FS Energy and Power Fund 8-K [fsep-8k_051816.htm]

 

Exhibit 10.3

 

 

 

 

 

 

 

INVESTMENT MANAGEMENT AGREEMENT

 

dated as of May 18, 2016

 

BY AND BETWEEN

 

BRYN MAWR FUNDING LLC,
a Delaware limited liability company

 

AND

 

FS ENERGY AND POWER FUND
a Delaware statutory trust

 

 

TABLE OF CONTENTS

    Page 1. General Duties of the Investment Manager 1 2. Duties and Obligations
of the Investment Manager with Respect to the Administration of the Company 3 3.
Authority to Bind the Company; No Joint Venture 4 4. Limitations Relating to
Transferred Assets 5 5. Brokerage 6 6. Expenses 6 7. Services to Other Companies
or Accounts; Conflicts of Interest 6 8. Duty of Care and Loyalty; Exculpation of
Liability 7 9. Indemnification 7 10. Term of Agreement; Events Affecting the
Investment Manager; Survival of Certain Terms; Delegation 9 11. Power of
Attorney; Further Assurances 10 12. Amendment of this Agreement; Assignment 11
13. Notices 11 14. Binding Nature of Agreement; Successors and Assigns 12 15.
Entire Agreement 12 16. Costs and Expenses 12 17. Books and Records 12 18.
Titles Not to Affect Interpretation 12 19. Provisions Separable 13 20. Governing
Law 13 21. Execution in Counterparts 13 22. Third Party Rights; Benefits of
Agreement 13 23. Representations and Warranties of the Investment Manager 13 24.
Managing REO Assets 14

i

 

 

INVESTMENT MANAGEMENT AGREEMENT

This Investment Management Agreement (the “Agreement”), dated as of May 18, 2016
is made by and between BRYN MAWR FUNDING LLC (the “Company”), a Delaware limited
liability company, and FS ENERGY AND POWER FUND (the “Investment Manager”), a
Delaware statutory trust. Unless otherwise specified, capitalized terms used but
not otherwise defined in this Agreement shall have the meanings given to them in
the Limited Liability Company Agreement of the Company dated as of the date
hereof (as the same may be amended from time to time, the “Operating
Agreement”).

1.

General Duties of the Investment Manager.

Subject to the direction and control of the Company and in a manner consistent
with the customary standards, policies and procedures followed by asset managers
of national standing relating to assets of the nature and character of the
equity and debt portfolio investments transferred by the Investment Manager to
the Company from time to time (the “Transferred Assets”) and without regard to
any relationship that the Investment Manager or any Affiliate thereof may have
with any Person who is an obligor under, or issuer of, any Transferred Asset
(“Obligor”) or any Affiliate of any Obligor (the “Investment Manager Standard”),
the Operating Agreement, the policies adopted or approved by the Company and the
terms of this Agreement, the Investment Manager agrees to supervise and direct
the investment and reinvestment of the Transferred Assets, manage, service,
administer and make collections on the Transferred Assets and perform its duties
set forth herein, and shall have such other powers with respect to the
investment and leverage related functions of the Company as shall be delegated
from time to time to the Investment Manager by the Company. The Investment
Manager shall endeavor to comply in all material respects with all applicable
federal and state laws and regulations, except to the extent that the failure to
comply would not have a Material Adverse Effect (as defined below) on the
operations of the Company or the Investment Manager. The Investment Manager is
hereby appointed as the Company’s agent and attorney-in-fact with authority to
negotiate, execute and deliver all documents and agreements on behalf of the
Company and to do or take all related acts, with the power of substitution, to
acquire, dispose of or otherwise take action with respect to or affecting the
Transferred Assets, including, without limitation:

(a)

identifying and originating Transferred Assets to be purchased by the Company,
selecting the dates for such purchases, and purchasing or directing the purchase
of such Transferred Assets on behalf of the Company;

(b)

identifying Transferred Assets owned by the Company to be sold by the Company,
selecting the dates for such sales, and selling such Transferred Assets on
behalf of the Company;

(c)

negotiating and entering into, on behalf of the Company, documentation providing
for the purchase and sale of Transferred Assets, including without limitation,
confidentiality agreements and commitment letters;

(d)

structuring the terms of, and negotiating, entering into and/or consenting to,
on behalf of the Company, documentation relating to Transferred Assets to be
purchased, held, exchanged or sold by the Company, including any amendments,
modifications or supplements with respect to such documentation;

 

 -1- 

 

 

(e)

exercising, on behalf of the Company, rights and remedies associated with the
Transferred Assets, including without limitation, rights to petition to place an
obligor or issuer in bankruptcy proceedings, to vote to accelerate the maturity
of a Transferred Asset, to waive any default, including a payment default, with
respect to a Transferred Asset and to take any other action which the Investment
Manager deems necessary or appropriate in its discretion in connection with any
restructuring, reorganization or other similar transaction involving an obligor
or issuer with respect to a Transferred Asset, including without limitation,
initiating and pursuing litigation;

