
$
2,161

 
$
2,599

 
$
(182
)
 
$
4,578

 
0.5
%
Total Control & Affiliate Investments
 
 
 
 
 
$
154,458

 
$
—

 
$
7,291

 
$
199,035

 
$
138,951

 
$
(139,992
)
 
$
197,994

 
21.4
%


This schedule should be read in connection with the Company's Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements as of March 31, 2019 included in the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2019.
______________________
(1)
The principal amount and ownership detail are shown in the Company's Consolidated Schedules of Investments as of March 31, 2019 included in the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2019.
(2)
Represents the total amount of interest (net of non-accrual amounts), fees and dividends credited to income for the portion of the period an investment was included in the Control or Affiliate categories.

70

(3)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest (net of non-accrual amounts) and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category.
(4)
Gross reductions include decreases in the cost basis of investments resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
(5)
First Star Speir Aviation Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding company to be investment companies under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding companies are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entity.
(6)
Together with Kemper, the Company co-invests through SLF JV I. SLF JV I is capitalized as transactions are completed and all portfolio and investment decisions in respect to SLF JV I must be approved by the SLF JV I investment committee consisting of representatives of the Company and Kemper (with approval from a representative of each required).






71


Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in connection with our Consolidated Financial Statements and the notes thereto included elsewhere in this quarterly report on Form 10-Q.
Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to:

•
our future operating results and distribution projections;
•
the ability of Oaktree Capital Management, L.P., or Oaktree, to reposition our portfolio and to implement Oaktree's future plans with respect to our business;
•
the ability of Oaktree to attract and retain highly talented professionals;
•
our business prospects and the prospects of our portfolio companies;
•
the impact of the investments that we expect to make;
•
the ability of our portfolio companies to achieve their objectives;
•
our expected financings and investments and additional leverage we may seek to incur in the future;
•
the adequacy of our cash resources and working capital;
•
the timing of cash flows, if any, from the operations of our portfolio companies; and
•
the cost or potential outcome of any litigation to which we may be a party.
In addition, words such as “anticipate,” “believe,” “expect,” “seek,” “plan,” “should,” “estimate,” “project” and “intend” indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended September 30, 2019 and elsewhere in this quarterly report on Form 10-Q.
Other factors that could cause actual results to differ materially include:
 
•
changes or potential disruptions in our operations, the economy, financial markets or political environment;
•
risks associated with possible disruption in our operations or the economy generally due to terrorism, natural disasters or the COVID-19 pandemic;
•
future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to Business Development Companies or regulated investment companies, or RICs;
•
general considerations associated with the COVID-19 pandemic; and
•
other considerations that may be disclosed from time to time in our publicly disseminated documents and filings.
We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly 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, 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 the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
All dollar amounts in tables are in thousands, except share and per share amounts and as otherwise indicated.
Business Overview
We are a specialty finance company that looks to provide customized, one-stop credit solutions to companies with limited access to public or syndicated capital markets. We are a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a Business Development Company under the Investment Company Act of 1940, as amended, or the Investment Company Act. In addition, we have qualified and elected to be treated as a RIC under the Internal Revenue Code of 1986, as amended, or the Code, for tax purposes.
As of March 31, 2020, we are externally managed by Oaktree pursuant to an investment advisory agreement, as amended from time to time, or the Investment Advisory Agreement, between the Company and Oaktree. Oaktree Fund Administration, LLC, or the Oaktree Administrator, a subsidiary of Oaktree, provides certain administrative and other services necessary for us to operate pursuant to an administration agreement, as amended from time to time, or the Administration Agreement.

72


We seek to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, bonds, preferred equity and certain equity co-investments. We may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions. Our portfolio may also include certain structured finance and other non-traditional structures. We invest in companies that typically possess business models we expect to be resilient in the future with underlying fundamentals that will provide strength in economic downturns. We intend to deploy capital across credit and economic cycles with a focus on long-term results, which we believe will enable us to build lasting partnerships with financial sponsors and management teams, and we may seek to opportunistically take advantage of dislocations in the financial markets and other situations that may benefit from Oaktree’s credit and structuring expertise, including during the COVID-19 pandemic. Sponsors may include financial sponsors, such as an institutional investor or a private equity firm, or a strategic entity seeking to invest in a portfolio company. Oaktree is generally focused on middle-market companies, which we define as companies with enterprise values of between $100 million and $750 million. We generally invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “high yield” and “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
Oaktree intends to continue to reposition our portfolio into investments that are better aligned with Oaktree's overall approach to credit investing and that it believes have the potential to generate attractive returns across market cycles. Since becoming our investment adviser, Oaktree has performed a comprehensive review of our portfolio and categorized our portfolio into core investments, non-core performing investments and underperforming investments. Certain additional information on such categorization and our portfolio composition is included in investor presentations that we file with the SEC. Since becoming our investment adviser, Oaktree has reduced the investments it has identified as non-core by over $700 million at fair value. Over time, Oaktree intends to rotate us out of the remaining non-core investments, which were approximately $142 million at fair value as of March 31, 2020. Oaktree periodically reviews designations of investments as core and non-core and may change such designations over time.
Business Environment and Developments
We believe that the economic impact of the COVID-19 pandemic has contributed to significant market volatility and disruption, which may have lasting effects on the U.S. and global financial markets and have caused (and may cause further) economic uncertainties or deterioration in the performance of the middle market in the United States and worldwide.
In particular, the disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets, significant write-offs in the financial sector and re-pricing of credit risk in the broadly syndicated market. This widening of spreads makes it more difficult for middle market businesses to access capital as lenders could become more selective in evaluating investment opportunities, equity sponsors delay transactions given earnings uncertainty and sellers are hesitant to accept lower purchase price multiples.
In this type of environment, we believe attractive risk-adjusted returns can be achieved by making loans to companies in the middle market. Given the breadth of Oaktree’s investment platform, we believe that we have the resources and experience to source, diligence and structure investments in these companies and are well placed to generate attractive returns for investors.
We have proactively taken a number of actions to evaluate and support our portfolio companies in light of the COVID-19 pandemic, including outreach to a variety of management teams and sponsors.  We have established a dialogue with many of our portfolio companies and are especially focused on those that might have moderate to higher risk of material impacts from COVID-19. We believe that these efforts to identify vulnerable credits will allow us to address potential problems early and provide constructive solutions to our portfolio companies.
As of March 31, 2020, 90.6% of our debt investment portfolio (at fair value) and 90.9% of our debt investment portfolio (at cost) bore interest at floating rates indexed to the London Interbank Offered Rate, or LIBOR, and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly or monthly at the borrower’s option. As a result of the COVID-19 pandemic and the related decision of the U.S. Federal Reserve to reduce certain interest rates, LIBOR decreased in March 2020. A prolonged reduction in interest rates will result in a decrease in our total investment income and could result in a decrease in our net investment income to the extent the decreases are not offset by an increase in the spread on our floating rate investments, a decrease in our interest expense or a reduction of our incentive fee on income. In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S.-dollar LIBOR with the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities. Although there have been a few issuances utilizing SOFR or the Sterling Over Night Index Average, an alternative reference rate that is based on transactions, it remains unknown whether these alternative reference rates will attain market acceptance as replacements for LIBOR.  If LIBOR ceases to exist, we may need to renegotiate any credit agreements extending beyond 2021 with our prospective portfolio

73


companies that utilize LIBOR as a factor in determining the interest rate and may also need to renegotiate the terms of the Credit Facility (as defined below), which matures in 2024. Certain of the loan agreements with our portfolio companies have included fallback language in the event that LIBOR becomes unavailable. This language generally provides that the administrative agent may identify a replacement reference rate, typically with the consent of (or prior consultation with) the borrower.  In certain cases, the administrative agent will be required to obtain the consent of either a majority of the lenders under the facility, or the consent of each lender, prior to identifying a replacement reference rate.  Certain of the loan agreements with our portfolio companies do not include any fallback language providing a mechanism for the parties to negotiate a new reference interest rate and will instead revert to the base rate in the event LIBOR ceases to exist. It remains unclear whether the cessation of LIBOR will be delayed due to COVID-19 or what form any delay may take, and there are no assurances that there will be a delay. It is also unclear what the duration and severity of COVID-19 will be, and whether this will impact LIBOR transition planning. COVID-19 may also slow regulators’ and others’ efforts to develop and implement alternative reference rates, which could make LIBOR transition planning more difficult, particularly if the cessation of LIBOR is not delayed but alternatives do not develop.
Critical Accounting Policies

Basis of Presentation
Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair presentation of the Consolidated Financial Statements have been made. All intercompany balances and transactions have been eliminated. We are an investment company following the accounting and reporting guidance in Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 946, Financial Services-Investment Companies, or ASC 946.
Investment Valuation
We value our investments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820, which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. ASC 820 prioritizes the use of observable market prices over entity-specific inputs. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity.
Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
 
•
Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
•
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.
•
Level 3 — Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
If inputs used to measure fair value fall into different levels of the fair value hierarchy, an investment's level is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. This includes investment securities that are valued using "bid" and "ask" prices obtained from independent third party pricing services or directly from brokers. These investments may be classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustments for investment-specific factors or restrictions.
Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, Oaktree obtains and analyzes readily available market quotations provided by pricing vendors and brokers for all of our investments for which quotations are available. In determining the fair value of a particular investment, pricing vendors and brokers use observable market information, including both binding and non-binding indicative quotations.
We seek to obtain at least two quotations for the subject or similar securities, typically from pricing vendors. If we are unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within our set threshold, we seek to obtain a quote directly from a broker making a market for the asset. Oaktree evaluates the quotations provided by pricing vendors and brokers

74


based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Oaktree also performs back-testing of valuation information obtained from pricing vendors and brokers against actual prices received in transactions. In addition to ongoing monitoring and back-testing, Oaktree performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process. Generally, we do not adjust any of the prices received from these sources.
If the quotations obtained from pricing vendors or brokers are determined to not be reliable or are not readily available, we value such investments using any of three different valuation techniques. The first valuation technique is the transaction precedent technique, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value, or EV, of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine (i) the value of equity investments, (ii) whether there is credit impairment for debt investments and (iii) the value for debt investments that we are deemed to control under the Investment Company Act. To estimate the EV of a portfolio company, Oaktree analyzes various factors, including the portfolio company’s historical and projected financial results, macroeconomic impacts on the company and competitive dynamics in the company’s industry. Oaktree also utilizes some or all of the following information based on the individual circumstances of the portfolio company: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase prices as a multiple of their earnings or cash flow, (iv) the portfolio company’s ability to meet its forecasts and its business prospects, (v) a discounted cash flow analysis, (vi) estimated liquidation or collateral value of the portfolio company’s assets and (vii) offers from third parties to buy the portfolio company. We may probability weight potential sale outcomes with respect to a portfolio company when uncertainty exists as of the valuation date. The third valuation technique is a market yield technique, which is typically performed for non-credit impaired debt investments. In the market yield technique, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk, and we consider the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by us are substantially illiquid with no active transaction market, we depend on primary market data, including newly funded transactions and industry-specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.
In accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. These investments are generally not redeemable.
We estimate the fair value of privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions, including the current stock price (by using an EV analysis as described above), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk-free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.
Our Board of Directors undertakes a multi-step valuation process each quarter in connection with determining the fair value of our investments:
•
The quarterly valuation process begins with each portfolio company or investment being initially valued by Oaktree’s valuation team in conjunction with Oaktree’s portfolio management team and investment professionals responsible for each portfolio investment;
•Preliminary valuations are then reviewed and discussed with management of Oaktree;
•
Separately, independent valuation firms engaged by our Board of Directors prepare valuations of our investments, on a selected basis, for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment, and submit the reports to us and provide such reports to Oaktree and the Audit Committee of our Board of Directors;
•
Oaktree compares and contrasts its preliminary valuations to the valuations of the independent valuation firms and prepares a valuation report for the Audit Committee;
•
The Audit Committee reviews the preliminary valuations with Oaktree, and Oaktree responds and supplements the preliminary valuations to reflect any discussions between Oaktree and the Audit Committee;
•
The Audit Committee makes a recommendation to our full Board of Directors regarding the fair value of the investments in our portfolio; and
•
Our Board of Directors discusses valuations and determines the fair value of each investment in our portfolio.

75


The fair value of our investments as of March 31, 2020 and September 30, 2019 was determined in good faith by our Board of Directors. Our Board of Directors has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of a portion of our portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board of Directors may reasonably rely on that assistance. As of March 31, 2020, 92.4% of our portfolio at fair value was valued either based on market quotations, the transactions precedent approach or corroborated by independent valuation firms. However, our Board of Directors is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to our valuation policy and a consistently applied valuation process.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
As of March 31, 2020 and September 30, 2019, approximately 92.7% and 97.1%, respectively, of our total assets represented investments at fair value.
Revenue Recognition
Interest Income
Interest income, adjusted for accretion of original issue discount, or OID, is recorded on an accrual basis to the extent that such amounts are expected to be collected. We stop accruing interest on investments when it is determined that interest is no longer collectible. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management’s judgment. A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash, and the portfolio company, in management’s judgment, is likely to continue timely payment of its remaining obligations. As of March 31, 2020, there were three investments on which we had stopped accruing cash and/or payment in kind, or PIK, interest or OID income.
In connection with our investment in a portfolio company, we sometimes receive nominal cost equity that is valued as part of the negotiation process with the portfolio company. When we receive nominal cost equity, we allocate our cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.
For our secured borrowings, the interest earned on the entire loan balance is recorded within interest income and the interest earned by the buyer from the partial loan sales is recorded within interest expense in the Consolidated Statements of Operations.
PIK Interest Income
Our investments in debt securities may contain PIK interest provisions. PIK interest, which typically represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We generally cease accruing PIK interest if there is insufficient value to support the accrual or if we do not expect the portfolio company to be able to pay all principal and interest due. Our decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; our assessment of the portfolio company's business development success; information obtained by us in connection with periodic formal update interviews with the portfolio company's management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. Our determination to cease accruing PIK interest is generally made well before our full write-down of a loan or debt security. In addition, if it is subsequently determined that we will not be able to collect any previously accrued PIK interest, the fair value of the loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on our debt investments increases the recorded cost bases of these investments in our Consolidated Financial Statements including for purposes of computing the capital gains incentive fee payable by us to Oaktree. To maintain our status as a RIC, certain income from PIK interest may be required to be distributed to our stockholders, even though we have not yet collected the cash and may never do so.
Fee Income
Oaktree may provide financial advisory services to portfolio companies and, in return, we may receive fees for capital structuring services. These fees are generally nonrecurring and are recognized by us upon the investment closing date. We may also receive additional

76


fees in the ordinary course of business, including servicing, amendment and prepayment fees, which are classified as fee income and recognized as they are earned or the services are rendered.
We have also structured exit fees across certain of our portfolio investments to be received upon the future exit of those investments. These fees are typically paid to us upon the earliest to occur of (i) a sale of the borrower or substantially all of the assets of the borrower, (ii) the maturity date of the loan or (iii) the date when full prepayment of the loan occurs. The receipt of such fees is contingent upon the occurrence of one of the events listed above for each of the investments. These fees are included in net investment income over the life of the loan.
Dividend Income
We generally recognize dividend income on the record date. Distributions received from equity investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, we will not record distributions from such equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.
Portfolio Composition
Our investments principally consist of loans, common and preferred equity and warrants in privately-held companies and Senior Loan Fund JV I, LLC, or SLF JV I. Our loans are typically secured by a first, second or subordinated lien on the assets of the portfolio company and generally have terms of up to ten years (but an expected average life of between three and four years).
During the six months ended March 31, 2020, we originated $407.1 million of investment commitments in 41 new and 12 existing portfolio companies and funded $387.9 million of investments.
During the six months ended March 31, 2020, we received $251.5 million of proceeds from prepayments, exits, other paydowns and sales and exited 17 portfolio companies.
A summary of the composition of our investment portfolio at cost and fair value as a percentage of total investments is shown in the following tables:
 
 
 
March 31, 2020
 
September 30, 2019
Cost:
 
 
 
 
Senior secured debt
 
77.94
%
 
77.35
%
Subordinated debt
 
6.37

 
6.88

Debt investments in SLF JV I
 
5.91

 
6.36

Common equity and warrants
 
4.32

 
3.48

LLC equity interests of SLF JV I
 
3.03

 
3.26

Preferred equity
 
2.43

 
2.67

Total
 
100.00
%
 
100.00
%
 
 
 
March 31, 2020
 
September 30, 2019
Fair value:
 
 
 
 
Senior secured debt
 
81.93
%
 
78.64
%
Debt investments in SLF JV I
 
6.62

 
6.69

Subordinated debt
 
5.75

 
5.65

Common equity and warrants
 
3.45

 
4.10

Preferred equity
 
2.25

 
2.82

LLC equity interests of SLF JV I
 
—

 
2.10

Total
 
100.00
%
 
100.00
%


77


The industry composition of our portfolio at cost and fair value as a percentage of total investments was as follows:
 
 
March 31, 2020
 
September 30, 2019
Cost:
 
 
 
 
Application Software
 
11.97
%
 
8.73
%
Multi-Sector Holdings (1)
 
9.73

 
9.67

Data Processing & Outsourced Services
 
6.50

 
6.46

Health Care Services
 
4.44

 
6.62

Biotechnology
 
4.40

 
5.43

Pharmaceuticals
 
3.89

 
3.92

Auto Parts & Equipment
 
3.59

 
2.82

Specialized Finance
 
3.42

 
3.52

Personal Products
 
3.28

 
0.00

Property & Casualty Insurance
 
3.14

 
4.83

Specialty Chemicals
 
2.76

 
2.10

Research & Consulting Services
 
2.44

 
2.30

Real Estate Services
 
2.41

 
2.60

Aerospace & Defense
 
2.25

 
2.23

Health Care Technology
 
2.24

 
3.37

Systems Software
 
2.07

 
2.10

Oil & Gas Storage & Transportation
 
1.94

 
0.77

Internet Services & Infrastructure
 
1.93

 
2.15

Alternative Carriers
 
1.92

 
1.94

Oil & Gas Refining & Marketing
 
1.86

 
2.01

Managed Health Care
 
1.69

 
1.83

Specialized REITs
 
1.50

 
0.55

Education Services
 
1.42

 
1.04

Advertising
 
1.41

 
2.80

Airport Services
 
1.38

 
—

Independent Power Producers & Energy Traders
 
1.35

 
—

Integrated Telecommunication Services
 
1.31

 
2.23

Electrical Components & Equipment
 
1.29

 
1.40

General Merchandise Stores
 
1.17

 
1.25

Diversified Support Services
 
1.15

 
1.24

Apparel, Accessories & Luxury Goods
 
1.08

 
1.20

Industrial Machinery
 
0.99

 
1.13

Health Care Distributors
 
0.97

 
1.49

IT Consulting & Other Services
 
0.92

 
0.99

Movies & Entertainment
 
0.82

 
1.25

Construction & Engineering
 
0.81

 
1.55

Oil & Gas Equipment & Services
 
0.70

 
0.80

Airlines
 
0.65

 
0.70

Trading Companies & Distributors
 
0.63

 
0.68

Restaurants
 
0.57

 
0.20

Commercial Printing
 
0.49

 
0.40

Food Retail
 
0.42

 
0.96

Health Care Facilities
 
0.22

 
—

Distributors
 
0.21

 
—

Specialty Stores
 
0.17

 
0.09

Construction Materials
 
0.13

 
—

Leisure Facilities
 
0.12

 
0.12

Building Products
 
0.10

 
—

Communications Equipment
 
0.08

 
—

Thrifts & Mortgage Finance
 
0.06

 
0.08

Other Diversified Financial Services
 
0.01

 
0.01

Interactive Media & Services
 
—

 
1.44

Household Appliances
 
—

 
0.52

Environmental & Facilities Services
 
—

 
0.39

Human Resource & Employment Services
 
—

 
0.05

Department Stores
 
—

 
0.04

Total
 
100.00
%
 
100.00
%

78


 
 
March 31, 2020
 
September 30, 2019
Fair value:
 
 
 
 
Application Software
 
13.02
%
 
9.00
%
Multi-Sector Holdings (1)
 
7.53

 
8.94

Data Processing & Outsourced Services
 
6.51

 
6.83

Biotechnology
 
5.20

 
5.96

Health Care Services
 
4.55

 
4.06

Pharmaceuticals
 
4.24

 
4.18

Personal Products
 
3.70

 
—

Specialized Finance
 
3.56

 
3.58

Auto Parts & Equipment
 
3.29

 
2.82

Property & Casualty Insurance
 
3.26

 
5.16

Research & Consulting Services
 
2.56

 
2.60

Health Care Technology
 
2.55

 
3.64

Real Estate Services
 
2.50

 
2.75

Specialty Chemicals
 
2.41

 
1.64

Systems Software
 
2.21

 
2.19

Internet Services & Infrastructure
 
2.13

 
2.26

Oil & Gas Storage & Transportation
 
2.12

 
0.83

Aerospace & Defense
 
2.12

 
2.35

Alternative Carriers
 
1.87

 
2.06

Oil & Gas Refining & Marketing
 
1.85

 
2.20

Managed Health Care
 
1.73

 
1.93

Specialized REITs
 
1.61

 
0.57

Airport Services
 
1.55

 
—

Independent Power Producers & Energy Traders
 
1.52

 
—

Electrical Components & Equipment
 
1.31

 
1.39

Advertising
 
1.24

 
2.59

Diversified Support Services
 
1.18

 
1.30

Airlines
 
1.05

 
1.12

Integrated Telecommunication Services
 
1.05

 
2.01

Industrial Machinery
 
1.02

 
1.17

General Merchandise Stores
 
1.00

 
1.18

Health Care Distributors
 
0.92

 
1.53

IT Consulting & Other Services
 
0.86

 
0.96

Apparel, Accessories & Luxury Goods
 
0.82

 
0.92

Movies & Entertainment
 
0.75

 
1.29

Construction & Engineering
 
0.75

 
1.67

Oil & Gas Equipment & Services
 
0.64

 
0.95

Trading Companies & Distributors
 
0.63

 
0.72

Commercial Printing
 
0.55

 
0.41

Education Services
 
0.50

 
—

Food Retail
 
0.50

 
1.04

Restaurants
 
0.46

 
0.19

Health Care Facilities
 
0.24

 
—

Distributors
 
0.24

 
—

Leisure Facilities
 
0.22

 
0.33

Construction Materials
 
0.13

 
—

Building Products
 
0.11

 
—

Specialty Stores
 
0.11

 
—

Communications Equipment
 
0.10

 
—

Thrifts & Mortgage Finance
 
0.03

 
0.05

Interactive Media & Services
 
—

 
1.56

Leisure Products
 
—

 
1.05

Household Appliances
 
—

 
0.53

Environmental & Facilities Services
 
—

 
0.41

Human Resource & Employment Services
 
—

 
0.05

Department Stores
 
—

 
0.03

Total
 
100.00
%
 
100.00
%
___________________
(1)
This industry includes our investments in SLF JV I, collateral loan obligations and certain limited partnership interests.

79


Loans and Debt Securities on Non-Accrual Status
During the three months ended March 31, 2020, with the exception of one portfolio company that modified its scheduled interest payment to PIK in order to preserve liquidity, all of our portfolio companies made their scheduled interest payments.
During the three months ended March 31, 2020, two debt investments were added to cash non-accrual status after experiencing price deterioration in the quarter. As of each of March 31, 2020 and September 30, 2019, there were three investments on which we had stopped accruing cash and/or PIK interest or OID income.
The percentages of our debt investments at cost and fair value by accrual status as of March 31, 2020 and September 30, 2019 were as follows:
 
 
March 31, 2020
 
September 30, 2019
 
 
Cost
 
% of Debt
Portfolio
 
Fair
Value
 
% of Debt
Portfolio
 
Cost
 
% of Debt
Portfolio
 
Fair
Value
 
% of Debt
Portfolio
Accrual
 
$
1,443,128

 
98.22
%
 
$
1,306,989

 
99.55
%
 
$
1,311,849

 
95.72
%
 
$
1,305,718

 
99.79
%
PIK non-accrual (1)
 
12,661

 
0.86

 
—

 
—

 
12,661

 
0.92

 
—

 
—

Cash non-accrual (2)
 
13,572

 
0.92

 
5,864

 
0.45

 
46,107

 
3.36

 
2,706

 
0.21

Total
 
$
1,469,361

 
100.00
%
 
$
1,312,853

 
100.00
%
 
$
1,370,617

 
100.00
%
 
$
1,308,424

 
100.00
%
 ___________________
(1)
PIK non-accrual status is inclusive of other non-cash income, where applicable.
(2)
Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.

Senior Loan Fund JV I, LLC
In May 2014, we entered into a limited liability company, or LLC, agreement with Trinity Universal Insurance Company, a subsidiary of Kemper Corporation, or Kemper, to form SLF JV I. We co-invest in senior secured loans of middle-market companies and other corporate debt securities with Kemper through our investment in SLF JV I. SLF JV I is managed by a four person Board of Directors, two of whom are selected by us and two of whom are selected by Kemper. All portfolio decisions and investment decisions in respect of SLF JV I must be approved by the SLF JV I investment committee, which consists of one representative selected by us and one representative selected by Kemper (with approval from a representative of each required). Since we do not have a controlling financial interest in SLF JV I, we do not consolidate SLF JV I.
SLF JV I is capitalized pro rata with LLC equity interests as transactions are completed and may be capitalized with additional subordinated notes issued to us and Kemper by SLF JV I. On December 28, 2018, we and Kemper directed the redemption of our holdings of mezzanine notes issued by SLF Repack Issuer 2016, LLC, a wholly-owned, special purpose issuer subsidiary of SLF JV I. Upon such redemption, the assets collateralizing the mezzanine notes, which consisted of equity interests of SLF JV I Funding LLC, or the Equity Interests, were distributed in-kind to each of us and Kemper, based upon our respective holdings of mezzanine notes. Upon such distribution, we and Kemper each then directed that a portion of our respective Equity Interests holdings be contributed to SLF JV I in exchange for LLC equity interests of SLF JV I and the remainder be applied as payment for the subordinated notes of SLF JV I.  SLF Repack Issuer 2016, LLC was dissolved following the foregoing redemption and liquidation. The subordinated notes issued by SLF JV I, or the SLF JV 1 Subordinated Notes, and the mezzanine notes issued by SLF Repack Issuer 2016, LLC, or the SLF Repack Notes, collectively are referred to as the SLF JV I Notes. Prior to their redemption on December 28, 2018, the SLF Repack Notes consisted of Class A mezzanine secured deferrable floating rate notes and Class B mezzanine secured deferrable fixed rate notes. The SLF JV I Subordinated Notes are (and the SLF Repack Notes were, prior to their redemption) senior in right of payment to SLF JV I LLC equity interests and subordinated in right of payment to SLF JV I’s secured debt. As of March 31, 2020 and September 30, 2019, we and Kemper owned, in the aggregate, 87.5% and 12.5%, respectively, of the LLC equity interests of SLF JV I and the outstanding SLF JV I Subordinated Notes.
SLF JV I has a senior revolving credit facility with Deutsche Bank AG, New York Branch, or, as amended, the Deutsche Bank I Facility, which permitted up to $250.0 million of borrowings (subject to borrowing base and other limitations) as of March 31, 2020 and September 30, 2019. Borrowings under the Deutsche Bank I Facility are secured by all of the assets of SLF JV I Funding LLC, a special purpose financing subsidiary of SLF JV I. As of March 31, 2020, the reinvestment period of the Deutsche Bank I Facility was scheduled to expire June 28, 2021 and the maturity date for the Deutsche Bank I Facility was June 29, 2026. As of March 31, 2020, borrowings under the Deutsche Bank I Facility accrued interest at a rate equal to the 3-month LIBOR plus 1.85% per annum during the reinvestment period and 3-month LIBOR plus 2.00% per annum during the amortization period. Under the Deutsche Bank I Facility, $193.9 million and $170.2 million of borrowings were outstanding as of March 31, 2020 and September 30, 2019, respectively.
As of March 31, 2020 and September 30, 2019, SLF JV I had total assets of $329.6 million and $360.9 million, respectively. SLF JV I's portfolio primarily consisted of senior secured loans to 53 and 51 portfolio companies as of March 31, 2020 and September 30, 2019,

80


respectively. The portfolio companies in SLF JV I are in industries similar to those in which we may invest directly. As of March 31, 2020, our investment in SLF JV I consisted of LLC equity interests and SLF JV I Subordinated Notes of $92.2 million in aggregate at fair value. As of September 30, 2019, our investment in SLF JV I consisted of LLC equity interests and SLF JV I Subordinated Notes of $126.3 million in aggregate at fair value.
As of each of March 31, 2020 and September 30, 2019, we and Kemper had funded approximately $165.5 million to SLF JV I, of which $144.8 million was from us. As of March 31, 2020 and September 30, 2019, we and Kemper had the option to fund additional SLF JV I Notes, subject to additional equity funding to SLF JV I. As of each of March 31, 2020 and September 30, 2019, we had commitments to fund LLC equity interests in SLF JV I of $17.5 million, of which $1.3 million was unfunded.
Below is a summary of SLF JV I's portfolio, followed by a listing of the individual loans in SLF JV I's portfolio as of March 31, 2020 and September 30, 2019:

 
 
March 31, 2020
 
September 30, 2019
Senior secured loans (1)
 
$337,016
 
$340,960
Weighted average interest rate on senior secured loans (2)
 
5.54%
 
6.57%
Number of borrowers in SLF JV I
 
53
 
51
Largest exposure to a single borrower (1)
 
$10,686
 
$10,835
Total of five largest loan exposures to borrowers (1)
 
$51,441
 
$50,510
__________________
(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans at fair value.

81



SLF JV I Portfolio as of March 31, 2020
Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Access CIG, LLC
First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025
5.53
%
Diversified Support Services
$
9,253

 
$
9,213

 
$
7,622

 
AdVenture Interactive, Corp.
927 shares of common stock
 
Advertising
 
 
1,390

 
1,312

(4)
AI Convoy (Luxembourg) S.À.R.L.
First Lien Term Loan, LIBOR+3.50% cash due 1/18/2027
5.34
%
Aerospace & Defense
9,200

 
9,154

 
8,257

 
AI Ladder (Luxembourg) Subco S.a.r.l.
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025
5.49
%
Electrical Components & Equipment
6,092

 
5,953

 
5,137

(4)
Altice France S.A.
First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026
4.70
%
Integrated Telecommunication Services
9,709

 
9,398

 
9,296

 
Alvogen Pharma US, Inc.
First Lien Term Loan, LIBOR+5.25% cash due 12/31/2023
6.32
%
Pharmaceuticals
9,879

 
9,586

 
8,594


Anastasia Parent, LLC
First Lien Term Loan, LIBOR+3.75% cash due 8/11/2025
5.20
%
Personal Products
2,843

 
2,360

 
1,658

 
Apptio, Inc.
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025
8.25
%
Application Software
4,615

 
4,542

 
4,398

(4)
 
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025
 
Application Software
—

 
(6
)
 
(18
)
(4)(5)
Total Apptio, Inc.
 
 
 
 
 
4,536

 
4,380

 
Aurora Lux Finco S.À.R.L.
First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026
7.00
%
Airport Services
6,500

 
6,344

 
6,111

(4)
Blackhawk Network Holdings, Inc.
First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025
3.99
%
Data Processing & Outsourced Services
9,825

 
9,807

 
8,134

 
Boxer Parent Company Inc.
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025
5.24
%
Systems Software
7,571

 
7,483

 
6,366

(4)
Brazos Delaware II, LLC
First Lien Term Loan, LIBOR+4.00% cash due 5/21/2025
4.92
%
Oil & Gas Equipment & Services
7,369

 
7,342

 
3,887

 
C5 Technology Holdings, LLC
171 Common Units
 
Data Processing & Outsourced Services
 
 
—

 
—

(4)
 
7,193,539.63 Preferred Units
 
 
 
 
7,194

 
5,683

(4)
Total C5 Technology Holdings, LLC
 
 
 
 
 
7,194

 
5,683

 
CITGO Petroleum Corp.
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024
6.00
%
Oil & Gas Refining & Marketing
7,920

 
7,841

 
7,009

(4)
Connect U.S. Finco LLC
First Lien Term Loan, LIBOR+4.50% cash due 12/11/2026
5.49
%
Alternative Carriers
8,367

 
8,162

 
6,746

(4)
Curium Bidco S.à.r.l.
First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026
5.07
%
Biotechnology
5,970

 
5,925

 
5,672

 
Dcert Buyer, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 10/16/2026
4.99
%
Internet Services & Infrastructure
8,000

 
7,980

 
7,193

 
Dealer Tire, LLC
First Lien Term Loan, LIBOR+4.25% cash due 12/12/2025
5.24
%
Distributors
948

 
904

 
788

(4)
Delta 2 (Lux) S.à.r.l.
First Lien Term Loan, LIBOR+2.50% cash due 2/1/2024
3.50
%
Movies & Entertainment
5,167

 
4,649

 
4,665

 
Ellie Mae, Inc.
First Lien Term Loan, LIBOR+3.75% cash due 4/17/2026
5.20
%
Application Software
4,974

 
4,950

 
4,372

 
eResearch Technology, Inc.
First Lien Term Loan, LIBOR+4.50% cash due 2/4/2027
5.95
%
Application Software
7,500

 
7,425

 
6,653


Frontier Communications Corporation
First Lien Term Loan, LIBOR+3.75% cash due 6/15/2024
5.21
%
Integrated Telecommunication Services
7,162

 
7,068

 
6,846


GFL Environmental, Inc.
First Lien Term Loan, LIBOR+3.00% cash due 5/30/2025
4.00
%
Environmental & Facilities Services
718

 
663

 
700

 
Gigamon, Inc.
First Lien Term Loan, LIBOR+4.25% cash due 12/27/2024
5.25
%
Systems Software
7,820

 
7,767

 
6,726



82


Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
GoodRx, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 10/10/2025
3.74
%
Interactive Media & Services
$
8,592

 
$
8,470

 
$
8,119

 
Guidehouse LLP
Second Lien Term Loan, LIBOR+8.00% cash due 5/1/2026
8.99
%
Research & Consulting Services
6,000

 
5,977

 
5,190

(4)
Helios Software Holdings, Inc.
First Lien Term Loan, LIBOR+4.25% cash due 10/24/2025
5.32
%
Systems Software
3,990

 
3,950

 
3,438

 
Intelsat Jackson Holdings S.A.
First Lien Term Loan, LIBOR+3.75% cash due 11/27/2023
5.68
%
Alternative Carriers
10,686

 
10,563

 
9,905


KIK Custom Products Inc.
First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023
5.00
%
Household Products
8,000

 
7,976

 
7,237


Mindbody, Inc.
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025
8.00
%
Internet Services & Infrastructure
4,524

 
4,450

 
4,185

(4)
 
First Lien Revolver, LIBOR+7.00% cash due 2/14/2025
8.07
%
Internet Services & Infrastructure
476

 
468

 
440

(4)
Total Mindbody, Inc.
 
 
 
 
 
4,918

 
4,625

 
MRI Software LLC
First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026
6.57
%
Application Software
3,411

 
3,379

 
3,019

(4)
 
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026
 
Application Software
—

 
(4
)
 
(68
)
(4)(5)
 
First Lien Revolver, LIBOR+5.50% cash due 2/10/2026
6.57
%
Application Software
169

 
166

 
130

(4)(5)
Total MRI Software LLC
 
 
 
 
 
3,541

 
3,081

 
Navicure, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 10/22/2026
4.99
%
Health Care Technology
6,000

 
5,970

 
5,565


New IPT, Inc.
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
6.45
%
Oil & Gas Equipment & Services
1,138

 
1,138

 
1,138

(4)
 
21.876 Class A Common Units in New IPT Holdings, LLC
 
Oil & Gas Equipment & Services
 
 
—

 
697

(4)
Total New IPT, Inc.
 
 
 
 
 
1,138

 
1,835

 
Northern Star Industries Inc.
First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025
5.57
%
Electrical Components & Equipment
6,860

 
6,835

 
5,831


Novetta Solutions, LLC
First Lien Term Loan, LIBOR+5.00% cash due 10/17/2022
6.00
%
Application Software
5,962

 
5,935

 
5,315


OEConnection LLC
First Lien Term Loan, LIBOR+4.00% cash due 9/25/2026
5.45
%
Application Software
7,271

 
7,234

 
5,871

 
 
First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/25/2026
 
Application Software
—

 
(3
)
 
(133
)
(5)
Total OEConnection LLC
 
 
 
 
 
7,231

 
5,738

 
Olaplex, Inc.
First Lien Term Loan, LIBOR+6.50% cash due 1/8/2026
7.50
%
Personal Products
5,000

 
4,904

 
4,675

(4)
 
First Lien Revolver, LIBOR+6.50% cash due 1/8/2025
7.50
%
Personal Products
540

 
530

 
505

(4)
Total Olaplex, Inc.
 
 
 
 
 
5,434

 
5,180

 
Quikrete Holdings, Inc.
First Lien Term Loan, LIBOR+2.50% cash due 2/1/2027
3.49
%
Construction Materials
2,280

 
2,106

 
2,109

 
Sabert Corporation
First Lien Term Loan, LIBOR+4.50% cash due 12/10/2026
5.50
%
Metal & Glass Containers
4,350

 
4,307

 
4,046

 
Salient CRGT, Inc.
First Lien Term Loan, LIBOR+6.50% cash due 2/28/2022
7.57
%
Aerospace & Defense
2,173

 
2,156

 
1,793

(4)
Scientific Games International, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 8/14/2024
3.74
%
Casinos & Gaming
6,483

 
6,461

 
5,262


SHO Holding I Corporation
First Lien Term Loan, LIBOR+5.00% cash due 10/27/2022
6.78
%
Footwear
8,376

 
8,362

 
6,575


Signify Health, LLC
First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024
5.95
%
Health Care Services
9,800

 
9,732

 
8,232


Star US Bidco LLC
First Lien Term Loan, LIBOR+4.25% cash due 3/17/2027
5.94
%
Industrial Machinery
2,973

 
2,943

 
2,587

 
Sirva Worldwide, Inc.
First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025
6.49
%
Diversified Support Services
4,844

 
4,771

 
3,633

 

83


Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Sunshine Luxembourg VII SARL
First Lien Term Loan, LIBOR+4.25% cash due 10/1/2026
5.32
%
Personal Products
$
7,980

 
$
7,940

 
$
7,262

(4)
Supermoose Borrower, LLC
First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025
5.20
%
Application Software
4,913

 
4,566

 
3,960

(4)
Surgery Center Holdings, Inc.
First Lien Term Loan, LIBOR+3.25% cash due 9/2/2024
4.25
%
Health Care Facilities
4,987

 
4,966

 
3,868

(4)
Thruline Marketing, Inc.
927 Class A Units in FS AVI Holdco, LLC
 
Advertising
 
 
949

 
449

(4)
Thunder Finco (US), LLC
First Lien Term Loan, LIBOR+4.25% cash due 11/26/2026
5.24
%
Movies & Entertainment
8,000

 
7,920

 
6,260

 
Uber Technologies, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025
5.00
%
Application Software
10,509

 
10,440

 
9,887

(4)
UFC Holdings, LLC
First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026
4.25
%
Movies & Entertainment
4,831

 
4,787

 
4,306

(4)
Veritas US Inc.
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023
5.95
%
Application Software
6,859

 
6,826

 
5,941

(4)
Verscend Holding Corp.
First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025
5.49
%
Health Care Technology
4,133

 
4,099

 
3,926


VM Consolidated, Inc.
First Lien Term Loan, LIBOR+3.25% cash due 2/28/2025
4.24
%
Data Processing & Outsourced Services
10,542

 
10,554

 
9,593

(4)
WideOpenWest Finance, LLC
First Lien Term Loan, LIBOR+3.25% cash due 8/18/2023
4.25
%
Cable & Satellite
962

 
867

 
897

 
WP CPP Holdings, LLC
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026
9.53
%
Aerospace & Defense
6,000

 
5,953

 
4,120

(4)
 
 
 
 
$
337,016

 
$
341,737

 
$
299,572

 
__________________
(1) Represents the current interest rate as of March 31, 2020. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, we have provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of March 31, 2020, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 0.99%, the 60-day LIBOR at 1.26%, the 90-day LIBOR at 1.45% and the 180-day LIBOR at 1.07%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(3) Represents the current determination of fair value as of March 31, 2020 utilizing a similar technique as us in accordance with ASC 820. However, the determination of such fair value is not included in our Board of Directors' valuation process described elsewhere herein.
(4) This investment is held by both us and SLF JV I as of March 31, 2020.
(5) Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
 

SLF JV I Portfolio as of September 30, 2019
Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Access CIG, LLC
First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025
6.07
%
Diversified support services
$
9,300

 
$
9,256

 
$
9,201

 
AdVenture Interactive, Corp.
927 shares of common stock
 
Advertising
 
 
1,390

 
1,295

(4)
AI Ladder (Luxembourg) Subco S.a.r.l.
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025
6.60
%
Electrical components & equipment
6,145

 
5,992

 
5,659

(4)
Air Newco LP
First Lien Term Loan, LIBOR+4.75% cash due 5/31/2024
6.79
%
IT consulting & other services
9,900

 
9,875

 
9,916

 
AL Midcoast Holdings LLC
First Lien Term Loan, LIBOR+5.50% cash due 8/1/2025
7.60
%
Oil & gas storage & transportation
9,900

 
9,801

 
9,764

 
Altice France S.A.
First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026
6.03
%
Integrated telecommunication services
7,444

 
7,282

 
7,439

 
Alvogen Pharma US, Inc.
First Lien Term Loan, LIBOR+4.75% cash due 4/1/2022
6.79
%
Pharmaceuticals
7,656

 
7,656

 
6,963

 
Apptio, Inc.
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025
9.56
%
Application software
4,615

 
4,534

 
4,530

(4)
 
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025
 
Application software
—

 
(7
)
 
(7
)
(4)(5)
Total Apptio, Inc.
 
 
 
 
 
4,527

 
4,523

 

84


Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Blackhawk Network Holdings, Inc.
First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025
5.04
%
Data processing & outsourced services
$
9,875

 
$
9,855

 
$
9,858

 
Boxer Parent Company Inc.
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025
6.29
%
Systems software
7,609

 
7,518

 
7,336

(4)
Brazos Delaware II, LLC
First Lien Term Loan, LIBOR+4.00% cash due 5/21/2025
6.05
%
Oil & gas equipment & services
7,406

 
7,376

 
6,855

 
C5 Technology Holdings, LLC
171 Common Units
 
Data Processing & Outsourced Services
 
 
—

 
—

(4)
 
7,193,539.63 Preferred Units
 
 
 
 
7,194

 
7,194

(4)
Total C5 Technology Holdings, LLC
 
 
 
 
 
7,194

 
7,194

 
Cast & Crew Payroll, LLC
First Lien Term Loan, LIBOR+4.00% cash due 2/9/2026
6.05
%
Application software
4,975

 
4,925

 
5,018

 
CITGO Petroleum Corp.
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024
7.10
%
Oil & gas refining & marketing
7,960

 
7,880

 
8,010

(4)
Connect U.S. Finco LLC
First Lien Term Loan, LIBOR+4.50% cash due 9/23/2026
7.10
%
Alternative Carriers
8,000

 
7,840

 
7,888

(4)
Curium Bidco S.à r.l.
First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026
6.10
%
Biotechnology
6,000

 
5,955

 
6,030

 
Dcert Buyer, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 8/8/2026
6.26
%
Internet services & infrastructure
8,000

 
7,980

 
7,985

 
DigiCert, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 10/31/2024
6.04
%
Internet services & infrastructure
8,250

 
8,148

 
8,249

(4)
Ellie Mae, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 4/17/2026
6.04
%
Application software
5,000

 
4,975

 
5,015

 
Everi Payments Inc.
First Lien Term Loan, LIBOR+3.00% cash due 5/9/2024
5.04
%
Casinos & gaming
4,764

 
4,742

 
4,776

 
Falmouth Group Holdings Corp.
First Lien Term Loan, LIBOR+6.75% cash due 12/14/2021
8.95
%
Specialty chemicals
4,938

 
4,909

 
4,910

 
Frontier Communications Corporation
First Lien Term Loan, LIBOR+3.75% cash due 6/15/2024
5.80
%
Integrated telecommunication services
6,473

 
6,400

 
6,471

 
Gentiva Health Services, Inc.
First Lien Term Loan, LIBOR+3.75% cash due 7/2/2025
5.81
%
Healthcare services
7,920

 
7,801

 
7,974

 
Gigamon, Inc.
First Lien Term Loan, LIBOR+4.25% cash due 12/27/2024
6.29
%
Systems software
7,860

 
7,801

 
7,644

 
GoodRx, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 10/10/2025
4.81
%
Interactive media & services
7,852

 
7,835

 
7,862

 
Guidehouse LLP
Second Lien Term Loan, LIBOR+7.50% cash due 5/1/2026
9.54
%
Research & consulting services
6,000

 
5,975

 
5,925

(4)
Indivior Finance S.a.r.l.
First Lien Term Loan, LIBOR+4.50% cash due 12/19/2022
6.76
%
Pharmaceuticals
7,898

 
7,797

 
7,272

 
Intelsat Jackson Holdings S.A.
First Lien Term Loan, LIBOR+3.75% cash due 11/27/2023
5.80
%
Alternative Carriers
10,000

 
9,891

 
10,042

 
KIK Custom Products Inc.
First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023
6.26
%
Household products
8,000

 
7,972

 
7,610

 
McDermott Technology (Americas), Inc.
First Lien Term Loan, LIBOR+5.00% cash due 5/9/2025
7.10
%
Oil & gas equipment & services
4,187

 
4,119

 
2,676

 
Mindbody, Inc.
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025
9.06
%
Internet services & infrastructure
4,524

 
4,443

 
4,438

(4)
 
First Lien Revolver, LIBOR+7.00% cash due 2/15/2025
 
Internet services & infrastructure
—

 
(9
)
 
(9
)
(4)(5)
Total Mindbody, Inc.
 
 
 
 
 
4,434

 
4,429

 
Navicure, Inc.
First Lien Term Loan, LIBOR+3.75% cash due 9/18/2026
6.13
%
Healthcare technology
6,000

 
5,970

 
6,008

 
New IPT, Inc.
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
7.10
%
Oil & gas equipment & services
1,422

 
1,422

 
1,422

(4)
 
21.876 Class A Common Units in New IPT Holdings, LLC
 
Oil & gas equipment & services
 
 
—

 
1,268

(4)
Total New IPT, Inc.
 
 
 
 
 
1,422

 
2,690

 
Northern Star Industries Inc.
First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025
6.56
%
Electrical components & equipment
6,895

 
6,868

 
6,792

 

85


Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Novetta Solutions, LLC
First Lien Term Loan, LIBOR+5.00% cash due 10/17/2022
7.05
%
Application software
$
5,993

 
$
5,961

 
$
5,882

 
OCI Beaumont LLC
First Lien Term Loan, LIBOR+4.00% cash due 3/13/2025
6.10
%
Commodity chemicals
7,880

 
7,872

 
7,890

 
OEConnection LLC
First Lien Term Loan, LIBOR+4.00% cash due 9/24/2026
6.13
%
Application software
7,312

 
7,275

 
7,298

 
 
First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/24/2026
 
Application software
—

 
(3
)
 
(1
)
(5)
Total OEConnection LLC
 
 
 
 
 
7,272

 
7,297

 
Red Ventures, LLC
First Lien Term Loan, LIBOR+3.00% cash due 11/8/2024
5.04
%
Interactive media & services
3,990

 
3,971

 
4,011

 
Salient CRGT, Inc.
First Lien Term Loan, LIBOR+6.00% cash due 2/28/2022
8.05
%
Aerospace & defense
2,205

 
2,183

 
2,094

(4)
Scientific Games International, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 8/14/2024
4.79
%
Casinos & gaming
6,516

 
6,491

 
6,470

 
SHO Holding I Corporation
First Lien Term Loan, LIBOR+5.00% cash due 10/27/2022
7.26
%
Footwear
8,420

 
8,403

 
7,999

 
Signify Health, LLC
First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024
6.60
%
Healthcare services
9,850

 
9,775

 
9,838

 
Sirva Worldwide, Inc.
First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025
7.54
%
Diversified support services
4,906

 
4,833

 
4,759

 
Sunshine Luxembourg VII SARL
First Lien Term Loan, LIBOR+4.25% cash due 9/25/2026
6.59
%
Personal products
8,000

 
7,960

 
8,048

 
Thruline Marketing, Inc.
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022
9.10
%
Advertising
1,854

 
1,851

 
1,854

(4)
 
927 Class A Units in FS AVI Holdco, LLC
 
Advertising
 
 
1,088

 
658

(4)
Total Thruline Marketing, Inc.
 
