Execution copy 10/8/13
SECOND AMENDED AND AGREEMENT RESTATED COMMITTED FACILITY
--------------------------------------------------------------------------------
BNP PARI BAS PRIME BROKERAGE INTERNATIONAL, L TO. ("PBL") and the counterparty
specified on the signature page ("CUSTOMER"), hereby enter into this Committed
Facility Agreement (this "AGREEMENT"), dated as of October 8, 2013.
Whereas PBL and Customer have entered into an Amended and Restated U.S . PB
Agreement, dated as of the date hereof (the "U.S. PB Agreement") (the U.S. PB
Agreement and this Agreement, collectively, the "40 ACT FINANCING AGREEMENTS").
Whereas PBL and Customer have previously entered into an Amended and Restated
Committed Facility Agreement dated as of July 24, 2013 (the "PRIOR AGREEMENT").
Whereas PBL and Customer hereby desire to amend and restate the Prior Agreement
as set forth herein.
Whereas this Agreement supplements and forms part of the other 40 Act Financing
Agreements and sets out the terms of the commitment of PBL to provide financing
to Customer under the 40 Act Financing Agreements.
Now, therefore, in consideration of the foregoing promises 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) "ADDITIONAL FIXED RATE FINANCING AMOUNT" means an amount of cash
financing provided by PBL to Customer equal to $50,200,000 with a
Fixed Rate Period duration of ten (1 0) years and an interest rate
equal to the 2nd 1 0-Year Fixed Rate as set forth in Appendix 8
attached hereto.
(d) "Borrowing" means a draw of cash financing by Customer from PBL
pursuant to Section 2 of this Agreement.
(e) "CLOSING DATE" means the execution date hereof.
(f) "COLLATERAL REQUIREMENTS" means the collateral requirements set
forth in Section 1 of Appendix A attached hereto.
(g) "DEFAULT ACTION" means exercising any rights of set-off, liquidating
positions or Contracts, terminating or accelerating any loan or
Contract, canceling orders, closing out transactions, deducting
charges from an account (other than normal charges for interest,
clearing fees and ticket charges), selling any or all of the
securities and commodities or other property that may be in
possession or control of the BNPP Entities (either individually or
jointly with others), buying-in any securities, commodities or other
property that Customer's account or accounts may be short, or acting
as attorney-in-fact with respect to Customer, any Customer account
or any property in a Customer account.
(h) "FIXED RATE FINANCING AMOUNT" means the Initial Fixed Rate Financing
Amount and the Additional Fixed Rate Financing Amount, individually
or collectively, as applicable. Each of the Initial Fixed Rate
Financing Amount and the Additional Fixed Rate Financing Amount
shall be deemed to be a separate Borrowing for the purposes of
determining interest payments pursuant to Section 5 below.
(i) "FIXED RATE FINANCING PREPAYMENT DATE" means the date on which a
Fixed Rate Financing Prepayment Event occurs.
j) "FIXED RATE FINANCING PREPAYMENT EVENT" means, on any day during the
Fixed Rate Period, (A) the date of termination of any 40 Act
Financing Agreement in connection with (i) a Default, (ii) Facility
Termination Event, or (iii) a request from Customer to terminate
this Agreement in accordance with Section 13(e) herein is effective,
and (B) the date of any prepayment of all or any portion of the
Fixed Rate Financing Amount (including, as a result of a request
from PBL to terminate all or any portion of the Fixed Rate Financing
Amount) pursuant to Section 4 below.
(k) "FIXED RATE PERIOD" means the period commencing on the relevant
Fixed Rate Period Effective Date, and expiring on the tenth
anniversary of such Fixed Rate Period Effective Date, as adjusted,
if necessary, in accordance with the Modified Following Business Day
Convention, and unless the parties agree in writing to amend or
extend the term of the relevant Fixed Rate Period (the "Fixed Rate
Period End Date").
(l) "FIXED RATE PERIOD EFFECTIVE DATE" means (i) with respect to the
Initial Fixed Rate Financing Amount, the date of the Prior Agreement
and (ii) with respect to the Additional Fixed Rate Financing Amount,
the Closing Date.
