Exhibit 10.1

 

EXECUTION VERSION

 

Committed Facility Agreement

 

 

BNP PARIBAS PRIME BROKERAGE, INC., ON BEHALF OF ITSELF AND AS AGENT FOR THE BNPP
ENTITIES (“BNPP PB, Inc.”) and the counterparty specified on the signature
page hereto (“Customer”), hereby enter into this Committed Facility Agreement
(this “Agreement”), dated as of the date specified on the signature page hereto.

 

Whereas Customer is a limited liability company duly formed and organized in
Delaware, and a wholly-owned subsidiary of FS Energy and Power Fund (“FSEP”);

 

Whereas BNPP PB, Inc. and Customer have entered into the U.S. PB Agreement,
dated as of the date hereof (the “U.S. PB Agreement”);

 

Whereas BNPP PB, Inc., Customer and State Street Bank and Trust Company
(“Custodian”) have entered into the Special Custody and Pledge Agreement, dated
on or about the date hereof (the “Special Custody Agreement” and, together with
this Agreement and the U.S. PB Agreement, the “40 Act Financing Agreements”);
and

 

Whereas this Agreement supplements and forms part of the other 40 Act Financing
Agreements and sets out the terms of the commitment of BNPP PB, Inc. to provide
financing to Customer under the 40 Act Financing Agreements.

 

Now, therefore, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties agree as follows:

 

1.                                     Definitions -

 

(a)       Capitalized terms not defined in this Agreement have the respective
meanings assigned to them in the U.S. PB Agreement.  The 40 Act Financing
Agreements are included in the term “Contract,” as defined in the U.S. PB
Agreement.

 

(b)        “Account Agreement” means the Account Agreement attached as Exhibit A
to the U.S. PB Agreement.

 

(c)         “Borrowing” means a draw of cash financing by Customer from BNPP
PB, Inc. pursuant to Section 2 of this Agreement.

 

(d)        “Closing Date” means the date specified on the signature page hereto.

 

(e)         “Collateral Requirements” means the collateral requirements set
forth in Appendix A attached hereto.

 

(f)           “Maximum Commitment Financing” means USD $200,000,000.

 

(g)        “Net Asset Value” with respect to any person or entity means such
person’s net asset value calculated in accordance with generally accepted
accounting principles in the United States.

 

(h)       “Net Asset Value Floor” means, with respect to FSEP, an amount equal
to the greater of (i) USD $684,000,000 or (ii) 50% of the Net Asset Value of
FSEP, calculated based on FSEP’s Net Asset Value as of its most recent fiscal
year end subsequent to the date hereof.

 

(i)           “Outstanding Debit Financing” means the aggregate cash borrowings
under the 40 Act Financing Agreements.  For the purposes of calculating such
aggregate cash borrowings, if Customer holds debit cash balances in non-USD
currencies, BNPP PB, Inc. will convert

 

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each of these balances into USD at prevailing market rates, such rates to be
disclosed to Customer upon request, to determine Customer’s aggregate cash
borrowings.

 

(j)             “1940 Act” means the Investment Company Act of 1940, as amended.

 

2.                                     Borrowings -

 

Subject to the terms hereof, BNPP PB, Inc. shall make available cash financing
under the 40 Act Financing Agreements in an amount up to the Maximum Commitment
Financing.  Such cash financing shall be made available in immediately available
funds. Customer may borrow under this Section 2, prepay pursuant to Section 4
and reborrow under this Section 2 without penalty.

 

On the Closing Date, subject to the terms hereof, BNPP PB, Inc. shall make funds
available to Customer in an amount up to the Maximum Commitment Financing.  Each
subsequent Borrowing (not to exceed, in the aggregate with each other
outstanding Borrowing, the Maximum Commitment Financing) shall be made on
written notice (the “Borrow Request”), given by Customer to BNPP PB, Inc. not
later than 11:00 a.m. (New York City time) on the Business Day immediately
preceding the date of the proposed Borrowing (which must be a Business Day). 
Subject to Section 7, BNPP PB, Inc. shall, before 11:00 a.m. (New York City
time) on the date of such Borrowing, make available to Customer the amount of
such Borrowing (provided that the Outstanding Debit Financing, taking into
account the amount specified in the Borrow Request, does not exceed the Maximum
Commitment Financing) payable to the account designated by Customer in such
Borrow Request.

 

3.                                     Repayment -

 

(a)        Upon the occurrence of a Facility Termination Event, an event
described in Section 15(a) hereof, or the date specified in the Facility
Modification Notice as described in Section 6, all Borrowings (including all
accrued and unpaid interest thereon and all other amounts owing or payable
hereunder) may be recalled by BNPP PB, Inc. in accordance with Section 1 of the
U.S. PB Agreement.