 
 
 
 
2,939

 
2,512

 
Triple Royalty Sub LLC
Fixed Rate Bond 144A 9.0% Toggle PIK cash due 4/15/2033
 
Pharmaceuticals
5,000

 
5,000

 
5,175

 
Uber Technologies, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025
6.03
%
Application software
9,875

 
9,836

 
9,836

(4)
UFC Holdings, LLC
First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026
5.30
%
Movies & entertainment
4,489

 
4,489

 
4,506

 
Uniti Group LP
First Lien Term Loan, LIBOR+5.00% cash due 10/24/2022
7.04
%
Specialized REITs
6,401

 
6,221

 
6,256

(4)
Valeant Pharmaceuticals International Inc.
First Lien Term Loan, LIBOR+2.75% cash due 11/27/2025
4.79
%
Pharmaceuticals
1,772

 
1,764

 
1,778

 
Veritas US Inc.
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023
6.60
%
Application software
6,894

 
6,856

 
6,534

(4)
Verra Mobility, Corp.
First Lien Term Loan, LIBOR+3.75% cash due 2/28/2025
5.79
%
Data processing & outsourced services
10,835

 
10,849

 
10,894

 
WP CPP Holdings, LLC
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026
10.01
%
Aerospace & defense
6,000

 
5,949

 
5,974

(4)
 
 
 
 
$
340,960

 
$
347,985

 
$
345,032

 
__________________
(1) Represents the current interest rate as of September 30, 2019. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, we have provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of September 30, 2019, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 2.04%, the 60-day LIBOR at 2.09%, the 90-day LIBOR at 2.10%, the 180-day LIBOR at 2.06%, and the PRIME at 5.00%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(3) Represents the current determination of fair value as of September 30, 2019 utilizing a similar technique as us in accordance with ASC 820. However, the determination of such fair value is not included in our Board of Directors' valuation process described elsewhere herein.
(4) This investment was held by both us and SLF JV I as of September 30, 2019.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
 
As of March 31, 2020, the cost and fair value of our debt investments in the SLF JV I were $96.3 million and $92.2 million, respectively. Both the cost and fair value of our debt investment in the SLF JV I were $96.3 million as of September 30, 2019. We earned interest income of $2.1 million and $4.3 million on our investments in the SLF JV I Subordinated Notes for the three and six months ended March 31, 2020, respectively. We earned interest income of $2.3 million and $5.1 million on our investments in the SLF JV I Notes for the

86


three and six months ended March 31, 2019, respectively. The SLF JV I Subordinated Notes bear interest at a rate of one-month LIBOR plus 7.0% per annum and mature on December 29, 2028.
The cost and fair value of the LLC equity interests in SLF JV I held by us was $49.3 million and $0.0 million, respectively, as of March 31, 2020, and $49.3 million and $30.1 million, respectively, as of September 30, 2019. We did not earn dividend income for the three and six months ended March 31, 2020 and 2019 with respect to our investment in the LLC equity interests of SLF JV I. The LLC equity interests of SLF JV I are dividend producing to the extent SLF JV I has residual cash to be distributed on a quarterly basis.
Below is certain summarized financial information for SLF JV I as of March 31, 2020 and September 30, 2019 and for the three and six months ended March 31, 2020 and 2019:
 
 
March 31, 2020
 
September 30, 2019
Selected Balance Sheet Information:
 
 
 
 
Investments at fair value (cost March 31, 2020: $341,737; cost September 30, 2019: $347,985)
 
$
299,572

 
$
345,032

Cash and cash equivalents
 
14,039

 
3,674

Restricted cash
 
5,242

 
5,242

Other assets
 
10,783

 
6,912

Total assets
 
$
329,636

 
$
360,860

 
 
 
 
 
Senior credit facility payable
 
$
193,910

 
$
170,210

Debt securities payable at fair value (proceeds March 31, 2020: $110,000; proceeds September 30, 2019: $110,000)
 
105,339

 
110,000

Other liabilities
 
30,387

 
46,303

Total liabilities
 
329,636

 
326,513

Members' equity
 
—

 
34,347

Total liabilities and members' equity
 
$
329,636

 
$
360,860


 
 
Three months ended March 31, 2020
 
Three months ended March 31, 2019
 
Six months ended March 31, 2020
 
Six months ended March 31, 2019
Selected Statements of Operations Information:
 
 
 
 
 
 
 
 
Interest income
 
$
5,546

 
$
5,551

 
$
10,939

 
$
10,989

Other income
 
291

 
80

 
297

 
89

Total investment income
 
5,837

 
5,631

 
11,236

 
11,078

Interest expense
 
4,493

 
4,709

 
9,134

 
9,863

Other expenses
 
64

 
276

 
131

 
326

Total expenses (1)
 
4,557

 
4,985

 
9,265

 
10,189

Net unrealized appreciation (depreciation)
 
(37,491
)
 
4,576

 
(34,550
)
 
1,120

Net realized gains (losses)
 
(615
)
 
19

 
(1,767
)
 
(4,986
)
Net income (loss)
 
$
(36,826
)
 
$
5,241

 
$
(34,346
)
 
$
(2,977
)
 __________
(1) There are no management fees or incentive fees charged at SLF JV I.

SLF JV I has elected to fair value the debt securities issued to us and Kemper under FASB ASC Topic 825, Financial Instruments - Fair Value Option. The debt securities are valued based on the total assets less the total liabilities senior to the mezzanine notes of SLF JV I in an amount not exceeding par under the enterprise value technique.
During the three and six months ended March 31, 2020 and 2019, we did not sell any debt investments to SLF JV I.
Discussion and Analysis of Results and Operations
Results of Operations
Net increase (decrease) in net assets resulting from operations includes net investment income, net realized gains (losses) and net unrealized appreciation (depreciation). Net investment income is the difference between our income from interest, dividends and fees and net expenses. Net realized gains (losses) is the difference between the proceeds received from dispositions of investment related assets and

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liabilities and their stated costs. Net unrealized appreciation (depreciation) is the net change in the fair value of our investment related assets and liabilities carried at fair value during the reporting period, including the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.
Comparison of three and six months ended March 31, 2020 and March 31, 2019
Total Investment Income
Total investment income includes interest on our investments, fee income and dividend income.
Total investment income for the three months ended March 31, 2020 and March 31, 2019 was $34.2 million and $38.2 million, respectively. For the three months ended March 31, 2020, this amount consisted of $31.8 million of interest income from portfolio investments (which included $1.9 million of PIK interest), $2.1 million of fee income and $0.3 million of dividend income. For the three months ended March 31, 2019, this amount consisted of $36.6 million of interest income from portfolio investments (which included $2.3 million of PIK interest), $1.1 million of fee income and $0.5 million of dividend income. The decrease of $4.1 million, or 10.7%, in our total investment income for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, was due primarily to a $4.7 million decrease in interest income, which was attributable to lower levels of OID accretion, primarily attributable to $4.3 million of OID accretion related to one of our investments during the three months ended March 31, 2019, and decreases in LIBOR on our floating rate investments.
Total investment income for the six months ended March 31, 2020 and March 31, 2019 was $65.1 million and $76.5 million, respectively. For the six months ended March 31, 2020, this amount consisted of $61.4 million of interest income from portfolio investments (which included $3.1 million of PIK interest), $3.1 million of fee income and $0.6 million of dividend income. For the six months ended March 31, 2019, this amount consisted of $73.2 million of interest income from portfolio investments (which included $3.1 million of PIK interest), $2.3 million of fee income and $1.0 million of dividend income. The decrease of $11.4 million, or 14.9%, in our total investment income for the six months ended March 31, 2020, as compared to the six months ended March 31, 2019, was due primarily to a $11.8 million decrease in interest income, which was attributable to lower levels of OID accretion, primarily the result of $9.9 million of OID accretion related to one of our investments during the six months ended March 31, 2019, and decreases in LIBOR on our floating rate investments.
Expenses
Net expenses (expenses net of fee waivers) for the three months ended March 31, 2020 and March 31, 2019 were $11.3 million and $20.5 million, respectively. Net expenses decreased for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, by $9.2 million, or 44.8%, due primarily to a $7.7 million decrease in base management fees and incentive fees (net of fee waivers), which was attributable to a $6.6 million reversal of previously accrued Part II incentive fees as a result of unrealized depreciation on investments during the quarter and lower Part I incentive fees due to lower investment income, and a $1.8 million decrease in interest expense primarily driven by decreases to LIBOR, partially offset by a $0.2 million increase in professional fees.
Net expenses (expenses net of fee waivers) for the six months ended March 31, 2020 and March 31, 2019 were $34.5 million and $41.5 million, respectively. Net expenses decreased for the six months ended March 31, 2020, as compared to the six months ended March 31, 2019, by $7.0 million, or 17.0%, due primarily to a $2.4 million decrease in base management fees and incentive fees (net of fee waivers), which was attributable to a $1.7 million decrease in Part I incentive fees (net of waivers) due to a reversal of previously waived fees of $0.6 million in the prior period and lower investment income during the current period and a $0.4 million decrease in base management fees due to a decrease in the size of the investment portfolio at fair value, and a $4.1 million decrease in interest expense resulting from decreases to LIBOR during the period.
Net Investment Income
As a result of the $4.1 million decrease in total investment income and the $9.2 million decrease in net expenses, net investment income for the three months ended March 31, 2020 increased by $5.1 million, or 29.0%, compared to the three months ended March 31, 2019.
As a result of the $11.4 million decrease in total investment income and the $7.0 million decrease in net expenses, net investment income for the six months ended March 31, 2020 decreased by $4.3 million, or 12.4%, compared to the six months ended March 31, 2019.



88


Realized Gain (Loss)
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of investments, secured borrowings and foreign currency and the cost basis without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period, net of recoveries. Realized losses may also be recorded in connection with our determination that certain investments are considered worthless securities and/or meet the conditions for loss recognition per the applicable tax rules.
During the three months ended March 31, 2020 and 2019, we recorded aggregate net realized gains (losses) of $(26.5) million and $25.2 million, respectively, primarily in connection with the exits or restructurings of various investments. During the six months ended March 31, 2020 and 2019, we recorded aggregate net realized gains (losses) of $(23.2) million and $43.2 million, respectively, in connection with the exits or restructurings of various investments. See “Note 9. Realized Gains or Losses and Net Unrealized Appreciation or Depreciation” in the notes to the accompanying Consolidated Financial Statements for more details regarding investment realization events for the three and six months ended March 31, 2020 and 2019.
Net Unrealized Appreciation (Depreciation)
Net unrealized appreciation or depreciation is the net change in the fair value of our investments, secured borrowings and foreign currency during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
During the three months ended March 31, 2020 and 2019, we recorded net unrealized appreciation (depreciation) of $(163.5) million and $21.5 million, respectively. For the three months ended March 31, 2020, this consisted of $(139.8) million of net unrealized depreciation on debt investments and $(54.4) million of net unrealized depreciation on equity investments, partially offset by $28.4 million of net unrealized appreciation related to exited investments (a portion of which results in a reclassification to realized losses) and $2.2 million of net unrealized appreciation of foreign currency forward contracts. The unrealized depreciation on debt and equity investments during the three months ended March 31, 2020 was largely due to increased market volatility and wider credit spreads resulting from the onset of the COVID-19 pandemic in March 2020 and the direct impact of the COVID-19 pandemic on certain of our portfolio companies, including the impact of leverage at the SLF JV I.
For the three months ended March 31, 2019, this consisted of $22.3 million of net unrealized appreciation on equity investments, $3.6 million of net unrealized appreciation on debt investments and $0.8 million of net unrealized appreciation of foreign currency forward contracts, partially offset by $(5.2) million of net unrealized depreciation related to exited investments (a portion of which results in a reclassification to realized gains).
During the six months ended March 31, 2020 and 2019, we recorded net unrealized appreciation (depreciation) of $(160.7) million and $14.5 million, respectively. For the six months ended March 31, 2020, this consisted of $(134.0) million of net unrealized depreciation on debt investments and $(50.0) million of net unrealized depreciation on equity investments, partially offset by $22.5 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses) and $0.8 million of net unrealized appreciation of foreign currency forward contracts.
For the six months ended March 31, 2019, this consisted of $24.2 million of net unrealized appreciation related to exited investments (a portion of which results in a reclassification to realized losses), $14.0 million of net unrealized appreciation on equity investments and $0.4 million of net unrealized appreciation of foreign currency forward contracts, partially offset by $(24.1) million of net unrealized depreciation on debt investments.
Financial Condition, Liquidity and Capital Resources
We have a number of alternatives available to fund our investment portfolio and our operations, including raising equity, increasing or refinancing debt and funding from operational cash flow. We generally expect to fund the growth of our investment portfolio through additional debt and equity capital, which may include securitizing a portion of our investments. We cannot assure you, however, that our efforts to grow our portfolio will be successful. For example, our common stock has generally traded at prices below net asset value for the past several years, and we are currently limited in our ability to raise additional equity at prices below the then-current net asset value per share. We intend to continue to generate cash primarily from cash flows from operations, including interest earned, and future borrowings. We intend to fund our future distribution obligations through operating cash flow or with funds obtained through future equity and debt offerings or credit facilities, as we deem appropriate.

89


Our primary uses of funds are investments in our targeted asset classes and cash distributions to holders of our common stock. We may from time to time repurchase or redeem some or all of our outstanding notes in open-market transactions, privately negotiated transactions or otherwise. At a special meeting of our stockholders held on June 28, 2019, our stockholders approved the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act to us effective as of June 29, 2019. As a result of the reduced asset coverage requirement, we can incur $2 of debt for each $1 of equity as compared to $1 of debt for each $1 of equity. As of March 31, 2020, we had $704.8 million in senior securities and our asset coverage ratio was 205.9%. During the quarter, we increased our target debt to equity ratio from 0.70x to 0.85x to 0.85x to 1.0x (i.e., one dollar of equity for each $0.85 to $1.00 of debt outstanding) as we plan to continue to opportunistically deploy capital into the markets.
For the six months ended March 31, 2020, we experienced a net increase in cash and cash equivalents of $74.1 million. During that period, we used $121.6 million of net cash from operating activities, primarily from funding $379.2 million of investments, a $21.0 million of net decrease in payables from unsettled transactions, partially offset by $251.5 million of principal payments and sale proceeds received and the cash activities related to $30.7 million of net investment income. During the same period, net cash provided by financing activities was $195.7 million, primarily consisting of $90.0 million of net borrowings under the Credit Facility (as defined below) and $136.2 million net incurrence of unsecured notes, partially offset by $25.8 million of cash distributions paid to our stockholders, $3.7 million of deferred financing costs paid and $1.0 million of repurchases of common stock under our dividend reinvestment plan, or DRIP.
For the six months ended March 31, 2019, we experienced a net decrease in cash and cash equivalents and restricted cash of $0.3 million. During that period, we received $74.7 million of net cash from operating activities, primarily from $329.0 million of principal payments and sale proceeds received and the cash activities related to $35.0 million of net investment income, partially offset by funding $270.3 million of investments. During the same period, net cash used in financing activities was $75.1 million, primarily consisting of $183.8 million of net borrowings under the Credit Facility (as defined below), $228.8 million of repayments of unsecured notes, $0.7 million of repayments of secured borrowings, $26.1 million of cash distributions paid to our stockholders and $0.7 million of repurchases of common stock under our dividend reinvestment plan, or DRIP.
As of March 31, 2020, we had $89.5 million in cash and cash equivalents, portfolio investments (at fair value) of $1.4 billion, $6.2 million of interest, dividends and fees receivable, $295.2 of undrawn capacity on the Credit Facility (subject to borrowing base and other limitations), $34.0 million of net payables from unsettled transactions, $404.8 million of borrowings outstanding under our Credit Facility, $293.9 million of unsecured notes payable (net of unamortized financing costs and unaccreted discount) and unfunded commitments to portfolio companies of $91.6 million. As of March 31, 2020, we have analyzed cash and cash equivalents, availability under the Credit Facility, the ability to rotate out of certain assets and amounts of unfunded commitments that could be drawn and believe our liquidity and capital resources are sufficient to take advantage of market opportunities in the current economic climate.
As of September 30, 2019, we had $15.4 million in cash and cash equivalents, portfolio investments (at fair value) of $1.4 billion, $11.2 million of interest, dividends and fees receivable, $385.2 of undrawn capacity on the Credit Facility (subject to borrowing base and other limitations), $55.0 million of net payables from unsettled transactions, $314.8 million of borrowings outstanding under our Credit Facility, $158.5 million of unsecured notes payable (net of unamortized financing costs) and unfunded commitments of $88.3 million.

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Significant Capital Transactions
The following table reflects the distributions per share that we have paid, including shares issued under our DRIP, on our common stock since October 1, 2017:
Date Declared
 
Record Date
 
Payment Date
 
Amount
per Share
 
Cash
Distribution
 
DRIP Shares
Issued (1)
 
DRIP Shares
Value
August 7, 2017
 
December 15, 2017
 
December 29, 2017
 
$
0.125

 
 $ 17.3 million
 
58,456

 
 $ 0.3 million
February 5, 2018
 
March 15, 2018
 
March 30, 2018
 
0.085

 
11.5 million
 
122,884

 
0.5 million
May 3, 2018
 
June 15, 2018
 
June 29, 2018
 
0.095

 
13.0 million
 
87,283

 
0.4 million
August 1, 2018
 
September 15, 2018
 
September 28, 2018
 
0.095

 
13.2 million
 
34,575

 
0.2 million
November 19, 2018
 
December 17, 2018
 
December 28, 2018
 
0.095

 
13.0 million
 
87,429

 
0.4 million
February 1, 2019
 
March 15, 2019
 
March 29, 2019
 
0.095

 
13.1 million
 
59,603

 
 0.3 million
May 3, 2019
 
June 14, 2019
 
June 28, 2019
 
0.095

 
13.1 million
 
61,093

 
 0.3 million
August 2, 2019
 
September 13, 2019
 
September 30, 2019
 
0.095

 
13.1 million
 
61,205

 
 0.3 million
November 12, 2019
 
December 13, 2019
 
December 31, 2019
 
0.095

 
12.9 million
 
87,747

 
0.5 million
January 31, 2020
 
March 13, 2020
 
March 31, 2020
 
0.095

 
12.9 million
 
157,523

 
0.5 million
 ______________
(1)
Shares were purchased on the open market and distributed.
Indebtedness
See “Note 6. Borrowings” in the Consolidated Financial Statements for more details regarding our indebtedness.
Credit Facility

As of March 31, 2020 and September 30, 2019, (i) the size of our senior secured revolving credit facility, or, as amended and restated, the Credit Facility, pursuant to a senior secured revolving credit agreement, with the lenders party thereto, ING Capital LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents, was $700 million (with an “accordion” feature that permits us, under certain circumstances, to increase the size of the facility up to $1.02 billion), (ii) the period during which we may make drawings will expire on February 25, 2023 and the maturity date is February 25, 2024 and (iii) the interest rate margin for (a) LIBOR loans (which may be 1-, 2-, 3- or 6-month, at our option) was 2.00% (which can be increased up to 2.25%) and (b) alternate base rate loans was 1.00% (which can be increased up to 1.25%), each depending on our senior debt coverage ratio.

On December 13, 2019, we amended the Credit Facility to (1) reduce the required ratio of total assets (less total liabilities) to total indebtedness of us and our subsidiaries (subject to certain exceptions), from 1.65 to 1.00 to 1.50 to 1.00 and (2) modify the definition of Advance Rate to reference asset coverage of 1.50 to 1.00, rather than 1.65 to 1.00.

Each loan or letter of credit originated or assumed under the Credit Facility is subject to the satisfaction of certain conditions. Borrowings under the Credit Facility are subject to the facility’s various covenants and the leverage restrictions contained in the Investment Company Act. We cannot be assured that we will be able to borrow funds under the Credit Facility at any particular time or at all.

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The following table describes significant financial covenants, as of March 31, 2020, with which we must comply under the Credit Facility on a quarterly basis:
Financial Covenant
 
Description
 
Target Value
 
December 31, 2019 Reported Value (1)
Minimum shareholders' equity
 
Net assets shall not be less than the greater of (a) 40% of total assets and (b) $700 million plus 50% of the aggregate net proceeds of all sales of equity interests after November 30, 2017
 
$700 million
 
$931 million
Asset coverage ratio
 
Asset coverage ratio shall not be less than the greater of 1.50:1 and the statutory test applicable to us
 
1.50:1
 
2.72:1
Interest coverage ratio
 
Interest coverage ratio shall not be less than 2.00:1
 
2.00:1
 
2.89:1
Minimum net worth
 
Net worth shall not be less than $600 million
 
$600 million
 
$887 million
 ___________ 
(1) As contractually required, we report financial covenants based on the last filed quarterly or annual report, in this case our Quarterly Report on Form 10-Q for the quarter ended December 31, 2019. We were in compliance with all financial covenants under the Credit Facility based on the financial information contained in this Quarterly Report on Form 10-Q.
As of March 31, 2020 and September 30, 2019, we had $404.8 million and $314.8 million of borrowings outstanding under the Credit Facility, respectively, which had a fair value of $404.8 million and $314.8 million, respectively. Our borrowings under the Credit Facility bore interest at a weighted average interest rate of 3.806% and 4.688% for the six months ended March 31, 2020 and 2019, respectively. For the three and six months ended March 31, 2020, we recorded interest expense (inclusive of fees) of $4.2 million and $8.2 million, respectively, related to the Credit Facility. For the three and six months ended March 31, 2019, we recorded interest expense (inclusive of fees) of $4.3 million and $7.5 million in the aggregate, related to the Credit Facility.
2025 Notes
On February 25, 2020, we issued $300.0 million in aggregate principal amount of our 3.500% notes due 2025, or the 2025 Notes, for net proceeds of $293.8 million after deducting OID of $2.5 million, underwriting commissions and discounts of $3.0 million and offering costs of $0.7 million. The OID on the 2025 Notes is amortized based on the effective interest method over the term of the notes.
For each of the three and six months ended March 31, 2020, we recorded interest expense of $1.1 million related to the 2025 Notes. As of March 31, 2020, there were $300.0 million of 2025 Notes outstanding, which had a carrying value and fair value of $293.9 million and $274.5 million, respectively.
2019 Notes
For the three and six months ended March 31, 2019, we recorded interest expense of $2.1 million and $5.1 million (inclusive of fees), respectively, related to our 4.875% unsecured notes due 2019, or the 2019 Notes. The 2019 Notes matured on March 1, 2019 and were fully repaid during the three months ended March 31, 2019. As of March 31, 2020 and September 30, 2019, there were no 2019 Notes outstanding.
2024 Notes
For the three and six months ended March 31, 2020, we recorded interest expense of $0.8 million and $1.9 million (inclusive of fees), respectively, related to our 5.875% unsecured notes due 2024, or the 2024 Notes. For the three and six months ended March 31, 2019, the Company recorded interest expense of $1.2 million and $2.3 million (inclusive of fees), respectively, related to the 2024 Notes.
On March 2, 2020, we redeemed 100%, or $75.0 million aggregate principal amount, of the issued and outstanding 2024 Notes. The redemption price per 2024 Note was $25 plus accrued and unpaid interest. We recognized a loss of $1.0 million in connection with the redemption of the 2024 Notes during the three and six months ended March 31, 2020. As of March 31, 2020, there were no 2024 Notes outstanding. As of September 30, 2019, there were $75.0 million of 2024 Notes outstanding, which had a carrying value and fair value of $73.9 million and $77.4 million, respectively.
2028 Notes
For the three and six months ended March 31, 2020, we recorded interest expense of $1.1 million and $2.5 million (inclusive of fees), respectively, related to our 6.125% unsecured notes due 2028, or the 2028 Notes. For the three and six months ended March 31, 2019, we recorded interest expense of $1.4 million and $2.7 million (inclusive of fees), respectively, related to the 2028 Notes.
On March 13, 2020, we redeemed 100%, or $86.3 million aggregate principal amount, of the issued and outstanding 2028 Notes. The redemption price per 2028 Note was $25 plus accrued and unpaid interest. We recognized a loss of $1.5 million in connection with the redemption of the 2028 Notes during the three and six months ended March 31, 2020. As of March 31, 2020, there were no 2028 Notes

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outstanding. As of September 30, 2019, there were $86.3 million of 2028 Notes outstanding, which had a carrying value and fair value of $84.6 million and $87.6 million, respectively.
Off-Balance Sheet Arrangements
We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. As of March 31, 2020, our only off-balance sheet arrangements consisted of $91.6 million of unfunded commitments, which was comprised of $86.7 million to provide debt financing to certain of our portfolio companies, $1.3 million to provide equity financing to SLF JV I and $3.5 million related to unfunded limited partnership interests. As of September 30, 2019, our only off-balance sheet arrangements consisted of $88.3 million of unfunded commitments, which was comprised of $83.5 million to provide debt financing to certain of its portfolio companies, $1.3 million to provide equity financing to SLF JV I and $3.5 million related to unfunded limited partnership interests. Such commitments are subject to our portfolio companies' satisfaction of certain financial and nonfinancial covenants and may involve, to varying degrees, elements of credit risk in excess of the amount recognized in our Consolidated Statements of Assets and Liabilities.

93


A list of unfunded commitments by investment (consisting of revolvers, term loans with delayed draw components, SLF JV I subordinated notes and LLC equity interests, and limited partnership interests) as of March 31, 2020 and September 30, 2019 is shown in the table below:
 
 
March 31, 2020
 
September 30, 2019
Assembled Brands Capital LLC
 
$
33,143

 
$
35,182

WPEngine, Inc.
 
26,348

 
—

Dominion Diagnostics, LLC
 
5,887

 
—

Corrona, LLC
 
4,273

 
—

PaySimple, Inc.
 
3,985

 
12,250

Pingora MSR Opportunity Fund I-A, LP
 
3,500

 
3,500

MRI Software LLC
 
2,857

 
—

Accupac, Inc.
 
2,346

 
—

Acquia Inc.
 
2,240

 
—

New IPT, Inc.
 
2,229

 
2,229

Apptio, Inc.
 
1,538

 
1,538

Senior Loan Fund JV I, LLC
 
1,328

 
1,328

iCIMs, Inc.
 
882

 
882

Ministry Brands, LLC
 
425

 
800

Coyote Buyer, LLC
 
352

 
—

GKD Index Partners, LLC
 
231

 
1,156

P2 Upstream Acquisition Co.
 
—

 
9,000

Sorrento Therapeutics, Inc.
 
—

 
7,500

4 Over International, LLC
 
—

 
1,977

Mindbody, Inc.
 
—

 
3,048

Thruline Marketing, Inc.
 
—

 
3,000

TerSera Therapeutics, LLC
 
—

 
4,200

PLATO Learning Inc. (1)
 
—

 
746

Total
 
$
91,564

 
$
88,336

 ___________ 
(1) This investment was on cash non-accrual status as of March 31, 2020 and September 30, 2019.

Contractual Obligations
The following table reflects information pertaining to our principal debt outstanding under the Credit Facility, 2025 Notes, 2024 Notes and 2028 Notes:
 
 
Debt Outstanding
as of September 30, 2019
 
Debt Outstanding
as of March 31, 2020
 
Weighted average debt
outstanding for the
six months ended
March 31, 2020
 
Maximum debt
outstanding for the six months ended
March 31, 2020
Credit Facility
 
$
314,825

 
$
404,825

 
$
358,005

 
$
424,825

2025 Notes
 
—

 
300,000

 
57,377

 
300,000

2024 Notes
 
75,000

 
—

 
63,115

 
75,000

2028 Notes
 
86,250

 
—

 
77,766

 
86,250

Total debt
 
$
476,075

 
$
704,825

 
$
556,263

 


94


 
The following table reflects our contractual obligations arising from the Credit Facility and the 2025 Notes:
 
 
 
Payments due by period as of March 31, 2020
Contractual Obligations
 
Total
 
Less than 1 year
 
1-3 years
 
3-5 years
 
More than 5 years
Credit Facility
 
$
404,825

 
$
—

 
$
—

 
$
404,825

 
$
—

Interest due on Credit Facility
 
44,622

 
11,429

 
22,859

 
10,334

 
—

2025 Notes
 
300,000

 
—

 
—

 
300,000

 
—

Interest due on 2025 Notes
 
51,551

 
10,500

 
21,000

 
20,051

 
—

Total
 
$
800,998

 
$
21,929

 
$
43,859

 
$
735,210

 
$
—


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Regulated Investment Company Status and Distributions
We have qualified and elected to be treated as a RIC under Subchapter M of the Code for tax purposes. As long as we continue to qualify as a RIC, we will not be subject to tax on our investment company taxable income (determined without regard to any deduction for dividends paid) or realized net capital gains, to the extent that such taxable income or gains is distributed, or deemed to be distributed as dividends, to stockholders on a timely basis.
Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation. Distributions declared and paid by us in a taxable year may differ from taxable income for that taxable year as such distributions may include the distribution of taxable income derived from the current taxable year or the distribution of taxable income derived from the prior taxable year carried forward into and distributed in the current taxable year. Distributions also may include returns of capital.
To maintain RIC tax treatment, we must, among other things, distribute dividends, with respect to each taxable year, of an amount at least equal to 90% of our investment company taxable income (i.e., our net ordinary income and our realized net short-term capital gains in excess of realized net long-term capital losses, if any), determined without regard to any deduction for dividends paid. As a RIC, we are also subject to a federal excise tax, based on distribution requirements of our taxable income on a calendar year basis. We anticipate timely distribution of our taxable income in accordance with tax rules. We did not incur a U.S. federal excise tax for calendar years 2018 and 2019. We may incur a federal excise tax in future years.
We intend to distribute at least 90% of our annual taxable income (which includes our taxable interest and fee income) to our stockholders. The covenants contained in the Credit Facility may prohibit us from making distributions to our stockholders, and, as a result, could hinder our ability to satisfy the distribution requirement associated with our ability to be subject to tax as a RIC. In addition, we may retain for investment some or all of our net capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) and treat such amounts as deemed distributions to our stockholders. If we do this, our stockholders will be treated as if they received actual distributions of the capital gains we retained and then reinvested the net after-tax proceeds in our common stock. Our stockholders also may be eligible to claim tax credits (or, in certain circumstances, tax refunds) equal to their allocable share of the tax we paid on the capital gains deemed distributed to them. To the extent our taxable earnings for a fiscal and taxable year fall below the total amount of our dividend distributions for that fiscal and taxable year, a portion of those distributions may be deemed a return of capital to our stockholders.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a Business Development Company under the Investment Company Act and due to provisions in our credit facilities and debt instruments. If we do not distribute a certain percentage of our taxable income annually, we will suffer adverse tax consequences, including possible loss of our ability to be subject to tax as a RIC. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.
A RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder elects to receive his or her entire distribution in either cash or stock of the RIC, subject to certain limitations regarding the aggregate amount of cash to be distributed to all stockholders. If these and certain other requirements are met, for U.S federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.
We may generate qualified net interest income or qualified net short-term capital gains that may be exempt from U.S. withholding tax when distributed to foreign stockholders. A RIC is permitted to designate distributions of qualified net interest income and qualified short-term capital gains as exempt from U.S. withholding tax when paid to non-U.S. shareholders with proper documentation. The following table, which may be subject to change as we finalize our annual tax filings, lists the percentage of qualified net interest income and qualified short-term capital gains for the year ended September 30, 2019, our last tax year end.
Year Ended
 
Qualified Net Interest Income
Qualified Short-Term Capital Gains
September 30, 2019
 
89.6
%
—

We have adopted a DRIP that provides for the reinvestment of any distributions that we declare in cash on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our Board of Directors declares a cash distribution, then our stockholders who have not “opted out” of the DRIP will have their cash distributions automatically reinvested in additional shares of our common stock, rather than receiving a cash distribution. If our shares are trading at a premium to net asset value, we typically issue new shares to implement the DRIP, with such shares issued at the greater of the most recently computed net asset value per share of our common stock or 95% of the current market value per share of our common stock on the payment date for such distribution. If our shares are trading at a discount to net asset value, we typically purchase shares in the open market in connection with our obligations under the DRIP.

96


Related Party Transactions
We have entered into the Investment Advisory Agreement with Oaktree and the Administration Agreement with Oaktree Administrator, a wholly-owned subsidiary of Oaktree. Mr. John B. Frank, an interested member of our Board of Directors, has an indirect pecuniary interest in Oaktree. Oaktree is a registered investment adviser under the Advisers Act that is partially and indirectly owned by OCG. See “Note 11. Related Party Transactions – Investment Advisory Agreement” and “– Administrative Services” in the notes to the accompanying Consolidated Financial Statements.
Oaktree has voluntarily deferred the payment of Part I incentive fees earned during the three months ended March 31, 2020.
Recent Developments
Distribution Declaration
On April 30, 2020, our Board of Directors declared a quarterly distribution of $0.095 per share, payable in cash on June 30, 2020 to stockholders of record on June 15, 2020.
Investment Advisory Agreement

         On May 4, 2020, Oaktree effected the novation of the Investment Advisory Agreement to Oaktree Fund Advisors, LLC, a registered investment adviser under common control with Oaktree. Immediately following such novation, we and Oaktree Fund Advisors, LLC
entered into a new investment advisory agreement with the same terms, including fee structure, as the Investment Advisory Agreement.
Investment Portfolio Activity
From April 1, 2020 to April 30, 2020, originations totaled $132 million with a weighted average yield of 10.6% and were primarily comprised of opportunistic purchases made in both the private and public markets. Of these new investment commitments, 50% were first lien loans, 5% were second lien loans and 45% were subordinated debt investments.
Liquidity
As of April 30, 2020, we had $68 million of cash and cash equivalents and $260 million of undrawn capacity on our credit facility (subject to borrowing base and other limitations). Unfunded investment commitments were $122 million as of April 30, 2020, with approximately $76 million that can be drawn immediately as the remaining amount is subject to certain milestones that must be met by portfolio companies.
Credit Facility Amendment
On May 6, 2020, we amended our revolving credit facility (i) to reduce the minimum shareholders' equity covenant from $700 million to $550 million, (ii) to increase the interest rate margin up to 2.75% on LIBOR loans or 1.75% on alternative base rate loans if our minimum shareholders' equity is below $700 million depending on our senior coverage ratio and (iii) to reduce the maximum size of the facility under the "accordion" feature to the greater of $800 million or our net worth on the date of such increase.


Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to financial market risks, including changes in the valuations of our investment portfolio and interest rates.
Valuation Risk
Our investments may not have a readily available market price, and we value these investments at fair value as determined in good faith by our Board of Directors, with the assistance of the Audit Committee and Oaktree. There is no single standard for determining fair value in good faith and valuation methodologies involve a significant degree of management judgment. In addition, our valuation methodology utilizes discount rates in part in valuing our investments, and changes in those discount rates may have an impact on the valuation of our investments. Accordingly, valuations by us do not necessarily represent the amounts which may eventually be realized from sales or other dispositions of investments. Estimated fair values may differ from the values that would have been used had a ready market for the investment existed, and the differences could be material to the financial statements.

97


Interest Rate Risk
We are subject to financial market risks, including changes in interest rates. Changes in interest rates may affect both our cost of funding and our interest income from portfolio investments, cash and cash equivalents and idle fund investments. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs. Our investment income will be affected by changes in various interest rates, including LIBOR and prime rates, to the extent our debt investments include floating interest rates.
As of March 31, 2020, 90.6% of our debt investment portfolio (at fair value) and 90.9% of our debt investment portfolio (at cost) bore interest at floating rates. The composition of our floating rate debt investments by interest rate floor as of March 31, 2020 and September 30, 2019 was as follows: 
 
 
March 31, 2020
 
September 30, 2019
($ in thousands)
 
Fair Value
 
% of Floating Rate Portfolio
 
Fair Value
 
% of Floating Rate Portfolio
0%
 
$
489,126

 
41.1
%
 
$
489,464

 
41.6
%
>0% and <1%
 
785

 
0.1
%
 
—

 
—
%
1%
 
699,954

 
58.8
%
 
685,995

 
58.4
%
Total Floating Rate Investments
 
$
1,189,865

 
100.0
%
 
$
1,175,459

 
100.0
%

98


Based on our Consolidated Statement of Assets and Liabilities as of March 31, 2020, the following table shows the approximate annualized net increase (decrease) in net assets resulting from operations of hypothetical base rate changes in interest rates, assuming no changes in our investment and capital structure. However, there can be no assurances our portfolio companies will be able to meet their contractual obligations at any or all levels on increases in interest rates.
($ in thousands)
 
 
 
 
 
 
Basis point increase
 
Increase in Interest Income
 
(Increase) in Interest Expense
 
Net increase (decrease) in net assets resulting from operations
250
 
$
33,773

 
$
(10,121
)
 
$
23,652

200
 
27,018

 
(8,097
)
 
18,921

150
 
20,264

 
(6,072
)
 
14,192

100
 
13,509

 
(4,048
)
 
9,461

50
 
6,755

 
(2,024
)
 
4,731


Basis point decrease
 
(Decrease) in Interest Income
 
Decrease in Interest Expense
 
Net increase (decrease) in net assets resulting from operations
50
 
$
(4,183
)
 
$
2,024

 
$
(2,159
)
100
 
(6,782
)
 
3,333

 
(3,449
)
150
 
(7,303
)
 
3,333

 
(3,970
)
200 (1)
 
(7,309
)
 
3,333

 
(3,976
)
 __________
(1) The effect of a greater than 200 basis point decrease is limited by interest rate floors on certain investments.
We regularly measure exposure to interest rate risk. We assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on this review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. The following table shows a comparison of the interest rate base for our interest-bearing cash and outstanding investments, at principal, and our outstanding borrowings as of March 31, 2020 and September 30, 2019: 
 
 
March 31, 2020
 
September 30, 2019
($ in thousands)
 
Interest Bearing
Cash and
Investments
 
Borrowings
 
Interest Bearing
Cash and
Investments
 
Borrowings
Money market rate
 
$
82,928

 
$
—

 
$
9,611

 
$
—

Prime rate
 
1,221

 
—

 
48,036

 
14,000

LIBOR
 
 
 
 
 
 
 
 
30 day
 
718,343

 
404,825

 
686,880

 
300,825

60 day
 
9,000

 
—

 
9,000

 
—

90 day
 
423,728

 
—

 
402,603

 
—

180 day
 
167,265

 
—

 
20,967

 
—

EURIBOR
 
 
 
 
 
 
 
 
30 day
 
20,015

 
—

 
19,078

 
—

UK LIBOR
 
 
 
 
 
 
 
 
30 day
 
22,319

 
—

 
22,181

 
—

Fixed rate
 
135,797

 
300,000

 
185,809

 
161,250

Total
 
$
1,580,616

 
$
704,825

 
$
1,404,165

 
$
476,075



99


Item 4. Controls and Procedures

Management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as of March 31, 2020, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, in timely identifying, recording, processing, summarizing and reporting any material information relating to us that is required to be disclosed in the reports we file or submit under the Exchange Act.

There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.




100


PART II

Item 1.     Legal Proceedings
Although we may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise, we are currently not a party to any pending material legal proceedings.

Item 1A. Risk Factors

Except as set forth below, there have been no material changes during the three and six months ended March 31, 2020 to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended September 30, 2019.
Global economic, political and market conditions caused by the current public health crisis have (and in the future could further) adversely affect our business, results of operations and financial condition and those of our portfolio companies.

A novel strain of coronavirus initially appeared in China in late 2019 and has rapidly spread to other countries, including the United States.  In an attempt to slow the spread of the coronavirus, governments in major jurisdictions, including the United States, the United Kingdom, France, Italy, South Korea and China, have placed restrictions on travel, issued “stay at home” orders and ordered the temporary closure of certain businesses, such as factories and retail stores.  As such restrictions and closures have impacted supply chains, consumer demand and/or the operations of many business, uncertainty surrounding the full economic impact of the coronavirus pandemic has contributed to significant market volatility and disruption, which may have long-term effects on the U.S. and global financial markets and have caused (and may cause further) economic uncertainties or deterioration in the United States and worldwide.

Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets, significant write-offs in the financial sector and re-pricing of credit risk in the broadly syndicated market.  These and any other unfavorable economic conditions created by the coronavirus and related restrictions and closures could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events have negatively impacted the fair value of the investments that we hold and could limit our investment originations (including as a result of the investment professionals of our investment adviser diverting their time to the restructuring of certain investments), negatively impact our operating results and limit our ability to grow.  In addition, our success depends in substantial part on the management, skill and acumen of our investment adviser, whose operations may be adversely impacted, including through quarantine measures and travel restrictions imposed on its investment professionals or service providers, or any related health issues of such investment professionals or service providers.

In addition, the restrictions and closures and related market conditions have resulted in certain of our portfolio companies halting or significantly curtailing operations and have negatively affected the supply chains of certain of our portfolio companies.  The financial results of middle-market companies, like those in which we invest, have experienced deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults, and further deterioration will further depress the outlook for those companies. Further, adverse economic conditions have decreased and may in the future decrease the value of collateral securing some of our loans and the value of our equity investments. Such conditions have required and may in the future require us to modify the payment terms of our investments, including changes in PIK interest provisions and/or cash interest rates. The performance of certain of our portfolio companies has been, and in the future may be, negatively impacted by these economic or other conditions, which can result in our receipt of reduced interest income from our portfolio companies and/or realized and unrealized losses related to our investments, and, in turn, may adversely affect distributable income and have a material adverse effect on our results of operations.

As the potential impact of the coronavirus remains difficult to predict, the extent to which the coronavirus could negatively affect our and our portfolio companies’ operating results or the duration of any potential business or supply-chain disruption is uncertain. Any potential impact to our results of operations will depend to a large extent on future developments regarding the duration and severity of the coronavirus and the actions taken by governments and their citizens to contain the coronavirus or treat its impact, all of which are beyond our control.




101

As a result of the COVID-19 pandemic and related government actions, certain of our portfolio companies are distressed, and we have opportunistically acquired the securities and obligations of distressed companies.  These and future investments in distressed companies are subject to significant risks, including lack of income, extraordinary expenses, uncertainty with respect to satisfaction of debt, lower-than-expected investment values or income potentials and resale restrictions.

We have acquired, and may in the future acquire, the securities and other obligations of distressed or bankrupt companies, including opportunistic acquisitions during the COVID-19 pandemic. At times, distressed debt obligations may not produce income and may require us to bear certain extraordinary expenses (including legal, accounting, valuation and transaction expenses) in order to protect and recover our investment. Therefore, when we invest in distressed debt, our ability to achieve current income for our stockholders may be diminished, particularly where the portfolio company has negative EBITDA.

We also are subject to significant uncertainty as to when and in what manner and for what value the distressed debt we acquire will eventually be satisfied whether through a refinancing, restructuring, liquidation, an exchange offer or plan of reorganization involving the distressed debt securities or a payment of some amount in satisfaction of the obligation. In addition, even if an exchange offer is made or plan of reorganization is adopted with respect to distressed debt held by us, there can be no assurance that the securities or other assets received by us in connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made.

Moreover, any securities received by us upon completion of an exchange offer or plan of reorganization may be restricted as to resale. As a result of our participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of distressed debt, we may be restricted from disposing of such securities.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.
None.


Item 3. Defaults Upon Senior Securities
None.

Item 4.     Mine Safety Disclosures
Not applicable.


Item 5. Other Information
None.


102


Item 6. Exhibits

 
 
 
4.1
 
Fifth Supplemental Indenture, dated as of February 25, 2020, relating to the 3.500% Notes due 2025, between the Company and Deutsche Bank Trust Company Americas, as trustee (Incorporated by reference to Exhibit 4.1 filed with the Registrant’s Form 8-K (File No. 814-00755) filed on February 25, 2020).
 
 
 
4.2
 
Form of 3.500% Notes due 2025 (included as Exhibit A to Exhibit 4.1 hereto).
 
 
 
 
 Investment Advisory Agreement, dated as of May 4, 2020, by and between the Company and Oaktree Fund Advisors, LLC.
 
 
 
 
Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement, dated as of May 6, 2020, among the Company, as Borrower, the lenders party thereto from time to time and ING Capital LLC, as administrative agent for the lenders thereunder.
 
 
 
  
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
 
 
 
  
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
 
 
 
  
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
 
 
 
  
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
*
Filed herewith.