(f)

responding to any offer in respect of Transferred Assets by tendering the
affected Transferred Assets, declining such offer, or taking such other actions
as the Investment Manager may determine;

(g)

exercising all voting, consent and similar rights of the Company on its behalf
and advising the Company with respect to matters concerning the Transferred
Assets;

(h)

advising and assisting the Company with respect to the valuation and rating of
the Transferred Assets;

(i)

retaining legal counsel and other professionals (such as financial advisers) to
assist in the structuring, negotiation, documentation, administration and
modification and restructuring of Transferred Assets;

(j)

directing, or causing to be directed, all Obligors to pay all payments and
collections owing to the Company on any Transferred Asset (“Collections”)
directly to the appropriate account of the Company, depositing all Collections
received directly by it into the appropriate account of the Company within one
(1) Business Day of receipt thereof and, within three (3) Business Days after
receipt into such account, identifying all available balances in the such
account as interest Collections or principal Collections. The Investment Manager
shall direct, or cause to be directed, the related Obligor to make such payments
to the appropriate account of the Company and shall promptly, and in any event
no later than the Business Day after receipt thereof, deposit or cause to be
deposited all such amounts into such account (and shall identify such amounts as
either principal Collections or interest Collections, as applicable). For
purposes of this Agreement, “Business Day” means any day that is not a Saturday,
Sunday or other day on which banking institutions in New York, New York are
authorized or obligated by law, executive order or government decree to remain
closed; and

(k)

causing the Company to pay, perform and discharge or cause to be paid, performed
and discharged promptly (i) all federal, state, county, city, municipal, local,
foreign or other governmental taxes; (ii) all levies, assessments, charges, or
claims of any governmental entity or any claims of statutory lienholders, the
nonpayment of which could give rise by operation of law to a Lien on the
Transferred Assets or any other property of the Company and (iii) any such
taxes, levies, assessment, charges or claims which constitute a lien or
encumbrance on any property of the Company (collectively, “Charges”) payable by
it, except where the failure to so pay, discharge or otherwise satisfy such
Charge would not, individually or in the aggregate, be expected to have a
Material Adverse Effect. For purposes of this Agreement, “Lien” means (i) any
mortgage, pledge, hypothecation, assignment for security, encumbrance, lien
(statutory or other), charge, or other security interest of any kind or nature
whatsoever (including any conditional sale or other title retention agreement,
and any financing lease having substantially the same economic effect as any of
the foregoing), and (ii) any right of set off or offset, or other liens of any
kind or nature whatsoever (including federal or state Tax (as defined below)
liens).

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For the avoidance of doubt, the Investment Manager, in its capacity as such,
does not guarantee the performance of any obligations of any other Person under
this Agreement or any other document to be executed and delivered in connection
with this Agreement (“Transaction Document”).

2.

Duties and Obligations of the Investment Manager with Respect to the
Administration of the Company.

The Investment Manager agrees to furnish office facilities and equipment and
clerical, bookkeeping and administrative services (other than such services, if
any, provided by the Company's custodian and other service providers) to the
Company. To the extent requested by the Company, the Investment Manager agrees
to provide the following administrative services:

(a)

maintain or oversee the maintenance of the books and records of the Company and
maintain (or oversee maintenance by other persons) such other books and records
required by law or for the proper operation of the Company;

(b)

to the extent prepared or filed by the Company, oversee the preparation and
filing of the Company’s federal, state and local income Tax returns and any
other required Tax returns or reports. For purposes of this Agreement, “Taxes”
means all taxes, levies, imposts, duties, deductions, withholdings (including
backup withholding), assessments, fees or other charges imposed by any Official
Body, including any interest, additions to tax or penalties applicable thereto,
and “Official Body” means any government or political subdivision or any agency,
authority, regulatory body, bureau, central bank, commission, department or
instrumentality of any such government or political subdivision, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic;

(c)

review the appropriateness of and arrange for payment of the Company's expenses;

(d)

prepare for review and approval by officers and other authorized persons of the
Company (collectively, the “Authorized Signatories”) financial information for
the Company’s financial statements (if the Company prepares separate financial
statements);

(e)

prepare reports relating to the business and affairs of the Company as may be
mutually agreed upon and not otherwise prepared by others;

 

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(f)

make recommendations to the Company concerning the performance and fees of any
of the Company's service providers as the Company may reasonably request or deem
appropriate;

(g)

oversee and review calculations of fees paid to the Company’s service providers;

(h)

consult with the Authorized Signatories, and the Company’s independent
accountants, legal counsel, custodian and other service providers in
establishing the accounting policies of the Company and monitor financial
accounting services;

(i)

determine the amounts available for distribution as dividends and distributions
to be paid by the Company to its Member;

(j)

prepare such information and reports as may be required under any Financing;

(k)

provide such assistance to the Company’s custodian, counsel, auditors and other
service providers as generally may be required to properly carry on the business
and operations of the Company;

(l)

respond to, or refer to the Company’s officers or Authorized Signatories,
inquiries relating to the Company;

(m)

supervise any other aspects of the Company’s administration as may be agreed to
by the Company and the Investment Manager; and

(n)

from time to time promptly following receipt thereof, forward additional
documents evidencing any assumption, modification, consolidation or extension of
a Transferred Asset to any collateral custodian of the Company.