 

(b)       Upon the occurrence of a Default, the BNPP Entities shall have the
right to take any action described in Section 13(b) hereof.

 

4.                                     Prepayments -

 

Customer may, upon at least one Business Day’s notice to BNPP PB, Inc., stating
the proposed date and aggregate principal amount of the prepayment, prepay all
or any portion of the outstanding principal amount of the Outstanding Debit
Financing, together with accrued interest to the date of such prepayment on the
principal amount prepaid; provided that Customer shall continue to be obligated
to pay the Commitment Fee as set forth in Appendix B.

 

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5.                                     Interest -

 

Customer shall pay interest on the outstanding principal amount of each
Borrowing from the date of such Borrowing until such principal amount has been
paid in full, at the rates specified in Appendix B attached hereto.  Such
interest shall be payable monthly, and if not paid when due, any unpaid interest
shall be capitalized on the principal balance as additional cash borrowing by
Customer and, for the avoidance of doubt, failure to pay such capitalized
interest shall not constitute a Facility Termination Event.

 

6.                                     Scope of Committed Facility -

 

Subject to Section 7, BNPP PB, Inc. may not take any of the following actions
except upon at least 270 calendar days’ prior written notice to Customer (the
“Facility Modification Notice”):

 

(a)        modify the method for calculating the Collateral Requirements;

 

(b)       recall or cause repayment of any cash loan under the 40 Act Financing
Agreements;

 

(c)        modify the interest rate spread on cash loans under the 40 Act
Financing Agreements, as set forth in Appendix B attached hereto;

 

(d)       modify the fees, charges or expenses other than those described in
clause (b) above, as set forth in Appendix B attached hereto (the “Fees”); or

 

(e)        terminate this Agreement or any of the other 40 Act Financing
Agreements.

 

7.                                     Conditions for Committed Facility -

 

The commitment as set forth in Sections 2 and 6 only applies so long as –

 

(a)       Customer satisfies the Collateral Requirements (after giving effect to
any applicable notice requirement or grace period);

 

(b)      no Default or Facility Termination Event has occurred and is
continuing;

 

(c)       Customer is not bankrupt, insolvent, or subject to any bankruptcy,
reorganization, insolvency or similar proceeding; and

 

(d)      there has not occurred any termination of this Agreement (including,
without limitation, pursuant to Section 15).

 

8.                                     Arrangement and Commitment Fees -

 

(a)         Customer shall pay when due an Arrangement Fee as set forth in
Appendix B.

 

(b)        Customer shall pay when due a Commitment Fee as set forth in Appendix
B.

 

9.                                     Substitution -

 

(a)        After BNPP PB, Inc. sends a Facility Modification Notice, Customer
may not substitute any collateral, provided that Customer may, subject to the
Special Custody Agreement, purchase and sell portfolio securities in the
ordinary course of business consistent with its investment restrictions;
provided further that BNPP PB, Inc. may permit substitutions upon request, which
permission shall not be unreasonably withheld; provided further that for
substitutions of rehypothecated collateral, such collateral shall be returned
for substitution within a commercially reasonable period (in any event no sooner
than the standard settlement period applicable to such collateral).

 

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(b)      Prior to BNPP PB, Inc. sending a Facility Modification Notice, Customer
may, subject to the Special Custody Agreement, substitute collateral, provided
that for substitutions of rehypothecated collateral, such collateral shall be
returned for substitution within a reasonable period (in any event no sooner
than the standard settlement period applicable to such collateral).

 

10.                              Collateral Delivery -

 

If notice of a Collateral Requirement is sent to Customer: (i) on or before
11:00 a.m. on any Business Day, then Customer shall deliver all required
Collateral no later than the close of business on such Business Day, and
(ii) after 11:00 a.m. on any Business Day, then Customer shall deliver all
required Collateral no later than the close of business on the immediately
succeeding Business Day.

 

11.                              Representations and Warranties -

 

Customer hereby makes all the representations and warranties set forth in
Section 5 of the Account Agreement, which are deemed to refer to this Agreement,
and such representations and warranties shall survive each transaction and the
termination of the 40 Act Financing Agreements until such time as Customer has
satisfied all Obligations and no assets remain in any Accounts.