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
 
 
OAKTREE SPECIALTY LENDING CORPORATION
 
 
By:
 
/s/   Armen Panossian
 
 
Armen Panossian




 
 
Chief Executive Officer
 
 
By:
 
/s/    Mel Carlisle
 
 
Mel Carlisle

 
 
Chief Financial Officer and Treasurer
Date: May 6, 2020

103

INVESTMENT ADVISORY AGREEMENT
BETWEEN
OAKTREE SPECIALTY LENDING CORPORATION
AND
OAKTREE FUND ADVISORS, LLC
This Investment Advisory Agreement (this “Agreement”) made effective as of May 4, 2020 (the “Effective Date”), by and between OAKTREE SPECIALTY LENDING CORPORATION, a Delaware corporation (the “Company”), and OAKTREE FUND ADVISORS, LLC, a Delaware limited liability company (the “Adviser”).
WHEREAS, the Company is a closed-end management investment fund that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “Investment Company Act”); and
WHEREAS, the Adviser is organized as an investment adviser that is registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”); and
WHEREAS, the Company and the Adviser desire to set forth the terms and conditions for the provision by the Adviser of investment advisory services to the Company.
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the parties hereby agree as follows:
1.
Duties of the Adviser.
(a)    The Company hereby appoints the Adviser to act as the investment adviser to the Company and to manage the investment and reinvestment of the assets of the Company, subject to the supervision of the Board of Directors of the Company, (the “Board”) for the period and upon the terms herein set forth, (i) in accordance with the investment objective, policies and restrictions that are set forth in the reports and/or registration statements that the Company files with the Securities and Exchange Commission (the “SEC”) from time to time; (ii) in accordance with all other applicable federal and state laws, rules and regulations, and the Company’s certificate of incorporation and bylaws (each as amended, restated and/or corrected); and (iii) in accordance with the Investment Company Act. Without limiting the generality of the foregoing, the Adviser shall, during the term and subject to the provisions of this Agreement (A) determine the composition of the portfolio of the Company, the nature and timing of the changes therein and the manner of implementing such changes; (B) identify, evaluate and negotiate the structure of the investments made by the Company; (C) execute, close, monitor and service the Company’s investments; (D) determine the securities and other assets that the Company will purchase, retain, or sell; (E) perform due diligence on prospective portfolio companies; and (F) provide the Company with such other investment advisory, research and related services as the Company may, from time to time, reasonably require for the investment of its funds. The Adviser shall have the power and authority on behalf of the Company to effectuate its investment

1

decisions for the Company, including the negotiation, execution and delivery of all documents relating to the Company’s investments and the placing of orders for other purchase or sale transactions on behalf of the Company. In the event that the Company determines to obtain debt financing (or refinance such financing), the Adviser shall arrange for such financing on the Company’s behalf, subject to the oversight and approval of the Board. If it is necessary for the Adviser to make investments on behalf of the Company through a special purpose vehicle, the Adviser shall have authority to create or arrange for the creation of such special purpose vehicle and to make such investments through such special purpose vehicle.
(b)    The Adviser hereby accepts such appointment and agrees during the term hereof to render the services described herein for the compensation provided herein.
(c)    The Adviser is hereby authorized to enter into one or more sub-advisory agreements with other investment advisers (each, a “Sub-Adviser”) pursuant to which the Adviser may obtain the services of the Sub-Adviser(s) to assist the Adviser in fulfilling its responsibilities hereunder. Specifically, the Adviser may retain a Sub-Adviser to recommend specific securities or other investments based upon the Company’s investment objective and policies, and work, along with the Adviser, in structuring, negotiating, arranging or effecting the acquisition or disposition of such investments and monitoring investments on behalf of the Company, subject to the oversight of the Adviser and the Company. The Adviser, and not the Company, shall be responsible for any compensation payable to any Sub-Adviser. Any sub-advisory agreement entered into by the Adviser shall be in accordance with the requirements of the Investment Company Act and other applicable federal and state law.
(d)    The Adviser shall, for all purposes herein provided, be deemed to be an independent contractor and, except as expressly provided or authorized herein, shall have no authority to act for or represent the Company in any way or otherwise be deemed an agent of the Company.
(e)    Subject to review by and the overall control of the Board, the Adviser shall keep and preserve, in the manner and for the period required by the Investment Company Act, any books and records relevant to the provision of its investment advisory services to the Company and shall specifically maintain all books and records with respect to the Company’s portfolio transactions and shall render to the Board such periodic and special reports as the Board may reasonably request. The Adviser agrees that all records that it maintains for the Company are the property of the Company and shall surrender promptly to the Company any such records upon the Company’s request, provided that the Adviser may retain a copy of such records.
2.
Company’s Responsibilities and Expenses Payable by the Company.
All personnel of the Adviser, when and to the extent engaged in providing investment advisory services hereunder, and the compensation and routine overhead expenses of such personnel allocable to such services, shall be provided and paid for by the Adviser and not by the Company. The Company shall bear all other costs and expenses of its operations and transactions, including (without limitation) fees and expenses relating to: (a) offering expenses; (b) diligence and monitoring of the Company’s financial, regulatory and legal affairs (to the extent an investment opportunity is being considered for the Company and any other accounts

2

managed by Adviser or its affiliates, the Adviser’s out-of-pocket expenses related to the due diligence for such investment will be shared with such other accounts pro rata based on the anticipated allocation of such investments opportunity between the Company and the other accounts); (c) the cost of calculating the Company’s net asset value; (d) the cost of effecting sales and repurchases of shares of the Company’s common stock and other securities; (e) management and incentive fees payable pursuant to this Agreement; (f) fees payable to third parties relating to, or associated with, making investments and valuing investments (including third-party valuation firms); (g) transfer agent and custodial fees; (h) fees and expenses associated with marketing efforts (including attendance at investment conferences and similar events); (i) allocable out-of-pocket costs incurred in providing managerial assistance to those portfolio companies that request it; (j) fees, interest or other costs payable on or in connection with any indebtedness; (k) federal and state registration fees; (l) any exchange listing fees; (m) federal, state and local taxes; (n) independent directors’ fees and expenses; (o) brokerage commissions; (p) costs of proxy statements, stockholders’ reports and notices; (q) costs of preparing government filings, including periodic and current reports with the SEC; (r) fidelity bond, liability insurance and other insurance premiums; (s) printing, mailing, independent accountants and outside legal costs; (t) all other direct expenses incurred by either the Company’s administrator or the Company in connection with administering the Company’s business, including payments under the Company’s administration agreement with its administrator (as in effect from time to time, the “Administration Agreement”) that will be based upon the Company’s allocable portion of overhead and other expenses incurred by the Company’s administrator in performing its obligations under the Administration Agreement; and (u) the compensation of the Company’s chief financial officer and chief compliance officer, and their respective staffs.
3.
Compensation of the Adviser.
The Company agrees to pay, and the Adviser agrees to accept, as compensation for the services provided by the Adviser hereunder, a base management fee (“Base Management Fee”) and an incentive fee (“Incentive Fee”) as hereinafter set forth. The Adviser may agree to temporarily or permanently waive or defer, in whole or in part, the Base Management Fee and/or the Incentive Fee. See Appendix A for examples of how these fees are calculated. The Company shall make any payments due hereunder to the Adviser or to the Adviser’s designee as the Adviser may otherwise direct. Any portion of a deferred fee payable to the Adviser shall be deferred without interest and may be paid in any quarter prior to the termination of this Agreement as the Adviser may determine upon written notice to the Company.
(a)    As of the Effective Date, the Base Management Fee shall be calculated at an annual rate of 1.50% of the Company’s gross assets, including any investments made with borrowings, but excluding any cash and cash equivalents; provided, however, that the Base Management Fee shall be calculated at an annual rate of 1.00% of the Company’s gross assets, including any investments made with borrowings, but excluding any cash and cash equivalents that exceeds the product of (A) 200% and (B) the Company’s net asset value. For the avoidance of doubt, the 200% will be calculated in accordance with the Investment Company Act and will give effect to exemptive relief the Company received with respect to debentures issued by a small business investment company subsidiary. For purposes of this Agreement, the term “cash and cash equivalents” will have the meaning ascribed to it from time to time in the notes to the

3

financial statements that the Company files with the SEC. The Base Management Fee shall be payable quarterly in arrears, and shall be calculated based on the value of the Company’s gross assets at the end of each fiscal quarter, and appropriately adjusted for any equity capital raises or repurchases during such quarter. The Base Management Fee for any partial month or quarter shall be appropriately prorated (upon termination of the Agreement, as of the termination date).
(b)    Incentive Fee. The Incentive Fee shall consist of two parts, as follows:
(i)    The first part, referred to as the “Incentive Fee on Income,” shall be calculated and payable quarterly in arrears based on the Company’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter (or upon termination of the Agreement, as of the termination date). The payment of the Incentive Fee on Income shall be subject to payment of a preferred return to investors each quarter, expressed as a rate of return on the value of the Company’s net assets at the end of the most recently completed calendar quarter, of 1.50%, subject to a “catch up” feature (as described below).
For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies, other than fees for providing managerial assistance) accrued during the calendar quarter, minus the Company’s operating expenses for the quarter (including the Base Management Fee, expenses payable under the Administration Agreement, and any interest expense and dividends 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 a deferred interest feature (such as original issue discount debt instruments with payment-in-kind interest and zero coupon securities), accrued income that the Company has 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.
The calculation of the Incentive Fee on Income for each quarter is as follows:
(A)    No Incentive Fee on Income shall be payable to the Adviser in any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment Income does not exceed the preferred return rate of 1.50% (the “Preferred Return”) on net assets;
(B)    100% of the Company’s Pre-Incentive Fee Net Investment Income, if any, that exceeds the Preferred Return but is less than or equal to 1.8182% in any calendar quarter shall be payable to the Adviser. This portion of the company’s Incentive Fee on Income is referred to as the “catch up” and is intended to provide the Adviser with an incentive fee of 17.5% on all of the Company’s Pre-Incentive Fee Net Investment Income when the Company’s Pre-Incentive Fee Net Investment Income reaches 1.8182% on net assets in any calendar quarter; and

4

(C)    For any quarter in which the Company’s Pre-Incentive Fee Net Investment Income exceeds 1.8182% on net assets, the Incentive Fee on Income shall equal 17.5% of the amount of the Company’s Pre-Incentive Fee Net Investment Income, as the Preferred Return and catch-up will have been achieved.
(ii)    The second part of the Incentive Fee, referred to as the “Incentive Fee on Capital Gains,” shall be determined and payable in arrears as of the end of each fiscal year (or upon termination of the Agreement, as of the termination date), commencing the fiscal year ended September 30, 2019, and shall equal 17.5% of the Company’s realized capital gains, if any, on a cumulative basis from the beginning of the fiscal year ended September 30, 2019 through the end of each subsequent fiscal 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 under this Agreement. Any realized capital gains, realized capital losses, unrealized capital appreciation and unrealized capital depreciation with respect to the Company’s portfolio as of the end of the fiscal year ended September 30, 2018 shall be excluded from the calculations of the second part of the incentive fee.
(c)    In certain circumstances the Adviser, any Sub-Adviser, or any of their respective affiliates, may receive compensation from a portfolio company in connection with the Company’s investment in such portfolio company. Any compensation received by the Adviser, Sub-Adviser, or any of their respective affiliates, attributable to the Company’s investment in any portfolio company, in excess of any of the limitations in or exemptions granted from the 1940 Act, any interpretation thereof by the staff of the SEC, or the conditions set forth in any exemptive relief granted to the Adviser, any Sub-Adviser or the Company by the SEC, shall be delivered promptly to the Company and the Company will retain such excess compensation for the benefit of its shareholders.
4.
Covenants of the Adviser.
The Adviser covenants that it will maintain its registration as an investment adviser under the Advisers Act. The Adviser agrees that its activities will at all times be in compliance in all material respects with all applicable federal and state laws governing its operations and investments.
5.
Brokerage Commissions.
The Adviser is hereby authorized, to the fullest extent now or hereafter permitted by law, to cause the Company to pay a member of a national securities exchange, broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another member of such exchange, broker or dealer would have charged for effecting that transaction, if the Adviser determines in good faith, taking into account such factors as price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution, and operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities, that such amount of commission is reasonable in relation to the

5

value of the brokerage and/or research services provided by such member, broker or dealer, viewed in terms of either that particular transaction or its overall responsibilities with respect to the Company’s portfolio, and constitutes the best net results for the Company.
6.
Other Activities of the Adviser.
The services of the Adviser to the Company are not exclusive. Subject to the provisions of the Company’s certificate of incorporation and bylaws (each as amended, restated and/or corrected), the Adviser and its managers, members, principals, officers, employees and agents shall be free to act for their own account or the account of any other Account, and to engage in any other business or render similar or different services to others including, without limitation, the direct or indirect sponsorship or management of other investment based accounts or commingled pools of capital, however structured, having investment objectives similar to those of the Company, so long as the Adviser’s services to the Company hereunder are not impaired thereby. The Company agrees that the Adviser may give advice and take action in the performance of its duties with respect to any of its other clients which may differ from advice given or the timing or nature of action taken with respect to the investments of the Company. Nothing in this Agreement shall limit or restrict the right of any manager, member, principal, officer, employee or agent of the Adviser to engage in any other business or to devote his or her time and attention in part to any other business, whether of a similar or dissimilar nature, or to receive any fees or compensation in connection therewith (including fees for serving as a director of, or providing consulting services to, one or more of the Company’s portfolio companies, subject to applicable law). So long as this Agreement or any extension, renewal or amendment remains in effect, the Adviser shall be the only investment adviser for the Company, subject to the Adviser’s right to enter into sub-advisory agreements. The Adviser assumes no responsibility under this Agreement other than to render the services called for hereunder. It is understood that directors, managers, officers, employees and stockholders of the Company are or may become interested in the Adviser and its affiliates, as directors, officers, employees, partners, principals, stockholders, members, managers, agents or otherwise, and that the Adviser and directors, officers, employees, partners, principals, stockholders, members, managers and agents of the Adviser and its affiliates are or may become similarly interested in the Company as stockholders or otherwise.
7.
Responsibility of Dual Directors, Officers and/or Employees.
If any person who is a manager, member, principal, officer, employee or agent of the Adviser is or becomes a director, manager, officer and/or employee of the Company and acts as such in any business of the Company, then such manager, member, principal, officer, employee and/or agent of the Adviser shall be deemed to be acting in such capacity solely for the Company, and not as a manager, member, principal, officer, employee or agent of the Adviser or under the control or direction of the Adviser, even if paid by the Adviser.
8.
Limitation of Liability of the Adviser; Indemnification.
The Adviser (and its officers, managers, members (and their partners or members, including the owners of their partners or members), agents, employees, controlling persons and any other person or entity affiliated with the Adviser) shall not be liable to the Company for any

6

action taken or omitted to be taken by the Adviser in connection with the performance of any of its duties or obligations under this Agreement or otherwise as an investment adviser of the Company (except to the extent specified in Section 36(b) of the Investment Company Act concerning loss resulting from a breach of fiduciary duty (as the same is finally determined by judicial proceedings) with respect to the receipt of compensation for services, and the Company shall indemnify, defend and protect the Adviser (and its officers, managers, members (and their partners or members, including the owners of their partners or members), agents, employees, controlling persons and any other person or entity affiliated with the Adviser, each of whom shall be deemed a third party beneficiary hereof) (collectively, the “Indemnified Parties”) and hold them harmless from and against all damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) incurred by the Indemnified Parties in or by reason of any pending, threatened or completed action, suit, investigation or other proceeding (including an action or suit by or in the right of the Company or its security holders) arising out of or otherwise based upon the performance of any of the Adviser’s duties or obligations under this Agreement or otherwise as an investment adviser of the Company. Notwithstanding the preceding sentence of this Paragraph 8 to the contrary, nothing contained herein shall protect or be deemed to protect the Indemnified Parties against or entitle or be deemed to entitle the Indemnified Parties to indemnification in respect of, any liability to the Company or its security holders to which the Indemnified Parties would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of the Adviser’s duties or by reason of the reckless disregard of the Adviser’s duties and obligations under this Agreement.
9.
Effectiveness, Duration and Termination of Agreement.
This Agreement shall become effective as of the Effective Date. This Agreement shall remain in effect until September 30, 2021, and thereafter shall continue automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (a) the vote of the Board or a majority of the outstanding voting securities of the Company and (b) the vote of a majority of the Company’s directors who are not parties to this Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the Investment Company Act) of any such party, in accordance with the requirements of the Investment Company Act and each of whom is an “independent director” under applicable New York Stock Exchange listing standards. This Agreement may be terminated at any time, without the payment of any penalty, upon 60 days’ written notice, by the vote of a majority of the outstanding voting securities of the Company, or by the vote of the Company’s directors or by the Adviser. This Agreement shall automatically terminate in the event of its “assignment” (as such term is defined for purposes of Section 15(a)(4) of the Investment Company Act). Further, notwithstanding the termination or expiration of this Agreement as aforesaid, the Adviser shall be entitled to any amounts owed under Paragraph 3 through the date of termination or expiration.
10.
Notices.
Any notice under this Agreement shall be given in writing, addressed and delivered or mailed, postage prepaid, to the other party at its principal office.


7

11.
Amendments.
This Agreement may be amended by mutual consent.
12.
Entire Agreement; Governing Law.
This Agreement contains the entire agreement of the parties and supersedes all prior agreements, understandings and arrangements with respect to the subject matter hereof. Notwithstanding the place where this Agreement may be executed by any of the parties hereto, this Agreement shall be construed in accordance with the laws of the State of New York. For so long as the Company is regulated as a BDC under the Investment Company Act, this Agreement shall also be construed in accordance with the applicable provisions of the Investment Company Act. In such case, to the extent the applicable laws of the State of New York, or any of the provisions herein, conflict with the provisions of the Investment Company Act, the latter shall control. To the fullest extent permitted by law, in the event of any dispute arising out of the terms and conditions of this Agreement, the parties hereto consent and submit to the jurisdiction of the courts of the State of New York in the county of New York and of the U.S. District Court for the Southern District of New York.
13.
Forum Selection.
Any legal action or proceeding with respect to this Agreement or the services provided hereunder or for recognition and enforcement of any judgment in respect hereof brought by the other party hereto or its successors or assigns must be brought and determined in the state or United States district courts of the State of New York (and may not be brought or determined in any other forum or jurisdiction), and each party hereto submits with regard to any action or proceeding for itself and in respect of its property, generally and unconditionally, to the sole and exclusive jurisdiction of the aforesaid courts.
14.
No Third Party Beneficiary.
Other than expressly provided for in Paragraph 8 of this Agreement, this Agreement does not and is not intended to confer any rights or remedies upon any person other than the parties to this Agreement; there are no third-party beneficiaries of this Agreement, including but not limited to stockholders of the Company.
15.
Severability.
Every term and provision of this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such term or provision will be enforced to the maximum extent permitted by law and, in any event, such illegality or invalidity shall not affect the validity of the remainder of this Agreement.
16.
Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall constitute a single agreement.

8

17.
Survival of Certain Provisions.
The provisions of Paragraph 8 of this Agreement shall survive any termination or expiration of this Agreement and the dissolution, termination and winding up of the Company.


9


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date above written.
OAKTREE SPECIALTY LENDING CORPORATION
By: /s/ Mathew Pendo
Name: Mathew Pendo
Title: President and Chief Operating Officer
OAKTREE FUND ADVISORS, LLC


By: /s/ Armen Panossian
Name: Armen Panossian
Title: Managing Director


By: /s/ Mary Gallegly
Name: Mary Gallegly
Title: Senior Vice President


10


Appendix A
Example 1: Incentive Fee on Income for Each Quarter
Alternative 1
Assumptions
Investment income (including interest, dividends, fees, etc.) = 2%
Preferred return = 1.50%
Management fee = 0.375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.20%
Pre-Incentive Fee net investment income
(investment income – (management fee + other expenses)) = 1.425%
Pre-Incentive Fee Net Investment Income does not exceed the Preferred Return, therefore there is no Incentive Fee on Income.
Alternative 2
Assumptions
Investment income (including interest, dividends, fees, etc.) = 2.375%
Preferred Return1 = 1.5%
Management fee2 = 0.375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.20%
Pre-Incentive Fee net investment income
(investment income – (management fee + other expenses)) = 1.80%
Incentive Fee = 17.5% × pre-Incentive Fee net investment income, subject to “catch-up”
= 100% × (1.80% – 1.5%)
= 0.30%
____________________________
1    Represents 6.0% annualized preferred return.
2    Represents 1.5% annualized management fee.
3
The “catch-up” provision is intended to provide the Adviser with an Incentive Fee of 17.5% on all of our pre-Incentive Fee net investment income as if a preferred return did not apply when our net investment income exceeds 1.5% in any calendar quarter and is not applied once the Adviser has received 17.5% of investment income in a quarter. The “catch-up” portion of our pre-Incentive Fee Net Investment Income is the portion that exceeds the 1.5% preferred return but is less than or equal to approximately 1.8182% (that is, 1.5% divided by (1 - 0.175)) in any fiscal quarter.

A-1

Alternative 3
Assumptions
Investment income (including interest, dividends, fees, etc.) = 3.5%
Preferred Return1 = 1.5%
Management fee2 = 0.375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.20%
Pre-Incentive Fee net investment income
(investment income – (management fee + other expenses)) = 2.925%
Incentive Fee = 17.5% × pre-Incentive Fee net investment income,
subject to “catch-up”3 
Incentive Fee = 100% × “catch-up” + (17.5% × (pre-Incentive Fee net investment income – 1.8182%))
Catch-up = 1.8182% – 1.5% = 0.3182%
Incentive Fee = (100% × 0.3182%) + (17.5% × (2.925% – 1.8182%))
= 0.3182% + (17.5% × 1.1068%)
= 0.3182% + 0.1937%
= 0.5119%
Example 2: Incentive Fee on Capital Gains
Assumptions
•
Year 1: $10 million investment made in Company A (“Investment A”), $10 million investment made in Company B (“Investment B”), $10 million investment made in Company C (“Investment C”), $10 million investment made in Company D (“Investment D”) and $10 million investment made in Company E (“Investment E”).
•
Year 2: Investment A sold for $20 million, fair market value (“FMV”) of Investment B determined to be $8 million, FMV of Investment C determined to be $12 million, and FMV of Investments D and E each determined to be $10 million.
•
Year 3: FMV of Investment B determined to be $8 million, FMV of Investment C determined to be $14 million, FMV of Investment D determined to be $14 million and FMV of Investment E determined to be $16 million.
•
Year 4: Investment D sold for $12 million, FMV of Investment B determined to be $10 million, FMV of Investment C determined to be $16 million and FMV of Investment E determined to be $14 million.
•
Year 5: Investment C sold for $20 million, FMV of Investment B determined to be $14 million and FMV of Investment E determined to be $10 million
•
Year 6: Investment B sold for $16 million and FMV of Investment E determined to be $8 million.

A-2

•
Year 7: Investment E sold for $8 million and FMV.
These assumptions are summarized in the following chart:
 
Investment A
Investment B
Investment C
Investment D
Investment E
Cumulative Unrealized Capital Depreciation
Cumulative Realized Capital Losses
Cumulative Realized Capital Gains
Year 1
$10 million
(cost basis)
$10 million
(cost basis)
$10 million
(cost basis)
$10 million
(cost basis)
$10 million (cost basis)
—
—
—
Year 2
$20 million
(sale price)
$8 million FMV
$12 million
FMV
$10 million
FMV
$10 million FMV
$2 million
—
$10 million
Year 3
—
$8 million
FMV
$14 million
FMV
$14 million
FMV
$16 million FMV
$2 million
—
$10 million
Year 4
—
$10 million
FMV
$16 million
FMV
$12 million
(sales price)
$14 million FMV
—
—
$12 million
Year 5
—
$14 million
FMV
$20 million
(sale price)
—
$10 million FMV
—
—
$22 million
Year 6
—
$16 million
(sale price)
—
—
$8 million FMV
$2 million
—
$28 million
Year 7
—
—
—
—
$8 million (sale price)
—
$2 million
$28 million

•
Year 1: None
•
Year 2:
Capital Gains Fee = 17.5% multiplied by ($10 million realized capital gains on sale of Investment A less $2 million cumulative capital depreciation) = $1.4 million
•
Year 3:
Capital Gains Fee = (17.5% multiplied by ($10 million cumulative realized capital gains less $2 million cumulative capital depreciation)) less $1.4 million cumulative Capital Gains Fee previously paid = $1.4 million less $1.4 million = $0.00 million
•
Year 4:
Capital Gains Fee = (17.5% multiplied by ($12 million cumulative realized capital gains)) less $1.4 million cumulative Capital Gains Fee previously paid = $2.1 million less $1.4 million = $0.7 million
•
Year 5:
Capital Gains Fee = (17.5% multiplied by ($22 million cumulative realized capital gains)) less $2.1 million cumulative Capital Gains Fee previously paid = $3.85 million less $2.1 million = $1.75 million
•
Year 6:
Capital Gains Fee = (17.5% multiplied by ($28 million cumulative realized capital gains less $2 million cumulative capital depreciation)) less $3.85 million

A-3

cumulative Capital Gains Fee previously paid = $4.55 million less $3.85 million = $0.70 million
•
Year 7:
Capital Gains Fee = (17.5% multiplied by ($28 million cumulative realized capital gains less $2 million cumulative realized capital losses)) less $4.55 million cumulative Capital Gains Fee previously paid = $4.55 million less $4.55 million = $0.00 million


A-4
Execution Version

AMENDMENT NO. 2 TO AMENDED AND RESTATED SENIOR SECURED REVOLVING CREDIT AGREEMENT

This AMENDMENT NO. 2 TO AMENDED AND RESTATED SENIOR SECURED REVOLVING CREDIT AGREEMENT (this “Agreement”), dated as of May 6, 2020, is made with respect to the Amended and Restated Senior Secured Revolving Credit Agreement, dated as of February 25, 2019 (as amended by that certain Amendment No. 1 to Amended and Restated Senior Secured Revolving Credit Agreement dated as of December 13, 2019, and as further amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Credit Agreement”), among OAKTREE SPECIALTY LENDING CORPORATION, a Delaware corporation (the “Borrower”), the lenders party to the Credit Agreement from time to time (the “Lenders”), and ING CAPITAL LLC, as administrative agent for the Lenders under the Credit Agreement (in such capacity, together with its successors in such capacity, the “Administrative Agent”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement (as amended hereby).
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have made certain loans and other extensions of credit to the Borrower;
WHEREAS, the Borrower has requested that the Lenders and the Administrative Agent amend certain provisions of the Credit Agreement; and
WHEREAS, the Lenders signatory hereto and the Administrative Agent have agreed to do so on the terms and subject to the conditions contained in this Agreement.
NOW THEREFORE, in consideration of the promises and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION I AMENDMENTS TO CREDIT AGREEMENT
1.1.     Effective as of the Effective Date (as defined below), and subject to the terms and conditions set forth below, the Credit Agreement is hereby amended as follows:
(a)    The Credit Agreement is amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example: doubled-underlined text) as set forth in the Credit Agreement attached hereto as Annex A.
(b)    Exhibit B to the Credit Agreement is hereby amended and restated with Annex B hereto.
(c)    Exhibit D to the Credit Agreement is hereby amended and restated with Annex C hereto.


26662735.10.BUSINESS
    

                SECTION II     MISCELLANEOUS
2.1.     Conditions to Effectiveness of Agreement. This Agreement shall become effective as of the date (the “Effective Date”) on which the Borrower has satisfied each of the following conditions precedent (unless a condition shall have been waived in accordance with Section 9.02 of the Credit Agreement):
(a)    Executed Counterparts. The Administrative Agent shall have received from each party hereto either (1) a counterpart of this Agreement signed on behalf of such party or (2) written evidence satisfactory to the Administrative Agent (which may include telecopy or e-mail transmission of a signed signature page to this Agreement) that such party has signed a counterpart of this Agreement.
(b)    Consents. Each Obligor shall have obtained and delivered to the Administrative Agent certified copies of all consents, approvals, authorizations, registrations, or filings (other than any filing required under the Exchange Act or the rules or regulations promulgated thereunder, including, without limitation, any filing required on Form 8-K) required to be made or obtained by the Borrower and all guarantors in connection with this Agreement, 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 this Agreement or any transaction being financed with the proceeds of the Loans shall be ongoing.
(c)    No Litigation. There shall not exist any action, suit, investigation, litigation or proceeding or other legal or regulatory developments pending or, to the knowledge of a Financial Officer of the Borrower, threatened in any court or before any arbitrator or Governmental Authority that relates to this Agreement or that could have a Material Adverse Effect.
(d)    Default. No Default or Event of Default shall have occurred and be continuing under the Credit Agreement or any other Loan Document (including this Agreement) after giving effect to this Agreement.
(e)    Opinion of Counsel to the Borrower and the Subsidiary Guarantor. A favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of Latham & Watkins LLP, special counsel for the Borrower and the Subsidiary Guarantor, in form and substance reasonably acceptable to the Administrative Agent and covering such matters as the Administrative Agent may reasonably request (and each of the Borrower and the Subsidiary Guarantor hereby instructs such counsel to deliver such opinion to the Administrative Agent and the Lenders).
(f)    Fees and Expenses. The Administrative Agent and the Lenders shall have received all fees and expenses (including the legal fees of Dechert LLP, special New York counsel to the Administrative Agent to the extent invoiced) related to this Agreement and the Credit Agreement owing as of the Effective Date.

2
26662735.10.BUSINESS
    

(g)    Other Documents. The Administrative Agent shall have received such other documents, instruments, certificates and information as the Administrative Agent may reasonably request in form and substance satisfactory to the Administrative Agent.
2.2.     Representations and Warranties. To induce the other parties hereto to enter into this Agreement, each Obligor represents and warrants to the Administrative Agent and each of the Lenders that, as of the Effective Date and after giving effect to this Agreement:
(a)    This Agreement has been duly authorized, executed and delivered by the Borrower and the Subsidiary Guarantors and each of the Credit Agreement, as amended by this Agreement, and this Agreement constitutes a legal, valid and binding obligation of the Borrower and the Subsidiary Guarantors, enforceable in accordance with its respective 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).
(b)    The representations and warranties set forth in Article III of the Credit Agreement and the representations and warranties in each other Loan Document are true and correct in all material respects (other than any representation or warranty already qualified by materiality or Material Adverse Effect, which shall be true and correct in all respects) on and as of the Effective Date, or, as to any such representations and warranties that refer to a specific date, as of such specific date.
2.3.     Counterparts. 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 contract. This Agreement constitutes the entire contract between and among the parties relating to the subject matter hereof and supersedes any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective as provided in Section 2.1, and thereafter shall be binding upon and inure to the benefit of the parties thereto and the respective successors and assigns as permitted under the Credit Agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopy or electronic mail shall be effective as delivery of a manually executed counterpart of this Agreement.
2.4.     Payment of Expenses. The Borrower agrees to pay and reimburse the Administrative Agent for all of its reasonable and documented out-of-pocket costs and expenses incurred in connection with this Agreement, including, without limitation, the reasonable fees, charges and disbursements of legal counsel to the Administrative Agent.
2.5.     GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
2.6.     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 OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,

3
26662735.10.BUSINESS
    

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.
2.7.     Incorporation of Certain Provisions. The provisions of Sections 9.01, 9.07, 9.09 and 9.12 of the Credit Agreement are hereby incorporated by reference mutatis mutandis as if fully set forth herein.
2.8.     Effect of Agreement. Except as expressly set forth herein, this Agreement shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Administrative Agent, the Collateral Agent, the Borrower or the Subsidiary Guarantors under the Credit Agreement or any other Loan Document, and, except as expressly set forth herein, shall not alter, modify, amend or in any way affect any of the other terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle any Person to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. This Agreement shall apply and be effective only with respect to the provisions amended herein of the Credit Agreement. Upon the effectiveness of this Agreement, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of similar import shall mean and be a reference to the Credit Agreement as amended by this Agreement and each reference in any other Loan Document shall mean the Credit Agreement as amended hereby. This Agreement shall constitute a Loan Document.
2.9.     Electronic Execution of Documents. The words “execution,” “execute”, “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include electronic signatures, deliveries 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, physical delivery thereof 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, and the parties hereto consent to conduct the transactions contemplated hereunder by electronic means.
2.10.     Consent and Affirmation. Without limiting the generality of the foregoing, by its execution hereof, the Borrower and each Subsidiary Guarantor, to the extent applicable, hereby, as of the date hereof, (i) consents to this Agreement and the transactions contemplated hereby, (ii) agrees that the Guarantee and Security Agreement and each of the other Security Documents is in full force and effect, (iii) affirms its obligations under the Guarantee and Security Agreement, confirms its guarantee (solely in the case of the Subsidiary Guarantors) and confirms its grant of a security interest in its assets as Collateral for the Secured Obligations (as defined in the Guarantee and Security Agreement), and (iv) acknowledges and affirms that such guarantee and/or grant, as

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applicable, is in full force and effect in respect of, and to secure, the Secured Obligations (as defined in the Guarantee and Security Agreement).

[Signature pages follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.


OAKTREE SPECIALTY LENDING CORPORATION, as Borrower

By:    /s/ Mary Gallegly    
Name: Mary Gallegly
Title: General Counsel and Secretary


OCSL SRNE, LLC, as Subsidiary Guarantor

By:    Oaktree Specialty Lending Corporation
Its:    Managing Member


By:    /s/ Mary Gallegly    
Name: Mary Gallegly
Title: General Counsel and Secretary


FSFC HOLDINGS, INC., as Subsidiary Guarantor

    
By:     /s/ Mary Gallegly    
Name: Mary Gallegly
Title: Secretary


[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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ING CAPITAL LLC, as Administrative Agent
and as a Lender


By:     /s/ Patrick Frisch    
Name: Patrick Frisch
Title: Managing Director


By:     /s/ Dominik Breuer    
Name: Dominik Breuer
Title: Director

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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J.P. MORGAN CHASE BANK N.A., as a Lender


By:     /s/ Diego E Nunes    
Name: Diego E Nunes
Title: Executive Director

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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BANK OF AMERICA, N.A., as a Lender


By:     /s/ Chris Choi     
Name: Chris Choi    
Title: Director

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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ROYAL BANK OF CANADA, as a Lender


By:     /s/ Glenn Van Allen    
Name: Glenn Van Allen
Title: Authorized Signatory

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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CITY NATIONAL BANK, as a Lender


By:     /s/ Jennifer Velez    
Name: Jennifer Velez
Title: Senior Vice President

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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KEYBANK N.A., as a Lender


By:     /s/ Richard Andersen    
Name: Richard Andersen    
Title: Senior Vice President

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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BARCLAYS BANK PLC, as a Lender


By:     /s/ Ronnie Glenn    
Name: Ronnie Glenn
Title: Director

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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CITIBANK, N.A., as a Lender


By:     /s/ Eros Marshall    
Name: Eros Marshall
Title: Vice President

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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DEUTSCHE BANK AG NEW YORK BRANCH, as a Lender


By:     /s/ Annie Chung    
Name: Annie Chung
Title: Director


By:     /s/ Ming K. Chu    
Name: Ming K. Chu
Title: Director

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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GOLDMAN SACHS BANK USA, as a Lender


By:     /s/ Jamie Minieri    
Name: Jamie Minieri
Title: Authorized Signatory

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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HSBC BANK USA, N.A., as a Lender


By:     /s/ Myles Bae     
Name: Myles Bae    
Title: Senior Vice President


[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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MORGAN STANLEY BANK, N.A., as a Lender


By:     /s/ David White    
Name: David White
Title: Authorized Signatory

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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CIT BANK, N.A., as a Lender


By:     /s/ Robert L. Klein    
Name: Robert L. Klein
Title: Director

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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LIBERTY BANK, as a Lender


By:     /s/ Donald Peruta    
Name: Donald Peruta
Title: Senior Vice President

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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STATE STREET BANK AND TRUST COMPANY, as a Lender


By:     /s/ Pallo Blum - Tucker    
Name: Pallo Blum- Tucker
Title: Managing Director

[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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MUFG UNION BANK, N.A., as a Lender


By:     /s/ Jacob Ulevich    
Name: Jacob Ulevich
Title: Director


[Signature Page to Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement]
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Annex A

Conformed Credit Agreement

[Attached]




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Annex A






AMENDED AND RESTATED SENIOR SECURED
REVOLVING CREDIT AGREEMENT

dated as of

February 25, 2019,

as amended by
Amendment No. 1, dated as of December 13, 2019, and
Amendment No. 2, dated as of May 6, 2020,

among

OAKTREE SPECIALTY LENDING CORPORATION
as Borrower

The LENDERS Party Hereto

ING CAPITAL LLC
as Administrative Agent

ING CAPITAL LLC,
JPMORGAN CHASE BANK, N.A. and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
as Joint Lead Arrangers and Joint Bookrunners

and

JPMORGAN CHASE BANK, N.A. and
BANK OF AMERICA, N.A.
as Syndication Agents







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TABLE OF CONTENTS
Page
ARTICLE I

DEFINITIONS
SECTION 1.01.
Defined Terms 1
SECTION 1.02.
Classification of Loans and Borrowings 3536
SECTION 1.03.
Terms Generally 3536
SECTION 1.04.
Accounting Terms; GAAP 3637
SECTION 1.05.
Times of Day; Interest Rates 3637
SECTION 1.06.
Issuers 3638
ARTICLE II
THE CREDITS
SECTION 2.01.
The Commitments 3738
SECTION 2.02.
Loans and Borrowings 3738
SECTION 2.03.
Requests for Borrowings 3839
SECTION 2.04.
Letters of Credit 3940
SECTION 2.05.
Funding of Borrowings 4445
SECTION 2.06.
Interest Elections 4446
SECTION 2.07.
Termination, Reduction or Increase of the Commitments 4647
SECTION 2.08.
Repayment of Loans; Evidence of Debt 4950
SECTION 2.09.
Prepayment of Loans 5051
SECTION 2.10.
Fees 5253
SECTION 2.11.
Interest 5455
SECTION 2.12.
Eurocurrency Borrowing Provisions 5456
SECTION 2.13.
Increased Costs 5658
SECTION 2.14.
Break Funding Payments 5859
SECTION 2.15.
Taxes 5860
SECTION 2.16.
Payments Generally; Pro Rata Treatment: Sharing of Set-offs 6364
SECTION 2.17.
Defaulting Lenders 6566
SECTION 2.18.
Mitigation Obligations; Replacement of Lenders 6768
SECTION 2.19.
German Bank Separation Act 6869
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01.
Organization; Powers 6971
SECTION 3.02.
Authorization; Enforceability 7071
SECTION 3.03.
Governmental Approvals; No Conflicts 7071
SECTION 3.04.
Financial Condition; No Material Adverse Effect 7071


(i)
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SECTION 3.05.
Litigation. 7072
SECTION 3.06.
Compliance with Laws and Agreements. 7172
SECTION 3.07.
Taxes. 7172
SECTION 3.08.
ERISA. 7172
SECTION 3.09.
Disclosure. 7173
SECTION 3.10.
Investment Company Act; Margin Regulations. 7273
SECTION 3.11.
Material Agreements and Liens 7374
SECTION 3.12.
Subsidiaries and Investments 7374
SECTION 3.13.
Properties 7375
SECTION 3.14.
Solvency 7475
SECTION 3.15.
No Default. 7475
SECTION 3.16.
Use of Proceeds. 7475
SECTION 3.17.
Security Documents. 7475
SECTION 3.18.
Financing Subsidiaries 7476
SECTION 3.19.
Affiliate Agreements. 7576
SECTION 3.20.
Compliance with Sanctions. 7576
SECTION 3.21.
Anti-Money Laundering and Sanctions Program 7576
SECTION 3.22.
Foreign Corrupt Practices Act. 7576
SECTION 3.23.
Beneficial Ownership Certification. 7577
SECTION 3.24.
EEAAffected Financial Institution. 7677
ARTICLE IV
CONDITIONS
SECTION 4.01.
Restatement Effective Date 7677
SECTION 4.02.
Conditions to Each Credit Event 7980
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.01.
Financial Statements and Other Information 8081
SECTION 5.02.
Notices of Material Events 8384
SECTION 5.03.
Existence; Conduct of Business 8384
SECTION 5.04.
Payment of Obligations 8385
SECTION 5.05.
Maintenance of Properties; Insurance 8385
SECTION 5.06.
Books and Records; Inspection and Audit Rights 8485
SECTION 5.07.
Compliance with Laws and Agreements 8486
SECTION 5.08.
Certain Obligations Respecting Subsidiaries; Further Assurances 8586
SECTION 5.09.
Use of Proceeds 8889
SECTION 5.10.
Status of RIC and BDC 8890
SECTION 5.11.
Investment Policies 8890
SECTION 5.12.
Portfolio Valuation and Diversification Etc. 8990
SECTION 5.13.
Calculation of Borrowing Base 9596
SECTION 5.14.
Taxes 105107
SECTION 5.15.
Post-Closing Matters 106107

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ARTICLE VI

NEGATIVE COVENANTS
SECTION 6.01.
Indebtedness 106108
SECTION 6.02.
Liens 108109
SECTION 6.03.
Fundamental Changes 109110
SECTION 6.04.
Investments 110112
SECTION 6.05.
Restricted Payments 111113
SECTION 6.06.
Certain Restrictions on Subsidiaries 112114
SECTION 6.07.
Certain Financial Covenants 113114
SECTION 6.08.
Transactions with Affiliates 113115
SECTION 6.09.
Lines of Business 114115
SECTION 6.10.
No Further Negative Pledge 114115
SECTION 6.11.
Modifications of Indebtedness 114116
SECTION 6.12.
Payments of Longer-Term Indebtedness 115116
SECTION 6.13.
Payments of the 2019 Notes and the 2024 Notes 115117
SECTION 6.14.
Modification of Investment Policies 116117
SECTION 6.15.
SBIC Guarantee 116117
SECTION 6.16.
Derivative Transactions 116117
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01.
Events of Default. 116118
ARTICLE VIII

THE ADMINISTRATIVE AGENT
SECTION 8.01.
Appointment 119121
SECTION 8.02.
Capacity as Lender 120122
SECTION 8.03.
Limitation of Duties; Exculpation 120122
SECTION 8.04.
Reliance 121123
SECTION 8.05.
Sub-Agents 121123
SECTION 8.06.
Resignation; Successor Administrative Agent 121123
SECTION 8.07.
Reliance by Lenders 122124
SECTION 8.08.
Modifications to Loan Documents 122124
SECTION 8.09.
Certain ERISA Matters 122124
SECTION 8.10.
Agents 124126
SECTION 8.11.
Collateral Matters 124126
SECTION 8.12.
Credit Bidding 125127

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ARTICLE IX

MISCELLANEOUS
SECTION 9.01.
Notices; Electronic Communications 126128
SECTION 9.02.
Waivers; Amendments 129131
SECTION 9.03.
Expenses; Indemnity; Damage Waiver 132134
SECTION 9.04.
Successors and Assigns 134136
SECTION 9.05.
Survival 139141
SECTION 9.06.
Counterparts; Integration; Effectiveness; Electronic Execution 139141
SECTION 9.07.
Severability 140142
SECTION 9.08.
Right of Setoff 140142
SECTION 9.09.
Governing Law; Jurisdiction; Etc 140142
SECTION 9.10.
WAIVER OF JURY TRIAL 141143
SECTION 9.11.
Judgment Currency 141143
SECTION 9.12.
Headings 142144
SECTION 9.13.
Treatment of Certain Information; Confidentiality 142144
SECTION 9.14.
USA PATRIOT Act 143145
SECTION 9.15.
Termination 143145
SECTION 9.16.
Acknowledgment and Consent to Bail-In of EEAAffected Financial Institutions 143145
SECTION 9.17.
Interest Rate Limitation 144146
SECTION 9.18.
Amendment and Restatement 144146
SECTION 9.19.
Acknowledgement Regarding any Supported QFCs 145147

SCHEDULE 1.01(a)
-    Approved Dealers and Approved Pricing Services
SCHEDULE 1.01(b)
-    Commitments
SCHEDULE 1.01(c)
-     Eligibility Criteria
SCHEDULE 1.01(d)
-     [Intentionally Omitted]
SCHEDULE 1.01(e)
-     Excluded Investments
SCHEDULE 1.01(f)
-    Industry Classification Groups
SCHEDULE 3.11(a)
-    Material Agreements
SCHEDULE 3.11(b)
-    Liens
SCHEDULE 3.12(a)
-    Subsidiaries
SCHEDULE 3.12(b)
-    Investments
SCHEDULE 6.08
-    Certain Affiliate Transactions

EXHIBIT A
-    Form of Assignment and Assumption
EXHIBIT B
-    Form of Borrowing Base Certificate
EXHIBIT C
-    Form of Promissory Note
EXHIBIT D -
Form of Borrowing Request


(iv)
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AMENDED AND RESTATED SENIOR SECURED REVOLVING CREDIT AGREEMENT dated as of February 25, 2019 (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”), among OAKTREE SPECIALTY LENDING CORPORATION, a Delaware corporation (the “Borrower”), the LENDERS party hereto, solely with respect to Section 2.02(e)(ii), the DEPARTING LENDERS party hereto and ING CAPITAL LLC, as Administrative Agent.
WHEREAS, the Borrower and the Administrative Agent entered into that certain Senior Secured Revolving Credit Agreement dated as of November 30, 2017 (as the same has been amended, supplemented, or otherwise modified from time to time prior to the Restatement Effective Date, the “Existing Credit Agreement”) with the lenders party thereto from time to time (the “Existing Lenders”), pursuant to which the Existing Lenders extended certain commitments and made certain loans to the Borrower (the “Existing Loans”);
WHEREAS, the Borrower desires to amend and restate the Existing Credit Agreement and to make certain changes, including to increase the size of the commitments thereunder and to extend the maturity date;
WHEREAS, the Borrower wishes to prepay in full the pro rata portion of the Loans and other obligations owing to certain Existing Lenders identified in writing by the Administrative Agent to the Borrower (the “Departing Lenders” and the Existing Lenders that are not Departing Lenders, the “Existing Continuing Lenders”) with a corresponding termination of such Departing Lenders’ commitments (the “Prepayment”);
WHEREAS, concurrently with the Prepayment, each Person identified as an “Increasing Lender” on the signature pages hereto wishes to increase its commitment under the Credit Agreement, and each Person identified as a “New Lender” on the signature pages hereto wishes to become a Lender under the Credit Agreement; and
WHEREAS, the Existing Continuing Lenders are willing to make such changes to the Existing Credit Agreement upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained herein, the parties hereto hereby agree that, effective as of the Restatement Effective Date, 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 and the terms defined in Section 5.13 have the meanings assigned thereto in such section:
“2019 Notes” means the Borrower’s 4.875% unsecured notes due in 2019.


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“2024 Notes” means the Borrower’s 5.875% unsecured notes due in 2024.
“2028 Notes” means the Borrower’s 6.125% unsecured notes due in 2028.
“ABR”, 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 Alternate Base Rate.
“Adjusted Borrowing Base” means the Borrowing Base minus the aggregate amount of Cash and Cash Equivalents included in the Borrowing Base.
“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 Borrowing Base (excluding any Cash Collateral).
“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 the greater of (i) (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate for such Interest Period and (ii) zero.
“Administrative Agent” means ING, in its capacity as administrative agent for the Lenders hereunder.
“Administrative Agent’s Account” means an account 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.
“Affected Date” has the meaning assigned to such term in Section 2.12(c).
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“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 such Person in the ordinary course of business.
“Affiliate Agreements” means, collectively, (a) the Investment Advisory Agreement, dated as of October 17May 4, 20172020, between the Borrower and Oaktree Capital Management, L.P. andFund Advisors, LLC, (b) the Administration Agreement, dated as of October 17, 2017September 30, 2019, between the Borrower and Oaktree Fund Administration, LLC, and (c) the Novation of Investment Advisory Agreement, dated as of May 4, 2020, by and among the Borrower, Oaktree Fund Advisors, LLC, and Oaktree Capital Management, L.P.



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“Agency Account” has the meaning assigned to such term in Section 5.08(c)(v).
“Agreement” has the meaning assigned to such term in the preamble of 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%, (c) the Overnight Bank Funding Rate plus 1/2 of 1%, (d) the Adjusted LIBO Rate for deposits in Dollars for a period of three (3) months plus 1% and (e) zero. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate, Overnight Bank Funding Rate, or such LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate, Overnight Bank Funding Rate, or such LIBO Rate, as the case may be.
“Amendment No. 2 Effective Date” means May 6, 2020.
“Anti-Corruption Laws” has the meaning assigned to such term in Section 3.22.
“Applicable External Value” shall mean with respect to any Unquoted Investment, the most recent Borrower External Unquoted Value determined with respect to such Unquoted Investment; provided, however, if an IVP External Unquoted Value with respect to such Unquoted Investment is more recent than such Borrower External Unquoted Value, then the term “Applicable External Value” shall mean the most recent IVP External Unquoted Value obtained with respect to such Unquoted Investment.
“Applicable Margin” means a per annum rate determined on a daily basis according to the following pricing grid:
 
Eurocurrency Loans
ABR Loans
When the Senior Coverage Ratio is less than 1.20 to 1.00 and the Obligors’ Net Worth is less than $700,000,000
2.75%
1.75%
When (A) the Senior Coverage Ratio is less than 1.35 to 1.00 and greater than or equal to 1.20 or (B) the Senior Coverage Ratio is less than 1.35 to 1.00 and the Obligors’ Net Worth is greater than or equal to $700,000,000
2.25%
1.25%
When the Senior Coverage Ratio is greater than or equal to 1.35 to 1.01.00
2.00%
1.00%
Any change in the Applicable Margin due to a change in the Senior Coverage Ratio and/or Obligors’ Net Worth as set forth in (or otherwise calculated based on the information provided in) any Borrowing Base Certificate or Borrowing Request shall be effective from and including the day immediately succeeding the date of delivery of such Borrowing Base Certificate or Borrowing Request, as applicable.
        