All services are to be furnished through the medium of any officers, Authorized
Signatories or employees of the Investment Manager or its Affiliates as the
Investment Manager deems appropriate, or any investment adviser to the
Investment Manager, in order to fulfill its obligations hereunder.

The Company shall, upon demand, reimburse the Investment Manager or its
Affiliates for all expenses incurred by them in connection with the performance
of the administrative services described in this Section 2.

3.

Authority to Bind the Company; No Joint Venture.

(a)

Except as provided in or pursuant to Sections 1, 4 and 11 hereof, the Investment
Manager shall have no authority to bind or obligate the Company. All acts of the
Investment Manager (other than as provided in the Operating Agreement or in
Section 1, Section 4 or Section 11 hereof with respect to any Transferred Asset)
shall require the Company’s consent and approval to bind the Company. Nothing in
this Agreement shall be deemed to create a joint venture or partnership between
the parties with respect to the arrangements set forth in this Agreement. For
all purposes hereof, the Investment Manager shall be deemed to be an independent
contractor and, unless otherwise provided herein or specifically authorized by
the Company from time to time, shall have no authority to act for or represent
the Company.

 

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(b)

The Investment Manager shall act in conformity with the written instructions and
directions of the Company delivered in accordance with the terms and conditions
hereof, except to the extent that authority has been delegated to the Investment
Manager pursuant to the terms of this Agreement or the Operating Agreement. The
Investment Manager will not be bound to follow any amendment to the Operating
Agreement until it has received written notice thereof and until it has received
a copy of the amendment from the Company; provided that if any such amendment
materially or adversely affects the rights or duties of the Investment Manager,
the Investment Manager shall not be obligated to respect or comply with the
terms of such amendment unless it consents thereto. Subject to the fiduciary
duty of the Member, if applicable, the Company agrees that it shall not permit
any amendment to the Operating Agreement that materially or adversely affects
the rights or duties of the Investment Manager to become effective unless the
Investment Manager has been given prior written notice of such amendment and has
consented thereto in writing. The Investment Manager may, with respect to the
affairs of the Company, consult with such legal counsel, accountants and other
advisors as may be selected by the Investment Manager. The Investment Manager
shall be fully protected, to the extent permitted by applicable law, in acting
or failing to act hereunder if such action or inaction is taken or not taken in
good faith by the Investment Manager in accordance with the advice or opinion of
such counsel, accountants or other advisors. The Investment Manager shall be
fully protected in relying upon any writing signed in the appropriate manner
with respect to any instruction, direction or approval of the Company and may
also rely on opinions of the Investment Manager’s counsel with respect to such
instructions, directions and approvals. The Investment Manager shall also be
fully protected when acting upon any instrument, certificate or other writing
the Investment Manager believes in good faith to be genuine and to be signed or
presented by the proper person or persons. The Investment Manager shall be under
no duty to make any investigation or inquiry as to any statement contained in
any such writing and may accept the same as conclusive evidence of the truth and
accuracy of the statements therein contained if the Investment Manager in good
faith believes the same to be genuine.

4.

Limitations Relating to Transferred Assets.

(a)

Transferred Assets. Except as otherwise provided in this Section 4, and subject
to the requirements of the Operating Agreement and applicable law, the
Investment Manager may cause the Company (which term shall include, for all
purposes relating to the purchase and sale of Transferred Assets and the duties
and obligations of the Investment Manager set forth in Section 1 hereof, the
Company and its consolidated subsidiaries, if any) from time to time to purchase
Transferred Assets.

(b)

Transaction, Director, Consulting, Advisory, Closing and Break- up Fees. The
Company shall receive its pro-rata share, measured by the amount invested or
proposed to be invested by the Company in any Transferred Asset, of any
transaction, director, consulting, advisory, closing and break-up fees, or
similar fees (“Additional Fees”) payable with respect to any Transferred Asset.

 

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5.

Brokerage.

The Investment Manager shall use commercially reasonable efforts to effect all
purchases and sales of securities in a manner consistent with the principles of
best execution, taking into account net price (including commissions) and
execution capability and other services which the broker or other intermediary
may provide. In this regard, the Investment Manager may effect transactions
which cause the Company to pay a commission in excess of a commission which
another broker or other intermediary would have charged; provided, however, that
the Investment Manager shall have first determined that such commission is
reasonable in relation to the value of the brokerage or research services
performed by that broker or other intermediary or that the Company is the sole
beneficiary of the services provided.