(m) "FLOATING RATE FINANCING AMOUNT" means the Initial Floating Rate
Financing Amount as adjusted on the Fixed Rate Period End Date or
Fixed Rate Financing Prepayment Date, as applicable, in accordance
with Section 2(e) below; provided, however, that Customer may, upon
one (1) Business Day's prior written notice to PBL, reduce the
Floating Rate Financing Amount one time each calendar month by an
amount not to exceed 20% of the Initial Floating Rate Financing
Amount.
(n) "INITIAL FIXED RATE FINANCING AMOUNT" means an amount of cash
financing provided by PBL to Customer equal to $52,500,000 with a
Fixed Rate Period duration of ten (1 0) years and an interest rate
equal to the 1st 10-Year Fixed Rate as set forth in Appendix B
attached hereto.
(o) "INITIAL FLOATING RATE FINANCING AMOUNT" means $127,300,000.
(p) "MODIFIED FOLLOWING BUSINESS DAY CONVENTION" means, with respect to
any date, if such date would otherwise fall on a day that is not a
Business Day, an adjustment will be made so that the relevant date
will be the first following day that is a Business Day unless that
day falls in the next calendar month, in which case the relevant
date will be the first preceding day that is a Business Day.
(q) "NET ASSET VALUE" means, with respect to Customer, the aggregate net
asset value of the common stock issued by Customer calculated in
accordance with U.S. generally accepted accounting principles.
(r) "NET ASSET VALUE FLOOR" means, with respect to Customer, an amount
equal to the greater of (i) 50% of the Net Asset Value of Customer,
calculated as of the date of execution, and (ii) 50% of the Net
Asset Value of Customer, calculated based on the Customer's Net
Asset Value as of its most recent fiscal year end.
2
(s) "Outstanding Debit Floating Rate Financing" means the aggregate net
cash balance (excluding current short sale proceeds) held under the
40 Act Financing Agreements minus the sum of all Fixed Rate
Financing Amounts in effect, if such net cash balance is a debit, or
zero if such aggregate net cash balance is a credit. For the
purposes of calculating such aggregate net cash balance, if Customer
holds credit or debit cash balances in non-USD currencies, PBL will
convert each of these balances into USD at prevailing market rates
to determine Customer's aggregate net cash balance.
2. BORROWINGS-
Subject to Section 7:
(a) On the Closing Date, PBL shall (i) lend funds to Customer equal to
the Additional Fixed Rate Financing Amount and (ii) make funds
available up to the Initial Floating Rate Financing Amount. Such
cash financing shall be made available in immediately available
funds.
(b) The parties agree that on the date of the Prior Agreement, PBL lent
funds to Customer equal to the Initial Fixed Rate Financing Amount
and that such loan shall remain in place for the applicable Fixed
Rate Period.
(c) Subsequent Borrowings on Floating Rate Financing Amount. In respect
of cash financing available to the Customer in connection with the
Floating Rate Financing Amount, any Borrowing (not to exceed the
Floating Rate Financing Amount) following the Closing Date shall be
made on written notice (the "BORROW REQUEST"), given by Customer to
PBL not later than 10:00 A.M. (New York City time) on the Business
Day immediately preceding the date of the proposed Borrowing (which
must be a Business Day) by Customer. Subject to Section 7, PBL
shall, before 1 0:00 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 Floating Rate Financing, taking
into account the amount specified in the Borrow Request, does not
exceed the Floating Rate Financing Amount) payable to the account
designated by the Customer in such Borrow Request.
(d) No Subsequent Borrowings on Fixed Rate Financing. On any day
following the Closing Date. PBL shall not provide fixed rate
financing to Customer on any amounts in excess of the Fixed Rate
Financing Amount unless otherwise agreed by PBL in writing.
(e) Conversion affixed Rate Financing Amounts to Floating Rate Financing
Amounts.
i. On the relevant Fixed Rate Period End Date, the Initial Fixed
Rate Financing Amount or Additional Fixed Rate Financing
Amount, as applicable, shall be reduced to zero and the
Floating Rate Financing Amount shall be correspondingly
increased by the same amount. Such increase to the Floating
Rate Financing Amount on such Fixed Rate Period End Date shall
be deemed to be a separate Borrowing for the purposes of
determining interest payments pursuant to Section 5 below.
ii. At any time following the Closing Date, the Customer may elect
to reduce all or any portion of the Fixed Rate Financing
Amount and correspondingly increase the Floating Rate
Financing Amount by the same amount. To the extent that such
an action constitutes a Fixed Rate Financing Prepayment Event
pursuant to Section 4 below, a Breakage Fee shall be payable
by one party to the other in accordance with Section 8(c).