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“Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented by such Lender’s 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 pursuant to Section 9.04(b).
“Approved Dealer” means (a) in the case of any Eligible 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 and (b) in the case of a U.S. Government Security, any primary dealer in U.S. Government Securities, in the case of each of clauses (a) and (b) above, as set forth on Schedule 1.01(a), or (c) any other bank or broker-dealer acceptable to the Administrative Agent in its reasonable determination.
“Approved Pricing Service” means (a) a pricing or quotation service as set forth in Schedule 1.01(a) or (b) any other pricing or quotation service (i) approved by the Directing Body of the Borrower, (ii) designated in writing by the Borrower to the Administrative Agent (which designation shall be accompanied by a copy of a resolution of the Directing Body of the Borrower that such pricing or quotation service has been approved by the Borrower), and (iii) acceptable to the Administrative Agent in its reasonable determination.
“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 Directing Body of the Borrower that such firm has been approved by the Borrower for purposes of assisting the Directing Body of the Borrower in making valuations of portfolio assets to determine the Borrower’s compliance with the applicable provisions of the Investment Company Act) and (b) acceptable to the Administrative Agent in its reasonable discretion; provided that, if any proposed appraiser requests or requires a non-reliance letter, confidentiality agreement or similar agreement prior to allowing the Administrative Agent to review any written valuation report, such Person shall only be deemed an Approved Third-Party Appraiser if the Administrative Agent and such Approved Third-Party Appraiser shall have entered into such a letter or agreement. Subject to the foregoing (other than clause (b)), it is understood and agreed that, so long as the same are independent third-party appraisal firms approved by the Directing Body of the Borrower, Houlihan Lokey Howard & Zukin Capital, Inc., Duff & Phelps LLC, Murray, Devine and Company, Lincoln Partners Advisors, LLC, Valuation Research Corporation and Stout Risius Ross, LLC are acceptable to the Administrative Agent solely to the extent they are not serving as the Independent Valuation Provider.
“Asset Coverage Ratio” means, on a consolidated basis for Borrower and its Subsidiaries, the ratio which the value of total assets, less all liabilities and indebtedness not represented by Senior Securities, bears to the aggregate amount of Senior Securities representing indebtedness of the Borrower and its Subsidiaries (all as determined pursuant to the Investment Company Act and any orders of the SEC issued to the Borrower thereunder, in each case as in effect on the Amendment No. 2 Effective Date but excluding the effect of Release No. 33837/April 8, 2020). For clarity, the calculation of the Asset Coverage Ratio shall be made in accordance with any exemptive order issued by the SEC under Section 6(c) of the Investment Company Act relating to the exclusion of any Indebtedness of any SBIC Subsidiary from the


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definition of Senior Securities only so long as (a) such order is in effect, (b) no obligations have become due and owing pursuant to the terms of any Permitted SBIC Guarantee and (c) such Indebtedness is owed to the SBA.
“Asset Sale” means a sale, lease or sub lease (as lessor or sublessor), sale and leaseback, assignment, conveyance, transfer or other disposition to, or any exchange of property with, any Person, in one transaction or a series of transactions, of all or any part of any Obligor’s assets or properties of any kind, whether real, personal, or mixed and whether tangible or intangible, whether now owned or hereafter acquired; provided, however, the term “Asset Sale” as used in this Agreement shall not include the disposition of Portfolio Investments originated by the Borrower and immediately transferred to a Financing Subsidiary pursuant to the terms of Section 6.03(e) or 6.03(i) hereof.
“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(b)), 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 2.07(e)(i).
“Availability Period” means the period from and including the Original Effective Date to but excluding the earlier of the Revolver Termination Date and the date of termination of the Commitments in accordance with this Agreement.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEAAffected Financial Institution.
“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule. and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Beneficial Ownership Certification” means a certification regarding a beneficial ownership required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for


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purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.
“Board” means the Board of Governors of the Federal Reserve System of the United States of America.
“Board of Directors” means, with respect to any person, (a) in the case of any corporation, the board of directors of such person, (b) in the case of any limited liability company, the board of managers (or the equivalent) of such person, or if there is none, the Board of Directors of the managing member of such Person, (c) in the case of any partnership, the Board of Directors (or the equivalent) of the general partner of such person and (d) in any other case, the functional equivalent of the foregoing.
“Borrower” has the meaning assigned to such term in the preamble to this Agreement.
“Borrower External Unquoted Value” has the meaning assigned to such term in Section 5.12(b)(ii)(B)(y).
“Borrower Tested Assets” has the meaning assigned to such term in Section 5.12(b)(ii)(B)(y).
“Borrowing” means Loans of the same Type made, converted or continued on the same date and, in the case of Eurocurrency Loans, that have the same Interest Period.
“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 (i) (a) the aggregate Covered Debt Amount as of such date exceeds (b) the Borrowing Base as of such date or (ii) (a) the aggregate Covered Debt Amount as of such date exceeds the sum of (b) (x) the aggregate Value of all Eligible Portfolio Investments included in the Borrowing Base, less (y) the aggregate Value of all Eligible Portfolio Investments issued by the four largest issuers.
“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03, substantially in the form of Exhibit D hereto or such other form as is reasonably satisfactory to the Administrative Agent.
“Business Day” means any day (a) that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed and (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, or to a notice by the Borrower with respect to any such borrowing, payment, prepayment,



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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.
“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 or finance 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, with respect to a Letter of Credit, the pledge and deposit of immediately available funds into a Letter of Credit Escrow Account maintained on behalf of the Administrative Agent in an amount equal to one hundred and two percent (102%) (or one hundred and five percent (105%) in accordance with the last paragraph of Section 7.01) of the undrawn face amount of such Letter of Credit (or such other amount as may be specified in any applicable provision hereof) as collateral pursuant to documentation in form and substance satisfactory to the 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 (if any).
“Cash Equivalents” means investments (other than Cash) that are one or more of the following obligations:
(a)    Short-Term U.S. Government Securities;
(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 Moody’s;
(c)    investments in certificates of deposit, banker’s 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; provided that such certificates of deposit, banker’s 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 Moody’s;
(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


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having) at such date of acquisition, a credit rating of at least A-1 from S&P and at least P-1 from Moody’s;
(e)    certificates of deposit or bankers’ acceptances with a maturity of ninety (90) days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $1,000,000,000; and
(f)    investments in money market funds and mutual funds, which invest substantially all of their assets in Cash or assets of the types described in clauses (a) through (e) above;
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 Moody’s 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 Moody’s or S&P, as the case may be; (iii) Cash Equivalents (other than U.S. Government Securities, certificates of deposit or repurchase agreements) shall not include any such investment representing more than 25% of total assets of the Obligors in any single issuer; and (iv) in no event shall Cash Equivalents include any obligation that is not denominated in Dollars.
“CFC” means a Subsidiary that is a “controlled foreign corporation” directly or indirectly owned by an Obligor within the meaning of Section 957 of the Code.
“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 SEC thereunder as in effect on the date hereof) other than the Investment Advisor of shares representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower, (b) the occupation of a majority of the seats (other than vacant seats) on the Board of Directors of the Borrower by Persons who were neither (A) members of the Board of Directors of the Borrower as of the later of (x) the Restatement Effective Date and (y) the corresponding date of the previous year, (B) approved, selected or nominated to become members of the Board of Directors of the Borrower by the Board of Directors of the Borrower of which a majority consisted of individuals described in clause (A), or (C) approved, selected or nominated to become members of the Board of Directors of the Borrower by the Board of Directors of the Borrower of which a majority consisted of individuals described in clause (A) and individuals described in clause (B) or (c) the acquisition of direct or indirect Control of the Borrower by any Person or group other than the Investment Advisor.
“Change in Law” means (a) the adoption of any law, rule or regulation or treaty after the Restatement Effective Date, (b) any change in any law, rule or regulation or treaty or in the interpretation, implementation or application thereof by any Governmental Authority after the Restatement Effective Date or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.13(b) or Section 2.18(a), by such Lender’s or the Issuing Bank’s holding company, if any, or by any lending office of such Lender) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the


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Restatement Effective Date; provided that, notwithstanding anything herein to the contrary, (I) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives in connection therewith and (II) all requests, rules, guidelines or directives promulgated by the Bank For International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law” regardless of the date enacted, adopted, issued, promulgated or implemented.
“Code” means the U.S. 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 ING in its capacity as Collateral Agent under the Guarantee and Security Agreement, and includes any successor Collateral Agent thereunder.
“Combined Debt Amount” means, as of any date, (i) the aggregate amount of Commitments as of such date (or, if greater, the Credit Exposures of all Lenders as of such date) plus (ii) the aggregate amount of outstanding Designated Indebtedness (as such term is defined in the Guarantee and Security Agreement) and, without duplication, unused commitments of the holders of Designated Indebtedness to extend credit to the Borrower that will give rise to Designated Indebtedness under the Guarantee and Security Agreement.
“Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans, and to acquire participations in Letters of Credit, expressed as an amount representing the maximum aggregate amount of such Lender’s Credit Exposure hereunder, as such commitment may be (a) reduced or increased from time to time pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The aggregate amount of each Lender’s Commitment as of the Restatement Effective Date is set forth on Schedule 1.01(b), or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Commitment, as applicable. The aggregate amount of the Lenders’ Commitments as of the Restatement Effective Date is $680,000,000.
“Commitment Increase” has the meaning assigned to such term in Section 2.07(e)(i).
“Commitment Increase Date” has the meaning assigned to such term in Section 2.07(e)(i).
“Consolidated EBIT” means, for any period with respect to the Borrower and its Subsidiaries on a consolidated basis, income after deduction of all expenses and other proper charges other than Taxes, Consolidated Interest Expense and excluding from the calculation of such income (a) net realized gains or losses, (b) net change in unrealized appreciation or depreciation, (c) gains or losses on re-purchases of Indebtedness, (d) the amount of interest paid-in-kind to the Borrower or any of its Subsidiaries (“PIK”) to the extent such amount exceeds the


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sum of (i) PIK interest collected in cash (including any amortization payments on such applicable debt instrument up to the amount of PIK interest previously capitalized thereon) and (ii) realized gains collected in cash (net of realized losses); provided that the amount determined pursuant to this clause (d)(ii) shall not be less than zero, all as determined in accordance with GAAP, and (e) other non-cash charges and gains to the extent included to calculate income.
“Consolidated Interest Coverage Ratio” means the ratio as of the last day of any fiscal quarter of the Borrower and its Subsidiaries on a consolidated basis of (a) Consolidated EBIT for the four fiscal quarter period then ending, taken as a single accounting period, to (b) Consolidated Interest Expense (but excluding for this purpose (x) any non-cash interest expense representing amortization of debt issuance costs (including any accelerated amortization of debt issuance costs) and amortization of any original issue discount and (y) any debt extinguishment costs such as prepayment fees and make whole premiums) for such four fiscal quarter period.
“Consolidated Interest Expense” means, with respect to the Borrower and its Subsidiaries on a consolidated basis and for any period, the sum of (x) the total consolidated interest expense (including capitalized interest expense and interest expense attributable to Capital Lease Obligations) of the Borrower and/or its Subsidiaries and in any event shall include all interest expense with respect to any Indebtedness in respect of which the Borrower and/or its Subsidiaries is wholly or partially liable plus (y) the net amount paid or payable (or minus the net amount receivable) under Hedging Agreements permitted under Section 6.04 relating to interest during such period (whether or not actually paid or received during such period) and to the extent not already taken into account under clause (x).
“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.
“Control Account” has the meaning assigned to such term in Section 5.08(c)(ii).
“Control Agreement” means each of (a) the Amended and Restated Custody Control Agreement, dated as of November 30, 2017, by and among the Borrower, the Collateral Agent and U.S. Bank National Association, (b) the Collateral Account Control Agreement, dated as of January 15, 2019, by and among OCSL SRNE, LLC, a Delaware limited liability company, the Collateral Agent and The Bank of New York Mellon, and (c) any other control agreement entered into by and among the Borrower, the Collateral Agent and a Custodian, in form and substance reasonably satisfactory to the Collateral Agent, the applicable Custodian and the applicable Obligor.
“Covered Debt Amount” means, on any date, the sum of (x) all of the Credit Exposures of all Lenders on such date, plus (y) the aggregate principal amount (including any increase in the aggregate principal amount resulting from payable-in-kind interest) of Other Covered Indebtedness outstanding on such date minus (z) LC Exposure that has been Cash Collateralized. For the avoidance of doubt, for purposes of calculating the Covered Debt


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Amount, any convertible securities included in the Covered Debt Amount will be included at the then outstanding principal balance thereof.
“Covered Taxes” means (i) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower under any Loan Document and (ii) to the extent not otherwise described in clause (i), Other Taxes.
“Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Loans and LC Exposure at such time (including, for the avoidance of doubt, the Loans and LC Exposure surviving after the Revolver Termination Date).
“Custodian” means each of U.S. Bank National Association, The Bank of New York Mellon and any other financial institution mutually agreeable to the Collateral Agent and the Borrower, as custodian holding documentation for Portfolio Investments, and accounts of the Obligors holding Portfolio Investments, on behalf of the Obligors and, pursuant to the applicable Control Agreement, the Collateral Agent. The term “Custodian” includes any agent or sub-custodian acting on behalf of the applicable Custodian pursuant to the terms of the applicable Custodian Agreement.
“Custodian Account” means an account subject to a Custodian Agreement.
“Custodian Agreement” means, collectively, (i) the Amended and Restated Custody Agreement, dated November 30, 2017, among the Borrower, the Collateral Agent, and U.S. Bank National Association, and (ii) each such other control agreements as may be entered into by and among an Obligor, the Collateral Agent and a Custodian, in form and substance reasonably satisfactory to the Administrative Agent and the Borrower.
“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 any Lender that has, as reasonably determined by the Administrative Agent, (a) failed to fund any portion of its Loans or participations in Letters of Credit within two (2) Business Days of the date required to be funded by it hereunder, unless, in the case of any Loans, such Lender notifies the Administrative Agent and the Borrower in writing that such Lender’s failure is based on such Lender’s reasonable determination that the conditions precedent to funding such Loan under this Agreement have not been met, such conditions have not otherwise been waived in accordance with the terms of this Agreement and such Lender has advised the Administrative Agent and the Borrower in writing (with reasonable detail of those conditions that have not been satisfied) prior to the time at which such funding was to have been made, (b) notified the Borrower, the Administrative Agent, the Issuing Bank or any other Lender in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement that it does not intend to comply with its funding obligations under this Agreement (unless such writing or public statement states that such position is based on such Lender’s determination that one or more conditions precedent to funding (which conditions precedent, together with the applicable default, if any, shall be


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specifically identified in such writing or public statement) cannot be satisfied), (c) failed, within three (3) Business Days after request by the Administrative Agent or the Borrower to confirm in writing to the Administrative Agent and the Borrower that it will comply with the terms of this Agreement relating to its obligations to fund prospective Loans or participations in then outstanding Letters of Credit (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), (d) otherwise failed to pay over to the Administrative Agent or any other Lender any other amount (other than a de minimis amount) required to be paid by it hereunder within two (2) Business Days of the date when due, unless the subject of a good faith dispute, or (e) other than via an Undisclosed Administration, either (i) has been adjudicated as, or determined by any Governmental Authority having regulatory authority over such Person or its assets to be, insolvent or has a parent company that has been adjudicated as, or determined by any Governmental Authority having regulatory authority over such Person or its assets to be, insolvent, (ii) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian, appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or (iii) become the subject of a Bail-In Action (unless in the case of any Lender referred to in this clause (e), the Borrower, the Administrative Agent and the Issuing Bank shall be satisfied in the exercise of their respective reasonable discretion that such Lender intends, and has all approvals required to enable it, to continue to perform its obligations as a Lender hereunder); provided that a Lender shall not qualify as a Defaulting Lender solely as a result of the acquisition or maintenance of an ownership interest in such Lender or its parent company, or of the exercise of control over such Lender or any Person controlling such Lender, by a Governmental Authority or instrumentality thereof, or solely as a result of an Undisclosed Administration, so long as such ownership interest or Undisclosed Administration does not result in or provide such Lender with immunity from the jurisdiction of courts 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) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.
“Departing Lenders” has the meaning assigned to such term in the preamble to this Agreement.
“Directing Body” means the Borrower’s Board of Directors (or appropriate committee thereof with the necessary delegated authority).
“Disqualified Equity Interests” means Equity Interests of the Borrower that after issuance are subject to any agreement between the holder of such Equity Interests and the Borrower whereby the Borrower is required to purchase, redeem, retire, acquire, cancel or terminate such Equity Interests, other than (x) as a result of a change of control, or (y) in


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connection with any purchase, redemption, retirement, acquisition, cancellation or termination with, or in exchange for, shares of Equity Interests that are not Disqualified Equity Interests.
“Disqualified Lenders” means any Person identified by name on the “Disqualified Lender” list provided by the Borrower to the Administrative Agent on or before the Original Effective Date as a direct competitor of the Borrower; provided, that the Disqualified Lender list shall be limited to no more than five (5) such competitors (as such list may be updated by the Borrower from time to time with the consent of the Administrative Agent after consultation with the Lenders); provided further, that no update of the list of Disqualified Lenders shall apply retroactively to disqualify any parties that have previously acquired an assignment or participation interest in the Loan or Commitments pursuant to the terms hereof.
“Dollar Equivalent” means, on any date of determination, with respect to an amount denominated in any currency other than Dollars, the amount of Dollars that would be required to purchase such amount of such currency on the date two Business Days prior to such date, based upon the spot selling rate at which the Administrative Agent (or other foreign currency broker reasonably acceptable to the Administrative Agent) offers to sell such currency for Dollars in the London foreign exchange market at approximately 11:00 a.m., London time, for delivery two Business Days later.
“Dollars” or “$” refers to lawful money of the United States of America.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clausesclause (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Eligible Liens” means, any right of offset, banker’s lien, security interest or other like right against the Portfolio Investments held by a Custodian pursuant to or in connection with its rights and obligations relating to each Custodian Account with such Custodian, provided that such rights are subordinated, pursuant to the terms of the applicable Control Agreement, to the first priority perfected security interest in the Collateral created in favor of the Collateral Agent, except to the extent expressly provided therein.
“Eligible Portfolio Investment” means any Portfolio Investment held by any Obligor (and solely for purposes of determining the Borrowing Base, Cash (for the avoidance of doubt, other than Cash Collateral) and Cash Equivalents held by any Obligor) that, in each case, meets all of the criteria set forth on Schedule 1.01(c) hereto; provided, that no Portfolio


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Investment, Cash or Cash Equivalent shall constitute an Eligible Portfolio Investment or be included in the Borrowing Base if the Collateral Agent does not at all times maintain a first priority, perfected Lien (subject to no other Liens other than Eligible Liens) on such Portfolio Investment, Cash or Cash Equivalent or if such Portfolio Investment, Cash or Cash Equivalent has not been or does not at all times continue to be Delivered (as defined in the Guarantee and Security Agreement). Without limiting the generality of the foregoing, it is understood and agreed that any Portfolio Investments that have been contributed or sold, purported to be contributed or sold or otherwise transferred to any Financing Subsidiary, Immaterial Subsidiary, CFC, Transparent Subsidiary or any other Person that is not a Subsidiary Guarantor, or held by any Financing Subsidiary, Immaterial Subsidiary, CFC, Transparent Subsidiary or any other Person that is not a Subsidiary Guarantor, or which secure obligations of any Financing Subsidiary, Immaterial Subsidiary, CFC, Transparent Subsidiary or any other Person that is not a Subsidiary Guarantor shall not be treated as Eligible Portfolio Investments until distributed, sold or otherwise transferred to any Obligor free and clear of all Liens (other than Eligible Liens). Notwithstanding the foregoing, nothing herein shall limit the provisions of Section 5.12(b)(i), which provide that, for purposes of this Agreement, all determinations of whether an Investment is to be included as an Eligible Portfolio Investment shall be determined on a Settlement-Date Basis, provided that no such Investment shall be included as an Eligible Portfolio Investment to the extent it has not been paid for in full.
“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. As used in this Agreement, “Equity Interests” shall not include convertible debt unless and until such debt has been converted to capital stock.
“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(m) or (o) of the Code.
“ERISA Event” means (a) any “reportable event,” as defined in Section 4043 of ERISA, with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) with respect to any Plan, the failure to satisfy the minimum funding standards set forth in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (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 (other than premiums due and not delinquent under Section 4007 of ERISA); (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 to appoint a trustee to administer any Plan under Section 4041(c) or Section 4042 of ERISA; (f) the incurrence by the Borrower or any of its ERISA Affiliates of Withdrawal Liability; (g) the occurrence of any non-exempt prohibited


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transaction within the meaning of Section 4975 of the Code or Section 406 of ERISA which would result in liability to a Lender; (h) the failure to make any required contribution to a Multiemployer Plan or to any Plan that would result in the imposition of a lien or other encumbrance or the provision of security under Section 412 or 430 of the Code or Section 302, 303 or 4068 of ERISA; or (i) the receipt by the Borrower or any ERISA Affiliate of any notice concerning a determination that a Multiemployer Plan is insolvent or in reorganization, in each case, as defined in Title IV of ERISA.
“Escrow Agent” means the person or entity designated by Administrative Agent to be the escrow agent pursuant to the Escrow Agreement.
“Escrow Agreement” means the escrow agreement acceptable in form and substance reasonably satisfactory to the Borrower and the Administrative Agent with respect to the Letter of Credit Escrow Account.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“Eurocurrency”, when used in reference to any Loan or Borrowing, refers to whether such Loan is, or the Loans constituting such Borrowing are, bearing interest at a rate determined by reference to the Adjusted LIBO Rate. For clarity, a Loan or Borrowing bearing interest by reference to clause (d) of the definition of the Alternate Base Rate shall not be a Eurocurrency Loan or Eurocurrency Borrowing.
“Event of Default” has the meaning assigned to such term in Article VII.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to the Administrative Agent, any Lender or the Issuing Bank or required to be withheld or deducted from a payment to the Administrative Agent, any Lender or the Issuing Bank, (a) Taxes imposed on (or measured by) its net income or franchise Taxes, in each case, imposed (i) 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, or (ii) that are Other Connection Taxes, (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 (other than an assignee pursuant to a request by the Borrower under Section 2.18(b)), any U.S. federal withholding Tax that is imposed on amounts payable to or for the account of such Lender pursuant to a law in effect at the time such Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding Tax pursuant to Section 2.15(a), (d) Taxes



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attributable to such recipient’s failure to comply with Section 2.15(f), and (e) any withholding Taxes imposed under FATCA.
“Existing Credit Agreement” has the meaning assigned to such term in the preamble to this Agreement.
“Existing Continuing Lenders” 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.
“External Quoted Value” has the meaning assigned to such term in Section 5.12(b)(ii)(A).

“External Unquoted Value” means (i) with respect to Borrower Tested Assets, the Borrower External Unquoted Value and (ii) with respect to IVP Tested Assets, the IVP External Unquoted Value.

“FATCA” means Sections 1471 through 1474 of the Code, as of the Restatement Effective Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code, any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code, and any fiscal or regulatory legislation, rules, or official practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code.
“FCPA” has the meaning assigned to such term in Section 3.22.
“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, 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; provided, that if the Federal Funds Effective Rate is less than zero, such rate shall be zero for purposes of this Agreement.
“Financial Officer” means the chief executive officer, president, chief operating officer, chief financial officer, chief legal officer, principal accounting officer, treasurer, controller or chief compliance officer of the Borrower, in each case, whom has been authorized by the Board of Directors of the Borrower to execute the applicable document or certificate.


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“Financing Subsidiary” means (i) any Structured Subsidiary or (ii) any SBIC Subsidiary.
“First Star Bermuda” means First Star Bermuda Aviation Limited.
“First Star Ireland” means First Star Speir Aviation Limited.
“Foreign Lender” means any Lender or Issuing Bank that is not a U.S. Person.
“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 (including any supra-national body exercising such powers or functions, such as the European Union or the European Central Bank).
“Gross Borrowing Base” has the meaning assigned to such term in Section 5.13(e).
“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 endorsements for collection or deposit in the ordinary course of business or customary indemnification agreements entered into in the ordinary course of business in connection with obligations that do not constitute Indebtedness. The amount of any Guarantee at any time shall be deemed to be an amount equal to the maximum stated or determinable amount of the primary obligation in respect of which such Guarantee is incurred, unless the terms of such Guarantee expressly provide that the maximum amount for which such Person may be liable thereunder is a lesser amount (in which case the amount of such Guarantee shall be deemed to be an amount equal to such lesser amount).
“Guarantee and Security Agreement” means that certain Amended and Restated Guarantee, Pledge and Security Agreement, dated as of the Restatement Effective Date, among the Borrower, the Subsidiary Guarantors, the Administrative Agent, each holder (or a


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representative, agent or trustee therefor) from time to time of any Secured Longer-Term Indebtedness, and the Collateral Agent.
“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, or to which the Collateral Agent shall otherwise consent).
“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.
“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 (x) the designation of each such Immaterial Subsidiary and (y) the most recent balance sheet required to be delivered pursuant to Section 5.01 (and the Borrower shall in each case deliver to the Administrative Agent a certificate of a Financial Officer to such effect setting forth reasonably detailed calculations demonstrating such compliance): (a) such Subsidiaries and their Subsidiaries do not hold any Eligible Portfolio Investment, (b) the aggregate assets of all 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 (c) the aggregate revenues of all 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. Notwithstanding the foregoing, no Immaterial Subsidiary that is later designated as a Subsidiary Guarantor may be an Immaterial Subsidiary.
“Increasing Lender” has the meaning assigned to such term in Section 2.07(e)(i).
“Indebtedness” of any Person means, without duplication, (a) (i) all obligations of such Person for borrowed money or (ii) with respect to deposits, loans or advances of any kind that are required to be accounted for under GAAP as a liability on the financial statements of an Obligor (other than deposits received in connection with a Portfolio Investment in the ordinary course of the Obligor’s business (including, but not limited to, any deposits or advances in connection with expense reimbursement, prepaid agency fees, other fees, indemnification, work fees, tax distributions or purchase price adjustments)), (b) all obligations of such Person evidenced by bonds, debentures, notes or similar debt 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 (other than trade accounts payable and accrued expenses in the ordinary course of business not past due for more than 90 days after the date on which such trade account payable was due), (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


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(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, (i) the net amount such Person would be obligated for under any Hedging Agreement if such Hedging Agreement was terminated at the time of determination, (j) all obligations, contingent or otherwise, with respect to Disqualified Equity Interests, and (k) 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 Person’s 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 (or such Person is not otherwise liable for such Indebtedness). 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, (y) a commitment arising in the ordinary course of business to make a future Portfolio Investment or fund the delayed draw or unfunded portion of any existing Portfolio Investment or (z) indebtedness of an Obligor on account of the sale by an Obligor of the first out tranche of any First Lien Credit Facility Loan that arises solely as an accounting matter under ASC 860, provided that such indebtedness (i) is non-recourse to the Borrower and its Subsidiaries and (ii) would not represent a claim against the Borrower or any of its Subsidiaries in a bankruptcy, insolvency or liquidation proceeding of the Borrower or its Subsidiaries, in each case in excess of the amount sold or purportedly sold.
“Independent Valuation Provider” means any of Houlihan Capital Advisors, LLC, Duff & Phelps LLC, Murray, Devine and Company, Lincoln Advisors, Valuation Research Corporation, Alvarez & Marsal, Houlihan Lokey and Stout Risius Ross, LLC, or any other independent nationally recognized third-party appraisal firm selected by the Administrative Agent, and reasonably acceptable to the Borrower.
“Industry Classification Group” means any of the classification groups set forth on Schedule 1.01(f) hereto, together with any classification groups that may be subsequently established by Moody’s and provided by the Borrower to the Administrative Agent.
“ING” means ING Capital LLC.
“Interest Election Request” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.06.
“Interest Payment Date” means (a) with respect to any ABR Loan, each Quarterly Date and (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.
“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


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corresponding day in the calendar month that is one, two, three or six months thereafter or, with respect to such portion of any Loan or Borrowing that is scheduled to be repaid on the Maturity Date, a period of less than one month’s duration commencing on the date of such Loan or Borrowing and ending on the Maturity Date, as specified in the applicable Interest Election Request; provided, that (a) 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 (b) any Interest Period (other than an Interest Period that ends on the Maturity Date that is permitted to be of less than one month’s 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 Borrowing comprising Loans that have been converted or continued shall be the effective date of the most recent conversion or continuation of such Loans.
“Internal Value” has the meaning assigned to such term in Section 5.12(b)(ii)(C).
“Investment” means, for any Person: (a) Equity Interests, bonds, notes, debentures or other securities of any other Person (including convertible securities) 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 Advisor” means Oaktree or another investment advisor reasonably satisfactory to the Administrative Agent and approved by the Required Lenders.
“Investment Company Act” means the Investment Company Act of 1940, as amended from time to time.
“Investment Policies” means the Borrower’s written investment objectives, policies, restrictions and limitations as in existence on the Original Effective Date (including the Investment Advisor’s most recent Form ADV, which describes allocation and conflicts mitigation guidelines that the Investment Advisor adheres to) delivered to the Administrative Agent prior to the Original Effective Date, as may be amended or modified from time to time by a Permitted Policy Amendment.
“IRS” means the U.S. Internal Revenue Service.
“Issuing Bank” means ING, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.04(j).


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“IVP External Unquoted Value” has the meaning assigned to such term in Section 5.12(b)(ii)(B)(x).
“IVP Supplemental Cap” has the meaning assigned to such term in Section 9.03(a).
“IVP Tested Assets” has the meaning assigned to such term in Section 5.12(b)(ii)(B)(x).
“IVP Testing Date” has the meaning assigned to such term in Section 5.12(b)(ii)(B)(x).
“Joint Lead Arrangers” means, collectively, ING, JPMorgan Chase Bank, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (or any other registered broker-dealer wholly-owned by Bank of America Corporation to which all or substantially all of Bank of America Corporation’s or any of its subsidiaries’ investment banking, commercial lending services or related businesses may be transferred following the date of this Agreement).
“Largest Industry Classification Group” means, as of any date of determination, the single Industry Classification Group contributing a greater portion of the Borrowing Base than any other single Industry Classification Group.
“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 (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time (including any Letter of Credit for which a draft has been presented but not yet honored by the Issuing Bank) 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 LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided that with respect to any Letter of Credit that, by its terms or a document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.
“Lenders” means the Persons listed on Schedule 1.01(b) (as amended from time to time pursuant to Section 2.07) as having 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 Commitment or to acquire Credit Exposure, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.
“Letter of Credit” means any letter of credit issued pursuant to this Agreement.
“Letter of Credit Documents” means, with respect to any Letter of Credit, collectively, any application therefor and any other agreements, instruments, guarantees or other


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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.
“Letter of Credit Escrow Account” has the meaning assigned to such term in Section 2.04(k).
“LIBO Rate” means, for any Interest Period, (i) the Intercontinental Exchange Benchmark Administration Ltd. LIBO Rate (or the successor thereto if the Intercontinental Exchange Benchmark Administration Ltd. is no longer making such rates available) per annum for deposits in Dollars for a period equal to the Interest Period appearing on the display designated as Reuters Screen LIBO01 Page (or such other page on that service or such other service designated by the Intercontinental Exchange Benchmark Administration Ltd. LIBO Rate (or the successor thereto if the Intercontinental Exchange Benchmark Administration Ltd. is no longer making such rates available) for the display of such Administration’s Interest Settlement Rates for deposits in Dollars) 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 LIBO01 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) or (ii) if the Administrative Agent determines that the sources set forth in clause (i) are unavailable for the relevant Interest Period, LIBO Rate for purposes of this definition 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 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 Agent’s portion of the relevant Eurocurrency Borrowing; provided, that if the LIBO Rate is less than zero for the relevant Interest Period, such rate shall be deemed to be zero for such Interest Period.
“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 (other than on market terms at fair value so long as in the case of any Portfolio Investment, the Value used in determining the Borrowing Base is not greater than the purchase or call price), except in favor of the issuer thereof (and in the case of Portfolio Investments that are equity securities, excluding customary drag-along, tag-along, right of first refusal, restrictions on assignments or transfers and other similar rights in favor of other equity holders of the same issuer). For the avoidance of doubt, in the case of Investments that are loans or other debt obligations, restrictions on assignments or transfers thereof on customary and market based terms pursuant to the underlying documentation relating to such Investment shall not be deemed to be a “Lien”.


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“Loan Documents” means, collectively, this Agreement, the Letter of Credit Documents, any promissory notes delivered pursuant to Section 2.08(f) and the Security Documents.
“Loans” means the revolving loans made by the Lenders to the Borrower pursuant to this Agreement.
“Margin Stock” means “margin stock” within the meaning of Regulations D, T, U and X.
“Material Adverse Effect” means a material adverse effect on (a) the business, Portfolio Investments of the Obligors (taken as a whole) and other assets, liabilities (actual or contingent), operations or condition (financial or otherwise) of the Borrower and its Subsidiaries (other than any Financing Subsidiary), taken as a whole, 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 or the ability of the Obligors to perform their respective obligations 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 (including any Financing Subsidiary) in an aggregate outstanding principal amount exceeding $20,000,000 and (b) obligations in respect of one or more Hedging Agreements or other swap or derivative transactions under which the maximum aggregate amount (after giving effect to any netting agreements) that the Borrower and its Subsidiaries would be required to pay if such Hedging Agreement(s) or other swap or derivative transactions were terminated at such time would exceed $20,000,000.
“Maturity Date” means the date that is the one (1) year anniversary of the Revolver Termination Date.
“Moody’s” means Moody’s Investors Service, Inc. or any successor thereto.
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA in respect of which the Borrower or any ERISA Affiliates makes or is required to make any contributions.
“Net Asset Sale Proceeds” means, with respect to any Asset Sale, an amount equal to (a) the sum of Cash payments and Cash Equivalents received by the Obligors from such Asset Sale (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) any costs, fees, commissions, premiums and expenses actually incurred by any Obligor directly incidental to such Asset Sale and paid in cash to a Person that is not an Affiliate of any Obligor (or if paid to an Affiliate, only to the extent such expenses are reasonable and customary), including reasonable legal fees and expenses, minus (c) all taxes paid or reasonably estimated to be payable by any Obligor (other than any income tax) as a result of such Asset Sale (after taking into account any applicable tax credits or deductions that are reasonably expected to be available), minus (d) reserves for indemnification, purchase price


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adjustments or analogous arrangements reasonably estimated by the Borrower or the relevant Subsidiary in connection with such Asset Sale; provided that (i) for purposes of this clause (d), such reserved amount shall not be included in the Borrowing Base and (ii) if the amount of any estimated reserves pursuant to this clause (d) exceeds the amount actually required to be paid in cash in respect of indemnification, purchase price adjustments or analogous arrangements for such Asset Sale, the aggregate amount of such excess shall constitute Net Asset Sale Proceeds (as of the date the Borrower determines such excess exists), minus (e) payments of unassumed liabilities relating to the assets sold or otherwise disposed of at the time, or within 30 days after, the date of such Asset Sale.
“Net Return of Capital” means an amount equal to (i) (a) any Cash amount (and proceeds of any non-Cash amount) received by any Obligor at any time 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 Cash proceeds (including Cash proceeds of any non-Cash consideration) received by any Obligor at any time from the sale of any property or assets pledged as collateral in respect of any Portfolio Investment to the extent such Cash proceeds are less than or equal to the outstanding principal balance of such Portfolio Investment, (c) solely to the extent such proceeds, along with any such proceeds previously received (other than on account of taxes paid or reasonably estimated to be payable), are less than or equal to the Obligor’s investments therein, any cash amount (and Cash proceeds of any non-Cash amount) received by any Obligor at any time in respect of any Portfolio Investment that is an Equity Interest (x) upon the liquidation or dissolution of the Portfolio Company of such Portfolio Investment, (y) as a distribution of capital made on or in respect of such Portfolio Investment (other than, in the case of a Portfolio Investment that is Capital Stock, any distribution on account of actual taxes paid or reasonably estimated to be payable by an Obligor solely in its capacity as a holder of such Equity Interest (and not on account of such Obligor’s status as a RIC)), or (z) pursuant to the recapitalization or reclassification of the capital of the Portfolio Company of such Portfolio Investment or pursuant to the reorganization of such Portfolio Company or (d) any similar return of capital received by any Obligor in Cash (and Cash proceeds of any non-Cash amount) in respect of any Portfolio Investment minus (ii) any costs, fees, commissions, premiums and expenses incurred by any Obligor directly incidental to such Cash receipts, including reasonable legal fees and expenses.
“Non-Consenting Lender” has the meaning assigned to such term in Section 9.02(d).
“NYFRB” means the Federal Reserve Bank of New York.
“Oaktree” means Oaktree Capital Management, L.P., a Delaware limited partnership, or any of its Affiliates.
“Obligors” means, collectively, the Borrower and the Subsidiary Guarantors.
“Obligors’ Net Worth” means, at any date, Stockholders’ Equity at such date, minus the net asset value held by any Obligor in any non-Obligor Subsidiary.



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“OFAC” has the meaning assigned to such term in Section 3.20.
“Organization Documents” means, for any Person, its constituent or organizational documents, including: (a) in the case of any limited partnership, the certificate of limited partnership and limited partnership agreement for such Person; (b) in the case of any limited liability company, the articles of formation and operating agreement for such Person; and (c) in the case of a corporation, the certificate or articles of incorporation and the bylaws or memorandum and articles of association for such Person.
“Original Effective Date” means November 30, 2017.
“Other Connection Taxes” means, with respect to any recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, Taxes imposed as a result of a present or former connection between such recipient and the jurisdiction imposing such Tax (other than connections arising from such recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Covered Indebtedness” means, collectively, (i) Secured Longer-Term Indebtedness, (ii) from May 31, 2018, the 2019 Notes and (iii) and Unsecured Shorter-Term Indebtedness.
“Other Taxes” means any and all present or future stamp, court, documentary, intangible, recording or filing 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, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are imposed with respect to an assignment (other than an assignment made pursuant to Section 2.18(b)).
“Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and overnight Eurocurrency transactions by U.S.-managed banking offices of depository institutions, as such composite rate shall be determined by the NYFRB as set forth on its public website from time to time, and published on the next succeeding Business Day by the NYFRB as an overnight bank funding rate (from and after such date as the NYFRB shall commence to publish such composite rate); provided, that if the Overnight Bank Funding Rate is less than zero, such rate shall be zero for purposes of this Agreement.
“Participant” has the meaning assigned to such term in Section 9.04(f).
“Participant Register” has the meaning assigned to such term in Section 9.04(f).
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
“Permitted Equity Interests” means common stock of the Borrower that after its issuance is not subject to any agreement between the holder of such common stock and the


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Borrower where the Borrower is required to purchase, redeem, retire, acquire, cancel or terminate any such common stock at any time prior to the first anniversary of the later of the Maturity Date (as in effect from time to time) and the Termination Date.
“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 materialmen’s, mechanics’, carriers’, workmens’, storage, landlord, and repairmen’s 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; (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 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, in the case of each of clauses (i) through (iii) above, securing payment of fees, indemnities, charges for returning items 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; (i) Eligible Liens; (j) Liens in favor of any escrow agent solely on and in respect of any cash earnest money deposits made by any Obligor in connection with any letter of intent or purchase agreement (to the extent that the acquisition or disposition with respect thereto is otherwise permitted hereunder); (k) zoning restrictions, easements, licenses, or other restrictions on the use of any real estate (including leasehold title), in each case which do not interfere with or affect in any material respect the ordinary course conduct of the business of the Borrower and its Subsidiaries; (l) purchase money Liens on specific equipment and fixtures, provided that (i) such Liens only attach to such equipment and fixtures and (ii) the Indebtedness secured thereby does not exceed the lesser of the cost and the fair market value of such equipment and fixtures at the time of the acquisition thereof; and (m) deposits of money securing leases to which Borrower is a party as lessee made in the ordinary course of business.


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“Permitted Policy Amendment” is an amendment, modification, termination or restatement of the Investment Policies, in each case, that either (i) is approved in writing by the Administrative Agent (with the consent of the Required Lenders), (ii) is required by applicable law or Governmental Authority, or (iii) is not or could not reasonably be expected to be materially adverse to the Lenders.
“Permitted SBIC Guarantee” means a guarantee by the Borrower of SBA Indebtedness of an SBIC Subsidiary on the SBA’s then applicable form; provided that the recourse to the Obligors 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 (q) 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.
“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.
“Portfolio Company” means the issuer or obligor under any Portfolio Investment held by any Obligor.
“Portfolio Investment” means any Investment held by the Borrower and its Subsidiaries in their asset portfolio that is included (or will at the end of the then current fiscal quarter be included) on the schedule of investments on the financial statements of the Borrower delivered pursuant to Section 5.01(a) or (b) (and, for the avoidance of doubt, shall not include any Subsidiary of the Borrower).
“Prime Rate” means the rate of interest quoted in The Wall Street Journal, Money Rates Section, as the “U.S. Prime Rate” (or its successor), as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Administrative Agent or any Lender may make commercial loans or other loans at rates of interest at, above, or below the Prime Rate.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“Quarterly Dates” means the last Business Day of March, June, September and December in each year, commencing on December 29, 2017.
“Quoted Investments” has the meaning assigned to such term in Section 5.12(b)(ii)(A).
“Register” has the meaning assigned to such term in Section 9.04(c).


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“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 Person’s Affiliates and the respective directors, partners, officers, employees, agents and advisors of such Person and such Person’s Affiliates.
“Relevant Asset Coverage Ratio” means, as of any date, the Asset Coverage Ratio as of the most recent Quarterly Date.
“Required Lenders” means, at any time, subject to Section 2.17(b), Lenders having Credit Exposures and unused Commitments representing more than 50% of the sum of the total Credit Exposures and unused Commitments at such time.
“Required Payment Amount” has the meaning assigned to such term in Section 6.05(b).
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Restatement Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).
“Restricted Investment” means any joint venture or any subsidiary of such joint venture that the Borrower or any of its Subsidiaries has a direct or indirect ownership interest in.
“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 (other than any equity awards granted to employees, officers, directors and consultants of the Borrower and its Affiliates); provided, for clarity, neither the conversion of convertible debt into Permitted Equity Interests nor the purchase, redemption, retirement, acquisition, cancellation or termination of convertible debt made solely with Permitted Equity Interests (other than interest or expenses or fractional shares, which may be payable in cash) shall be a Restricted Payment hereunder.
“Revolver Termination Date” means the date that is the four (4) year anniversary of the Restatement Effective Date, unless extended with the consent of each Lender in its sole and absolute discretion.
“RIC” means a Person qualifying for treatment as a “regulated investment company” under Subchapter M of the Code.


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“S&P” means S&P Global Ratings, a division of S&P Global Inc., a New York corporation, or any successor thereto.
“Sanctioned Country” means, at any time, a country, territory or region that is, or whose government is, the subject or target of any comprehensive Sanctions (which are, as of the date of this Agreement, Cuba, Iran, North Korea, Syria, and the Crimea region of Ukraine).
“Sanctions” has the meaning assigned to such term in Section 3.20.
“SBA” means the United States Small Business Administration or any Governmental Authority succeeding to any or all of the functions thereof.
“SBIC Subsidiary” means any Subsidiary of the Borrower (or such Subsidiary’s general partner or manager entity) that is (x)  either (i) a “small business investment company” licensed by the SBA (or that has applied for such a license and is actively pursuing the granting thereof by appropriate proceedings promptly instituted and diligently conducted) under the Small Business Investment Act of 1958, as amended, or (ii) any wholly-owned, direct or indirect, Subsidiary of an entity referred to in clause (x)(i) of this definition, and (y) designated in writing by the Borrower (as provided below) as an SBIC Subsidiary, so long as:
(a)    other than pursuant to a Permitted SBIC Guarantee or the requirement by the SBA that the Borrower make an equity or capital contribution to the SBIC Subsidiary in connection with its incurrence of SBA Indebtedness (provided that such contribution is permitted by Section 6.03(e) or 6.03(i) and is made substantially contemporaneously with such incurrence), no portion of the Indebtedness or any other obligations (contingent or otherwise) of such Person (i) is Guaranteed by the Borrower or any of its Subsidiaries (other than any SBIC Subsidiary), (ii) is recourse to or obligates the Borrower or any of its Subsidiaries (other than any SBIC Subsidiary) in any way, or (iii) subjects any property of the Borrower or any of its Subsidiaries (other than any SBIC Subsidiary) to the satisfaction thereof, other than Equity Interests in any SBIC Subsidiary pledged to secure such Indebtedness;
(b)    other than pursuant to a Permitted SBIC Guarantee, neither the Borrower nor any of its Subsidiaries has any material contract, agreement, arrangement or understanding with such Person other than on terms no less favorable to the Borrower or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Borrower or such Subsidiary;
(c)    neither the Borrower nor any of its Subsidiaries (other than any SBIC Subsidiary) has any obligation to such Person to maintain or preserve its financial condition or cause it to achieve certain levels of operating results; and
(d)    such Person has not Guaranteed or become a co-borrower under, and has not granted a security interest in any of its properties to secure, and the Equity Interests it has issued are not pledged to secure, in each case, any indebtedness, liabilities or obligations of any one or more of the Obligors.



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Any designation by the Borrower under clause (y) above 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 Financial Officer’s knowledge, such designation complied with the foregoing conditions.
“SEC” means the United States Securities and Exchange Commission or any Governmental Authority succeeding to any or all of the functions thereof.
“Second Largest Industry Classification Group” means, as of any date of determination, the single Industry Classification Group contributing a greater portion of the Borrowing Base than any other single Industry Classification Group other than the Largest Industry Classification Group.
“Secured Longer-Term Indebtedness” means, as at any date, Indebtedness for borrowed money (other than Indebtedness hereunder) of the Borrower (which may be Guaranteed by Subsidiary Guarantors) that (a) has no amortization (other than for amortization in an amount not greater than 1% of the aggregate initial principal amount of such Indebtedness per annum (or an amount in excess of 1% of the aggregate initial principal amount of such Indebtedness per annum on terms mutually agreeable to the Borrower and the Required Lenders)) or mandatory redemption, repurchase or prepayment prior to, and a final maturity date not earlier than, six months after the Maturity Date; (b) is incurred pursuant to documentation containing (i) financial covenants, covenants governing the borrowing base, if any, covenants regarding portfolio valuations, and events of default that are no more restrictive in any respect than those set forth in this Agreement (other than, if such Indebtedness is governed by a customary indenture or similar instrument, events of default that are customary in indentures or similar instruments and that have no analogous provisions in this Agreement or credit agreements generally) (provided that, upon the Borrower’s request, this Agreement will be deemed to be automatically amended (and, upon the request of the Administrative Agent or the Required Lenders, the Borrower and the Lenders shall enter into a document evidencing such amendment), mutatis mutandis, to make such covenants more restrictive in this Agreement as may be necessary to meet the requirements of this clause (b)(i)) and (ii) other terms (other than interest and any commitment or related fees) that are no more restrictive in any material respect than those set forth in this Agreement; and (c) ranks pari passu with the obligations under this Agreement and is not secured by any assets of any Person other than any assets of any Obligor pursuant to the Security Documents and the holders of which, or the agent, trustee or representative of such holders on behalf of and for the benefit of such holders, have agreed to be bound by the provisions of the Security Documents in a manner reasonably satisfactory to the Administrative Agent and the Collateral Agent. For the avoidance of doubt, (a) Secured Longer-Term Indebtedness shall also include any refinancing, refunding, renewal or extension of any Secured Longer-Term Indebtedness so long as such refinanced, refunded, renewed or extended Indebtedness continues to satisfy the requirements of this definition and (b) any payment on account of Secured Longer-Term Indebtedness shall be subject to Section 6.12.
“Secured Party” and “Secured Parties” have the meaning assigned to such term in the Guarantee and Security Agreement.
 


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“Security Documents” means, collectively, the Guarantee and Security Agreement, all Custodian Agreements, all Control Agreements, 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 at any time 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.
“Senior Coverage Ratio” means, as of any date of determination, the ratio, expressed as a number, obtained by dividing (a) the Borrowing Base by (b)(i) the Covered Debt Amount minus (ii) to the extent included in the calculation of the Covered Debt Amount, the aggregate principal amount of the 2019 Notes.
“Senior Securities” means senior securities (as such term is defined and determined pursuant to the Investment Company Act and any orders of the SEC issued to the Borrower thereunder).
“Settlement-Date Basis” means that any Investment that has been purchased will not be treated as an Eligible Portfolio Investment until such purchase has settled, and any Eligible Portfolio Investment which has been sold will not be excluded as an Eligible Portfolio Investment until such sale has settled.
“Solvent” means, with respect to any Obligor, that as of the date of determination, both (i) (a) the sum of such Obligor’s debt and liabilities (including contingent liabilities) does not exceed the present fair saleable value of such Person’s present assets, (b) such Obligor’s capital is not unreasonably small in relation to its business as contemplated on the Restatement Effective Date and reflected in any projections delivered to the Lenders or with respect to any transaction contemplated or undertaken after the Restatement Effective Date, and (c) such Obligor has not incurred and does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise); and (ii) such Obligor is “solvent” within the meaning given to such term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).
“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 breach of representations and warranties referred to in clause (c), and (c) representations, warranties, covenants and indemnities (together with any related performance guarantees) of a type that are reasonably customary in commercial loan securitizations (in each case in clauses (a), (b) and (c) excluding obligations related to the


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collectability of the assets sold or the creditworthiness of the underlying obligors and excluding obligations that constitute credit recourse).
“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 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.
“Stockholders’ Equity” means, at any date, the amount determined on a consolidated basis, without duplication, in accordance with GAAP, of stockholders’ equity for the Borrower and its Subsidiaries at such date.
“Structured Subsidiaries” means:
(a)    a direct or indirect Subsidiary of the Borrower which is formed in connection with, and which continues to exist for the sole purpose of, third-party financings (including prior to the Restatement Effective Date) and which engages in no material activities other than in connection with the purchase and financing of assets from the Obligors or any other Person, and which is designated by the Borrower (as provided below) as a Structured Subsidiary, so long as:
(i)    no portion of the Indebtedness or any other obligations (contingent or otherwise) of such Subsidiary (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 (other than property that has been contributed or sold or otherwise transferred to such Subsidiary in accordance with the terms Section 6.03(e) or 6.03(i)), directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings or any Guarantee thereof;
(ii)    no Obligor has any material contract, agreement, arrangement or understanding with such Subsidiary 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 loan assets; and




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(iii)    no Obligor has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results; and
(b)    any passive holding company that is designated by the Borrower (as provided below) as a Structured Subsidiary, so long as:

(i)    such passive holding company is the direct parent of a Structured Subsidiary referred to in clause (a);
(ii)    such passive holding company engages in no activities and has no assets (other than in connection with the transfer of assets to and from a Structured Subsidiary referred to in clause (a), and its ownership of all of the Equity Interests of a Structured Subsidiary referred to in clause (a)) or liabilities;
(iii)    all of the Equity Interests of such passive holding company are owned directly by an Obligor and are pledged as Collateral for the Obligations and the Collateral Agent has a first-priority perfected Lien (subject to no other Liens other than Eligible Liens) on such Equity Interests;
(iv)    no Obligor has any contract, agreement, arrangement or understanding with such passive holding company; and
(v)    no Obligor has any obligation to maintain or preserve such passive holding company’s financial condition or cause such entity to achieve certain levels of operating results.
Any designation of a Structured Subsidiary 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 Financial Officer’s knowledge, such designation complied with each of the conditions set forth in clause (a) or (b) above, as applicable.
“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 parent’s 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 (x) any Person that constitutes an Investment held by any Obligor in the ordinary course of business and that is not, under GAAP, consolidated on the financial statements of the Borrower and its Subsidiaries, (y) the Borrower’s Investments in First Star Bermuda, which shall be deemed to be Portfolio Investments hereunder for so long as each of the Borrower’s Investments in First Star Bermuda


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is listed on the schedule of investments in the financial statements most recently delivered pursuant to Section 5.01(a) or (b), as applicable, and such Investments are in substantially similar form as they are on the Original Effective Date and First Star Bermuda is in a substantially similar line of business as it is on the Original Effective Date or (z) the Borrower’s Investments in First Star Ireland, which shall be deemed to be Portfolio Investments hereunder for so long as each of the Borrower’s Investments in First Star Ireland is listed on the schedule of investments in the financial statements most recently delivered pursuant to Section 5.01(a) or (b), as applicable, and such Investments are in substantially similar form as they are on the Original Effective Date and First Star Ireland is in a substantially similar line of business as it is on the Original Effective Date. Unless otherwise specified, “Subsidiary” means a Subsidiary of the Borrower.
“Subsidiary Guarantor” means any Subsidiary that is or is required to be a Guarantor under the Guarantee and Security Agreement. It is understood and agreed that, subject to Section 5.08(a), no CFC, Transparent Subsidiary, Immaterial Subsidiary or Financing Subsidiary shall be required to be a Subsidiary Guarantor as long as it remains a CFC, Transparent Subsidiary, Immaterial Subsidiary or Financing Subsidiary, as applicable, each as defined and described herein.
“Tax Amount” has the meaning assigned to such term in Section 6.05(b).
“Tax Damages” has the meaning assigned to such term in Section 2.15(d).
“Taxes” means any and all present or future taxes levies, imposts, duties, deductions, 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 date on which the Commitments have expired or been terminated and the principal of and accrued interest on each Loan and all fees and other amounts payable hereunder by the Borrower or any other Obligor shall have been paid in full (excluding, for the avoidance of doubt, any amount in connection with any contingent, unasserted indemnification obligations), all Letters of Credit shall have (x) expired or (y) terminated and, in each case, all LC Disbursements then outstanding have been reimbursed.
“Third Largest Industry Classification Group” means, as of any date of determination, the single Industry Classification Group contributing a greater portion of the Borrowing Base than any other single Industry Classification Group other than the Largest Industry Classification Group and the Second Largest Industry Classification Group.
“Transactions” means the execution, delivery and performance by the Borrower of this Agreement and other Loan Documents, the borrowing of Loans, and the use of the proceeds thereof and the issuance of Letters of Credit hereunder.
“Transparent Subsidiary” means a Subsidiary classified as a partnership or as a disregarded entity for U.S. federal income tax purposes directly or indirectly owned by an


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Obligor that has no material assets other than Equity Interests (held directly or indirectly through other Transparent Subsidiaries) in one or more CFCs.
“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.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Undisclosed Administration” means, in relation to a Lender or its direct or indirect parent company, 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 or its direct or indirect parent company is subject to home jurisdiction supervision if applicable law requires that such appointment is not to be publicly disclosed and such appointment has not been publicly disclosed (including, without limitation, under the Dutch Financial Supervision Act 2007 (as amended from time to time and including any successor legislation)).
“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York.
“Unquoted Investments” has the meaning assigned to such term in Section 5.12(b)(ii)(B).
“Unsecured Longer-Term Indebtedness” means (A) prior to May 31, 2018, the 2019 Notes, and (B) any other Indebtedness of the Borrower for borrowed money that (a) has no amortization, or mandatory redemption, repurchase or prepayment prior to, and a final maturity date not earlier than, six months after the Maturity Date (it being understood that (i) the conversion features into Permitted Equity Interests under convertible notes (as well as the triggering of such conversion and/or settlement thereof solely with Permitted Equity Interests, except in the case of interest, fractional shares pursuant to customary and market conversion and other provisions or expenses (which may be payable in cash)) shall not constitute “amortization”, “redemption”, “repurchase” or “prepayment” for the purposes of this definition and (ii) any amortization, mandatory redemption, repurchase or prepayment obligation or put right that is contingent upon the happening of an event that is not certain to occur (including, without limitation, a Change in Control or bankruptcy) shall not in and of itself be deemed to disqualify such Indebtedness under this clause (a)), (b) is incurred pursuant to documentation containing (i) financial covenants, covenants governing the borrowing base, if any, covenants regarding portfolio valuation, and events of default that are no more restrictive in any respect than those set


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forth in this Agreement (other than, if such Indebtedness is governed by a customary indenture or similar instrument, events of default that are customary in indentures or similar instruments and that have no analogous provisions in this Agreement or credit agreements generally) (provided that, upon the Borrower’s request, this Agreement will be deemed to be automatically amended (and, upon the request of the Administrative Agent or the Required Lenders, the Borrower and the Lenders shall enter into a document evidencing such amendment), mutatis mutandis, to make such covenants more restrictive in this Agreement as may be necessary to meet the requirements of this clause (b)(i)) (it being understood that customary put rights or repurchase or redemption obligations (x) in the case of convertible securities, in connection with the suspension or delisting of the Equity Interests of the Borrower or the failure of the Borrower to satisfy a continued listing rule with respect to its Equity Interests or (y) arising out of circumstances that would constitute a “fundamental change” (as such term is customarily defined in convertible note offerings) shall not be deemed to be more restrictive for purposes of this definition) and (ii) other terms that are substantially comparable to market terms for substantially similar debt of other similarly situated borrowers as reasonably determined in good faith by the Borrower, and (c) is not secured by any assets of any Person. For the avoidance of doubt, (a) Unsecured Longer-Term Indebtedness shall also include any refinancing, refunding, renewal or extension of any Unsecured Longer-Term Indebtedness so long as such refinanced, refunded, renewed or extended Indebtedness continues to satisfy the requirements of clause (B) of this definition and (b) any payment on account of Unsecured Longer-Term Indebtedness shall be subject to Section 6.12.
“Unsecured Shorter-Term Indebtedness” means, collectively, (a) any Indebtedness for borrowed money of the Borrower or any Subsidiary (other than a Financing Subsidiary) that is not secured by any assets of any Person and that does not constitute Unsecured Longer-Term Indebtedness and (b) any Indebtedness for borrowed money of the Borrower or any Subsidiary (other than a Financing Subsidiary) that is designated as “Unsecured Shorter-Term Indebtedness” pursuant to Section 6.11. For the avoidance of doubt, Unsecured Shorter-Term Indebtedness shall also include any refinancing, refunding, renewal or extension of any Unsecured Shorter-Term Indebtedness so long as such refinanced, refunded, renewed or extended Indebtedness continues to satisfy the requirements of this definition.
“USA PATRIOT Act” has the meaning assigned to such term in Section 3.21.
“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.
“Valuation Policy” has the meaning assigned to such term in Section 5.12(b)(ii)(B)(y).