6.

Expenses.

Other than as set forth below, the Company will be responsible for paying all of
its expenses. On behalf of the Company, the Investment Manager may advance
payment of any expenses, and the Company shall, upon request, reimburse the
Investment Manager therefor within 30 days following written request from the
Investment Manager. Nothing in this Section 6 shall limit the ability of the
Investment Manager to be reimbursed by any Person other than the Company
(including issuers or obligors of securities, instruments or obligations owned
by the Company) for expenses incurred by the Investment Manager in connection
with the performance of services hereunder. The Investment Manager shall
maintain complete and accurate records with respect to costs and expenses and
shall furnish the Company with receipts or other written vouchers with respect
thereto upon request of the Company.

7.

Services to Other Companies or Accounts; Conflicts of Interest.

(a)

The Investment Manager and its Affiliates, employees or associates are in no way
prohibited from, and intend to, spend substantial business time in connection
with other businesses or activities, including, but not limited to, managing
investments, advising or managing entities whose investment objectives are the
same as or overlap with those of the Company, participating in actual or
potential investments of the Company, providing consulting, merger and
acquisition, structuring or financial advisory services, including with respect
to actual, contemplated or potential investments of the Company, or acting as a
director, officer or creditors’ committee member of, advisor to, or participant
in, any corporation, company, trust or other business entity. The Investment
Manager and its Affiliates may, and expect to, receive fees or other
compensation from third parties for any of these activities unrelated to the
Company, which fees will be for the benefit of their own account and not the
Company.

(b)

In addition, the Investment Manager and its Affiliates may manage other
investment vehicles and separate accounts (“Other Accounts”) that invest in
assets eligible for purchase by the Company. The Company may have the ability,
under certain circumstances, to take certain actions that would have an adverse
effect on Other Accounts. In these circumstances, the Investment Manager and its
affiliated persons will act in a manner believed to be equitable to the Company
and such Other Accounts, including co-investment in accordance with applicable
laws, including the conditions of any exemptive relief obtained by the Company
and the Investment Manager. The allocation of investment opportunities among the
Company and Other Accounts will be made in good faith pursuant to the Investment
Manager’s written allocation policies. The Investment Manager may combine
purchase or sale orders on behalf of the Company with orders for Other Accounts,
and allocate the assets so purchased or sold among such accounts in an equitable
manner. The Company may invest in portfolio companies in which Other Accounts
have or are concurrently making the same investment or a different investment
(e.g., an investment that is junior to the Company’s investment). In such
situations, the Company and the Other Accounts may potentially have conflicting
interests. If any matter arises that the Investment Manager determines in its
good faith judgment constitutes an actual conflict of interest, the Investment
Manager may take such actions as may be necessary or appropriate to ameliorate
the conflict. These actions may include, by way of example and without
limitation, disposing of the asset giving rise to the conflict of interest,
appointing an independent fiduciary, or delegating decisions relating to the
asset giving rise to the conflict of interest to a subcommittee of the
Investment Manager.

 

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8.

Duty of Care and Loyalty; Exculpation of Liability.

The Investment Manager shall exercise its discretion and authority in accordance
with applicable law, all customary and usual servicing practices for assets
similar to the Transferred Assets and, to the extent consistent with the
foregoing, (i) with reasonable care, using a degree of skill and diligence not
less than that with which the Company or Investment Manager, as applicable,
services and administers assets for its own account or for the account of its
Affiliates having similar investment objectives and restrictions, and (ii) to
the extent not inconsistent with clause (i), in a manner consistent with the
customary standards, policies and procedures followed by institutional managers
of national standing relating to assets of the nature and character of the
Transferred Assets and without regard to any relationship that the Investment
Manager or any Affiliate thereof may have with any underlying Obligor or any
Affiliate of an Obligor.

9.

Indemnification.

(a)

To the fullest extent permitted by applicable law, the Company shall be held
harmless and indemnified by the Investment Manager against any claims, demands,
costs, liabilities and expenses, including amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and reasonable and
documented out-of-pocket counsel fees incurred by the Company (“Losses”) in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
investigative body in which the Company may be or may have been involved as a
party or otherwise or with which the Company may be or may have been threatened,
while acting in connection with the establishment, management or operations of
the Company or the management of the Transferred Assets; provided, however, to
the fullest extent permitted by applicable law, that the Company shall not be
indemnified hereunder if there has been a determination by a final decision on
the merits by a court or other body of competent jurisdiction before whom the
issue of entitlement to indemnification was brought that such Losses have been
primarily attributable to the Company’s willful misfeasance, bad faith, gross
negligence in performance, or reckless disregard, of its obligations; provided
further, that the Investment Manager will not be required to indemnify the
Company with respect to any Losses (i) arising out of an action or claim brought
against the Company by the Investment Manager or its Affiliates, or (ii)
resulting from the performance or non-performance of the Transferred Assets.