3. REPAYMENT -
3
(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 recal led by
PBL 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 prior written notice to PBL 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
Floating Rate Financing and/or Fixed Rate Financing Amount, together with
any unpaid accrued interest to the date of such prepayment on the
principal amount prepaid as follows: if such notice is sent to PBL (a) on
or before 10:00 a.m. New York time on any Business Day, then Customer may
prepay the relevant amount on such Business Day, and (b) after 10:00 a.m.
New York time on any Business Day, then Customer may prepay such amount on
the next Business Day; provided that Customer shall continue to be
obligated to pay the commitment fee as set forth in Appendix B in respect
of any undrawn Floating Rate Financing Amount. PBL may, upon 180 days'
prior written notice to Customer, early terminate all or any portion of
the Fixed Rated Financing Amount, in which case Customer shall be required
to prepay the Fixed Rate Financing Amount (or portion thereof) in
accordance with the preceding sentence on the effective termination date.
For the avoidance of doubt, the prepayment or early termination of all or
any portion of the Fixed Rate Financing Amount shall be a Fixed Rate
Financing Prepayment Event, and a fee may apply to Customer or PBL
pursuant to Section 8(c) below, but such prepayment shall not result in a
termination of this Agreement or any commitment set forth herein in
relation to any of Customer's remaining Borrowings.
In the event of a Fixed Rate Financing Prepayment Event and at the request
of Customer, PBL will use its commercially reasonable efforts to assign
and novate the Interest Rate Hedging Transaction (as defined in Appendix
B) to a third party designated by Customer, together with the principal
amount. Any costs (including the principal amount of the associated loans)
will be settled between PBL and the third party assignee.
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 relevant rate 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;
provided that, notwithstanding such capitalization, the failure by
Customer to pay such interest when due, shall be a failure of Customer to
comply with an obligation under this Agreement.
6. SCOPE OF COMMITTED FACILITY -
PBL may not take any of the following actions except upon at least 180
calendar days' prior notice (the "FACILITY MODIFICATION NOTICE"):
(a) modify the Collateral Requirements other than in accordance with the
terms of Appendix A;
(b) recall or cause repayment of any cash loan under the 40 Act
Financing Agreements;
(c) modify the Customer Debit Rate, the Liquidity Premium, or the
Commitment Fee, in each case as set forth in Appendix 8 attached
hereto;
4
(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"), provided that PBL may modify any Fees immediately if (i)
the amount of such Fees charged to PBL, as the case may be, have
been increased by the provider of the relevant services or (ii)
consistent with increases generally to customers; or
(e) terminate any of the 40 Act Financing Agreements.
7. CONDITIONS FOR COMMITTED FACILITY -
The commitment as set forth in Section 6 only applies so long as
(a) Customer satisfies the Collateral Requirements; and
(b) no Default or Facility Termination Event has occurred.
8. ARRANGEMENT, BREAKAGE 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;
(c) Upon the occurrence of a Fixed Rate Financing Prepayment Event, one
party shall pay to the other when due a Breakage Fee as set forth in
Appendix B, provided, however, that such Breakage Fee shall not
apply to the extent the relevant Fixed Rate Financing Amount and
Interest Rate Hedging Transaction (as defined in Appendix B) has
been assigned and novated in accordance with Section 4 above; and
(d) In the event that this Agreement is terminated by Customer upon
thirty (30) days' prior written notice pursuant to Section 13(e)
hereto, Customer shall pay a Facility Breakage Fee as set forth in
Appendix B.
9. SUBSTITUTION -
(a) After PBL sends a Facility Modification Notice, Customer may not
substitute any collatera l, provided that PBL may permit
substitutions (the terms of which shall be determined by PBL in its
sole discretion) upon request, which permission shall not be
unreasonably withheld.
(b) Prior to PBL sending a Facility Modification Notice, Customer may
substitute collateral.
10. COLLATERAL DELIVERY -
If notice of a Collateral Requirement is sent to Customer orally or via
facsimile or electronic mail or such other delivery method as the parties
agree (in each case, with delivery deemed when sent): (i) on or before
10:00 a.m. New York time 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 10:00 a.m. New York time 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 4 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.
