UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of 1934
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Date
of Report (Date of earliest event reported)
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December
31, 2008
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Virtus
Investment Partners, Inc.
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(Exact
Name of Registrant as Specified in
Charter)
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Delaware
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1-10994
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95-4191764
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(State
or other jurisdiction
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(Commission
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(I.R.S.
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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100
Pearl St., 9th Floor, Hartford, CT
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06103
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code
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(800)
248-7971
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
o Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01 Entry into a Material Definitive Agreement.
The
information included in Item 2.03 of this Current Report on Form 8-K is
incorporated by reference into this item.
Item
2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
As
contemplated under Amendment No. 4 to the Registration Statement on Form 10 and
the related Information Statement, filed as Exhibit 99.1 thereto (the “Form 10 and Information
Statement”) filed with the Securities and Exchange Commission on December
19, 2008 by Virtus Investment Partners, Inc. (the “Company”), on
December 31, 2008, the Company spun-off from its former indirect parent, The
Phoenix Companies, Inc. (“Phoenix”).
As
disclosed in the Form 10 and Information Statement and in connection with the
spin-off, the Company sought to refinance the existing loan made by Phoenix Life
Insurance Company, a wholly-owned subsidiary of Phoenix (“Phoenix Life”) to
Virtus Partners, Inc. (f/k/a Phoenix
Investment Partners, Ltd.), a subsidiary of the Company (“Virtus Partners”),
pursuant to that certain Loan Agreement, dated as of December 30, 2005, by and
between Phoenix Life and Virtus Partners (the “Former Loan
Agreement”), and that certain Guaranty Agreement, dated as of December
30, 2005, by and between Phoenix and Virtus Partners (the “Former
Guaranty”). In connection with the refinancing, on December
31, 2008, the Company entered into a Loan Agreement by and between Phoenix Life,
as Lender and the Company, as Borrower (the “Loan Agreement”) and
a Guarantee and Collateral Agreement made by the Company and certain of its
subsidiaries in favor of Phoenix Life (the “Guarantee”). All
obligations of Virtus Partners under the Former Loan Agreement were repaid and
all obligations of Phoenix under the Former Guarantee were extinguished in
connection with the Company’s entry into the Loan Agreement and Guarantee. A
brief description of the material terms and conditions of the Loan Agreement and
Guarantee appears directly below.
The Loan and Note. The
Company’s indebtedness to Phoenix Life is evidenced by a senior note (the “Note”) in the
principal amount of $20 million (the “Loan”). Pursuant
to the Loan Agreement, the proceeds of the Loan were used to refinance the
amount outstanding under the Former Loan Agreement.
Principal Payments. On the
last day of each calendar quarter of the Company (the “Interest Payment
Dates”), the Company is obligated under the Loan Agreement to make a
payment of principal (together with accrued and unpaid interest) to Phoenix
Life. During fiscal 2009, the principal payment is equal to $1
million per Interest Payment Date and during fiscal 2010, the principal payment
is equal to $4 million per Interest Payment Date. On December 31, 2010 (the
“Maturity
Date”), the Company must make a final payment of any outstanding
principal amount (together with accrued and unpaid interest
therein).
Interest Rate and Interest
Payments. Under the Loan Agreement, following January 16, 2009, the
interest rate (the “Interest Rate”) on
the Loan’s outstanding principal will be 9.0% (prior to such time the applicable
interest rate will be 6.55%). The Company’s pro forma financial
presentation in the Form 10 and Information Statement assumed a renegotiated
interest rate on this indebtedness of LIBOR plus 400 basis
points. Interest on the outstanding principal of the Loan is
generally due and payable in arrears on each Interest Payment
Date. Following the Maturity Date, or during any periods of “Default”
or in the “Event of Default” (as such terms are defined below), the Loan will
bear interest at an annual rate equal to the Interest Rate plus 2% and such
interest would be due and payable on demand.
Optional and Mandatory
Prepayments. Pursuant to the terms of the Loan Agreement, the
Company may elect to prepay all or part of the Loan in a minimum amount of $2
million together with accrued interest to each such date on the amount
prepaid. In the event that the Company or any of its subsidiaries
issue any capital stock or incur any new indebtedness, 100% of the cash proceeds
received in connection with such issuance or incurrence (net of certain
customary fees and expenses) must be immediately applied toward the prepayment
of the Loan. Neither optional or mandatory prepayments made on the
Loan may be reborrowed.
Representations and Warranties/
Affirmative Covenants. The Loan Agreement contains customary
representations and warranties as well as customary affirmative covenants for
the benefit of Phoenix Life. In addition, the Company agreed under
the Loan Agreement to provide Phoenix Life with any new additional collateral
created after December 31, 2008, such as any property acquired or any new
subsidiary created or acquired following December 31, 2008.
Negative Covenants. The
Company also agreed under the Loan Agreement to maintain certain negative
covenants. Pursuant to such negative covenants, the Company and each
of its subsidiaries generally may not, among other things, (i) incur additional
indebtedness or create additional liens on any of its property; (ii) enter into
any merger, consolidation or similar transaction or dispose of all or
substantially all of its property or business; or (iii) declare or pay any
dividend, except in certain limited circumstances so long as no Default or Event
of Default exists (or would result therefrom) and such dividend would not exceed
100% of the prior fiscal quarter’s EBITDA, as adjusted by mutual agreement by
the Company and Phoenix Life.