 

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Indemnification under this Section 9(a) shall survive the termination of this
Agreement and shall include fees and expenses of counsel and expenses of
litigation.

If for any reason (other than the exclusions set forth in the first paragraph of
Section 9(a)) the indemnification provided above in Section 9(a) is unavailable
to the Company or is insufficient to hold the Company harmless, then the
Investment Manager agrees to contribute to the amount paid or payable by the
Company as a result of such loss, claim, damage or liability in such proportion
as is appropriate to reflect not only the relative benefits received by the
Company, on the one hand, and the Investment Manager and its Affiliates, on the
other hand, but also the relative fault of the Company, on the one hand, and the
Investment Manager and its Affiliates, on the other hand, as well as any other
relevant equitable considerations.

(b)

(i) To the fullest extent permitted by applicable law, each of the Investment
Manager, and its Affiliates, or any officer, director, member, manager,
employee, stockholder, assign, representative or agent of any such Person (each
an “Indemnified Person”, and collectively, the “Indemnified Persons”) shall be
held harmless and indemnified by the Company (solely out of the Transferred
Assets and in accordance with Section 9(b)(v), and not (solely for the purposes
of this Agreement) out of the separate assets of any Member) against any Losses
incurred by such Indemnified Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or investigative body in which such
Indemnified Person may be or may have been involved as a party or otherwise
(other than as authorized by the trustees of the Member, as the plaintiff or
complainant) or with which such Indemnified Person may be or may have been
threatened, while acting in such Person’s capacity as an Indemnified Person in
connection with the establishment, management or operations of the Company or
the management of the Transferred Assets; provided, however, that an Indemnified
Person shall not be indemnified hereunder if and to the extent resulting from
such Indemnified Person’s bad faith, willful misfeasance, gross negligence or
reckless disregard; provided further, that the Company will not be required to
indemnify the Indemnified Persons with respect to any Losses (i) arising out of
an action or claim brought against any Indemnified Person by the Company or its
Affiliates, or (ii) resulting from the performance or non-performance of the
Transferred Assets.

(ii)

The Company shall make advance payments in connection with the expenses of
defending any action, suit or other proceeding with respect to which
indemnification might be sought hereunder if the Company receives a written
affirmation by the Indemnified Person of the Indemnified Person’s good faith
belief that the standards of conduct necessary for indemnification have been met
and a written undertaking to reimburse the Company unless it is subsequently
determined that the Indemnified Person is entitled to such indemnification and
if a majority of the trustees of the Member determine that the applicable
standards of conduct necessary for indemnification appear to have been met. In
addition, at least one of the following conditions must be met: (A) the
Indemnified Person shall provide adequate security for its undertaking, (B) the
Company shall be insured against losses arising by reason of any lawful
advances, or (C) independent legal counsel in a written opinion, shall conclude,
based on a review of readily available facts (as opposed to a full trial-type
inquiry), that there is substantial reason to believe that the Indemnified
Person ultimately will be found entitled to indemnification.

 

 -8- 

 

 

(iii)

The rights accruing to any Indemnified Person under these provisions shall not
exclude any other right to which such Indemnified Person may be lawfully
entitled.

(iv)

Each Indemnified Person (other than the Investment Manager) shall, in the
performance of its duties, be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance in good faith
upon the books of account or other records of the Company, upon an opinion of
counsel, or upon reports made to the Company by any of the Company’s officers or
employees or by any advisor, administrator, manager, distributor, selected
dealer, accountant, appraiser or other expert or consultant selected with
reasonable care by the trustees of the Member, officers or employees of the
Company, regardless of whether such counsel or other person may also be a
trustee of the Member. The Investment Manager shall, in the performance of its
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon any books of
account or other records of the Company that were prepared by an agent or other
third party, upon an opinion of counsel, or upon reports made to the Company by
any advisor, administrator, manager, distributor, selected dealer, accountant,
appraiser or other expert or consultant selected with reasonable care by the
trustees of the Member, officers or employees of the Company, regardless of
whether such counsel or other person may also be a trustee of the Member.

(v)

All determinations that may be made to make advance payments in connection with
the expense of defending or settling any action, suit or other proceeding,
whether civil or criminal, shall be authorized and made (if so authorized and
made) in accordance with paragraph (b)(ii) above.

10.

Term of Agreement; Events Affecting the Investment Manager; Survival of Certain
Terms; Delegation.

