FS Investment Corporation IV 8-K [fsiciv-8k_021017.htm]

 

Exhibit 10.1

 

Execution copy

 

Committed Facility Agreement

 

BNP Paribas prime brokerage INTERNATIONAL, LTD. (“BNPP PB”) 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 Investment Corporation IV (“FSIC
IV”);

 

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

 

Whereas BNPP PB, 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 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 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)“Funding Event” means on any day, (the “Rating Decline Date of
Determination”) BNP Paribas’ long-term credit rating has declined to a level
three or more notches below its highest rating by any of Standard & Poor’s
Ratings Services, Moody’s Investor Service, Inc. or Fitch Ratings, Ltd. during
the period beginning on and including the Closing Date and ending on and
including the Rating Decline Date of Determination.

 

(g)“Maximum Commitment Financing” means USD $50,000,000.

 

(h)“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.

 

(i)“Net Asset Value Floor” means, with respect to FSIC IV, an amount equal to
the greater of (i) USD $92,500,000 or (ii) 50% of the Net Asset Value of FSIC
IV, calculated based on FSIC IV’s Net Asset Value as of its most recent fiscal
year end subsequent to the date hereof.

 

 

 

 

(j)“Notice Date” means the day on which BNPP PB delivers the Facility
Modification Notice.

 

(k)“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
will convert 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.

 

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

 

2.Borrowings -

 

Subject to the terms hereof, BNPP PB shall make available cash financing under
this Agreement 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. For the avoidance of doubt, any cash financing
in excess of the Maximum Commitment Financing shall not be subject to the
commitment in Section 6.

 

On the Closing Date, subject to the terms hereof, BNPP PB 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 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 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 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, 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.

 

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.

 

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6.Scope of Committed Facility -

 

Subject to Section 7, BNPP PB 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 Borrowings under this Agreement;

 

(c)modify the interest rate spread on Borrowings under this Agreement, 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.

 

Notwithstanding the foregoing or anything to the contrary herein, on or at any
time after the occurrence of a Funding Event, BNPP PB shall have the option to
terminate this Agreement immediately upon notice. Upon termination resulting
from the exercise of such option, BNPP PB shall pay to Customer a fee equal to
50 bps on the amount of Maximum Commitment Financing. BNPP PB shall provide
notice to Customer of any downgrade of BNP Paribas’ long-term credit rating by
any of Standard & Poor’s Ratings Services, Moody’s Investor Service, Inc. or
Fitch Ratings, Ltd.

 

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 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 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 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 copies of –

 

(a)the most recent annual report on Form 10-K of FSIC IV, 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 twenty (120) calendar
days after the end of each fiscal year of FSIC IV;

 

(b)the most recent quarterly report on Form 10-Q of FSIC IV, 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 FSIC IV and
the Net Asset Value of Customer and FSIC IV, 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 FSIC IV within one (1)
Business Day of written request therefor by BNPP PB.

 

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Notwithstanding anything to the contrary herein, to the extent that FSIC IV’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 FSIC IV’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 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
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 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 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 FSIC
IV 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 FSIC IV and (y) USD $10,000,000;

 

ii.there occurs any change in BNPP PB’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, has the effect with regard to BNPP PB 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); provided, however, that it shall not be a
Facility Termination Event if there occurs a change in, or change in BNPP PB’s
interpretation of, any Applicable Law that results in a cost increase to BNPP PB
(as determined in its sole discretion), rather than a prohibition (as determined
in BNPP PB’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 in its sole discretion);

 

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iii.(A) as of the final Business Day of each calendar month, the Net Asset Value
of Customer or FSIC IV has declined by thirty percent (30%) or more from the Net
Asset Value of Customer or FSIC IV (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 FSIC IV has declined by
forty percent (40%) or more from the Net Asset Value of Customer or FSIC IV (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 FSIC IV has declined by fifty percent (50%) or more from the Net
Asset Value of Customer or FSIC IV (as applicable) as of the final Business Day
of the preceding calendar year; provided, however, that for purposes of the
foregoing clauses (A), (B) and (C) in respect of the Customer only, any
prepayments of the Outstanding Debit Financing (whether voluntary or mandatory
and including any prepayments in connection with a reduction of the Maximum
Commitment Financing) will be disregarded and, in any such case, the Net Asset
Value of the Customer as of the beginning of the relevant period will be
adjusted to reflect such prepayment and any change in Net Asset Value during the
relevant period will be calculated using such adjusted beginning Net Asset Value
amount;