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“wholly owned Subsidiary” of any person shall mean a Subsidiary of such person, all of the Equity Interests of which (other than directors’ qualifying shares or nominee or other similar shares required pursuant to applicable law) are owned by such person and/or one or more wholly owned Subsidiaries of such person. Unless the context otherwise requires, “wholly owned Subsidiary Guarantor” shall mean a wholly owned Subsidiary that is a Subsidiary Guarantor.
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a “complete withdrawal” or “partial withdrawal” from such Multiemployer Plan, as defined in Part I of Subtitle E of Title IV of ERISA.
“Withholding Agent” means any Obligor and the Administrative Agent.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule. and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contact or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
SECTION 1.02.    Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Type (e.g., an “ABR Loan”). Borrowings also may be classified and referred to by Type (e.g., an “ABR Borrowing”).
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, restated, amended and restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or therein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on such successors and assigns set forth herein), (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. Solely for purposes of this Agreement,


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any references to “obligations” owed by any Person under any Hedging Agreement shall refer to the amount that would be required to be paid by such Person if such Hedging Agreement were terminated at such time (after giving effect to any netting agreement).
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 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 Original Effective Date in GAAP or in the application or interpretation 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), then the Borrower, Administrative Agent and the Lenders agree to enter into negotiations in good faith in order to amend such provisions of the Agreement so as to equitably reflect such change to comply with GAAP with the desired result that the criteria for evaluating the Borrower's financial condition shall be the same after such change to comply with GAAP as if such change had not been made; provided, however, until such amendments to equitably reflect such changes are effective and agreed to by the Borrower, Administrative Agent and the Required Lenders, the Borrower’s compliance with such financial covenants shall be determined on the basis of GAAP as in effect and applied immediately before such change in GAAP becomes effective. Notwithstanding the foregoing or anything herein to the contrary, the Borrower covenants and agrees with the Lenders that whether or not the Borrower may at any time adopt Accounting Standard Codification 825, all determinations relating to fair value accounting for liabilities or compliance with the terms and conditions of this Agreement shall be made on the basis that the Borrower has not adopted Accounting Standard Codification 825. In addition, notwithstanding Accounting Standards Update 2015-03, GAAP or any other matter, for purposes of calculating any financial or other covenants hereunder, debt issuance costs shall not be deducted from the related debt obligation. Notwithstanding any other provision contained herein, solely with respect to any change in GAAP after the Original Effective Date with respect to the accounting for leases as either operating leases or capital leases, any lease that is not (or would not be) a capital lease under GAAP as in effect on the Original Effective Date shall not be treated as a capital lease, and any lease that would be treated as a capital lease under GAAP as in effect on the Original Effective Date shall continue to be treated as a capital lease, hereunder and under the other Loan Documents, notwithstanding such change in GAAP after the Original Effective Date, and all determinations of Capital Lease Obligations shall be made consistently therewith (i.e., ignoring any such changes in GAAP after the Original Effective Date).
SECTION 1.05.    Times of Day; Interest Rates. Unless otherwise specified in the Loan Documents, time references are to Eastern time (daylight or standard, as applicable). The Administrative Agent does not warrant or accept responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to the rates in the definition of “LIBO Rate” or with respect to any comparable or successor rate thereto, or replacement rate therefor.
SECTION 1.06.    Issuers. For all purposes of this Agreement, all issuers of Eligible Portfolio Investments that are Affiliates of one another shall be treated as a single issuer, unless such issuers are Affiliates of one another solely because they are under the common Control of the same private equity sponsor or similar sponsor.


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ARTICLE II    

THE CREDITS
SECTION 2.01.    The Commitments. Subject to the terms and conditions set forth herein, each Lender severally agrees to make Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (a) such Lender’s Credit Exposure exceeding such Lender’s Commitment, (b) the aggregate Credit Exposure of all of the Lenders exceeding the aggregate Commitments or (c) a Borrowing Base Deficiency. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Loans.
SECTION 2.02.    Loans and Borrowings.
(a)    Obligations of Lenders. Each Loan shall be made as part of a Borrowing consisting of Loans of the same Type made by the Lenders ratably in accordance with their respective Commitments. 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 Lender’s failure to make Loans as required.
(b)    Type of Loans. Subject to Section 2.12, each Borrowing shall be constituted entirely of ABR Loans or of Eurocurrency Loans as the Borrower may request in accordance herewith. Each 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 Borrowing shall be in an aggregate amount of $1,000,000 or a whole multiple of $100,000 in excess thereof; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.04(f). Borrowings of more than one 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 Maturity Date.
(e)    Restatement Effective Date Adjustments.
(i)    On the Restatement Effective Date, the Borrower shall (A) prepay the Existing Loans (if any) in full, including (i) all accrued but unpaid commitment fees relating to such Existing Loans as of such date, and (ii) all accrued but unpaid interest relating to such Existing Loans as of such date (in



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each case, calculated at the rate set forth in the Existing Credit Agreement), (B) simultaneously borrow new Loans hereunder in an amount equal to such prepayment (plus the amount of any additional borrowings that may have been requested by the Borrower at such time); provided that with respect to subclauses (A) and (B), (x) the prepayment to, and borrowing from, any Existing Continuing Lender may be effected by book entry to the extent that any portion of the amount prepaid to such Existing Continuing Lender will be subsequently borrowed in Dollars from such Existing Continuing Lender and (y) the Lenders shall make and receive payments among themselves, in a manner acceptable to the Administrative Agent, so that, after giving effect thereto, the Loans are held ratably by the Lenders in accordance with the respective Commitments of such Lenders (as set forth in Schedule 1.01(b)) and (C) pay to the Existing Lenders the amounts, if any, payable under Section 2.16 of the Existing Credit Agreement as a result of such prepayment. Each of the Existing Continuing Lenders agrees to waive payment of the amounts, if any, payable under Section 2.14 as a result of, and solely in connection with, any such prepayment, and hereby consents to the non-pro rata payment described in this Section 2.02(e).
(ii)    On the Restatement Effective Date, the Borrower shall prepay to the Departing Lenders such Departing Lenders’ pro rata portion of the Existing Loans, including (i) all accrued but unpaid commitment fees relating to such Existing Loans as of such date, and (ii) all accrued but unpaid interest relating to such Existing Loans as of such date (in each case, calculated at the rate set forth in the Existing Credit Agreement). Each of the Departing Lenders agrees to waive repayment of the amounts, if any, payable under Section 2.14 of the Existing Credit Agreement as a result of, and solely in connection with, any such prepayment, and hereby consents to the non-pro rata payment described in this Section 2.02(e). Upon the receipt of such prepayment, each Departing Lender shall cease to be a “Lender” under the Existing Credit Agreement, but shall continue to be entitled to the benefits of Sections 2.12, 2.13 and 9.03 of the Existing Credit Agreement with respect to facts and circumstances occurring prior to the Restatement Effective Date.
SECTION 2.03.    Requests for Borrowings.
(a)    Notice by the Borrower. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by delivery of a signed Borrowing Request or by telephone or e-mail (in each case, followed promptly by delivery of a signed Borrowing Request) (i) in the case of a Eurocurrency Borrowing, not later than 2:00 p.m., New York City time, three (3) Business Days before the date of the proposed Borrowing or (ii) in the case of an ABR Borrowing, not later than 2:00 p.m., New York City time, one Business Day before the date of the proposed Borrowing. Each such request for a Borrowing 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.




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(b)    Content of Borrowing Requests. Each request for a Borrowing (whether a written Borrowing Request, a telephonic request or e-mail request) shall specify the following information in compliance with Section 2.02:
(i)    the aggregate amount of the requested Borrowing;
(ii)    the date of such Borrowing, which shall be a Business Day;
(iii)    whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing;
(iv)    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);
(v)    a reasonably detailed calculation of the Senior Coverage Ratio and/or Obligors’ Net Worth as of such date and the Applicable Margin as of such date; and
(vi)    the location and number of the Borrower’s account (or such other account(s) as the Borrower may designate in a written Borrowing Request accompanied by information reasonably satisfactory to the Administrative Agent as to the identity and purpose of such other account(s)) to which funds are to be disbursed, which shall comply with the requirements of Section 2.05.
(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 Lender’s Loan to be made as part of the requested Borrowing.
(d)    Failure to Elect. If no election as to the Type of a Borrowing is specified in a Borrowing Request, then the requested Borrowing shall be a Eurocurrency Borrowing having an Interest Period of one (1) month. If a Eurocurrency Borrowing is requested but no Interest Period is specified, the Borrower shall be deemed to have selected an Interest Period of one (1) month.
SECTION 2.04.    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 the Commitments, Letters of Credit denominated in Dollars for its own account or for the account of its designee (provided the Obligors shall remain primarily liable to the Lenders hereunder for payment and reimbursement of all amounts payable in respect of such Letter of Credit hereunder) for the purposes set forth in Section 5.09 in such form as is acceptable to the Issuing Bank in its reasonable determination and for the benefit of such named beneficiary or beneficiaries as are specified by the Borrower. Letters of Credit issued hereunder shall constitute utilization of the Commitments up to the aggregate amount then available to be drawn thereunder.



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(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 of such Letter of Credit, stating that such Letter of Credit is to be issued under the 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. The Administrative Agent will promptly notify all Lenders following the issuance of any Letter of Credit. If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank’s 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 $50,000,000, (ii) the total Credit Exposures shall not exceed the aggregate Commitments and (iii) 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 (pursuant to customary “evergreen” provisions) for the renewal thereof for additional one-year periods; provided, further, that (x) in no event shall any Letter of Credit have an expiration date that is later than the Revolver Termination Date unless the Borrower (1) Cash Collateralizes, on or prior to the date that is five (5) Business Days prior to the Revolver Termination Date, such LC Exposure that will remain outstanding as of the close of business on the Revolver Termination Date and (2) pays in full, on or prior to the Revolver Termination Date, all commissions required to be paid with respect to any such Letter of Credit through the then-current expiration date of such Letter of Credit and (y) no Letter of Credit shall have an expiration date after the Maturity Date.
(e)    Participations. By the issuance of a Letter of Credit (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


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Lender, and each Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage 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 Commitments, provided that no Lender shall be required to purchase a participation in a Letter of Credit pursuant to this Section 2.04(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 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 hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank in respect of Letters of Credit 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 2.05 with respect to Loans made by such Lender (and Section 2.05 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 paragraph (f), 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 12:00 p.m., New York City 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., New York City 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 Disbursement is not less than $1,000,000, the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 that such payment be financed with an ABR Borrowing in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Borrowing.



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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 Lender’s Applicable Percentage thereof.
(g)    Obligations Absolute. The Borrower’s 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 Borrower’s obligations hereunder.
None of the Administrative Agent, the Lenders, the Issuing Bank, or any of their respective 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 Bank’s 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;
(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).



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(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 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 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 2.11(c) shall apply. Interest accrued pursuant to this paragraph shall be for the 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 the account of such Lender to the extent of such payment.
(j)    Replacement of the Issuing Bank. The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank. In addition to the foregoing, if a Lender becomes, and during the period in which it remains, a Defaulting Lender, and any Default has arisen from a failure of the Borrower to comply with Section 2.17(c), then the Issuing Bank may, upon prior written notice to the Borrower and the Administrative Agent, resign as Issuing Bank, effective at the close of business New York City 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 Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank. At the time any such replacement under any of the foregoing circumstances shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.10(b). From and after the effective date of any such replacement, (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 replacement of the Issuing Bank hereunder, the replaced Issuing Bank 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 replacement, but shall not be required to issue additional Letters of Credit.
(k)    Cash Collateralization. If the Borrower shall be required or shall elect, as the case may be, to provide cover for LC Exposure pursuant to Section 2.04(d), Section 2.09(b),



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Section 2.17(c)(ii) or the third to last paragraph of Article VII, the Borrower shall immediately Cash Collateralize such LC Exposure. Such Cash Collateral shall be held by the Administrative Agent in a segregated collateral account or accounts in the name of the Escrow Agent (for the benefit of the Issuing Bank), maintained with the Escrow Account Bank (herein, collectively, the “Letter of Credit Escrow Account”); provided (i) that the Obligors shall have no control over or interest in the Letter of Credit Escrow Account or the funds contained therein and (ii) the Letter of Credit Escrow Account shall be subject to a deposit account control agreement in form and substance reasonably satisfactory to the Issuing Bank, the Escrow Agent and the Borrower. For the avoidance of doubt, the Borrower shall not have access to the funds in the Letter of Credit Escrow Account and no portion of such funds shall constitute property of the Borrower or the Borrower’s estate.
(l)    Assumption of Existing Letter of Credit. Notwithstanding any provision herein to the contrary, the Administrative Agent, the Issuing Bank, the Lenders and the Borrower hereby agree and acknowledge that, effective immediately upon the Restatement Effective Date, L/C No. G80112, issued by ING Capital LLC at the direction of the Borrower to CNSC (CARGO NETWORK SERVICES CORP), shall be deemed to have been assumed hereunder and issued on the Restatement Effective Date as a Letter of Credit hereunder, and shall automatically be subject to all of the terms and provisions of the Loan Documents applicable to Letters of Credit, including the obligation of each of the Lenders to participate in such Letter of Credit pursuant to Section 2.04(e) and the obligation of the Borrower to reimburse any LC Disbursement in respect thereof pursuant to Section 2.04(f) and to pay fees, costs and expenses in connection with such Letter of Credit pursuant to Section 2.10(b) (provided that, for the avoidance of doubt, no fee shall be paid to the Issuing Bank on the Restatement Effective Date as an issuance fee).
SECTION 2.05.    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 1:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. 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 ABR Borrowings made to finance the reimbursement of an LC Disbursement as provided in Section 2.04(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 Lender’s 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, in reliance upon such assumption, the Administrative Agent may (in its sole discretion and without any obligation to do so) 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



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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 and (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 Lender’s Loan included in such Borrowing. Nothing in this paragraph shall relieve any Lender of its obligation to fulfill its commitments hereunder, and shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.
SECTION 2.06.    Interest Elections.
(a)    Elections by the Borrower for Borrowings. Subject to Section 2.03(d), the Loans constituting each 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, subject to Section 2.06(e), the Borrower 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. 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, and the Loans constituting each such portion shall be considered a separate Borrowing.
(b)    Notice of Elections. To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by delivery of a signed Interest Election Request in a form approved by the Administrative Agent or by telephone (followed promptly, but no later than the close of business on the date of such request, by a signed Interest Election Request in a form approved by the Administrative Agent) by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such Interest Election Request shall be irrevocable.
(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 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;




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(iii)    whether 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).
(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 Lender’s 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, at the end of such Interest Period such Borrowing shall be converted to a Eurocurrency Borrowing having an Interest Period of one (1) month. 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 shall, at the end of the applicable Interest Period for such Eurocurrency Borrowing, be automatically converted to an ABR Borrowing and (ii) the Borrower shall not be entitled to elect to convert or continue any Borrowing into or as a Eurocurrency Borrowing.
SECTION 2.07.    Termination, Reduction or Increase of the Commitments.
(a)    Scheduled Termination. Unless previously terminated in accordance with the terms of this Agreement, on the Revolver Termination Date the Commitments shall automatically be reduced to an amount equal to the aggregate principal amount of the Loans and LC Exposure of all Lenders outstanding on the Revolver Termination Date and thereafter to an amount equal to the aggregate principal amount of the Loans and LC Exposure outstanding after giving effect to each payment of principal and each expiration or termination of a Letter of Credit hereunder; provided that, for clarity, except as expressly provided for herein (including, without limitation, Section 2.04(e)), no Lender shall have any obligation to make new Loans or to issue, amend or renew an existing Letter of Credit on or after the Revolver Termination Date, and any outstanding amounts shall be due and payable on the Maturity Date in accordance with Section 2.08.
(b)    Voluntary Termination or Reduction. The Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the Commitments pursuant to this Section 2.07(b) shall be in a minimum amount of at least $1,000,000 (or an amount less than $1,000,000 if the Commitments are being reduced to zero) and (ii) the Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.09, the total Credit Exposures would exceed the total Commitments.
(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 (3) Business Days prior to the effective date of such


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termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the 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 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 shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments.
(e)    Increase of the Commitments.
(i)    Requests for Increase by Borrower. The Borrower may, at any time prior to the Revolver Termination Date, propose that the Commitments hereunder be increased (each such proposed increase being a “Commitment Increase”) by 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 date shall be a Business Day at least three Business Days (or such lesser period as the Administrative Agent may reasonably agree) after delivery of such notice and at least thirty (30) days prior to the Revolver Termination Date; provided that, subject to the foregoing, each Commitment Increase shall become effective only upon satisfaction of the following conditions:
(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 $5,000,000 or a larger multiple of $1,000,000 in excess thereof (or, in each case, in such other amounts as agreed by the Administrative Agent),
(B)    immediately after giving effect to such Commitment Increase, the total Commitments of all of the Lenders hereunder shall not exceed $1,020,000,000the greater of (x) $800,000,000 and (y) 100% of the Obligors’ Net Worth as of the Commitment Increase Date;
(C)    each Assuming Lender and the Commitment Increase shall be consented to by the Administrative Agent and the Issuing Bank (which consent shall not be unreasonably withheld or delayed);
(D)    no Default or Event of 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 and the other Loan Documents shall be true and correct in all material respects (other


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than any representation or warranty already qualified by materiality or Material Adverse Effect, which shall be true and correct in all respects) 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).
For the avoidance of doubt, no Lender shall be obligated to agree to an additional Commitment requested by the Borrower pursuant to this Section 2.07(e).
(ii)    Effectiveness of Commitment Increase by Borrower. On the Commitment Increase Date for any Commitment Increase, each Assuming Lender part of such Commitment Increase, if any, shall become a Lender hereunder as of such Commitment Increase Date with a Commitment in the amount set forth in the agreement referred to in Section 2.07(e)(ii)(y) and the Commitment of any Increasing Lender part of such Commitment Increase shall be increased as of such Commitment Increase Date to the amount set forth in the agreement referred to in Section 2.07(e)(ii)(y); provided that:
(x)    the Administrative Agent shall have received on or prior to 12:00 p.m., New York City time, on such Commitment Increase Date (or on or 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 12:00 p.m., New York City 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 reasonably 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, as applicable, duly executed by such Assuming Lender or Increasing Lender, as applicable, and the Borrower and acknowledged by the Administrative Agent.
Promptly following satisfaction of such conditions, the Administrative Agent shall notify the Lenders (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 each Assuming Lender and each Increasing Lender part of such Commitment Increase, as applicable, together with the certificate referred to in clause (ii)(x) above, the Administrative Agent shall, if such agreement referred to in clause (ii)(y) 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 each Commitment Increase Date, the Borrower shall (A) prepay the outstanding Loans (if


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any) in full, (B) simultaneously borrow new Loans 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 are held ratably by the Lenders in accordance with the respective Commitments of such Lenders (after giving effect to such Commitment Increase) and (C) pay to the Lenders the amounts, if any, payable under Section 2.14 as a result of any such prepayment. Notwithstanding the foregoing, unless otherwise consented in writing by the Borrower, no Commitment Increase Date shall occur on any day other than the last day of an Interest Period. Concurrently therewith, the Lenders shall be deemed to have adjusted their participation interests in any outstanding Letters of Credit so that such interests are held ratably in accordance with their Commitments as so increased. The Administrative Agent shall amend Schedule 1.01(b) to reflect the aggregate amount of each Lender’s Commitments (including Increasing Lenders and Assuming Lenders). Each reference to Schedule 1.01(b) in this Agreement shall be to Schedule 1.01(b) as amended pursuant to this Section.
(v)    Terms of Loans issued on the Commitment Increase Date. For the avoidance of doubt, the terms and provisions of any new Loans issued by any Assuming Lender or Increasing Lender, and the Commitment Increase of any Assuming Lender or Increasing Lender, shall be identical to the terms and provisions of Loans issued by, and the Commitments of, the Lenders immediately prior to the applicable Commitment Increase Date.
SECTION 2.08.    Repayment of Loans; Evidence of Debt.
(a)    Repayment. Subject to, and in accordance with, the terms of this Agreement, the Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of the Lenders the outstanding principal amount of the Loans and all other amounts due and owing hereunder and under the other Loan Documents on the Maturity Date.
(b)    Manner of Payment. Prior to any repayment or prepayment of any Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to be paid and shall notify the Administrative Agent by telephone (confirmed by telecopy or e-mail) of such selection not later than the time set forth in Section 2.09(e) prior to the scheduled date of such repayment; provided that each repayment of Borrowings shall be applied to repay any outstanding ABR Borrowings before any other Borrowings. 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 and, second, to other Borrowings 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 Borrowing shall be applied ratably to the Loans included in such Borrowing.




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(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 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 of each Loan made hereunder, the Type thereof and each Interest Period therefor, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.
(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 manifest 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. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.
(f)    Promissory Notes. Any Lender may request that Loans 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 permitted registered assigns) and in a form attached hereto as Exhibit C. 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 permitted registered assigns).
SECTION 2.09.    Prepayment of Loans.
(a)    Optional Prepayments. The Borrower shall have the right at any time and from time to time (but subject to Section 2.09(e)) to prepay any Borrowing in whole or in part, without premium or fee (but subject to Section 2.14), subject to the requirements of this Section. Each prepayment in part under this Section 2.09(a) shall be in a minimum amount of $1,000,000 or a larger multiple of $100,000 (or such lesser amount as is then outstanding).
(b)    Mandatory Prepayments due to Borrowing Base Deficiency. In the event that the amount of total Credit Exposure exceeds the total Commitments, the Borrower shall prepay Loans (and, to the extent necessary, provide cover for Letters of Credit as contemplated by Section 2.04(k)) in such amounts as shall be necessary so that the amount of total Credit Exposure does not exceed the total Commitments. In the event that at any time any Borrowing Base Deficiency shall exist, promptly (but in no event later than 5 Business Days), the Borrower shall either prepay (x) the Loans (and, to the extent necessary, provide cover for Letters of Credit as contemplated by Section 2.04(k)) so that the Borrowing Base Deficiency is promptly cured or (y) the Loans and the Other Covered Indebtedness that is Secured Longer-Term Indebtedness in


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such amounts as shall be necessary so that such Borrowing Base Deficiency is promptly cured (and, as among the Loans (and Letters of Credit) and the Other Covered Indebtedness that is Secured Longer-Term Indebtedness, at least ratably (based on the outstanding principal amount of such Indebtedness) as to payments of Loans in relation to Other Covered Indebtedness); provided, that if within such 5 Business Day period, the Borrower shall present to the Administrative Agent a reasonably feasible plan, which plan is reasonably satisfactory to the Administrative Agent, that will enable any such Borrowing Base Deficiency to be cured within 30 Business Days of the occurrence of such Borrowing Base Deficiency (which 30-Business Day period shall include the 5 Business Days permitted for delivery of such plan), then such prepayment or reduction shall be effected in accordance with such plan (subject, for the avoidance of doubt, to the limitations as to the allocation of such prepayments set forth above in this Section 2.09(b)); provided further, that to the extent such Borrowing Base Deficiency is a result of the failure of the Borrowing Base to include the minimum Senior Investments required pursuant to Section 5.13(e) because of a change in either (i) the ratio of the Gross Borrowing Base to the Senior Debt Amount or (ii) the Relevant Asset Coverage Ratio, such 30-Business Day period shall be extended by an additional 15 Business Days solely with respect to compliance with Section 5.13(e). Notwithstanding the foregoing, the Borrower shall pay interest in accordance with Section 2.11(c) for so long as the Covered Debt Amount exceeds the Borrowing Base during such 30-Business Day period. For clarity, in the event that the Borrowing Base Deficiency is not cured prior to the end of such 5-Business Day period (or, if applicable, such 30-Business Day period), it shall constitute an Event of Default under clause (a) of Article VII.
(c)    Mandatory Prepayments due to Certain Events Following Availability Period. Subject to Section 2.09(e):
(i)    Asset Sales. In the event that any Obligor shall receive any Net Asset Sale Proceeds at any time after the Availability Period, the Borrower shall, no later than the third Business Day following the receipt of such Net Asset Sale Proceeds, prepay the Loans in an amount equal to such Net Asset Sale Proceeds (and the Commitments shall be permanently reduced by such amount); provided, that with respect to Asset Sales of assets that are not Portfolio Investments, the Borrower shall not be required to prepay the Loans unless and until (and to the extent that) the aggregate Net Asset Sale Proceeds relating to all such Asset Sales are greater than $2,000,000.
(ii)    Returns of Capital. In the event that any Obligor shall receive any Net Return of Capital at any time after the Availability Period, the Borrower shall, no later than the third Business Day following the receipt of such Net Return of Capital, prepay the Loans in an amount equal to 100% of such Net Return of Capital (and the Commitments shall be permanently reduced by such amount).
(iii)    Equity Issuances. In the event that the Borrower shall receive any Cash proceeds from the issuance of Equity Interests of the Borrower (other than (x) up to $5,000,000 of proceeds in the aggregate from issuance(s) of Equity Interests to managers, partners, members, directors, officers, employees or consultants of the Investment Advisor or (y) pursuant to any distribution reinvestment plan of the Borrower) at any time after the Availability Period, the Borrower shall, no later than the third Business Day


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following the receipt of such Cash proceeds, prepay the Loans in an amount equal to 100% of such Cash proceeds, net of underwriting discounts and commissions or other similar payments and other reasonable costs, fees, premiums and expenses directly associated therewith, including, without limitation, reasonable legal fees and expenses (and the Commitments shall be permanently reduced by such amount).
(iv)    Indebtedness. In the event that any Obligor shall receive any Cash proceeds from the issuance of Indebtedness (excluding Hedging Agreements permitted by Section 6.01 and other Indebtedness permitted by Section 6.01(a), (e), (f), (g) and (k)) at any time after the Availability Period, such Obligor shall, no later than the third Business Day following the receipt of such Cash proceeds, prepay the Loans in an amount equal to 100% of such Cash proceeds, net of underwriting discounts and commissions or other similar payments and other reasonable costs, fees, commissions, premiums and expenses directly associated therewith, including, without limitation, reasonable legal fees and expenses (and the Commitments shall be permanently reduced by such amount).
(d)    Mandatory Prepayment of Eurocurrency Loans. If the Loans to be prepaid pursuant to Section 2.09(c)(ii) are Eurocurrency Loans, the Borrower may defer such prepayment (and permanent Commitment reduction) until the last day of the Interest Period applicable to such Loans, so long as the Borrower deposits an amount equal to an amount required to be prepaid, no later than the third Business Day following the receipt of such amount, into a segregated collateral account in the name and under the dominion and control (within the meaning of Section 9-104 of the Uniform Commercial Code) of the Administrative Agent pending application of such amount to the prepayment of the Loans (and permanent reduction of the Commitments) on the last day of such Interest Period.
(e)    Notices, Etc. The Borrower shall notify the Administrative Agent in writing or by telephone (followed promptly by written confirmation) of any prepayment hereunder (i) in the case of prepayment of a Eurocurrency Borrowing under Section 2.09(a), not later than 11:00 a.m., New York City time, three (3) Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing under Section 2.09(a), or in the case of any prepayment under Section 2.09(b) or (c), not later than 11:00 a.m., New York City time, one (1) 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, (1) if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.07(c), then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.07(c) and (2) any such notices given in connection with any of the events specified in Section 2.09(c) may be conditioned upon (x) the consummation of the issuance of Equity Interests or Indebtedness (as applicable) or (y) the receipt of net cash proceeds from Asset Sales or Net Returns of Capital. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. In the event the Borrower is required to make any concurrent prepayments under both paragraph (b) and also another paragraph of this Section 2.09, any such prepayments shall be applied toward a prepayment pursuant to paragraph (b) before any prepayment pursuant to any other paragraph of this Section


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2.09. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.11 and shall be made in the manner specified in Section 2.08(b).
(f)    RIC Tax Distributions. Notwithstanding anything herein to the contrary, Net Asset Sale Proceeds and Net Return of Capital required to be applied to the prepayment of the Loans pursuant to Section 2.09(c) shall exclude the amounts estimated in good faith by the Borrower to be necessary for the Borrower to make distributions on account of such Net Asset Sale Proceeds and Net Returns of Capital sufficient in amount to achieve the objectives set forth in (i), (ii) and (iii) of Section 6.05(b)(1) hereof solely to the extent that the Tax Amount in or with respect to any taxable year (or any calendar year, as relevant) is increased as a result of the receipt of such Net Asset Sale Proceeds or Net Return of Capital, as the case may be.
SECTION 2.10.    Fees.
(a)    Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue (i) for the period beginning on the Original Effective Date to and including the earlier of the date such Lender’s Commitment terminates and the date that is six months after the Original Effective Date (the “Ramp-Up Period”), at a rate equal to 0.50% per annum on the daily unused portion of the Commitment of such Lender as of the close of business on such day and (ii) for the period beginning the day after the end of the Ramp-Up Period to and including the earlier of the date such Lender’s Commitment terminates and the Revolver Termination Date, at a rate equal to (x) 0.375% per annum on the daily unused amount of the Commitment of such Lender as of the close of business on such day if the daily unused amount as of the close of business on such day is less than sixty-five percent (65%) of such Lender’s Commitment and (y) 1.00% per annum on the daily unused amount of the Commitment of such Lender as of the close of business on such day if the daily unused amount as of the close of business on such day is equal to or greater than sixty-five percent (65%). Accrued commitment fees shall be payable in arrears (x) within one Business Day after each Quarterly Date and (y) on the earlier of the date the Commitments terminate and the Revolver Termination Date, commencing on the first such date to occur after the Original Effective Date. 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 Commitments shall be deemed to be used to the extent of the outstanding Loans and LC Exposure of all Lenders.
(b)    Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, 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 Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Original Effective Date to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate of one-half of one percent (0.50%) per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC



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Disbursements) during the period from and including the Original 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 Bank’s 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 Original Effective Date; provided that all such fees with respect to the Letters of Credit shall be payable on the earlier of the Revolver Termination Date and the date on which the Commitments are otherwise terminated in accordance with the terms hereof (such earlier date, 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. 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 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 manifest error.
SECTION 2.11.    Interest.
(a)    ABR Loans. The Loans constituting each ABR Borrowing 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 described in clause (a), (b), (d) (only with respect to Section 6.07), (h) or (i) of Article VII has occurred and is continuing, or if the Covered Debt Amount exceeds the Borrowing Base during the 5-Business Day period (or, if applicable, the 30-Business Day period) referred to in Section 2.09(b), the interest rates applicable to the Loans shall accrue, and any fee or other amount due and 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


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fee otherwise applicable to such Letter of Credit as provided in Section 2.10(b) or (iii) in the case of any fee or other amount, 2% plus the rate applicable to ABR 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 Dollars and upon termination in full of the Commitments; 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 an ABR Loan prior to the 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 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 by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate 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.
SECTION 2.12.    Eurocurrency Borrowing Provisions.
(a)    Alternate Rate of Interest. If prior to the commencement of the Interest Period for any Eurocurrency Borrowing:
(i)    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 such Interest Period; or
(ii)    the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate 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 Lenders by telephone, telecopy or e-mail promptly thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or the continuation of any Borrowing as, a Eurocurrency Borrowing shall be ineffective and such Borrowing (unless prepaid) shall be continued as, or converted to, an ABR Borrowing and (ii) if any Borrowing Request requests a Eurocurrency Borrowing, such Borrowing shall be made as an ABR Borrowing.

(b)    Illegality. Without duplication of any other rights that any Lender has hereunder, if any Lender determines that any law has made it unlawful, or that any Governmental


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Authority has asserted that it is unlawful for any Lender to make, maintain or fund Loans whose interest is determined by reference to the LIBO Rate, or to determine or charge interest rates based upon the LIBO Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower and the Administrative Agent, (i) any obligation of such Lender to make or continue Eurocurrency Borrowings or to convert ABR Borrowings to Eurocurrency Borrowings shall be suspended, and (ii) if such notice asserts the illegality of such Lender making or maintaining Eurocurrency Borrowings the interest rate on which is determined by reference to the LIBO Rate component of the Alternate Base Rate, the interest rate on which ABR Borrowings of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the LIBO Rate component of the Alternate Base Rate, in each case until such Lender revokes such notice and advises the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, (x) all Eurocurrency Borrowings of such Lender shall automatically convert to ABR Borrowings (the interest rate on which ABR Borrowings of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the LIBO Rate component of the Alternate Base Rate), either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Borrowings to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurocurrency Borrowings (in which event Borrower shall not be required to pay any yield maintenance, breakage or similar fees) and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the LIBO Rate, the Administrative Agent shall during the period of such suspension compute the Alternate Base Rate applicable to such Lender without reference to the LIBO Rate component thereof until the Administrative Agent is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon the LIBO Rate. Upon any such conversion, the Borrower shall also pay accrued interest on the amount so converted.
(c)    Notwithstanding the foregoing, if at any time the Administrative Agent determines (which determination shall be conclusive absent manifest error) that (i) the circumstances set forth in clause (a)(i) have arisen and such circumstances are unlikely to be temporary or (ii) the circumstances set forth in clause (a)(i) have not arisen but the supervisor for the administrator of the LIBO Rate or a Governmental Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date (such date, the “Affected Date”) after which the LIBO Rate (or any component thereof) shall no longer be used for determining interest rates for loans, the Borrower and the Administrative Agent shall use reasonable efforts to establish an alternate rate of interest to the LIBO Rate (x) which is consistent with the then-prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time and (y) that is a rate for which the Administrative Agent has indicated in writing to the Lenders that it is able to calculate and administer and the Borrower and the Administrative Agent may enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be applicable (but for the avoidance of doubt, such related changes shall not include a reduction of the Applicable Margin); provided that, if such alternate rate of interest to the LIBO Rate is less than zero for a relevant Interest Period, then such rate shall be deemed to be zero for such Interest Period. Notwithstanding anything to the contrary herein, such amendment shall become effective without any further action or consent of any other party to


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this Agreement so long as the Administrative Agent shall not have received, within five Business Days of the date notice of such alternate rate of interest is provided to the Lenders, a written notice from the Required Lenders stating that such Required Lenders object to such amendment. Until an alternate rate of interest is determined in accordance with this clause (c), (w) the obligation of the Lenders to make or maintain Eurocurrency Loans shall be suspended, (x) the utilization of the LIBO Rate component in determining the Alternate Base Rate shall be suspended, (y) any Interest Election Request that requests the conversion of any Borrowing to, or the continuation of any Borrowing as, a Eurocurrency Borrowing shall be ineffective and such Borrowing (unless prepaid) shall be continued as, or converted to, an ABR Borrowing and (z) if any Borrowing Request requests a Eurocurrency Borrowing, such Borrowing shall be made as an ABR Borrowing; provided, that if an alternate rate of interest to the LIBO Rate is required due to circumstances set forth in clause (c)(ii), then such suspensions under the foregoing clauses (w) and (x) shall not occur, and such limitations under the foregoing clauses (y) and (z) shall not apply, until the Affected Date. To the extent a comparable or successor rate is established by the Administrative Agent and the Borrower in accordance with this clause (c), the approved rate shall be applied in a manner consistent with market practice; provided, that to the extent such market practice is not administratively feasible for the Administrative Agent, such approved rate shall be applied in a manner as otherwise reasonably determined by the Administrative Agent.
SECTION 2.13.    Increased Costs.
(a)    Increased Costs Generally. If any Change in Law shall:
(i)    impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank;
(ii)    subject any Lender to any Taxes (other than Covered Taxes and Excluded Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
(iii)    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 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, upon the request of such Lender or Issuing Bank, 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 and Liquidity Requirements. If any Lender or the Issuing Bank determines that any Change in Law regarding capital or liquidity requirements has or would have


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the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in 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 Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy or liquidity position), by an amount deemed to be material by such Lender or the 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 Lender’s or the Issuing Bank’s holding company for any such reduction suffered.
(c)    Certificates from Lenders. A certificate of a Lender or the Issuing Bank setting forth (in reasonable detail the basis for and calculation of) 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 (it being understood that no Lender shall be required to disclose (i) any confidential or price sensitive information or (ii) any information to the extent prohibited by applicable law). 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 ten (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 Lender’s or the Issuing Bank’s right to demand such compensation; provided that no Obligor shall be required to compensate a Lender or the Issuing Bank pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than six months prior to the date that such Lender or the Issuing Bank notifies the Borrower in writing of any such Change in Law giving rise to such increased costs or reductions (except that, if the Change in Law giving rise to such increased costs is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof).
SECTION 2.14.    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 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 Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable under Section 2.09(e) 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 (excluding, in any event, loss of anticipated profits) shall be deemed to include an amount determined by such Lender to be equal to the excess, if any, of:




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(i)    the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan referred to in clauses (a), (b), (c) or (d) of this Section 2.14 denominated in Dollars 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, 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 Dollars 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 Dollars from other banks in the Eurocurrency market at the commencement of such period.
Payments under this Section shall be made upon written request of a Lender delivered not later than thirty (30) 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 written certificate of such Lender setting forth in reasonable detail 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 2.15.    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, unless otherwise required by applicable law; provided that if any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Taxes from such payments, then (i) the Withholding Agent shall make such deductions or withholdings, (ii) the Withholding Agent shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and (iii) if such Tax is a Covered Tax, the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section 2.15) the Administrative Agent, Lender or the Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions or withholdings been made.
(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 ten (10) Business Days after written demand therefor, pay the full amount of any Covered Taxes (including Covered Taxes imposed or asserted on or attributable to amounts payable under this Section 2.15) payable or paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, and


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any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Covered 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 the Borrower by a Lender, by 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.
(d)    Indemnification by the Lenders. To the extent required by any applicable law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. Without limiting the provisions of Section 2.15(a) or (c), each Lender severally shall, and does hereby, agree to indemnify the Administrative Agent, and shall make payable in respect thereof within 10 days after demand therefor, (i) against any and all Taxes and any and all related losses, claims, liabilities and expenses (including fees, charges and disbursements of any counsel for the Administrative Agent) (collectively, “Tax Damages”) incurred by or asserted against the Administrative Agent by the Internal Revenue Service or any other Governmental Authority as a result of the failure of the Administrative Agent to properly withhold Tax from amounts paid to or for the account of such Lender for any reason (including because the appropriate form was not delivered or not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstance that rendered the exemption from, or reduction of withholding tax ineffective) and (ii) Tax Damages attributable to such Lender’s failure to comply with the provisions of Section 9.04 relating to the maintenance of a Participant Register. 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 this Agreement or any other 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. The agreements in this paragraph shall survive the resignation and/or replacement of the Administrative Agent, any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all other obligations.
(e)    Evidence of Payments. As soon as practicable after any payment of Taxes by the Borrower to a Governmental Authority pursuant to this Section 2.15, 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. If the Borrower fails to pay any U.S. federal withholding Taxes that are Excluded Taxes when due to the appropriate Governmental Authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence on account of such Excluded Taxes, the Borrower shall indemnify the Administrative Agent and each Lender for any incremental Taxes that may become payable by the Administrative Agent or such Lender as a result of such failure.
(f)    Status of Lenders.
(i)    Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments under this Agreement or any other Loan



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Documents shall deliver to the Borrower and the Administrative Agent, at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. 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 2.15(f)(ii)(A) or (B) or Section 2.15(g) below) shall not be required if in the Lender’s 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, if the Borrower is a U.S. Person,
(A)    any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;
(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, in any event, only if such Foreign Lender is legally entitled to do so) whichever of the following is applicable:
(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party duly completed executed originals of Internal Revenue Service Form W-8BEN or Internal Revenue Service Form W-8BEN-E, as applicable, or any successor form establishing an exemption from, or reduction of, U.S. federal withholding Tax (x) with respect to payments of interest under any Loan Document, pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, pursuant to the “business profits” or “other income” article of such tax treaty,



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(2) duly completed executed originals 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,
(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate, signed under penalties of perjury, to the effect that such Foreign Lender is not (I) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (II) a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or (III) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code and (y) duly completed executed originals of Internal Revenue Service Form W-8BEN or Internal Revenue Service Form W-8BEN-E, as applicable (or any successor form), certifying that the Foreign Lender is not a U.S. Person, or
(4) any other form as prescribed by applicable law as a basis for claiming exemption from or a reduction in United States 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, including, to the extent a Foreign Lender is not the beneficial owner, duly completed executed originals of Internal Revenue Service Form W-8IMY accompanied by Internal Revenue Service Form W-8ECI, Internal Revenue Service Form W-8BEN or Internal Revenue Service Form W-8BEN-E, as applicable, a certificate substantially similar to the certificate described in Section 2.15(f)(ii)(B)(3)(x) above, Internal Revenue Service Form W-9 and/or other certification documents from each beneficial owner, as applicable.
(C)     any Foreign Lender shall, to the extent it is legally entitled to do so, 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), executed originals of any other form 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 or the Administrative Agent to determine the withholding or deduction required to be made.


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(g)    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 Administrative Agent and the Borrower such documentation 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 Administrative Agent or the Borrower, at the time or times prescribed by law and at such time or times reasonably requested by the Administrative Agent or the Borrower, as may be necessary for the Administrative Agent and the Borrower to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from any such payment. Solely for purposes of this clause (g), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered under this Agreement expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

(h)    Treatment of Certain Refunds. If the Administrative Agent, any Lender or the Issuing Bank determines, in its sole discretion exercised in good faith, that it has received a refund of any Covered 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 2.15, 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 Covered Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses of the Administrative Agent, any Lender or the 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 the Issuing Bank, agrees to repay the amount paid over to the Borrower pursuant to this paragraph (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, any Lender or the Issuing Bank in the event the Administrative Agent, any Lender or the Issuing Bank is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (h), in no event will the Administrative Agent, any Lender or the Issuing Bank be required to pay any amount to the Borrower pursuant to this paragraph (h) the payment of which would place the Administrative Agent, such Lender or the Issuing Bank in a less favorable net position after-Taxes than the Administrative Agent, such Lender or the Issuing Bank would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph (h) shall not be construed to require the Administrative Agent, any Lender or the 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.
(i)    Survival. Each party’s obligations under this Section 2.15 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or


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replacement of, any Lender or the Issuing Bank, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document to which the Borrower or any of its Subsidiaries is a party.
(j)    Defined Terms. For purposes of this Section 2.15, the term “applicable law” includes FATCA.
SECTION 2.16.    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, reimbursement of LC Disbursements, or under Section 2.13, 2.14 or 2.15, or otherwise) or under any other Loan Document (except to the extent otherwise expressly provided therein) prior to 2:00 p.m., New York City time, on the date when due, in immediately available funds, without set-off, deduction 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 Agent at the Administrative Agent’s Account, except as otherwise expressly provided in the relevant Loan Document and except payments to be made directly to the Issuing Bank as expressly provided herein and pursuant to Sections 2.13, 2.14, 2.15 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 the 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 Sections 2.13 and 2.14 or under any other Loan Document (except to the extent otherwise provided therein)) are payable in Dollars.
(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 then due hereunder, such funds shall be applied (i) first, to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, to pay principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.
(c)    Pro Rata Treatment. Except to the extent otherwise provided herein: (i) each Borrowing shall be made from the Lenders, each payment of commitment fee under Section 2.10 shall be made for the account of the Lenders, and each termination or reduction of the amount of the Commitments under Section 2.07, Section 2.09 or otherwise shall be applied to the respective Commitments of the Lenders, pro rata according to the amounts of their respective Commitments; (ii) each Borrowing shall be allocated pro rata among the Lenders according to the amounts of their respective Commitments (in the case of the making of


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Loans) or their respective Loans that are to be included in such Borrowing (in the case of conversions and continuations of Loans); (iii) each payment or prepayment of principal of Loans by the Borrower shall be made for the account of the Lenders pro rata in accordance with the respective unpaid principal amounts of the Loans held by them; and (iv) each payment of interest on Loans by the Borrower shall be made for the account of the Lenders pro rata in accordance with the amounts of interest on such Loans then due and payable to the respective Lenders.
(d)    Sharing of Payments by Lenders. If any Lender 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 Loans, or participations in LC Disbursements, resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements, and accrued interest thereon then due than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements; 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 the 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 and 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.
(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(e), 2.05 or 2.16(e), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such


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Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.
SECTION 2.17.    Defaulting Lenders.
Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:
(a)    commitment fees pursuant to Section 2.10(a) shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender to the extent, and during the period in which, such Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such commitment fee that otherwise would have accrued and been required to have been paid to such Defaulting Lender to the extent and during the period in which such Lender is a Defaulting Lender);
(b)    the Commitment and Credit Exposure of such Defaulting Lender shall not be included in determining whether all Lenders, two-thirds of the Lenders or the Required Lenders have taken or may take any action hereunder or under any other Loan Document (including any consent to any amendment or waiver pursuant to Section 9.02, except for any amendment or waiver described in Section 9.02(b)(i), (ii), (iii) or (iv)); provided that any waiver, amendment or modification requiring the consent of all Lenders, two-thirds of the Lenders or each affected Lender which affects such Defaulting Lender differently than other Lenders or affected Lenders (as applicable) shall require the consent of such Defaulting Lender.
(c)    if any LC Exposure exists at the time a Lender becomes a Defaulting Lender then:
(i)    all or any part of such LC Exposure shall be reallocated among the non-Defaulting Lenders in accordance with their respective Applicable Percentages but only to the extent (x) the sum of all non-Defaulting Lenders’ Credit Exposures plus such Defaulting Lender’s LC Exposure does not exceed the total of all non-Defaulting Lenders’ Commitments, (y) no non-Defaulting Lender’s Credit Exposure will exceed such Lender’s Commitment, and (z) the conditions set forth in Section 4.02 are satisfied at such time (and unless the Borrower has notified the Administrative Agent at such time, the Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time);
(ii)    if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under law, within three Business Days following notice by the Administrative Agent, Cash Collateralize such Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 2.04(k) for so long as such LC Exposure is outstanding;




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(iii)    if the Borrower Cash Collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to clause (ii) above, the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.10(b) with respect to such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC Exposure is Cash Collateralized;
(iv)    if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to clause (i) above, then the fees payable to the Lenders pursuant to Section 2.10(a) and Section 2.10(b) shall be adjusted in accordance with such non-Defaulting Lenders’ Applicable Percentages;
(v)    if any Defaulting Lender’s LC Exposure is neither Cash Collateralized nor reallocated pursuant to this Section 2.17(c), then, without prejudice to any rights or remedies of the Issuing Bank or any Lender hereunder, all facility fees that otherwise would have been payable to such Defaulting Lender (solely with respect to the portion of such Defaulting Lender’s Commitment that was utilized by such LC Exposure) and letter of credit fees payable under Section 2.10(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Bank until such LC Exposure is Cash Collateralized and/or reallocated; and
(vi)    subject to Section 9.16, 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 Lender’s increased exposure following such reallocation.
(d)    so long as any Lender is a Defaulting Lender, the Issuing Bank shall not be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the related exposure will be 100% covered by the Commitments of the non-Defaulting Lenders and/or Cash Collateral will be provided by the Borrower in accordance with Section 2.17(c), and participating interests in any such newly issued or increased Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.17(c)(i) (and Defaulting Lenders shall not participate therein).
In the event that the Administrative Agent, the Borrower and the Issuing Bank each agrees in writing that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then, on the date of such agreement, such Lender shall no longer be deemed a Defaulting Lender, the Borrower shall no longer be required to Cash Collateralize any portion of such Lender’s LC Exposure Cash Collateralized pursuant to Section 2.17(c)(ii) above, the LC Exposure of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment and such Lender shall purchase at par the portion of the Loans of the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Applicable Percentage in effect immediately after giving effect to such agreement.



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SECTION 2.18.    Mitigation Obligations; Replacement of Lenders.
(a)    Designation of a Different Lending Office. If any Lender exercises its rights under Section 2.12(b) or requests compensation under Section 2.13, or if the Borrower is required to pay any Covered Taxes or additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts (subject to overall policy considerations of such Lender) 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 sole reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the future, or eliminate the circumstance giving rise to such Lender exercising its rights under Section 2.12(b) 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 exercises its rights under Section 2.12(b) or requests compensation under Section 2.13, or if the Borrower is required to pay any Covered Taxes or additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15 and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 2.18(a), or if any Lender becomes a Defaulting Lender, or if any Lender becomes a Non-Consenting Lender, 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 and the other Loan Documents 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 the Issuing Bank, which consent shall not be unreasonably withheld, conditioned or delayed, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, 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 2.13 or payments required to be made pursuant to Section 2.15, 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.
(c)    Defaulting Lenders. If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(e), 2.05 or 9.03(c), then the Administrative Agent may, in its discretion and notwithstanding any contrary provision hereof, (i) apply any amounts thereafter received by the Administrative Agent or the Issuing Bank for the account of such Lender for the benefit of the Administrative Agent or the Issuing Bank to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid, and/or (ii)


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hold any such amounts in a segregated account as cash collateral for, and application to, any future funding obligations of such Lender under such Sections, in the case of each of clauses (i) and (ii) above, in any order as determined by the Administrative Agent in its discretion.