5
12. FINANCIAL INFORMATION -
Customer shall provide PBL with copies of-
(a) the most recent annual report of Customer 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
120 calendar days after the end of each fiscal year of Customer;
(b) the most recent quarterly portfolio report of Customer, including
net asset value of Customer, as soon as available and in any event
within 90 calendar days after the end of each calendar quarter; and
(c) the estimated net asset value statement of Customer as of any
Business Day, upon request thereof by PBL.
13. TERMINATION -
(a) Upon the occurrence of a Facility Termination Event (as defined in
clause (d) below), this Agreement automatically terminates;
provided, however, that if there occurs a Facility Termination Event
under Section 13(d)iii, this Agreement shall not automatically
terminate, but instead the commitment referred to in Section 6 shall
be reduced from 180 calendar days to 30 calendar days,
notwithstanding any other provision herein.
(b) Upon the occurrence of a Default, the BNPP Entities may terminate
any of the 40 Act Financing Agreements and take Default Action.
(c) Each of the following events constitutes a "DEFAULT":
i. Customer fails to meet the Collateral Requirements within one
Business Day after the time periods set forth in Section 1 0;
ii. Customer fails to deliver the financial information (1) within
five Business Days after the time periods set out in Sections
12(a) and (b), and (2) within one Business Day after the time
period set out in Section 12(c), provided that such cure
periods shall apply only in respect of Section 12;
iii. the Net Asset Value of Customer declines below the Net Asset
Value Floor (unless such decline is also a Facility
Termination Event under Section 13(d)iii, in which case such
Section 13(d)iii shall apply);
iv. any representation or warranty made or deemed made by Customer
to PBL under any 40 Act Financing Agreements (including under
Section 11 herein) proves false or misleading when made or
deemed made; v. Customer fails to comply with or perform any
agreement or obligation under this Agreement or the other 40
Act Financing Agreements (other than those covered by Section
13(c)i or i), provided, however, that other than a failure by
Customer to make a payment due to a BNPP Entity or a Default
as set forth in Sections 13(c)i, 13(c)ii, or 13(c)iv, such
event or occurrence shall not be deemed a Default and Default
Action may not be taken unless Customer has failed to remedy
such event or occurrence within five Business Days; or
vi. the filing by or against Customer of a petition or other
proceeding in bankruptcy, insolvency or for the appointment of
a receiver or upon the levy or attachment against any property
or accounts of Customer.
(d) Each of the following events constitutes a "FACILITY TERMINATION
EVENT":
6
i. there occurs any change in PBL's interpretation of any Applicable
Law or the adoption of or any changes 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 ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇ Street Reform and
Consumer Protection Act) that, in the reasonable opinion of counsel
to PBL, has the effect with regard to PBL 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 PBL); provided,
however, that it shall not be a Facility Termination Event if there
occurs a change in, or change in PBL's interpretation of, any
Applicable Law that results in a cost increase to PBL (as determined
in its sole discretion}, rather than a prohibition (as determined in
PBL'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 PBL in its sole reasonable
discretion);
ii. 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 between Customer and a BNPP Entity,
if appl icable) by Customer under any contract with (A) a BNPP
Entity or affiliate of a BNPP Entity or (B) a third party entity,
where the aggregate principal amount of any such contract (which,
for the avoidance of doubt, includes any obligations with respect to
borrowed money or other assets in connection with such contract) is
not less than $10,000,000;
iii. (A) the Net Asset Value of Customer as of the close of business on
the last Business Day of any calendar month declines by thirty
percent (30%) or more from the Net Asset Value of Customer as of the
close of business on the last Business Day of the immediately
preceding calendar month, (B) the Net Asset Value of Customer as of
the close of business on the last Business Day of any calendar month
declines by forty percent (40%) or more from the Net Asset Value of
Customer as of the close of business on the last Business Day of the
calendar month three months prior, or (C) the Net Asset Value of
Customer as of the close of business on the last Business Day of any
calendar month declines by fifty percent (50%) or more from the Net
Asset Value of Customer as of the close of business on the last
Business Day of the calendar month twelve months prior (for purposes
of (A), (B) and (C) above, any decline in Net Asset Value shall not
take into account any positive or negative change caused by capital
transfers, such as redemptions, withdrawals, subscriptions,
contributions, dividends or investments, howsoever characterized,
and all amounts set forth in redemption notices received by or on
behalf of Customer (notwithstanding the date the actual redemption
shall occur));
iv. the investment management agreement between Customer and its
investment advisor ("ADVISOR") is terminated or the Advisor
otherwise ceases to act as investment advisor of Customer; provided,
however, such termination or cessation shall not constitute a
Facility Termination Event if there is a replacement investment
advisor appointed immediately who is acceptable to PBL in its sole
discretion;
v. the asset coverage for all borrowings constituting 'senior
securities' (as defined for purposes of Section 18 of the Investment
Company Act of 1940 ("1940 ACT")) of Customer falls below the 300%
minimum required by Section 18(f)(1) of the 1940 Act or such other
minimum percentage as may be approved by U.S. governmental
authorities from time to time under applicable U.S. securities law
(provided that, for purposes of this provision, such minimum
percentage cannot be lower than 200%); or
7
vi. Customer fails to make any filing necessary to comply with the
rules of any exchange in which its shares are listed.