 

iv.the investment advisory and administrative services agreement between FSIC IV
and its investment adviser (the “Advisor”) is terminated or the Advisor
otherwise ceases to act as the investment adviser of FSIC IV; 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 in its good faith
discretion;

 

v.FSIC IV violates Section 61 of the 1940 Act;

 

vi.FSIC IV 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.FSIC IV 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 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 FSIC IV declines below the Net Asset Value Floor;

 

6 

 

 

iv.any representation or warranty made or deemed made by Customer to BNPP PB
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 FSIC IV 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 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, 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 who (x) have received margin loans from BNPP PB 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 may recall any outstanding cash loan under the 40 Act Financing
Agreements;

 

iii.BNPP PB 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.

 

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(b)This Agreement will not limit the ability of BNPP PB 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 who (x) have received margin loans
from BNPP PB 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, and (ii) if no such notice
has been received by BNPP PB 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.

 

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 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 March 1, 2017.

 

  BROOMALL FUNDING LLC         By: /s/ Gerald F. Stahlecker     Name:  Gerald F.
Stahlecker     Title:  Executive Vice President         bnp paribas prime
brokerage INTERNATIONAL, LTD.         By: /s/ JP Muir     Name: JP Muir    
Title:  Managing Director         By: /s/ Jeffrey Lowe     Name:  Jeffrey Lowe  
  Title:  Managing Director

 

9 

 

 

Execution copy

 

Appendix A – Collateral Requirements

 

THIS AppendiX A forms a part of the Committed Facility Agreement entered into
between BNP Paribas Prime Brokerage International, Ltd. (“BNPP PB”) and Broomall
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) 35% 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.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 in its sole
discretion;

 

ii.any short security position;

 

 

 

 

iii.any security offered through a private placement or any restricted
securities; provided that a 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);

 

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 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
non-convertible corporate debt securities and/or preferred securities
denominated in CAD exceeds 20% or more of the Portfolio Gross Market Value, any
non-convertible corporate debt securities and/or preferred securities
denominated in CAD in excess of such 20% (and BNPP PB 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 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;

 

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

 

xvi.to the extent that the Gross Market Value of Positions in any industry
sector (as defined by Bloomberg) exceeds 20% of the Portfolio Gross Market
Value, any Positions in excess of such 20% (and BNPP PB shall determine in its
sole discretion which specific securities shall be considered to be in excess of
such 20%).

 

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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 Debt Core 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 Rate
plus 10%, and (iii) if a Debt Security is a Payment-in-Kind Bond, its Collateral
Percentage shall be the Debt Core Rate plus 10%.

 

(a) Debt Core Rate.

 

(i)The “Debt Core Rate” with respect to an applicable Position in an Eligible
Security shall be (A) for Treasury Securities, 6%, and (B) for all other Debt
Securities, as determined pursuant to the following table using the lower of the
S&P or Moody’s rating as shown below; provided that (I) if there is only one
such rating, then the Debt Core Rate corresponding to such rating shall be used
and (II) if there is no such rating, then the Debt Core Rate shall be 30%.

 

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S& P’s Rating Moody’s Rating Debt Core Rate AAA to A- Aaa to A3 10% BBB+ to BBB-
Baa1 to Baa3 12% BB+ to BB- Ba1 to Ba3 15% B+ to B- / NR B1 to B3 20% CCC+ to
CCC- Caa1 to Caa3 / NR 30%

 

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 in its sole discretion.

 

6.One-off Collateral Requirements -

 

From time to time BNPP PB, in its sole discretion, may agree to a lower
Collateral Requirement than the Collateral Requirement determined pursuant to
this Appendix A for the portfolio or for one or more Positions or Eligible
Securities in the portfolio; 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 Requirement determined in accordance with this
Appendix A and BNPP PB shall have the right at any time to increase the
Collateral Requirement up to the Collateral Requirement that would be required
as determined in accordance with this Appendix A.

 

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
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).

 

(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 in its sole discretion), as
denominator.

 

(f)“Debt Security” means 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 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 in its sole discretion.

 

 4

 

 

(i)“Face Value” means the value in USD representing the principal of a Debt
Security.

 

(j)“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.

 

(k)“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.

 

(l)“Issuer Concentration Floor” means, as of any date, the product of (i) the
largest Issuer Loss and (ii) 2.4. Issuer Loss is the theoretical loss upon an
Issuer default with zero recovery.

 

(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.

 

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