 

12.                              Financial Information –

 

Customer shall provide or cause to be provided to BNPP PB, Inc. copies of –

 

(a)     the most recent annual report on Form 10-K of FSEP, containing financial
statements certified by independent certified public accountants and prepared in
accordance with generally accepted accounting principles in the United States,
as soon as available and in any event within one hundred and twenty (120)
calendar days after the end of each fiscal year of FSEP;

 

(b)      the most recent quarterly report on Form 10-Q of FSEP, containing
financial statements prepared in accordance with generally accepted accounting
principles in the United States, as soon as available and in any event within
sixty (60) calendar days after the end of each quarter;

 

(c)        a monthly statement of the leverage and asset coverage ratios of FSEP
and the Net Asset Value of Customer and FSEP, respectively, as of the last day
of each calendar month as soon as available and in any event within fifteen (15)
calendar days after the end of each calendar month delivered to
rcm_regulated_funds@us.bnpparibas.com; and

 

(d)       the estimated Net Asset Value statement of Customer or FSEP within one
(1) Business Day of written request therefor by BNPP PB, Inc.

 

Notwithstanding anything to the contrary herein, to the extent that FSEP’s Net
Asset Value, most recent annual report on Form 10-K or most recent quarterly
report on Form 10-Q (the “Reports”) is publicly available on either FSEP’s
website or filed with the U.S. Securities and Exchange Commission (the “SEC”)
and publicly available at http://www.sec.gov, such Report shall be deemed to
have been provided to BNPP PB, Inc. in satisfaction of the requirements of this
Section 12 without any further action by Customer.

 

13.                              Termination -

 

(a)        Upon the occurrence and continuation of a Facility Termination Event,
BNPP PB, Inc. shall have the right to terminate this Agreement, accelerate the
maturity of any and all Borrowings to be immediately due and payable, modify the
method for calculating the Collateral Requirements, and modify any interest rate
spread, fees, charges, or

 

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expenses, in each case, in accordance with the timeframes specified in the U.S.
PB Agreement; provided that, if there occurs a Facility Termination Event under
Section 13(c)(ii) and BNPP PB, Inc. exercises its right to terminate this
Agreement as a result thereof or if this Agreement is terminated by Customer or
any BNPP Entity pursuant to Section 15, Customer shall not be obligated to pay
the Commitment Fee as set forth in Appendix B following such termination.

 

(b)      Upon the occurrence of a Default, if such Default is at that time
continuing, the BNPP Entities may terminate any of the 40 Act Financing
Agreements and/or take Default Action or any other action provided for under the
40 Act Financing Agreements.

 

(c)       Each of the following events constitutes a “Facility Termination
Event”:

 

i.                the occurrence of a repudiation, misrepresentation, material
breach or the occurrence of a default, termination event or similar condition
(howsoever characterized, which, for the avoidance of doubt, includes the
occurrence of an Additional Termination Event under an ISDA Master Agreement) by
Customer or FSEP under any contract or agreement with a third party, where the
aggregate principal amount of any such contract or agreement (which, for the
avoidance of doubt, includes any obligations with respect to borrowed money or
other assets in connection with such contract or agreement) is not less than the
lesser of (x) 3% of the Net Asset Value of FSEP and (y) USD $10,000,000;

 

ii.              there occurs any change in BNPP PB, Inc.’s interpretation of
any Applicable Law or the adoption of or any change in the same (including, for
the avoidance of doubt, any new or amended rules, requests, guidelines and
directives promulgated in connection with current Applicable Law, including the
Dodd-Frank Wall Street Reform and Consumer Protection Act) that, in the
reasonable opinion of counsel to BNPP PB, Inc., has the effect with regard to
BNPP PB, Inc. of impeding or prohibiting the arrangements under the 40 Act
Financing Agreements (including, but not limited to, imposing or adversely
modifying or affecting the amount of regulatory capital to be maintained by BNPP
PB, Inc.); provided, however, that it shall not be a Facility Termination Event
if there occurs a change in, or change in BNPP PB, Inc.’s interpretation of, any
Applicable Law that results in a cost increase to BNPP PB, Inc. (as determined
in its sole discretion), rather than a prohibition (as determined in BNPP
PB, Inc.’s sole discretion), and such cost increase is accepted by Customer (for
the avoidance of doubt, such cost increase may be implemented by adjusting the
fees and rates in Appendix B or in any other manner, as determined by BNPP
PB, Inc. in its sole discretion);