(a)

This Agreement shall become effective as of the date hereof and, unless sooner
terminated by the Company or the Investment Manager as provided herein, shall
continue in effect during the existence of the Company. Notwithstanding the
foregoing, this Agreement may be terminated (i) at any time by the mutual
agreement of the parties hereto or (ii) by the Company without the payment of
any penalty, upon the occurrence of a “cause” event. A “cause” event for
purposes of this Section 10(a) shall have occurred by reason of (x) the
conviction (or plea of no contest) for a felony of the Investment Manager, (y)
the conviction (or plea of no contest) for a felony of an officer or a member of
the board of trustees of the Investment Manager, if the employment or other
affiliation of such Person so convicted is not terminated by the Investment
Manager within 30 days of such conviction and the Member votes thereafter to
invoke this termination provision, or (z) the Investment Manager or an officer
or a member of the board of trustees of the Investment Manager has engaged in
gross negligence or willful misconduct with respect to the Company that has
resulted in a Material Adverse Effect on the Company or the Transferred Assets,
or has committed a knowing material violation of securities laws, each as
determined by a final decision of a court or binding arbitration decision
unless, in the case of such natural persons, their employment or other
affiliation with the Investment Manager is terminated or suspended within 30
days after discovery by the Investment Manager. The Investment Manager shall
promptly provide written notice to the Member upon the occurrence of a “cause”
event.

 

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(b)

Notwithstanding anything herein to the contrary, Sections 6 and 9 of this
Agreement shall survive any termination hereof.

(c)

From and after the effective date of termination of this Agreement, the
Investment Manager and its Affiliates shall not be entitled to compensation for
further services hereunder, but shall be paid all compensation and reimbursement
of expenses accrued to the date of termination. Upon such termination and upon
request by the Company, the Investment Manager shall deliver as directed copies
of all documents, books, records and other information prepared and maintained
by or on behalf of the Company with respect to any Transferred Asset (“Records”)
within five (5) Business Days after demand therefor and a computer tape or
diskette (or any other means of electronic transmission acceptable to the
successor investment manager) containing as of the close of business on the date
of demand all of the data maintained by the Investment Manager in computer
format in connection with managing the Transferred Assets. The Investment
Manager agrees to use reasonable efforts to cooperate with any successor
investment manager in the transfer of its responsibilities hereunder, and will,
among other things, provide upon receipt of a written request by such successor
investment manager any information available to it regarding any Transferred
Assets. The Investment Manager agrees that, notwithstanding any termination, it
will reasonably cooperate in any proceeding arising in connection with this
Agreement or any Transferred Asset (excluding any such proceeding in which
claims are asserted against the Investment Manager or any Affiliate of the
Investment Manager) upon receipt of appropriate indemnification and expense
reimbursement.

(d)

Until a successor investment manager has commenced investment management
activities in the place of FS Energy and Power Fund, FS Energy and Power Fund
shall not resign as Investment Manager hereunder. Notwithstanding anything
contained herein to the contrary and to the extent permitted by applicable law
without causing the Investment Manager to have liability, the resignation of the
Investment Manager shall not become effective until another entity shall have
assumed the responsibilities and obligations of the Investment Manager.

11.

Power of Attorney; Further Assurances.

In addition to the power of attorney granted to the Investment Manager in
Section 1 of this Agreement, the Company hereby makes, constitutes and appoints
the Investment Manager, with full power of substitution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its name, place and
stead, in accordance with the terms of this Agreement (a) to sign, execute,
certify, swear to, acknowledge, deliver, file, receive and record any and all
documents which the Investment Manager reasonably deems necessary or appropriate
in connection with its investment management duties under this Agreement and
(b) to (i) subject to any policies adopted by the Member or the Company with
respect thereto, exercise in its discretion any voting or consent rights
associated with any securities, instruments or obligations included in the
Company’s assets, (ii) execute proxies, waivers, consents and other instruments
with respect to such securities, instruments or obligations, (iii) endorse,
transfer or deliver such securities, instruments and obligations and
(iv) participate in or consent (or decline to consent) to any modification,
work-out, restructuring, bankruptcy proceeding, class action, plan of
reorganization, merger, combination, consolidation, liquidation or similar plan
or transaction with regard to such securities, instruments and obligations. To
the extent permitted by applicable law, this grant of power of attorney is
irrevocable and coupled with an interest, and it shall survive and not be
affected by the subsequent dissolution or bankruptcy of the Company; provided
that this grant of power of attorney will expire, and the Investment Manager
will cease to have any power to act as the Company’s attorney-in-fact, upon
termination of this Agreement in accordance with its terms. The Company shall
execute and deliver to the Investment Manager all such other powers of attorney,
proxies, dividend and other orders, and all such instruments, as the Investment
Manager may reasonably request for the purpose of enabling the Investment
Manager to exercise the rights and powers which it is entitled to exercise
pursuant to this Agreement. Each of the Investment Manager and the Company shall
take such other actions, and furnish such certificates, opinions and other
documents, as may be reasonably requested by the other party hereto in order to
effectuate the purposes of this Agreement and to facilitate compliance with
applicable laws and regulations and the terms of this Agreement.

 

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12.

Amendment of this Agreement; Assignment.

No provision of this Agreement may be amended, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against which
enforcement of the amendment, waiver, discharge or termination is sought. The
Investment Manager may not, directly or indirectly, assign all or any part of
its rights and duties under this Agreement to any Person without the prior
consent of the Company.

13.

Notices.