SECTION 2.19.    German Bank Separation Act. Solely for so long as Deutsche Bank AG New York Branch, or any Affiliate thereof, is a Lender, if any such Lender is subject to the GBSA (as defined below) (any such Lender, a “GBSA Lender”) and such GBSA Lender shall have determined in good faith (based on advice of counsel (including in-house counsel)), which determination shall be made in consultation with the Borrower subject to the terms hereof) that, due to the implementation of the German Act on the Ring-fencing of Risks and for the Recovery and Resolution Planning for Credit Institutions and Financial Groups (Gesetz zur Abschirmung von Risiken und zur Planung der Sanierung und Abwicklung von Kreditinstituten und Finanzgruppen) of 7 August 2013 (commonly referred to as the German Bank Separation Act (Trennbankengesetz) (the “GBSA”), whether before or after the date hereof, or any corresponding European legislation (such as the proposed regulation on structural measures improving the resilience of European Union credit institutions) that may amend or replace the GBSA in the future or any regulation thereunder, or due to the promulgation of, or any change in the interpretation by, any court, tribunal or regulatory authority with competent jurisdiction of the GBSA or any corresponding future European legislation that may amend or replace the GBSA in the future or any regulation thereunder, the arrangements contemplated by this Agreement or the Loans have, or will, become illegal, prohibited or otherwise unlawful (regardless of whether such illegality, prohibition or unlawfulness could be prevented by transferring such arrangements, Commitments and/or Loans to an Affiliate or other third party), then, and in any such event, such GBSA Lender shall give written notice to the Borrower and the Administrative Agent of such determination (which written notice shall include a reasonably detailed explanation of such illegality, prohibition or unlawfulness, including, without limitation, evidence and calculations used in the determination thereof, a “GBSA Initial Notice”), whereupon until the fifth Business Day after the date of such GBSA Initial Notice, such GBSA Lender shall use commercially reasonable efforts to transfer to the extent permitted under applicable law such arrangements, Commitments and/or Loans to an Affiliate or other third party in accordance with Section 9.04. If no such transfer is effected in accordance with the preceding sentence, such GBSA Lender shall give written notice thereof to the Borrower and the Administrative Agent a (“GBSA Final Notice”), whereupon (i) all of the obligations of such GBSA Lender shall become due and payable, and the Borrower shall repay the outstanding principal of such obligations together with accrued interest thereon and all other amounts due and payable to the GBSA Lender, on the fifth Business Day immediately after the date of such GBSA Final Notice (the “Initial GBSA Termination Date”) and, for the avoidance of doubt, such repayment shall not be subject to the terms and conditions of Section 2.16 to the extent that there are no outstanding amounts then due and payable to the other Lenders on such fifth Business Day and (ii) the Commitment of such GBSA Lender shall terminate on the Initial GBSA Termination Date; provided that, notwithstanding the foregoing, if, prior to such Initial GBSA Termination Date, the Borrower and/or the Administrative Agent in good faith reasonably believes that there is a mistake, error or omission in the grounds used to determine such illegality, prohibition or unlawfulness under the GBSA or any corresponding future European legislation that may amend or replace the GBSA in the future or any regulation thereunder, then the Borrower and/or the Administrative Agent, as applicable, may provide written notice (which written notice shall include a reasonably detailed


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explanation of the basis of such good faith belief, including, without limitation, evidence and calculations used in the determination thereof, a “GBSA Consultation Notice”) to that effect, at which point the obligations owed to such GBSA Lender hereunder and under the Loans shall not become due and payable, and the Commitments of such GBSA Lender shall not terminate, until the Business Day immediately following the tenth Business Day immediately after the Initial GBSA Termination Date (the period from, and including, the date of the GBSA Consultation Notice until the tenth Business Day immediately thereafter being the “GBSA Consultation Period”). In the event that the Borrower and/or the Administrative Agent, as applicable, and such GBSA Lender cannot in good faith reasonably agree during the GBSA Consultation Period whether the arrangements contemplated by this Agreement or the Loans have, or will, become illegal, prohibited or otherwise unlawful under the GBSA or any corresponding future European legislation that may amend or replace the GBSA in the future or any regulation thereunder, then all of the obligations owed to such GBSA Lender hereunder and under the Loans shall become due and payable, and the Commitments of such GBSA Lender shall terminate, on the Business Day immediately following the last day of such GBSA Consultation Period. Notwithstanding anything to the contrary contained herein, no part of the proceeds of any extension of credit hereunder will be used to pay any GBSA Lender or otherwise satisfy any obligation under this Section 2.19. To the extent that any LC Exposure exists at the time a GBSA Lender’s Commitments are cancelled and its obligations under the Loan Documents are repaid in full, such LC Exposure shall be reallocated as set forth in Sections 2.17(c)(i) through (v) treating for purposes hereof each Lender (other than any GBSA Lender) as a non-Defaulting Lender for purposes of such reallocation and treating the GBSA Lender as a Defaulting Lender solely for such purposes.
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, as applicable, is duly organized or incorporated, validly existing and in good standing under the laws of the jurisdiction of its organization or incorporation, 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 the failure to do so could reasonably be expected to result in a Material Adverse Effect. There is no existing default under the Organization Documents of Borrower or its Subsidiaries or any event which, with the giving of notice or passage of time or both, would constitute a default by any party thereunder.
SECTION 3.02.    Authorization; Enforceability. The Transactions are within the Borrower’s corporate powers and have been duly authorized by all necessary corporate and, if required, by all necessary stockholder action and the Directing Body of each of the Borrower and its Subsidiaries have approved the transactions contemplated in this Agreement. This Agreement has been duly executed and delivered by the Borrower and each of the other Loan Documents to which any Obligor is a party have been or will be duly executed and delivered by



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each such Obligor. This Agreement constitutes, and each of the other Loan Documents to which any Obligor is a party when executed and delivered will constitute, a legal, valid and binding obligation of the applicable Obligor or Obligors, 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 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 (including the Investment Company Act and the rules, regulations and orders issued by the SEC thereunder), (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 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 Effect.
(a)    Financial Statements. The financial statements delivered to the Administrative Agent and the Lenders by the Borrower pursuant to Section 4.01(c) and 5.01(a) and (b) present fairly, in all material respects, the consolidated financial position, assets and liabilities, results of operations, changes in net assets, cash flows and investments of the Borrower and its consolidated Subsidiaries as of the end of and for the applicable period in accordance with GAAP, subject, in the case of unaudited financial statements, to year-end audit adjustments and the absence of footnotes. None of the Borrower or any of its Subsidiaries has any material contingent liabilities, material liabilities for taxes, material unusual forward or material long-term commitments or material unrealized or anticipated losses from any unfavorable commitments not reflected in such financial statements.
(b)    No Material Adverse Effect. Since September 30, 2018, there has not been any event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect.
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 could reasonably be expected to result in a Material Adverse Effect. Each of the Borrower and its Subsidiaries is in compliance with its respective Organization Documents in all material respects.

SECTION 3.07.    Taxes. Each of the Borrower and its Subsidiaries has timely filed or has caused to be timely filed all material U.S. federal, state and local Tax returns that are required to be filed by it and all other material Tax returns that are required to be filed by it and has paid all material Taxes for which it is directly or indirectly liable and any assessments made against it or any of its property and all other material Taxes, fees or other charges imposed on it or any of its property by any Governmental Authority, except such Taxes, fees or other charges the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or its Subsidiaries, as the case may be. The charges, accruals and reserves on the books of the Borrower and any of its Subsidiaries in respect of Taxes and other governmental charges are adequate in accordance with GAAP. Neither the Borrower nor any of its Subsidiaries has given or been requested to give a waiver of the statute of limitations relating to the payment of any federal, state, local and foreign Taxes or other impositions, and no Tax lien (other than Liens permitted pursuant to clause (a) of the definition of Permitted Liens) has been filed with respect to the Borrower or any of its Subsidiaries. There is no proposed Tax assessment against the Borrower or any of its Subsidiaries, and there is no basis for any such assessment.

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.
(a)    All written information (other than financial projections, pro forma financial information, other forward-looking information and information of a general economic or general industry nature) which has been made available to the Administrative Agent or any Lender by the Borrower or any of its Subsidiaries or any of their respective representatives on behalf of the Borrower or such Subsidiaries in connection with the transactions contemplated by this Agreement or delivered under any Loan Document, taken as a whole, is and will be (after giving effect to all written updates provided by the Borrower to the Administrative Agent for delivery to the Lenders from time to time) complete, true and correct in all material respects and does not and will not (after giving effect to all written updates provided by the Borrower to the Administrative Agent for delivery to the Lenders from time to time) contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements


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contained therein at the time made and taken as a whole not misleading in light of the circumstances under which such statements were made; and
(b)    All financial projections, pro forma financial information and other forward-looking information which has been delivered to the Administrative Agent or any Lender by the Borrower or any of its Subsidiaries or any of their respective representatives on behalf of the Borrower or such Subsidiaries in connection with the transactions contemplated by this Agreement or delivered under any Loan Document, are based upon estimates and assumptions believed by the Borrower in good faith to be reasonable at the time made, it being recognized that (i) such projections, financial information and other forward-looking information as they relate to future events are subject to significant uncertainty and contingencies (many of which are beyond the control of the Borrower and that no assurance can be given that such projections will be realized) and therefore are not to be viewed as fact and (ii) actual results during the period or periods covered by such projections, financial information and other forward-looking information may materially differ from the projected results set forth therein.
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 and has qualified as a RIC at all times since January 2, 2008.
(b)    Compliance with Investment Company Act. The business and other activities of the Borrower and its Subsidiaries, including, without limitation, entering into this Agreement and the other Loan Documents to which each is a party, the borrowing 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 of the applicable provisions of the Investment Company Act or any rules, regulations or orders issued by the SEC thereunder, except where such breaches or violations, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
(c)    Investment Policies. The Borrower is in compliance in all material respects with the Investment Policies and the Valuation Policy.
(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 in violation of law, rule or regulation. The Borrower does not own or intend to carry or purchase any Margin Stock or to extend “purpose credit” within the meaning of Regulation U.
SECTION 3.11.    Material Agreements and Liens.
(a)    Material Agreements. Schedule 3.11(a) is a complete and correct list of each credit agreement, loan agreement, indenture, purchase agreement, guarantee, letter of credit


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or other arrangements (to the extent that such other arrangements exceed an aggregate outstanding principal amount of $5,000,000) 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 Restatement Effective Date, and the aggregate principal or face amount outstanding or that is, or may become, outstanding under each such arrangement is correctly described in Schedule 3.11(a).
(b)    Liens. Schedule 3.11(b) is a complete and correct list of each Lien securing Indebtedness of any Person outstanding on the Restatement Effective Date covering any property of the Borrower or any of its Subsidiaries, and the aggregate principal amount of such Indebtedness secured (or that may be secured) by each such Lien and the property covered by each such Lien as of the Restatement Effective Date is correctly described in Schedule 3.11(b).
SECTION 3.12.    Subsidiaries and Investments.
(a)    Subsidiaries. Set forth in Schedule 3.12(a) is a complete and correct list of all of the Subsidiaries of the Borrower as of the Restatement Effective Date together with, for each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary and (iii) the percentage of ownership of such Subsidiary represented by such ownership interests. Except as disclosed in Schedule 3.12(a), as of the Restatement Effective Date, (x) the Borrower owns, free and clear of Liens (other than Eligible Liens and Liens permitted pursuant to Section 6.02(b) or (e)), and has the unencumbered right to vote, all outstanding ownership interests in each Subsidiary shown to be held by it in Schedule 3.12(a), and (y) all of the issued and outstanding capital stock of each such Subsidiary organized as a corporation is validly issued, fully paid and nonassessable (to the extent such concepts are applicable).
(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), (d), (e) and (g) of Section 6.04) held by the Borrower or any of its Subsidiaries in any Person on the Restatement Effective Date and, for each such Investment, (i) the identity of the Person or Persons holding such Investment and (ii) the nature of such Investment. Except as disclosed in Schedule 3.12(b), as of the Restatement Effective Date each of the Borrower and its Subsidiaries owns, free and clear of all Liens (other than Liens permitted pursuant to Section 6.02), all such Investments.
SECTION 3.13.    Properties.
(a)    Title Generally. Each of the Borrower and its Subsidiaries 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.
(b)    Intellectual Property. Each of the Borrower and its Subsidiaries 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 does not



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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.    Solvency. On the Restatement Effective Date, and upon the incurrence of any extension of credit hereunder, on any date on which this representation and warranty is made, (a) the Borrower will be Solvent on an unconsolidated basis, and (b) each Obligor will be Solvent on a consolidated basis with the other Obligors.
SECTION 3.15.    No Default. No Default or Event of Default has occurred and is continuing under this Agreement.

SECTION 3.16.    Use of Proceeds. The proceeds of the Loans shall be used for the general corporate purposes of the Borrower and its Subsidiaries (other than Financing Subsidiaries except as expressly permitted under Section 6.03(e) or 6.03(i)) in the ordinary course of its business, including making distributions not prohibited by this Agreement, making payments on Indebtedness of the Obligors to the extent permitted under this Agreement and the acquisition and funding (either directly or indirectly as expressly permitted hereunder) of leveraged loans, mezzanine loans, high yield securities, convertible securities, preferred stock, common stock and other Investments, but excluding, for clarity, Margin Stock in violation of applicable law, rule or regulation.
SECTION 3.17.    Security Documents. The Guarantee and Security Agreement is effective to create in favor of the Collateral Agent for the benefit of the Secured Parties, legal, valid and enforceable first-priority Liens on, and security interests in, the Collateral and, (i) when all appropriate filings or recordings are made in the appropriate offices as may be required under applicable law and, as applicable, and (ii) upon the taking of possession or control by the Collateral Agent of the Collateral with respect to which a security interest may be perfected by possession or control (which possession or control shall be given to the Collateral Agent to the extent possession or control by the Collateral Agent is required by the Guarantee and Security Agreement), the Liens created by the Guarantee and Security Agreement shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors in the Collateral (other than such Collateral in which a security interest cannot be perfected under the UCC as in effect at the relevant time in the relevant jurisdiction), in each case subject to no Liens other than Permitted Liens.

SECTION 3.18.    Financing Subsidiaries
(a)    Any Structured Subsidiary complies with each of the conditions set forth in clause (a) or (b) in the definition of “Structured Subsidiary”, as applicable.
(b)    Any SBIC Subsidiary complies with each of the conditions set forth in the definition of “SBIC Subsidiary.”
(c)    As of the Restatement Effective Date, other than (i) FSMP IV GP, LLC, (ii) Fifth Street Mezzanine Partners IV, L.P., (iii) FSMP V GP, LLC and (iv) Fifth Street Mezzanine Partners V, L.P., the Borrower has no Financing Subsidiaries.


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SECTION 3.19.    Affiliate Agreements. As of the Restatement Effective Date, the Borrower has heretofore delivered to each of the Lenders true and complete copies of each of the Affiliate Agreements (including any schedules and exhibits thereto, and any amendments, supplements or waivers executed and delivered thereunder). As of the Restatement Effective Date, (a) each of the Affiliate Agreements is in full force and effect and (b) other than the Affiliate Agreements, there is no contract, agreement or understanding, in writing, between the Borrower or any of its Subsidiaries, on the one hand, and any Affiliate of the Borrower, on the other hand.

SECTION 3.20.    Compliance with Sanctions. Neither the Borrower nor any of its Subsidiaries, nor any executive officer or director thereof, nor, to the knowledge of the Borrower, any controlled Affiliate of the Borrower, (i) is subject to, or subject of, any economic or financial sanctions (collectively, “Sanctions”) administered by the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the U.S. Department of State, the European Union, Her Majesty’s Treasury, the United Nations Security Council, or any other relevant sanctions authority, or (ii) is located, organized or resident in a Sanctioned Country. Furthermore, no part of the proceeds of a Loan will be used, directly or indirectly, or made available by the Borrower to any Person to finance or facilitate any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions.

SECTION 3.21.    Anti-Money Laundering and Sanctions Program. The Borrower has implemented an anti-money laundering program to the extent required by the Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism, as amended (the “USA PATRIOT Act”), and the rules and regulations thereunder and maintains in effect and enforces policies and procedures designed to ensure compliance by the Borrower and its Subsidiaries (and, when acting on behalf of the Borrower and its Subsidiaries, their respective directors, officers, employees and agents) with applicable Sanctions.

SECTION 3.22.    Foreign Corrupt Practices Act. The Borrower, its Subsidiaries and, to the Borrower’s knowledge, the directors, officers and employees acting on behalf of the Borrower and its Subsidiaries, are in compliance with all applicable Sanctions and the U.S. Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”) and any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (collectively with the FCPA, the “Anti-Corruption Laws”); and each of the Borrower and any Subsidiary of the Borrower have instituted and maintained policies and procedures reasonably designed to ensure, and which are reasonably expected to continue to ensure, compliance therewith. Furthermore, no part of the proceeds of a Loan will be used, directly or indirectly, by the Borrower or any Subsidiary of the Borrower, or by any of their respective directors, officers, agents or employees acting on behalf of the Borrower or any Subsidiary of the Borrower, to finance or facilitate a transaction in violation of the Anti-Corruption Laws.

SECTION 3.23.    Beneficial Ownership Certification. To the best knowledge of the Borrower, the information included in any Beneficial Ownership Certification provided prior


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to, on or after the Restatement Effective Date to any Lender in connection with this Agreement is true and correct in all respects.
 
SECTION 3.24.    EEAAffected Financial Institution. None of the Obligors is an EEAAffected Financial Institution.
ARTICLE IV    

CONDITIONS
SECTION 4.01.    Restatement Effective Date. The effectiveness of this Agreement on the Restatement Effective Date 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 reasonably 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 (x) a counterpart of this Agreement signed on behalf of such party or (y) written evidence satisfactory to the Administrative Agent (which may include telecopy or e-mail transmission of a signed signature page to this Agreement) that such party has signed a counterpart of this Agreement.
(ii)    Guarantee and Security Agreement; Custodian Agreement. The Guarantee and Security Agreement, the Custodian Agreement with respect to the Borrower’s Custodian Account and the Control Agreement, each duly executed and delivered by each of the parties thereto, and all other documents or instruments required to be delivered by the Guarantee and Security Agreement, the Custodian Agreement and the Control Agreement in connection with the execution thereof.
(iii)    Opinion of Counsel to the Borrower. A favorable written customary opinion (addressed to the Administrative Agent, the Collateral Agent and the Lenders and dated the Restatement Effective Date) of each of (x) Latham & Watkins LLP, special counsel for the Obligors and (y) Simpson Thacher & Bartlett LLP, regulatory counsel for the Borrower, each in form and substance reasonably satisfactory to the Administrative Agent and covering such matters as the Administrative Agent may reasonably request (and the Borrower hereby instructs such counsel to deliver such opinion to the Lenders, the Administrative Agent and the Collateral Agent).
(iv)    Corporate Documents. A certificate of the secretary or assistant secretary of each Obligor, dated the Restatement Effective Date, certifying that attached thereto are (v) true and complete copies of the organizational documents of each Obligor certified as of a recent date by the appropriate governmental official, (w) signature and incumbency certificates of the officers of such Person executing the Loan Documents to which it is a


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party, (x) true and complete resolutions of the Board of Directors of each Obligor approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party or by which it or its assets may be bound as of the Restatement Effective Date and, in the case of the Borrower, authorizing the borrowings hereunder, and that such resolutions are in full force and effect without modification or amendment, (y) a good standing certificate from the applicable Governmental Authority of each Obligor’s jurisdiction of incorporation, organization or formation and in each jurisdiction in which it is qualified as a foreign corporation or other entity to do business, each dated a recent date prior to the Restatement Effective Date, and (z) such other documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Obligors, and the authorization of the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel.
(v)    Officer’s Certificate. A certificate, dated the Restatement Effective Date and signed by a Financial Officer of the Borrower, confirming compliance with the conditions set forth in Sections 4.01(e) and (h) and Sections 4.02 (a), (b), (c) and (d).
(b)    Liens. The Administrative Agent shall have received results of a recent lien search in each relevant jurisdiction with respect to the Obligors, 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 Obligors except for Liens permitted under Section 6.02 or Liens to be discharged on or prior to the Restatement Effective Date pursuant to documentation reasonably satisfactory to the Administrative Agent. All UCC financing statements, control agreements, stock certificates and other documents or instruments required to be filed or executed and delivered in order to create in favor of the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, a first-priority perfected (subject to Eligible Liens) security interest in the Collateral (to the extent that such a security interest may be perfected by filing, possession or control under the Uniform Commercial Code) shall have been properly filed (or provided to the Administrative Agent) or executed and delivered in each jurisdiction required.
(c)    Financial Statements. The Administrative Agent and the Lenders shall have received, prior to the execution of this Agreement, (i) the audited consolidated statements of assets and liabilities and the related audited consolidated statements of operations, audited consolidated statements of changes in net assets, audited consolidated statements of cash flows and related audited consolidated schedule of investments of the Borrower and its consolidated Subsidiaries as of and for the fiscal year ended September 30, 2018, and (ii) the consolidated statements of assets and liabilities and the related consolidated statements of operations, consolidated statements of changes in net assets, consolidated statements of cash flows and related consolidated schedule of investments of the Borrower and its consolidated Subsidiaries as of and for the fiscal quarter ended December 31, 2018, in each case, certified in writing 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. The Administrative Agent and the Lenders shall have received any


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other financial statements of the Borrower and its Subsidiaries as they shall have reasonably requested.
(d)    Consents. The Borrower shall have obtained and delivered to the Administrative Agent certified copies of all consents, approvals, authorizations, registrations, or filings (other than any filing required under the Exchange Act or the rules or regulations promulgated thereunder, including any filing required on Form 8-K) required to be made or obtained by the Borrower and all guarantors in connection with the Transactions and any other evidence reasonably requested by, and reasonably satisfactory to, the Administrative Agent as to compliance with all material legal and regulatory requirements applicable to the Obligors, 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.
(e)    No Litigation. There shall not exist any action, suit, investigation, litigation or proceeding or other legal or regulatory developments pending or, to the knowledge of the Borrower, threatened in writing in any court or before any arbitrator or Governmental Authority (including any SEC investigation) that relates to the Transactions or that could reasonably be expected to have a Material Adverse Effect.
(f)    Solvency Certificate. On the Restatement Effective Date, the Administrative Agent shall have received a solvency certificate of a Financial Officer of the Borrower dated as of the Restatement Effective Date and addressed to the Administrative Agent and the Lenders, and in form, scope and substance reasonably satisfactory to Administrative Agent, with appropriate attachments and demonstrating that both before and after giving effect to the Transactions, (a) the Borrower will be Solvent on an unconsolidated basis and (b) each Obligor will be Solvent on a consolidated basis with the other Obligors.
(g)    Due Diligence. All customary confirmatory due diligence on the Borrower and its Subsidiaries shall have been completed by the Administrative Agent and the Lenders and the results of such due diligence shall be satisfactory to the Administrative Agent and the Lenders. No information shall have become available which the Administrative Agent reasonably believes has had, or could reasonably be expected to have, a Material Adverse Effect.
(h)    Default. No Default or Event of Default shall have occurred and be continuing under this Agreement, nor any default or event of default that permits (or which upon notice, lapse of time or both, would permit) the acceleration of any Material Indebtedness, immediately before and after giving effect to the Transactions, any incurrence of Indebtedness hereunder and the use of the proceeds hereof.
(i)    USA PATRIOT Act. The Administrative Agent and each Lender shall have received all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act, as requested by the Administrative Agent or any Lender.



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(j)    Borrowing Base Certificate. The Administrative Agent shall have received a Borrowing Base Certificate dated as of the Restatement Effective Date, showing a calculation of the Borrowing Base (using valuation procedures consistent with those set forth in Section 5.13 of the Existing Credit Agreement) as of the date immediately prior to the Restatement Effective Date, in form and substance reasonably satisfactory to the Administrative Agent.
(k)    [Reserved].
(l)    Beneficial Ownership Regulation. The Administrative Agent and the Lenders shall have received, to the extent the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, prior to the Restatement Effective Date, a Beneficial Ownership Certification.
(m)    Fees and Expenses. The Borrower shall have paid in full to the Administrative Agent, the Joint Lead Arrangers and the Lenders all fees and expenses (including reasonable legal fees to the extent invoiced) related to or payable under this Agreement and under any fee letters in connection with this Agreement and the other Loan Documents, in each case, owing on or prior to the Restatement Effective Date, including any up-front fee due to any Lender on or prior to the Restatement Effective Date.
(n)    Other Documents. The Administrative Agent shall have received such other documents, instruments, certificates, opinions and information as the Administrative Agent may reasonably request or require in form and substance reasonably satisfactory to the Administrative Agent.
SECTION 4.02.    Conditions to 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, including in each case any such extension of credit on the Restatement Effective Date, is additionally subject to the satisfaction of the following conditions:
(a)    the representations and warranties of the Obligors set forth in this Agreement and in the other Loan Documents shall be true and correct in all material respects (other than any representation or warranty already qualified by materiality or Material Adverse Effect, which shall be true and correct in all 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 date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default or Event of Default shall have occurred and be continuing or would result from such extension of credit after giving effect thereto and to the use of proceeds thereof on a pro forma basis;
(c)    no Borrowing Base Deficiency shall exist at the time of and immediately after giving effect to such extension of credit;



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(d)    after giving effect to such extension of credit, the Borrower shall be in pro forma compliance with each of the covenants set forth in Sections 6.07(a), (b), (d) and (e); and
(e)    the proposed date of such extension of credit shall take place during the Availability Period.
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 Termination Date, 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 for distribution to each Lender (provided that, the Administrative Agent shall not be required to distribute any document or report to any Lender to the extent such distribution would cause the Administrative Agent to breach or violate any agreement that it has with another Person (including any non-reliance or non-disclosure letter with any Approved Third-Party Appraiser)):
(a)    within 90 days after the end of each fiscal year of the Borrower (commencing with the fiscal year ending September 30, 2017), the audited consolidated statements of assets and liabilities and the related audited consolidated statements of operations, audited consolidated statements of changes in net assets, audited consolidated statements of cash flows and related audited consolidated schedule of investments of the Borrower and its Subsidiaries on a consolidated basis as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year (to the extent full fiscal year information is available), all reported on by PricewaterhouseCoopers 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 (which report shall be unqualified as to going concern and scope of audit and shall not contain any explanatory paragraph or paragraph of emphasis with respect to going concern); provided that the requirements set forth in this clause (a) may be fulfilled by providing to the Administrative Agent for distribution to each Lender the report filed by the Borrower with the SEC on Form 10-K for the applicable fiscal year;
(b)    within 45 days after the end of each of the first three (3) fiscal quarters of each fiscal year of the Borrower (commencing with the fiscal quarter ending December 31, 2017), the consolidated statements of assets and liabilities and the related consolidated statements of operations, consolidated statements of changes in net assets, consolidated statements of cash flows and related consolidated schedule of investments of the Borrower and


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its Subsidiaries on a consolidated basis 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 statement of assets and liabilities, as of the end of) the corresponding period or periods of the previous fiscal year (to the extent such information is available for 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 Administrative Agent for distribution to each Lender the report filed by the Borrower with 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) to the extent the requirements in clauses (a) and (b) of this Section are not fulfilled by the Borrower delivering the applicable report delivered to (or filed with) the SEC, certifying that such statements are consistent with the financial statements filed by the Borrower with the SEC, (ii) certifying as to whether the Borrower has knowledge that a Default or Event of Default has occurred and, if a Default or Event of Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (iii) setting forth reasonably detailed calculations (which reconcile to the financial statements) demonstrating compliance with Sections 6.01(h) and (k), 6.03(e) and (i), 6.04(j), 6.05(b), 6.07 and 6.13, (iv) stating whether any change in GAAP as applied by (or in the application of GAAP by) the Borrower has occurred since the Original Effective Date (but only if the Borrower has not previously reported such change to the Administrative Agent) and, if any such change has occurred (and has not been previously reported to the Administrative Agent), specifying the effect of such change on the financial statements accompanying such certificate and (v) attaching a list of Subsidiaries and Immaterial Subsidiaries as of the date of delivery of such certificate or a confirmation that there is no change in such information since the date of the last such list;
(d)    as soon as available and in any event not later than the last Business Day of the next succeeding month after the end of each monthly accounting period (ending on the last day of each calendar month) of the Borrower and its Subsidiaries, commencing with the monthly accounting period ending November 30, 2017, a Borrowing Base Certificate as of the last day of such accounting period (which Borrowing Base Certificate shall include: an Excel schedule containing information substantially similar to the information included on the Excel schedule included in the Borrowing Base Certificate delivered to the Administrative Agent on the Restatement Effective Date, a reasonably detailed calculation of the Senior Coverage Ratio as of such date and the Applicable Margin as of such date);
(e)    promptly but no later than two Business Days after any Financial Officer of the Borrower shall at any time have knowledge (based upon facts and circumstances known to him) that there is a Borrowing Base Deficiency, a Borrowing Base Certificate as at the date such Financial Officer has knowledge of such Borrowing Base Deficiency indicating the amount of the Borrowing Base Deficiency as at the date such Financial Officer obtained knowledge of such deficiency and the amount of the Borrowing Base Deficiency as of the date not earlier than two



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Business Days prior to the date the Borrowing Base Certificate is delivered pursuant to this paragraph;
(f)    promptly upon receipt thereof copies of all significant and non-routine written reports submitted to the management or Board of Directors of the Borrower by the Borrower’s 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 (other than the periodic reports that the Borrower’s independent auditors provide, in the ordinary course, to the audit committee of the Borrower’s Board of Directors);
(g)    to the extent not previously delivered, within 45 days after the end of each fiscal quarter of the Borrower, all final internal and external valuation reports relating to the Eligible Portfolio Investments (including all valuation reports delivered by an Approved Third-Party Appraiser in connection with the quarterly appraisals of Unquoted Investments in accordance with Section 5.12(b)(ii)(B)) and a summary of any applicable internal underwriting memoranda for all Eligible Portfolio Investments included in such valuation reports, and any other information relating to the Eligible Portfolio Investments as reasonably requested by the Administrative Agent or any Lender;
(h)    to the extent not otherwise provided by each Custodian, within thirty (30) days after the end of each month, full, correct and complete updated copies of custody reports (including, to the extent available, (i) activity reports with respect to Cash and Cash Equivalents included in the calculation of the Borrowing Base, (ii) an itemized list of each account and the amounts therein with respect to Cash and Cash Equivalents included in the calculation of the Borrowing Base and (iii) an itemized list of each Portfolio Investment held in any Custodian Account owned by the Borrower or any Subsidiary) reflecting all assets being held in any Custodian Account owned by the Borrower or any of its Subsidiaries or otherwise subject to any Custodian Agreement;
(i)    within 45 days after the end of each fiscal quarter of the Borrower a certificate of a Financial Officer of the Borrower certifying that attached thereto is a complete and correct description of all Portfolio Investments as of the date thereof, including, with respect to each such Portfolio Investment, the name of the Borrower or Subsidiary holding such Portfolio Investment and the amounts held by each;
(j)    to the extent such information is not otherwise available in the financial statements delivered pursuant to clause (a) or (b) of this Section, upon the reasonable request of the Administrative Agent, within five (5) Business Days of the due date set forth in clause (a) or (b) of this Section for any quarterly or annual financial statements, as the case may be, a schedule prepared in accordance with GAAP setting forth in reasonable detail with respect to each Portfolio Investment where there has been a realized gain or loss in the most recently completed fiscal quarter, (i) the cost basis of such Portfolio Investment, (ii) the realized gain or loss associated with such Portfolio Investment, (iii) the associated reversal of any previously unrealized gains or losses associated with such Portfolio Investment, (iv) the proceeds received with respect to such Portfolio Investment representing repayments of principal during the most


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recently ended fiscal quarter, and (v) any other amounts received with respect to such Portfolio Investment representing exit fees or prepayment penalties during the most recently ended fiscal quarter;
(k)    any change in the information provided in any Beneficial Ownership Certification delivered to a Lender that would result in a change to the list of beneficial owners identified in such certificate;
(l)    information and documentation requested by the Administrative Agent or any Lender for purposes of compliance with applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act and the Beneficial Ownership Regulation; and
(m)    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.
SECTION 5.02.    Notices of Material Events. Upon the Borrower becoming aware of any of the following, the Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following:
(a)    the occurrence of any Default or Event of 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 a Material Adverse Effect; and
(d)    any other development (excluding matters of a general economic, financial of political nature to the extent that they could not reasonably be expected to have a disproportionate effect on the Borrower) 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;



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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 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, (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 business, operating in the same or similar locations (including, without limitation, directors and officers liability insurance) and (c) after the reasonable request of the Administrative Agent, promptly deliver to the Administrative Agent any certificate or certificates from the Borrower’s insurance broker or other documentary evidence, in each case, demonstrating the effectiveness of, or any changes to, such insurance.
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, or cause to be kept, 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 the Borrower, at the sole expense of the Borrower, to (i) visit and inspect its properties during normal business hours, to examine and make extracts from its books and records, and (ii) discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested, in each case to the extent such information can be provided or discussed without violation of law, rule or regulation (it being understood that the Obligors will use their commercially reasonable efforts to be able to provide such information not in violation of law, rule or regulation); 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; provided, further, that the Borrower shall not be required to pay for more than two (2) such visits and inspections in any calendar year unless an Event of Default has occurred and is continuing at the time of any subsequent visits and inspections during such calendar year.
(b)    Audit Rights. The Borrower will, and will cause each of its Subsidiaries (other than Financing 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 Borrower’s computation of the Borrowing Base and the assets included in the Borrowing Base (including, for clarity, audits


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of any Agency Accounts, funds transfers and custody procedures), all at such reasonable times and as often as reasonably requested. The Borrower shall pay the reasonable, documented out-of-pocket fees and expenses of 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 and/or the assets included in the Borrowing Base, to the extent required by the Administrative Agent or the Required Lenders as a result of any such evaluation or appraisal indicating that such computation or inclusion of assets is not consistent with the terms of this Agreement, 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.
(c)    Notwithstanding the foregoing, nothing contained in this Section 5.06 shall impair or affect the rights of the Administrative Agent under Section 5.12(b)(ii) in any respect.
SECTION 5.07.    Compliance with Laws and Agreements. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations, including the Investment Company Act (if applicable to such Person), and orders of any Governmental Authority applicable to it (including orders issued by the SEC) or its property and all indentures, agreements and other instruments, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. Policies and procedures will be maintained and enforced by or on behalf of the Borrower that are designed in good faith and in a commercially reasonable manner to promote and achieve compliance, in the reasonable judgment of the Borrower, by the Borrower and each of its Subsidiaries and, when acting on behalf of the Borrower or any of its Subsidiaries, their respective directors, officers, employees and agents with any applicable Anti-Corruption Laws and applicable Sanctions, in each case, giving due regard to the nature of such Person’s business and activities. The Borrower will, and will cause each of its Subsidiaries to, act in accordance with their respective Organization Documents in all material respects.

SECTION 5.08.    Certain Obligations Respecting Subsidiaries; Further Assurances.
(a)    Subsidiary Guarantors.
(i)    In the event that (1) the Borrower or any of its Subsidiaries shall form or acquire any new Subsidiary (other than a Financing Subsidiary, a CFC, an Immaterial Subsidiary or a Transparent Subsidiary), or any other Person shall become a “Subsidiary” within the meaning of the definition thereof (other than a Financing Subsidiary, a CFC, an Immaterial Subsidiary or a Transparent Subsidiary); (2) any Structured Subsidiary shall no longer constitute a “Structured Subsidiary” pursuant to the definition thereof (in which case such Person shall be deemed to be a “new” Subsidiary for purposes of this Section 5.08); (3) any SBIC Subsidiary shall no longer constitute an “SBIC Subsidiary” pursuant to the definition thereof (in which case such Person shall be deemed to be a


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“new” Subsidiary for purposes of this Section 5.08); (4) any CFC shall no longer constitute a “CFC” pursuant to the definition thereof (in which case such Person shall be deemed to be a “new” Subsidiary for purposes of this Section 5.08); (5) any Transparent Subsidiary shall no longer constitute a “Transparent Subsidiary” pursuant to the definition thereof (in which case such Person shall be deemed to be a “new” Subsidiary for purposes of this Section 5.08); or (6) any Immaterial Subsidiary shall no longer constitute an “Immaterial Subsidiary” pursuant to the definition thereof (in which case such Person shall be deemed to be a “new” Subsidiary for purposes of this Section 5.08), the Borrower will, in each case, on or before thirty (30) days (or such longer period as may be agreed to by the Administrative Agent in its sole discretion) following such Person becoming a Subsidiary or such Financing Subsidiary, CFC, Transparent Subsidiary or Immaterial Subsidiary, as the case may be, no longer qualifying as such, cause such new Subsidiary or former Financing Subsidiary, former CFC, former Transparent Subsidiary or former Immaterial Subsidiary, as the case may be, 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 (as in effect on the Original Effective Date) on the Original Effective Date and as the Administrative Agent shall have reasonably requested.
(ii)    The Borrower acknowledges that the Administrative Agent and the Lenders have agreed to exclude each Structured Subsidiary, each SBIC Subsidiary, each CFC, each Transparent Subsidiary and each Immaterial Subsidiary as an Obligor only for so long as such Person qualifies as a “Structured Subsidiary”, “SBIC Subsidiary”, “CFC”, “Transparent Subsidiary” or “Immaterial Subsidiary”, respectively, pursuant to the definition thereof, and thereafter such Person shall no longer constitute a “Structured Subsidiary”, “SBIC Subsidiary”, “CFC”, “Transparent Subsidiary” or “Immaterial Subsidiary”, as applicable, for any purpose of this Agreement or any other Loan Document.
(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 direct or indirect wholly owned Subsidiary; provided that the foregoing shall not prohibit any transaction permitted under Section 6.03 or 6.04, so long as after giving effect to such permitted transaction each of the remaining Subsidiaries is a direct or indirect 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:
(i)    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



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Administrative Agent 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 first-priority 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)    with respect to each deposit account or securities account of the Obligors (other than (A) any such account that is maintained by the Borrower in its capacity as “servicer” for a Financing Subsidiary or any Agency Account, (B) any such accounts which hold solely money or financial assets of a Financing Subsidiary, (C) any payroll account so long as such payroll account is coded as such, (D) withholding tax and fiduciary accounts or any trust account maintained solely on behalf of a Portfolio Investment, (E) any checking account of the Obligors in which the aggregate value of deposits therein, together with all other such accounts under this clause (E), does not at any time exceed $1,000,000, provided that Borrower will, and will cause each of its Subsidiary Guarantors to, use commercially reasonable efforts to obtain control agreements governing any such account in this clause (E), and (F) any account in which the aggregate value of deposits therein, together with all other such accounts under this clause (F), does not at any time exceed $75,000; provided that in the case of each of the foregoing clauses (A) through (F), no other Person (other than the depository institution at which such account is maintained) shall have “control” (within the meaning of the Uniform Commercial Code) over such account, cause each 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 such deposit account or securities account (each, a “Control Account”) and in that connection, the Borrower agrees, subject to Sections 5.08(c)(iv) and (v) below, to cause all cash and other proceeds of Portfolio Investments received by any Obligor to be immediately deposited into a Control Account (or otherwise delivered to, or registered in the name of, the Collateral Agent) and, both prior to and following such deposit, delivery or registration such cash and other proceeds shall be held in trust by the Borrower for the benefit and as the property of the Collateral Agent and shall not be commingled with any other funds or property of such Obligor or any other Person (including with any money or financial assets of the Borrower in its capacity as “servicer” for a Structured Subsidiary, or any money or financial assets of a Structured Subsidiary, or any money or financial assets of the Borrower in its capacity as an “agent” or “administrative agent” for any other Credit Facility Loans subject to Section 5.08(c)(v) below);
(iii)    cause the Financing Subsidiaries to execute and deliver to the Administrative Agent such certificates and agreements, in form and substance reasonably satisfactory to the Administrative Agent, as it shall determine are necessary to confirm that such Financing Subsidiary qualifies or continues to qualify as a “Structured Subsidiary” or an “SBIC Subsidiary”, as applicable, pursuant to the definitions thereof;
(iv)    in the case of any Portfolio Investment consisting of a Credit Facility Loan 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


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loans or other extensions of credit under such loan documents, (x) not permit such Financing Subsidiary to have a participation acquired from an Obligor in such underlying loan documents and the extensions of credit thereunder or any other indirect interest therein acquired from an Obligor; and (y) ensure that, subject to Section 5.08(c)(v) below, all amounts owing to any Obligor by the underlying borrower or other obligated party are remitted by such borrower or obligated party (or the applicable administrative agents, collateral agents or equivalent Person) directly to a Custodian Account and no other amounts owing by such underlying borrower or obligated party are remitted to such Custodian Account;
(v)    in the event that any Obligor is acting as an agent or administrative agent under any loan documents with respect to any Credit Facility Loan (or is acting in an analogous agency capacity under any agreement related to any Portfolio Investment) and such Obligor does not hold all of the credit extended to the underlying borrower or issuer under the relevant underlying loan documents or other agreements, ensure that (1) all funds held by such Obligor in such capacity as agent or administrative agent are segregated from all other funds of such Obligor and clearly identified as being held in an agency capacity (an “Agency Account”); (2) all amounts owing on account of such Credit Facility Loan or Portfolio Investment by the underlying borrower or other obligated party are remitted by such borrower or obligated party to either (A) such Agency Account or (B) directly to an account in the name of the underlying lender to whom such amounts are owed (for the avoidance of doubt, no funds representing amounts owing to more than one underlying lender may be remitted to any single account other than the Agency Account); and (3) within two (2) Business Days after receipt of such funds, such Obligor acting in its capacity as agent or administrative agent shall distribute any such funds belonging to any Obligor to a Custodian Account (provided that if any distribution referred to in this clause (v) is not permitted by applicable bankruptcy law to be made within such two (2) Business Day period as a result of the bankruptcy of the underlying borrower, such Obligor shall use commercially reasonable efforts to obtain permission to make such distribution and shall make such distribution as soon as legally permitted to do so); and
(vi)    in the case of any Portfolio Investment held by any Financing Subsidiary, including any cash collection related thereto, ensure that such Portfolio Investment shall not be held in any Custodian Account, or any other account of any Obligor.
SECTION 5.09.    Use of Proceeds. The Borrower will use the proceeds of the Loans and the issuances of Letters of Credit only for general corporate purposes of the Borrower and its Subsidiaries (other than Financing Subsidiaries except as expressly permitted under Section 6.03(e) or 6.03(i)) in the ordinary course of business, including making distributions not prohibited by this Agreement and the acquisition and funding (either directly or indirectly as permitted hereunder) of leveraged loans, mezzanine loans, high-yield securities, convertible securities, preferred stock, common stock and other Investments in each case to the extent otherwise permitted hereunder; 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, rule or regulation or, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any Margin Stock. On the Restatement Effective Date, the first day (if any) an Obligor acquires any Margin


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Stock and at any other time requested by the Administrative Agent or any Lender, the Borrower shall furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U. Margin Stock shall be purchased by the Obligors only with the proceeds of Indebtedness not directly or indirectly secured by Margin Stock (within the meaning of Regulation U), or with the proceeds of equity capital of the Borrower. No Obligor will directly or knowingly indirectly use the proceeds of the Loans or otherwise make available such proceeds (I) to any Person for the purpose of financing the activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of any Sanctions or (II) 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 any Anti-Corruption Laws. For the avoidance of doubt, Letters of Credit may be issued to support obligations of any Portfolio Company; provided that the underlying obligations of such Portfolio Company to the applicable Obligors in respect of such Letters of Credit shall not be included in the Borrowing Base.
SECTION 5.10.    Status of RIC and BDC. The Borrower shall at all times maintain its status as a “business development company” under the Investment Company Act and as a RIC under the Code.

SECTION 5.11.    Investment Policies. The Borrower shall at all times be in compliance in all material respects with its Investment Policies and its Valuation Policy.
SECTION 5.12.    Portfolio Valuation and Diversification Etc.
(a)    Industry Classification Groups. For purposes of this Agreement, the Borrower shall assign each Eligible Portfolio Investment to an Industry Classification Group as reasonably determined by the Borrower. To the extent that the Borrower reasonably determines that any Eligible Portfolio Investment is not correlated with the risks of other Eligible Portfolio Investments in an Industry Classification Group, such Eligible Portfolio Investment may be assigned by the Borrower to an Industry Classification Group that is more closely correlated to such Eligible Portfolio Investment.
(b)    Portfolio Valuation Etc.
(i)    Settlement-Date Basis. For purposes of this Agreement and the other Loan Documents, all determinations of whether a Portfolio Investment is an Eligible Portfolio Investment shall be determined on a Settlement-Date Basis, provided that no such investment shall be included as an Eligible Portfolio Investment to the extent it has not been paid for in full.
(ii)    Determination of Values. The Borrower will conduct reviews of the value to be assigned to each of its Eligible Portfolio Investments as follows:
(A)    Quoted Investments External Review. With respect to Eligible Portfolio Investments (including Cash Equivalents) traded in an active


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and orderly market for which market quotations are readily available (“Quoted Investments”), the Borrower shall, not less frequently than once each calendar week, determine the market value of such Quoted Investments which shall, in each case, be determined in accordance with one of the following methodologies as selected by the Borrower (each such value, an “External Quoted Value”):
(w)    in the case of public and 144A securities, the average of the most recent mid-prices as determined by at least two Approved Dealers selected by the Borrower or an Approved Pricing Service with respect to such public and 144A securities,

(x)    in the case of Credit Facility Loans, the average of the most recent mid-prices as determined by at least two Approved Dealers selected by the Borrower or an Approved Pricing Service with respect to such Credit Facility Loans,

(y)    in the case of any Quoted Investment traded on an exchange, the closing price for such Eligible Portfolio Investment most recently posted on such exchange, and

(z)    in the case of any other Quoted Investment, the fair market value thereof as determined by an Approved Pricing Service; and

(B)    Unquoted Investments External Review. With respect to Eligible Portfolio Investments for which market quotations are not readily available (“Unquoted Investments”):
(x)     Commencing with the quarter ending December  31, 2017, and for each calendar quarter thereafter (or such other dates as are reasonably agreed by the Borrower and the Administrative Agent (provided that such testing dates shall occur not less than quarterly), each an “IVP Testing Date”), the Administrative Agent through an Independent Valuation Provider will, solely for purposes of determining the Borrowing Base, test the values as of such IVP Testing Date of those Unquoted Investments that are Portfolio Investments included in the Borrowing Base selected by the Administrative Agent (such selected assets, the “IVP Tested Assets” and such value, the “IVP External Unquoted Value”); provided, that the fair value of such Portfolio Investments tested by the Independent Valuation Provider as of any IVP Testing Date shall be approximately 25% (but in no event shall exceed 30%) of the aggregate value of the Eligible PortfolioUnquoted Investments owned by the Obligors included in the Borrowing Base (the determination of fair value for such percentage thresholds shall be based off of the last determination of value of the Portfolio Investments pursuant to this Section 5.12); provided, further, that the Administrative Agent shall provide written notice to the Borrower, setting forth a description of which Unquoted Investments shall be IVP Tested Assets as of such IVP Testing Date, not


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later than 15 days prior to the IVP Testing Date (or such later date as agreed to between the Administrative Agent and the Borrower). For the avoidance of doubt, Unquoted Investments that are part of the Collateral but not included in the Borrowing Base shall not be subject to testing under this Section 5.12(b)(ii)(B)(x).

(y)    The Borrower shall value Unquoted Investments as of each IVP Testing Date in a manner consistent with its “Net Asset Valuation Policy”, as the same may be amended, supplemented, waived or otherwise modified from time to time consistent with standard industry practice and in a manner not prohibited by this Agreement (the “Valuation Policy”). 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 certain of the Unquoted Investments in the Borrowing Base that are not IVP Tested Assets as of each IVP Testing Date selected by the Borrower (such assets, the “Borrower Tested Assets” and such value, the “Borrower External Unquoted Value”). The fair value of such Portfolio Investments tested by the Approved Third-Party Appraiser as of any IVP Testing Date shall not be less than 35% of the aggregate value of the Eligible Portfolio Investments owned by the Obligors included in the Borrowing Base (the determination of fair value for such 35% threshold shall be based off of the last determination of the value of the Portfolio Investments pursuant to this Section 5.12), as of each IVP Testing Date, such assistance each quarter to include providing the Directing Body of the Borrower (with a copy to the Administrative Agent) with a written independent valuation report.

(C)    Internal Review. The Borrower shall conduct internal reviews to determine the value of all Eligible Portfolio Investments in accordance with its Valuation Policy at least once each calendar quarter, and shall conduct internal reviews with respect to the Eligible Portfolio Investments at least once each calendar week for the purpose of reviewing and discussing the Borrower’s asset portfolio (including any known changes to the performance or value of any Investment to the extent the Borrower determines that the value of any such Portfolio Investment should be updated) (each such value established pursuant to this clause (C), an “Internal Value”).
(D)    Credit Agreement Value of Quoted Investments. Subject to clause (G) of this Section 5.12(b)(ii), the “Value” of each Quoted Investment for all purposes of this Agreement shall be the lowest of (1) the Internal Value of such Quoted Investment as most recently determined by the Borrower pursuant to Section 5.12(b)(ii)(C), (2) the External Quoted Value of such Quoted Investment as most recently determined pursuant to Section 5.12(b)(ii)(A) and (3) the par or face value of such Quoted Investment.