 

iii.           (A) as of the final Business Day of each calendar month, the Net
Asset Value of Customer or FSEP has declined by thirty percent (30%) or more
from the Net Asset Value of Customer or FSEP (as applicable) as of the final
Business Day of the preceding calendar month; (B) as of the final Business Day
of each calendar quarter, the Net Asset Value of Customer or FSEP has declined
by forty percent (40%) or more from the Net Asset Value of Customer or FSEP (as
applicable) as of the final Business Day of the preceding calendar quarter; or
(C) as of the final Business Day of each calendar year, the Net Asset Value of
Customer or FSEP has declined by fifty percent (50%) or more from the Net Asset
Value of Customer or FSEP (as applicable) as of the final Business Day of the
preceding calendar year; (for purposes of (A), (B) and (C), any decline in the
Net Asset Value shall not take into account any positive or negative change
caused by capital transfers, such as redemptions, withdrawals, subscriptions,
contributions or investments, howsoever characterized, and all amounts set forth
in redemption notices received by or on behalf of Customer or FSEP
(notwithstanding the date the actual redemption shall occur));

 

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iv.          the investment advisory and administrative services agreement
between FSEP and its investment adviser (the “Advisor”) is terminated or the
Advisor otherwise ceases to act as the investment adviser of FSEP; provided,
however, such termination or cessation shall not constitute a Facility
Termination Event if there is a replacement investment adviser appointed
immediately who is either (A) an affiliate of the Advisor or (B) acceptable to
BNPP PB, Inc. in its good faith discretion;

 

v.             FSEP violates Section 61 of the 1940 Act;

 

vi.          FSEP is not classified as a “closed-end company” as defined in
Section 5 of the 1940 Act;

 

vii.       Customer enters into any additional indebtedness with a party other
than a BNPP Entity or its affiliates beyond the financing provided hereunder
through the 1940 Act Financing Agreements, including without limitation any
further borrowings constituting ‘senior securities’ (as defined for purposes of
Section 18 of the 1940 Act) or any promissory note or other evidence of
indebtedness, whether with a bank or any other person;

 

viii.    FSEP changes its fundamental or material investment policies; or

 

ix.          Customer pledges to any other party, other than a BNPP Entity or
its affiliates, any securities owned or held by Customer.

 

(d)        Each of the following events constitutes a “Default” and shall be an
“Event of Default” for purposes of the Account Agreement:

 

i.                 Customer fails to meet the Collateral Requirements within the
time periods set forth in Section 10; provided that, it shall not be a Default
if (A) such failure is caused by an error or omission of an administrative or
operational nature, (B) funds were available for Customer to pay or post, as
applicable, when due, (C) Customer has provided written proof reasonably
satisfactory to BNPP PB, Inc. of (A) and (B), and (D) such posting is made by
within one (1) Business Day after such payment or posting was originally due;

 

ii.              Customer fails to deliver, or cause the delivery of, financial
information within the time periods set forth in Section 12 and such failure is
not remedied within (A) five (5) Business Days for a failure under Sections
12(a), 12(b) and 12(c), and (B) one (1) Business Day for a failure under
Section 12(d);

 

iii.           the Net Asset Value of FSEP declines below the Net Asset Value
Floor;

 

iv.          any representation or warranty made or deemed made by Customer to
BNPP PB, Inc. under any 40 Act Financing Agreement (including under Section 11
hereof) proves false or misleading when made or deemed made;

 

v.             Customer fails to comply with or perform any other agreement or
obligation under this Agreement or the other 40 Act Financing Agreements (other
than those agreements and obligations already covered by this Section 13, in
which case the relevant subsection shall govern);

 

vi.          Customer or FSEP becomes bankrupt, insolvent, or subject to any
bankruptcy, reorganization, insolvency or similar proceeding or all or
substantially all of its assets become subject to a suit, levy, enforcement, or
other legal process where a secured party maintains possession of such assets,
has a resolution passed for its winding-up, official management or liquidation
(other than pursuant to a consolidation, amalgamation or merger), seeks or
becomes subject to the appointment of an

 

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administrator, provisional liquidator, conservator, receiver, trustee, custodian
or other similar official for it or for all or substantially all of its assets,
has a secured party take possession of all or substantially all of its assets,
or takes any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the foregoing acts; or

 

vii.       the occurrence of a repudiation, misrepresentation, material breach
or the occurrence of a default, termination event or similar condition
(howsoever characterized, which, for the avoidance of doubt, includes the
occurrence of an Additional Termination Event under an ISDA Master Agreement)
by, or with respect to, Customer under any contract or agreement with a BNPP
Entity or affiliate of a BNPP Entity.

 

(e)         Upon 270 calendar days’ prior written notice to BNPP PB, Inc.,
Customer may terminate this Agreement.

 

14.                              Notices -

 

Notices under this Agreement shall be provided pursuant to Section 12(a) of the
Account Agreement.