Unless expressly provided otherwise herein, any notice, request, direction,
demand or other communication required or permitted under this Agreement shall
be in writing and shall be deemed to have been duly given, made and received if
sent by hand or by overnight courier, when personally delivered, if sent by
telecopier, when receipt is confirmed by telephone, or if sent by registered or
certified mail, postage prepaid, return receipt requested, when actually
received if addressed as set forth below:

(a)

If to the Company:

Bryn Mawr Funding LLC
c/o FS Energy and Power Fund
201 Rouse Boulevard
Philadelphia, PA 19112
Attention: Gerald F. Stahlecker, Executive Vice President
Tel: (215) 495-1169
Fax: (215) 222-4649
E-mail: jerry.stahlecker@franklinsquare.com

 

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(b)

If to the Investment Manager:

FS Energy and Power Fund
201 Rouse Boulevard
Philadelphia, PA 19112
Attention: Gerald F. Stahlecker, Executive Vice President
Tel: (215) 495-1169
Fax: (215) 222-4649
E-mail: jerry.stahlecker@franklinsquare.com

Either party to this Agreement may alter the address to which communications or
copies are to be sent to it by giving notice of such change of address in
conformity with the provisions of this Section 13.

14.

Binding Nature of Agreement; Successors and Assigns.

This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns as provided herein.

15.

Entire Agreement.

This Agreement contains the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof, and supersedes all
prior and contemporaneous agreements, understandings, inducements and
conditions, express or implied, oral or written, of any nature whatsoever with
respect to the subject matter hereof. The express terms hereof control and
supersede any course of performance or usage of the trade inconsistent with any
of the terms hereof.

16.

Costs and Expenses.

The costs and expenses (including the fees and disbursements of counsel and
accountants) incurred in connection with the negotiation, preparation and
execution of this Agreement, and all matters incident thereto, shall be borne by
each party hereto.

17.

Books and Records.

In compliance with the requirements of Rule 31a-3 under the Investment Company
Act of 1940, as amended (the “1940 Act”), the Investment Manager hereby agrees
that all records which it maintains for the Company are the property of the
Company and further agrees to surrender promptly to the Company any such records
upon the Company’s request. The Investment Manager further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act the records
maintained by it in its capacity as Investment Manager that are required to be
maintained by Rule 31a-1 under the 1940 Act.

 

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18.

Titles Not to Affect Interpretation.

The titles of sections contained in this Agreement are for convenience only, and
they neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.

19.

Provisions Separable.

The provisions of this Agreement are independent of and separable from each
other, and, to the extent permitted by applicable law, no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for any
reason any other or others of them may be invalid or unenforceable in whole or
in part.

20.

Governing Law.

This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.

21.

Execution in Counterparts.

This Agreement may be executed in separate counterparts, each of which shall be
an original and all of which taken together shall constitute one and the same
instrument.

22.

Third Party Rights; Benefits of Agreement.

None of the provisions of this Agreement shall be for the benefit of or
enforceable by any creditor of the Company or by any creditor of the Member.

23.

Representations and Warranties of the Investment Manager.

The Investment Manager represents, warrants and covenants as of the date hereof
as to itself:

(a)

Organization and Good Standing. It has been duly organized and is validly
existing as a corporation in good standing under the laws of its jurisdiction of
organization, with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is currently
conducted, and had at all relevant times;

(b)

Due Qualification. It is duly qualified to do business as a Delaware statutory
trust in good standing and has obtained all necessary licenses and approvals in
all jurisdictions where the failure to do so would have a Material Adverse
Effect;

(c)

Power and Authority. It has the power, authority and legal right to execute and
deliver this Agreement and to perform its obligations hereunder; and the
execution, delivery and performance of this Agreement has been duly authorized
by the Investment Manager by all necessary action;

(d)

Binding Obligations. This Agreement has been executed and delivered by the
Investment Manager and, assuming due authorization, execution and delivery by
the Company, constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, except as enforceability may be limited
by (A) bankruptcy, insolvency, reorganization, or other similar laws affecting
the enforcement of creditors’ rights generally, (B) equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law and (C) implied covenants of good
faith and fair dealing;

 

 -13- 

 

 

(e)

No Violation. The execution, delivery and performance of this Agreement by the
Investment Manager, the Investment Manager’s consummation of the transactions
contemplated hereby and the Investment Manager’s fulfillment of the terms hereof
do not (A) conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a default
under, its declaration of trust or bylaws, each as amended, or any material
indenture, agreement, mortgage, deed of trust or other material instrument to
which it is a party or by which it or its properties are bound, (B) result in
the creation or imposition of any adverse claim upon any of its properties
pursuant to the terms of any such material indenture, agreement, mortgage, deed
of trust or other material instrument (except as may be created pursuant to this
Agreement or any other Transaction Document), or (C) violate in any material
respect any applicable law except, in the case of this subclause (C), to the
extent that such conflict or violation would not reasonably be expected to have
a material adverse effect on (i) the assets, operations, properties, financial
condition, or business of the Investment Manager; (ii) the ability of the
Investment Manager to perform its obligations under this Agreement or any of the
other Transaction Documents; or (iii) the validity or enforceability of this
Agreement or any of the other Transaction Documents (a “Material Adverse
Effect”);