(e) Customer or PBL may terminate this Agreement upon 180 days' prior
written notice; provided that Customer may terminate this Agreement
upon thirty (30) calendar days' written notice to PBL designating a
date, not earlier than thirty days following the giving of such
written notice (the "FACILITY BREAKAGE PAYMENT DATE"), on which such
termination shall occur, subject to a Facility Breakage Fee.
14. NOTICES -
Notices under this Agreement shall be provided pursuant to Section 11 (a)
of the Account Agreement.
15. COMPLIANCE WITH APPLICABLE LAW -
(a) Notwithstanding any of the foregoing , to the extent required by
Applicable Law
i. the BNPP Entities may terminate any 40 Act Financing Agreement
and any Contract;
ii. PBL may recall any outstanding loan under the 40 Act Financing
Agreements;
iii. PBL may modify the Collateral Requirements; and
iv. The BNPP Entities may take Default Action.
(b) This Agreement will not limit the ability of PBL to change the
product provided under this Agreement and the 40 Act Financing
Agreements as necessary to comply with Applicable Law.
(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, th is 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.
(c) Section 15(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 provision 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) This Agreement and the other 40 Act Financing Agreements shall not
be publicly distributed via syndication (for the avoidance of doubt,
nothing in this Subsection shall affect the rephypothecation rights
in the 40 Act Financing Agreements).
(f) The Customer's Declaration of Trust is on file with the Secretary to
the Commonwealth of Massachusetts. This Agreement is executed on
behalf of the Customer by the Customer's officers as officers and
not individually, and the obligations imposed upon the Customer by
this Agreement are not binding upon any of the Customer's trustees,
officers or shareholders individually, but are binding only upon the
assets and property of the Customer.
8
(g) Notwithstanding anything in the U.S. PB Agreement to the contrary,
all Collateral will be held by the Customer's custodian pursuant to
a Special Custody and Pledge Agreement among the Customer, PBL and
The Bank of New York Mellon (or any successor custodian).
(The remainder of this page is blank.)
9
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date specified on the first page of this Agreement.
FIRST TRUST ENERGY INCOME AND
GROWTH FUND (FKA ENERGY INCOME
AND GROWTH FUND)
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Treasurer and CFO
BNP PARIBAS PRIME BROKERAGE
INTERNATIONAL, LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Director
Execution copy 10/8/13
APPENDIX A- COLLATERAL REQUIREMENTS
THIS APPENDIX forms a part of the Second Amended and Restated Committed Facility
Agreement entered into between BNP Paribas Prime Brokerage International, Ltd.
("PBL") and First Trust Energy Income and Growth Fund ("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") shall be the greatest of:
(a) the sum of (i) the aggregate product of (x) the Collateral
Percentage applicable to such Positions and (y) the Current Market
Value of such respective Positions and (ii) 10% of the Fixed Rate
Financing Amount;
(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
FINRA Rule 4210, as amended from time to time; or (d) 50% of the
Portfolio Gross Market Value.
2. ELIGIBLE SECURITIES -
(a) Positions in the following eligible equity and fixed income security
types ("ELIGIBLE SECURITIES") are covered under the Committed
Facility Agreement:
i. common stock traded on the following U.S. exchanges: the New
York Stock Exchange, NASDAQ, NYSE Area, and NYSE MKT;
ii. non-USD common stock, provided such stock is (A) listed in the
FTSE All-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, or Portugal and (C)
denominated in one of the following currencies: CAD, GBP, EUR,
JPY, CHF, AUD or SEK; or
iii. non-convertible and convertible preferred securities and
corporate bonds denominated in USD, provided such securities
are 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.