 

15.                              Compliance with Applicable Law -

 

(a)         Notwithstanding any of the foregoing, if required by Applicable Law
(including, for the avoidance of doubt, any new or amended final and effective
rules, guidelines (to the extent such guidelines are applied generally to
customers of BNPP PB, Inc. who (x) have received margin loans from BNPP PB, Inc.
and (y) are wholly owned subsidiaries of an investment company registered under
the 1940 Act) and directives promulgated in connection with the Dodd-Frank Wall
Street Reform and Consumer Protection Act) –

 

i.                 the BNPP Entities may terminate any 40 Act Financing
Agreement and any Contract;

 

ii.              BNPP PB, Inc. may recall any outstanding cash loan under the 40
Act Financing Agreements;

 

iii.           BNPP PB, Inc. may modify the method for calculating the
Collateral Requirements; and

 

iv.          the BNPP Entities may take Default Action;

 

each action shall be taken solely to the extent required to comply with
Applicable Law.

 

(b)        This Agreement will not limit the ability of BNPP PB, Inc. to change
the product provided under this Agreement and the other 40 Act Financing
Agreements as necessary to comply with Applicable Law (including, for the
avoidance of doubt, any new or amended rules, requests, guidelines (to the
extent such guidelines are applied generally to customers of BNPP PB, Inc. who
(x) have received margin loans from BNPP PB, Inc. and (y) are wholly owned
subsidiaries of an investment company registered under the 1940 Act) and
directives promulgated in connection with the Dodd-Frank Wall Street Reform and
Consumer Protection Act); provided that (i) Customer may terminate this
Agreement within thirty days following any such change by the giving of written
notice to BNPP PB, Inc., and (ii) if no such notice has been received by BNPP
PB, Inc. by the end of such thirty-day period, then Customer’s termination
rights shall be as set forth in Section 13(e) hereof.

 

(c)         The BNPP Entities may exercise any remedies permitted under the
Contracts if Customer fails to comply with Applicable Law.

 

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16.                              Miscellaneous -

 

(a)         In the event of a conflict between any provision of this Agreement
and the other 40 Act Financing Agreements, this Agreement prevails.

 

(b)        This Agreement is governed by and construed in accordance with the
laws of the State of New York, without giving effect to the conflict of laws
doctrine other than Title 14 of Article 5 of New York General Obligations Law.

 

(c)         Section 16(c) of the Account Agreement is hereby incorporated by
reference in its entirety and shall be deemed to be a part of this Agreement to
the same extent as if such provisions had been set forth in full herein.

 

(d)        This Agreement may be executed in counterparts, each of which will be
deemed an original instrument and all of which together will constitute one and
the same agreement.

 

(e)         Notwithstanding anything to the contrary contained in the 40 Act
Financing Agreements, absent fraud and gross negligence, any amounts owed or
liabilities incurred by Customer in respect of any Obligations owed by Customer
under any Contract may be satisfied solely from the assets of Customer.  Without
limiting the generality of the foregoing, in no event shall BNPP PB, Inc. or the
BNPP Entities have recourse, whether by setoff or otherwise, with respect to any
amounts owed or liabilities incurred, to or against (i) any assets of any
persons or entity (including, without limitation, any person or entity whose
account is under the management of the investment manager of Customer) other
than Customer, (ii) any assets of any affiliate of Customer, or (iii) any assets
of the adviser or manager of Customer or any affiliate of such manager or
adviser.  Notwithstanding the foregoing, the BNPP Entities reserve all rights
against any party liable for the liabilities of Customer as provided under
Applicable Law.

 

(The remainder of this page is blank.)

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of December 11, 2013.

 

 

BERWYN FUNDING LLC

 

 

 

 

 

 

 

 

By:

/s/ Gerald F. Stahlecker

 

 

 

Name:

Gerald F. Stahlecker

 

 

 

Title:

Executive Vice President

 

 

 

 

 

 

 

 

BNP PARIBAS PRIME BROKERAGE, INC., ON BEHALF OF ITSELF AND AS AGENT FOR THE BNPP
ENTITIES

 

 

 

 

 

 

 

 

By:

  /s/ Jeffrey Lowe

 

 

 

Name:

Jeffrey Lowe

 

 

 

Title:

Managing Director

 

 

 

 

 

 

By:

/s/ Chris Innes

 

 

 

Name:

Chris Innes

 

 

 

Title:

Managing Director

 

 

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EXECUTION VERSION

 

 

Appendix A – Collateral Requirements

 

 

THIS APPENDIX A forms a part of the Committed Facility Agreement entered into
between BNP Paribas Prime Brokerage, Inc. (“BNPP PB, Inc.”) and Berwyn Funding
LLC (“Customer”) (the “Committed Facility Agreement”).