(f)

No Proceedings. There are no proceedings or investigations pending or, to the
best of the Investment Manager’s knowledge, threatened against it, before any
Official Body having jurisdiction over it or its properties (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation of any of
the transactions contemplated hereby or (C) seeking any determination or ruling
that would reasonably be expected to have a Material Adverse Effect;

(g)

No Consents. No consent, license, approval, authorization or order of, or
registration, declaration or filing with, any Official Body having jurisdiction
over it or any of its properties is required to be made in connection with the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby, in each case other than (A) consents,
licenses, approvals, authorizations, orders, registrations, declarations or
filings which have been obtained or made and continuation statements and
renewals in respect thereof and (B) where the lack of such consents, licenses,
approvals, authorizations, orders, registrations, declarations or filings would
not have a Material Adverse Effect;

(h)

Investment Company Status. It is not required to be registered as an “investment
company” within the meaning of the 1940 Act.

24.

Managing REO Assets.

(a)

If, in the reasonable business judgment of the Investment Manager, it becomes
necessary to foreclose upon or repossess from the applicable Obligor any real
property securing any Transferred Asset (each such Transferred Asset, an “REO
Asset”), the Investment Manager shall first cause the Company to transfer and
assign such Transferred Asset (or the portion thereof owned by the Company) to a
special purpose vehicle wholly owned by the Company (the “REO Asset Owner”)
using a contribution agreement. The Investment Manager shall cause each REO
Asset to be serviced (i) in accordance with applicable laws, (ii) in accordance
with the Investment Manager Standard and (iii) in accordance with the applicable
REO Asset Owner’s limited liability company operating agreement (collectively,
the “REO Investment Management Standard”). The Investment Manager will cause all
“Distributable Cash” (or comparable definition set forth in the REO Asset
Owner’s organization documents) to be deposited into the appropriate account of
the Company within two (2) Business Days of receipt thereof.

 

 -14- 

 

 

(b)

In the event that title to any Related Property (as defined below) is acquired
on behalf of the REO Asset Owner for the benefit of its members in foreclosure,
by deed in lieu of foreclosure or upon abandonment or reclamation from
bankruptcy, the deed or certificate of sale shall be taken in the name of a REO
Asset Owner. The Investment Manager shall cause the REO Asset Owner to manage,
conserve, protect and operate each REO Asset for its members solely for the
purpose of its prompt disposition and sale.

(c)

Notwithstanding any provision to the contrary contained in this Agreement, the
Investment Manager shall not (and shall not permit the REO Asset Owner to)
obtain title to any property or other assets designated and pledged or mortgaged
as collateral to secure repayment of such Transferred Asset (“Related Property”)
as a result of or in lieu of foreclosure or otherwise, obtain title to any
direct or indirect partnership interest in any Obligor pledged pursuant to a
pledge agreement and thereby be the beneficial owner of Related Property, have a
receiver of rents appointed with respect to, and shall not otherwise acquire
possession of, or take any other action with respect to, any Related Property
if, as a result of any such action, the REO Asset Owner would be considered to
hold title to, to be a “mortgagee-in-possession” of, or to be an “owner” or
“operator” of, such Related Property within the meaning of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended from
time to time, or any comparable state or local environmental law, unless the
Investment Manager has previously determined in accordance with the REO
Investment Management Standard, based on an updated Phase I environmental
assessment report generally prepared in accordance with the ASTM Phase I
Environmental Site Assessment Standard E 1527-05, as may be amended or, with
respect to residential property, a property inspection and title report, that:

(i)

such Related Property is in compliance in all material respects with applicable
environmental laws; and

(ii)

there are no circumstances present at such Related Property relating to the use,
management or disposal of any hazardous materials for which investigation,
testing, monitoring, containment, clean-up or remediation would reasonably be
expected to be required by the owner, occupier or operator of the Related
Property under applicable federal, state or local law or regulation.

(d)

In the event that the Phase I or other environmental assessment first obtained
by the Investment Manager with respect to Related Property indicates that such
Related Property may not be in compliance with applicable environmental laws or
that hazardous materials may be present but does not definitively establish such
fact, the Investment Manager shall cause the Company to immediately sell the
related loan.

[Remainder of page intentionally left blank.]

 -15- 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.

  FS ENERGY AND POWER FUND           By:  /s/ Gerald F. Stahlecker  

Name:

Title:

Gerald F. Stahlecker
Executive Vice President

 

  BRYN MAWR FUNDING LLC           By:  /s/ Gerald F. Stahlecker  

Name:

Title:

Gerald F. Stahlecker
Executive Vice President