(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 PBL in
its sole discretion;
ii. any short security position;
iii. any security offered through a private placement or any
restricted securities;
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;
1
v. any securities that are municipal securities, asset-backed
securities, mortgage securities or Structured Securities
(notwithstanding the fact that such securities would otherwise be
covered);
vi. to the extent 20% of the Eligible Collateral's Current Market Value
consists of non-investment grade corporate bonds and/or preferred
securities (for the avoidance of doubt, unrated securities are
considered to be non-investment grade), any non-investment grade
corporate bonds and preferred securities in excess of such 20%: and
vii. to the extent 30% of the Elig ible Collateral's Current Market Value
consists of non-USD securities (whether common stock, preferred
securities, or corporate bonds), any non-USD securities in excess of
such 30%.
3. EQUITY SECURITIES COLLATERAL PERCENTAGE -
The Collateral Percentage for a Position consisting of applicable
Eligible Securities shall be:
i. subject to paragraphs ii and iii below, the sum of (A) the Equity
Core Collateral Rate and (B) the product of (1) the Equity Core
Collateral Rate and (2) the sum of the Equity Concentration Factor,
the Equity Liquidity Factor, and the Equity Volatility Factor:
ii. 100% if (A) the product determined under paragraph i above is
greater than 100%, (B) the Current Market Value per share of the
relevant equity securities is lower than USD $3, or (C) if Section
3(a), (b) or (c) so provides: and
iii. determined by PBL on a case-by-case basis, if 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).
(a) Equity Concentration Factor.
The "EQUITY CONCENTRATION FACTOR" shall be determined pursuant to the
following table, provided that notwithstanding any other provision of this
Appendix, the Collateral Percentage sha ll be 100% with respect to the
relevant Position if the Position Concentration is equal to or greater
than 10% of the Portfolio Gross Market Value.
---------------------------------- ---------------------------------------
POSITION CONCENTRATION EQUITY CONCENTRATION FACTOR
---------------------------------- ---------------------------------------
Less than 5% 0
---------------------------------- ---------------------------------------
5%+ to 10% 0.5
---------------------------------- ---------------------------------------
(b) Equity Liquidity Factor.
The "EQUITY LIQUIDITY FACTOR" shall be determined pursuant to the
following table, provided that notwithstanding any other provision of this
Appendix, the Collateral Percentage shall be 100% with respect to the
relevant Position if the Days of Trading Volume is equal to or greater
than 10.
2
---------------------------------------------- ---------------------------
DAYS OF TRADING VOLUME EQUITY LIQUIDITY FACTOR
---------------------------------------------- ---------------------------
Less than 2 0
---------------------------------------------- ---------------------------
Equal to or greater than 2 and less than 5 1
---------------------------------------------- ---------------------------
Equal to or greater than 5 and less than 7 2
---------------------------------------------- ---------------------------
Equal to or greater than 7 and less than 10 3
---------------------------------------------- ---------------------------
(c) EQUITY VOLATILITY FACTOR.
The "EQUITY VOLATILITY FACTOR" shall be determined pursuant to the
following table, provided that notwithstanding any other provision of this
Appendix, the Collateral Percentage shall be 100% with respect to the
relevant Position if the Equity Volatility is equal to or greater than
100%.
---------------------------------------------------- ---------------------
EQUITY VOLATILITY
EQUITY VOLATILITY FACTOR
---------------------------------------------------- ---------------------
Less than 20% -0.15
---------------------------------------------------- ---------------------
Equal to or greater than 20% and 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 shall be the sum of (A) the Debt Core Collateral Rate and (B)
the product of (1) the Debt Core Collateral Rate and (2) the sum of the
Debt Concentration Factor and the Debt Liquidity Adjustment; provided that
the Collateral Percentage for any debt security which trades below 40% of
its nominal value shall be 100%.
(a) DEBT CORE COLLATERAL RATE.
The "DEBT CORE COLLATERAL RATE" shall be based on the credit quality of
the Issuer as set forth below. The lower of the S&P or ▇▇▇▇▇'▇ rating as
shown below will be used to determine the credit quality of the Issuer;
provided, that if there is only one such rating, then the Debt Core
Collateral Rate corresponding to such rating shall be used.