Financial Covenants. Under
the Loan Agreement (and each as defined in such agreement), the Company must
maintain certain financial covenants, including (i) an adjusted “EBITDA to Total
Interest Expense Ratio” of not less than 4.00 to 1.00 for any period of four
consecutive fiscal quarters; (ii) an adjusted “EBITDA to Senior Interest Expense
Ratio” of not less than 3.50 to 1.00 for any period of four consecutive fiscal
quarters; (iii) “Net Worth” of at least $135,000,000 plus (y) 50.0% of net
income for each fiscal quarter (without deducting for any net losses) and (z)
75.0% of all future equity contributions; (iv) “Assets Under Management” of at
least $18,500,000; and (v) an adjusted “Senior Debt to EBITDA Ratio” of not more
than 2.50 to 1.00 for any period of four consecutive fiscal
quarters. For purposes of the Loan Agreement, adjusted “EBITDA”
means, as of the end of any fiscal quarter of the Company, net income of the
Company and its subsidiaries before interest expense, income taxes, depreciation
and amortization expenses, non-cash stock-based compensation, unrealized
mark-to-market gains and losses and other non-recurring, extraordinary items, in
each case as mutually agreed, for the four fiscal quarters then ending,
determined on a consolidated basis in accordance with GAAP, as reported in the
Company’s Form 10-Q and Form 10-K.
Default. Under the Loan
Agreement the occurrence of certain events will be considered a “Default” and
once notice and/or lapse of time requirements have been met, will be considered
“Events of Default.” If an Event of Default were to occur, all or any portion of
the Loan due or to become due, whether under the Loan Agreement, the Note or
otherwise, would, at the option of Phoenix Life, become due and payable together
with all accrued and unpaid interest thereon and the Company would be obligated
to pay such amounts to Phoenix Life. For purposes of the Loan
Agreement (and subject to applicable cure periods, if any), a Default generally
would be deemed to have occurred if, among other things, (i) the Company failed
to make a scheduled payment of the Loan’s principal or interest; (ii) any
representation or warranty made in connection with the Loan was inaccurate in
any material respect; (iii) the Company or any of its subsidiaries failed to
comply with the negative or financial covenants under the Loan Agreement, or
other provisions of the Loan Agreement, Guarantee or Note; (iv) the Company or
its subsidiaries defaulted under any other indebtedness in an amount exceeding
in the aggregate $1 million; (v) certain bankruptcy-related events occurred for
the Company or its subsidiaries; (vi) certain ERISA defaults or related defaults
occurred and were reasonably expected to result in a material adverse effect;
(vii) a judgment in the aggregate of $1 million or more was entered against the
Company or its subsidiaries and was not vacated, discharged, stayed or bonded
pending appeal; or (viii) the Guarantee ceased to be in full force and
effect.
Guarantee. Pursuant
to the Guarantee, each of the subsidiaries of the Company, jointly and
severally, unconditionally and irrevocably guaranteed the prompt and complete
payment and performance by the Company of all of the Company’s obligations under
the Loan Agreement and the other loan documents related thereto. In
connection therewith, each of the subsidiaries of the Company agreed to assign
and transfer to Phoenix Life, and grant to Phoenix Life, a security in, all of
the following property owned or at any time thereafter acquired by such
subsidiary or in which any such subsidiary has or at any time in the future may
acquire any right, title or interest (collectively, the “Collateral”), as
collateral security for the prompt and complete payment and performance when due
of such subsidiaries’ obligations: (i) all Accounts, (ii) all Chattel Paper,
(iii) all Deposit Accounts, (iv) all Documents (other than title documents with
respect to Vehicles), (v) all Equipment, (vi) all Fixtures, (vii) all General
Intangibles, (viii) all Instruments, (ix) all Intellectual Property, (x) all
Inventory, (xi) all Investment Property, (xii) all Letter-of-Credit Rights,
(xiii) all other property not otherwise described above, (xiv) all books and
records pertaining to the Collateral, and (xv) to the extent not otherwise
included, all Proceeds, Supporting Obligations and products of any and all of
the foregoing and all collateral security and guarantees given by any Person
with respect to any of the foregoing. The Guarantee contains
customary representations and warranties, covenants, and remedial provisions for
the benefit of Phoenix Life.
The Loan
Agreement and the Guarantee are attached as Exhibits 10.1 and 10.2 respectively,
to this Current Report on Form 8-K and are incorporated by reference into this
item. This description of the Loan Agreement and the Guarantee does not purport
to be complete and is qualified in its entirety by reference to such
exhibits.
Item
9.01 Financial Statements and Exhibits.
(d) Exhibits.
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10.1
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Loan
Agreement by and between Phoenix Life Insurance Company, as Lender and
Virtus Investment Partners, Inc., as Borrower dated December 31,
2008
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10.2
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Guarantee
and Collateral Agreement made by Virtus Investment Partners, Inc. and
certain of its Subsidiaries in favor of Phoenix Life Insurance Company, as
Lender dated as of December 31,
2008
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SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
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VIRTUS
INVESTMENT PARTNERS, INC.
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By:
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Name:
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Title:
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