 

1.            Collateral Requirements  -

 

The Collateral Requirements in relation to all positions held in the accounts
established pursuant to the 40 Act Financing Agreements (the “Positions”)
consisting of Eligible Securities shall be the greatest of:

 

(a) the sum of the Position Charges of all Positions consisting of Eligible
Securities;

 

(b) the sum of the collateral requirements of such Positions as per Regulation T
or Regulation X, as applicable, of the Board of Governors of the Federal Reserve
System, as amended from time to time;

 

(c) the sum of the collateral requirements of such Positions as per Financial
Industry Regulatory Authority, Inc. Rule 4210, as amended from time to time, to
the extent applicable;

 

(d) 40% of the Portfolio Gross Market Value; and

 

(e) the Issuer Concentration Floor.

 

2.            Eligible Securities  -

 

(a)   Positions in the following eligible equity and fixed income security types
(“Eligible Securities”, which term shall exclude any securities described in
Section 2(b)) are covered under the Committed Facility Agreement:

 

i.      USD common stock traded on the New York Stock Exchange, NASDAQ, NYSE
Arca and NYSE Amex Equities;

 

ii.    convertible and non-convertible corporate debt securities or preferred
securities, provided that such securities are (A) issued by an issuer
incorporated in one of the following countries: USA, Canada, United Kingdom,
France, Germany, Switzerland, Austria, Spain, Italy, The Netherlands, Finland,
Belgium, Japan, Australia or Portugal and (B) denominated in USD, CAD or EUR;

 

iii.    Treasury Securities; or

 

iv.   non-USD common stock, provided such stock is (A) listed in the FTSE World
Index, (B) traded on a major exchange in one of the following countries: Canada,
United Kingdom, France, Germany, Switzerland, Austria, Spain, Italy, The
Netherlands, Finland, Belgium, Japan, Australia, Sweden or Portugal and
(C) denominated in one of the following currencies: CAD, GBP, EUR, JPY, CHF, AUD
or SEK.

 

(b)   Notwithstanding the foregoing, the following will not be part of the
collateral commitment and shall have no collateral value:

 

i.      any security type not covered above, as determined by BNPP PB, Inc. in
its sole discretion;

 

ii.     any short security position;

 

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iii.    any security offered through a private placement or any restricted
securities; provided that a convertible or non-convertible corporate debt
security that is eligible for resale pursuant to Rule 144A under the Securities
Act of 1933, as amended, shall not be deemed restricted for this purpose;

 

iv.   any security that is not maintained as a book-entry security on a major
depository, such as The Depository Trust Company, Euroclear or Clearstream;

 

v.   any securities that are municipal securities, asset-backed securities,
mortgage securities, Structured Securities or capital contingent convertible
bonds (notwithstanding the fact that such securities would otherwise be
covered);

 

vi.   any security where Customer or Customer’s Advisor (i) is an Affiliate of
the Issuer of the relevant equity securities or (ii) beneficially owns more than
9% of either (a) the voting interests of the Issuer or (b) any voting class of
equity securities of the Issuer (in each case, whether such positions are held
in accounts established pursuant to the 40 Act Financing Agreements or
otherwise). For the avoidance of doubt, for purposes of determining beneficial
ownership, any convertible debt of preferred debt shall be treated as converted;

 

vii.  to the extent that the Gross Market Value of non-USD-denominated Positions
exceeds 50% of the Portfolio Gross Market Value, any such securities in excess
of such 50% (and BNPP PB, Inc. shall determine in its sole discretion which
specific securities shall be considered to be in excess of 50%);

 

viii. to the extent that the Gross Market Value of the aggregate of convertible
and non-convertible corporate debt securities and/or preferred securities
denominated in CAD exceeds 20% or more of the Portfolio Gross Market Value, any
convertible and non-convertible corporate debt securities and/or preferred
securities denominated in CAD in excess of such 20% (and BNPP PB, Inc. shall
determine in its sole discretion which specific securities shall be considered
to be in excess of 20%);

 

ix.   any equity security of an Issuer with a market capitalization of less than
USD $300,000,000;

 

x.    any Debt Security which (i) trades below 40% of its nominal value or
(ii) is greater than 10% of the Issue Size;

 

xi.   any Debt Security whose outstanding issuance, calculated pursuant to its
face value, is less than USD $75,000,000;

 

xii.  to the extent that the Gross Market Value of any Debt Securities with an
outstanding issuance, calculated pursuant to its face value, between USD
$75,000,000 and USD $150,000,000 exceeds 10% of the Portfolio Gross Market
Value, any Debt Securities in excess of such 10% (and BNPP PB, Inc. shall
determine in its sole discretion which specific securities shall be considered
to be in excess of 10%);

 

xiii. any Positions with a long-term debt rating below CCC- by S&P or below Caa3
by Moody’s or that have defaulted (excluding, for the avoidance of doubt,
unrated securities);

 

xiv. any Positions with Days of Trading Volume equal to or greater than 4; and

 

xv.  any Positions with Equity Volatility equal to or greater than 100%.