-------------------------- ---------------------------- ------------------
DEBT CORE
S&P'S RATING ▇▇▇▇▇'▇ RATING COLLATERAL RATE
-------------------------- ---------------------------- ------------------
AAA to A- Aaa to A3 50%
-------------------------- ---------------------------- ------------------
BBB+ to BBB- Baa1 to Baa3 50%
-------------------------- ---------------------------- ------------------
BB+ to BB- Ba1 to Ba3 75%
-------------------------- ---------------------------- ------------------
B+ to B- / NR B1 to B3 / NR 75%
-------------------------- ---------------------------- ------------------
CCC+ to CCC- Caa1 to Caa3 100%
-------------------------- ---------------------------- ------------------
Below CCC- or defaulted Below Caa3 or defaulted 100%
-------------------------- ---------------------------- ------------------
(b) DEBT CONCENTRATION FACTOR
The "DEBT CONCENTRATION FACTOR" shall be determined pursuant to the
following table, provided that notwithstanding any other provision of this
Appendix, the Collateral Percentage shall be 100% with respect to the
relevant Position if the Position Concentration is equal to or greater
than 10% of the Portfolio Gross Market Value.
3
------------------------------------ -------------------------------------
POSITION CONCENTRATION DEBT CONCENTRATION FACTOR
------------------------------------ -------------------------------------
Less than 5% 0
------------------------------------ -------------------------------------
5%+ to 10% 0.5
------------------------------------ -------------------------------------
(c) DEBT LIQUIDITY ADJUSTMENT
The "DEBT LIQUIDITY ADJUSTMENT" shall be determined pursuant to the
following table; provided that, notwithstanding any other provision of
this Appendix, the Collateral Percentage shall be 100% with respect to the
relevant Position if its percentage of Issue Size is equal to or greater
than 10%.
------------------------------------ -------------------------------------
PERCENTAGE OF ISSUE SIZE DEBT LIQUIDITY ADJUSTMENT
------------------------------------ -------------------------------------
Less than 10% 0
------------------------------------ -------------------------------------
5. POSITIONS OUTSIDE THE SCOPE OF THIS APPENDIX -
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 shall be determined by PBL in its sole
discretion.
6. ONE-OFF COLLATERAL REQUIREMENTS -
From time to time PBL may, at its sole discretion, agree to a different
Collateral Requirement than the Collateral Requirement determined by this
Appendix 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 PBL 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.
(b) "BLOOMBERG" means the Bloomberg Professional service.
(c) "COLLATERAL PERCENTAGE" means the percentage as determined by PBL
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 the relevant security and
(ii) the price per share of the relevant security (determined by
PBL).
(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 PBL in its sole discretion), as
denominator.
(f) "DEBT SECURITY" means convertible and non-convertible preferred
securities and corporate debt securities.
4
(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 PBL
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 PBL in its sole
discretion.
(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 an applicable security, the issuer
of such security.
(k) "ISSUE SIZE" means with respect to a Position in an applicable
security of an Issuer, the aggregate market value of all such
securities issued by the Issuer and still outstanding.
(l) "PORTFOLIO GROSS MARKET VALUE" means the Gross Market Value of all
of Customer's Positions that are Eligible Securities.
(m) "POSITION CONCENTRATION" means with respect to a Position, an amount
equal to the quotient of (i) the absolute value of the Current
Market Value of such Position and (ii) the Gross Market Value of all
of Customer's Positions, expressed as a percentage; provided that in
the event that two Positions hedge one another as determined by PBL,
only the absolute value of the Current Market Value of the unhedged
portion of such Positions shall be considered for the purposes of
Section 3(a).
(n) "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.
5
Execution copy 10/8/13
APPENDIX B
PRICING
--------------------------------------------------------------------------------
FIRST TRUST ENERGY INCOME AND GROWTH FUND
--------------------------------------------------------------------------------
BNP PARIBAS PRIME BROKERAGE INTERNATIONAL, LTD.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FINANCING RATES
--------------------------------------------------------------------------------
CUSTOMER DEBIT RATE
(applicable to the Outstanding Debit Floating Rate Financing)
1 Month LIBOR + 70 bps per annum on the drawn amount
ISO CODE
USD
1ST 10-YEAR FIXED RATE
Fixed Base Rate + Liquidity Premium, where
Fixed Base Rate = 267.97 bps
Liquidity Premium = 70 bps
2ND Fixed Base Rate + Liquidity Premium, where
Fixed Base Rate = 268.13 bps
Liquidity Premium = 70 bps
--------------------------------------------------------------------------------
ARRANGEMENT FEE
--------------------------------------------------------------------------------
Customer shall pay an arrangement fee equal to the product of the Additional
Fixed Rate Financing Amount and 10 bps upon execution, to be paid on the Closing
Date.