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(E)    Credit Agreement Value of Unquoted Investments. Subject to clause (G) of this Section 5.12(b)(ii) and, as applicable, Section 5.12(b)(iii),
(x)    if the Internal Value of any Unquoted Investment as most recently determined by the Borrower pursuant to Section 5.12(b)(ii)(C) falls below the range of the Applicable External Value of such Unquoted Investment as most recently determined pursuant to Section 5.12(b)(ii)(B), then the “Value” of such Unquoted Investment for all purposes of this Agreement shall be deemed to be the lower of (i) the Internal Value and (ii) the par or face value of such Unquoted Investment;

(y)    (i) if the Internal Value of any Unquoted Investment as most recently determined by the Borrower pursuant to Section 5.12(b)(ii)(C) falls above the range of the Borrower External Unquoted Value of such Unquoted Investment as most recently determined pursuant to Section 5.12(b)(ii)(B) (and the Applicable External Value of such Unquoted Investment is such Borrower External Unquoted Value), then the “Value” of such Unquoted Investment for all purposes of this Agreement shall be deemed to be the lower of (i) the midpoint of the range of the Borrower External Unquoted Value and (ii) the par or face value of such Unquoted Investment.

(ii)    if the Internal Value of any Unquoted Investment as most recently determined by the Borrower pursuant to Section 5.12(b)(ii)(C) falls more than 5% above the midpoint of the range of the IVP External Unquoted Value of such Unquoted Investment as most recently determined pursuant to Section 5.12(b)(ii)(B) (and the Applicable External Value of such Unquoted Investment is such IVP External Unquoted Value), then the “Value” of such Unquoted Investment for all purposes of this Agreement shall be deemed to be the lower of (i) the midpoint of the range of the IVP External Unquoted Value and (ii) the par or face value of such Unquoted Investment; and

(z)    if the Internal Value of any Unquoted Investment as most recently determined by the Borrower pursuant to Section 5.12(b)(ii)(C) is within the range of the Borrower External Unquoted Value of such Unquoted Investment (and the Applicable External Value of such Unquoted Investment is such Borrower External Unquoted Value), or within or not more than 5% above the midpoint of the range of the IVP External Unquoted Value of such Unquoted Investment (and the Applicable External Value of such Unquoted Investment is such IVP External Unquoted Value), in each case as most recently determined pursuant to Section 5.12(b)(ii)(B), then the “Value” of such Unquoted Investment for all purposes of this Agreement shall be deemed to


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be the lower of (i) the Internal Value and (ii) the par or face value of such Unquoted Investment,

except that:
(1) with respect to an Unquoted Investment for which the most recent Borrower External Unquoted Value is the Applicable External Value, if the difference between the highest and lowest Borrower External Unquoted Value in such range exceeds an amount equal to 6% of the midpoint of such range, the “Value” of such Unquoted Investment shall instead be deemed to be the lowest of (i) the lowest Borrower External Unquoted Value in such range, (ii) the Internal Value determined pursuant to Section 5.12(b)(ii)(C), and (iii) the par or face value of such Unquoted Investment; and
(2) if an Applicable External Value with respect to an Unquoted Investment has not been obtained, the “Value” of such Unquoted Investment shall be deemed to be equal to the lowest of (i) the Internal Value of such Unquoted Investment as determined by the Borrower pursuant to Section 5.12(b)(ii)(C), (ii) the cost of such Unquoted Investment, until such time as the External Unquoted Value of such Unquoted Investment is determined in accordance with Section 5.12(b)(ii)(B) as at the IVP Testing Date; and (iii) the par or face value of such Unquoted Investment.

(F)    Actions Upon a Borrowing Base Deficiency. If, based upon such weekly internal review, the Borrower determines that a Borrowing Base Deficiency exists, then the Borrower shall, promptly and in any event within two Business Days as provided in Section 5.01(e), deliver a Borrowing Base Certificate reflecting the new amount of the Borrowing Base and shall take the actions, and make prepayments (and, to the extent necessary, provide cover for Letters of Credit as contemplated by Section 2.04(k)), but only to the extent required by Section 2.09(b).
(G)    Failure to Determine Values. If the Borrower shall fail to determine the value of any Eligible Portfolio Investment as at any date pursuant to the requirements (but subject to the exclusions) of the foregoing subclauses (A), (B), (C), (D) or (E) (or if the Administrative Agent shall fail to determine the value of any Eligible Portfolio Investment as described in the foregoing subclause (B) as a result of any action, inaction or lack of cooperation of the Borrower or any of its Affiliates), then the “Value” of such Eligible Portfolio Investment as at such date shall be deemed to be zero. If the Administrative Agent shall fail to determine the value of any Eligible Portfolio Investment as at any date pursuant to clause (B)(x) (except as provided above), then the “Value” of such Eligible Portfolio Investment as at such date (subject to clause (iii) below) shall be the lower of (x) the Internal Value with respect to such Eligible Portfolio Investment and (y) the par or face value of such Eligible Portfolio Investment; provided,


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however, that if an Applicable External Value has been obtained with respect to such asset for any quarterly period preceding the current quarterly testing period, then the “Value” of such Eligible Portfolio Investment will be determined as provided in clause (E) above.
(H)    [Intentionally omitted.]

(iii)    Supplemental Testing of Values; Valuation Dispute Resolutions
Notwithstanding the foregoing, the Administrative Agent, individually or at the request of the Required Lenders, shall at any time have the right, solely for purposes of the Borrowing Base, to request in its reasonable discretion any Portfolio Investment included in the Borrowing Base with a value assigned by the Borrower (other than IVP Tested Assets as of the most recent IVP Testing Date) to be independently valued by an Independent Valuation Provider for purposes of the Borrowing Base. There shall be no limit on the number of such appraisals requested by the Administrative Agent in its reasonable discretion and, subject to Section 5.12(b)(iv)(C) below, the costs of any such valuation shall be at the expense of the Borrower. If (x) the value of any Borrower Tested Asset determined pursuant to Section 5.12(b)(ii) is less than the value determined by the Independent Valuation Provider pursuant to this clause, then the value determined pursuant to Section 5.12(b)(ii) shall continue to be used as the “Value” for purposes of this Agreement and (y) if the value of any Borrower Tested Asset determined pursuant to Section 5.12(b)(ii) is greater than the value determined by the Independent Valuation Provider and the difference between such values is (1) less than or equal to 5% of the value determined pursuant to Section 5.12(b)(ii), then the value determined pursuant to Section 5.12(b)(ii) shall become the “Value” of such Portfolio Investment, (2) greater than 5% and less than or equal to 20% of the value determined pursuant to Section 5.12(b)(ii), then the “Value” of such Portfolio Investment shall become the average of the value determined pursuant to Section 5.12(b)(ii) and the value determined by the Independent Valuation Provider, and (3) greater than 20% of the value determined pursuant to Section 5.12(b)(ii), then the Borrower and the Administrative Agent shall retain an additional third-party appraiser and, upon the completion of such appraisal, the “Value” of such Portfolio Investment shall become the average of the three valuations (with the average of the value of the Independent Valuation Provider and value determined pursuant to Section 5.12(b)(ii) to be used until the third value is obtained).
(iv)    Generally Applicable Valuation Provisions
(A)    The Value of any Portfolio Investment for which the Independent Valuation Provider’s value is used shall be the midpoint of the range (if any) determined by the Independent Valuation Provider. The Independent Valuation Provider shall apply a recognized valuation methodology that is commonly accepted in the Borrower’s industry for valuing Portfolio Investments of the type being valued and held by the Obligors. Other procedures relating to


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the valuation will be reasonably agreed upon by the Administrative Agent and the Borrower.
(B)    All valuations shall be on a Settlement-Date Basis. For the avoidance of doubt, the value of any Portfolio Investments determined in accordance with any provision of this Section 5.12 shall be the Value of such Portfolio Investment for purposes of this Agreement until a new Value for such Portfolio Investment is subsequently determined in good faith in accordance with this Section 5.12.
(C)    Subject to the last sentence of Section 9.03(a), the reasonable and documented out-of-pocket costs of any valuation reasonably incurred by the Administrative Agent under this Section 5.12 shall be at the expense of the Borrower; provided that the Borrower’s obligation to reimburse valuation costs incurred by the Administrative Agent under Section 5.12(b)(iii) shall under no circumstances be in excess of the IVP Supplemental Cap.
(D)    The values determined by the Independent Valuation Provider shall be deemed to be “Information” hereunder and subject to Section 9.13 hereof.
(E)    The Administrative Agent shall provide a copy of the final results of any valuation received by the Administrative Agent and performed by the Independent Valuation Provider or an Approved Third-Party Appraiser to any Lender within ten (10) Business Days after such Lender’s request, except to the extent that such recipient has not executed and delivered a non-reliance letter, confidentiality agreement or similar agreement requested or required by such Independent Valuation Provider or Approved Third-Party Appraiser, as applicable.
(F)    The foregoing valuation procedures shall only be required to be used for purposes of calculating the Borrowing Base and related concepts and shall not be required to be utilized by the Borrower for any other purpose, including, without limitation, the delivery of financial statements or valuations required under ASC820 or the Investment Company Act.
(G)    The Independent Valuation Provider shall be instructed to conduct its tests in a manner not disruptive to the business of the Borrower in any material respect. The Administrative Agent shall notify the Borrower of its receipt of the written final results of any such test within ten (10) Business Days after its receipt thereof and shall provide a copy of such results and the related report to the Borrower within ten (10) Business Days after the Borrower’s request.
(c)    Investment Company Diversification Requirements. The Borrower (together with its Subsidiaries to the extent required by the Investment Company Act) will at all times comply in all material respects with the portfolio diversification and similar requirements set forth in the Investment Company Act applicable to business development companies. The



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Borrower will at all times, 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.
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 products obtained by multiplying (x) the Value of each Eligible Portfolio Investment (excluding any Cash Collateral) by (y) the applicable Advance Rate; provided that:
(a)    the Advance Rate applicable to the aggregate Value of all Eligible Portfolio Investments in their entirety shall be 0% at any time when the Borrowing Base is composed entirely of Eligible Portfolio Investments issued by fewer than 20 different issuers;
(b)    if, as of such date, the Relevant Asset Coverage Ratio is (i) greater than or equal to 2.00:1.00, the Advance Rate applicable to that portion of the Value of the Eligible Portfolio Investments issued by a single Portfolio Company exceeding 6% of the aggregate Value of all Eligible Portfolio Investments included in the Borrowing Base (for the avoidance of doubt, the calculation of Value for purposes of this subclause shall be made without taking into account any Advance Rate), shall be 50% of the otherwise applicable Advance Rate; (ii) less than 2.00:1.00 and greater than or equal to 1.75:1.00, the Advance Rate applicable to that portion of the Value of the Eligible Portfolio Investments issued by a single Portfolio Company exceeding 5% of the aggregate Value of all Eligible Portfolio Investments included in the Borrowing Base (for the avoidance of doubt, the calculation of Value for purposes of this subclause shall be made without taking into account any Advance Rate), shall be 50% of the otherwise applicable Advance Rate; or (iii) less than 1.75:1.00, the Advance Rate applicable to that portion of the Value of the Eligible Portfolio Investments issued by a single Portfolio Company exceeding 4% of the aggregate Value of all Eligible Portfolio Investments included in the Borrowing Base (for the avoidance of doubt, the calculation of Value for purposes of this subclause shall be made without taking into account any Advance Rate), shall be 50% of the otherwise applicable Advance Rate;
(c)    if, as of such date, the Relevant Asset Coverage Ratio is (i) greater than or equal to 2.00:1.00, the Advance Rate applicable to that portion of the Value of the Eligible Portfolio Investments issued by a single Portfolio Company exceeding 12% of the aggregate Value of all Eligible Portfolio Investments included in the Borrowing Base (for the avoidance of doubt, the calculation of Value for purposes of this subclause shall be made without taking into account any Advance Rate), shall be 0%; (ii) less than 2.00:1.00 and greater than or equal to 1.75:1.00, the Advance Rate applicable to that portion of the Value of the Eligible Portfolio Investments issued by a single Portfolio Company exceeding 10% of the aggregate Value of all Eligible Portfolio Investments included in the Borrowing Base (for the avoidance of doubt, the calculation of Value for purposes of this subclause shall be made without taking into account any Advance Rate), shall be 0%; or (iii) less than 1.75:1.00, the Advance Rate applicable to that portion of the Value of the Eligible Portfolio Investments issued by a single Portfolio Company exceeding 8% of the aggregate Value of all Eligible Portfolio Investments included in the



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Borrowing Base (for the avoidance of doubt, the calculation of Value for purposes of this subclause shall be made without taking into account any Advance Rate), shall be 0%;
(d)    the portion of the Borrowing Base attributable to Eligible Portfolio Investments that are Performing PIK Obligations or Performing DIP Loans shall not exceed (i) commencing from the Amendment No. 2 Effective Date and ending on and through December 31, 2020, 15% of the Borrowing Base and (ii) at all other times, 10% of the Borrowing Base;
(e)    if, as of such date, the Relevant Asset Coverage Ratio is (A) (i) greater than or equal to 2.00:1.00 or (ii) less than 2.00:1.00 and greater than or equal to 1.75:1.00 and, with respect to this subclause (ii), the Borrowing Base (without giving effect to any adjustment required pursuant to this paragraph (e), the “Gross Borrowing Base”) is greater than or equal to 1.50 times the Senior Debt Amount, the portion of the Borrowing Base attributable to Eligible Portfolio Investments that are Senior Investments shall be at least 35% of the Borrowing Base; (B) less than 2.00:1.00 and greater than or equal to 1.75:1.00, and the Gross Borrowing Base is less than 1.50 times the Senior Debt Amount, the portion of the Borrowing Base attributable to Eligible Portfolio Investments that are Senior Investments shall be at least 60% of the Borrowing Base; or (C) less than 1.75:1.00, the portion of the Borrowing Base attributable to Eligible Portfolio Investments that are Senior Investments shall be at least (i) 50% of the Borrowing Base if the Gross Borrowing Base is greater than or equal to 1.50 times the Senior Debt Amount, and (ii) 75% of the Borrowing Base if the Gross Borrowing Base is less than 1.50 times the Senior Debt Amount;
(f)    if, as of such date, the Relevant Asset Coverage Ratio is (i) greater than or equal to 2.00:1.00, the portion of the Borrowing Base attributable to Eligible Portfolio Investments that are Performing High Yield Securities and Performing Mezzanine Investments shall not exceed 50% of the Borrowing Base; (ii) less than 2.00:1.00 and greater than or equal to 1.75:1.00, the portion of the Borrowing Base attributable to Eligible Portfolio Investments that are Performing High Yield Securities and Performing Mezzanine Investments shall not exceed 30% of the Borrowing Base; or (iii) less than 1.75:1.00, the portion of the Borrowing Base attributable to Eligible Portfolio Investments that are Performing High Yield Securities and Performing Mezzanine Investments shall not exceed 20% of the Borrowing Base;
(g)    if, as of such date, the Relevant Asset Coverage Ratio is greater than or equal to 1.75:1.00, the portion of the Borrowing Base attributable to Eligible Portfolio Investments in the (i) Largest Industry Classification Group shall not exceed 25% of the Borrowing Base, (ii) Second Largest Industry Classification Group shall not exceed 20% of the Borrowing Base and (iii) the Third Largest Industry Classification Group shall not exceed 20% of the Borrowing Base;
(h)    if, as of such date, the Relevant Asset Coverage Ratio is less than 1.75:1.00, the portion of the Borrowing Base attributable to Eligible Portfolio Investments in each of the Industry Classification Groups that are part of the Largest Industry Classification Group, Second Largest Industry Classification Group and the


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Third Largest Industry Classification Group shall, in each case, not exceed 20% of the Borrowing Base;
(i)    the portion of the Borrowing Base attributable to Eligible Portfolio Investments in any single Industry Classification Group (other than the Largest Industry Classification Group, the Second Largest Industry Classification Group and the Third Largest Industry Classification Group) shall, in each case, not exceed 15% of the Borrowing Base;
(j)    the weighted average maturity (based on the fair value of such Eligible Portfolio Investments to the extent included in the Borrowing Base) of all Unquoted Investments that are Debt Eligible Portfolio Investments (excluding Long-Term U.S. Government Securities) shall not exceed 5 years;
(k)    the portion of the Borrowing Base attributable to Unquoted Investments that are Debt Eligible Portfolio Investments (excluding Long-Term U.S. Government Securities) with a maturity greater than 7 years shall not exceed 20% of the Borrowing Base;
(l)    the portion of the Borrowing Base attributable to Eligible Portfolio Investments that are Affiliate Investments shall not exceed 10% of the Borrowing Base;
(m)    the portion of the Borrowing Base attributable to Eligible Portfolio Investments that are investments in a Permitted Foreign Jurisdiction shall not exceed 20% of the Borrowing Base;
(n)    [intentionally omitted];
(o)    [intentionally omitted];
(p)    the portion of the Borrowing Base attributable to Eligible Portfolio Investments that are Performing Mezzanine Investments, Performing Second Lien Credit Facility Loans and Performing Subordinated Covenant-Lite Loans shall not exceed 50% of the Borrowing Base; provided, that the constraints contained in this paragraph (p) shall not apply at such time the Borrower obtains and for so long as the Borrower maintains a credit rating of at least BBB- from S&P (or equivalent rating from Moody’s or Fitch); and
(q)    the portion of the Borrowing Base attributable to Eligible Portfolio Investments that are Performing Mezzanine Investments shall not exceed 35% of the Borrowing Base; provided, that the constraints contained in this paragraph (q) shall not apply at such time the Borrower obtains and for so long as the Borrower maintains a credit rating of at least BBB- from S&P (or equivalent rating from Moody’s or Fitch).
For all purposes of this Section 5.13, to the extent the Borrowing Base is required to be reduced to comply with this Section 5.13, the Borrower shall be permitted to choose the Eligible Portfolio Investments to be so removed to effect such reduction. For the avoidance of doubt, no Portfolio Investment shall be an Eligible Portfolio Investment unless, among the other



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requirements set forth in this Agreement, (i) such Investment is subject only to Eligible Liens, (ii) such Investment is Transferable and (iii) such Investment meets all of the other criteria set forth on Schedule 1.01(c) hereto. In addition, as used herein, the following terms have the following meanings:

“Advance Rate” means, as to any Eligible Portfolio Investment and subject to adjustment as provided above and as provided below based on the Relevant Asset Coverage Ratio as of such date, the following percentages with respect to such Eligible Portfolio Investment:

 
Relevant Asset Coverage Ratio ≥ 2.00:1.00
2.00:1.00 > Relevant Asset Coverage Ratio ≥ 1.75:1.00
1.75:1.00 > Relevant Asset Coverage Ratio ≥ 1.50:1.00
Eligible Portfolio Investment
Quoted
Unquoted
Quoted
Unquoted
Quoted
Unquoted
Cash and Cash Equivalents
100%
n/a
100%
n/a
100%
n/a
Long-Term U.S. Government Securities
90%
n/a
90%
n/a
90%
n/a
Performing First Lien Credit Facility Loans
85%
75%
85%
75%
8580%

7570%

Performing Last Out Loans
75%
65%
70%
60%
6560%

5550%

Performing Second Lien Credit Facility Loans and Performing First Lien Covenant-Lite Loans
70%
60%
65%
55%
6055%

5045%

Performing High Yield Securities
65%
55%
60%
50%
5550%

4540%

Performing Mezzanine Investments and Performing Subordinated Covenant-Lite Loans
60%
50%
55%
45%
5045%

4035%

Performing PIK Obligations and Performing DIP Loans
50%
40%
45%
35%
40%
30%
Non-Performing Portfolio Investments
0%
0%
0%
0%
0%
0%

For the avoidance of doubt, the categories above are intended to be indicative of the traditional investment types. All determinations of whether a particular Portfolio Investment belongs to one category or another shall be made by the Borrower on a consistent basis with the foregoing. For example, a secured bank loan solely at a holding company, the only assets of which are the


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shares of an operating company, may constitute Mezzanine Investments, but would not ordinarily constitute a First Lien Credit Facility Loan.

“Affiliate Investment” means any Portfolio Investment in a Person in which either (i) the Borrower or any of its Subsidiaries owns or controls more than 10% of the equity interests or (ii) is controlled by the Borrower or any Subsidiary.

“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.
“Cash” has the meaning assigned to such term in Section 1.01 of this Agreement.
“Cash Equivalents” has the meaning assigned to such term in Section 1.01 of this Agreement.

“Covenant-Lite Loan” means a Credit Facility Loan that does not require the Portfolio Company thereunder to comply with at least one financial maintenance covenant (including, without limitation, any covenant relating to a borrowing base, asset valuation or similar asset-based requirement), in each case, regardless of whether compliance with one or more incurrence covenants is otherwise required by such Credit Facility Loan.

“Credit Facility Loans” means debt obligations (including, without limitation, term loans, revolving loans, debtor-in-possession financings, the funded portion of revolving credit lines and other similar loans and investments including interim loans, bridge loans and senior subordinated loans) that are generally provided under a syndicated loan or credit facility or pursuant to any loan agreement or other similar credit facility, whether or not syndicated.

“Debt Eligible Portfolio Investment” means an Eligible Portfolio Investment that is an Investment in Indebtedness.

“Defaulted Obligation” means any Investment in Indebtedness (a) as to which, (x) a default as to the payment of principal and/or interest has occurred and is continuing for a period of thirty two (32) consecutive days with respect to such Indebtedness (without regard to any grace period applicable thereto, or waiver thereof) or (y) a default not set forth in clause (x) has occurred and the holders of such Indebtedness have accelerated all or a portion of the principal amount thereof as a result of such default; (b) as to which a default as to the payment of principal and/or interest has occurred and is continuing for a period of thirty two (32) consecutive days with respect to another material debt obligation of the Portfolio Company under such Indebtedness which is senior or pari passu in right of payment to such Indebtedness; (c) as to which the Portfolio Company under such Indebtedness or others have instituted proceedings to have such Portfolio Company adjudicated bankrupt or insolvent or placed into receivership and such proceedings have not been stayed or dismissed or such Portfolio Company has filed for protection under the United States Bankruptcy Code or under any foreign bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation


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of its business or custodian, appointed for it (unless, in the case of clause (b) or (c), such Indebtedness is a DIP Loan, in which case it shall not be deemed to be a Defaulted Obligation under such clause); (d) as to which a default rate of interest has been and continues to be charged for more than 120 consecutive days, or foreclosure on collateral for such Indebtedness has been commenced and is being pursued by or on behalf of the holders thereof; (e) as to which the Borrower has delivered written notice to the Portfolio Company declaring such Indebtedness in default or as to which the Borrower otherwise exercises significant remedies following a default; or (f) that the Borrower has in its reasonable commercial judgment otherwise declared to be a Defaulted Obligation.

“DIP Loan” means a Credit Facility Loan, whether revolving or term, that is originated after the commencement of a case under Chapter 11 of the Bankruptcy Code by a Portfolio Company, which is a debtor in possession as described in Section 1107 of the Bankruptcy Code or a debtor as defined in Section 101(13) of the Bankruptcy Code in such case (a “Debtor”) organized under the laws of the United States or any state therein and domiciled in the United States, and which satisfies the following criteria: (a) the DIP Loan is duly authorized by a final order of the applicable bankruptcy court or federal district court under the provisions of subsection (b), (c) or (d) of 11 U.S.C. Section 364; (b) the Debtor’s bankruptcy case is still pending as a case under the provisions of Chapter 11 of Title 11 of the Bankruptcy Code and has not been dismissed or converted to a case under the provisions of Chapter 7 of Title 11 of the Bankruptcy Code; (c) the Debtor’s obligations under such loan have not been (i) disallowed, in whole or in part, or (ii) subordinated, in whole or in part, to the claims or interests of any other Person under the provisions of 11 U.S.C. Section 510; (d) the DIP Loan is secured and the Liens granted by the applicable bankruptcy court or federal district court in relation to the Loan have not been subordinated or junior to, or pari passu with, in whole or in part, to the Liens of any other lender under the provisions of 11 U.S.C. Section 364(d) or otherwise; (e) the Debtor is not in default on its obligations under the loan; (f) neither the Debtor nor any party in interest has filed a Chapter 11 plan with the applicable federal bankruptcy or district court that, upon confirmation, would (i) disallow or subordinate the loan, in whole or in part, (ii) subordinate, in whole or in part, any Lien granted in connection with such loan, (iii) fail to provide for the repayment, in full and in cash, of the loan upon the effective date of such plan or (iv) otherwise impair, in any manner, the claim evidenced by the loan; (g) the DIP Loan is documented in a form that is commercially reasonable; (h) the DIP Loan shall not provide for more than 50% (or a higher percentage with the consent of the Required Lenders) of the proceeds of such loan to be used to repay prepetition obligations owing to all or some of the same lender(s) in a “roll-up” or similar transaction; (i) no portion of the DIP Loan is payable in consideration other than cash; and (j) no portion of the DIP Loan has been credit bid under Section 363(k) of the Bankruptcy Code or otherwise. For the purposes of this definition, an order is a “final order” if the applicable period for filing a motion to reconsider or notice of appeal in respect of a permanent order authorizing the Debtor to obtain credit has lapsed and no such motion or notice has been filed with the applicable bankruptcy court or federal district court or the clerk thereof.

“EBITDA” means the consolidated net income of the applicable Person (excluding extraordinary, unusual or non-recurring gains and extraordinary losses (to the extent excluded in the definition of “EBITDA” (or similar defined term used for the purposes contemplated herein) in the relevant agreement relating to the applicable Eligible Portfolio




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Investment)) for the relevant period plus, without duplication, the following to the extent deducted in calculating such consolidated net income in the relevant agreement relating to the applicable Eligible Portfolio Investment for such period: (i) consolidated interest charges for such period, (ii) the provision for Federal, state, local and foreign income taxes payable for such period, (iii) depreciation and amortization expense for such period, and (iv) such other adjustments included in the definition of “EBITDA” (or similar defined term used for the purposes contemplated herein) in the relevant agreement relating to the applicable Eligible Portfolio Investment, provided that such adjustments are usual and customary and substantially comparable to market terms for substantially similar debt of other similarly situated borrowers at the time such relevant agreements are entered into as reasonably determined in good faith by the Borrower.

“Eligible Liens” has the meaning assigned to such term in Section 1.01 of this Agreement.

“Eligible Portfolio Investment” has the meaning assigned to such term in Section 1.01 of this Agreement.

“First Lien Credit Facility Loan” means a Credit Facility Loan that is entitled to the benefit of a first lien and first priority perfected security interest on all or substantially all of the assets of the respective borrower and guarantors obligated in respect thereof, and which has the most senior pre-petition priority in any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceedings in such collateral; provided, however, that, in the case of accounts receivable and inventory (and the proceeds thereof), such lien and security interest may be second in priority to a Permitted Prior Working Capital Lien; and further provided that any portion (and only such portion) of such a Credit Facility Loan which has a total first lien debt to EBITDA ratio above 4.00 to 1.00 will have the Advance Rate of a Second Lien Credit Facility Loan applied to such portion. For the avoidance of doubt, in no event shall a First Lien Credit Facility Loan include a Last Out Loan or a Performing DIP Loan.

“Fixed Rate Portfolio Investment” means a Debt Eligible Portfolio Investment that bears interest at a fixed rate.
“Floating Rate Portfolio Investment” means a Debt Eligible Portfolio Investment that bears interest at a floating rate.
“High Yield Securities” means debt Securities, 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 (described under clause (i) of the definition thereof) or Credit Facility Loans.

“Last Out Loan” means, with respect to any Credit Facility Loan that is a term loan structured in a first out tranche and a last out tranche (with the first out tranche entitled to a lower interest rate but priority with respect to payments), that portion of such Credit Facility Loan that is the last out tranche; provided that:



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(a) such last out tranche is entitled (along with the first out tranche) to the benefit of a first lien and first priority perfected security interest on all or substantially all of the assets of the respective borrower and guarantors obligated in respect thereof (subject to customary exceptions), and which has the most senior pre-petition priority in any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceedings (taking into account the payment priority of the first out tranche and subject to customary permitted liens as contemplated by the applicable Credit Facility Loan documents);

(b) the ratio of (x) the amount of the first out tranche to (y) EBITDA of the underlying obligor does not at any time exceed 2.25 to 1.00;
 
(c) such last out tranche (i) gives the holders of such last out tranche full enforcement rights during the existence of an event of default (subject to customary standstill and other customary limitations and exceptions, including if the holders of the first out tranche have previously exercised enforcement rights), (ii) shall have the same maturity date as the first out tranche, (iii) is entitled to the same representations, covenants and events of default as the holders of the first out tranche, and (iv) provides the holders of such last out tranche with customary protections (including consent rights with respect to (1) any increase of the principal balance of the first out tranche, (2) any increase of the margins (other than as a result of the imposition of default interest) applicable to the interest rates with respect to the first out tranche, (3) any reduction of the final maturity of the first out tranche, and (4) amending or waiving any provision in the underlying loan documents that is specific to the holders of such last out tranche); and
(d) such first out tranche is not subject to multiple drawings (unless, at the time of such drawing and after giving effect thereto, the ratio referenced in clause (b) above is not exceeded).

For clarity, any last out loan that complies with subsection (a) above, but fails to qualify under any of (b), (c) and/or (d) above, shall be deemed a Second Lien Credit Facility Loan (to the extent it otherwise meets the definition of Second Lien Credit Facility Loan).

“Long-Term U.S. Government Securities” means U.S. Government Securities maturing more than three months from the applicable date of determination.

“Mezzanine Investments” means (i) debt Securities (including convertible debt Securities (other than the “in-the-money” equity component thereof)) (a) issued by public or private Portfolio Companies, (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 Portfolio Company and (ii) a Credit Facility Loan that is not a First Lien Credit Facility Loan, Last Out Loan, a Covenant-Lite Loan, a High Yield Security or Second Lien Credit Facility Loan.
“Non-Performing Portfolio Investment” means any Eligible Portfolio Investment that is not a Performing (as defined below) Eligible Portfolio Investment.





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“Performing” means, with respect to any Eligible Portfolio Investment, that such Eligible Portfolio Investment (i) is not a Defaulted Obligation, (ii) other than with respect to DIP Loans, does not represent debt or Capital Stock of an issuer that has issued any Defaulted Obligation and (iii) is not on non-accrual (provided that for this clause (iii), any Eligible Portfolio Investment that is on “PIK non-accrual” may continue to be Performing for so long as such Eligible Portfolio Investment is not a PIK Obligation).

“Performing Covenant-Lite Loans” means Performing First Lien Covenant-Lite Loans or Performing Subordinated Covenant-Lite Loans.

“Performing DIP Loans” means funded DIP Loans that (a) are not PIK Obligations and (b) are not Defaulted Obligations.

“Performing First Lien Covenant-Lite Loans” means funded Covenant-Lite Loans that (a) are not PIK Obligations or DIP Loans, (b) are First Lien Credit Facility Loans, and (c) are Performing.

“Performing First Lien Credit Facility Loans” means funded First Lien Credit Facility Loans that (a) are not PIK Obligations, DIP Loans, Covenant-Lite Loans or Last Out Loans and (b) are Performing.

“Performing High Yield Securities” means funded High Yield Securities that (a) are not PIK Obligations or DIP Loans and (b) are Performing.

“Performing Last Out Loans” means funded Last Out Loans that (a) are not PIK Obligations, DIP Loans or Covenant-Lite Loans and (b) are Performing.

“Performing Mezzanine Investments” means funded Mezzanine Investments that (a) are not PIK Obligations, DIP Loans or Covenant-Lite Loans and (b) are Performing.

“Performing PIK Obligations” means funded PIK Obligations that (a) are not DIP Loans and (b) are Performing.

“Performing Subordinated Covenant-Lite Loans” means funded Covenant-Lite Loans that (a) are not PIK Obligations, DIP Loans or Performing First Lien Covenant-Lite Loans and (b) are Performing.

“Performing Second Lien Credit Facility Loans” means funded Second Lien Credit Facility Loans that (a) are not PIK Obligations, DIP Loans, Covenant-Lite Loans or Last Out Loans and (b) are Performing.

“Permitted Foreign Jurisdiction” means Australia, Bermuda, Canada, Germany, Ireland, Luxembourg, New Zealand, Sweden, Switzerland, the Netherlands and the United Kingdom.




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“Permitted Prior Working Capital Lien” means, with respect to a Portfolio Company that is a borrower under a Credit Facility Loan, a security interest to secure a working capital facility for such Portfolio Company in the accounts receivable and/or inventory (and the proceeds thereof) of such Portfolio Company and any of its subsidiaries that are guarantors of such working capital facility; provided that (i) such Credit Facility Loan has a second priority lien on such accounts receivable and/or inventory, as applicable (and the proceeds thereof), (ii) such working capital facility is not secured by any other assets (other than a second priority lien, subject to the first priority lien of the Credit Facility Loan on such other assets) and does not benefit from any standstill rights or other agreements (other than customary rights) with respect to any other assets and (iii) the maximum principal amount of such working capital facility is not at any time greater than 15% of the aggregate enterprise value of the Portfolio Company (as determined in accordance with the valuation methodology for determining the enterprise value of the applicable Portfolio Company as established by an Approved Third Party Appraiser).

“PIK Obligation” means an obligation that provides that any portion of the interest accrued for a specified period of time or until the maturity thereof is, or at the option of the obligor may be, added to the principal balance of such obligation or otherwise deferred and accrued rather than being paid in cash, provided that any such obligation shall not constitute a PIK Obligation if it (i) is a fixed rate obligation and requires payment of interest in cash on an at least quarterly basis at a rate of not less than 8% per annum or (ii) is not a fixed rate obligation and requires payment of interest in cash on an at least quarterly basis at a rate of not less than 4.5% per annum in excess of the applicable index.

“Restructured Investment” means, as of any date of determination, (a) any Portfolio Investment that has been a Defaulted Obligation within the past six months, or (b) any Portfolio Investment that has in the past six months been (x) on cash non-accrual, or (y) amended or subject to a deferral or waiver the effect of which is to (i) change the amount of previously required scheduled debt amortization (other than by reason of repayment thereof) or (ii) extend the tenor of previously required scheduled debt amortization, in each case such that the remaining weighted average life of such Portfolio Investment is extended by more than 20% and the reason for such amendment, deferral or waiver is related to the deterioration of the credit profile of the underlying borrower such that, in the absence of such amendment, deferral or waiver, it is reasonably expected by the Borrower that such underlying borrower either (x) will not be able to make any such previously required scheduled debt amortization payment or (y) is anticipated to incur a breach of a material financial covenant. A DIP Loan shall not be deemed to be a Restructured Investment, so long as it does not meet the conditions of the definition of Restructured Investment. An “exit” financing for an obligor that emerges from a case under Chapter 11 of the Bankruptcy Code in accordance with a Chapter 11 plan that has been duly confirmed by the federal bankruptcy court exercising jurisdiction over the obligor pursuant to a final non-appealable order and such “exit” financing has been duly approved by a final non-appealable order of the federal bankruptcy court exercising jurisdiction over the obligor in connection with the confirmed Chapter 11 plan of the obligor shall not be deemed to be a Restructured Investment, so long as such “exit” financing is a new facility and does not otherwise meet the conditions of the definition of Restructured Investment.





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“Second Lien Credit Facility Loan” means a Credit Facility Loan (other than a First Lien Credit Facility Loan and a Last Out Loan) that is entitled to the benefit of a first and/or second lien and first and/or second priority perfected security interest on all or substantially all 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 Credit Facility Loans.

“Securities Act” means the United States Securities Act of 1933, as amended.

“Senior Debt Amount” means, on any date, the greater of (i) the Covered Debt Amount and (ii) the Combined Debt Amount.

“Senior Investments” means Cash, Cash Equivalents, Long-Term U.S. Government Securities, Performing First Lien Credit Facility Loans and Quoted Investments that are Performing First Lien Covenant-Lite Loans.

“Short-Term U.S. Government Securities” means U.S. Government Securities maturing within three months of the applicable date of determination.

“Structured Finance Obligation” means any obligation issued by a special purpose vehicle (or similar obligor) and secured directly by, referenced to, or representing ownership of or investment in, a pool of receivables or other financial assets of any obligor, including collateralized loan obligations, collateralized debt obligations and mortgage-backed securities, or any finance lease. For the avoidance of doubt, if an obligation satisfies this definition, such obligation (a) shall not qualify as any other category of Eligible Portfolio Investment and (b) shall not be included in the Borrowing Base.

“U.S. Government Securities” has the meaning assigned to such term in Section 1.01 of this Agreement.

“Value” means, with respect to any Eligible Portfolio Investment, the value thereof determined for purposes of this Agreement in accordance with Section 5.12(b)(ii) or 5.12(b)(iii), as applicable.

SECTION 5.14.    Taxes. Each of the Borrower and its Subsidiaries will timely file or cause to be timely filed all U.S. federal, state and material local Tax returns that are required to be filed by it and all other material Tax returns that are required to be filed by it and will pay all Taxes for which it is directly or indirectly liable and any assessments made against it or any of its property and all other Taxes, fees or other charges imposed on it or any of its property by any Governmental Authority, except Taxes that are being contested in good faith by


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appropriate proceedings, and with respect to which reserves in conformity with GAAP are provided on the books of the Borrower or its Subsidiaries, as the case may be. The charges, accruals and reserves on the books of the Borrower and any of its Subsidiaries in respect of Taxes and other governmental charges will be adequate in accordance with GAAP.
SECTION 5.15.    Post-Closing Matters. Notwithstanding anything to the contrary contained herein, to the extent not delivered on the Restatement Effective Date, within thirty (30) days (or such longer period approved by the Administrative Agent in its discretion), the Administrative Agent shall have received certificates from the Borrower’s insurance broker or other evidence reasonably satisfactory to it that all insurance required to be maintained pursuant to the Loan Documents is in full force and effect, together with endorsements naming the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, as additional insured and lender’s loss payee, as applicable, thereunder.
Article VI    

NEGATIVE COVENANTS
Until the Termination Date, the Borrower covenants and agrees with the Lenders that:
SECTION 6.01.    Indebtedness. 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 under this Agreement;
(b)    (i) Unsecured Shorter-Term Indebtedness in an aggregate principal amount not to exceed (1) prior to the payment in full of the 2019 Notes, $20,000,000 and (2) after the payment in full of the 2019 Notes, $100,000,00050,000,000, and (ii) Secured Longer-Term Indebtedness with the consent of the Administrative Agent and the Required Lenders, so long as, in the case of each clause (i) and (ii), (w) no Default or Event of Default exists at the time of the incurrence, refinancing or replacement thereof (or immediately after the incurrence, refinancing or replacement thereof), (x) prior to and immediately after giving effect to the incurrence, refinancing or replacement thereof, the Borrower is in pro forma compliance with each of the covenants set forth in Sections 6.07(a), (b), (d) and (e), and on the date of such incurrence, refinancing or replacement the Borrower delivers to the Administrative Agent a certificate of a Financial Officer to such effect, (y) prior to and immediately after giving effect to the incurrence, refinancing or replacement thereof, the Covered Debt Amount does not or would not exceed the Borrowing Base then in effect and (z) on the date of the incurrence, refinancing or replacement thereof, the Borrower delivers to the Administrative Agent and each Lender a Borrowing Base Certificate as at such date demonstrating compliance with subclause (y) after giving effect to such incurrence, refinancing or replacement. For purposes of preparing such Borrowing Base Certificate, (A) the fair market value of Quoted Investments shall be the most recent quotation available for such Eligible Portfolio Investment and (B) the fair market value of Unquoted Investments shall be the Value set forth in the Borrowing Base Certificate most recently delivered by the Borrower to the Administrative Agent pursuant to Section 5.01(d) or if


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an Unquoted Investment is acquired after the delivery of the Borrowing Base Certificate most recently delivered, then the Value of such Unquoted Investment shall be the lower of the cost of such Unquoted Investment and the Internal Value of such Unquoted Investment; provided, that the Borrower shall reduce or increase, as applicable, the Value of any Eligible Portfolio Investment referred to in this subclause (B), in a manner consistent with the valuation methodology set forth in Section 5.12, to the extent necessary to take into account any events of which the Borrower has knowledge that adversely or positively, as applicable, affect the value of such Eligible Portfolio Investment;
(c)    Unsecured Longer-Term Indebtedness pursuant to clause (B) of the definition thereof, so long as (x) no Default or Event of Default exists at the time of the incurrence, refinancing or replacement thereof (or immediately after the incurrence, refinancing or replacement thereof) and (y) prior to and immediately after giving effect to the incurrence, refinancing or replacement thereof, the Borrower is in pro forma compliance with each of the covenants set forth in Sections 6.07(a), (b), (d) and (e) and on the date of such incurrence, refinancing or replacement the Borrower delivers to the Administrative Agent a certificate of a Financial Officer to such effect;
(d)    Indebtedness of Financing Subsidiaries; provided that (i) on the date that such Indebtedness is incurred (for clarity, with respect to any and all revolving loan facilities, term loan facilities, staged advance loan facilities or any other credit facilities, “incurrence” shall be deemed to take place at the time such facility is entered into, and not upon each borrowing thereunder), prior to and immediately after giving effect to the incurrence thereof, the Borrower is in pro forma compliance with each of the covenants set forth in Sections 6.07(a), (b), (d) and (e) and on the date of such incurrence Borrower delivers to the Administrative Agent a certificate of a Financial Officer to such effect and (ii) in the case of revolving loan facilities or staged advance loan facilities, upon each borrowing thereunder, the Borrower is in pro forma compliance with the covenant set forth in Sections 6.07(b);
(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)    obligations of the Borrower under a Permitted SBIC Guarantee and obligations (including Guarantees) in respect of Standard Securitization Undertakings;
(h)    Indebtedness of the Borrower under any Hedging Agreements entered into in the ordinary course of the Borrower’s business and not for speculative purposes, in an aggregate amount not to exceed $20,000,000 at any time outstanding (for the avoidance of doubt, the amount of any Indebtedness under any Hedging Agreement shall be the amount such Obligor would be obligated for under such Hedging Agreement if such Hedging Agreement were terminated at the time of determination);



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(i)    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;
(j)    Indebtedness (i) of an Obligor to any other Obligor, (ii) of a Financing Subsidiary to any Obligor to the extent such Indebtedness is an Investment permitted under Section 6.04(e), (iii) of an Immaterial Subsidiary to any Obligor to the extent such Indebtedness is an Investment permitted under Section 6.04(i) and (iv) of any other Subsidiary to any Obligor to the extent such Indebtedness is an Investment permitted under Section 6.04(j);
(k)    additional Indebtedness not for borrowed money, in an aggregate amount not to exceed $25,000,000 at any time outstanding;
(l)    the 2019 Notes as in effect on the date hereof; and
(m)    the 2024 Notes and 2028 Notes, in each case, so long as the 2024 Notes and the 2028 Notes continue to satisfy clause (B) of the definition of Unsecured Longer-Term Indebtedness.
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 Restatement Effective Date and set forth in Schedule 3.11(b), 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 Restatement Effective Date and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;
(b)    Liens created pursuant to the Security Documents;
(c)    Liens on assets owned by Financing Subsidiaries;
(d)    Permitted Liens;
(e)    Liens on Equity Interests in any SBIC Subsidiary created in favor of the SBA and Liens on Equity Interests in any Structured Subsidiary described in clause (a) of the definition thereof in favor of and required by any lender providing third-party financing to such Structured Subsidiary;
(f)    Liens on assets owned by (i) Immaterial Subsidiaries created in favor of an Obligor to the extent solely securing Indebtedness permitted under Section 6.01(j)(iii) and (ii) any other Subsidiary (other than (1) an Obligor or (2) a Financing Subsidiary) created in favor of an Obligor to the extent solely securing Indebtedness permitted under Section 6.01(j)(iv); and



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(g)    additional Liens securing Indebtedness not for borrowed money not to exceed $5,000,000 in the aggregate provided such Indebtedness is not otherwise prohibited under Section 6.01(k).
SECTION 6.03.    Fundamental Changes. The Borrower will not, nor will it permit any of its Subsidiaries (other than a Financing Subsidiary or an Immaterial Subsidiary) to, enter into any transaction of merger, 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 a Financing Subsidiary or an Immaterial Subsidiary) 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 (including Cash, Cash Equivalents and Equity Interests), whether now owned or hereafter acquired, but excluding (x) assets (including Cash and Cash Equivalents but excluding Portfolio Investments) sold or disposed of in the ordinary course of business of the Borrower and its Subsidiaries (including to make expenditures of cash in the normal course of the day-to-day business activities of the Borrower and its Subsidiaries (other than a Financing Subsidiary)) and (y) subject to the provisions of clauses (d) and (e) below, Portfolio Investments. The Borrower will not, nor will it permit any of its Subsidiaries to, file a certificate of division; adopt a plan of division or otherwise take any action to effectuate a division pursuant to Section 18-217 of the Delaware Limited Liability Company Act (or any analogous action taken pursuant to applicable law with respect to any corporation, limited liability company, partnership or other entity).

Notwithstanding the foregoing provisions of this Section:
(a)    any Subsidiary 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 (i) between a Subsidiary or a wholly-owned Subsidiary Guarantor and the Borrower, the Borrower shall be the continuing or surviving entity and (ii) between a Subsidiary and a wholly owned Subsidiary Guarantor, the wholly owned Subsidiary Guarantor shall be the continuing or surviving entity;
(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;
(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 or a Restricted Investment) so long as prior to and after giving effect to such sale, transfer or other disposition (and any concurrent acquisitions


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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 (other than ownership interests in Financing Subsidiaries or Restricted Investments), Cash and Cash Equivalents to a Financing Subsidiary or a Restricted Investment (including, for clarity, as investments (debt or equity) or capital contributions) so long as (i) prior to and immediately 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 no Default or Event of Default exists, and the Borrower delivers to the Administrative Agent a certificate of a Financial Officer to such effect and (ii) 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), either (x) the amount by which the Borrowing Base exceeds the Covered Debt Amount immediately prior to such sale, transfer or other disposition is not diminished as a result of such sale, transfer or other disposition or (y) the Borrowing Base immediately 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) is at least 115% 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 or Event of Default shall have occurred or be continuing;
(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 $10,000,000 in any fiscal year;
(h)    any Subsidiary of the Borrower may be liquidated or dissolved; provided that in connection with such liquidation or dissolution, any and all of the assets of such Subsidiary shall be distributed or otherwise transferred to the Borrower or any wholly owned Subsidiary Guarantor of the Borrower; and
(i)    an Obligor may transfer assets to a Financing Subsidiary for the sole purpose of facilitating the transfer of assets from one Financing Subsidiary (or a Subsidiary that was a Financing Subsidiary immediately prior to such disposition) to another Financing Subsidiary, directly or indirectly through such Obligor (such assets, the “Transferred Assets”), provided that (i) no Default exists or is continuing at such time, (ii) the Covered Debt Amount shall not exceed the Borrowing Base at such time and (iii) the Transferred Assets were transferred to such Obligor by the transferor Financing Subsidiary on the same Business Day that such assets are transferred by such Obligor to the transferee Financing Subsidiary.