 

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3.            Equity Securities Collateral Percentage  -

 

The Collateral Percentage for a Position consisting of applicable equity
securities that are Eligible Securities shall be:

 

i.      subject to paragraph (ii) below, the sum of (A) the Equity Core
Collateral Rate and (B) the product of (I) the Equity Core Collateral Rate and
(II) the sum of the Equity Liquidity Factor and the Equity Volatility Factor, or

 

ii.     100% if the product determined under paragraph (i) above is greater than
100%.

 

(a)   Equity Liquidity Factor.

 

The “Equity Liquidity Factor” shall be determined pursuant to the following
table.

 

Days of Trading Volume

Equity Liquidity Factor

Less than 2

0

2 to 4

1

 

(b)   Equity Volatility Factor.

 

The “Equity Volatility Factor” shall be determined pursuant to the following
table.

 

Equity Volatility

Equity Volatility Factor

Less than 35%

0

Equal to or greater than 35% and less than 50%

0.5

Equal to or greater than 50% and less than 75%

1

Equal to or greater than 75% and less than 100%

2

 

4.            Debt Securities Collateral Percentage -

 

The Collateral Percentage for a Position consisting of applicable Debt
Securities that are Eligible Securities shall be the Debt Core Collateral Rate;
provided that (i) the Collateral Percentage for any Debt Security which trades
below 40% of its nominal value shall be 100%, (ii) if a Debt Security’s
remaining maturity is greater than 10 years, its Collateral Percentage shall be
the Debt Core Collateral Rate plus 15%, and (iii) if a Debt Security is a
Payment-in-Kind Bond, its Collateral Percentage shall be the Debt Core
Collateral Rate plus 10%.

 

(a)   Debt Core Collateral Rate.

 

The “Debt Core Collateral Rate” shall be (i) for Treasury Securities, 20%, and
(ii) for all other Debt Securities, as determined pursuant to the following
table, based on the credit rating of the Issuer, using the lower of the S&P or
Moody’s long term debt rating as shown below; provided that (I) if there is only
one such rating, then the Debt Core Collateral Rate corresponding to such rating
shall be used, (II) if there is no such rating, then the Debt Core Collateral
Rate shall be 40%, and (III) to the extent the Gross Market Value of all
positions with a long term debt rating of CCC+ to CCC- by S&P or Caa1 to Caa3 by
Moody’s exceeds 30% of the Portfolio Gross Market Value, any Positions in excess
of such 30% shall have a Debt Core Collateral Rate of 60% (and BNPP PB, Inc.
shall determine in its sole discretion which specific securities shall be
considered to be in excess of such 30%).

 

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S& P’s Rating

Moody’s Rating

Debt Core Collateral Rate

AAA to A-

Aaa to A3

20%

BBB+ to BBB-

Baa1 to Baa3

20%

BB+ to BB-

Ba1 to Ba3

30%

B+ to B- / NR

B1 to B3 / NR

40%

CCC+ to CCC-

Caa1 to Caa3

50%

 

 

5.            Positions Outside the Scope of this Appendix A -

 

For the avoidance of doubt, the Collateral Requirements set forth herein are
limited to the types and sizes of securities specified herein.  The Collateral
Requirement for any Position or part of a Position not covered by the terms of
this Appendix A shall be determined by BNPP PB, Inc. in its sole discretion.

 

6.            One-off Collateral Requirements  -

 

From time to time BNPP PB, Inc., in its sole discretion, may agree to a
different Collateral Requirement than the Collateral Requirement determined
pursuant to this Appendix A for a particular Position; provided that, for the
avoidance of doubt, the commitment in Section 6(a) of the Committed Facility
Agreement shall apply only with respect to the Collateral Requirements based
upon the Collateral Percentage determined pursuant to Sections 3 and 4 hereof
and BNPP PB, Inc. shall have the right at any time to increase the Collateral
Requirement for such Position up to the Collateral Requirement that would be
required as determined in accordance to Sections 3 and 4 hereof.

 

7.            Certain Definitions  -

 

(a)   “Affiliate” means an affiliate as defined in Rule 144(a)(1) under the
Securities Act of 1933, as amended.

 

(b)   “Bloomberg” means the Bloomberg Professional service.

 

(c)   “Collateral Percentage” means the percentage as determined by BNPP
PB, Inc. according to this Appendix A.