--------------------------------------------------------------------------------
COMMITMENT FEE
--------------------------------------------------------------------------------
Customer shall pay a commitment fee equal to 80 bps per annum on the amount of
undrawn Floating Rate Financing Amount, to be paid when the amounts calculated
under the Financing Rates section above are due.
--------------------------------------------------------------------------------
BREAKAGE FEE
--------------------------------------------------------------------------------
Upon the occurrence of a Fixed Rate Financing Prepayment Event, Customer and PBL
shall, in good faith and a commercially reasonable manner, jointly determine a
Breakage Fee equal to the cost (or benefit) of entering into a replacement swap
rate transaction to offset the Interest Rate Hedging Transaction as follows:
(a) Both parties shall each seek to obtain two market quotations from
Reference Marketmakers by 12:00 p.m . New York time on the Business
Day following the Fixed Rate Financing Prepayment Date (the
"DETERMINATION DATE"). The parties shall determine the Breakage Fee
at such time by taking the average of the market quotations obtained
as of such time, and taking into account any associated commission
fees and transaction costs to terminate the existing swap rate
transaction (if any) and enter into the replacement swap rate
transaction. If, as of 12:00 p.m. New York time, (i) only one market
quotation is obtained, such market quotation shall be used for the
Breakage Fee determination or (ii) no market quotations have been
obtained, PBL shall determine the rate of such replacement swap
transaction, subject to approval by Customer and such approval will
not be unreasonably withheld.
(b) If entering into the replacement swap rate transaction results in
(a) an economic benefit to PBL, then PBL shall pay the Breakage Fee
to Customer, and (b) an economic cost to PBL, then Customer shall
pay the Breakage Fee to PBL, in either event, by the close of
business on the Determination Date.
(c) "INTEREST RATE HEDGING TRANSACTION" means an assumed transaction
that could be entered into to hedge the interest rate risk in
connection with providing the Fixed Rate Financing Rate on the Fixed
Rate Financing Amount for the term of the Fixed Rate Period. For
purposes of any calculations to be used herein, the terms of the
Interest Rate Hedging Transaction shall be as follows :
i. The Notional Amount will be equal to the Fixed Rate Financing
Amount.
ii. The Trade Date wil l be the Closing Date.
111. The Effective Date will be two (2) Business Days following the
Trade Date.
iv. The Termination Date will be ten (I 0) years from the
Effective Date, as adjusted, if necessary, in accordance with
the Modified Following Business Day Convention .
v. PBL Pays Fixed/ Receives Floating; Monthly.
vi. Fixed Rate will be the Fixed Base Rate.
vii. Floating Rate Option will be USD-LIBOR-BBA. The Designated
Maturity will be I Month.
viii. Fixed I Floating Rate Day Count Fraction will be: Actual/360.
ix. Business Days will be London and New York Business Days.
(d) "REFERENCE MARKET-MAKER" means a leading dealer in the relevant
market selected by the relevant party in good faith (a) from among
dealers of the highest credit standing which satisfy all the
criteria that such party applies generally at the time in deciding
whether to offer or to make an extension of credit and (b) to the
extent practicable, from among such dealers having an office in the
same city.
--------------------------------------------------------------------------------
FACILITY BREAKAGE FEE
--------------------------------------------------------------------------------
In the event that this Agreement is terminated by Customer upon
thirty (30) days' prior written notice to PBL, Customer shall pay to PBL a
Facility Breakage Fee due on the Facility Breakage Payment Date. The
"Facility Breakage Fee" shall be equal to the sum of the Facility
2
Breakage Rate and any unpaid accrued interest. For the purposes of the
foregoing, "FACILITY BREAKAGE RATE" means the product of(i) the Final
Commitment Amount and (ii) 7.5 bps. The "FINAL COMMITMENT AMOUNT" shall be
the sum of the Fixed Rate Financing Amount and the Floating Rate Financing
Amount as of the Facility Breakage Payment Date.
3