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:




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(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 Borrower’s business for financial planning and not for speculative purposes;
(d)    Portfolio Investments (other than Restricted Investments) by the Borrower and its Subsidiaries to the extent such Portfolio Investments are permitted under the Investment Company Act (to the extent such applicable Person is subject to the Investment Company Act) and the Investment Policies; provided that no proceeds from any new Investment made in First Star Bermuda and/or First Star Ireland after the Original Effective Date may be used to make payments (directly or indirectly) on account of any obligations owed by First Star Bermuda and/or First Star Ireland to any Obligor;
(e)    Investments in (x) (or capital contribution to) Financing Subsidiaries to the extent expressly permitted by Section 6.03(e) or 6.03(i), and (y) Restricted Investments to the extent expressly permitted by Section 6.03(e);
(f)    Investments by any Financing Subsidiary or any Immaterial Subsidiary;
(g)    Investments in Cash and Cash Equivalents;
(h)    Investments described on Schedule 3.12(b) hereto;
(i)    Investments in Immaterial Subsidiaries; and
(j)    other Investments in an aggregate amount for all such Investments not to exceed $25,000,000 (for purposes of this clause (j), 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 (calculated at the time such Investment is made), minus (B) the aggregate amount of dividends, distributions or other payments received in cash in respect of capital or principal on account of such Investment (other than, for the avoidance of doubt, interest or on account of taxes), provided that in no event shall the aggregate amount of any Investment be less than zero, and provided further that the amount of any Investment shall not be reduced by reason of any write-off of such Investment, nor increased by way of 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 the Financing Subsidiaries) to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except that:
(a)    the Borrower may declare and pay dividends with respect to the capital stock of the Borrower payable solely in additional shares of the Borrower’s common stock;


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(b)    (1) the Borrower may declare and pay dividends and distributions in either case in cash or other property (excluding for this purpose the Borrower’s common stock) in or with respect to any taxable year of the Borrower (or any calendar year, as relevant) in amounts not to exceed 110% (tested as of September 30 of each year) of the higher of (x) the net investment income of the Borrower for the applicable fiscal year determined in accordance with GAAP and as specified in the annual financial statements most recently delivered pursuant to Section 5.1(a) and (y) the amount that is estimated by the Borrower in good faith to be required by the Borrower to be distributed to: (i) allow the Borrower to satisfy the minimum distribution requirements imposed by Section 852(a) of the Code (or any successor thereto) to maintain its eligibility to be taxed as a RIC for any such taxable year, (ii) reduce to zero for any such taxable year its liability for federal income taxes imposed on (y) its investment company taxable income pursuant to Section 852(b)(1) of the Code (or any successor thereto), or (z) its net capital gain pursuant to Section 852(b)(3) of the Code (or any successor thereto), and (iii) reduce to zero its liability for federal excise taxes for any such calendar year imposed pursuant to Section 4982 of the Code (or any successor thereto) (the “Tax Amount”) (such higher amount of (x) and (y) (and without, for the avoidance of doubt, taking into account the 110% multiplier), the “Required Payment Amount”), and (2) with respect to any other Restricted Payment, if at the time of any such Restricted Payment, (i) no Default or Event of Default shall have occurred and be continuing, and (ii) the Covered Debt Amount does not exceed 85% of the Borrowing Base calculated on a pro forma basis after giving effect to any such Restricted Payment), then in addition to any dividend or distribution in clause (1), the Borrower may make additional Restricted Payments (including dividends, other distributions and repurchases or redemptions of Equity Interests of the Borrower), so long as (x) the aggregate amount of all such Restricted Payments together with any dividends and distributions paid pursuant to clause (1) in any calendar year does not exceed an amount equal to 125% of the Required Payment Amount for such calendar year and (y) solely with respect to any repurchase or redemption of Equity Interests of the Borrower, prior to and immediately after giving effect to such Restricted Payment, the Asset Coverage Ratio shall not be less than 1.75 to 1.00;
(c)    the Subsidiaries of the Borrower may make Restricted Payments to the Borrower or to any Subsidiary Guarantor; and
(d)    the Obligors may make Restricted Payments to repurchase Equity Interests of the Borrower from officers, directors and employees of the Investment Advisor, the Borrower or any of its Subsidiaries or their respective authorized representatives upon the death, disability or termination of employment of such employees or termination of their seat on the Board of Directors of the Investment Advisor, the Borrower or any of its Subsidiaries, in an aggregate amount not to exceed $1,000,000 in any calendar year with unused amounts in any calendar year being carried over to succeeding calendar years subject to a maximum of $2,000,000 in any calendar year.
For the avoidance of doubt, the Borrower shall not declare any dividend to the extent such declaration violates the provisions of the Investment Company Act that are applicable to it.
SECTION 6.06.    Certain Restrictions on Subsidiaries. The Borrower will not permit any of its Subsidiaries to enter into or suffer to exist any indenture, agreement, instrument



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or other arrangement (other than the Loan Documents) that prohibits or restrains, in each case in any material respect, or imposes materially adverse conditions upon, (v) the incurrence or payment of Indebtedness, (w) the granting of Liens, (x) the declaration or payment of dividends, (y) the making of loans, advances, guarantees or Investments or (z) the sale, assignment, transfer or other disposition of property, in each case by the Borrower or any of its Subsidiaries (other than Financing Subsidiaries), except for any prohibitions or restraints contained in (i) any Indebtedness permitted under Section 6.01(b), (c), (l) or (m), (ii) any Indebtedness permitted under Section 6.01(h) or (i) 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 and (iii) any agreement, instrument or other arrangement pertaining to any sale or other disposition of any asset permitted by this Agreement so long as the applicable restrictions (A) only apply to such assets and (B) do not restrict prior to the consummation of such sale or disposition the creation or existence of the Liens in favor of the Collateral Agent pursuant to the Security Documents or otherwise required by this Agreement, or the incurrence or payment of Indebtedness under this Agreement or the ability of the Borrower and its Subsidiaries to perform any other obligation under any of the Loan Documents.

SECTION 6.07.    Certain Financial Covenants.
(a)    Minimum Stockholders’ Equity. After the Original Effective Date, the Borrower will not permit Stockholders’ Equity as of the last day of any fiscal quarter of the Borrower to be less than the greater of (i) 40% of the total assets of the Borrower and its Subsidiaries as at the last day of such fiscal quarter (determined on a consolidated basis, without duplication, in accordance with GAAP) and (ii) the sum of (x) $700,000,000sum of (x) $550,000,000, plus (y) 50% of the aggregate net proceeds of all sales of Equity Interests by the Borrower after the OriginalAmendment No. 2 Effective Date.
(b)    Asset Coverage Ratio. After the Original Effective Date, the Borrower will not permit the Asset Coverage Ratio to be less than the greater of (i) 1.50 to 1.00 and (b) the statutory test applicable to the Borrower at any time.
(c)    Consolidated Interest Coverage Ratio. On and after the Restatement Effective Date, the Borrower will not permit the Consolidated Interest Coverage Ratio to be less than (i) 2.00 to 1.00 as of the last day of each of the first four fiscal quarters of the Borrower after the Restatement Effective Date or (ii) 2.25 to 1.00 as of the last day of any fiscal quarter of the Borrower thereafter.
(d)    Liquidity Test. After the Original Effective Date, the Borrower will not permit the aggregate Value of the Eligible Portfolio Investments that can be converted to Cash in fewer than 20 Business Days without more than a 5% change in price to be less than 10% of the Covered Debt Amount for more than 30 Business Days during any period when the Adjusted Covered Debt Balance is greater than 90% of the Adjusted Borrowing Base.
(e)    Obligors’ Net Worth Test. On and after the Restatement Effective Date, the Borrower will not permit the Obligors’ Net Worth to be less than $600,000,000500,000,000.



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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 (or, in the case of a transaction between an Obligor and a non-Obligor Subsidiary, not less favorable to such Obligor) than could be obtained at the time on an arm’s-length basis from unrelated third parties, (b) transactions between or among the Obligors not involving any other Affiliate, (c) Restricted Payments permitted by Section 6.05, dispositions permitted by Section 6.03(e) and 6.03(i) and Investments permitted by Section 6.04(e), (d) the transactions provided in the Affiliate Agreements as the same may be amended in accordance with Section 6.11(b), (e) existing transactions with Affiliates as set forth in Schedule 6.08, (f) the payment of compensation and reimbursement of expenses of directors in a manner consistent with current practice of the Borrower and general market practice, and indemnification to directors in the ordinary course of business or (g) co-investments with other funds advised by Oaktree shall be permitted to the extent permitted by applicable law and/or SEC guidance (including exemptive relief from the SEC and/or a no-action letter).
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.
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 and the other Loan Documents and documents with respect to Indebtedness permitted under Sections 6.01(b)(ii) and 6.01(k); (b) covenants in documents creating Liens permitted by Section 6.02 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 Indebtedness and Affiliate Agreements. The Borrower will not, and will not permit any of its Subsidiaries to, 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, Unsecured Longer-Term Indebtedness or Unsecured Shorter-Term Indebtedness that would result in such Indebtedness not meeting the requirements of the definition of “Secured Longer-Term Indebtedness”, clause (B) of the definition of “Unsecured Longer-Term Indebtedness” or the definition of “Unsecured Shorter-Term Indebtedness”, as applicable, set forth in Section 1.01 of this Agreement, unless, in


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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);
(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 arm’s-length basis from unrelated third parties.
The Administrative Agent and the Lenders hereby acknowledge and agree that the Borrower may, at any time and from time to time, without the consent of the Administrative Agent, freely amend, restate, terminate, or otherwise modify any documents, instruments and agreements evidencing, securing or relating to Indebtedness permitted pursuant to Section 6.01(d), including increases in the principal amount thereof, modifications to the advance rates and/or modifications to the interest rate, fees or other pricing terms; provided that no such amendment, restatement or modification shall, for so long as the Borrower complies with the terms of Section 5.08(a)(i) hereof, cause a Financing Subsidiary to fail to be a “Financing Subsidiary” in accordance with the definition thereof.
SECTION 6.12.    Payments of Longer-Term Indebtedness. The Borrower will not, nor will it permit any of its 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 or involuntary 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 (i) to refinance any such Secured Longer-Term Indebtedness or Unsecured Longer-Term Indebtedness with Indebtedness permitted under Section 6.01(b)(ii) and (c), (ii) with the proceeds of any issuance of Equity Interests (in each case with respect to clauses (i) and (ii) of this Section 6.12 to the extent not required to be used to repay Loans), or (iii) the 2019 Notes and the 2024 Notes, which are addressed in Section 6.13 below), except (a) for regularly scheduled payments of interest in respect thereof required pursuant to the instruments evidencing such Indebtedness and the payment when due of the types of fees and expenses that are customarily paid in connection with such Indebtedness (it being understood that (w) the conversion features into Permitted Equity Interests under convertible notes, (x) the triggering of such conversion and/or settlement thereof solely with Permitted Equity Interests, and (y) any cash payment on account of interest or expenses on such convertible notes made by the Borrower in respect of such triggering and/or settlement thereof, shall be permitted under this clause (a)) or (b) for payments and prepayments of Secured Longer-Term Indebtedness required to comply with requirements of Section 2.09(b).
SECTION 6.13.    Payments of the 2019 Notes and the 2024 Notes. Except for regularly scheduled payments of interest required pursuant to the 2019 Notes and the 2024 Notes and the payment when due of the fees and expenses that are required to be paid in connection with the 2019 Notes and the 2024 Notes, the Borrower will not 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 or involuntary payment or prepayment of the principal of or interest on, or any other amount owing


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in respect of, the 2019 Notes or the 2024 Notes other than (i) to refinance the 2019 Notes or the 2024 Notes in full or in part with Indebtedness permitted under Section 6.01(b)(ii) and (c), (ii) to prepay the 2019 Notes or the 2024 Notes in full or in part with the proceeds of any issuance of Equity Interests, or (iii) to pay or prepay the 2019 Notes or the 2024 Notes in full or in part using Cash and/or the proceeds of Loans (including in combination with, as applicable, proceeds permitted pursuant to the immediately preceding clauses (i) or (ii))); provided, that in the case of any such refinancing or prepayment (1) no Default or Event of Default shall have occurred and be continuing and (2) immediately after giving effect to such refinancing or prepayment pursuant to clause (iii) of this Section 6.13, the Covered Debt Amount does not exceed 90% of the Borrowing Base calculated on a pro forma basis after giving effect to any such refinancing or prepayment.
SECTION 6.14.    Modification of Investment Policies. Other than with respect to Permitted Policy Amendments, the Borrower will not amend, supplement, waive or otherwise modify in any material respect the Investment Policies as in effect on the Original Effective Date.
SECTION 6.15.    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.

SECTION 6.16.    Derivative Transactions. The Borrower will not, nor will it permit any of its Subsidiaries (other than a Financing Subsidiary) to, enter into any swap or derivative transactions (including total return swaps) or other similar transactions or agreements, except for Hedging Agreements to the extent permitted pursuant to Section 6.01(h) and Section 6.04(c).
Article VII    
EVENTS OF DEFAULT
SECTION 7.01.    Events of Default. If any of the following events (“Events of Default”) shall occur and be continuing:
(a)    (i) the Borrower shall fail to pay any principal of any Loan (including, without limitation, any principal payable under Section 2.09(b) or (c)) 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 Cash Collateralize any LC Exposure as and when required by Section 2.04(k);
(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 (5) 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


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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 (except that such materiality qualifier shall not be applicable to any representation or warranty already qualified by materiality or Material Adverse Effect);
(d)    the Borrower shall fail to observe or perform any covenant, condition or agreement contained in (i) Section 5.01(e), Section 5.03 (with respect to the Borrower’s and its Subsidiaries’ existence only, and not with respect to the Borrower’s and its Subsidiaries’ rights, licenses, permits, privileges or franchises), Sections 5.08(a) or (b), Section 5.10, Section 5.12(c) or 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) Section 5.01(f), Sections 5.02 or Section 5.09 and, in the case of this clause (ii), such failure shall continue unremedied for a period of five (5) or more days after the earlier of (A) notice thereof by the Administrative Agent (given at the request of any Lender) to the Borrower and (B) a Financial Officer of the Borrower’s actual knowledge of such failure;
(e)    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) or (d) of this Article) or any other Loan Document and such failure shall continue unremedied for a period of thirty (30) or more days after the earlier of (A) notice thereof by the Administrative Agent (given at the request of any Lender) to the Borrower and (B) a Financial Officer of the Borrower’s actual knowledge of such failure;
(f)    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 (other than with respect to payments of principal) any applicable grace period;
(g)    any event or condition occurs that (i) results in all or any portion of any Material Indebtedness becoming due prior to its scheduled maturity or (ii) that enables or permits (after giving effect to any applicable grace periods) 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, unless, in the case of this clause (ii), such event or condition is no longer continuing or has been waived in accordance with the terms of such Material Indebtedness such that the holder or holders thereof or any trustee or agent on its or their behalf are no longer enabled or permitted to cause such Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) 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 contingent mandatory conversion or redemption event provided such conversion or redemption is effectuated only in capital stock that is not Disqualified Equity Interests;



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(h)    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;
(i)    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 (h) 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 (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;
(j)    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;
(k)    there is rendered against the Borrower or any of its Subsidiaries (other than Immaterial Subsidiaries) or any combination thereof (i) one or more judgments or orders for the payment of money in an aggregate amount (as to all such judgments and orders) in excess of $20,000,000 (to the extent not covered by independent third-party insurance as to which the insurer has been notified of the potential claim and does not dispute coverage) or (ii) any one or more non-monetary judgments that, individually or in the aggregate, has resulted in or could reasonably be expected to result in a Material Adverse Effect and, in either case, (1) enforcement proceedings, actions or collection efforts are commenced by any creditor upon such judgment or order, or (2) there is a period of thirty (30) consecutive days during which such judgment is undischarged or a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect;
(l)    an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;
(m)    a Change in Control shall occur;
(n)    any SBIC Subsidiary shall become the subject of an enforcement action and be transferred into liquidation status by the SBA;



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(o)    the Liens created by the Security Documents shall, at any time with respect to Portfolio Investments held by Obligors having an aggregate Value in excess of 5% of the aggregate Value of all Portfolio Investments held by Obligors, 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 Collateral Agent (or any Obligor or any Affiliate of an Obligor shall so assert in writing), 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 certificates representing securities pledged under the Guarantee and Security Agreement;
(p)    except for expiration or termination 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 any Obligor, or there shall be any actual invalidity of any guaranty thereunder or any Obligor or any Affiliate of an Obligor shall so assert in writing;
(q)    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; or
(r)    the Investment Advisor shall cease to be the investment advisor of the Borrower;
then, and in every such event (other than an event described in clause (h),  (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 described in clause (h),  (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, the Issuing Bank 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 Cash Collateralize such LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to Cash Collateralize such LC Exposure shall become effective immediately, and such deposit shall become immediately due and payable,


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without demand or other notice of any kind, upon the occurrence of any Event of Default described in clause (h), (i) or (j) of this Article.
Article VIII    

THE ADMINISTRATIVE AGENT
SECTION 8.01.    Appointment.
(a)    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.
(b)    Appointment of the Collateral Agent. The Collateral Agent is hereby confirmed and reaffirmed as having been appointed as the collateral agent hereunder and under the other Loan Documents and in such capacity has been and is authorized to have all the rights and benefits hereunder and thereunder (including Section 9 of the Guarantee and Security Agreement), and 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. In addition to the rights, privileges and immunities in the Guarantee and Security Agreement, the Collateral Agent has been and shall be entitled to all rights, privileges, immunities, exculpations and indemnities of the Administrative Agent for such purpose and each reference to the Administrative Agent in this Article VIII shall be deemed to include the Collateral Agent.
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 (without having to account therefor to any other Lender) accept deposits from, lend money to, make investments in 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, and such Person and its Affiliates may accept fees and other consideration from the Borrower or any Subsidiary or other Affiliate thereof for services in connection with this Agreement or otherwise without having to account for the same to the other Lenders.

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 or Event of 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


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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 such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents) or in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and non-appealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative 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, (v) the creation, perfection or priority of any Lien purported to be created by the Loan Documents or the value or the sufficiency of any Collateral or (vi) 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. Notwithstanding anything to the contrary contained herein, in no event shall the Administrative Agent be liable or responsible in any way or manner for the failure to obtain or receive an IVP External Unquoted Value for any asset or for the failure to send any notice required under Section 5.12(b)(ii)(B)(x). The Administrative Agent shall not be responsible or have any liability for, or have any duty to ascertain, inquire into, monitor or enforce, compliance with the provisions hereof relating to Disqualified Lenders. Without limiting the generality of the foregoing, the Administrative Agent shall not (x) be obligated to ascertain, monitor or inquire as to whether any Lender or Participant or prospective Lender or Participant is a Disqualified Lender or (y) have any liability with respect to or arising out of any assignment or participation of Loans, or disclosure of confidential information, to any Disqualified Lender.
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 or on behalf of the proper Person or Persons, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel, 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


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Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent 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.
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 (provided that no such consent shall be required if an Event of Default has occurred and is continuing), to appoint a successor, which is not a Disqualified Lender. 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 Agent’s resignation shall nonetheless become effective except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the Issuing Bank under any of the Loan Documents, the retiring or removed Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed 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 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 Agent’s resignation hereunder, the provisions of this Article VIII 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.
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.

SECTION 8.08.    Modifications to Loan Documents. Except as otherwise provided in Section 9.02(b) or 9.02(c) 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


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or in the Security Documents) release all or substantially all 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 (x) a disposition of property permitted hereunder (which release described in this clause (x) shall be automatic and require no further action from any party) or (y) a disposition to which the Required Lenders have consented.

SECTION 8.09.    Certain ERISA Matters.
(a)    Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, each Joint Lead Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Obligor, that at least one of the following is and will be true:
(i)    such Lender is not using “plan assets” (within the meaning of 29 CFR §2510.3-101, as modified by Section 3(42) of ERISA) of one or more Benefit Plans in connection with the Loans, the Letters of Credit or the Commitments,
(ii)    the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement,
(iii)    (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement, or



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(iv)    such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.
(b)    In addition, unless subclause (i) in the immediately preceding clause (a) is true with respect to a Lender or such Lender has not provided another representation, warranty and covenant as provided in subclause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and each Joint Lead Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Obligor, that:
(i)    none of the Administrative Agent or any Joint Lead Arranger or any of their respective Affiliates is a fiduciary with respect to the assets of such Lender (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related to hereto or thereto),
(ii)    the Person making the investment decision on behalf of such Lender with respect to the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement is independent (within the meaning of 29 CFR § 2510.3-21) and is a bank, an insurance carrier, an investment adviser, a broker-dealer or other person that holds, or has under management or control, total assets of at least $50,000,000, in each case as described in 29 CFR § 2510.3-21(c)(1)(i)(A)-(E),
(iii)    the Person making the investment decision on behalf of such Lender with respect to the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement is capable of evaluating investment risks independently, both in general and with regard to particular transactions and investment strategies (including in respect of the Obligations),
(iv)    the Person making the investment decision on behalf of such Lender with respect to the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement is a fiduciary under ERISA or the Code, or both, with respect to the Loans, the Letters of Credit, the Commitments and this Agreement and is responsible for exercising independent judgment in evaluating the transactions hereunder, and
(v)    no fee or other compensation is being paid directly to the Administrative Agent or any Joint Lead Arranger or any their respective Affiliates for investment advice (as opposed to other services) in connection with the Loans, the Letters of Credit, the Commitments or this Agreement.
(c)    The Administrative Agent and each Joint Lead Arranger hereby informs the Lenders that each such Person is not undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity, in connection with the transactions contemplated hereby,



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and that such Person has a financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest or other payments with respect to the Loans, the Letters of Credit, the Commitments and this Agreement, (ii) may recognize a gain if it extended the Loans, the Letters of Credit or the Commitments for an amount less than the amount being paid for an interest in the Loans, the Letters of Credit or the Commitments by such Lender or (iii) may receive fees or other payments in connection with the transactions contemplated hereby, the Loan Documents or otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront fees, underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees, utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other early termination fees or fees similar to the foregoing.
SECTION 8.10.    Agents. None of the Syndication Agent, any Co-Documentation Agent or any Lead Arranger shall have obligations or duties whatsoever in such capacity under this Agreement or any other Loan Document and shall incur no liability hereunder or thereunder in such capacity, but all such persons shall have the benefit of the indemnities provided for hereunder.
SECTION 8.11.    Collateral Matters. (a) Except with respect to the exercise of setoff rights in accordance with Section 9.08 or with respect to a Secured Party’s right to file a proof of claim in an insolvency proceeding, no Secured Party shall have any right individually to realize upon any of the Collateral or to enforce any Guarantee of the Guaranteed Obligations (as defined in the Guarantee and Security Agreement), it being understood and agreed that all powers, rights and remedies under the Loan Documents may be exercised solely by the Administrative Agent and/or the Collateral Agent on behalf of the Secured Parties in accordance with the terms thereof.
(b)    In furtherance of the foregoing and not in limitation thereof, no arrangements in respect of any Hedging Agreement the obligations under which constitute Hedging Agreement Obligations, will create (or be deemed to create) in favor of any Secured Party that is a party thereto any rights in connection with the management or release of any Collateral or of the obligations of any Obligor under any Loan Document. By accepting the benefits of the Collateral, each Secured Party that is a party to any such arrangement in respect of Hedging Agreements shall be deemed to have appointed the Administrative Agent and Collateral Agent to serve as administrative agent and collateral agent, respectively, under the Loan Documents and agreed to be bound by the Loan Documents as a Secured Party thereunder, subject to the limitations set forth in this paragraph.
(c)    Neither the Administrative Agent nor the Collateral Agent shall be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent’s or the Collateral Agent’s Lien thereon or any certificate prepared by any Obligor in connection therewith, nor shall the Administrative Agent or the Collateral Agent be responsible or liable to the Lenders or any other Secured Party for any failure to monitor or maintain any portion of the Collateral.




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SECTION 8.12.    Credit Bidding. The Secured Parties hereby irrevocably authorize the Collateral Agent, at the direction of the Required Lenders, to credit bid all or any portion of the Secured Obligations (including by accepting some or all of the Collateral in satisfaction of some or all of the Secured Obligations pursuant to a deed in lieu of foreclosure or otherwise) and in such manner purchase (either directly or through one or more acquisition vehicles) all or any portion of the Collateral (a) at any sale thereof conducted under the provisions of the Bankruptcy Code, including under Sections 363, 1123 or 1129 of the Bankruptcy Code, or any similar laws in any other jurisdictions to which an Obligor is subject, or (b) at any other sale, foreclosure or acceptance of collateral in lieu of debt conducted by (or with the consent or at the direction of) the Collateral Agent (whether by judicial action or otherwise) in accordance with any applicable law. In connection with any such credit bid and purchase, the Secured Obligations owed to the Secured Parties shall be entitled to be, and shall be, credit bid by the Collateral Agent at the direction of the Required Lenders on a ratable basis (with Secured Obligations with respect to contingent or unliquidated claims receiving contingent interests in the acquired assets on a ratable basis that shall vest upon the liquidation of such claims in an amount proportional to the liquidated portion of the contingent claim amount used in allocating the contingent interests) for the asset or assets so purchased (or for the equity interests or debt instruments of the acquisition vehicle or vehicles that are issued in connection with such purchase). In connection with any such bid, (i) the Collateral Agent shall be authorized to form one or more acquisition vehicles and to assign any successful credit bid to such acquisition vehicle or vehicles, (ii) each of the Secured Parties’ ratable interests in the Secured Obligations which were credit bid shall be deemed without any further action under this Agreement to be assigned to such vehicle or vehicles for the purpose of closing such sale, (iii) the Collateral Agent shall be authorized to adopt documents providing for the governance of the acquisition vehicle or vehicles (provided that any actions by the Collateral Agent with respect to such acquisition vehicle or vehicles, including any disposition of the assets or equity interests thereof, shall be governed, directly or indirectly, by, and the governing documents shall provide for, control by the vote of the Required Lenders or their permitted assignees under the terms of this Agreement or the governing documents of the applicable acquisition vehicle or vehicles, as the case may be, irrespective of the termination of this Agreement and without giving effect to the limitations on actions by the Required Lenders contained in Section 9.02 of this Agreement), (iv) the Collateral Agent on behalf of such acquisition vehicle or vehicles shall be authorized to issue to each of the Secured Parties, ratably on account of the relevant Secured Obligations which were credit bid, interests, whether as equity, partnership, limited partnership interests or membership interests, in any such acquisition vehicle and/or debt instruments issued by such acquisition vehicle, all without the need for any Secured Party or acquisition vehicle to take any further action, and (v) to the extent that Secured Obligations that are assigned to an acquisition vehicle are not used to acquire Collateral for any reason (as a result of another bid being higher or better, because the amount of Secured Obligations assigned to the acquisition vehicle exceeds the amount of Secured Obligations credit bid by the acquisition vehicle or otherwise), such Secured Obligations shall automatically be reassigned to the Secured Parties pro rata with their original interest in such Secured Obligations and the equity interests and/or debt instruments issued by any acquisition vehicle on account of such Secured Obligations shall automatically be cancelled, without the need for any Secured Party or any acquisition vehicle to take any further action. Notwithstanding that the ratable portion of the Secured Obligations of each Secured Party are deemed assigned to the acquisition vehicle or vehicles as set forth in clause (ii) above, each


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Secured Party shall execute such documents and provide such information regarding the Secured Party (and/or any designee of the Secured Party which will receive interests in or debt instruments issued by such acquisition vehicle) as the Collateral Agent may reasonably request in connection with the formation of any acquisition vehicle, the formulation or submission of any credit bid or the consummation of the transactions contemplated by such credit bid.
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 or to the extent permitted by Section 9.01(b) or otherwise herein, e-mail, as follows:
(i)    if to the Borrower, to it at:
Oaktree Specialty Lending Corporation
333 South Grand Ave., 28th Floor
Los Angeles, CA 90071
Attention: Mathew M. Pendo
Telephone: (213) 830-6740
Facsimile: (213) 356-3357
E-Mail: mpendo@oaktreecapital.com

with a copy to (which shall not constitute notice):

Latham & Watkins LLP
355 South Grand Avenue, Suite 100
Los Angeles, CA 90071
Attention: Douglas H. Burnaford
Telephone: (213) 891-8259
Facsimile: (213) 891-8763
E-Mail: douglas.burnaford@lw.com

(ii)    if to the Administrative Agent or the Issuing Bank, to it at:
ING Capital LLC
1133 Avenue of the Americas
New York, New York 10036
Attention:  Patrick Frisch
Telephone: (646) 424-6912
Facsimile: (646) 424-6919



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E-Mail: patrick.frisch@ing.com

with a copy, which shall not constitute notice, to:
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Attention: Jay R. Alicandri, Esq.
Telephone: (212) 698-3800
Facsimile: (212) 698-3599
E-Mail: jay.alicandri@dechert.com

(iii)    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, telecopy number or e-mail address 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 2.03 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.
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s 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, 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.
(c)    Posting of Communications.



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(i)    For so long as a Debtdomain™ 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 Section 5.01 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 Debtdomain™ or such equivalent website; provided that the Administrative Agent shall have no responsibility to maintain access to Debtdomain™ or an equivalent website.
(ii)    The Obligors agree that the Administrative Agent may, but shall not be obligated to, make any Communications available to the Lenders by posting the Communications on IntraLinks™, Debtdomain™, SyndTrak, ClearPar or any other electronic platform chosen by the Administrative Agent to be its electronic transmission system (the “Approved Electronic Platform”).
(iii)    Although the Approved Electronic Platform and its primary web portal are secured with generally-applicable security procedures and policies implemented or modified by the Administrative Agent from time to time (including, as of the Restatement Effective Date, a user ID/password authorization system) and the Approved Electronic Platform is secured through a per-deal authorization method whereby each user may access the Approved Electronic Platform only on a deal-by-deal basis, each of the Lenders and each of the Obligors acknowledges and agrees that the distribution of material through an electronic medium is not necessarily secure, that the Administrative Agent is not responsible for approving or vetting the representatives or contacts of any Lender that are added to the Approved Electronic Platform, and that there are confidentiality and other risks associated with such distribution. Each of the Lenders and each Obligor hereby approves distribution of the Communications through the Approved Electronic Platform and understands and assumes the risks of such distribution.
(iv)    THE APPROVED ELECTRONIC PLATFORM AND THE COMMUNICATIONS ARE PROVIDED “AS IS” AND “AS AVAILABLE”. THE APPLICABLE PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE APPROVED ELECTRONIC PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE APPROVED ELECTRONIC PLATFORM AND THE COMMUNICATIONS. 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 APPLICABLE PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE APPROVED ELECTRONIC PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT, ANY LEAD ARRANGER, ANY CO-DOCUMENTATION AGENT, ANY SYNDICATION AGENT OR ANY OF THEIR RESPECTIVE RELATED PARTIES (COLLECTIVELY, “APPLICABLE PARTIES”) HAVE ANY LIABILITY TO ANY OBLIGOR, ANY LENDER OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT,


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CONTRACT OR OTHERWISE) ARISING OUT OF ANY OBLIGOR’S OR THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET OR THE APPROVED ELECTRONIC PLATFORM.
SECTION 9.02.    Waivers; Amendments.
(a)    No Deemed Waivers; Remedies Cumulative. No failure or delay by the Administrative Agent, the Issuing Bank 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 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 or issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default or Event of Default at the time.
(b)    Amendments to this Agreement. Except as set forth in the definition of Secured Longer-Term Indebtedness and Unsecured Longer-Term Indebtedness, 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, subject to Section 2.17(b), 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 directly 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 or other amounts payable to a Lender hereunder, or reduce the amount or waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender directly affected thereby,
(iv)    change Section 2.16(b), (c) or (d) (or other sections referred to therein to the extent relating to pro rata payments) in a manner that would alter the pro rata reduction of commitments, sharing of payments, or making of disbursements, required thereby without the written consent of each Lender directly affected thereby,



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(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, or
(vi)    permit the assignment or transfer by any Obligor of any of its rights or obligations under any Loan Document without the consent of each Lender;
provided further that (x) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Issuing Bank hereunder without the prior written consent of the Administrative Agent or the Issuing Bank, as the case may be, and (y) the consent of Lenders holding not less than two-thirds of the total Credit Exposures and unused Commitments will be required for (A) any change adverse to the Lenders affecting the provisions of this Agreement relating to the Borrowing Base (including the definitions used therein) and/or the valuation procedures set forth in Section 5.12, and (B) 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.

For purposes of this Section, the “scheduled date of payment” of any amount shall refer to the date of payment of such amount specified in this Agreement, and shall not refer to a date or other event specified for the mandatory or optional prepayment of such amount.

(c)    Amendments to Security Documents.  No Security Document nor any provision thereof may be waived, amended or modified, except to the extent otherwise expressly contemplated by the Guarantee and Security Agreement, and the Liens granted under the Guarantee and Security Agreement may not be spread to secure any additional obligations (including any increase in Loans hereunder, but excluding (i) any such increase pursuant to a Commitment Increase under Section 2.07(e) and (ii) any Secured Longer-Term Indebtedness permitted hereunder) except to the extent otherwise expressly contemplated by the Guarantee and Security Agreement and 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, subject to Section 2.17(b), (i) without the written consent of the holders of not less than two-thirds of the total Credit Exposures and unused Commitments, no such waiver, amendment or modification to the Guarantee and Security Agreement shall (A) release any Obligor representing more than 10% of the Stockholders’ Equity from its obligations under the Security Documents, (B) release any guarantor representing more than 10% of the Stockholders’ Equity under the Guarantee and Security Agreement from its guarantee obligations thereunder, or (C) amend the definition of “Collateral” under the Security Documents (except to add additional collateral) and (ii) without the written consent of each Lender, no such agreement shall (W) release all or substantially all of the Obligors from their respective obligations under the Security Documents, (X) release all or substantially all of the collateral security or otherwise terminate all or substantially all of the Liens under the Security Documents, (Y) release all or substantially all of the guarantors under the Guarantee and Security Agreement from their guarantee obligations thereunder, or (Z) 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


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all or substantially all of the collateral security provided thereby; except that no such consent described in clause (i) or (ii) above 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 (1) 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 or the required number or percentage of Lenders have consented (and such Lien shall be released automatically to the extent provided in Section 10.03(c) of the Guarantee and Security Agreement), or otherwise in accordance with Section 9.15 and (2) release from the Guarantee and Security Agreement any Subsidiary Guarantor (and any property of such Subsidiary Guarantor) that is designated as a Financing Subsidiary in accordance with this Agreement or which ceases to be consolidated on the Borrower’s financial statements and is no longer required to be a “Subsidiary Guarantor”, so long as in the case of this clause (2): (A) prior to and immediately after giving effect to any such release (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 no Default or Event of Default exists, and the Borrower delivers to the Administrative Agent a certificate of a Financial Officer to such effect and (B) after giving effect to such release (and any concurrent acquisitions of Portfolio Investments or payment of outstanding Loans or Other Covered Indebtedness), either (I) 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 (II) the Borrowing Base immediately after giving effect to such release is at least 115% of the Covered Debt Amount.
(d)    Replacement of Non-Consenting Lender. If, in connection with any proposed amendment, waiver or consent requiring (i) the consent of “each Lender” or “each Lender affected thereby,” or (ii) the consent of “two-thirds of the holders of the total Credit Exposures and unused Commitments”, the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but not obtained being referred to herein as a “Non-Consenting Lender”), then 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 2.18(b) so long as at the time of such replacement, each such replacement Lender consents to the proposed change, waiver, discharge or termination.
(e)    Ambiguity, Omission, Mistake or Typographical Error. Notwithstanding the foregoing, if the Administrative Agent and the Borrower acting together identify any ambiguity, omission, mistake, typographical error or other defect in any provision of this Agreement or any other Loan Document, then the Administrative Agent and the Borrower shall be permitted to amend, modify or supplement such provision to cure such ambiguity, omission, mistake, typographical error or other defect, and such amendment shall become effective without any further action or consent of any other party to this Agreement.
SECTION 9.03.    Expenses; Indemnity; Damage Waiver.
(a)    Costs and Expenses. The Borrower shall pay all reasonable and documented out-of-pocket fees, costs and expenses incurred (i)  by the Administrative Agent, the Collateral Agent and their Affiliates (including the reasonable fees, charges and disbursements of



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one outside counsel and of any necessary special and/or local counsel for the Administrative Agent and the Collateral Agent), in connection with the syndication of the credit facilities provided for herein, the preparation 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) including all costs and expenses of the Independent Valuation Provider, (ii)  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) by the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender, (including fees, charges and disbursements of counsel for the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender), in connection with the administration (other than internal overhead charges), enforcement or protection of its rights in connection with this Agreement 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)  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. Unless an Event of Default has occurred and is continuing, the Borrower shall not be responsible for the reimbursement of any fees, costs and expenses of the Independent Valuation Provider incurred pursuant to 5.12(b)(iii) in excess of $200,000 in the aggregate incurred for all such fees, costs and expenses in any 12-month period (the “IVP Supplemental Cap”).
(b)    Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, the Issuing Bank 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 and related expenses (other than Taxes or Other Taxes which shall only be indemnified by the Borrower to the extent provided in Section 2.15), including the reasonable and documented out-of-pocket fees, charges and disbursements of any counsel for any Indemnitee (other than the allocated costs of internal counsel), 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 (including any arrangement entered into with an Independent Valuation Provider), (ii) any 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 (including any investigation or inquiry) relating to any of the foregoing, whether based on contract, tort or any other theory and whether brought by the Borrower, any Indemnitee 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 (x) the willful misconduct or gross negligence of such Indemnitee, (y) a material breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document or (z) a claim between any Indemnitee or Indemnitees, on the one hand, and any other Indemnitee or Indemnitees, on the other hand (other than (1) any dispute involving claims against the Administrative Agent or the Issuing Bank, in each case in their


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respective capacities as such, and (2) claims arising out of any act or omission by the Borrower and/or its Related Parties).
The Borrower shall not be liable to any Indemnitee for any special, indirect, consequential or punitive damages (as opposed to direct or actual damages (other than in respect of any such damages incurred or paid by an Indemnitee to a third party)) 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.
(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 or the Issuing Bank under paragraph (a) or (b) of this Section (and without limiting its obligation to do so) or to the extent that the fees, costs and expenses of the Independent Valuation Provider incurred pursuant to Section 5.12(b)(iii) exceed the IVP Supplemental Cap for any 12-month period (provided that prior to incurring expenses in excess of the IVP Supplemental Cap, the Administrative Agent shall have afforded the Lenders an opportunity to consult with the Administrative Agent regarding such expenses), each Lender severally agrees to pay to the Administrative Agent or the Issuing Bank, as the case may be, such Lender’s 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 or the Issuing Bank 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 unauthorized Persons 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.
(f)    No Fiduciary Relationship. 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 the Lender, on the



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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 arm’s-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) except as otherwise provided in any of the Loan Documents, 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 (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) and (y) each Lender is acting hereunder solely as principal and not as the agent or fiduciary of the Borrower or any of its Subsidiaries, their management or stockholders. The Borrower and each Obligor each acknowledge and agree that it has consulted 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 Obligor each agree that it will not claim that any Lender has rendered advisory services hereunder of any nature or respect, or owes a fiduciary duty to the Borrower or any of its Subsidiaries, in each case, in connection with such transactions contemplated hereby or the process leading thereto.
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 any of its rights or obligations hereunder except in accordance with this Section (and any attempted assignment or transfer by any Lender which is not in accordance with this Section shall be treated as provided in the last sentence of Section 9.04(b)(iii)). 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 all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans and LC Exposure at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld, conditioned or delayed) of:
(A)    the Borrower; provided that (i) no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, or, if a Default or




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an Event of Default has occurred and is continuing, any other assignee, and (ii) the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within five (5) Business Days after having received written notice thereof; and

(B)    the Administrative Agent and the Issuing Bank; provided that no consent of the Administrative Agent or the Issuing Bank shall be required for an assignment by a Lender to a Lender or an Affiliate of a Lender with prior written notice by such assigning Lender to the Administrative Agent and the Issuing Bank.

Notwithstanding anything to the contrary contained herein, Borrower’s consent shall be required with respect to an assignment to any Disqualified Lender. The Administrative Agent shall provide, and the Borrower hereby expressly authorizes the Administrative Agent to provide, the Disqualified Lender list to each Lender requesting the same.

(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 Lender’s Commitment or Loans and LC Exposure, the amount of the Commitment or Loans and LC Exposure 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 $1,000,000 unless each of the Borrower and the Administrative Agent otherwise consent; provided that no such consent of the Borrower shall be required if a Default or an Event of Default has occurred and is continuing;
(B)    each partial assignment of Commitments or Loans and LC Exposure shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement in respect of such Commitments and 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 $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 (except in the case of an assignment pursuant to Section 2.18(b)); and
(D)    the assignee, if it shall not already be a Lender, 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



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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 Assignment and Assumption covering all of the assigning Lender’s 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 2.13, 2.14, 2.15 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 (f) of this Section.
(c)    Maintenance of Registers by Administrative Agent. The Administrative Agent, acting solely for this purpose as a non-fiduciary 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 shall 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 assignee’s 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.
(e)    Special Purposes Vehicles. Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle other than a Disqualified Lender (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


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SPC shall be entitled to the benefits of Section 2.13 (or any other increased costs protection provision), 2.14 or 2.15. 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 (f) 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.
(f)    Participations. Any Lender may, with notice to the Borrower (which notice shall not be required to identify the name of any Participant or include any other information), sell participations to one or more banks or other entities other than a Disqualified Lender (a “Participant”) in all or a portion of such Lender’s 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) such Lender’s obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) 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 Lender’s 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


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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 2.13, 2.14 and 2.15 (subject to the requirements and limitations therein, including Sections 2.15(f) and (g) (it being understood that the documentation required under Sections 2.15(f) and (g) shall be delivered to the participating Lender)) 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 agrees to be subject to the provisions of Section 2.18 as if it were an assignee under paragraph (b) of this Section 9.04. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.18 with respect to any Participant. 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 2.16(d) as though it were a Lender hereunder. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary 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 Participant’s interest in the Loans or other obligations under the Loan Documents (each a “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 information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is 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 each 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 the Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(g)    Limitations on Rights of Participants. A Participant shall not be entitled to receive any greater payment under Section 2.13, 2.14 or 2.15 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 Borrower’s 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 2.15 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 (c) and (f) of Section 2.15 as though it were a Lender (it being understood that that the documentation required under Section 2.15(f) shall be delivered to the participating Lender).
(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, 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 or Participations to the Borrower or Affiliates or Certain Other Persons. Anything in this Section to the contrary notwithstanding, no Lender may


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(i) assign or participate any interest in any Commitment, 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, or (ii) assign any interest in any Commitment, Loan or LC Exposure held by it hereunder to a natural person (or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person) or to any Person known by such Lender at the time of such assignment to be a Defaulting Lender, a Subsidiary of a Defaulting Lender or a Person who, upon consummation of such assignment would be a Defaulting 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 Event of 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 2.13, 2.14, 2.15 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 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 contract. This Agreement, the other Loan Documents 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 or electronic mail 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


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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, the Issuing Bank and their respective 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, the Issuing Bank or any such Affiliate to or for the credit or the account of any Obligor against any of and all the obligations of any Obligor now or hereafter existing under this Agreement or any other Loan Document held by such Lender or Issuing Bank, irrespective of whether or not such Lender or Issuing Bank shall have made any demand under this Agreement and although such obligations may be contingent or unmatured, or are owed to a branch, office or Affiliate of such Lender or Issuing Bank different from the branch, office or Affiliate holding such deposit or obligated on such Indebtedness. The rights of each Lender, the Issuing Bank and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender, the Issuing Bank or Affiliate may have; provided that in the event that any Defaulting Lender exercises any such right of setoff, (a) all amounts so set off will be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.17 and, pending such payment, will be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the Issuing Bank and the Lenders and (b) the Defaulting Lender will provide promptly to the Administrative Agent a statement describing in reasonable detail the obligations owing to such Defaulting Lender as to which it exercised such right of setoff. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender; provided that the failure to give such notice shall not affect the validity of such set-off and application.
SECTION 9.09.    Governing Law; Jurisdiction; Etc.
(a)    Governing Law. This Agreement and each of the other Loan Documents (unless otherwise set forth therein) 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 exclusive 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 or any other Loan Document (unless otherwise set forth therein), 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


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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 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.

SECTION 9.11.    Judgment Currency. This is a loan transaction in which the specification of Dollars and payment in New York City is of the essence, and Dollars shall be the currency of account in all events relating to Loans. 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 Dollars and transfer to New York City under normal banking procedures does not yield the amount of Dollars in New York City due hereunder. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder into another currency (the “Other 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 Dollars with the Other 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


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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 Other Currency such Entitled Person may in accordance with normal banking procedures purchase and transfer Dollars to New York City with the amount of the Other 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 Dollars, the amount (if any) by which the sum originally due to such Entitled Person in Dollars hereunder exceeds the amount of Dollars 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; 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.
(b)    Confidentiality. Each of the Administrative Agent (including in its capacity as Collateral Agent), the Lenders and the Issuing Bank agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and consultants and to its and its Affiliates’ and consultants 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), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) 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, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, or (iii) any insurer, (g) with the consent of the Borrower, (h) on a confidential basis to (i) any rating agency in connection with rating the Borrower or its Subsidiaries or the Loans and (ii) the CUSIP Service Bureau or any similar


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agency in connection with the issuance and monitoring of CUSIP numbers with respect to the Loans, (i) 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 or (j) in connection with the Lenders’ right to grant a security interest pursuant to Section 9.04(h) to the Federal Reserve Bank or any other central bank, or subject to an agreement containing provisions substantially the same as those of this Section, to any other pledgee or assignee pursuant to Section 9.04(h).
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 (including any Portfolio Investments), 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 Original Effective Date, such information is clearly 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 each Obligor, which information includes the name and address of such Obligor and other information that will allow such Lender to identify such Obligor in accordance with said Act.

SECTION 9.15.    Termination. Promptly (and in any event within 3 Business Days) upon the Termination Date, the Administrative Agent shall direct the Collateral Agent to, on behalf of the Administrative Agent, the Collateral Agent and the Lenders, deliver to Borrower such termination statements and releases and other documents reasonably necessary or appropriate to evidence the termination of this Agreement, the Loan Documents, and each of the documents securing the obligations hereunder as the Borrower may reasonably request, all at the sole cost and expense of the Borrower.

SECTION 9.16.    Acknowledgment and Consent to Bail-In of EEAAffected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEAAffected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEAthe applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:



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(a)    the application of any Write-Down and Conversion Powers by an EEAthe applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEAAffected Financial Institution; and
(b)    the effects of any Bail-In Action on any such liability, including, if applicable:
(i)    a reduction in full or in part or cancellation of any such liability;
(ii)    a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEAAffected Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii)    the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEAthe applicable Resolution Authority.
SECTION 9.17.    Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to Borrower. In determining whether the interest contracted for, charged, or received by Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
SECTION 9.18.    Amendment and Restatement. On the Restatement Effective Date, the Existing Credit Agreement shall be amended and restated in its entirety by this Agreement, and the Existing Credit Agreement shall thereafter be of no further force and effect, except to evidence (i) the incurrence by the Borrower of the obligations under the Existing Credit Agreement (whether or not such obligations are contingent as of the Restatement Effective Date), (ii) the representations and warranties made by the Borrower prior to the Restatement Effective Date and (iii) any action or omission performed or required to be performed pursuant to such Existing Credit Agreement prior to the Restatement Effective Date (including any failure, prior to the Restatement Effective Date, to comply with the covenants contained in such Existing Credit Agreement). The amendments and restatements set forth herein shall not cure any breach thereof or any “Default” or “Event of Default” under and as defined in the Existing Credit Agreement prior to the Restatement Effective Date. It is the intention of each of the parties hereto that the Existing Credit Agreement be amended and restated hereunder so as to preserve the perfection and priority of all Liens securing the “Secured Obligations” under the Loan


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Documents and that all “Secured Obligations” of the Borrower and the Subsidiary Guarantors hereunder shall continue to be secured by Liens evidenced under the Security Documents, and that this Agreement does not constitute a novation or termination of the Indebtedness and obligations existing under the Existing Credit Agreement. The terms and conditions of this Agreement and the Administrative Agent’s and the Lenders’ rights and remedies under this Agreement and the other Loan Documents shall apply to all of the obligations incurred under the Existing Credit Agreement. This amendment and restatement is limited as written and is not a consent to any other amendment, restatement or waiver, whether or not similar and, unless specifically amended hereby or by any other Loan Document, each of the Loan Documents shall continue in full force and effect and, from and after the Restatement Effective Date, all references to the “Credit Agreement” contained therein shall be deemed to refer to this Agreement.
SECTION 9.19.    Acknowledgement Regarding any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Hedging Agreements or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
(a)    In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in


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no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
(b)    As used in this Section 9.19, the following terms have the following meanings:
(i)    “BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. § 1841(k)) of such party.
(ii)    “Covered Entity” means any of the following:
(A)    a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R.§ 252.82(b);
(B)    a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R.§ 47.3(b); or
(C)    a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R.§ 382.2(b).
(iii)    “Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, §§ 12 C.F.R.§ 252.81, 47.2 or 382.1, as applicable.
(iv)    “QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. § 5390(c)(8)(D).

[Remainder of Page Intentionally Left Blank]


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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 first above written.

OAKTREE SPECIALTY LENDING CORPORATION


By:
                    
Name:
Title:


    



[Signature Page to the Amended and Restated Revolving Credit Agreement]
26661682.226661682.11.BUSINESS
                


ING CAPITAL LLC, as Administrative Agent and an Increasing Lender


By:
                    
Name:
Title:

By:
                    
Name:
Title:


[Signature Page to the Amended and Restated Revolving Credit Agreement]
26661682.226661682.11.BUSINESS
                


JP MORGAN CHASE BANK, N.A., as an Increasing Lender


By:
                    
Name:
Title:


BANK OF AMERICA, N.A., as an Increasing Lender


By:
                    
Name:
Title:




ROYAL BANK OF CANADA, as an Existing Continuing Lender


By:
                    
Name:
Title:


CITY NATIONAL BANK, as a New Lender


By:
                    
Name:
Title:





KEYBANK N.A., as an Existing Continuing Lender


By:
                    
Name:
Title:



BARCLAYS BANK PLC, as an Increasing Lender


By:
                    
Name:
Title:


CITIBANK, N.A., as an Existing Continuing Lender


By:
                    
Name:
Title:

DEUTSCHE BANK AG NEW YORK BRANCH, as an Increasing Lender


By:
                    
Name:
Title:

GOLDMAN SACHS BANK USA, as an Increasing Lender


By:
                    
Name:
Title:

HSBC BANK USA, N.A., as an Existing Continuing Lender


By:
                    
Name:
Title:

MORGAN STANLEY BANK, N.A., as an Existing Continuing Lender


By:
                    
Name:
Title:

CIT BANK, N.A., as an Increasing Lender


By:
                    
Name:
Title:

LIBERTY BANK, as an Increasing Lender


By:
                    
Name:
Title:


STATE STREET BANK AND TRUST COMPANY, as a New Lender


By:
                    
Name:
Title:



TIAA, FSB, as a Departing Lender


By:
                    
Name:
Title:




[Signature Page to the Amended and Restated Revolving Credit Agreement]
26661682.226661682.11.BUSINESS


Exhibit 31.1

I, Armen Panossian, Chief Executive Officer of Oaktree Specialty Lending Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2020 of Oaktree Specialty Lending 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 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 registrant as of, and for, the periods presented in this report;
4. The registrant’s 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 registrant 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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(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 financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.


Dated this 6th day of May, 2020.

 
 
 
By:
 
/s/    Armen Panossian
 
 
Armen Panossian
Chief Executive Officer





Exhibit 31.2
I, Mel Carlisle, Chief Financial Officer of Oaktree Specialty Lending Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2020 of Oaktree Specialty Lending 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 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 registrant as of, and for, the periods presented in this report;
4. The registrant’s 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 registrant 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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(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 financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.


Dated this 6th day of May, 2020.
 
 
 
 
By:
 
/s/    Mel Carlisle
 
 
Mel Carlisle
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 the quarterly report on Form 10-Q for the quarter ended March 31, 2020 (the “Report”) of Oaktree Specialty Lending Corporation (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Armen Panossian, the 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/    Armen Panossian
Name:    Armen Panossian
 
Date: May 6, 2020





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 the quarterly report on Form 10-Q for the quarter ended March 31, 2020 (the “Report”) of Oaktree Specialty Lending Corporation (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Mel Carlisle, the 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/    Mel Carlisle
Name:    Mel Carlisle
 
Date: May 6, 2020