 

(d)   “Current Market Value” means, with respect to a Position, an amount equal
to the product of (i) the number of units of the relevant security and (ii) the
price per unit of the relevant security (determined by BNPP PB, Inc.).

 

(e)   “Days of Trading Volume” means, with respect to an equity security, an
amount equal to the quotient of (i) the number of shares of such security
constituting the Position, as numerator, and (ii) the 90-day average daily
trading volume of such security as shown on Bloomberg (or, if the 90-day average
daily trading volume of such security is unavailable, the 30-day average daily
trading volume of such security, as determined by BNPP PB, Inc. in its sole
discretion), as denominator.

 

(f)    “Debt Security” means convertible and non-convertible preferred
securities and corporate debt securities.

 

(g)   “Equity Core Collateral Rate” means 15%.

 

(h)   “Equity Volatility” means, with respect to an equity security, the 90-day
historical volatility of such security as determined by BNPP PB, Inc. in its
sole discretion or, if the 90-day historical price volatility of such security
is unavailable, the 30-day historical price volatility of such security as
determined by BNPP PB, Inc. in its sole discretion.

 

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(i)    “Gross Market Value” of one or more Positions means an amount equal to
the sum of all Current Market Values of all such Positions, where, for the
avoidance of doubt, the Current Market Value of each Position is expressed as a
positive number whether or not such Position is held long.

 

(j)    “Issuer” means, with respect to a Debt Security or equity security, the
ultimate parent company or similar term as used by Bloomberg; provided that, if
the relevant security was issued by a company or a subsidiary of a company that
has issued common stock, the Issuer shall be deemed to be the entity that has
issued common stock; provided further that, with respect to any exchange-traded
funds, the Issuer of such securities shall be the index to which the relevant
securities relate, if any.

 

(k)   “Issuer Concentration Floor” means, as of any date, the product of (i) the
Gross Market Value of the Issuer Position with the largest Gross Market Value
and (ii) 3.

 

(l)    “Issuer Position” means all Positions consisting of Eligible Securities
issued by the same Issuer.

 

(m)  “Issue Size” means, with respect to a Position in a Debt Security of an
Issuer, the Current Market Value of all such Debt Securities issued by the
Issuer and still outstanding.

 

(n)   “Moody’s” means Moody’s Investor Service, Inc.

 

(o)   “Payment-in-Kind Bond” means a Debt Security whose interest or principal
payments may be paid with additional Debt Securities, as opposed to cash.

 

(p)   “Portfolio Gross Market Value” means the Gross Market Value of all of the
Positions that are Eligible Securities.

 

(q)   “Position Charge” means, with respect to a Position consisting of Eligible
Securities, the product of (x) the Collateral Percentage applicable to such
Position and (y) the Current Market Value of such Position.

 

(r)    “Structured Securities” means any security (i) the payment to a holder of
which is linked to a different security, provided that such different security
is issued by a different issuer or (ii) structured in such a manner that the
credit risk of acquiring the security is primarily related to an entity other
than the issuer of the security itself.

 

(s)   “S&P” means Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc.

 

(t)    “Treasury Security” means any security that is a direct obligation of the
United States Treasury.  For the avoidance of doubt, neither Treasury
Inflation-Protected Securities nor securities issued under the Separate Trading
of Registered Interest and Principal of Securities program nor securities issued
by any other United States government agency or government sponsored enterprise
are herein considered Treasury Securities.

 

5

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EXECUTION VERSION

 

Appendix B

 

Pricing

 

Berwyn Funding LLC

 

 

 

Financing Rate

 

Customer Debit Rate

 

3 Month LIBOR + 110 bps

 

ISO Code

 

USD

 

Arrangement Fee

 

Customer shall pay an arrangement fee (the “Arrangement Fee”) to BNPP PB, Inc.
equal to the product of the Maximum Commitment Financing and 15 bps and shall
pay such Arrangement Fee on the execution date of the Committed Facility
Agreement.

 

Commitment Fee

 

Customer shall pay a commitment fee (the “Commitment Fee”) to BNPP PB, Inc.
equal to sum of the Daily Commitment Fees over the relevant calculation period,
when the amount calculated under the Financing Rate above is due.  For purposes
of this section, the “Daily Commitment Fee” on each day shall be the product of
(a) the difference between (i) the Maximum Commitment Financing and (ii) the
current Outstanding Debit Financing, (b) 1/360 and (c) 55 bps.  Notwithstanding
the foregoing, in the event that the Committed Facility Agreement is terminated
by either party for any reason, including, without limitation, pursuant to
Section 13 or Section 15 thereof, Customer shall not be liable for payment of
the Commitment Fee for any date subsequent to the date of such termination.

 

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